Guide Exploration Ltd.
TSX : GO

Guide Exploration Ltd.

November 10, 2011 20:24 ET

Guide Exploration Ltd. Announces Third Quarter 2011 Financial Results, 2012 Capital Budget, Change in Third Party Engineer, and Addition of New Board Member

CALGARY, ALBERTA--(Marketwire - Nov. 10, 2011) - Guide Exploration Ltd. (TSX:GO) ("Guide" or the "Corporation") is pleased to announce the financial results for the third quarter 2011 and 2012 budget.

Guide Exploration Ltd. was incorporated under the Business Corporations Act (Alberta) on March 27, 2003 as Galleon Energy Inc. On November 1, 2011 the name of the Corporation was changed to Guide.

The unaudited interim consolidated financial statements of the Corporation for the three and nine month periods ended September 30, 2011 and the related management's discussion and analysis can be accessed on-line on SEDAR at www.sedar.com or on the Corporation's website at www.guidex.ca.

Third Quarter 2011 Financial Highlights

  • Revenues (before realized financial derivatives) of $44.0 million ($0.52 per basic share) and funds flow from operations of $26.8 million ($0.32 per basic share) were generated from average production of 11,698 BOE/d (34% oil and liquids and 66% natural gas) in Q3 2011. This compares to revenues (before realized financial derivatives) of $48.0 million ($0.57 per basic share), funds flow from operations of $20.1 million ($0.24 per basic share) and average production of 11,755 BOE/d (32% oil and liquids and 68% natural gas) in Q2 2011;
  • Revenues averaged $50.01/BOE which includes $9.10/BOE from realized commodity financial derivatives. Revenues, including realized commodity financial derivatives, were generated 58% from oil and liquids sales and 42% from natural gas sales;
  • Operating expenses averaged $11.79/BOE;
  • Including realized commodity financial derivatives, the operating netback was $31.05/BOE and the corporate netback was $24.89/BOE;
  • Earnings of $17.1 million ($0.20 per basic share) were recorded, which included a non-cash unrealized gain from financial derivatives of $15.4 million;
  • The Corporation drilled 14 (14.0 net) wells resulting in 12 (12.0 net) oil wells and 2 (2.0 net) natural gas wells, for a success rate of 100% during the quarter;
  • Capital of $36.1 million was invested in exploration and development activities, $6.9 million was spent to acquire properties and $12.7 million was received on the sale of properties;
  • Net debt was $167.9 million at September 30, 2011 including $149.4 million drawn on available bank credit facilities of $250 million;
  • At September 30, 2011, issued and outstanding Class A shares were 86,090,083, share options totaling 7,561,333 with an average exercise price of $4.05 and 2,300,000 warrants.

Subsequent to Third Quarter 2011

On November 4, 2011, the Corporation entered into agreements to issue 5,634,000 CEE flow through common shares at a price of $3.55 per share on a bought deal brokered basis and 1,515,152 CDE flow through common shares at a price of $3.30 per share on a non-brokered private placement. The combined proceeds of the financings are $25,000,700. Closing of the CDE financing is scheduled prior to November 18, 2011 and closing of the CEE financing is planned for November 24, 2011.

Letter to Our Shareholders

This marks the first quarterly report for Guide Exploration Ltd. ("Guide"). We come to Guide with full knowledge of our position in the market and of our need to begin to effect a quick turnaround and push to a growth oriented exploration company. Guide has a tremendous suite of assets centered in the high profile Peace River Arch/Deep Basin area of Alberta. Our near term goal is to ensure that through focused development in oil rich areas of our portfolio we meet and hopefully exceed our production and funds flow targets for 2012. In addition, we will be implementing an active exploration program in 2012 keying on our large acreage resource plays in the Peace area.

Third quarter production volumes were 11,698 Boe/d compared to 11,755 Boe/d reported in the second quarter of 2011. Our oil and liquids percentage of production increased to 33.9% from 31.6% as we shift our drilling focus to oil.

During the months of September and October, Guide purchased 1,022,100 Class A Shares ("shares") under its Normal Course Issuer Bid ("NCIB") on the open market through the facilities of the Toronto Stock Exchange ("TSX"). These shares were acquired at an average cost of $2.34 per share for a gross amount of $2.4 million and have subsequently been cancelled.

The company entered into a hedge on 500 Bbl/d of crude oil for the 2012 calendar year with a costless collar having a floor of WTI CAD $85/bbl and a ceiling of WTI CAD $90/bbl. This hedge, along with our other hedge positions, will ensure that we can carry out our 2012 capital budget.

Guide put a disposition package of non-core assets into the market through Scotia Waterous in September and we are currently reviewing bids on various properties.

