Greenfields Petroleum Corporation
TSX VENTURE : GNF

Greenfields Petroleum Corporation

August 29, 2011 19:02 ET

Greenfields Petroleum Corporation Announces Financial Results for the Second Quarter Ended June 30, 2011

CALGARY, ALBERTA--(Marketwire - Aug. 29, 2011) -

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Greenfields Petroleum Corporation (the "Company" or "Greenfields") (TSX VENTURE:GNF), an independent exploration and production compa,ny with assets in Azerbaijan, announces the financial results for the second quarter ended June 30, 2011. Greenfields' functional and reporting currency is the United States dollar.

General Highlights
  • Approval of the Plan of Development ("POD") for rehabilitation and development of the Gum Deniz oil field and Bahar gas field in the Bahar Exploration, Rehabilitation Development and Production Sharing Agreement ("ERDPSA") was received from the State Oil Company of Azerbaijan ("SOCAR") on June 22, 2011.
  • Approval of the POD from SOCAR starts the performance period in which the Contractor Parties (Bahar Energy Limited and SOCAR Oil Affiliate) are required to increase, for a period of ninety consecutive days, production in the rehabilitation area within three years to 150% of the 2008 oil and natural gas production levels from the Gum Deniz oil field and the Bahar gas field. The gross 2008 production levels of the Gum Deniz oil field and the Bahar gas field were 1,233 bbl/d and 18.8 mmcf/d. Current gross production levels are approximately 1,263 bbl/d and 12.7 mmcf/d.
  • Two workover rigs are now in service, one each in the Bahar and Gum Deniz fields, using older- style rigs provided by SOCAR. Two newer western style workover rigs are scheduled to arrive and be placed in the fourth quarter of 2011 and in the first quarter of 2012. New well drilling operations are scheduled to start in the fourth quarter of 2011 with the arrival of a drilling rig.
Second Quarter 2011 Highlights
  • The Company's entitlement sales volumes from production for its net interest through Bahar Energy Limited in the Bahar ERDPSA averaged 395 bbl/d and 3.9 mmcf/d or 1,039 boe/d in the quarter and 421 bbl/d and 4.1 mmcf/d or 1,105 boe/d year to date.
  • Through its interest in Bahar Energy Limited the Company realized an average oil price $104.89 per barrel and $3.96 per mcf in the quarter and $102.82 per barrel and $3.96 per mcf year to date.

Operational Activities

In the third quarter work over operations began on well 209 in the Bahar gas field and well 464 in the Gum Deniz oil field using two locally sourced Azerbaijan (Soviet era) drilling rigs from SOCAR. Arrival of two new western style work over rigs is scheduled for the fourth quarter this year and first quarter next year. Once these rigs are in service it is anticipated that they will increase the operational efficiency and allow for the acceleration of the work over program in both Bahar and Gum Deniz fields. Platform modifications and upgrades are currently underway on platforms in the Gum Deniz oil field in anticipation of a drilling rig arriving in the fourth quarter of this year. If the proposed drilling program can be started in late fourth quarter, this would result in advancing the drilling program by six months over the original scheduled plan.

Bahar Energy Limited has undertaken several facility upgrades as well as started a refurbishing program on six offshore platforms located in the Bahar ERPDSA in preparation for both the work over and drilling programs. A procurement program is underway to acquire associated equipment and work over materials needed to support the two western style work over rigs and drilling rig. On June 22, 2011, SOCAR approved the Phase I Plan of Development for the Contract Rehabilitation and Development Area and since that point Bahar Energy Limited has been able to more quickly proceed to execute the Phase I program. The initial Phase I of the POD includes the drilling of 57 new development wells and completing 107 work overs in existing wells located in the Gum Deniz oil field and the Bahar gas field.

The Company, through its 33.33% affiliate Bahar Energy Limited, has contracted the acquisition of 140 kilometers of 2-D seismic. Approximately 70% of the 2-D program has been shot. It is anticipated that by year end the processing and shooting of this 2-D seismic program over the Bahar gas field and the Gum Deniz oil field will be complete.

