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

NuLoch Resources Inc.

May 19, 2010 20:26 ET

NuLoch Resources Records 63% Increase in Production

CALGARY, ALBERTA--(Marketwire - May 19, 2010) - NuLoch Resources Inc. (TSX VENTURE:NLR.A) (TSX VENTURE:NLR.B) (OTCQX:NULCF) advises that it has filed its unaudited interim financial statements as at March 31, 2010 and for the quarter then ended along with the associated Management Discussion and Analysis at www.sedar.com and on the company's website at www.nuloch.ca. The Annual General and Special Meeting of Shareholders will be held on May 26, 2010 at 10:00 am at the Westin Calgary, 320 4th Avenue S.W., Calgary.

Production averaged 837 boe/d in Q1 2010 and, currently, is in excess of 1,000 boe/d with a 2010 exit target of 1,800 boe/d. Monetary amounts are presented in Canadian dollars unless otherwise indicated.

2010 Q1 Accomplishments

Production increase

Increased production 63% to average 837 boe/d in Q1 2010 compared to 515 boe/d in Q1 2009;

Oil production weighting

Moved to 59% oil production weighting in Q1 2010 compared to 31% in year-ago period;

Funds flow increase

Q1 2010 funds flow from operations increased to $1.8 million compared to $0.5 million in Q1 2009;

Petroleum property acquisition

Acquired 8,500 net undeveloped acres in Burke County, North Dakota in January 2010 that are prospective in the Bakken and Three Forks Sanish formations bringing total for Williston Basin to 65,000 net acres;

Market capitalization

NuLoch's market capitalization increased from $75.7 million on December 31, 2009 to finish Q1 2010 at $147.7 million;

Equity financing

A $23.0 million equity financing at $1.45 per Class A share was completed in March 2010; and

Line of Credit

NuLoch has an $8.5 million credit facility with a Canadian chartered bank that is undrawn. The Company had positive working capital of $9.3 million at March 31, 2010.



HIGHLIGHTS

----------------------------------------------------------------------------
Three months ended
March 31,
2010 2009
------- -------
OPERATING
----------------------------------------------------------------------------
Production - daily average
Oil and NGL (bbls/d) 495 159
Natural gas (Mcf/d) 2,047 2,140
Combined oil equivalent (boe/d)(1) 837 515
Average sales prices
Oil and NGL ($/bbl) 77.17 46.01
Natural gas ($/Mcf) 4.98 5.06
Combined oil equivalent ($/boe) 57.89 35.19

FINANCIAL
($ thousands except per share amounts)
----------------------------------------------------------------------------
Petroleum and natural gas revenue 4,360 1,632

Funds flow from operations(2) 1,770 469
Per share - basic 0.02 0.01
Per share - diluted 0.02 0.01

Net loss (280) (614)
Per share - basic - (0.02)
Per share - diluted - (0.02)

Working capital (deficiency) - end of period 9,323 (4,470)
Line of credit available 8,500 5,700

Capital expenditures 14,988 525

COMMON SHARES
(thousands)
----------------------------------------------------------------------------
Class A, end of period 95,499 30,780
Class B, end of period 653 653
Options, end of period 9,498 3,143
Basic, weighted average combined 88,075 37,305
Diluted, weighted average 88,075 37,305
----------------------------------------------------------------------------
(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).


Outlook

NuLoch is encouraged by recent developments in its Bakken and Three Forks Sanish prospects in the Williston Basin:



- First two Saskatchewan wells have higher initial production rates (IP's)
than expected;
- Continuing 100% success rate on North Dakota lands; and
- High prices paid for offsetting acreage at recent land sales.


Over the past several months, NuLoch has had a series of positive 30-day IP's in the Three Forks Sanish formation that are confirming the potential for its 65,000 net acres (over 100 net sections) in the Williston Basin in Saskatchewan and North Dakota. At Tableland Saskatchewan, the first two wells produced crude oil at an average of 205 barrels per day (bopd) and 186 bopd, respectively, over 30 day periods. They both exceeded the 150 bopd IP rate assumed by the Company in formulating its investment decisions. In North Dakota, the IP rates have averaged 300 bopd for the last five wells (0.5 net) developed on 640 acre (one-mile) spacing. The most recent of those averaged 450 bopd and it was an infill well on the same section as a well that achieved a 240 bopd IP in 2008.

NuLoch's first phase of drilling at Tableland, consisting of nine horizontal wells, is expected to be complete in July, 2010. To date, the IP's of two (1.7 net) producing wells have been disclosed while four wells (2.8 net) are in the early stages of production or completion. One well (0.7 net) has been rig-released with two more (1.4 net) planned to spud in Q2. The Company will evaluate this group in detail as it formulates its go-forward drilling plans at Tableland.

The North Dakota properties are non-operated and the Company expects to participate in drilling 24 (2.5 net) wells in 2010. The five one-mile wells with IP's averaging 300 bopd discussed above were drilled in the last half of 2009. Two (0.2 net) one-mile wells drilled in 2010 are in the early stages of production or completion and one (0.1 net) is drilling. NuLoch is also participating in long-reach two-mile wells on 1280 acre spacing. While the Company's working interest in two 2009 two-mile wells is small at approximately 1%, they are providing valuable information from their early production results. A third long-reach horizontal well with a 10% working interest has recently been fracture stimulated in 30 stages with 68 tonnes of sand per stage. A fourth and fifth well (4.5% and 0.7%, respectively) are drilled or being drilled.

Recent offerings of government owned mineral leases that offset NuLoch lands in Saskatchewan and North Dakota were acquired by industry at high prices. 221 sections to the west of Tableland, Saskatchewan were sold for an average of $900 per acre while considerable North Dakota acreage in Divide and Burke counties attracted average prices of US$1,360 to US$1,490 per acre, respectively. The highest prices paid were $3,200 per acre in Divide and $3,700 per acre in Burke. NuLoch's investments in these areas over the past two years were made at fractions of these values.

In Q1 2010, NuLoch invested $15 million in its capital program. The capital expenditure budget for all of 2010 is $40 - $50 million and leads to a target exit rate for 2010 of 1,800 boe/d (83% crude oil).

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 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.

Common Shares Outstanding

Class A : 95,448,538

Class B : 652,500

Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts 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