Kick Energy Corporation
TSX : KEC

Kick Energy Corporation

August 11, 2005 16:01 ET

Kick Adds New Oil Pool

CALGARY, ALBERTA--(CCNMatthews - Aug. 11, 2005) -

All results are expressed in Canadian dollars.

Kick Energy Corporation (TSX:KEC) is pleased to report operating results for the quarter ended June 30, 2005. Kick's production for the quarter was up 22% from the same period in 2004 averaging 3,148 boe/d. Increased production, higher commodity prices and lower operating costs resulted in cash flow of $7.6 million, up 27% from the same period in 2004. Earnings were $2.1 million up 28% compared to the second quarter of 2004. Capital spending more than doubled totalling $10.9 million in the quarter while total net debt remained relatively unchanged at $18.0 million as $1.9 million was received on the exercise of stock options.

Production from the Brazeau area was 11% lower than in the first quarter of 2005 due to plant operating disruptions at all three of the processing plants used by Kick. Also contributing to lower production was the delay of production from a new oil pool that needed the installation of a pump jack. Hydrates in the well's flow line delayed production until the third quarter. The well is now on production but experiencing high water production not characteristic of oil wells in the area with similar pay thicknesses. Remedial work is planned to repair the well. A Nisku gas well drilled into the "KK" pool in the first quarter has been tied in and is producing approximately 400 boe/d net to Kick. Three new Rock Creek wells are expected to be on stream in the third quarter.

Three (2.0 net) wells were drilled in the second quarter resulting in one (0.8 net) Nisku gas well in "KK" pool, one (1.0 net) new oil pool discovery in the Pembina area and one (0.2 net) potential Viking oil well in the Caroline area. The gas well drilled into "KK" pool encountered a 12 meter column of gas and confirmed that the gas/water contact had not moved. The new oil pool discovery at Pembina was completed but was only flow tested for one and one half hours to limit flaring. The flow rate exceeded 500 boe/d and further testing will be done after the well is tied in to Kick's gathering system. The thickness of the pay along with the assistance of seismic control supports the capital expenditures required for the tie in. Both Nisku wells are expected to be on production prior to year end. The Viking well in the Caroline area is currently being completed.

Kick has moved a drilling rig onto an existing well that was drilled offsetting "AA" pool and is directionally drilling a new well bore higher on the structure to increase productivity. The drilling rig will subsequently be moved to a Nisku oil location offsetting the existing "EE" pool. Three to five additional Nisku tests will be drilled prior to year end subject to license approval and rig availability.

Kick continues to acquire land and seismic to explore for deep liquids rich natural gas and light oil. High quality reserves yield premium netbacks and are not as sensitive to commodity price fluctuations.



Balance Sheets
($thousands)

June 30, December 31,
(Unaudited) 2005 2004
------------------------------------------------------------------------

Assets
Current
Accounts receivable 8,036 6,632
Prepaid expenses 23 59
------------------------------------------------------------------------
Total current assets 8,059 6,691
Property and equipment (Note 2) 89,368 75,111
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Total assets 97,427 81,802
------------------------------------------------------------------------
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Liabilities
Current
Accounts payable and accrued liabilities 19,107 16,367
Production loan (Note 3) 6,953 7,725
------------------------------------------------------------------------
Total current liabilities 26,060 24,092
Asset retirement obligation (Note 4) 3,043 2,352
Future income tax liability 17,948 13,943
------------------------------------------------------------------------
Total liabilities 47,051 40,387
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Shareholders' Equity
Share capital (Note 5) 26,444 24,983
Contributed surplus (Note 5) 2,652 2,215
Retained earnings 21,280 14,217
------------------------------------------------------------------------
Total shareholders' equity 50,376 41,415
------------------------------------------------------------------------
Total liabilities and shareholders' equity 97,427 81,802
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Statements of Operations and Retained Earnings
($thousands, except per share amounts)

Three months ended Six months ended
June 30, June 30,
(unaudited) 2005 2004 2005 2004
------------------------------------------------------------------------
Revenue
Oil sales 569 7 1,149 55
Natural gas sales 5,661 5,240 10,947 9,437
Natural gas liquids sales 10,250 5,914 23,291 10,538
Other 33 38 60 80
Royalty expense (net of ARTC) (5,252) (2,607) (9,852) (4,332)
------------------------------------------------------------------------
11,261 8,592 25,595 15,778
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Expenses
Operating 2,224 2,158 4,058 3,912
General and administrative 618 430 1,111 759
Depletion and depreciation 3,921 3,290 8,441 6,051
Accretion of asset
retirement obligation 63 34 122 68
Interest 56 29 140 31
------------------------------------------------------------------------
6,882 5,941 13,872 10,821
------------------------------------------------------------------------
Earnings before income taxes 4,379 2,651 11,723 4,957
Provision for current
income taxes 1,034 - 1,053 33
Provision for future
income taxes 1,211 986 3,607 1,533
------------------------------------------------------------------------
Net earnings 2,134 1,665 7,063 3,391
Retained earnings,
beginning of period 19,146 8,894 14,217 7,168
------------------------------------------------------------------------
Retained earnings,
end of period 21,280 10,559 21,280 10,559
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------------------------------------------------------------------------
Net earnings per share (Note 6)
Basic 0.05 0.04 0.16 0.08
Diluted 0.05 0.04 0.16 0.08
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Weighted average Common
Shares outstanding (Note 6)
Basic 44,161,485 42,514,574 43,461,169 42,514,574
Diluted 45,551,439 43,892,989 44,800,267 43,926,650
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Statements of Cash Flows
($ thousands)

