Kick Energy Corporation
TSX : KEC

Kick Energy Corporation

March 20, 2006 17:04 ET

Kick Reports Record Earnings of $14 million in 2005

CALGARY, ALBERTA--(CCNMatthews - March 20, 2006) - Kick Energy Corporation (TSX:KEC):

All results are expressed in Canadian dollars.

Kick Energy Corporation is pleased to report strong operating results for 2005. A successful exploration program discovered several new pools and helped push production generated cash flow to a record high for the Company. Cash flow increased 68% to $40 million and earnings doubled to $14 million compared to 2004. Commodity prices increased 35% to average $63.13 per equivalent barrel. Production averaged 3,231 boe/day, up 25% from last year. Capital expenditures were up 46% to $51 million. Land and seismic accounted for $3.8 million, drilling and completions for $31.1 million and equipment and facilities for $16.3 million. Kick's undeveloped land base increased 14% to 59,795 net acres. Total debt at year end was $26.5 million; 0.7 times 2005 cash flow.

Production consisted of 88 bbls/d of light oil, 7,982 mcf/d of natural gas and 1,812 bbls/d of natural gas liquids. Production was curtailed several times during the year due to unforeseen non-operated plant repairs and company facility expansions. Challenging weather conditions and extended equipment delivery times delayed production from new wells and restricted production from existing wells. Plant problems have been remedied and facility upgrades will now allow optimum production rates. Production from three Nisku oil wells is expected to increase production by the end of the first quarter of 2006 by over 1,000 boe/d and the tie-in of two additional wells is expected by mid-year. Production of new Nisku oil pools is difficult to predict due to the timing of Good Production Practice (GPP) or special Maximum Rate Limitation (MRL) approvals. Once adequate production data is obtained on these new oil pools, production rates will be optimized.

In 2005, Kick remained focused on exploration, drilling eight (7.2 net) exploratory wells and four (3.8 net) development wells. All of these wells were operated by Kick except for one (0.2 net) in the Ferrier/Ricinus area. Exploration drilling resulted in the discovery of four Nisku oil pools, one Rock Creek oil pool and one Notikewin gas pool. Development drilling resulted in two (2.0 net) Nisku gas wells in the Brazeau Nisku "KK" pool. These two wells confirm a common water line over the pool's six kilometre length, and indicate that the gas/water contact in the pool is at the same elevation as when it was initially drilled in 1983. Development drilling also resulted in plugging back a well in the Nisku "AA" pool and whip stocking it to gain five meters of structure on the reef.

Capital expenditures for land were down in 2005 due to Kick's refusal to participate in the high cost of land at Crown land sales in the greater Brazeau/Pembina area. Kick's strategy in 2005 was to commit to drill exploration wells on other operator's land to earn majority interest in the lands. Kick earned an average of 80 percent working interest in 13,440 acres of land with the drilling of four wells.

With the recent acquisition of 75 square kilometres of proprietary 3D seismic and the successful exploration efforts of 2005, Kick was able to increase its prospect inventory to over 30 Nisku locations. The capital budget for 2006 is currently set at $60 million and includes the drilling of 12-15 wells. The drilling program for 2006 will be balanced between exploration and development. Exploration drilling will test five new Nisku structures and one Leduc structure. Six development drilling locations targeting the Nisku will further delineate existing pools. Expenditures will be funded with cash flow and bank debt. Kick maintains that its debt will not exceed one times estimated current year cash flow.



Corporate Highlights

Three months ended Year ended

December December December December
31, 2005 31, 2004 31, 2005 31, 2004
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Financial
($thousands,
except per share amounts)
Revenue, before royalties 19,912 14,167 74,593 44,524
Revenue, net of royalties 14,291 10,219 53,997 33,116
Cash flow from operations 10,889 7,872 39,996 24,174
Per Common Share - basic 0.24 0.19 0.91 0.57
Per Common Share - diluted 0.24 0.18 0.89 0.54
Net earnings 3,309 2,543 14,285 7,049
Per Common Share - basic 0.07 0.06 0.32 0.17
Per Common Share - diluted 0.07 0.06 0.32 0.16
Capital expenditures 15,007 10,515 51,159 35,413
Working capital deficiency 19,116 9,676
Bank debt 7,346 7,725
Common Shares outstanding (millions) 44.8 42.8

