Galleon Energy Inc.
TSX : GO

Galleon Energy Inc.

August 11, 2011 20:29 ET

Galleon Energy Inc. Announces Management and Board Changes, Private Placement and Q2 2011 Financial Results

CALGARY, ALBERTA--(Marketwire - Aug. 11, 2011) - Galleon Energy Inc. ("Galleon" or the "Corporation") (TSX:GO) is pleased to announce the following management and board appointments effective immediately:

Mr. William E. Andrew as Executive Chairman and a Director. Mr. Andrew has 35 years of oil and natural gas industry experience. He has acted as the Senior Executive Officer of Penn West Exploration Ltd. from December 1992 until his appointment as Vice-Chairman on August 9, 2011. During this time, he led the company from a small capital explorer to one of Canada's largest senior oil and natural gas exploration and production companies. Mr. Andrew received an engineering diploma from the University of Prince Edward Island in 1973 and a Bachelor of Engineering in Mining from the Technical University of Nova Scotia in 1975. Mr. Andrew is currently serving his second term as Chancellor of the University of Prince Edward Island, Director of The Fathers of Confederation Buildings Trust, Board of Management member of the Alberta Economic Development Authority and honorary co-chair of L.M. Montgomery Land Trust fundraising campaign. He has served as a Trustee of the Grace Hospital as well as on the Board of Governors of the Canadian Association of Petroleum Producers, and is a former Director of the Canadian Wind Institute.

Mr. Dale A. Miller as President and a Director. Mr. Miller has 28 years of oil and natural gas industry experience. He has most recently acted as Vice-President and Chief Operating Officer of an intermediate oil and gas company. From 1993 to 2003, Mr. Miller worked for Penn West Exploration Ltd. in positions of increasing responsibility including for four years as the Vice President Operations and Engineering reporting to Mr. Andrew. Mr. Miller received a Petroleum Engineering degree from the University of Tulsa in 1982.

Mr. V. William Tang Kong as Vice President Corporate Development. Mr. Tang Kong has 23 years of oil and natural gas industry experience. From 1999 to 2008, Mr. Tang Kong worked for Penn West Exploration Ltd. in positions of increasing responsibility including Senior Vice President Corporate Development reporting to Mr. Andrew. Mr. Tang Kong received a Bachelor of Science degree in Mechanical Engineering in 1981, a Bachelor of Science degree in Geology in 1984, and a Master of Science degree in Petroleum Geology in 1988, all from the University of Calgary.

Mr. Glenn R. Carley has resigned as Executive Chairman and will remain a director of Galleon. Mr. Carley will assist the new management in the transition. Mr. Daryl Gilbert has resigned as a director of Galleon.

While continuing as a director, the board wishes to express its appreciation to Glenn Carley for his wide-ranging and significant contributions to Galleon, initially as CEO and latterly as Executive Chair. From the beginning in 2003, Glenn has been instrumental in creating and nurturing a strategic vision for the company, and for providing strong, purposeful leadership. Going forward, the company's growth and development will be very exciting, the more so for the solid foundation Glenn and his team have built.

The board would also like to thank Daryl Gilbert for his three years of service as a director and chair of the reserves committee. The application of his vast experience has proven to be a valuable resource for the company and its shareholders.

The board of directors of Galleon has approved a private placement to the new management group and their designates of up to 2.3 million units ("Units") at an issue price of $2.81per Unit. Each Unit consists of one Class A Share for the Corporation and one share purchase warrant ("Warrant"). Each Warrant will entitle the holder to acquire one Class A Share of the Corporation at an exercise price of $3.10 for a period of three years. The Warrants will not be exercised until the 20 day volume weighted average trading price of the Class A Shares exceeds $5.00 per share. Closing of the private placement is subject to receipt of required regulatory approvals including approval of the Toronto Stock Exchange.

The unaudited interim consolidated financial statements of the Corporation for the three and six month periods ended June 30, 2011 and the related management's discussion and analysis can be accessed on-line on SEDAR at www.sedar.com or on the Corporation's website at www.galleonenergy.com.

