Forent Energy Ltd.
TSX VENTURE : FEN

Forent Energy Ltd.

November 28, 2011 07:00 ET

Forent Announces Third Quarter Results

CALGARY, ALBERTA--(Marketwire - Nov. 28, 2011) - Forent Energy Ltd. (TSX VENTURE:FEN) ("Forent" or the "Company") is pleased to announce its third quarter financial results based on International Financial Reporting Standards ("IFRS"), which are the new accounting principles generally accepted in Canada.

Forent achieved the following key corporate milestones:

  • Positive cash flow over the first nine months with no outstanding debt;
  • approval of three Nova Scotia drilling locations that are anticipated to be spud mid-December.

The following table provides a summary of Forent's financial and operating results for the three and nine months ended September 30, 2011 with comparisons to the three and nine months ended September 30, 2010. Forent's financial statements and management discussion and analysis ("MD&A") for the three months and nine months ended September 30, 2011 have been filed on SEDAR at www.sedar.com and are available on Forent's website at www.forentenergy.com.

All amounts referred to in the press release are in Canadian dollars unless otherwise stated.

Selected Financial Information

3 months ended September 30, 2011 3 months ended September 30, 2010 9 months ended September 30, 2011 9 months ended September 30, 2010
($ ) ($ ) ($ ) ($ )
Total oil & natural gas revenues 916,923 773,448 3,135,088 1,550,593
Net earnings (loss) (540,761 ) (497,473 ) (1,203,732 ) (1,687,713 )
Net earnings (loss) per share -
basic and diluted
- (0.01 ) (0.01 ) (0.02 )
Capital expenditures (net) 743,919 1,662,839 2,219,736 4,365,955
Total assets 14,686,892 12,756,923 14,686,892 12,756,923
Working capital 1,585,969 1,076,066 1,585,969 1,076,066
Funds provided (used) in operations 151,947 49,173 445,843 (208,388 )

Financial and operating - Third Quarter of 2011

  • Oil production in the third quarter increased by 27 percent, with natural gas decreasing by 25%, compared to 2010;
  • average commodity selling prices for oil, NGL's and natural gas increased by 16 percent vs. 2010;
  • net oil and gas revenues increased by 14 percent to $856,864 from $751,568 in 2010;
  • operating expenses per boe increased 32 percent to $29.79 per boe from $22.52 in 2010;
  • corporate netbacks for the quarter increased from $1.03 per boe in 2010 to $4.18 per boe in 2011;
  • general and administrative expenses decreased 36 percent and fell on a per boe basis by 14 percent to $7.84 per boe; and
  • the Company generated cash flow of $151,947 in the third quarter of 2011, compared to $49,173 in 2010.

Overview of the Third Quarter 2011

The third quarter saw the Company make considerable progress on the onshore Alton Block in Nova Scotia with the acquisition, processing and interpretation of 65 km of 2D seismic data. During the third quarter the Company relinquished its interest in the Beech Hill Exploration Block (at the end of the first three year exploration term), in order to focus its efforts on the Alton Block and the Montgomery exploration opportunity in Alberta. As a junior company, management was concerned about diluting its exploration resources and decided not to make any additional spending commitments for another three years of exploration on the Beech Hill Block. Should Alton prove to be a success, the Company would consider re-applying to the government for an exploration licence at Beech Hill. The Company achieved a significant increase in funds from operations in the three months ended September 30, 2011, over the same period of 2010, with funds from operations increasing to $151,947 from $49,173 in the third quarter of 2010.

Alton Block, Nova Scotia

The Company's 65 km 2D seismic acquisition program was complete at the end of July. The total cost of the seismic program was under $1 million and well within budget. During the third quarter, the data was processed, interpreted and correlated to the 2010 gravity gradiometry information. The Company was very pleased by the results of its 2D program. In September the Company initiated applications to the Nova Scotia departments of Energy and Environment in order to obtain approval to drill three exploration wells on the Alton Block. Approvals from the government of Nova Scotia were received on November 16, 2011.

During the third quarter the Company continued to dedicate resources to ensure all stakeholders understand its objectives for the Alton Block. As part of this process the Company established a community liaison committee comprised of individuals from the local community, including members of the First Nations. The community liaison committee will meet several times a year and serve as a forum for the community to build understanding, make suggestions and identify concerns regarding Forent's operations on the Alton Block. Forent staff met with members of the public in mid-October at an open house in Stewiacke, Nova Scotia to review the Company's plan for the drilling of three exploration wells later this year. The open house was an important part of the approval process with the government of Nova Scotia for the drilling of the wells. The feedback received at the open house was positive and very encouraging for our drilling program.