In the Bahar 2 ("BE-2") exploration area of the ERDPSA, a 3-D seismic program is expected to begin in September. The contract for the 3-D seismic program is presently being negotiated and finalized. Data permitting, acquisition and processing in the BE-2 area for the 109 square kilometer program is expected to be completed in the second quarter of 2012. Should the 3-D seismic results confirm an attractive exploration target in the BE-2 exploration area, Bahar Energy plans to move one of the drilling rigs temporarily off the development drilling program in the Gum Deniz oil field to drill in the BE-2 area in 2013.

The Company's 33.33% estimated share of Bahar Energy Limited's current production is approximately 1,072 boe/d (400 bbl/d and 4.03 mmcf/d) net of the government's share. This represents a modest 2% decline over the second quarter entitlement sales volumes but it does not yet reflect any of the effects of the work over program started in the third quarter.

Selected Information

The selected information below is from the Company's Management Discussion & Analysis. The Company's complete financial statements as of and for the three and six months ended June 30, 2011 and 2010, with the notes thereto and the related Management's Discussion & Analysis can be found either on Greenfields' website at www.Greenfields-Petroleum.com or on SEDAR at www.sedar.com. All amounts below are in thousands of US dollars unless otherwise noted.

Three months ended Six months ended
($ Thousands, except as noted) June 30 , June 30 ,
2011 2010 2011 2010
Financial
Revenues 7,923 84 14,362 335
Net loss (703 ) (866 ) (1,534 ) (2,031 )
Per share, basic and diluted $ (0.05 ) $ (0.11 ) $ (0.10 ) $ (0.27 )
Operating
Average Entitlement Sales Volumes(1)
Oil/condensate (bbl/d) 395 - 421 -
Natural gas (mcf/d) 3,862 - 4,104 -
Barrel oil equivalent (boe/d) 1,039 - 1,105 -
Average Oil Price
Oil price ($/bbl) $ 104.89 - $ 102.82 -
Net back price ($/bbl) $ 100.81 - $ 98.92 -
Brent oil price ($/bbl) $ 117.01 $ 111.18
Natural gas price ($/mcf) $ 3.96 - $ 3.96 -
June 30 , December 31 , June 30 ,
2011 2010 2010
Capital Items
Cash and cash equivalents 30,295 47,977 3,596
Total Assets 63,968 57,316 5,010
Working capital 45,034 47,492 1,831
Shareholders' equity 49,971 50,457 3,177
(1) Daily volumes represent the Company's share of the contractor's entitlement sales volumes net of 5% compensatory petroleum and the government's share of profit petroleum. Current quarter volumes include prior year adjustments of (21) bbl/d and (199) mcf/d or (54) boe/d. Excluding adjustments current quarter entitlement sales volumes were 416 bbl/d and 4,061 mcf/d or 1093 boe/d.

About Greenfields Petroleum Corporation

Greenfields is a junior oil and natural gas corporation focused on the development and production of proven oil and gas reserves principally in the Republic of Azerbaijan. The Company plans to expand its oil and gas assets through further farm-ins and acquisitions of Production Sharing Agreements from foreign governments containing previously discovered but under developed international oil and gas fields, also known as "greenfields". More information about the Company may be obtained on the Greenfields website at www.greenfields-petroleum.com.

Forward Looking Statements

This press release contains forward-looking information that involves substantial known and unknown risks and uncertainties, most of which are beyond the control of Greenfields, including, without limitation, those listed under the headings "Risk Factors" in Greenfield's Annual Information Form, its Management Information Circular and similar headings in the Company's Management's Discussion & Analysis which may be viewed on www.sedar.com. Forward-looking information in this press release includes, but is not limited to, information concerning its future operations.

Should one or more of these risks or uncertainties materialize, or should assumptions underlying the forward-looking information prove incorrect, actual results, performance or achievements could vary materially from those expressed or implied by the forward-looking information. Accordingly, prospective investors should not place undue reliance on these forward-looking statements. These forward-looking statements are made as of the date of this press release and, other than as required by applicable securities laws, Greenfields does not assume any obligation to update or revise them to reflect new events or circumstances.

The term "boe" can be misleading, particularly if used in isolation. A barrel of oil equivalent ("boe") conversion ratio of 6 thousand cubic feet ("mcf") of gas to 1 barrel ("bbl") of crude oil is based on an energy content conversion method primarily applicable "at the burner" tip and does not represent a value equivalency at the wellhead.

Neither 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 release.

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