Grand Banks Energy Corporation
TSX VENTURE : GBE

Grand Banks Energy Corporation

August 17, 2005 16:00 ET

Grand Banks Announces Record Production, Cash Flow and Earnings in Q2, 2005

CALGARY, ALBERTA--(CCNMatthews - Aug. 17, 2005) -

NOT FOR DISTRIBUTION TO THE UNITED STATES NEWSWIRE SERVICES OR FOR DISSEMINATION TO THE UNITED STATES.

Grand Banks Energy Corporation (TSX VENTURE:GBE) (the 'Corporation') is pleased to announce its financial and operating results for the three months ended June 30, 2005.



Second quarter highlights:

- Increased Q2 average sales volumes to 1,123 barrels of oil equivalent
per day.
- Increased Q2 cash flow to $2.68 million, or $0.10 per share (basic)
- Increased bank lending facility to $5.4 million
- Ended the quarter with working capital of $4.5 million and no debt


Three months ended June 30
2005 2004 % Change
------------------------------------------------------------------------
Average Sales Volumes:
Natural gas - mcf/day 5,653 286 1,877
Crude oil & liquids - bbls/day 180 62 190
Average sales volumes - boe/day 1,123 116 868

Financial Results ($000's)
Gross revenues $ 4,685 $ 513 813
Net Income (loss) $ 1,018 $ (70) -
Funds generated from operations $ 2,681 $ 135 1,886
Additions to property and
equipment, net of proceeds $ 2,020 $ 1,097 84

June 30, 2005 December 31, 2004
--------------------------------------------
Working capital $ 4,499 $ 3,802
Total assets $ 31,492 $ 24,647

Common Shares (000's)
Outstanding 26,567 23,272
Fully diluted 29,810 27,346


Sales volumes during the three months ended June 30, 2005 averaged 1,123 boe per day and exited at 1,096 boe per day, compared to an average rate of 473 boe per day for the first quarter of 2005. Essentially all of the growth in volumes resulted from the drill bit.

During the second quarter of 2005, Grand Banks placed on production one gas well (0.5 net) drilled in the first quarter of 2005, which contributed approximately 150 boe per day net to the Company. One gas well (0.2 net) drilled in the first quarter of 2005 is standing waiting on a completion, which is scheduled for August 2005. Two other gas wells (0.4 net) drilled prior to the first quarter of 2005 remain suspended pending a review of the economics to tie them in or to work them over to improve productivity. Three oil wells (0.2 net), operated by a partner, are standing waiting on completion results or equipping decisions. Three wells (1.8 net) were drilled in the second quarter of 2005 by our partners and all three proved to be dry and were abandoned.

We have continued our leasing program in the Williston Basin in Manitoba and Southeast Saskatchewan. Grand Banks has acquired upwards of 15,000 net acres of land, a significant portion of which is proximal to numerous new oil discoveries including a large scale oil development that another company has undertaken for the production of light 38 degree API sweet Mississippian Bakken oil in Manitoba. Over 70 Bakken oil wells have been drilled by that company in Manitoba in the past 18 months. Grand Banks has contracted, until next spring, a drilling rig to begin exploratory step-outs and development drilling offsetting our discovery well in the play, located at 14-11-7-29 W1M. While unusually wet weather in the area delayed commencement of our drilling program, on August 3 the rig was finally able to move on to the first well of a 7 well light oil program (2 wells at Kingsford, Saskatchewan and 5 wells in Manitoba) with all but one well drilled at a 100% working interest. Subsequent drilling is proposed in the area, which will be firmed up as results of this program become determined. The play is especially attractive because of year round accessibility and relatively shallow drilling depths. Also, the high quality of this crude oil together with royalty holidays and low operating costs results in netbacks which are in the $50 to $60 per barrel range at current oil prices.

Grand Banks has received the results of a mid-year reserve update effective July 1, 2005, that was performed by Paddock Lindstrom & Associates Ltd., the independent engineering firm that also performed the year-end 2004 reserve report. During the six months ended June 30, 2005 the Company produced 144.7 Mboe. Compared to December 31, 2004, the results show that the Corporation's proven reserves, as the result of this production, asset sales, and revisions, decreased 34% from 761.2 to 505.1 Mboe. Probable reserves, on the other hand, increased 83%, from 359.3 to 656.3 Mboe. Total proved plus probable reserves increased by 4%, from 1,120 to 1,161 Mboe. The net present value (before tax) of the proved plus probable reserves, based on the Paddock Lindstrom price forecast of July 1, 2005, and inclusive of ARTC, has increased by 41%, from $18.95 million to $26.73 million. The reserve base of the Corporation will be exposed to very substantial increases from the drilling of up to 18 net wells during the second half of 2005.

Grand Banks will continue with our strategy of drilling high impact exploratory wells, while concurrently acquiring and drilling land that is prospective for light oil development. During July, we participated in the drilling of our first deep gas exploratory well at Fireweed B.C. Although this well did not encounter commercial volumes of gas, we earned a 12% working interest in an 8 section land block with future exploration potential. The second well of the 7 well deep gas program is currently drilling at Ferrier. A third well, at Saddle Hills, is expected to spud around September 1. Grand Banks expects to spud its Tower Creek (Harley) deep Leduc pinnacle test, located near Hinton, around mid-September. A deep prospect at Brazeau that targets Nisku gas, is expected to commence drilling in mid to late October. Grand Banks' share of the drilling costs in each of these prospects is 15%.

Grand Banks is also pleased to announce the promotion of Mr. Shawn McDonald, LL.B., to the position of Vice President of Land, and Corporate Secretary. Also, Mr. George Hassler, P. Geol., has been promoted to the position of Vice President of Exploration. Mr. David Blain, C.A. will become the Chief Financial Officer of the Corporation. Along with Mr. Keith Wilford, P. Eng., our Vice President of Operations, Grand Banks now has a full complement of committed, experienced professionals making up our management team.

We believe that the foundation is now in place to support the next phase of growth of the Corporation, in which we expect to increase our emphasis on development while maintaining a significant exploration program. While we expect some substantial declines from our high deliverability gas wells over the next few months, successful results from the first 2 phases of our oil drilling program are expected to consolidate our Corporate production in the 800 to 1,000 boe/d range, with further upside dependent upon success from our high impact gas wells. The Tower Creek (Harley) Leduc prospect alone, if successful, has the potential, based upon the production from analogous pools, to add over 500 boe/d of net sales volumes to Grand Banks Energy Corporation.

For a copy of Grand Bank's second quarter 2005 financial statements and management discussion and analysis please visit www.sedar.com.

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 BOE's 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 and Chief Executive Officer
    (403) 262-8666
    (403) 262-8796 (FAX)
    1600, 444 - 5th Avenue S.W.
    Calgary, Alberta T2P 2T8