Q2 2011 Financial Highlights
  • Revenues (before realized financial derivatives) of $48.0 million ($0.57 per basic share) and funds flow from operations of $20.1 million ($0.24 per basic share) were generated from average production of 11,755 BOE/d (32% oil and liquids and 68% natural gas) in Q2 2011. This compares to revenues (before realized financial derivatives) of $48.0 million ($0.57 per basic share), funds flow from operations of $26.8 million ($0.32 per basic share) and average production of 13,048 BOE/d (32% oil and liquids and 68% natural gas) in Q1 2011;
  • Revenues averaged $48.20/BOE which includes $3.25/BOE from realized commodity financial derivatives. Revenues, including realized commodity financial derivatives, were generated 53% from oil and liquids sales and 47% from natural gas sales;
  • Operating expenses averaged $12.64/BOE;
  • The operating netback was $24.62/BOE and the corporate netback was $18.80/BOE;
  • Earnings of $10.5 million ($0.13 per basic share) were recorded, which included a non-cash unrealized gain from financial derivatives of $15.5 million;
  • The Corporation drilled 8 (7.9 net) wells resulting in 4 (3.9 net) natural gas wells and 4 (4.0 net) oil wells, for a success rate of 100% during the quarter;
  • Capital of $15.9 million was invested in exploration and development activities;
  • Net debt was $169.5 million at June 30, 2011 including $153.8 million drawn on available bank credit facilities of $250 million;
  • At June 30, 2011, issued and outstanding Class A shares were 83,980,083 with share options totaling 6,394,666 with an average exercise price of $4.49.
FINANCIAL AND OPERATING HIGHLIGHTS
Three months ended
June 30
Six months ended
June 30
($000s except per share and per unit amounts) 2011 2010 2011 2010
Financial
Petroleum and natural gas revenue 48,086 55,273 96,128 117,557
Funds flow from operations1 20,115 27,146 46,957 58,826
Per share – basic 0.24 0.32 0.56 0.69
Per share – diluted 0.24 0.32 0.56 0.69
Net income (loss) 10,505 14,587 (2,792 ) 33,395
Per share – basic 0.13 0.17 0.03 0.39
Per share – diluted 0.13 0.17 0.03 0.39
Capital expenditures 15,938 21,718 64,059 61,764
Total assets 880,379 861,436 880,379 861,436
Net debt 1,2 169,481 115,844 169,481 115,844
Total non-current financial liabilities 7,180 - 7,180 -
Shareholders' equity 579,133 617,299 579,133 617,299
Weighted average shares outstanding
Basic 83,980,083 85,143,751 83,980,083 85,121,469
Diluted 83,980,083 85,143,751 83,980,083 85,121,469
Operating
Average daily production
Light oil (Bbl/d) 2,503 3,295 2,667 3,272
Heavy oil (Bbl/d) 863 1,108 905 1,135
NGLs (Bbl/d) 346 537 357 532
Natural gas (Mcf/d) 48,257 67,689 50,814 65,937
Total (BOE/d) 11,755 16,222 12,398 15,928
Average selling prices 3
Light oil ($/Bbl) 95.58 72.53 89.00 74.95
Heavy oil ($/Bbl) 75.80 57.76 69.83 61.43
NGLs ($/Bbl) 74.44 53.41 71.10 55.09
Natural gas ($/Mcf) 4.10 4.07 4.04 4.63
Total ($/BOE) 44.95 37.44 42.84 40.78
1 See "Non-GAAP Measurements"
2 Net debt includes bank indebtedness, working capital and financing leases, but excludes financial derivatives
3 The average prices reported are prior to financial derivatives and transportation charges

Petroleum and natural gas revenue, before royalties and financial derivatives, decreased 13% in the second quarter of 2011 compared to the second quarter of 2010. Increased prices for crude oil during the quarter were more than offset by decreased production volumes. Production in Q2 2011 averaged 11,755 BOE/d compared to 16,222 BOE/d in Q2 2010. The 28% reduction reflects a decline in natural gas production and the sale of properties, primarily the Puskwa light oil assets sold in late June 2010.

Excluding volumes from properties which were sold, average daily production for the three months ended June 30, 2011 was 20% lower than the average production recorded in the three months ended June 30, 2010. By product, excluding volumes which were sold, a 6% increase in oil production was offset by a 28% decrease in natural gas production.

The average price for natural gas, before transportation and financial derivative contracts, was $4.10/Mcf in the second quarter of 2011, comparable to the $4.07/Mcf price received in the second quarter of 2010. Crude oil prices increased 32% in Q2 2011 to $90.51/Bbl from $68.82/Bbl in Q2 2010.