Guide has engaged Sproule Associates Ltd. of Calgary as the third party engineering firm to evaluate Guide's 2011 year end reserves.

During the third quarter, Guide was an active driller with primary focus on our core Peace River area. We drilled 14 (14.0 net) wells resulting in 12 (12.0 net) oil wells and 2 (2.0 net) natural gas wells, for a success rate of 100% during the quarter.

Guidance for 2012 targets average production of 12,700 to 13,300 Boe/d with an increased weighting to oil and liquids. The capital development budget is expected to be in the range of $125 to $130 million with funds flow expectations of $110 to $115 million, based on average commodity prices of WTI US $85/bbl and $3.50/GJ AECO and currency exchange of US $0.97 per Canadian dollar.

We will be funding a very active exploration program with our recently announced flow through share offering of $20 million. Production volumes and reserves for these exploration initiatives are not reflected in the guidance. In total, our capital budget for both exploration and development is expected to be approximately $150 million.

The Board of Directors is pleased to announce that Jeffery E. Errico of Calgary, Alberta, a professional engineer with extensive senior management experience in the Western Canadian Sedimentary Basin, has agreed to join the Board of Directors effective immediately.

The Board of Directors also approved the formation of a Health, Safety & Environment committee.

On behalf of the Board of Directors and employees of Guide Exploration, we wish to thank you for your support. We will endeavor to make Guide Exploration a dynamic and growing explorer focused in Western Canada.

William E. Andrew, Chair, Chief Executive Officer

Dale A. Miller, President

Calgary, Alberta

November 10, 2011

FINANCIAL AND OPERATING HIGHLIGHTS
Three months ended September 30 Nine months ended September 30
($000s except per share and per unit amounts) 2011 2010 2011 2010
Financial
Petroleum and natural gas revenue 44,026 44,279 140,154 161,836
Funds flow from operations 1 26,789 20,425 73,746 79,251
Per share – basic 0.32 0.24 0.88 0.93
Per share – diluted 0.32 0.24 0.88 0.93
Net income (loss) 17,132 577 14,340 33,972
Per share – basic 0.20 0.01 0.17 0.40
Per share – diluted 0.20 0.01 0.17 0.40
Capital expenditures 36,140 41,055 100,199 102,819
Total assets 898,110 886,847 898,110 886,847
Net dispositions of oil and gas properties 5,835 416 6,521 114,362
Net debt 1,2 167,870 139,732 167,870 139,732
Total non-current financial liabilities 13,693 11,194 13,693 11,194
Shareholders' equity 602,240 614,468 602,240 614,468
Weighted average shares outstanding
Basic 84,364,096 84,869,236 84,109,494 85,036,467
Diluted 84,364,096 84,869,236 84,109,494 85,156,588
Operating
Average daily production
Light oil (Bbl/d) 2,343 2,517 2,557 3,018
Heavy oil (Bbl/d) 1,245 1,009 1,020 1,092
NGLs (Bbl/d) 374 433 363 499
Natural gas (Mcf/d) 46,416 59,186 49,333 63,662
Total (BOE/d) 11,698 13,823 12,162 15,219
Average selling prices 3
Light oil ($/Bbl) 80.14 71.26 86.25 73.94
Heavy oil ($/Bbl) 69.16 58.13 69.58 60.42
NGLs ($/Bbl) 66.79 49.48 69.54 53.40
Natural gas ($/Mcf) 3.87 3.75 3.99 4.35
Total ($/BOE) 40.91 34.82 42.21 38.95
Average selling prices, after financial derivative contracts 4
Crude oil ($/Bbl) 87.47 65.46 81.50 68.68
Natural gas ($/Mcf) 5.30 4.32 5.33 5.00

1 See "Non-GAAP Measurements"

2 Net debt includes bank indebtedness and working capital, but excludes financial derivatives and other liability

3 The average prices reported are prior to financial derivatives and transportation charges

4 The average prices reported are after financial derivatives and prior to transportation charges

Results of Operations

Comparative financial results for the quarter are as follows:

