Grand Banks Energy Corporation
TSX VENTURE : GBE

Grand Banks Energy Corporation

August 22, 2007 17:36 ET

Grand Banks Announces June 30, 2007 Results

CALGARY, ALBERTA--(Marketwire - Aug. 22, 2007) - Grand Banks Energy Corporation (the "Company" or "Grand Banks") (TSX VENTURE:GBE) is pleased to announce its financial and operating results for the three and six month periods ended June 30, 2007. The detailed financial statements and management discussion and analysis for the periods are accessible on the internet at the website www.sedar.com.

The first half of 2007 represented a building period in which Grand Banks undertook a number of measures that has positioned the Company for sustained value-added growth going forward.



Three Months Ended June 30, Six Months Ended June 30,
% %
2007 2006 Change 2007 2006 Change
------ ------ -------- ------ ------ --------
Average Sales Volumes:
----------------------
Crude oil & liquids
- bbls/day 554 527 5 585 585 -
Natural gas - mcf/day 1,026 1,561 (34) 1,041 1,702 (39)
Sales volumes
- boe/day (6:1) 725 787 (8) 758 868 (13)

Financial Results
(CDN $000's)
---------------------

Gross revenues $ 4,152 $ 4,088 2 $ 8,276 $ 8,720 (5)
Net income (loss) $ 328 $ (439) 175 $ 8 $ (864) 101
Funds flow from
operations(1) $ 2,086 $ 2,209 (6)$ 3,971 $ 5,012 (21)
Capital expenditures $ 8,499 $ 5,436 56 $11,438 $12,745 (10)
Working capital
(deficiency) $(8,721) $(6,011) (45)
Flow-through
obligations
(to year end) $ 1,475 $ 1,800 (18)
Total assets $53,479 $42,371 26

(1) Funds flow from operations is a non-GAAP measure that represents net
income plus depletion, depreciation and accretion, stock-based
compensation, future taxes and other non-cash expenses.


Operations: Grand Banks has devoted significant resources to the planning and implementing of the tie-ins and facilities needed to bring our Tower Creek 2-21-55-27 W5M Leduc gas discovery well on production. After the construction of a $14 million dehydration plant, and the completion of an 11 mile pipeline by a midstream company, the well was brought on production during the last week of June. Production levels for July and early August varied while commissioning operations at the new dehydration facilities and the scheduled summer maintenance program at the third party sour processing facilities were completed. The well is now producing steadily at gross raw rates in excess of 21 mmcf/d. Grand Banks 20.17% share of the well's production, after shrinkage, is currently about 500 boe/d (sales).

The second well at Tower Creek, a 4,500 meter Wabamun test located at 11-26-55-27-W5M, commenced drilling on June 16, 2007 and is currently in progress. Grand Banks expects the well to be finished drilling around November, 2007. Grand Banks is paying 22.13% of the costs of the well to earn a 19.47% working interest.

Since June, Grand Banks has drilled five horizontal development oil wells on its Sinclair Three Forks / Torquay light oil play along the Saskatchewan / Manitoba border. Completion operations on the first four wells are completed and the average initial well productivity has been about 75 bbls/d of oil per well. The fifth well is completed and will be on production within the week.

Field operations are completed on the first of two 3D seismic programs covering 22 square miles of Grand Banks' acreage in the area. The interpretation of this data will help to delineate additional locations on Grand Banks' 20,000 net acre land base on this play. We expect to drill at least four more horizontal wells this year. Total Company production, with all wells drilled to date completed and on production, is expected to be over 1,300 boe/d.

Finance and Budget:

Grand Banks had net debt (including working capital deficiency) of $8.7 million at the end of the second quarter. The Company currently has a $19.0 million line of credit with an Alberta financial institution. This credit facility, along with cash flow, is expected to fund a capital program of approximately $16.0 million during the second half of 2007.

Personnel:

Mr. George Hassler, Vice President, Exploration has decided to accept an offer from a large oil and gas company and will be leaving Grand Banks on August 31, 2007. George worked with Grand Banks since March, 2004 and was a key contributor to our 1,200% drill-bit growth in oil and gas production, taking the Company from about 100 boe/d to current levels. The land and plays that have been acquired during George's tenure have put Grand Banks in an excellent position for additional growth going forward, as these properties are further developed over the next few years.