Funds flow from operations decreased by $7.0 million, or 26%, in the three months ended June 30, 2011 compared to the second quarter of 2010, due primarily to the $6.9 million decrease in petroleum and natural gas revenues net of royalties. Also during Q2 2011 compared to Q2 2010, a $1.5 million decrease in interest expense was offset by a $1.9 million decrease in realized gains on financial derivative contracts, reflecting higher losses on oil derivative contracts.

Net earnings in the second quarter of 2011 of $10.5 million includes a $15.5 million unrealized gain on financial derivative contracts, compared to an unrealized loss on financial derivative contacts of $0.1 million in Q2 2010.

Results of Operations
Comparative financial results for the quarter are as follows:
Three months ended June 30 2011 2010
1,069,717 BOE 1,476,256 BOE
($000s) $/BOE $/BOE
Revenues 48,086 44.95 55,273 37.44
Realized gain on financial derivatives 3,474 3.25 5,329 3.61
Royalties (9,374 ) (8.76 ) (11,931 ) (8.08 )
GCA1 (268 ) (0.25 ) 2,016 1.37
Transportation costs (2,063 ) (1.93 ) (2,422 ) (1.64 )
Operating costs (13,517 ) (12.64 ) (13,328 ) (9.03 )
Net 26,338 24.62 34,937 23.67
G&A (3,928 ) (3.67 ) (3,063 ) (2.07 )
Restructuring costs - - (1,183 ) (0.81 )
Interest costs (2,046 ) (1.91 ) (3,578 ) (2.42 )
Exploration expenses (201 ) (0.19 ) - -
Capital and other taxes (48 ) (0.05 ) 33 0.02
Funds flow from operations2 20,115 18.80 27,146 18.39
Six months ended June 30 2011 2010
2,244,061 BOE 2,883,007 BOE
($000s) $/BOE $/BOE
Revenues 96,128 42.84 117,557 40.78
Realized gain on financial derivatives 8,245 3.67 6,764 2.35
Royalties (18,684 ) (8.32 ) (27,212 ) (9.44 )
GCA1 2,903 1.29 6,615 2.29
Transportation costs (4,263 ) (1.90 ) (4,611 ) (1.60 )
Operating costs (25,859 ) (11.52 ) (25,815 ) (8.95 )
Net 58,470 26.06 73,298 25.43
G&A (7,084 ) (3.16 ) (6,631 ) (2.30 )
Restructuring costs - - (1,183 ) (0.42 )
Interest costs (3,903 ) (1.74 ) (6,592 ) (2.29 )
Exploration expenses (416 ) (0.18 ) - -
Capital and other taxes (110 ) (0.05 ) (66 ) (0.02 )
Funds flow from operations2 46,957 20.93 58,826 20.40
1 GCA means Gas Cost Allowance
2 See "Non-GAAP Measurements"
Petroleum and Natural Gas Revenue (before royaltie)
Three months ended June 30 2011 2010
($000s) % %
Light oil 21,720 45 21,688 39
Heavy oil 5,964 13 5,836 11
NGLs 2,346 5 2,611 5
Natural gas 17,974 37 24,988 45
Royalty income 82 - 150 -
Total 48,086 100 55,273 100
Six months ended June 30 2011 2010
($000s) % %
Light oil 42,895 45 44,251 38
Heavy oil 11,437 12 12,620 11
NGLs 4,593 5 5,304 5
Natural gas 37,063 38 55,076 46
Royalty income 140 - 306 -
Total 96,128 100 117,557 100

Revenues for the three months ended June 30, 2011 decreased 13% to $48.0 million from $55.3 million for the same period of the prior year. Gas revenues decreased in Q2 2011 due to decreased production volumes. Increased crude oil prices during the second quarter of 2011 were offset by lower oil production volumes, reflecting primarily the sale of properties, including the Puskwa light oil properties sold at the end of the second quarter of 2010.

