NAL Energy Corporation
TSX : NAE

NAL Energy Corporation

January 26, 2011 01:58 ET

NAL Announces 2011 Guidance

CALGARY, ALBERTA--(Marketwire - Jan. 26, 2011) - NAL Energy Corporation (TSX:NAE) ("NAL" or the "Corporation") announces that it will be meeting with the investment community in Calgary, Alberta on Wednesday, January 26, at 8:00 am MDT to outline details of NAL's 2011 guidance with a focus on the Corporation's operating plan, key plays and prospects, and financial assumptions. The Corporation's 2011 guidance presentation will be available on the Corporation's website (www.nalenergy.com) on Wednesday, January 26, following the live webcast presentation.

A live webcast of the presentation will be available for viewing at:

http://events.digitalmedia.telus.com/nal/012611/index.php

The webcast will be available at this link for 60 days following the presentation date.

2011 STRATEGIC DIRECTION AND PRIORITIES

NAL's strategic direction remains unchanged after its year end 2010 conversion to a corporation. The Corporation's focus is to provide shareholders a competitive total return from a combination of yield and modest growth. NAL remains competitively positioned in the Cardium oil resource play in central Alberta and has added significant acreage in its emerging Mississippian light oil resource near Hoffer in SE Saskatchewan in 2010. These two light oil areas constitute the core of the Corporation's development program in 2011. The Corporation will also continue to actively high grade its asset base through selective acquisition and divestiture activities in 2011.

NAL's 2011 plans target a dividend payout ratio of 40 – 50 percent of current year cash flow. This objective balances an extensive inventory of light oil opportunities, maintains a competitive dividend, and prudently manages the balance sheet. Financial flexibility remains paramount for NAL and will allow the Corporation to take advantage of value adding acquisition opportunities in the future.

NAL has based its 2011 plans on a US$90 WTI per barrel crude oil price, a 1.00 C$/US$ exchange rate and C$3.75 per GJ AECO natural gas price.

2011 CAPITAL PROGRAM FOCUSED ON CARDIUM & MISSISSIPPIAN OIL

NAL is planning a $200 - $230 million capital program and expects to drill approximately 139 (73 net) wells, the largest capital program in the Corporation's 15 year history. The Corporation anticipates operating over 90 percent of its capital expenditures in 2011 and is not facing material land expiries. As a result, the Corporation has significant flexibility over timing and scale of the capital program which permits it to react to commodity prices, drilling results and market conditions.

2011 Capital Allocation

  $MM
Drill, complete, tie-in 175
Recompletions 6
Plant / facilities 15
Land / seismic       10
Alberta drilling credits    (5)
  201
Other   9
  210

Note: Assumes mid-point of guidance range. 

The 2011 program is expected to be 85% focused on oil development opportunities in Alberta and Saskatchewan with incremental capital committed to strategic natural gas drilling in Alberta and British Columbia. Highlights of the opportunities in the 2011 program include:

  • Cardium oil projects in Central Alberta focusing on the existing Garrington/Westward Ho core area as well as the delineation of extensive acreage to the south at Lochend (Cochrane);
  • A large inventory of conventional oil locations in Saskatchewan on existing lands coupled with new opportunities added in the Hoffer area in 2010 resulting in the planned drilling of 66 (33 net) horizontal wells;
  • Other oil drilling activity planned to evaluate emerging opportunities in the Viking and Pekisko plays in Alberta which is expected to set up attractive development opportunities in 2012 and beyond; and
  • Additional drilling on liquids rich natural gas projects in NAL's existing Kakwa (Falher) and Edson (Wilrich) areas in Alberta, and at Fireweed (Doig) in NE British Columbia.

The Corporation plans to have an active first quarter, spending approximately 40% of its full year capital during the quarter. 

PRODUCTION VOLUMES

As previously reported in NAL's press release dated December 17, 2010, with consolidation and conversion at year-end 2010, NAL elected to wind-up the Tiberius & Spear partnership. This will impact 2010 and 2011 full year average production volumes by approximately 300 boe per day and have an immaterial impact on cash flow.

In 2011, NAL is forecasted to deliver full year production volumes averaging between 29,700 – 30,700 boe per day. Production in 2011 is forecasted to be balanced, with a 50% weighting to crude oil and natural gas liquids and a 50% weighting to natural gas.

2011 Production Volume Composition

Crude oil (bbl/d) 12,700
Natural gas liquids (bbl/d) 2,300
Natural gas (mmcf/d) 91
Total Volume (boe/d) 30,200

Note: Assumes mid-point of guidance range.

