NuLoch Resources Inc.
OTCQX : NULCF
TSX VENTURE : NLR

NuLoch Resources Inc.

March 01, 2011 17:29 ET

NuLoch Resources Files Year-End 2010 Financials

CALGARY, ALBERTA--(Marketwire - March 1, 2011) -

NuLoch Resources Inc. (TSX VENTURE:NLR) (OTCQX:NULCF) advises that it has filed its audited annual financial statements as at December 31, 2010 and 2009 and for the years then ended along with the associated Management Discussion and Analysis at www.sedar.com and on its website at www.nuloch.ca.

Monetary amounts are in Canadian dollars unless otherwise indicated.

On January 19, 2011, NuLoch announced its intention to merge with Magnum Hunter Resources Corporation in an all-share transaction pursuant to a plan of arrangement.

2010 Accomplishments

Production increase

Increased production 30% to average 917 boe/d in Q4 2010 compared to 708 boe/d in Q4 2009. Production capability, including forecasts for newly completed wells, reached 1,550 boe/d in January 2011;

Oil production weighting

Moved to 76% oil production weighting in Q4 2010 compared to 55% in Q4 2009;

Resource acquisitions

Expanded the land position into Burke County, North Dakota with a purchase of 8,500 net acres in January 2010. Focus in 2010 shifted from acquisition to development of significant blocks of the Company's land;

Capital program

Managed a record capital program in 2010 that totaled $58 million compared to $21 million in 2009. Eighty percent of the 2010 program was drilling, completion and related equipment;

Reserve additions

Proved and probable reserves of petroleum and natural gas increased by 190% to end 2010 at 10,003 Mboe. The associated value of $152 million (before tax, 10% discounted cash flow) is a 279% increase. All-in finding, development and acquisition costs in the year were $21.93 per boe (three year average $24.94 per boe);

Market capitalization

NuLoch's market capitalization increased from $75.7 million on December 31, 2009 to finish 2010 at $254.5 million;

Equity financings

Two equity financings totaling $51.4 million were completed in 2010 and the Company had no outstanding bank debt at December 31, 2010; and

Production target

Targeting 2011 exit rate of 2,500 boe/d (greater than 90% crude oil) based on a 2011 capital program of $80 million.



HIGHLIGHTS
----------------------------------------------------------------------------
Periods ended December 31,
-------------------------------------
Three months Years
--------------- ---------------
2010 2009 2010 2009
------- ------- ------- -------
OPERATING
----------------------------------------------------------------------------
Production - daily average
Oil and NGL (bbls/d) 695 392 620 239
Natural gas (Mcf/d) 1,336 1,899 1,626 2,020
Combined oil equivalent (boe/d)(1) 917 708 891 576
Average sales prices
Oil and NGL ($/bbl) 77.01 73.26 75.04 65.43
Natural gas ($/Mcf) 3.54 4.57 4.06 4.31
Combined oil equivalent ($/boe) 63.47 52.77 59.63 42.31

FINANCIAL
($ thousands except per share amounts)
----------------------------------------------------------------------------
Petroleum and natural gas revenue 5,357 3,436 19,383 8,888

Funds flow from operations(2) 1,634 1,282 6,639 2,957
Per share - basic 0.01 0.02 0.06 0.06
Per share - diluted 0.01 0.02 0.06 0.06

Net earnings (loss)(3) (660) 1,238 (2,563) 1,884
Per share - basic (0.01) 0.02 (0.03) 0.04
Per share - diluted (0.01) 0.02 (0.03) 0.04

Working capital (deficiency)
- end of period (2,072) 374 (2,072) 374
Undrawn line of credit 25,000 7,000 25,000 7,000

Capital expenditures using cash 20,263 19,561 58,069 20,879

COMMON SHARES
(thousands)
----------------------------------------------------------------------------
Class A, end of period 122,333 78,288 122,333 78,288
Class B, end of period - 653 - 653
Employee options, end of period 11,816 7,415 11,816 7,415
Underwriter options, end of period 648 1,106 648 1,106
Basic, weighted average combined 119,279 77,407 102,159 49,031
Diluted, weighted average 119,279 77,407 102,159 49,735
----------------------------------------------------------------------------

(1) Six Mcf of natural gas is considered equivalent to 1 barrel of oil (see
Advisories).
(2) Cash flow from operations before changes in non-cash operating working
capital (see Advisories).
(3) In Q3 2009 the Company recorded a $2,281,000 gain from an extraordinary
item.