Crude Oil Prices

Three months ended June 30 2011 2010
$000s $/Bbl $000s $/Bbl
Crude oil 27,725 90.51 27,577 68.82
Realized financial contracts (2,527 ) (8.25 ) (1,005 ) (2.51 )
Transportation (703 ) (2.29 ) (550 ) (1.37 )
Net crude oil 24,495 79.97 26,022 64.94
Six months ended June 30 2011 2010
$000s $/Bbl $000s $/Bbl
Crude oil 54,398 84.14 57,014 71.48
Realized financial contracts (3,680 ) (5.69 ) (1,185 ) (1.49 )
Transportation (1,358 ) (2.10 ) (942 ) (1.18 )
Net crude oil 49,360 76.35 54,887 68.81
Natural Gas Prices
Three months ended June 30 2011 2010
$000s $/Mcf $000s $/Mcf
Natural gas 18,015 4.10 25,086 4.07
Realized financial contracts 6,001 1.37 6,451 1.05
Transportation (1,336 ) (0.30 ) (1,872 ) (0.30 )
Net natural gas 22,680 5.17 29,665 4.82
Six months ended June 30 2011 2010
$000s $/Mcf $000s $/Mcf
Natural gas 37,137 4.04 55,239 4.63
Realized financial contracts 11,915 1.30 8,226 0.69
Transportation (2,871 ) (0.31 ) (3,668 ) (0.31 )
Net natural gas 46,181 5.03 59,797 5.01
NGL Prices
Three months ended June 30 2011 2010
$000s $/Bbl $000s $/Bbl
NGL 2,346 74.44 2,610 53.41
Transportation (24 ) (0.69 ) - -
Net NGL 2,322 73.75 2,610 53.41
Six months ended June 30 2011 2010
$000s $/Bbl $000s $/Bbl
NGL 4,593 71.10 5,304 55.09
Transportation (34 ) (0.53 ) (1 ) (0.01 )
Net NGL 4,559 70.57 5,303 55.08
Performance by Property
Three months ended June 30
2011 2010
Production Operating netbacks/
BOE 1
Funds
from operations2
Production Operating netbacks/
BOE1
Funds
from operations2
BOE/d % $ % BOE/d % $ %
Eastern Montney 4,576 39 25.05 45 5,618 35 17.38 32
Kakut 3,528 30 21.78 30 4,331 27 19.30 28
North Peace River Arch 3,651 31 17.25 25 4,789 29 15.66 24
Sold properties - - - - 1,484 9 32.27 16
11,755 100 21.62 100 16,222 100 18.75 100
Six months ended June 30
2011 2010
Production Operating netbacks/
BOE 1
Funds
from operations2
Production Operating netbacks/
BOE1
Funds
from operations2
BOE/d % $ % BOE/d % $ %
Eastern Montney 4,875 39 23.93 44 5,425 34 19.42 32
Kakut 3,669 30 19.69 28 4,408 28 20.26 27
North Peace River Arch 3,854 31 19.00 28 4,621 29 17.60 25
Sold properties - - - - 1,474 9 36.85 16
12,398 100 21.10 100 15,928 100 20.74 100
1 Operating netbacks/BOE exclude GCA and hedging gains and losses, and are calculated by subtracting royalties, operating costs, and transportation from revenues and dividing the result by the average production for the period
2 See "Non-GAAP Measurements"
Operating Costs
Three months ended June 30
2011 2010
Production Operating Costs Production Operating Costs
% % $/BOE % % $/BOE
Eastern Montney 39 40 13.06 35 36 9.47
Kakut 30 26 10.74 27 23 7.59
North Peace River Arch 31 34 13.91 29 36 10.99
Sold properties - - - 9 5 5.20
100 100 12.64 100 100 9.03
Six months ended June 30
2011 2010
Production Operating Costs Production Operating Costs
% % $/BOE % % $/BOE
Eastern Montney 39 40 11.79 34 35 9.17
Kakut 30 28 11.02 28 23 7.50
North Peace River Arch 31 32 11.62 29 37 11.27
Sold properties - - - 9 5 5.28
100 100 11.52 100 100 8.95

Operating costs were $12.64/BOE during the second quarter of 2011, an increase of 40% from $9.03/BOE for the second quarter of 2010.

At Eastern Montney, operating costs were $3.59/BOE or 38% higher during Q2 2011 compared to Q2 2010, reflecting reduced production volumes and higher emulsion trucking, propane and fuel costs related in part to increased oil production. The operating expense increase also includes a prior period 13th month throughput equalization adjustment at Dreau.

Operating costs at Kakut were $10.74/BOE in Q2 2011, an increase of 42% from $7.59/BOE in the same period of the prior year. The increase reflects lower production volumes and increased equipment rentals, propane and fuel costs on a larger number of producing Doig oil wells. Galleon is in the process of electrifying the field to significantly reduce these costs.