Mr. Keith Wilford, Vice President, Operations, has also decided to leave Grand Banks at the end of August to pursue other opportunities. Keith joined Grand Banks in November 2004. Keith has also been a key element of our growth to date, including the co-ordination of the drilling and completion of wells, the construction of facilities and the operation of over 30 oil and gas wells. His contribution to the successful Tower Creek project, including the drilling and completion of the 2-21 well, negotiation of the processing arrangements and construction of the associated production facilities, has been particularly noteworthy.

Grand Banks, on behalf of all its stakeholders, is extremely grateful to both of these individuals and wishes them the best of success in their future endeavors.

We are pleased to announce that Mr. Tim Veenstra has agreed to join Grand Banks in the position of Vice President, Engineering, effective September 1, 2007. Tim is a Professional Engineer with over 25 years experience in oil and gas development, operations, exploration, exploitation, and business development. Tim worked with Stellarton Energy Corporation during the period from 1997 to 2001 when its production level grew from 700 to 4,500 boe/d, and has experience with both major companies and smaller private companies during his career. Grand Banks has also hired Mr. Chris Edwards in the position of Exploitation Engineer. Chris is an E.I.T. who graduated with a B.Sc. in Petroleum Engineering from the University of Alberta in 2004 and has worked in the energy industry in a variety of roles since 1997. Chris has a wide variety of experience in both field and office environments and worked with Harvest Energy Trust from 2003 to mid 2007, as an exploitation and production engineer.

To provide geological expertise and continuity as it develops its existing properties, and to identify new opportunities, Grand Banks has hired Mr. Steve Dryer, MSc, PGeol. Steve has over 25 years of diverse experience in the Western Canadian sedimentary basin as a working oil and gas geologist, his most recent experience being at a private junior oil and gas company, Trifecta Resources, Inc. Steve will be working for Grand Banks on a contract basis and will work with Grand Bank's contract geophysicist.

Grand Banks is currently in the process of reviewing potential candidates to assume the role of Vice President, Exploration. Given Grand Banks extremely favorable outlook and current industry conditions, we are confident that we can attract a highly qualified, proven oil and gas finder to round out our executive team.

Outlook:

Grand Banks production in the third quarter is expected to average over 1,200 boe/d, a record for the Company. Almost all of this production has resulted from drilling as opposed to acquisition. Our production is currently balanced about 55% light oil and 45% natural gas. The high netbacks from our light oil production resulted in top quartile Q2 operating netbacks of $44.00 per boe. Our 2-21 Tower Creek Leduc gas discovery is producing steadily at a current gross raw rate of over 21 mmcf/d, making it one of the most prolific gas wells drilled in Western Canada in 2006. Grand Banks has developed a very high quality, operated production base that will generate strong cash flow to help fund future growth. As the result of our production increases, and based upon our capital and operating forecast, we expect our Q2, 2007 cash flow of $0.06 per share (basic) to increase to $0.09 per share in Q3 and $0.12 per share in the last quarter of the year. The Company is well on track to meet or exceed its previously announced 2007 exit production target of 1,400 boe/d.

The Company's goal is to grow production to the 4,000 to 5,000 boe/d level while prudently balancing debt and equity to optimize growth in value per share. With the Tower Creek 2-21 discovery well now on stream and the Company's ongoing light oil development program underway, Grand Banks has now established a solid production base from which to grow. With our strong balance sheet, increasing cash flow, inventory of drilling locations and team of dedicated professionals we will continue with our strategy of disciplined capital allocation in pursuit of our overall goal of growth in value per share.

Grand Banks is listed on the TSX-Venture Exchange under the Symbol GBE.

FORWARD LOOKING STATEMENTS

This press release contains forward-looking statements including expectations of future production. These statements are based on current expectations that involve a number of risks and uncertainties, which could cause actual results to differ from those anticipated.

BOEs 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.

The TSX Venture Exchange does not accept responsibility for the adequacy or accuracy of this release.

Contact Information

  • Grand Banks Energy Corporation
    E.C. (Ted) McFeely
    Chairman, President & CEO
    (403) 262-8666
    (403) 262-8796 (FAX)
    or
    Grand Banks Energy Corporation
    John Kalman
    Vice President, Finance & CFO
    (403) 262-8666
    (403) 262-8796 (FAX)
    or
    Grand Banks Energy Corporation
    1600, 444 - 5th Avenue S.W.
    Calgary, Alberta T2P 2T8