Online Energy Inc.
TSX VENTURE : ONL

August 26, 2011 08:30 ET

Online Energy Inc. Announces Second Quarter 2011 Financial Results

CALGARY, ALBERTA--(Marketwire - Aug. 26, 2011) - Online Energy Inc. (the "Company or Online") (TSX VENTURE:ONL) announces the filing of its unaudited interim financial statements and related MD&A for the three and six months ended June 30, 2011 (collectively, the "Financial Statements"). Selected financial and operational information is outlined below and should be read in conjunction with the Financial Statements. The Financial Statements are available on the SEDAR website at www.sedar.com and on the Company's website at www.onln.ca.

Highlights

In Canadian Dollars, except shares 2011 Three months ended June 30
2010
2011 Six months ended June 30
2010
Petroleum and natural gas sales 1,197,639 - 1,910,160
Net loss (423,194 ) (234 ) (1,403,104 ) (442 )
Per share – basic and diluted (0.01 ) (26.00 ) (0.03 ) (49.11 )
Cash used in operating activities (402,441 ) (245 ) 744,018 (434 )
Capital expenditures 2,084,734 110,390 11,600,097 110,390
Shares outstanding 41,309,890 9 41,309,890 9
Working capital 8,545,447 1,868 8,545,447 1,868

Highlights of the second quarter included:

  • Production averaged 315 boe/d (37% oil and liquids);
  • Closed a bought deal equity financing on May 5, 2011 with a syndicate of underwriters pursuant to which the Company issued an aggregate of 8,000,000 common shares for gross proceeds of $4,245,700, consisting of 4,490,000 common shares at a price of $0.50 per share and 3,510,000 common shares issued on a flow-through basis at a price of $0.57 per share.
  • Increased the 2011 capital budget to $17,500,000, which will be funded from existing working capital. The majority of these funds will be directed towards ongoing activities in the greater Paddle River area.
  • Acquired producing oil and gas assets in the Paddle River area of west-central Alberta for cash consideration of approximately $1.0 million with an effective date of May 1, 2011 (the "Paddle River Acquisition"). In accordance with National Instrument 51-101 – Standards of Disclosure for Oil and Gas Activities ("NI 51-101"), McDaniel & Associates Consultants Ltd. ("McDaniel") prepared a report dated August 23, 2011, and effective December 31, 2010, evaluating the crude oil, natural gas liquids and natural gas reserves attributable to the assets (the "Paddle River Report"). Based on the Paddle River Report, the total proven plus probable reserves associated with the assets were 119,700 boe with a net present value before tax of $1,578,700 discounted at 10% per annum. The Paddle River Acquisition included production of approximately 28 boe/d (46% oil and liquids), excluding production associated with two acquired gas wells which were considered non-economic at the time of the acquisition and anticipated to be shut-in. The operations have subsequently been optimized at the two well sites and current production associated with these two gas wells is approximately 30 boe/d (20% oil and liquids). The Paddle River Acquisition also included 12.25 sections of land with a 64% average working interest, 2,508 net acres of undeveloped land, a 20% working interest in the vertically developed Paddle River Ostracod A & C Oil Pools and 100% and 96.5% working interests, respectively, in 2 vertically developed Notikewin liquids-rich gas pools.
  • Re-activated a Nordegg oil well (100% working interest) in the Paddle River area of central Alberta. This well went on-stream on May 21, 2011 and is currently producing at a stabilized rate of approximately 20 to 30 boe/d. This was the first of a series of re-activations, re-entries and re- completions that the Company plans to execute to supplement its current production base and reserves.
  • Acquired 8,700 acres of undeveloped land at Crown land sales in the greater Paddle River area for $550,000 at an average cost of $63 per acre.
  • Made significant progress assembling a solid platform for future growth in production focused in the greater Paddle River area. The Company controls approximately 37,000 net acres of undeveloped land in this area and continues to accumulate assets through Crown land sales and third-party acquisitions.
  • Exited Q2 - 2011 with $8.5 million of working capital and no debt.

Third Quarter Activities and Outlook

  • Increased the Company's working interests in certain operated producing natural gas assets in the Leaman and Niton areas of west-central Alberta for aggregate consideration of $520,000 plus a 5% gross overriding royalty on the properties acquired in the Niton area (the "Leaman and Niton Acquisitions"). The effective dates of the Leaman and Niton acquisitions were June 1, 2011 and July 1, 2011, respectively. In accordance with NI 51-101, McDaniel prepared separate reports dated August 23, 2011, and effective December 31, 2010, evaluating the crude oil, natural gas liquids and natural gas reserves attributable to the Leaman and Niton assets (the "Leaman and Niton Reports"). Based on the Leaman and Niton Reports, the total proven plus probable reserves associated with the assets are 100,000 boe with a net present value before tax of $911,200 discounted at 10% per annum. The Leaman and Niton Acquisitions included production of 26 boe/d (20% liquids), 7.25 sections of land with a 42.5% average working interest, 968 net acres of undeveloped land, an average 35.8% working interest in three Online operated vertical producing Notikewin liquids-rich gas wells at Niton and a 49.2% working interest in an Online operated producing Glauconitic liquids-rich gas well at Leaman.
  • Continuing to prepare for the drilling of horizontal multi-frac wells at Paddle River and Niton, targeting Ostracod oil and Notikewin liquids-rich gas, respectively. Drilling of the initial well at Paddle River is expected to commence subsequent to ground conditions drying-out to allow for the construction of the drilling pad.
  • In early August corporate production had increased to approximately 400 boe/d. Subsequently, all of Online's Niton production of approximately 60 boe/d was shut-in due to pipeline maintenance work. This curtailment is expected to last until the end of September. As a result, the Company estimates third quarter production to average 350 boe/d.