The $13.86/BOE operating cost at NPRA during the second quarter of 2011, 26% higher than the Q2 2010 operating cost of $10.99/BOE, is a function of lower production volumes reflecting reduced capital spending in the area.

Capital Expenditures

Three months ended June 30 2011 2010
($000s) % %
Land 454 3 1,477 7
Geological and geophysical 440 3 249 1
Drilling and completion 10,368 65 16,916 78
Plant and facilities 4,693 29 4,146 19
Inventory (19 ) - (1,070 ) (5 )
Other assets 2 - - -
Capital expenditures 15,938 100 21,718 100
Six months ended June 30 2011 2010
($000s) % %
Land 8,510 13 4,174 7
Geological and geophysical 1,087 2 531 1
Drilling and completion 44,380 69 46,676 76
Plant and facilities 9,561 15 10,251 16
Inventory 504 1 101 -
Other assets 17 - 31 -
Capital expenditures 64,059 100 61,764 100

Capital expenditures during the second quarter of 2011 were $15.9 million. Drilling and completions expenditures comprised 65% of capital activity. The Corporation drilled 8 (7.9 net) wells, resulting in 4 (3.9 net) natural gas wells and 4 (4.0 net) oil wells, for a success rate of 100% during the quarter.

On August 4, 2011, the Corporation purchased interests in certain natural gas properties in the Kakut area for
cash consideration of approximately $7.0 million including closing adjustments.

GALLEON ENERGY INC.
Consolidated Statements of Financial Position
(unaudited)
June 30 , December 31 , January 1 ,
($000's) 2011 2010 2010
ASSETS
CURRENT
Accounts receivable 20,260 28,829 41,270
Deposits and prepaid expenses 4,429 3,361 6,190
Fair value of financial derivatives 14,644 20,815 4,241
39,333 53,005 51,701
Fair value of financial derivatives 3,503 - -
Property and equipment 837,543 816,647 881,937
Goodwill - - 25,333
880,379 869,652 958,971
LIABILITIES
CURRENT
Accounts payable and accrued liabilities 40,372 49,369 55,531
Financing lease - - 1,545
Bank loan 153,798 135,682 217,243
Other liability - - 3,775
Fair value of financial derivatives 15,012 6,411 13,789
209,182 191,462 291,883
Decommissioning liabilities 42,043 39,947 38,228
Fair value of financial derivatives 7,180 14,980 -
Deferred income taxes 42,841 43,257 49,245
301,246 289,646 379,356
SHAREHOLDERS' EQUITY
Share capital 586,429 586,626 595,559
Contributed surplus 42,697 40,581 30,174
Retained earnings (deficit) (49,993 ) (47,201 ) (46,118 )
579,133 580,006 579,615
880,379 869,652 958,971
GALLEON ENERGY INC.
Consolidated Statements of Earnings (Loss), and Comprehensive Income (Loss)
(unaudited)
Three months ended
June 30
Six months ended
June 30
($000s, except per share amounts) 2011 2010 2011 2010
REVENUE
Petroleum and natural gas revenue 48,086 55,273 96,128 117,557
Royalties, net of gas cost allowance (9,642 ) (9,915 ) (15,781 ) (20,597 )
Realized gain on financial derivatives 3,474 5,329 8,245 6,764
Unrealized gain (loss) on financial derivatives 15,490 (952 ) (3,469 ) 17,577
Gain on disposal of assets 626 - 626 -
Other income - - 123 -
58,034 49,735 85,872 121,301
EXPENSES
Operating 13,517 13,328 25,859 25,815
Transportation 2,063 2,422 4,263 4,611
General and administration 3,928 3,063 7,084 6,631
Restructuring costs - 1,183 - 1,183
Share-based compensation 946 1,608 1,545 3,186
Interest 2,046 3,578 3,903 6,592
Exploration expenses 201 - 416 -
Accretion 808 745 1,618 1,492
Derecognition expenses 1,439 2,419 4,839 4,462
Depletion and depreciation 18,894 20,121 39,640 39,705
43,842 48,467 89,167 93,677
Earnings (loss) before taxes 14,192 1,268 (3,295 ) 27,624
Income taxes
Capital and other taxes 48 (33 ) 110 66
Deferred income tax (recovery) 3,639 (13,286 ) (613 ) (5,837 )
3,687 (13,319 ) (503 ) (5,771 )