Three months ended September 30 2011 2010
1,076,198 BOE 1,271,739 BOE
($000s) $/BOE $/BOE
Revenues 44,026 40.91 44,279 34.82
Realized gain on financial derivatives 9,795 9.10 2,420 1.90
Royalties (8,290 ) (7.70 ) (8,293 ) (6.52 )
GCA1 2,612 2.43 3,013 2.36
Transportation costs (2,041 ) (1.90 ) (2,110 ) (1.66 )
Operating costs (12,689 ) (11.79 ) (12,978 ) (10.20 )
Net 33,413 31.05 26,331 20.70
G&A (4,665 ) (4.34 ) (3,930 ) (3.09 )
Restructuring costs - - (59 ) (0.05 )
Interest costs (1,874 ) (1.74 ) (1,849 ) (1.45 )
Exploration expenses (23 ) (0.02 ) - -
Capital and other taxes (62 ) (0.06 ) (68 ) (0.05 )
Funds flow from operations2 26,789 24.89 20,425 16.06
Nine months ended September 30 2011 2010
3,320,259 BOE 4,154,746 BOE
($000s) $/BOE $/BOE
Revenues 140,154 42.21 161,836 38.95
Realized gain on financial derivatives 18,040 5.43 9,184 2.21
Royalties (26,975 ) (8.12 ) (35,505 ) (8.54 )
GCA1 5,516 1.66 9,628 2.32
Transportation costs (6,304 ) (1.90 ) (6,721 ) (1.62 )
Operating costs (38,548 ) (11.61 ) (38,793 ) (9.34 )
Net 91,883 27.67 99,629 23.98
G&A (11,749 ) (3.54 ) (10,561 ) (2.54 )
Restructuring costs - - (1,242 ) (0.30 )
Interest costs (5,777 ) (1.74 ) (8,441 ) (2.03 )
Exploration expenses (439 ) (0.13 ) - -
Capital and other taxes (172 ) (0.05 ) (134 ) (0.04 )
Funds flow from operations2 73,746 22.21 79,251 19.07

1 GCA means Gas Cost Allowance

2 See "Non-GAAP Measurements"

Petroleum and Natural Gas Revenue (before royalties)

Three months ended September 30 2011 2010
($000s) % %
Light oil 17,219 39 16,417 37
Heavy oil 7,933 18 5,397 12
NGLs 2,298 5 1,971 5
Natural gas 16,501 38 20,427 46
Royalty income 75 - 67 -
Total 44,026 100 44,279 100
Nine months ended September 30 2011 2010
($000s) % %
Light oil 60,113 43 60,668 38
Heavy oil 19,370 14 18,016 11
NGLs 6,892 5 7,275 4
Natural gas 53,563 38 75,503 47
Royalty income 216 - 374 -
Total 140,154 100 161,836 100

Revenues for the three months ended September 30, 2011 were $44.0 million, compared to $44.3 million during the same period of the prior year. Crude oil revenues increased $3.3 million, reflecting higher crude oil prices in 2011. Gas revenues decreased by $3.9 million in Q3 2011 due to decreased production volumes.

Production

Three months ended September 30 Nine months ended September 30
2011 2010 2011 2010
% % % %
Light oil (Bbls/d) 2,343 20 2,517 18 2,557 21 3,018 20
Heavy oil (Bbls/d) 1,245 11 1,009 7 1,020 8 1,092 7
NGLs (Bbls/d) 374 3 433 3 363 3 499 3
Natural gas (Mcf/d) 46,416 66 59,186 72 49,333 68 63,662 70
BOE/d (6:1) 11,698 100 13,823 100 12,162 100 15,219 100

Average production was 11,698 BOE/d for the third quarter 2011, 15% lower than the average production of 13,823 BOE/d in the third quarter 2010. By product, production volumes changed as follows: light oil production decreased by 7%, heavy oil production increased by 23%, natural gas liquids production decreased by 14% and natural gas production decreased by 22%.

Crude oil production during the third quarter of 2011 reflects a reclassification of 197 Bbls/d from light oil to heavy oil, relating to the six months ended June 30, 2011.

Commodity Pricing and Marketing

Petroleum products are sold to major Canadian marketers at spot reference prices or prices subject to commodity contracts based on US WTI for crude oil and AECO for natural gas. As a means of managing the risk of commodity price volatility, Guide has entered into several natural gas and crude oil financial contracts.

The Corporation has the following financial contracts in place as at September 30, 2011:

Natural Gas:
January 1, 2010 - December 31, 2011 5,000 GJ/d CDN $5.85/GJ
January 1, 2010 - December 31, 2011 5,000 GJ/d CDN $5.75/GJ
January 1, 2011 - December 31, 2011 20,000 GJ/d CDN $5.20/GJ
April 1, 2011 - December 31, 2011 5,000 GJ/d CDN $5.60/GJ
January 1, 2012 - December 31, 2012 22,500 GJ/d CDN $5.00/GJ
Crude Oil:

Fixed Price:
January 1, 2011 – December 31, 2011 1,000/Bbl/d WTI CDN $84.15/Bbl
January 1, 2011 – December 31, 2011 500 Bbl/d WTI CDN $92.00/Bbl
Costless Collars:
January 1, 2011 – December 31, 2011 1,000 Bbl/d WTI CDN $77.10-$90.00/Bbl
Other:
January 1, 2012 – December 31, 2012 527 Bbl/d WTI US $85.00/Bbl Put
January 1, 2012 – December 31, 2012 1,000 Bbl/d WTI US $85.00/Bbl Put
January 1, 2013 – December 31, 2013 1,527 Bbl/d WTI US $85.00/Bbl Call
January 1, 2013 – December 31, 2013 500 Bbl/d WTI US$ 85.00/Bbl Swaption
January 1, 2013 – December 31, 2013 73 Bbl/d WTI US $100.00/Bbl Call
January 1, 2014 – December 31, 2014 980 Bbl/d WTI US$ 85.00/Bbl Swaption

In the third quarter of 2011, Guide recorded realized gains of $9.8 million on financial contracts, compared to a $2.4 million gain realized in the third quarter of 2010. Spot prices for natural gas continued to be substantially lower than the prices Guide has secured using financial contracts. During the third quarter of 2011, oil contracts for 2012 were unwound for which a cash payment of $3.9 million was received.

Based on the mark to market value at September 30, 2011, unrealized gains on financial contracts of $15.4 million were recorded in the third quarter of 2011, compared to unrealized gains of $0.4 million in Q3 2010. If the contracts were unwound at September 30, 2011, the Corporation would receive a net amount of $11.3 million.

Subsequent to September 30, 2011, the Corporation entered into the following financial derivative transaction:

Crude Oil:
Costless collar:
January 1, 2012 – December 31, 2012 500 Bbl/d WTI CDN $85.00 - $90.00/Bbl

Crude Oil Prices

Three months ended September 30 2011 2010
$000s $/Bbl $000s $/Bbl
Crude oil 25,192 76.32 21,898 67.50
Realized financial contracts 3,679 11.15 (661 ) (2.04 )
Transportation (728 ) (2.21 ) (491 ) (1.51 )
Net crude oil 28,143 85.26 20,746 63.95
Nine months ended September 30 2011 2010
$000s $/Bbl $000s $/Bbl
Crude oil 79,590 81.50 78,911 70.33
Realized financial contracts (2 ) - (1,846 ) (1.65 )
Transportation (2,086 ) (2.13 ) (1,433 ) (1.28 )
Net crude oil 77,502 79.37 75,632 67.40

Natural Gas Prices

Three months ended September 30 2011 2010
$000s $/Mcf $000s $/Mcf
Natural gas 16,536 3.87 20,410 3.75
Realized financial contracts 6,120 1.43 3,119 0.57
Transportation (1,302 ) (0.30 ) (1,615 ) (0.30 )
Net natural gas 21,354 5.00 21,914 4.02
Nine months ended September 30 2011 2010
$000s $/Mcf $000s $/Mcf
Natural gas 53,673 3.99 75,650 4.35
Realized financial contracts 18,037 1.34 11,345 0.65
Transportation (4,173 ) (0.31 ) (5,283 ) (0.30 )
Net natural gas 67,537 5.02 81,712 4.70

NGL Prices

Three months ended September 30 2011 2010
$000s $/Bbl $000s $/Bbl
NGL 2,298 66.79 1,971 49.48
Transportation (11 ) (0.32 ) (4 ) (0.08 )
Net NGL 2,287 66.47 1,967 49.40
Nine months ended September 30 2011 2010
$000s $/Bbl $000s $/Bbl
NGL 6,891 69.54 7,275 53.40
Transportation (45 ) (0.46 ) (5 ) (0.03 )
Net NGL 6,846 69.08 7,270 53.37

Performance by Property

Three months ended September 30
2011 2010
Production Operating netbacks/
BOE 1
Funds
from operations2
Production Operating netbacks/
BOE1
Funds
from operations2
BOE/d % $ % BOE/d % $ %
Peace 6,764 58 21.07 62 7,753 56 17.89 62
Smoky 2,607 22 17.43 20 3,236 24 16.78 24
Cherhill 993 9 23.63 10 1,025 7 14.82 7
Worsley 492 4 3.39 1 882 6 5.53 2
Other 842 7 18.08 7 927 7 12.62 5
11,698 100 19.52 100 13,823 100 16.26 100
Nine months ended September 30
2011 2010
Production Operating netbacks/
BOE 1
Funds
from operations2
Production Operating netbacks/
BOE1
Funds
from operations2
BOE/d % $ % BOE/d % $ %
Peace 6,855 56 21.63 59 7,698 51 18.33 48
Smoky 2,925 24 19.78 23 3,506 23 19.02 23
Cherhill 964 8 24.82 10 1,100 7 19.77 7
Worsley 591 5 8.51 2 921 6 8.18 3
Other 827 7 18.33 6 1,994 13 28.93 19
12,162 100 20.58 100 15,219 100 19.37 100

1 Operating netbacks/BOE exclude GCA and hedging gains and losses, and are calculated by subtracting royalties, operating costs, and transportation from revenues and dividing the result by the average production for the period

2 See "Non-GAAP Measurements"

Peace Area - Includes Normandville, Girouxville, and Eaglesham

Peace area production averaged 6,764 BOE/d (67% natural gas and 33% oil and NGLs) during the third quarter of 2011, a 13% decrease from 7,753 BOE/d (73% natural gas and 27% oil and NGL) during the same period in 2010. The area contributed 62% to total funds from operating activities in Q3 2011 based on 58% of production volumes.