Cautionary Statements:

This press release contains certain forward-looking statements (forecasts) under applicable securities laws relating to future events or future performance. Forward-looking statements are necessarily based upon assumptions and judgements with respect to the future including, but not limited to, the outlook for commodity markets and capital markets, the performance of producing wells and reservoirs, well development and operating performance, general economic and business conditions, weather, the regulatory and legal environment and other risks associated with oil and gas operations. In some cases, forward-looking statements can be identified by terminology such as "may", "will", "should", "expect", "projects", "plans", "anticipates" and similar expressions. These statements represent management's expectations or beliefs concerning, among other things, future operating results and various components thereof affecting the economic performance of Online. Undue reliance should not be placed on these forward-looking statements which are based upon management's assumptions and are subject to known and unknown risks and uncertainties, including the business risks discussed above, which may cause actual performance and financial results in future periods to differ materially from any projections of future performance or results expressed or implied by such forward-looking statements. Accordingly, readers are cautioned that events or circumstances could cause results to differ materially from those predicted.

In the interest of providing Online shareholders and potential investors with information regarding the Company, including management's assessment of Online's future plans and operation, certain statements throughout this press release constitute forward looking statements. All forward-looking statements are based on the Company's beliefs and assumptions based on information available at the time the assumption was made. The use of any of the words "anticipate", "continue", "estimate", "expect", "may", "will", "project", "should", "believe" and similar expressions are intended to identify forward looking statements. By its nature, such forward-looking information involves known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward looking statements. Online believes the expectations reflected in those forward looking statements are reasonable but no assurance can be given that these expectations will prove to be correct and such forward looking statements contained throughout this press release should not be unduly relied upon. These statements speak only as of the date specified in the statements.

In particular, this press release may contain forward looking statements pertaining to the following:

  • the performance characteristics of the Company's oil and natural gas properties;
  • oil and natural gas production levels;
  • capital expenditure programs;
  • the quantity of the Company's oil and natural gas reserves and anticipated future cash flows from such reserves;
  • projections of commodity prices and costs;
  • supply and demand for oil and natural gas;
  • expectations regarding the ability to raise capital and to continually add to reserves through acquisitions and development; and
  • treatment under governmental regulatory regimes.

The material assumptions in making these forward-looking statements include certain assumptions disclosed in the Company's most recent management's discussion and analysis included in the material available on this press release.

The Company's actual results could differ materially from those anticipated in the forward looking statements contained throughout this press release as a result of the material risk factors set forth below, and elsewhere in this press release:

  • volatility in market prices for oil and natural gas;
  • liabilities inherent in oil and natural gas operations;
  • uncertainties associated with estimating oil and natural gas reserves;
  • competition for, among other things, capital, acquisitions of reserves, undeveloped lands and skilled personnel;
  • incorrect assessments of the value of acquisitions and exploration and development programs;
  • geological, technical, drilling and processing problems;
  • fluctuations in foreign exchange or interest rates and stock market volatility;
  • failure to realize the anticipated benefits of acquisitions;
  • general business and market conditions; and
  • changes in income tax laws or changes in tax laws and incentive programs relating to the oil and gas industry.

These factors should not be construed as exhaustive. Unless required by law, Online does not undertake any obligation to publicly update or revise any forward looking statements, whether as a result of new information, future events or otherwise.

Barrels of oil equivalent (boe) may be misleading, particularly if used in isolation. A boe conversion ratio of six thousand cubic feet (mcf) of natural gas to one barrel (bbl) of oil is based on an energy conversion method primarily applicable at the burner tip and is not intended to represent a value equivalency at the wellhead. All boe conversions in this press release are derived by converting natural gas to oil in the ratio of six thousand cubic feet of natural gas to one barrel of oil. Certain financial amounts are presented on a per boe basis, such measurements may not be consistent with those used by other companies.

Estimated values contained in this press release do not represent fair market value.

Neither the TSX Venture Exchange nor its Regulation Services Provider (as the term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

Contact Information

  • Online Energy Inc.
    Steve Dabner
    President & Chief Executive Officer
    (403) 262-1901 ext. 228
    sdabner@onln.ca

    Online Energy Inc.
    Thomas Love
    Chief Financial Officer
    (403) 262-1901 ext.227
    tlove@onln.ca
    www.onln.ca