NET EARNINGS (LOSS) AND COMPREHENSIVE INCOME (LOSS)
10,505 14,587 (2,792 ) 33,395
NET EARNINGS (LOSS) AND COMPREHENSIVE INCOME (LOSS) PER SHARE
Basic 0.13 0.17 (0.03 ) 0.39
Diluted 0.13 0.17 (0.03 ) 0.39
Weighted average Class A shares
– basic 83,980,083 85,143,751 83,980,083 85,121,469
– diluted 83,980,083 85,143,751 83,980,083 85,121,469
GALLEON ENERGY INC.
Consolidated Statement of Changes in Equity
(unaudited)



($000s)


Share
Capital


Contributed
Surplus

Retained
Earnings (Deficit
)


Total
Balance, January 1, 2010 595,559 30,174 (46,118 ) 579,615
Share-based compensation - 6,380 - 6,380
Options exercised 460 (123 ) - 337
Shares purchased and cancelled (8,304 ) 4,150 - (4,154 )
Tax deduction of share issue costs (1,089 ) - - (1,089 )
Comprehensive loss - - (1,083 ) (1,083 )
Balance, December 31, 2010 586,626 40,581 (47,201 ) 580,006
Share-based compensation - 2,116 - 2,116
Tax deduction of share issue costs (197 ) - - (197 )
Comprehensive loss - - (2,792 ) (2,792 )
Balance, June 30, 2011 586,429 42,697 (49,993 ) 579,133
GALLEON ENERGY INC.
Consolidated Statement of Changes in Equity
(unaudited)



($000s)


Share
Capital


Contributed
Surplus

Retained
Earnings (Deficit
)


Total
Balance, January 1, 2010 595,559 30,174 (46,118 ) 579,615
Share-based compensation - 4,551 - 4,551
Options exercised 367 (99 ) - 268
Tax deduction of share issue costs (530 ) - - (530 )
Comprehensive income - - 33,395 33,395
Balance, June 30, 2010 595,396 34,626 (12,723 ) 617,299
GALLEON ENERGY INC.
Consolidated Statements of Cash Flows
(unaudited)
Three months ended June 30 Six months ended June 30
($000s) 2011 2010 2011 2010
Cash provided by (used in):
OPERATING ACTIVITIES
Net earnings (loss) 10,505 14,587 (2,792 ) 33,395
Items not requiring cash:
Deferred income tax (recovery) 3,639 (13,286 ) (613 ) (5,837 )
Depletion and depreciation 18,894 20,121 39,640 39,705
Derecognition expenses 1,439 2,419 4,839 4,462
Accretion 808 745 1,618 1,492
Share-based compensation 946 1,608 1,545 3,186
Other income - - (123 ) -
Gain on disposal of assets (626 ) - (626 ) -
Unrealized (gain) loss on financial derivatives (15,490 ) 952 3,469 (17,577 )
Abandonment costs (123 ) (26 ) (204 ) (261 )
Change in non-cash working capital 458 (3,185 ) 1,630 (1,630 )
20,450 23,935 48,383 56,935
FINANCING ACTIVITIES
Issue of common shares - 56 - 268
Financing lease payments - (207 ) - (410 )
Bank loan (repayment) 7,773 (117,832 ) 18,116 (105,524 )
7,773 (117,983 ) 18,116 (105,666 )
INVESTING ACTIVITIES
Additions to oil and gas properties (15,938 ) (21,718 ) (64,059 ) (61,764 )
Acquisition of oil and gas properties - - (119 ) (16,966 )
Disposal of oil and gas properties 5 130,912 805 130,912
Change in non-cash working capital (12,290 ) (15,146 ) (3,126 ) (3,451 )
(28,223 ) 94,048 (66,499 ) 48,731
CHANGE IN CASH - - - -
CASH, BEGINNING AND END OF PERIOD - - - -
SUPPLEMENTAL INFORMATION
Cash interest paid 2,344 3,266 4,191 6,740
Cash taxes paid - 186 62 186
FINANCIAL DERIVATIVE CONTRACTS AT AUGUST 11, 2011
Natural Gas:
January 1, 2010 - December 31, 2011 5,000 GJ/d CDN $5.85/GJ
January 1, 2010 - December 31, 2011 5,000 GJ/d CDN $5.75/GJ
January 1, 2011 - December 31, 2011 20,000 GJ/d CDN $5.20/GJ
April 1, 2011 - December 31, 2011 5,000 GJ/d CDN $5.60/GJ
January 1, 2012 - December 31, 2012 15,000 GJ/d CDN $5.00/GJ
January 1, 2012 – December 31, 2012 5,500 GJ/d CDN $5.00/GJ
Crude Oil:
Fixed Price:
January 1, 2011 – December 31, 2011 1,000/Bbl/d WTI CDN $84.15/Bbl
January 1, 2011 – December 31, 2011 500/Bbl/d WTI CDN $92.00/Bbl
January 1, 2013 – December 31, 2013 527 Bbl/d WTI CDN $97.00/Bbl
Other:
January 1, 2012 – December 31, 2012 527 Bbl/d WTI US $85.00/Bbl Put
January 1, 2012 – December 31, 2012 1,000 Bbl/d WTI US $85.00/Bbl Put
January 1, 2013 – December 31, 2013 1,527 Bbl/d WTI US $85.00/Bbl Call
January 1, 2013 – December 31, 2013 1,100 Bbl/d WTI US$ 85.00/Bbl Swaption
January 1, 2013 – December 31, 2013 73 Bbl/d WTI US $100.00/Bbl Call
Costless Collars:
January 1, 2011 – December 31, 2011 1,000 Bbl/d WTI CDN $77.10-$90.00/Bbl
Interest Rate Swap:
New contract
Notional Amount CAD $50 million Term: August 5, 2011 – August 5, 2013
Fixed rate 1.34% - Floating rate is reset against CAD--CDOR on each 3 month anniversary