The Normandville/Girouxville Montney project was initially developed using vertical wells. However, as technology evolved to allow effective stimulation of horizontal wellbores, Guide implemented horizontal development in 2008. To date, Guide has drilled over 80 horizontal wells in the project area.

During the second half of 2010 Guide confirmed the viability of oil in this Montney fairway. This oil project was further advanced over the first three quarters of 2011 with the drilling of thirteen Montney oil wells. Guide plans to continue with the development of this pool over the remainder of 2011 and into 2012. Facility modification and pipeline relicensing was completed in September 2011. Further facility expansion in 2012 will be required to accommodate future growth.

A total of 10 (10.0 net) wells were drilled within the Peace area in the third quarter of 2011. Up to a total of 12 Montney oil wells are planned for Q4 2011.

Smoky Area – Includes Kakut

The Smoky area production averaged 2,607 BOE/d (84% natural gas and 16% oil and NGLs) during Q3 2011, representing a 19% decrease from 3,236 BOE/d in Q3 2010 (86% natural gas and 14% oil and NGLs).

The Corporation plans to continue drilling on this project at a measured pace and to closely monitor results. One (1.0 net) well was drilled within the Smoky area during the third quarter. One (1.0 net) operated well is planned for Q4 2011.

Cherhill Area - Includes Alexis and St Anne

Production in the Cherhill area averaged 993 BOE/d in Q3 2011 (37% natural gas and 63% oil and NGLs), a decrease of 3% from the third quarter of 2010 (34% natural gas and 66% oil and NGLs). In Q3 2011, the Cherhill area contributed 10% of the funds from operations and 9% of production volumes.

Assets at Alexis/St. Anne continue to be exploited and optimized with 2 (2.0 net) horizontal oil wells drilled during the third quarter of 2011.

Royalties

Three months ended September 30 2011 2010
($000s, except as indicated)
Crown 6,265 6,478
Freehold 1,190 996
GORR and other 835 819
Gross royalties 8,290 8,293
GCA (2,612 ) (3,013 )
Net royalties 5,678 5,280
% of revenue 18.8 18.7
% of revenue net of GCA 12.9 11.9
Nine months ended September 30 2011 2010
($000s, except as indicated)
Crown 21,218 28,994
Freehold 3,112 3,397
GORR and other 2,645 3,114
Gross royalties 26,975 35,505
GCA (5,516 ) (9,628 )
Net royalties 21,459 25,877
% of revenue 19.2 21.9
% of revenue net of GCA 15.3 16.0

Gross royalties were 18.8% of revenues for the third quarter of 2011, compared to 18.7% for the same period in 2010. By product, gross royalties were 18.1% for light oil, 15.4% for natural gas, 23.9% for heavy oil, and 31.7% for liquids. For the third quarter of 2010, gross royalties were 15.7% for light oil, 19.0% for natural gas, 22.9% for heavy oil, and 30.3% for liquids.

Total royalties, net of GCA, were 12.9% for the third quarter of 2011, compared to 11.9% for the same period in 2010.

The gross royalty rate for light oil increased in Q3 2011 as compared to Q3 2010, reflecting higher oil prices in 2011. The gross royalty rate for natural gas decreased in Q3 2011 due to lower production volumes.

Under the Drilling Royalty Credit ("DRC") incentive program, the Alberta Government applied up to $200 per meter for wells spud during the period April 1, 2009 to March 31, 2011 against net crown royalties payable. As at September 30, 2011, the Corporation had recorded drilling credits in total of $23.4 million as a reduction to property and equipment. Of the total $23.4 million in drilling credits recorded, $23.3 million had been received at September 30, 2011.

Gain on Disposal of Assets

Any gain or loss on the disposal of property and equipment, including oil and natural gas properties, determined as the difference between the net disposal proceeds and the carrying amount of the asset, is recognized in the statement of earnings. During the nine months ended September 30, 2011 gains on disposal of assets of $3.5 million were recognized (September 30, 2010 - $nil).

During the three months ended September 30, 2011, the Corporation disposed of properties in the Western Montney area of British Columbia for net proceeds of $12.7 million, resulting in a gain on disposal of $2.9 million.

