Iona Energy Inc.

August 30, 2011 09:00 ET

Iona Energy Inc. Announces 2011 Second Quarter Results

CALGARY, ALBERTA--(Marketwire - Aug. 30, 2011) -


Iona Energy Inc. ("Iona" or the "Company") (TSX VENTURE:INA) announces its 2011 second quarter results for the period ended June 30, 2011.

Neill A. Carson, Iona's CEO commented, "Iona is excited to report that we are positioned for significant development growth having successfully closed the private placement, our "go public" launch on TSX-V, and the completion of two significant North Sea deals. Our gas production and realized prices have remained strong, we have no debt, and we are building a 'recognized' industry team. Put simply we have laid a great foundations for an active forthcoming year of operations."

Highlights for the Quarter Ended June 30, 2011
  • CAD$44.5 million released from escrow upon closing Amalgamation and Trent and Tyne investment.
  • Gross production from September 1, 2010 through May 31, 2011 was approximately 3.02 Bcf or 600 MMscf net to Iona, generating USD$4.64 million in gas sales revenue net to Iona. Trent and Tyne gross production rates for May 2011 averaged 13 MMscf per day or 2.6 MMscf per day (433 boepd) net to Iona. The net production from the effective date of September 1, 2010 until completion of the work commitment by Iona, will be paid to Iona by the operator upon completion of the work commitment. As of June 30, 2011, net production revenue and related value added tax of $500,300 is being held in trust by the Company's United Kingdom legal counsel and has been deferred and included in accounts payable and accrued liabilities
  • With partners MPX Resources and Sorgenia, contracted a rig to drill a well on Orlando spudding in mid to late September 2011.
  • Completed the amalgamation of Iona Energy Company Limited ("Former Iona") and Northern Lights Acquisition Corp., a capital pool company, to form the amalgamated company called Iona Energy Inc. (the "Amalgamation"). The Amalgamation constituted the Qualifying Transaction of Northern pursuant to Policy 2.4 of the TSX Venture Exchange Inc. ("TSX Venture"). Listed the Company's common shares for trading on the TSX Venture.
  • Completed the acquisition of a 20% working interest in the Trent and Tyne gas fields from Perenco UK on May 31, 2011 as planned. Results in net gas production income to the Company effective September 1, 2010.
  • Entered into an option agreement to acquire a 58.8% working interest, including operatorship, in the West Wick oil discovery on UK Block 13/21a.

"With over $56 million in working capital and the addition of very talented members to our team, we are very well positioned to execute on our plan and look forward to continued growth." commented Brad Gunn, Iona's CFO.

Further details on the above are provided in the interim consolidated financial statements and management's discussion and analysis for the three and six months ended June 30, 2011, which have been filed with securities regulatory authorities in Canada. These documents are also available on SEDAR ( and on the Company's website (

Iona is an oil and natural gas acquisition, appraisal, and development corporation active through its 100% wholly owned United Kingdom subsidiary Iona Energy Company (UK) Ltd. in the United Kingdom's Continental Shelf ("UKCS"). On May 27, 2011, Iona and Northern Lights Acquisition Corporation amalgamated to form Iona Energy Inc. with the Company's shares listing for trading on the TSX Venture Exchange on June 8, 2011 under the symbol "INA."

Over the last year, the Corporation has continued its efforts to acquire strategically aligned assets for its UK portfolio. Iona seeks low-cost, proven undeveloped acquisition targets that are proximate to infrastructure willing and able to accept its production, and where sub-sea tiebacks can be utilized. Employing this strategy facilitates the Corporation's pursuit of profitable oil and gas production through the effective management of finding and development costs, initial capital expenditure, and lower long-term per barrel operating expenditure and tariffs. To date in 2011, the Company closed the following two transactions:

Orlando – A proven undeveloped oil discovery

In December 2010, the Corporation signed a Sale and Purchase Agreement with Wintershall (E&P) Limited ("Wintershall") to acquire their entire 35% equity interest in UKCS License P1606, Block 3/3b (An oil discovery referred to as "Orlando" located in the North Viking Graben area of the UK North Sea) with the transaction closing on March 14, 2011. The consideration payable to Wintershall for the Orlando acquisition is USD$3,000,000 and the Corporation will fund the respective commitment well to the extent of 42.5% (approximately USD$11,050,000) to earn their 35% equity interest. The Orlando drilling program will be operated by MPX North Sea Limited (with a 30% working interest) with Iona and Sorgenia E&P (UK) Ltd. as partners (each with a 35% working interest).

