Midway Energy Ltd.
TSX : MEL

Midway Energy Ltd.

March 24, 2011 08:37 ET

Midway Releases 4th Quarter and Year-End 2010 Results

CALGARY, ALBERTA--(Marketwire - March 24, 2011) -

NOT FOR DISSEMINATION IN THE UNITED STATES. ANY FAILURE TO COMPLY WITH THIS RESTRICTION MAY CONSTITUTE A VIOLATION OF U.S. SECURITIES LAW.

Midway Energy Ltd. ("Midway" or the "Company") (TSX:MEL) is pleased to announce its financial and operating results for the fourth quarter ended December 31, 2010 and its first full year of operations.

In 2010 Midway focused its efforts on developing its Garrington Cardium play. The Company has successfully proven the development potential of its Cardium lands and has identified an inventory of more than 140 Cardium "A" Sand development opportunities as well as additional development drilling prospects in the Cardium "B" Sand.

Highlights

  • At December 31, 2010 Midway had total proved ("1P") reserves of 11,601 Mboe and total proved plus probable ("2P") reserves of 16,707 Mboe, an increase of 88 percent over 2009 and subsequent to year end Midway acquired an additional 1,450 Mboe in Garrington (effective December 31, 2010);
  • Net present value of Midway's estimated future net revenue based on forecast prices and costs from its 2P reserves (discounted by 10 percent before income tax) increased in 2010 by 126 percent from $151.1 million to $341.1 million with 92 percent of the value coming from Garrington. These amounts do not include any value for Midway's undeveloped land and over 175 unbooked horizontal drilling locations in Garrington and Swan Hills.
  • Net asset value per share, excluding undeveloped land and any upside for undrilled locations, increased 95 percent from $2.26 in 2009 to $4.41 per common share in 2010 (based on the net present value of Midway's 2P reserves less debt net of working capital at December 31, 2010 divided by the weighted average common shares outstanding – basic);
  • Completed two equity financings in 2010 raising approximately $18.5 million of gross proceeds through the issuance of 5,082,000 common shares at $3.25 per common share and 550,000 flow-through common shares at $3.65 per common share;
  • Increased production over 200 percent from 951 boe per day in the fourth quarter of 2009 to 2,978 boe per day in the fourth quarter of 2010;
 
Corporate Highlights
 
($ 000's, except operational and share and per share amounts)
Q4
 
Q4
   
YTD
 
YTD
 
  2010   2009     2010   2009  
                   
Petroleum and natural gas revenue 15,193   3,682     39,627   11,271  
                   
Funds from (used in) operations 8,630   82     20,234   (168 )
Basic and diluted per share 0.13   0.00     0.31   (0.01 )
                   
Net earnings (loss) 4,177   (2,318 )   (3,626 ) (7,116 )
Basic and diluted per share 0.06   (0.04 )   (0.06 ) (0.27 )
                   
Working capital (deficiency) (1) (7,260 ) (8,383 )   (7,260 ) (8,383 )
Bank debt 35,256   4,155     35,256   4,155  
                   
Capital expenditures 23,947   37,661     71,015   50,719  
Total assets 175,389   111,211     175,389   111,211  
                   
Weighted average shares                  
  Basic and diluted (000's) 68,044   55,855     64,984   26,837  
                   
Common shares outstanding                  
  Basic (000's) 68,044   61,445     68,044   61,445  
  Diluted (000's) 75,246   64,445     75,246   64,445  
                   
Average production:                  
  Oil and NGL's (bbl/d) 1,881   321     1,184   202  
  Natural gas (mcf/d) 6,585   3,783     5,641   4,558  
  Oil equivalent (boe/d 6 : 1) 2,978   951     2,124   962  
                   
Average realized prices:                  
  Oil and NGL's ($/bbl) 73.95   70.09     71.40   61.94  
  Natural gas ($/mcf) 3.92   4.57     4.21   4.01  
  Oil equivalent (boe/d 6 : 1) 55.37   41.79     50.98   32.02  
                   
Netback ($/boe)                  
  Petroleum and natural gas revenue 55.37   41.79     50.98   32.02  
  Royalties 5.30   3.94     5.03   2.53  
  Operating expenses 12.46   16.79     13.13   15.59  
  Operating netback 37.61   21.06     32.82   13.90  
 
(1) Excludes the fair value of financial instruments and current portion of bank debt.

