Galleon Energy Inc.

Galleon Energy Inc.

October 05, 2010 19:52 ET

Galleon Energy Inc. Reports Third Quarter 2010 Drilling and Production and Updated 2011 Commodity Hedge Position

CALGARY, ALBERTA--(Marketwire - Oct. 5, 2010) - Galleon Energy Inc. (TSX:GO) ("Galleon" or the "Corporation") drilled and cased 17 wells during the third quarter of 2010 for a success rate of 100%. This drilling was as follows: 8 (8.0 net) Doig horizontal light oil wells, 1 (0.75 net) horizontal Montney gas well at Kakut, 2 (1.45 net) North Peace River arch wells, 4 (3.93 net) Eastern Montney horizontal gas wells and 2 (2.0 net) oil wells within the Eastern Montney Business Unit.

Galleon has hedged in excess of one half of its 2011 production at $5.73/Mcf and $82.90/Bbl WTI Cdn.

Production based on field estimates for the third quarter of 2010 is approximately 13,850 BOE/d (59.4 Mmcf/d of natural gas and 3,960 Bbl/d of crude oil and natural gas liquids). Production, net of contemplated minor asset sales, is expected to average over 14,000 BOE/d in the second half of 2010.

Current production for the week ended October 2, 2010 is in excess of 14,000 BOE/d based on field report estimates. In addition, there are 7 wells in the process of being completed which are expected to be tied in during Q4 2010. 900 BOE/d is shut in waiting upon regulatory approvals. 

Capital expenditures during the second half of 2010 are allocated 80% towards moving reserves from probable to proven and from proven to proven producing. Currently, there are 4 rigs drilling. 

Year end production is forecast to range between 14,000 BOE/d and 14,500 BOE/d of which 25-30% will be crude oil and natural gas liquids. This forecast excludes approximately 900 BOE/d shut in pending regulatory approvals.

Year end net debt is expected to be approximately $128 to $143 million depending upon the size of minor asset sales, with forecasted operating costs in the second half of 2010 to be less than $10.00/BOE. 

For the second half of 2010, 14,000 Mcf/d of natural gas is hedged with an average fixed price of $6.13/Mcf and 3,000 Bbl/d of crude oil is hedged with an average fixed price of $75.40/Bbl WTI Cdn.

For 2011, the Corporation has commodity hedge contracts in place for 33,000 Mcf/d of natural gas with an average fixed price of $5.73/Mcf and 2,500 Bbl/d of crude oil with an average fixed price of $82.90/Bbl WTI Cdn. Details of the outstanding financial contracts are as follows:

    Volume/Amount   Deal Details and Description   Term
  Interest rate      
    $100,000,000   1.1% fixed, 3 month CDOR floating   Jan 20/09-Jan20/11
  Crude oil      
    500 bbl/day   $74.30 WTI CAD   Jan 1/10-Dec 31/10
    500 bbl/day   $74.50 WTI CAD   Jan 1/10-Dec 31/10
    500 bbl/day   $76.50 WTI CAD   Jan 1/10-Dec 31/10
    500 bbl/day   $77.00 WTI CAD   Jan 1/10-Dec 31/10
    500 bbl/day   $75 - $94 WTI CAD   Jan 1/10-Dec 31/10
    500 bbl/day   $75 - $95 WTI CAD   Jan 1/10-Dec 31/10
    500 bbl/day   $92.00 WTI CAD   Jan 1/11-Dec 31/11
    1,000 bbl/day   $84.15 WTI CAD   Jan 1/11-Dec 31/11
    1,000 bbl/day   $77.10 - $90 WTI CAD   Jan 1/11-Dec 31/11
    1,000 bbl/day   $85.00 WTI USD CALL   Jan 1/12-Dec 31/12
    1,100 bbl/day   $85.00 WTI USD SWAPTION   Jan 1/12-Dec 31/12
  Natural gas      
    5,000 GJs/day   $5.75 GJ CDN   Jan 1/10-Dec 31/11
    5,000 GJs/day   $5.85 GJ CDN   Jan 1/10-Dec 31/11
    5,000 GJs/day   $5.76 GJ CDN   Apr 1/10-Mar 31/11
    10,000 GJs/day   $5.20 GJ CDN   Jan 1/11-Dec 31/11
    10,000 GJs/day   $5.20 GJ CDN   Jan 1/11-Dec 31/11

Forward-Looking Statements and Advisories

Statements herein that are not historical facts may be considered forward looking statements including expected production rates, drilling plans and the timing thereof, capital expenditures and the allocation thereof and the timing thereof, expected year end net debt level and 2010 operating costs. These forward-looking statements sometimes include words to the effect that management believes or expects a stated condition or result. All estimates and statements that describe the Corporation's future plans are forward-looking statements. Since forward-looking statements address future events and conditions, by their very nature they involve inherent risks and uncertainties 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, incorrect assessment of the value of acquisitions, failure to realize the anticipated benefits of acquisitions, delays resulting from or inability to obtain required regulatory approvals and ability to access sufficient capital from internal and external sources. As a consequence, Galleon's actual results may differ materially from those expressed in, or implied by, the forward-looking statements. 

Forward-looking statements or information are based on a number of factors and assumptions which have been used to develop such statements and information but which may prove to be incorrect. Although Galleon believes that the expectations reflected in such forward-looking statements or information are reasonable, undue reliance should not be placed on forward-looking statements because Galleon can give no assurance that such expectations will prove to be correct. In addition to other factors and assumptions which may be identified in this document, assumptions have been made regarding, among other things: the impact of increasing competition; the general stability of the economic and political environment in which Galleon operates; the timely receipt of any required regulatory approvals; the ability of Galleon to obtain qualified staff, equipment and services in a timely and cost efficient manner; drilling results; the ability of the operator of the projects which Galleon has an interest in to operate the field in a safe, efficient and effective manner; the ability of Galleon to obtain financing on acceptable terms; field production rates and decline rates; the ability to replace and expand oil and natural gas reserves through acquisition, development or exploration; the timing and costs of pipeline, storage and facility construction and expansion; the ability of Galleon to secure adequate product transportation; future oil and natural gas prices; currency, exchange and interest rates; the regulatory framework regarding royalties, taxes and environmental matters in the jurisdictions in which Galleon operates; and the ability of Galleon to successfully market its oil and natural gas products.

Readers are cautioned that the foregoing list of factors and assumptions is not exhaustive. Additional information on these and other factors that could effect 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 (, or at Galleon's website ( 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

Galleon uses the term net debt in this news release. 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.

Contact Information

  • Galleon Energy Inc.
    Glenn R. Carley
    Executive Chairman
    (403) 261-6012
    Galleon Energy Inc.
    Steve Sugianto
    President and Chief Executive Officer
    (403) 261-6012
    Galleon Energy Inc.
    Shivon Crabtree
    Vice President and Chief Financial Officer
    (403) 261-6012