NuLoch Resources Inc.

NuLoch Resources Inc.

April 17, 2008 06:30 ET

NuLoch Resources Releases Year-End 2007 Financial Results

CALGARY, ALBERTA--(Marketwire - April 17, 2008) - NuLoch Resources Inc. (TSX VENTURE:NLR.A) (TSX VENTURE:NLR.B) advises that it has filed its audited financial statements for the year ended December 31, 2007 at The Annual General and Special Meeting of Shareholders will be held on May 21, 2008 at 10:00 am at the Metropolitan Conference Centre, 333 - 4 Ave SW, Calgary.

The Company was incorporated on May 13, 2005 and commenced operations on July 1, 2005. Production averaged 304 boe/d in 2007 and, currently, is in excess of 500 boe/d.

NuLoch has made considerable progress in the face of industry-wide challenges encountered in 2007.

Accomplishments in 2007

- 2007 exit production was 465 boe/d

- Q4 2007 average production was 350 boe/d; 25 percent higher than a year before;

- Reserve volumes of petroleum and natural gas increased 23 percent;

- Reserve values increased 47 percent (before tax, 10 percent DCF);

- Invested $7.5 million in the capital program;

- FD&A costs of $13.75 per boe ($13.64 since inception) on a proved and probable basis.

Periods ended December 31,
Three months Years
--------------- ---------------
2007 2006 2007 2006
------- ------- ------- -------
Production - daily average
Oil and NGL (bbls/d) 70 9 47 5
Natural gas (mcf/d) 1,678 1,622 1,545 1,672
Combined oil equivalent (boe/d)(1) 350 279 304 284
Average sales prices
Oil and NGL ($/bbl) 83.37 50.69 75.72 58.38
Natural gas ($/mcf) 6.07 6.74 6.30 6.29
Combined oil equivalent ($/boe) 45.79 40.79 43.65 38.14

($ thousands except per share amounts)
Petroleum and natural gas revenue 1,473 1,048 4,851 3,955

Funds flow from operations(2) 406 500 1,483 1,357
Per share - basic 0.02 0.03 0.06 0.08
Per share - diluted 0.02 0.03 0.06 0.08

Net earnings (loss) 277 (23) (110) (225)
Per share - basic 0.01 - - (0.01)
Per share - diluted 0.01 - - (0.01)

Working capital deficiency (4,259) (2,271) (4,259) (2,271)
Line of credit 6,500 5,500 6,500 5,500

Capital expenditures 3,514 469 7,510 11,512

Class A, end of period 21,130 15,197 21,130 15,197
Class B, end of period 653 653 653 653
Options, end of period 1,378 823 1,378 823
Basic, weighted average combined 26,236 18,345 22,860 16,303
Diluted, weighted average 26,568 18,345 22,860 16,303

(1) Six mcf of natural gas is considered equivalent to 1 barrel of oil.
(2) Cash flow from operations before changes in non-cash operating working
(see Advisories)

The federal government's revision to the taxation of oil and gas trusts announced in October 2006 dampened enthusiasm for investment in oil and gas generally. Natural gas prices continued to de-couple from oil and prices fell in response to LNG imports to North America. The Alberta government announced its intention to increase its share of production with the implementation of a "New Royalty Framework". In response, capital markets shifted their focus away from the junior sector with a flight to larger, more liquid, stocks. 2007 was a year of opportunity for well-capitalized juniors despite these industry-wide challenges.

Some large firms announced wholesale cuts to their Alberta budgets as other projects in their portfolios became more attractive. Prospective lands that had been tightly held for years became available for farm-in as the year progressed. In particular, the "New Royalty Framework", led to sharp declines in rig counts, Crown land sale prices and service industry costs. These are all positive developments that provide juniors with opportunity.

Industry Outlook

European natural gas supply interruptions and the environmental movement drew mobile LNG deliveries away from United States pipelines just as North America experienced its coldest winter in recent years. When coupled with reduced deliverability out of the Western Canadian Sedimentary Basin and higher than expected draws from natural gas storage, the result has been higher prices projections over both short and longer terms. Recent strip pricing for the balance of 2008 is over $9.00 per GJ at AECO.

Emerging economies continue to drive the demand for crude oil that has overshadowed the effect of economic issues in the United States. Analysts are re-thinking their price forecasts for the next 12 months with increases into the US$87 to US$101 per barrel range.

All of this adds up to a "super-cycle" of high commodity prices and more reasonable serviced industry costs. The investment community's acceptance of oil-based resource plays, driven by high oil prices and proven technological advancement, allows juniors with access to the right prospects to capitalize on sector momentum.


NuLoch has taken advantage of this cycle with the execution of strategic farm-ins on lands that bring greater cash flow and value than the shallow natural gas upon which the Company was founded.


Drilling success in 2007 in Alberta has added significant reserves and production. Reserve volumes are up 23 percent to 2.7 MMboe and the reserve value has increased 47 percent to $34.4 million (proved plus probable, before tax, 10% DCF). The Company will continue to drill selective, internally-generated oil and natural gas opportunities in the Province. Further development of the shallow natural gas field at Enchant is contemplated with plans for perforation and stimulation of behind-pipe intervals in up to nine existing wellbores.

Tableland Saskatchewan

Over the past few years, numerous Saskatchewan producers have been successfully exploiting the Bakken formation with horizontal wells laid down in the Middle Bakken member. In North Dakota, success is being achieved drilling in the Sanish. This zone lies directly below the Lower Bakken shale, a world-class source rock, and has reservoir characteristics similar to the Middle Bakken. Using several North Dakota wells, located less than 7 miles away, as a template, NuLoch has now drilled and cased a horizontal well at Tableland, Saskatchewan. The well is costly - estimated at $4 million - but the Company will earn working interests ranging from 35 percent to 50 percent in approximately 51 sections of land. NuLoch retains 70 percent of any production from this first well, reverting to 35 percent after payout. Completion operations are planned to commence after spring break-up. A commercial success on this first well at Tableland may lead to numerous follow-up locations on the largely contiguous 51 section block.


In spite of tough financial markets, NuLoch has been able to obtain equity financing when required to support its capital program. In late March 2008, NuLoch issued Class A common shares and Class A flow-through common shares for total gross proceeds of $10 million. This financing, when combined with cash flow and the bank line of credit, provides resources that will be sufficient to support a capital program of up to $15 million.


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.

Calculation of Finding, Development and Acquisition 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.

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.

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 Resources Inc.
    2200, 444 - 5th Avenue SW
    Calgary, Alberta T2P 2T8