OPERATING COSTS

Operating costs are anticipated to be between $10.50 – $10.90 per boe in 2011. NAL will continue to focus on cost initiatives in its field operations to manage increases in service costs and build on improved operations efficiencies gained in 2010.

2011 FULL YEAR GUIDANCE SUMMARY

Average total production (boe/d) 29,700 – 30,700
Capital expenditures ($MM)* 200 – 230
Wells Drilled (Gross/Net) 139/73
Operating costs ($/boe) 10.50 – 10.90

*Note: Before Alberta drilling credits of $5MM

FINANCIAL POSITION – CREDIT LINES, HEDGING

At year-end 2010, committed credit lines of $550 million are drawn at approximately 50 percent of availability.

NAL continues to be active in its hedging program to manage cash flow volatility for the purposes of sustaining dividends and maintaining an active capital program. For crude oil, NAL has 45 – 50 percent of net budgeted 2011 production (after royalty) hedged for the full year. For natural gas, NAL has 10 - 15 percent of net budgeted volumes hedged for the full year. All commodity hedge counterparties are Canadian chartered banks.

DIVIDEND LEVELS

NAL anticipates maintaining the monthly dividend at the current $0.07 per common share level, assuming that the stated guidance and commodity price assumptions are realized. 

FORWARD LOOKING STATEMENTS

This press release contains statements that constitute "forward-looking information" within the meaning of applicable securities legislation. This forward-looking information includes, among others, statements regarding: the strategic direction of the Corporation; NAL's anticipated dividend payments and payout ratio; the 2011 capital program and estimated amounts and timing of capital expenditures; business plans for drilling, exploration and development; estimates of 2010 and 2011 production and operations performance; estimates of operating costs and unit operating costs; net debt levels; the Corporations hedging program; and other expectations, beliefs, plans, goals, objectives, assumptions, information and statements about possible future events, conditions, results of operations or performance.

Various assumptions were used in drawing the conclusions or making the forecasts contained in the forward-looking information contained in this press release. Forward-looking information is based on current expectations, estimates and projections that involve a number of risks, which could cause actual results to vary and in some instances to differ materially from those anticipated by NAL and described in the forward-looking information contained in this press release. Undue reliance should not be placed on forward-looking information. The material risk factors include, but are not limited to: the risks of the oil and gas industry, such as operational risks in exploring for, developing and producing oil and natural gas, market demand and unpredictable facilities outages; risks and uncertainties involving the geology of oil and gas deposits; the uncertainty of estimates and projections relating to production, costs and expenses; potential delays or changes in plans with respect to exploration or development projects or capital expenditures; risk that adequate pipeline capacity to transport oil and natural gas to market may not be available; fluctuations in oil and gas prices, foreign currency exchange rates and interest rates; the outcome and effects of any future acquisitions and dispositions; safety and environmental risks; uncertainties as to the availability and cost of financing and changes in capital markets; competitive actions of other industry participants; changes in general economic and business conditions; the possibility that government policies or laws may change or governmental approvals may be delayed or withheld; changes in tax laws; changes in royalty rates; and the results of NAL's risk mitigation strategies including hedging; and NAL's ability to implement its business strategy. Readers are cautioned that the foregoing list of risk factors is not exhaustive. Additional information on these and other factors which could affect NAL's operations or financial results are included in NAL's most recent Annual Information Form and Annual Financial Report. In addition, information is available in NAL's other reports on file with Canadian securities regulatory authorities.

Forward-looking information is based on the estimates and opinions of NAL's management at the time the information is released.

BOE CONVERSION

Throughout this press release, the calculation of barrels of oil equivalent (boe) is calculated at a conversion rate of six thousand cubic feet (mcf) of natural gas for one barrel of oil and is based on an energy equivalence conversion method. Boes may be misleading, particularly if used in isolation. A boe conversion ratio of 6 mcf:1 bbl is based on an energy equivalence conversion method primarily applicable at the burner tip and does not represent a value equivalence at the wellhead.

ABOUT NAL

NAL Energy Corporation provides a total return to its investors which combines income with modest growth in the Canadian upstream oil and gas industry. The Corporation generates returns for its shareholders by pursuing a strategy of acquiring, developing, producing and selling crude oil, natural gas and natural gas liquids from pools in southeastern Saskatchewan, central Alberta, northeastern British Columbia and Lake Erie, Ontario.

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