Galleon has approximately 84 million shares issued and outstanding which trade on the Toronto Stock Exchange under the symbol "GO".

ADVISORIES

Forward Looking Statements: Certain information regarding Galleon Energy Inc. in this news release including management's assessment of future plans and operations, proposed name change and proposed private placement and closing thereof may constitute forward-looking statements under applicable securities laws and necessarily involve risks including, without limitation, risks associated with oil and gas exploration, development, exploitation, production, marketing and transportation, loss of markets, volatility of commodity prices, currency fluctuations, imprecision of reserve estimates, environmental risks, competition from other producers, inability to retain drilling rigs and other services, capital expenditure costs, including drilling, completion and facilities costs, unexpected decline rates in wells, wells not performing as expected, delays resulting from or inability to obtain required regulatory approvals and ability to access sufficient capital from internal and external sources. As a consequence, actual results may differ materially from those anticipated in the forward-looking statements. Readers are cautioned that the foregoing list of factors is not exhaustive.

Additional information on these and other factors that could affect Galleon's operations and financial results are included in reports on file with Canadian securities regulatory authorities and may be accessed through the SEDAR website (www.sedar.com), at Galleon's website (www.galleonenergy.com). Furthermore, the forward-looking statements contained in this news release are made as at the date of this news release and Galleon does not undertake any obligation to update publicly or to revise any of the included forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by applicable securities laws.

Non-GAAP Measurements

This news release contains terms commonly used in the oil and gas industry, such as funds flow from operations, funds flow from operations per share, and operating netback. These terms are not defined by GAAP and should not be considered an alternative to, or more meaningful than, cash provided by operating activities or net earnings as determined in accordance with Canadian GAAP as an indicator of Galleon's performance. Management believes that in addition to net earnings, funds flow from operations is a useful financial measurement which assists in demonstrating the Corporation's ability to fund capital expenditures necessary for future growth or to repay debt. Galleon's determination of funds flow from operations may not be comparable to that reported by other companies. All references to funds flow from operations throughout this news release are based on cash flow from operating activities before changes in non-cash working capital and abandonment expenditures. The Corporation calculates funds flow from operations per share by dividing funds flow from operations by the weighted average number of Class A shares outstanding. Galleon uses the term net debt. This measure does not have any standardized meaning prescribed by Canadian GAAP and therefore may not be comparable to similar measures presented by other companies.

BOES

Disclosure provided herein in respect of barrels of oil equivalent (boe) may be misleading, particularly if used in isolation. A boe conversion ratio of 6 Mcf: 1 Bbl is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.

Contact Information

  • Galleon Energy Inc.
    William E. Andrew
    Executive Chairman
    (403) 261-6012

    Galleon Energy Inc.
    Shivon Crabtree
    Vice President and Chief Financial Officer
    (403) 261-6012
    www.galleonenergy.com