Iona Energy Inc.
TSX VENTURE : INA

November 29, 2012 14:36 ET

Iona Energy Inc. Announces 2012 Third Quarter Results

CALGARY, ALBERTA--(Marketwire - Nov. 29, 2012) -

NOT FOR DISTRIBUTION TO UNITED STATES NEWS WIRE SERVICES OR DISSEMINATION IN UNITED STATES

Iona Energy Inc. ("Iona" or the "Company") (TSX VENTURE:INA) announces its financial results for the three months and nine months ended September 30, 2012.

HIGHLIGHTS FOR THE THIRD QUARTER ENDED SEPTEMBER 30, 2012

Financial

  • Cash and current restricted cash positions totaled CAD$69.8 million as at September 30, 2012.
  • No short or long term debt as at September 30, 2012.
  • Exploration and evaluation assets of CAD$79.6 million (December 31, 2011 - CAD$28.2 million).
  • Total assets of CAD$179.3 million (December 31, 2011 - CAD$72.1 million).
  • Q3 Net loss of CAD$2.2 million (or CAD$0.01 per share) resulting in a loss for the nine months ended Sept 30, 2012 of CAD$6.2 million.

Operational

  • Trent & Tyne net production to Iona during the three months ended September 30, 2012 was 1.1 MMscf/d and the average realized gas price was strong at $9.00/mcf. The decrease in recent production rates was largely attributed to interruptions as a result of the start up of drilling operations on the T6 well and the annual maintenance shutdown during most of September.
  • During August 2012, the Ensco 80 jack-up rig commenced operations to side-track the Trent & Tyne T6 production gas well with first gas from the well expected during December 2012.
  • Performed an engineering and portfolio review and advanced Orlando development ahead of the Kells Development.
  • Installed process isolation valving and pipework on Ninian Central to allow future hook up and tie in of Orlando without need for shutdown of host platform process.
  • Completed the Orlando Environmental Statement and consultation with the Department of Energy and Climate Change ("DECC"), another step closer to final Field Development Approval.
  • Iona engaged Gaffney Cline & Associates ("GCA") to prepare an independent reserves report of the West Wick oil field, based on the draft Field Development Plan ("FDP") for West Wick prepared by CVPC (the "GCA West Wick Report"). The GCA West Wick Report has an effective date of December 31st, 2011. GCA has estimated net proved oil reserves ("1P") of 5.1 MMbbls, net proved plus probable oil reserves ("2P") of 9.71 MMbbls and net proved plus probable plus possible oil reserves ("3P") of 12.18 MMbbls. Using forecast prices and costs, GCA also estimates pre-tax net present value, discounted at 10% ("NPV10") of 1P reserves for West Wick of USD$146.6 million, NPV10 of 2P reserves for West Wick of USD$382.8 million, and NPV10 of 3P reserves for West Wick of USD$449.1 million, as of December 31st, 2011.

Acquisitions

  • Completion of the acquisition of an operated 58.73% interest in U.K. Block 13/21a containing the West Wick Oil Field from Centrica Venture Production Company ("CVPC"). DECC has also completed the license assignment. Under the terms of the sale and purchase agreement, Iona paid USD$5.1 million to CVPC.

Corporate

  • During September 2012, the UK Government announced the Brown Field Allowance ("BFA"), which is a new tax relief to encourage investment in older oil and gas fields. The BFA will shield up to £250m of income in qualifying brown field projects, or £500m for projects in fields paying Petroleum Revenue Tax, from the 32% Supplementary Charge rate (providing tax relief of up to £80m or £160m respectively). The Company welcomes this announcement and hopes to utilize it on its qualifying projects in the future.
  • 150,000 stock options granted during the third quarter of 2012.