Operating
Average daily production
Light and medium oil (bbls/d) 64 99 88 42
Natural gas (mcf/d) 8,425 7,268 7,982 7,085
NGL (bbls/d) 1,680 1,737 1,812 1,363
Barrels of oil equivalent (boe/d) 3,148 3,047 3,231 2,585
Average prices
Light and medium oil ($/bbl) 65.58 56.39 67.37 54.27
Natural gas ($/mcf) 12.13 7.03 9.59 7.03
NGL ($/bbl) 65.19 55.85 67.01 50.81
Barrels of oil equivalent ($/boe) 68.59 50.43 63.13 46.92
Wells drilled
Gross 2 2 12 12
Net 2.0 2.0 11.0 10.2
Gross reserves - proved plus probable
Light and medium oil (mbbls) 2,375 574
Natural gas (bcf) 27.4 20.8
NGL (mbbls) 3,093 2,756
Barrels of oil equivalent (mboe) 10,033 6,795
Net reserves - proved plus probable
Light and medium oil (mbbls) 1,705 454
Natural gas (bcf) 19.8 14.8
NGL (mbbls) 2,037 1,848
Barrels of oil equivalent (mboe) 7,041 4,764
Undeveloped land (net acres) 59,795 52,436
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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.

Gross reserves are the Company's working interest share before deduction of royalties.

Net reserves are the Company's working interest share after deduction of royalties.



Balance Sheets

As at December 31, (thousands) 2005 2004
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Assets
Current
Accounts receivable $ 9,656 $ 6,632
Prepaid expenses 50 59
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Total current assets 9,706 6,691

Property and equipment 109,331 75,111
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Total assets $119,037 $ 81,802
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Liabilities
Current
Accounts payable and accrued liabilities $ 28,822 $ 16,367
Production loan 7,346 7,725
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Total current liabilities 36,168 24,092

Asset retirement obligations 3,858 2,352
Future income tax liability 20,175 13,943
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Total liabilities 60,201 40,387
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Shareholders' Equity
Share capital 26,694 24,983
Contributed surplus 3,640 2,215
Retained earnings 28,502 14,217
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Total shareholders' equity 58,836 41,415
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Total liabilities and shareholders' equity $119,037 $ 81,802
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Statement of Operations and Retained Earnings

For the years ended December 31,
(thousands except share amounts) 2005 2004
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Revenue
Oil sales $ 2,167 $ 826
Natural gas sales 27,955 18,229
Natural gas liquids sales 44,331 25,343
Other 140 126
Royalty expense (21,096) (11,908)
Alberta royalty tax credit 500 500
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53,997 33,116
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Expenses
Operating 9,781 7,521
General and administrative 2,730 1,515
Depletion and depreciation 18,153 12,793
Accretion of asset retirement obligation 291 184
Interest 313 130
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31,268 22,143
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Earnings before income taxes 22,729 10,973
Provision for current income taxes 2,610 47
Provision for future income taxes 5,834 3,877
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Net earnings 14,285 7,049
Retained earnings, beginning of year 14,217 7,168
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Retained earnings, end of year $ 28,502 $ 14,217
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Net earnings per share
Basic $ 0.32 $ 0.17
Diluted $ 0.32 $ 0.16
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Weighted average Common Shares outstanding
Basic 44,025,085 42,521,099
Diluted 45,055,169 44,360,449
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Statements of Cash Flows

For the year ended December 31,
(thousands except share amounts) 2005 2004
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Cash flows related to the following activities:
Operating activities
Net earnings $ 14,285 $ 7,049
Items not requiring cash
Depletion and depreciation 18,153 12,793
Accretion of asset retirement obligation 291 184
Provision for future income taxes 5,834 3,877
Employee stock option expense 1,433 269
Donation of used office equipment - 2
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39,996 24,174
Changes in non-cash operating working capital 963 1,006
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Cash provided by operating activities 40,959 25,180
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Financing activities
Proceeds from issue of shares, net of costs 2,101 1,106
Increase in production loan (379) 7,725
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Cash provided by financing activities 1,722 8,831
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Investing activities
Additions to property and equipment (51,159) (35,413)
Changes in non-cash investing working capital 8,478 (419)
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Cash used in investing activities (42,681) (35,832)
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Net cash inflow - (1,821)
Cash and cash equivalents, beginning of year - 1,821
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Cash and cash equivalents, end of year $ - $ -
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Supplemental cash flow information:
Interest 313 130
Cash taxes 34 47
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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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