Onshore petroleum exploration in Nova Scotia is an industry that's in its infancy in comparison to the western Canadian sedimentary basin. Forent has taken an approach that is focused on ensuring all stakeholders are informed and educated as to the exploration process that the Company is pursuing. Specifically, the Company has indicated that it is drilling for crude oil into the reef structures it has identified and will not need to hydraulically fracture any of the proposed wells.

Montgomery, Alberta

The Company continued its search for a partner and while we came very close to identifying one in September, negotiations were not successful. In early October a decision was made to engage Sayer Energy Advisors to assist the Company to find a partner. Sayer has prepared a marketing package and requested that bids be submitted by November 24th, 2011 after which we hope to have identified at least a couple of interested parties and initiate negotiations for a partner to drill three exploration wells in the Montgomery, Alberta project area.

Forent holds a unique exploration land position at Montgomery, where it has identified a number of drilling locations, including multi-zone, three-way structural closures of significant areal extent, as well as, a number of Second White Specs prospects, that appear similar to a very successful nearby Second White Specs well. The lands have never been explored due to lack of surface access that Forent was able to obtain late last year. During the third quarter the Company continued its program of establishing and maintaining good working relationships with the ranchers that own the surface rights where we intend to drill.

Western Canadian Operations

After several delays the Company has tied in all of its Mervin, Saskatchewan producing wells to its salt water disposal well and has now stopped all in-field trucking, resulting in reduced monthly operating costs of approximately $70,000 and approximately $30,000 in additional third party disposal revenues being realized. The majority of the funds required for the Mervin salt water disposal project were secured from the sale of the Company's 37.5% interest in two wells in the Provost area of Alberta. On a combined basis the company's net interest in the two wells was approximately 14 bbl/d.

Outlook for the balance of 2011

The Company is currently undertaking a $3.5 million brokered financing on a best efforts basis for the private placement of 25,000,000 Common Shares to be issued on a "flow-through" basis at a price of $0.14 per share. The Offering is scheduled to close on or about December 7, 2011 and the funds raised will be dedicated to the three well Alton drilling program scheduled to commence in mid-December.

The Company has secured a drilling rig, suitable for our requirements and have commenced our site preparation during the week of November 21st. The Company will share the costs of moving the rig to Nova Scotia and returning it to Quebec with a private company that intends to use the rig to drill one well before we embark on our program.

At Mervin, the completion of the tie-in of its salt water disposal well enables the Company to initiate a program to increase production rates from the six existing Mervin producing wells later this quarter. The production optimization was delayed due to the incremental cost of trucking water that the Company would have incurred before the wells were tied in. In addition, we understand that there is considerable demand in the immediate vicinity for salt water disposal facilities and believe that additional revenues can be achieved. Our salt water disposal well is capable of handling more than 3,000 cubic metres a day of salt water and we estimate that we might achieve additional third party salt water revenues of approximately $30,000 per month.

As indicated previously, the Company is seeking a partner for its Montgomery, Alberta exploration opportunity and has engaged Sayer Energy Advisers to assist in identifying a partner and evaluating offers. Forent anticipates completing a multiple well farm-out in the fourth quarter of the year.

Shares of Forent trade on the TSX Venture Exchange under the symbol "FEN.V".

Except for statements of historical fact, this news release contains certain "forward-looking information" within the meaning of applicable securities law. Forward-looking information is frequently characterized by words such as "plan", "expect", "project", "intend", "believe", "anticipate", "estimate" and other similar words, or statements that certain events or conditions "may" or "will" occur. Forward-looking statements such as the estimates of reserves, the references to Forent's exploration program and drilling program and capital expenditures relating to, and timing of, such programs are based on the opinions and estimates at the date the statements are made, and are subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ materially from those anticipated in the forward-looking statements. There are uncertainties inherent in forward-looking information, including factors beyond Forent's control, and no assurance can be given that the programs will be completed on time, on budget or at all. In addition, there are numerous uncertainties inherent in estimating reserves, including many factors beyond Forent's control, and no assurance can be given that the indicated level of reserves or the recovery thereof will be realized. Forent undertakes no obligation to update forward-looking information if circumstances or management's estimates or opinions should change except as required by law. The reader is cautioned not to place undue reliance on forward-looking statements. Additional information identifying risks and uncertainties that could affect financial results is contained in Forent's filings with Canadian securities regulators, which filings are available at www.sedar.com.

The term boe may be misleading, particularly if used in isolation. A boe conversion ratio of six thousand cubic feet equal to one barrel is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.

The TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this press release.

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