NuLoch Resources Inc.

NuLoch Resources Inc.

April 16, 2009 19:51 ET

NuLoch Resources Releases Year-End 2008 Financial Results

CALGARY, ALBERTA--(Marketwire - April 16, 2009) - NuLoch Resources Inc. (TSX VENTURE:NLR.A)(TSX VENTURE:NLR.B) advises that it has filed its audited annual financial statements as at December 31, 2008 and 2007 and for the years then ended along with the associated Management Discussion and Analysis at The Annual General and Special Meeting of Shareholders will be held on May 27, 2009 at 10:00 am at the Sheraton Suites Calgary Eau Claire, 255 Barclay Parade S.W., Calgary.

The Company was incorporated on May 13, 2005 and commenced operations on July 1, 2005. Production averaged 522 boe/d in 2008 and, currently, is in excess of 500 boe/d.

2008 Accomplishments

- Raised $10 million additional share capital;

- Increased average daily production by 72 percent to 522 boe/d;

- Increased funds flow from operations by 4.4 times to $6.6 million;

- Achieved annual profit of $1.4 million compared to a $0.1 million loss in 2007;

- Reduced operating expenses to $10.03 per boe in 2008 compared to $13.72 in 2007;

- Capital investment program totalled $16 million; and

- Earned interests of 35% to 50% in 51 sections of land at Tableland, SK.

Periods ended December 31,
Three months Years
--------------- ---------------
2008 2007 2008 2007
------- ------- ------- -------
Production - daily average
Oil and NGL (bbls/d) 189 70 195 47
Natural gas (Mcf/d) 1,982 1,678 1,959 1,545
Combined oil equivalent (boe/d)(1) 520 350 522 304
Average sales prices
Oil and NGL ($/bbl) 58.66 83.37 97.42 75.72
Natural gas ($/Mcf) 6.87 6.07 8.36 6.30
Combined oil equivalent ($/boe) 47.56 45.79 67.84 43.65

($ thousands except per share amounts)
Petroleum and natural gas revenue 2,273 1,473 12,959 4,851

Funds flow from operations(2) 911 406 6,565 1,483
Per share - basic 0.02 0.02 0.19 0.06
Per share - diluted 0.02 0.02 0.19 0.06

Net earnings (loss) (266) 277 1,373 (110)
Per share - basic (0.01) 0.01 0.04 -
Per share - diluted (0.01) 0.01 0.04 -

Working capital deficiency
- end of period (4,414) (4,259) (4,414) (4,259)
Line of credit(3) 9,000 6,500 9,000 6,500

Capital expenditures 1,455 3,514 15,995 7,510

Class A, end of period 30,780 21,130 30,780 21,130
Class B, end of period 653 653 653 653
Options, end of period 2,618 1,378 2,618 1,378
Basic, weighted average combined 31,432 26,236 29,165 22,860
Diluted, weighted average 37,305 26,568 35,322 22,860

(1) Six mcf of natural gas is considered equivalent to 1 barrel of oil (see
(2) Cash flow from operations before changes in non-cash operating working
capital (see Advisories).
(3) in April 2009, the line of credit was reduced to 5.7 million.

The Company prudently reduced its capital program during Q4 2008 and has continued to restrict such expenditures in Q1 2009 to match its expected cash flow. Production, including some weather related downtime and shut-ins due to pressure testing, averaged approximately 500 boe/d in Q1 2009 and is expected to average 500 boe/d in Q2 2009.

Saskatchewan - Tableland

The Company has 75 (30 net) sections of largely contiguous land in southeast Saskatchewan that is prospective for Bakken / Sanish oil. Results from the Company's first well, drilled in 2008, did not meet our expectations. A planned follow-up location will use a different completion technique to minimize water infiltration from adjacent formations. A positive technical result combined with improved oil prices could lead to a high-impact development program at Tableland.

Alberta - Balsam

Two oil wells at Balsam (0.6 net) provide 140 boe/d of NuLoch's daily production. Results of a recent pressure analysis suggest that these wells may be in separate reservoirs. Additional pools of this size may exist on this trend.

Alberta - Southern - Enchant

NuLoch's first Mississippian gas well (1.0 net) at Enchant, has recovered 110 MMcf of natural gas in its first 11 months of production since tie-in on May 6, 2008. The follow-up well (1.0 net), on production since December 9, 2008, has recovered 86 MMcf of natural gas to March 31, 2009. Subject to well performance and pressure analysis, NuLoch has plans to drill another 1,000 metre Mississippian gas well nearby but firm timing has not been established.

NuLoch's 2008 oil discovery well at Enchant has been a solid performer. Seven months after being tied-in, the well continues to flow crude oil and solution gas without artificial lift at daily rates of 40 boe/d. Multiple follow-up development locations are being contemplated but firm timing has not been established. NuLoch has a 100 percent working interest in this prospect.

The net present value of the Company's proved and probable reserves at December 31, 2008, as estimated by independent engineers, stood at $29.9 million (before taxes and using a 10 percent discount factor). The Company has 36,000 net undeveloped acres of mineral rights.

The Company's business has been affected by the global financial crisis and associated recession in three significant ways. Firstly, cash flow from operations has been reduced as sales prices for the Company's oil and natural gas production declined significantly over the last six months of 2008 and strength has not yet returned. Secondly, the Company's bank has reduced its available line of credit from $9.0 million to $5.7 million, primarily because of the aforementioned decline in sales prices. The bank also increased the interest rate charged on the facility to prime plus 2.25% reflecting increased tightening in the credit markets. Thirdly, equity markets for junior oil and gas producers have shrunk as investors seek liquidity elsewhere. While these three factors are expected to limit the Company's prospects for growth over the near-term, management believes that its existing resources and prospects, along with the potential benefit of the Alberta economic stimulus program, are sufficient until a rebound in commodity prices it expects in the next 6 to 18 months.

The Company believes there is ample supply of natural gas in North America that will dampen prices until at least the next winter heating season. Some of this downside risk has been mitigated with the implementation of a fixed price natural gas sales contract at $4.08 per GJ at AECO (approximately $4.28 per Mcf) on 1,000 GJ/d for the period from April 2009 through October 2009. Oil sales prices have been left to float at market reflecting management's belief in an earlier return to better supply and demand balance for that commodity.

Over the next 3 to 4 months, the Company plans to continue with minimal capital expenditures while it prepares its prospects and capital investment program.


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.

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