The Corporation engaged Gaffney, Cline & Associates Ltd. ("GCA"), an independent reserve auditor of oil and gas resources, to provide a reserve audit and production estimate on the Orlando asset (the "GCA Reserve Report"). The GCA Reserves Report estimates proven reserves net to Iona of 2.4 MMbbls ("1P"), proven plus probable reserves of 3.6 MMbbls ("2P"), and proven plus probable plus possible reserves of 5.4 MMbbls ("3P"). The Corporation expects to commence drilling activities on Orlando by the fourth quarter of 2011. Production processing is planned for CNRL International's Ninian platform, where a per-barrel tariff has been negotiated at USD $5.50/bbl.

Trent & Tyne - Gas production

In November 2010, the Corporation signed a Letter of Intent with Perenco UK Limited ("Perenco") regarding Iona's acquisition of a 20% working interest in two producing UK Southern North Sea gas fields, the Trent Field (Block 43/24 - License P685) and the Tyne Field (Block 44/18 - License P609) (herein referred to as "Trent & Tyne") with the transaction closing on May 31, 2011. Pursuant to the agreement, Iona committed to fund up to $32,851,520 (GBP£21,200,000) for the drilling of a production well on the Tyne Field. The planned work program is comprised of a re-entry into the existing T5 well and sidetrack to an up-dip location (the "T5 Sidetrack Well"), intended by Perenco to be drilled on or about the first quarter of 2012. The Corporation's financial exposure will be cost-capped such that, in the event the T5 Sidetrack Well exceeds the $32,851,520 (GBP£21,200,000), any additional costs related to the well will be borne 100% by Perenco. Additionally, with respect to an area known as Tyne North West, Iona will have the option to increase its working interest in Trent & Tyne by a further 17.5% (37.5% in total), by committing to fund the drilling of a second well with Perenco as Operator. Again, this drilling program is cost-capped to Iona at $38,197,640 (GBP£24,650,000), such that any cost overrun beyond this amount will be borne 100% by Perenco.

As with Orlando, the Corporation contracted GCA to assess Trent & Tyne's reserve base and production profile. GCA's Reserve Report estimates 1P reserves of 6.1Bcf, 2P reserves of 12.6 Bcf, and 3P reserves of 16.2Bcf, net to Iona.

The Trent & Tyne agreement with Perenco is dated effective September 1, 2010, therefore Iona will receive production revenue and pay its share of production related costs associated with approximately 4MMscfd of net gas production as a result of its 20% working interest. The Corporation anticipates drilling the "T5 Sidetrack Well" during the third quarter of 2011, thereby increasing Iona's net Trent & Tyne production to 8MMscfd (2P @ 20%), and furthering this to 14.2MMscfd (2P @ 37.5%) with their commitment to drill Tyne North West.

Iona Energy intends to execute its business plan for the UK North Sea in large part due to its ability to access capital through the issuance of equity. In December of 2010, the Corporation appointed Wellington West Capital Markets Inc. as lead agent with Mackie Research Capital Corporation and National Bank Financial Inc. as syndicate partners to raise up to CAD$60,000,000 through a private placement of subscription receipts priced at CAD$0.60 per unit, with each receipt entitling the holder to one common share in the capital stock of the Corporation upon the completion of certain events. The financing closed on March 10, 2011, with $69.9 million raised as a result of an increased level of interest via the issue of 116,485,090 Subscription Receipts. The proceeds, which were held in escrow and have been, committed to the acquisition and development of Orlando, Trent & Tyne, and general working capital purposes. On March 10, 2011, as a result of the closing of the Orlando acquisition, $23 million was released from escrow and 38,333,333 Subscription Receipts were automatically converted into 38,333,333 Common Shares. On May 31, 2011, the remaining 78,151,757 Subscription Receipts were converted into Common Shares.

