NuLoch Resources Inc.
TSX VENTURE : NLR.A
TSX VENTURE : NLR.B

NuLoch Resources Inc.

November 13, 2006 19:33 ET

NuLoch Provides Operations Update

CALGARY, ALBERTA--(CCNMatthews - Nov. 13, 2006) - NuLoch (TSX VENTURE:NLR.A)(TSX VENTURE:NLR.B) has been active in recent weeks with completion, testing and tie-in operations on its eight-well summer drilling program. Current production has been stable at approximately 260 boe/d with 115 boe/d expected to be added within the next month. This is up from only 14 boe/d in the third quarter of 2005, our first quarter of operations.

Drilling and operations

At Balsam, Alberta the Company participated in the completion of one gross well (0.3 net) that flowed 32 degree API oil over a three-week period with an initial rate of 125 bbls/d. Pumping equipment has recently been installed but the well will remain shut-in until its solution gas tie-in is completed. Production is anticipated to resume in early December with an initial net rate of 40 boe/d.

In Southern Alberta, four (2.4 net) wells of the five-well Company-operated program have been completed with two (1.3 net) natural gas wells currently on-stream at combined net rates of 35 boe/d. Two (1.1 net) other natural gas wells completed in Mannville channels are currently being tied-in and are expected to contribute 75 boe/d.

Two (1.1 net) wells at Balsam and one (0.6 net) well at Enchant were not successful.

Industry Conditions

Overall, the oil and gas industry in Alberta has been increasingly competitive over the last several years and, as such, we have experienced significant increases in costs at all levels of our business. NuLoch is sensitive to natural gas prices and its primary market at AECO has experienced recent weakness with postings sliding below $4.00 per gj. As we move into the new "gas year" that commenced on November 1, daily spot prices at AECO have improved to more than $7.00 per gj. We are encouraged by this strengthening.

The recent proposals by the federal government to adjust taxation of the trust sector will undoubtedly impact the industry as a whole. We believe there will be a reduction or shift in activity industry-wide that may translate into reduced capital costs and increased opportunities. Accordingly, we shall adjust our strategies as these trends develop.

Development operations on our shallow gas property at Enchant that were originally forecast to add production in 2006 have been postponed as we monitor developments in natural gas pricing, capital costs and other opportunities.

Drilling inventory

The Company has 25 undrilled spacing units at its Enchant shallow gas property in addition to 16 re-completion candidates. Other drillable prospects in Southern Alberta and the Peace River Arch include four (2.1 net) locations. This capital inventory represents a $12 million program and has the potential to add risked initial production of up to 600 boe/d net to NuLoch without considering contributions from potential follow-up locations.

Financial

The Company's funds flow from operations for 2006 is forecast at $1.2 million, using an average fourth quarter natural gas price of $6.00 per mcf at AECO. The Company's available line of credit with a Canadian chartered bank has recently been expanded to $5.5 million.

Analysis

NuLoch's first 15 months of operations have been a success on many levels. The Company has drilled 51 (47.1 net) wells with only 5.8 net dry holes for an overall success rate of 88 percent. Production averaged 286 boe/d in the first nine months of 2006. Finding and development costs recorded to December 31, 2005 were $10.77 per boe and nearly 2.0 million long-life boe were added to reserves on a proved plus probable basis.

Beginning with the Company's second quarter after inception, quarterly funds flow from operations has been positive. These are all important measures of success for a junior oil and natural gas company. Our inventory of drillable prospects combined with a positive outlook for future natural gas pricing provides opportunity for follow-up success.

NuLoch has 13,466,195 Class A common shares and 652,500 Class B common shares outstanding.

Advisories

Use of Barrels of Oil Equivalent (boe)

Disclosure provided herein in respect of boe units may be misleading, particularly if used in isolation. A boe conversion ratio of 6 mcf of natural gas to 1 bbl of crude oil is based on an energy equivalency conversion method primarily applicable at the burner tip and may not represent a value equivalency at the wellhead.

Non-GAAP Measurement - Funds Flow

Funds flow from operations, calculated as cash flow from operating activities before changes in non-cash working capital, is used by the Company as a key measure of performance. Funds flow from operations does not have a standardized meaning prescribed by Canadian GAAP and therefore may not be comparable with the calculation of similar measures for other companies. Funds flow from operations as presented is not intended to represent operating profits for the period, nor should it be viewed as an alternative to cash provided by operating activities, net earnings or other measures of financial performance calculated in accordance with GAAP. Many of the Company's peers in the oil and natural gas industry use the same definition and, therefore, disclosure herein enhances comparability with those peers. Funds flow from operations per share is calculated using the same share bases which are used in the determination of earnings per share.

Forward-looking Information

The corporate information contained in these pages contains forward-looking information. The reader is cautioned that assumptions used in the preparation of such information, although considered reasonable by NuLoch at the time of preparation, may prove to be incorrect. The actual results achieved in future periods will vary from the information provided herein and the variations may be material. Consequently, there is no representation by NuLoch that actual results achieved during future periods will be the same in whole or in part as the information contained herein.


The TSX Venture Exchange does not accept responsibility for the adequacy or accuracy of this release.

Contact Information

  • NuLoch Resources Inc.
    James N. McIndoe
    President and CEO
    (403) 920-0455
    (403) 920-0457 (FAX)
    Email: nuloch@nuloch.ca
    or
    NuLoch Resources Inc.
    2200, 444 - 5th Avenue SW
    Calgary, Alberta T2P 2T8