Message to Shareholders

Midway's management views 2010 as a successful first year for the Company. We have established a large contiguous block of Cardium lands in Garrington and drilled throughout the land base proving productivity throughout. We have also focused on both controlling and expanding our infrastructure and, by early May, all of our current and expected 2011 incremental production will be pipeline connected to 100 percent owned Midway facilities.

Our goal in Garrington this year will be to grow our asset base and we feel confident that we will, at a minimum, be able to replace our drilled locations with more undeveloped Cardium lands at Garrington. Our 21 (net) well drilling program is well underway for the year and is repeatable in 2012, 2013 and onward.

In 2011 our new focus area will be the Beaverhill Lake oil zone in Swan Hills. Much like the Cardium in Garrington, this play is in an area with extensive vertical well control. We are confident that we will achieve productive wells from our Swan Hills drilling program. We will utilize the knowledge we have gained in the Cardium to better exploit this emerging resource play.

Midway's Board of Directors has approved a 2011 capital budget (the "Budget") of $126 million. The Budget includes the drilling of a total of 25.5 net wells comprised of 19.5 Cardium "A" Sand wells, 2 Cardium "B" Sand wells, 4 Beaverhill Lake wells and the acquisition of additional working interests in producing properties operated by Midway in Garrington (approximately 280 boe per day). The Budget also includes $11.5 million allocated to Crown land sales and acquisitions and $3.8 million to pipeline facilities in Garrington and Swan Hills. These capital expenditures are expected to result in an exit production rate for 2011 of 5,200 to 5,300 boe per day and an average 2011 production rate of 4,300 boe per day.

This capital program is expected to be financed through a combination of funds from operations, an expansion of the Company's credit facility, additional equity issued as partial consideration for the acquisition in Garrington noted above and the closing of a bought deal financing (the "Offering"). On March 18, 2011 Midway entered into an agreement with a syndicate of underwriters to purchase for resale to the public 6,522,000 common shares at a price of $4.60 per common share for gross proceeds of $30 million. The Company also granted the underwriters an over-allotment option for an additional 652,200 common shares for additional gross proceeds of $3 million. The Offering is scheduled to close on or about April 7, 2011 and is subject to certain conditions including, but not limited to, the receipt of all necessary approvals. 

We look forward to another year of continued growth.

On behalf of the Board of Directors

M. Scott Ratushny, Chairman and Chief Executive Officer

This press release shall not constitute an offer of securities for sale in the United States or in any jurisdiction in which such offer would be unlawful. Midway's securities have not been and will not be registered under the U.S. Securities Act of 1933, as amended, and may not be offered or sold in the United States absent registration or an exemption from the registration requirement of that Act.

Forward-looking Statements

This news release contains forward-looking statements relating to the Company's plans and other aspects of the Company's anticipated future operations, management focus, strategies, financial and operating results and business opportunities. Forward-looking statements typically use words such as "anticipate", "believe", "project", "expect", "goal", "plan", "intend" or similar words suggesting future outcomes, statements that actions, events or conditions "may", "would", "could" or "will" be taken or occur in the future. In particular, this press release contains forward-looking statements relating, but not limited to:

  • drilling and development plans, the timing of drilling, completion and tie-in of wells and the results therefrom;
  • anticipated facility upgrades and pipeline expansions;
  • plans to pursue acquisitions and land sales;
  • forecast capital expenditures and the allocation thereof;
  • the sources of funding of the Company's capital expenditure program, including an increase in the Company's credit facility;
  • anticipated exit and average production rates and production mix, including performance characteristics of Midway's oil and natural gas properties;
  • Midway's business strategy, plans and management focus;
  • access to sufficient debt and equity capital;
  • completion of the Offering and the timing thereof;
  • Midway's asset base and future prospects for development and growth.

Statements relating to reserves are deemed to be forward-looking as they involve an implied assessment, based on certain assumptions and estimates, that the reserves described can be properly produced in the future.