General and Administrative

General and administrative costs for the first three and six month periods ended June 30, 2011 has increased to $2,361,317 and $2,896,032 respectively compared to the three and six months periods ended June 30, 2010, $69,536 and $79,093 respectively, as a result of professional costs with respect to increased operations, the Company's public listing on the TSX Venture Exchange, financing, option grants and a one-time charge related to the NLAC acquisition. Costs will continue to increase as the Company continues to staff up its operations.

The stock option charge during the three months ended June 30, 2011 of $1,015,670 represents the fair value of the Company's stock options amortized over the respective vesting period via the graded vesting method. Options granted under the current plan vest as follows: ¼ immediately and ¼ vesting on the first, second and third anniversary dates. All unvested options vest upon the change of control of the Company. The options are non-transferable. The exercise price is based on the five day weighted average trading price of the Company's common shares prior to the day of the grant. The future expense will vary as it is dependent on the number and vesting provisions of future stock option grants.

Exploration and Evaluation

The Company's exploration and evaluation expense represents all pre-license costs and the capitalized costs from exploration and evaluation assets that have been expensed. These costs represent unrecoverable exploration and evaluation costs associated with an area and costs incurred prior to obtaining the legal rights to explore. The costs included in exploration and evaluation expense include pre-license costs and land expiries. During the three and six month periods ended June 30, 2011, $171,222 and $363,443, respectively of pre-license costs were incurred of which $193,221 of costs were incurred with respect to the Orlando and Trent & Tyne property acquisitions in the first three month of 2011.

Summary of Quarterly Results

($ thousands, except
months ended
June 30
, Three
months ended
March 31
, Three
months ended
December 31
, Three
months ended
June 30
, Three
months ended
March 31
per share amounts) 2011 2011 2010 2010 2010
Net earnings (loss) (2,694 ) (725 ) (589 ) (233 ) (18 )
Comprehensive (loss) (4,028 ) (842 ) - (233 ) -
Net capital expenditures (recovery) 2,854 3,648 347 - 8
Working capital surplus (deficiency) 56,063 17,372 1,211 (18 ) (224 )
Total assets 66,319 68,652 5,227 1,559 1,636

To view the Company's complete interim consolidated financial statements and management's discussion and analysis for the three and six months ended June 30, 2011 or for further information about Iona Energy Inc. please go to the Company's website or SEDAR (

Forward-looking statements

Some of the statements in this announcement are forward-looking. Forward-looking statements include statements regarding the intent, belief and current expectations of Iona Energy Inc. or its officers with respect to various matters. When used in this announcement, the words "expects," "believes," "anticipate," "plans," "may," "will," "should", "scheduled", "targeted", "estimated" and similar expressions, and the negatives thereof, whether used in connection with the estimated drilling times of the Orlando well, estimated production levels and future activity or otherwise, are intended to identify forward-looking statements. Such statements are not promises or guarantees, and are subject to risks and uncertainties that could cause actual outcome to differ materially from those suggested by any such statements. These forward-looking statements speak only as of the date of this announcement. Iona Energy Inc. expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statement contained herein to reflect any change in its expectations with regard thereto or any change in events, conditions or circumstances on which any forward-looking statement is based except as required by applicable securities laws.

Note: "Boe" means barrel of oil equivalent on the basis of 6 mcf of natural gas to 1 bbl of oil. 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. As used in this press release, possible reserves are those additional reserves that are less certain to be recovered than probable reserves. There is a 10% probability that the quantities actually recovered will equal or exceed the sum of proved plus probable plus possible reserves.

Additionally, this news release uses certain abbreviations as follows:

Oil and Natural Gas Liquids Natural Gas
bbls barrels scf standard cubic foot
MMbbls millions of barrels MMscf million standard cubic feet
boepd barrels of oil equivalent per day Bscf billion standard cubic feet

The TSX Venture Exchange Inc. has in no way passed upon the merits of and has neither approved nor disapproved the contents of this press release.

Contact Information

  • Iona Energy Company
    Neill A. Carson
    Chief Executive Officer
    +011 (44) 7919 057989

    Iona Energy Company
    Brad G. Gunn
    Chief Financial Officer
    (403) 775-7442