Operating Costs

Three months ended September 30 2011 2010
Production Operating Costs Production Operating Costs
% % $/BOE % % $/BOE
Peace 58 55 11.13 56 53 9.65
Smoky 22 13 7.14 24 10 4.40
Cherhill 9 10 13.79 7 12 15.86
Worsley 4 7 19.65 6 9 14.63
Other 7 15 24.54 7 16 24.64
100 100 11.79 100 100 10.20
Nine months ended September 30 2011 2010
Production Operating Costs Production Operating Costs
% % $/BOE % % $/BOE
Peace 56 55 11.27 51 52 9.62
Smoky 24 15 7.34 23 11 4.59
Cherhill 8 10 14.80 7 11 13.83
Worsley 5 6 14.41 6 9 14.03
Other 7 14 23.81 13 17 11.92
100 100 11.61 100 100 9.34

Operating costs were $11.79/BOE during the third quarter of 2011, an increase of 16% from $10.20/BOE for the third quarter of 2010. This increase was caused by a higher weighting to oil and a drop in daily production volumes.

General and Administration Expenses

Three months ended September 30 2011 2010
($000s) $/BOE $/BOE
Gross 6,057 5.63 5,323 4.18
Capitalized overhead (879 ) (0.81 ) (1,021 ) (0.80 )
Overhead recoveries (513 ) (0.48 ) (372 ) (0.29 )
Net 4,665 4.34 3,930 3.09
Nine months ended September 30 2011 2010
($000s) $/BOE $/BOE
Gross 15,402 4.64 14,504 3.49
Capitalized overhead (2,339 ) (0.70 ) (2,515 ) (0.61 )
Overhead recoveries (1,314 ) (0.40 ) (1,428 ) (0.34 )
Net 11,749 3.54 10,561 2.54

Gross G&A expenses increased $734,000 or 14% from Q3 2010 to Q3 2011, due primarily to corporate restructuring.

For the three months ended September 30, 2011 gross G&A expenses by category were: salary and employee – 67%, office – 14%, consulting – 6%, computer – 5%, shareholder costs – 1%, audit, engineering and legal – 4%, and corporate – 3%.

Capital Expenditures

($000s )
Property & equipment balance at December 31, 2010 816,647
Additions to property and equipment 100,199
Disposals of property and equipment (10,023 )
Acquisitions of property and equipment 7,007
Net decommissioning liability additions (disposals) (31 )
Capitalized share-based compensation 696
Derecognition expense (6,651 )
Non-monetary transactions 123
Depletion, depreciation and other (58,663 )
Property & equipment balance at September 30, 2011 849,304
Three months ended September 30 2011 2010
($000s) % %
Land 2,061 6 1,854 4
Geological and geophysical 360 1 660 2
Drilling and completion 25,139 69 30,369 74
Plant and facilities 8,750 24 7,815 19
Inventory (239 ) (1 ) 309 1
Other assets 69 1 48 -
Capital expenditures 36,140 100 41,055 100
Nine months ended September 30 2011 2010
($000s) % %
Land 10,572 11 6,028 6
Geological and geophysical 1,447 1 1,191 1
Drilling and completion 69,517 70 77,045 75
Plant and facilities 18,312 18 18,066 18
Inventory 265 - 410 -
Other assets 86 - 79 -
Capital expenditures 100,199 100 102,819 100

Capital expenditures during the third quarter of 2011 were $36.1 million. Drilling and completions expenditures comprised 69% of capital activity. The Corporation drilled 14 (14.0 net) wells, resulting in 2 (2.0 net) natural gas wells and 12 (12.0 net) oil wells, for a success rate of 100% during the quarter.

On August 4, 2011, the Corporation purchased interests in certain natural gas properties in the Kakut area for cash consideration of approximately $6.9 million including closing adjustments.

On August 31, 2011, properties in the Western Montney area of British Columbia were disposed of for net proceeds of $12.7 million, resulting in a gain on disposal of $2.9 million.

GUIDE EXPLORATION LTD.
(formerly Galleon Energy Inc.)
Consolidated Statements of Financial Position
(unaudited)

($000's)

