Grey Wolf Exploration Inc.

Grey Wolf Exploration Inc.

May 11, 2009 09:56 ET

Grey Wolf Announces Summary First Quarter 2009 Results and Provides Update on Strategic Review Process

CALGARY, ALBERTA--(Marketwire - May 11, 2009) - Grey Wolf Exploration Inc. ("Grey Wolf" or the "Company") (TSX:GWE) today reported summary financial and operating results for the quarter ended March 31, 2009. The complete financial statements and management's discussion and analysis for the related periods are available at or the corporate website at

The first quarter of 2009 resulted in:

$000's except per share Three months ended
and boe amounts March 31, 2009 March 31, 2008 Percent Change

Oil and natural gas revenue $ 8,058 11,065 (27)
Funds flow from operations 2,527 5,075 (50)
Per share - basic and diluted 0.06 0.12 (50)
Net income (loss) (2,512) (1,871) 34
Per share - basic and diluted (0.06) (0.04) (50)
EBITDA 2,977 5,685 (48)
Operating netback ($ per boe) 16.69 33.02 (49)
Capital expenditures 4,683 17,554 (73)
Total debt, including working
capital deficiency 56,469 50,872 11
Total assets 171,460 162,611 5

Daily production
Crude oil - barrels per day 198 263 (25)
Natural gas - (Mcf per day) 13,076 9,716 35
NGLs - barrels per day 170 233 (27)
Average daily sales (boe per day) 2,547 2,115 20

Average prices (excluding
Oil and NGLs ($ per barrel) 43.19 82.57 (48)
Natural gas ($ per Mcf) 5.63 8.29 (32)
Per boe ($ per boe) 35.15 57.49 (39)

"Funds flow from operations", "Funds flow - basic", "Funds flow - diluted", and Earnings Before Interest, Taxes, Depreciation and Amortization "EBITDA" are not measures that have any standardized meaning prescribed by Canadian GAAP and are considered non-GAAP measures. Therefore, these measures may not be comparable to similar measures presented by other issuers. These measures have been presented in this media release in order to provide stakeholders and potential investors with additional information regarding the Company's liquidity and its ability to generate funds to finance its operations.

The calculation of barrels of oil equivalent ("boe") is based on a conversion ratio of six thousand cubic feet of natural gas to one barrel of oil to estimate relative energy content and does not represent a value equivalency - boes may be misleading, particularly if used in isolation.

Total production during the first quarter of 2009, averaged 2,547 boe per day, an increase of 20 percent from the 2,115 boe per day recorded in the same period of 2008. The increase in production was primarily due to additional production on-stream from two new horizontal wells at Pouce Coupe in late 2008 and a Slave Point well at Petitot in late February 2009.

During the first quarter of 2009, the Company recorded a net loss of $2.5 million compared to net loss of $1.9 million in the same period last year. Funds flow from operations decreased 50 percent to $2.5 million from $5.1 million in the same period in 2008. The increase in net loss and decrease in funds flow from operations were mainly due to a sharp decline in commodity prices.

The Company's first quarter production revenue from crude oil, natural gas liquids and natural gas sales decreased 27 percent to $8.1 million from $11.1 million for the same period in 2008. The decrease in production revenue was primarily due to the deterioration of commodity prices. During the quarter, the average price for natural gas was $5.63 per Mcf, a 32 percent reduction from the $8.29 per Mcf realized last year. Grey Wolf's realized oil and natural gas liquid price also decreased by 48 percent to $43.19 per boe compared to $82.57 per boe in 2008.

Commodity prices continued to deteriorate and funds flow from operations declined substantially in the first quarter of 2009. The Company has responded to this situation by limiting capital expenditures and selecting those that would immediately improve production and cash flows for the Company. The majority of the $4.7 million of capital expenditures were spent on the tie-in of the Petitot well, which was placed on production in late February 2009.

From April to December 2009, the Company has a fixed price derivative contract of 6,000 GJ/day at $5.90 per GJ (approximately $6.79 per Mcf based on the Company's realized heating value), which is well above the current level of gas prices. If market prices continue at their current level, this derivative contract will certainly improve the cash flows of the Company for the remainder of the year and the Company will dedicate the majority of the 2009 cash flows to the reduction of debt.

Based on the 2008 year end reserves, the bank increased Grey Wolf's revolving credit facility to $60.0 million on March 20, 2009. As at March 31, 2009, $51.2 million was drawn on the facility and the Company had a working capital deficiency of $5.3 million for total debt of $56.5 million.


The Company is continuing with its previously announced review of strategic alternatives under the direction of a Special Committee of independent directors and with the assistance of its financial advisors, CIBC World Markets Inc. and Peters & Co. Limited. The Company has opened a data room and provided information to a number of interested parties and is in the process of seeking transaction proposals. The Committee is endeavouring to determine a specific course of action by the end of this month but the timing and outcome of the process will be dependent on market conditions and the proposals which the Company receives.

Grey Wolf is an independent Alberta-based, junior oil and natural gas company involved in the development and production of natural gas and crude oil in the Western Canadian Sedimentary Basin. Its common shares trade on the Toronto Stock Exchange under the symbol "GWE".

Forward-Looking Statements - Certain information set forth in this document, including management's assessment of Grey Wolf's future plans and operations, contains forward-looking statements. By their nature, forward-looking statements are subject to numerous risks and uncertainties, some of which are beyond Grey Wolf's control, including the impact of general economic conditions, industry conditions, volatility of commodity prices, currency fluctuations, imprecision of reserve estimates, environmental risks, competition from other industry participants, the lack of availability of qualified personnel or management, stock market volatility and ability to access sufficient capital from internal and external sources. Readers are cautioned that the assumptions used in the preparation of such information, although considered reasonable at the time of preparation, may prove to be imprecise and, as such, undue reliance should not be placed on forward-looking statements. Grey Wolf's actual results, performance or achievement could differ materially from those expressed in, or implied by, these forward-looking statements. No assurance can be given that any of the events anticipated will transpire or occur, or if any of them do so, what benefits Grey Wolf will derive from them. Grey Wolf disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

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