Post Quarter End

  • GCA completed an independent reserves report on the Orlando development project effective September 30, 2012 using GCA's forecast costs and prices. GCA reported Orlando's Proved Reserves ("1P") of 7.83 million barrels of oil ("MMbbls"), Proved plus Probable Reserves ("2P") of 15.37 MMbbls, and Proved plus Probable plus Possible Reserves ("3P") of 21.56 MMbbls. Iona has calculated a 15% increase in 1P Reserves, a 39% increase in 2P Reserves, and a 31% increase in 3P Reserves attributed to Orlando, all based on GCA's previous report effective December 31, 2011. Notably, the Pre-Tax Net Present Value of Cash Flows discounted at 10% ("NPV10") of Orlando 2P Reserves has increased to USD$609.3 million from USD$405.6 million, an increase of more than 50%.
  • Submitted a re-engineered Orlando FDP to DECC at the end of October with approval expected in the first half of 2013.
  • Iona was awarded three UK North Sea Blocks at 100% working interest, including two oil discoveries from DECC. The three awarded Blocks, 3/7c (part), 3/8c, and 3/12 (part), are located in the Northern North Sea, to the south-west of the Ninian field and immediately adjacent to Iona's 100% Block 3/8d which includes the to-be-developed "Kells" Oil and Gas field and the "Ossian" Oil discovery.
  • Iona engaged TD Securities in London to market and manage a joint venture offering of working interests in both Orlando and Kells with bid due at the end of October. Iona is now in final negotiations with potential partners and expects to enter into binding legal agreements prior to the year-end.

Reserves

  • The following table summarizes the Company's current estimated reserves(1)
1P 2P 3P
Asset MMboe Pre-tax NPV10 $m MMboe Pre-tax NPV10 $m MMboe Pre-tax NPV10 $m
Orlando 7.8 269.5 15.4 609.3 21.6 905.1
Kells 3.4 73.0 8.9 358.4 10.7 466.0
Trent & Tyne 0.7 -6.1 2.1 40.7 2.5 54.3
West Wick 5.1 146.6 9.7 382.8 12.2 449.1

(1) Based on: (a) Orlando reserves and net present value information prepared by GCA (using forecast prices and costs) as of September 30, 2012; (b) Trent & Tyne reserves and net present value information prepared by GCA (using forecast prices and costs) as of December 31, 2011; (c) Kells reserves and net present value information prepared by GCA (using forecast prices and costs) as of March 31, 2012, and (d) West Wick reserves and net present value information prepared by GCA (using forecast prices and costs) as of December 31, 2011.

Further details on the above are provided in the Condensed Consolidated Financial Statements and Management's Discussion and Analysis for the three and nine months ended September 30, 2012, which have been filed with securities regulatory authorities in Canada. These documents are available on the System for Electronic Document Analysis and Retrieval (SEDAR) at www.sedar.com and on the Company's website at www.ionaenergy.com.

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").

Forward-looking statements

Some of the statements in this announcement are forward-looking, including statements regarding Iona's plans for the development of its properties, anticipated effects of the UK small field allowance, and estimates of the net present value of future net revenue of proved and probable reserves from Iona's properties. 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 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, including without limitation, the risk that Iona's development plans change as a result of new information or events, and the risk that drilling results differ materially from management's current estimates. 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.

It should not be assumed that the present worth of estimated future net revenue represents the fair market value of the reserves disclosed in this press release. The reserve and related revenue estimates set forth in this press release are estimates only and the actual reserves and realized revenue may be greater or less than those calculated. The estimates of reserves and future net revenue for individual properties may not reflect the same confidence level as estimates of reserves and future net revenue for all properties, due to the effects of aggregation.

Additionally, this press release uses certain abbreviations as follows:

Oil and Natural Gas Liquids Natural Gas
bbls barrels mcf thousand cubic feet
Mbbls thousand barrels mcf/d thousand cubic feet per day
MMbbls million barrels scf standard cubic foot
bbls/d barrels per day MMscf millions of standard cubic feet
bopd barrels of oil per day MMscf/d millions of standard cubic feet per day
NGLs natural gas liquids Bscf billion standard cubic feet

Neither the TSX Venture Exchange Inc. nor its Regulation Services Provider (as that term is defined in policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

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