September 30, 2011



December 31, 2010
January 1, 2010
ASSETS
CURRENT
Accounts receivable 19,923 28,829 41,270
Deposits and prepaid expenses 3,641 3,361 6,190
Fair value of financial derivatives 20,996 20,815 4,241
44,560 53,005 51,701
Fair value of financial derivatives 4,246 - -
Property and equipment 849,304 816,647 881,937
Goodwill - - 25,333
898,110 869,652 958,971
LIABILITIES
CURRENT
Accounts payable and accrued liabilities 42,047 49,369 55,531
Financing lease - - 1,545
Bank loan 149,387 135,682 217,243
Other liability - - 3,775
Fair value of financial derivatives 213 6,411 13,789
191,647 191,462 291,883
Decommissioning liabilities 41,750 39,947 38,228
Fair value of financial derivatives 13,693 14,980 -
Deferred income taxes 48,780 43,257 49,245
295,870 289,646 379,356
SHAREHOLDERS' EQUITY
Share capital 590,277 586,626 595,559
Contributed surplus 44,824 40,581 30,174
Retained earnings (deficit) (32,861 ) (47,201 ) (46,118 )
602,240 580,006 579,615
898,110 869,652 958,971
GUIDE EXPLORATION LTD.
(formerly Galleon Energy Inc.)
Consolidated Statements of Earnings and Comprehensive Income
(unaudited)
Three months ended Nine months ended
September 30 September 30
($000s, except per share amounts) 2011 2010 2011 2010
REVENUE
Petroleum and natural gas revenue 44,026 44,279 140,154 161,836
Royalties, net of gas cost allowance (5,678 ) (5,280 ) (21,459 ) (25,877 )
Realized gain on financial derivatives 9,795 2,420 18,040 9,184
Unrealized gains on financial derivatives 15,381 428 11,912 18,005
Gain on disposal of assets 2,879 - 3,505 -
Other income - - 123 -
66,403 41,847 152,275 163,148
EXPENSES
Operating 12,689 12,978 38,548 38,793
Transportation 2,041 2,110 6,304 6,721
General and administration 4,665 3,930 11,749 10,561
Restructuring costs - 59 - 1,242
Share-based compensation 335 283 1,880 3,469
Interest 1,874 1,849 5,777 8,441
Exploration expenses 23 - 439 -
Accretion 792 746 2,410 2,238
Derecognition expenses 1,812 2,041 6,651 6,503
Depletion and depreciation 19,023 18,255 58,663 57,960
43,254 42,251 132,421 135,928
Earnings (loss) before taxes 23,149 (404 ) 19,854 27,220
Income taxes
Capital and other taxes 62 68 172 134
Deferred income tax (recovery) 5,955 (1,049 ) 5,342 (6,886 )
6,017 (981 ) 5,514 (6,752 )

NET EARNINGS AND COMPREHENSIVE INCOME
17,132 577

14,340
33,972
NET EARNINGS AND COMPREHENSIVE
INCOME PER SHARE
Basic 0.20 0.01 0.17 0.40
Diluted 0.20 0.01 0.17 0.40
Weighted average Class A shares – basic 84,364,096 84,869,236 84,109,494 85,036,467
– diluted 84,364,096 84,869,236 84,109,494 85,156,588

GUIDE EXPLORATION LTD.
(formerly Galleon Energy Inc.)
Consolidated Statement of Changes in Equity
(unaudited)




($000s)


Share Capital


Contributed Surplus

Retained Earnings (Deficit
)


Total
Balance, January 1, 2010 595,559 30,174 (46,118 ) 579,615
Share-based compensation - 6,380 - 6,380
Options exercised 460 (123 ) - 337
Shares purchased and cancelled (8,304 ) 4,150 - (4,154 )
Tax deduction of share issue costs (1,089 ) - - (1,089 )
Comprehensive loss - - (1,083 ) (1,083 )
Balance, December 31, 2010 586,626 40,581 (47,201 ) 580,006
Share-based compensation - 2,576 - 2,576
Tax deduction of share issue costs (197 ) - (197 )
Issue of common shares 6,415 6,415
Shares purchased for cancellation (2,567 ) 1,667 - (900 )
Comprehensive income 14,340 14,340
Balance, September 30, 2011 590,277 44,824 (32,861 ) 602,240

GUIDE EXPLORATION LTD.
(formerly Galleon Energy Inc.)
Consolidated Statement of Changes in Equity
(unaudited)




($000s)


Share
Capital


Contributed
Surplus

Retained Earnings (Deficit
)