Three months ended Six months ended
June 30, June 30,
(unaudited) 2005 2004 2005 2004
------------------------------------------------------------------------
Cash flows related to
the following activities:

Operating activities
Net earnings 2,134 1,665 7,063 3,391
Items not requiring cash
Depletion and depreciation 3,921 3,290 8,441 6,051
Accretion of asset
retirement obligation 63 34 122 68
Provision for future
income taxes 1,211 986 3,607 1,533
Employee stock option
expense (Note 5) 321 58 439 116
------------------------------------------------------------------------
7,650 6,033 19,672 11,159
Changes in non-cash
operating working
capital 1,512 2,777 1,494 2,837
------------------------------------------------------------------------
Cash provided by
operating activities 9,162 8,810 21,166 13,996
------------------------------------------------------------------------
Financing activities
Proceeds from issue of
shares, net of costs 1,857 - 1,857 (1)
Increase (decrease)
in production loan 460 3,556 (772) 4,506
------------------------------------------------------------------------
Cash provided by
financing activities 2,317 3,556 1,085 4,505
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Investing activities
Additions to property
and equipment (10,915) (5,672) (22,129) (12,898)
Changes in non-cash
investing working
capital (564) (6,694) (122) (7,424)
------------------------------------------------------------------------
Cash used in investing
activities (11,479) (12,366) (22,251) (20,322)
------------------------------------------------------------------------
Net cash inflow (outflow) - - - (1,821)
Cash position,
beginning of period - - - 1,821
------------------------------------------------------------------------
Cash position, end of period - - - -
------------------------------------------------------------------------
Supplemental disclosure
of cash flow information:
Interest paid 56 29 140 31
Taxes paid 22 - 41 33
------------------------------------------------------------------------
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Quarterly Highlights

Three months ended June 30, March 31, June 30,
2005 2005 2004
------------------------------------------------------------------------
Financial
($thousands, except per share amounts)
Revenue, before royalties 16,512 18,935 11,199
Revenue, net of royalties 11,261 14,334 8,592
Cash flow from operations (1) 7,650 12,022 6,033
Per Common Share - basic 0.17 0.28 0.12
Per Common Share - diluted 0.17 0.27 0.12
Net earnings 2,134 4,929 1,665
Per Common Share - basic 0.05 0.12 0.04
Per Common Share - diluted 0.05 0.11 0.04
Capital expenditures 10,915 11,214 5,672
Working capital deficiency 11,048 10,100 4,504
Bank debt 6,953 6,493 4,506
Common Shares outstanding (millions) 44.4 42.8 42.5
Operating
Average daily production
Light and medium oil (bbls/d) 98 98 1
Natural gas (mcf/d) 7,688 7,776 7,626
NGL (bbls/d) 1,768 2,146 1,307
Barrels of oil equivalent (boe/d) 3,148 3,540 2,580
Average prices
Light and medium oil ($/bbl) 63.50 65.77 49.23
Natural gas ($/mcf) 8.09 7.55 7.49
NGL ($/bbl) 63.69 67.51 49.73
Barrels of oil equivalent ($/boe) 57.52 59.34 47.55
Wells drilled
Gross 3 4 1
Net 2.0 4.0 1.0
------------------------------------------------------------------------
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(1) Cash flow from operations is a non-GAAP measurement. Management uses
cash flow from operations (before changes in non-cash working
capital) to analyze operating performance and leverage. Cash flow
from operations as presented does not have any standardized meaning
prescribed by Canadian GAAP and therefore it may not be comparable
with the calculation of similar measures for other entities. Cash
flow as presented is not intended to represent operating cash flow
or operating profits for the period nor should it be viewed as an
alternative to cash flow from operating activities, net earnings or
other measures of financial performance calculated in accordance
with Canadian GAAP. All references to cash flow from operations
throughout this report are based on cash flow before changes in
non-cash working capital.


Units of natural gas have been converted into barrel of oil equivalents ("boe") at a ratio of six thousand cubic feet of natural gas to one barrel of oil. Boe's may be misleading, particularly if used in isolation. A boe conversion rate 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.

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