These forward-looking statements are based on various assumptions including: the outlook for petroleum and natural gas prices; estimated amounts and timing of capital expenditures; the timing, location and extent of future drilling operations; anticipated timing and results of capital expenditures; estimates of future production and operating costs; the state of the economy and the exploration and production business; results of operations; performance; business prospects and opportunities; future exchange and interest rates, Midway's ability to obtain equipment in a timely manner to carry out development activities, impact of increasing competition, ability to market oil and natural gas successfully, the ability of Midway to access capital and the timing of obtaining regulatory approvals. While Midway considers these assumptions to be reasonable based on information currently available to it, they may prove to be incorrect.

By their nature, forward-looking statements involve numerous assumptions, known and unknown risks and uncertainties and other factors that contribute to the possibility that the predicted outcome will not occur, including, without limitation: 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; incorrect assessment of the value of acquisitions; failure to realize the anticipated benefits of acquisitions; general economic conditions in Canada, the U.S. and globally; and ability to access sufficient capital from internal and external sources. In addition, the closing of the Offering could be delayed if Midway is not able to obtain the necessary regulatory and stock exchange approvals on the timelines it has planned. The Offering will not be completed at all if these approvals are not obtained or some other condition to the closing is not satisfied.

Accordingly, there is a risk that the Offering will not be completed within the anticipated time or at all. Readers are cautioned that the foregoing list of factors is not exhaustive.

Although Midway believes that the expectations represented in such forward-looking statements are reasonable, there can be no assurance that such expectations will prove to be correct. As a consequence, actual results may differ materially from those anticipated in the forward-looking statements and you should not unduly rely on forward-looking statements. The forward-looking statements contained in this news release are made as the date of this new release and the company 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 Financial Measures

Midway uses the following terms for measurement within this press release that do not have a standardized prescribed meaning under GAAP and these measurements may not be comparable with the calculation of similar measurements of other entities. 

The terms "funds from operations", "funds from operations per share" and "operating netback per boe" in this press release are not recognized measures under Canadian generally accepted accounting principles (GAAP). Management of Midway believes that in addition to net earnings and cash flow from operating activities as defined by GAAP, these terms are useful supplemental measures to evaluate operating performance and assess leverage. Funds from operations per share are calculated using the weighted average shares outstanding used in calculating earnings per share. Users are cautioned; however, that these measures should not be construed as an alternative to net earnings or cash flow from operating activities determined in accordance with GAAP as an indication of Midway's performance. 

Midway considers funds from operations to be an important measure of Midway's ability to generate the funds necessary to finance capital expenditures and repay debt. All references to funds from operations throughout this press release are based on cash provided by operating activities before the change in non-cash working capital and actual asset retirement expenditures since Midway believes the timing of collection, payment or incurrence of these items involves a high degree of discretion and as such may not be useful for evaluating Midway's operating performance. Midway's method of calculating funds from operations may differ from that of other companies and, accordingly, may not be comparable to measures used by other companies.

51-101 Advisory

In conformity with National Instrument 51-101, Standards for Disclosure of Oil and Gas Activities ("NI 51-101"), natural gas volumes have been converted to barrels of oil equivalent ("boe") using a conversion rate of six thousand cubic feet of natural gas to one barrel of oil. This ratio is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. The estimate of future net revenue presented in this press release does not represent fair market value.  Readers are cautioned that the term "boe" may be misleading, particularly if used in isolation.

The estimates of reserves for individual properties may not reflect the same confidence level as estimates of reserves for all properties, due to the effects of aggregation.

Filings

Midway has filed with Canadian securities regulatory authorities its audited financial statements for the year ended December 31, 2010 and the accompanying Managements' Discussion and Analysis ("MD&A"). These filings are available under Midway's SEDAR profile at www.sedar.com. Full pdf versions of our December 31, 2010 audited financial statements and the accompanying MD&A are available on our website at www.midwayenergy.com.

Information Regarding Midway

Midway Energy Ltd. is a public oil and gas exploration and development company, located in Calgary, Alberta with operations in Alberta and British Columbia. Midway currently trades on the Toronto Stock Exchange (TSX) under the Symbol "MEL".

Contact Information