Total
Balance, January 1, 2010 595,559 30,174 (46,118 ) 579,615
Share-based compensation - 4,974 - 4,974
Options exercised 367 (99 ) - 268
Shares purchased and cancelled (7,065 ) 3,521 - (3,544 )
Tax deduction of share issue costs (817 ) - - (817 )
Comprehensive income - - 33,972 33,972
Balance, September 30, 2010 588,044 38,570 (12,146 ) 614,468
GUIDE EXPLORATION LTD.
(formerly Galleon Energy Inc.)
Consolidated Statements of Cash Flows
(unaudited)
Three months ended Nine months ended
September 30 September 30
($000s) 2011 2010 2011 2010
Cash provided by (used in):
OPERATING ACTIVITIES
Net earnings 17,132 577 14,340 33,972
Items not requiring cash:
Deferred income tax (recovery) 5,955 (1,049 ) 5,342 (6,886 )
Depletion and depreciation 19,023 18,255 58,663 57,960
Derecognition expenses 1,812 2,041 6,651 6,503
Accretion 792 746 2,410 2,238
Share-based compensation 335 283 1,880 3,469
Other income - - (123 ) -
Gain on disposal of assets (2,879 ) - (3,505 ) -
Unrealized gain on financial derivatives (15,381 ) (428 ) (11,912 ) (18,005 )
Abandonment costs (372 ) (130 ) (576 ) (391 )
Change in non-cash working capital (905 ) 5,403 725 3,773
25,512 25,698 73,895 82,633
FINANCING ACTIVITIES
Issue of common shares, net of costs 6,399 - 6,399 268
Repurchase of common shares (900 ) (3,544 ) (900 ) (3,544 )
Financing lease payments - (1,135 ) - (1,545 )
Bank loan (repayment) (4,411 ) 10,564 13,705 (94,960 )
1,088 5,885 19,204 (99,781 )
INVESTING ACTIVITIES
Additions to property and equipment (36,140 ) (41,055 ) (100,199 ) (102,819 )
Acquisitions of oil and gas properties (6,888 ) (684 ) (7,007 ) (17,650 )
Disposals of oil and gas properties 12,723 1,100 13,528 132,012
Change in non-cash working capital 3,705 9,056 579 5,605
(26,600 ) (31,583 ) (93,099 ) 17,148
CHANGE IN CASH - - - -
CASH, BEGINNING AND END OF PERIOD - - - -
SUPPLEMENTAL INFORMATION
Cash interest paid 1,886 1,309 6,077 8,049
Cash taxes paid 50 93 112 279

Guide has approximately 85.3 million shares issued and outstanding which trade on the Toronto Stock Exchange under the symbol "GO".

ADVISORIES

Forward Looking Statements: Certain information regarding Guide Exploration Ltd. in this news release including management's assessment of future plans and operations, drilling plans, production estimates, capital expenditures and the allocation thereof, 2012 funds flow from operations and the assumptions relating thereto. Forward looking statements necessarily involve 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, capital expenditure costs, including drilling, completion and facilities costs, unexpected decline rates in wells, wells not performing as expected, delays resulting from or inability to obtain required regulatory approvals and ability to access sufficient capital from internal and external sources. As a consequence, actual results may differ materially from those anticipated in the forward-looking statements. The forward-looking statements contained herein are made as at the date hereof 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, events or otherwise, except as may be required by applicable securities laws.

Included herein is an estimate of Galleon's 2012 funds flow from operations and is based on the various assumptions as to production levels, commodity prices and other assumptions stated herein. To the extent such estimate constitutes future oriented financial information or a financial outlook, they were approved by management of Galleon on November 10, 2011, and such future oriented financial information or financial outlook is included herein to provide readers with an understanding of Galleon's anticipated funds flow from operations based on the assumptions described herein estimated and readers are cautioned that the information may not be appropriate for other purposes.

Additional information on these and other factors that could affect Guide's operations and financial results are included in reports on file with Canadian securities regulatory authorities and may be accessed through the SEDAR website (www.sedar.com), at Guide's website (www.guidex.ca). Furthermore, the forward looking statements contained in this news release are made as at the date of this news release and Guide 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

This news release contains terms commonly used in the oil and gas industry, such as funds flow from operations, funds flow from operations per share, and operating netback. These terms are not defined by GAAP and should not be considered an alternative to, or more meaningful than, cash provided by operating activities or net earnings as determined in accordance with Canadian GAAP as an indicator of Guide's performance. Management believes that in addition to net earnings, funds flow from operations is a useful financial measurement which assists in demonstrating the Corporation's ability to fund capital expenditures necessary for future growth or to repay debt. Guide's determination of funds flow from operations may not be comparable to that reported by other companies. All references to funds flow from operations throughout this news release are based on cash flow from operating activities before changes in non-cash working capital and abandonment expenditures. The Corporation calculates funds flow from operations per share by dividing funds flow from operations by the weighted average number of Class A shares outstanding. Guide uses the term net debt. 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.

BOES

Disclosure provided herein in respect of barrels of oil equivalent (boe) 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.

Contact Information

  • Guide Exploration Ltd.
    William E. Andrew
    Chair, Chief Executive Officer
    (403) 261-6012

    Guide Exploration Ltd.
    Dale A. Miller
    President
    (403) 261-6012

    Guide Exploration Ltd.
    Shivon Crabtree
    Vice President and Chief Financial Officer
    (403) 261-6012
    www.guidex.ca