Outlook

On January 19, 2011, the Company entered into an agreement to be acquired by Magnum Hunter Resources Corporation (Magnum Hunter) that was unanimously approved by the boards of directors of both organizations. The transaction is expected to be completed through a plan of arrangement (the Arrangement) whereby shareholders of NuLoch will receive 0.3304 of a common share of Magnum Hunter. Magnum Hunter is a Texas based public company and its common shares trade on the NYSE under the symbol "MHR". The Arrangement is subject to approval in court and by the Company's and Magnum Hunter's shareholders. Upon completion of the Arrangement, NuLoch will be an indirect wholly owned subsidiary of Magnum.

The pending merger with Magnum Hunter has not changed the business plan for NuLoch. The 2011 capital budget is a continuation of the record levels of investment undertaken in 2010 with potential for a program of $80 million. Capital expenditures totaled $58.1 million in 2010 with more than 90% directed to the Williston Basin in Saskatchewan and North Dakota. The fourth quarter of 2010 accounted for $20.3 million of the total but was less than originally expected. While drilling activity remained on-pace with six rigs running, harsh weather and a shortage of services left 13 wells (3.3 net) awaiting completion at year-end. The Company was working through the completion inventory during January and February and seven wells (2.5 net) were fracture stimulated. Six rigs are currently operational.

NuLoch's most significant asset is its petroleum and natural gas property located in the Williston Basin. AJM Petroleum Consultants, NuLoch's independent reserves evaluator, assigned 3.5 Mboe of reserves in Saskatchewan and 4.6 Mboe in North Dakota (proved plus probable, company working interest) at December 31, 2010. Most of the Company's production and reserves in the Williston are attributable to the Three Forks Sanish (TFS) formation that lies directly below the shale of the Lower Bakken formation. Since acquiring its North Dakota position in 2009, 17 wells (1.4 net) have been completed that have at least 30 days of production history (IP30). The average IP30 is 267 bbls/d of oil. During the same period, six successful wells (4.5 net) were produced in Canada with an average IP30 rate of 143 bbls/d of oil.

One notable well result in 2010 (0.2 net well) was from the siltstone of Middle Bakken Formation (BK) in Burke County. BK production is observed from a number of locations across our North Dakota acreage. However most of these wells were completed a number of years ago using inferior techniques. The Gustafson 29-32-161-99 averaged 471 bbls/d of oil from the BK over its first 30 days (IP30) ranking it among the best results obtained by Nuloch last year. Further identification of this BK potential is an important objective for 2011. A considerable portion of our acreage may be prospective in both the TFS and BK.

As in 2010, NuLoch will be focusing its capital activity in the Williston Basin and, therefore, its non-Williston production, primarily in Alberta, is expected to decline from 450 boe/d to 350 boe/d by year end. The Company has accumulated more than a year of operational history since commencing its program in the Williston Basin. Current productive capability is 600 boe/d in Saskatchewan and 500 boe/d in North Dakota. NuLoch targets a corporate exit rate for 2011 at 2,500 boe/d with over 90% derived from light and medium crude oil. Although there is always risk that our drilling plans will be adjusted, achieving these targets is also highly dependent upon the pace of completion activity and repeatability of results to date.

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.

Use of Estimates in Reserves

The net present value of future net revenue attributable to the Company's reserves is stated without provision for interest costs and general and administrative costs, but after providing for estimated royalties, production costs, development costs, other income, future capital expenditures, and well abandonment costs for only those wells assigned reserves by AJM. The estimates of reserves and future net revenue for individual properties may not reflect the same confidence level as estimates of reserves and future net revenue for all properties, due to effects of aggregation. Actual recoveries may be greater than or less than the estimates provided herein and there is no guarantee that the estimated reserves will be recovered. It should not be assumed that the values of future net revenue attributable to the Company's reserves represent the fair market value of those reserves.

Calculation of Finding and Development Costs

Finding costs per boe of reserves added are a rough measure of the average per unit costs of finding and developing petroleum and natural gas reserves.

The aggregate of the exploration and development costs incurred in the most recent financial year and the change during that year in estimated future development costs generally will not reflect total finding and development costs related to reserve additions for that year.

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 Statements

Certain statements in this document or incorporated herein by reference constitute "forward-looking statements". These forward-looking statements can generally be identified as such because of the context of the statements, including words indicating that the Company "believes", "anticipates", "expects", "plans" or words of a similar nature. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include, among others, the following: general economic and business conditions which will, among other things, impact demand for and market prices of the Company's products; industry capacity; the ability of the Company to implement its business strategy, including exploration and development activities; the ability of the Company to complete its capital programs; successful negotiations with bankers and other third parties; the success of exploration and development activities; production levels; government regulations and the expenditures required to comply with them (especially safety and environmental laws and regulations); asset retirement obligations; and other circumstances affecting revenues and expenses.

Class A common shares outstanding: 122,332,907

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

Contact Information

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