Orion Oil & Gas Corporation

February 28, 2011 09:29 ET

Orion Announces 2010 Annual Results

CALGARY, ALBERTA--(Marketwire - Feb. 28, 2011) - Orion Oil & Gas Corporation (TSX:OIP) ("Orion" or the "Company") announces that it has filed its 2010 annual financial statements and the related Management Discussion and Analysis ("MD&A") for the year and quarter ended December 31, 2010 on SEDAR at www.SEDAR.com and on the Company's website at www.orionoilandgas.ca.

Highlights in 2010 were as follows:

  • Achieved an 86% increase in average daily production levels; averaging 4,364 boe/d in 2010 compared to 2,342 boe/d in 2009;
  • Achieved record production levels, exiting the year at approximately 6,000 boe/d, an increase of approximately 140% over exit rates for the fourth quarter of 2009;
  • Increased proved plus probable reserves ("2P") by 34% to 24.8 million boe;
  • Realized funds flow from operations of $36.5 million ($0.13 per diluted share);
  • Closed the acquisition of 4.4 sections of land and Viking light oil production immediately adjacent to Orion's Redwater light oil production operations for $6.6 million;
  • Decreased operating expenses from $12.79 per boe in 2009 to $12.16 per boe in 2010;
  • Realized an operating netback of $29.97 per boe, a 6% increase over 2009, mainly due to higher pricing environments and lower operating expenses; and
  • Completed a RTO of Wintraysan on January 8, 2010 and was listed on the TSX under the symbol "OIP".

2010 has been an exciting time for Orion and our shareholders. The year began with the completion of a key milestone in the growth of Orion by carrying out a reverse takeover transaction between Orion Oil & Gas Ltd., a privately owned company, and a TSXV company called Wintraysan Capital Corp. on January 8, 2010. As a result of that transaction, the company was renamed Orion Oil & Gas Corporation and was listed on the TSX under the symbol "OIP". We began trading on January 11, with our first trade executed at $0.48 per share and closed the year at $0.98 per share. 

Our strategy to increase production and funds flow with an aggressive capital program during 2010 has been successfully executed. The capital program was executed at below budgeted levels, partly a result of the exceptional performance of the Orion team in the face of some adverse weather and operational conditions. In 2010, we drilled 31.0 development wells (29.3 net) with a 100% success rate. 

Overall, we generated funds flow from operations of $36.5 million with production averaging 4,364 boe/d during the year. We exited 2010 at approximately 6,000 boe/d, a level 140% higher than the 2009 exit rate. This noteworthy achievement has established base production that Orion intends to maintain in 2011 and beyond.

Orion has realized substantial growth in reserves with a 2P reserve replacement ratio of approximately 490%. We increased 2P reserves by 34% to 24.8 million boe and added over $100.0 million in net present value (2P reserves discounted at 10% before tax).

In the fourth quarter of 2010, we completed the acquisition of 4.4 sections of land and Viking light oil production immediately adjacent to Orion's Redwater light oil production operations for $6.6 million. In 2011, we plan to optimize existing production on the acquired lands as well as re-develop with horizontal wells and other enhanced recovery opportunities.

Looking forward to 2011 and beyond, Orion is well positioned to generate significant free funds flow. We plan to maintain production in the 6,000 to 7,000 boe/d range for several years and re-direct free funds flow towards business development opportunities. Chief Executive Officer Gary Guidry commented: "We continue to identify and evaluate strategic opportunities in various regions, but have not entered into any definitive transactions. We hope that you as shareholders will share our excitement with our progress to this point and ensure you of our unequivocal commitment to our business plan and to our obligation to deliver growing net asset value per share".

Summary Information Relating to Orion

Orion is engaged in the exploration for and development of oil and natural gas interests located primarily in the Kaybob, Redwater and Bigstone areas of Alberta. Orion is operator at its Kaybob, Redwater and Bigstone properties.

Cautionary Statements
Certain information contained in this press release constitutes forward-looking information or statements including, without limitation, information and statements respecting: anticipated cash flow, future investment objectives, anticipated oil and gas pricing, expected inflation and future foreign exchange rates. Statements relating to "reserves" and "resources" are forward-looking information as they involve the implied assessment, based on certain estimates and assumptions that, among others, the reserves and resources described exist in the quantities predicted or estimated. Forward-looking information and statements are often, but not always, identified by the use of words such as "anticipate", "seek", "believe", "expect", "hope", "plan", "intend", "forecast", "target", "project", "guidance", "may", "might", "will", "should", "could", "estimate", "predict" or similar words or expressions suggesting future outcomes or language suggesting an outlook. By their very nature, forward-looking information and statements involve inherent risks and uncertainties, both general and specific, and risks that predictions, forecasts, projections and other forward-looking information and statements will not be achieved. We caution readers not to place undue reliance on these statements as a number of important factors could cause the actual results to vary materially from the forward-looking information or statements. These factors include, but are not limited to: the volatility of oil and gas prices; production and development costs; capital expenditures; the imprecision of reserve and resource estimates and estimates of recoverable quantities of oil, natural gas and liquids; the Company's ability to replace and expand oil and gas reserves; environmental claims and liabilities; incorrect assessments of value when making acquisitions or dispositions; increases in debt service charges; the loss of key personnel; the marketability of production; defaults by third party operators; unforeseen title defects; fluctuations in foreign currency and exchange rates; inadequate insurance coverage; compliance with environmental laws and regulations; changes in tax and royalty laws; the Company's ability to access external sources of debt and equity capital; and the Company's ability to obtain equipment in a timely manner to carry out development activities. Further information regarding these factors may be found under the headings "Risk Factors" and "Industry Conditions" in the Company's most recent Annual Information Form available under the Company's profile on SEDAR (www.sedar.com). Readers are cautioned that the foregoing list of factors that may affect future results is not exhaustive. When relying on our forward-looking statements to make decisions with respect to the Company, investors and others should also carefully consider information set forth in the section "Forward-Looking Statements" of the Company's most recent Annual Information Form respecting the assumptions upon which the Company bases certain forward-looking information and the uncertainties inherent in such assumptions. The Company does not assume responsibility for the accuracy and completeness of the forward-looking information or statements and such information and statements should not be taken as guarantees of future outcomes. Subject to applicable securities laws, the Company does not undertake any obligation to revise these forward-looking information or statements to reflect subsequent events or circumstances. Furthermore, the forward-looking information contained in this press release are made as of the date of this document and the Company does not undertake any obligation to update publicly or to revise any of the included forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law. The forward-looking information and statements contained in this press release are expressly qualified by this cautionary statement.

This press release uses the terms "funds flow from operations" and "operating netback" which terms are not recognized under Canadian generally accepted accounting principles ("GAAP") and may not be comparable to similar measures presented by other companies. The Company considers funds flow from operations a key performance measure as it demonstrates the Company's ability to generate funds necessary to repay debt and to fund future growth through capital investment. Funds flow from operations and funds flow from operations per share should not be considered an alternative to, or more meaningful than, cash flow from operating activities as determined in accordance with GAAP. Funds flow from operations is calculated as cash flow from operating activities before adjusting for changes in non-cash working capital. Funds flow from operations per share is calculated using the same weighted average number of shares outstanding as in the case of the net earnings per share calculation for a given reporting period. The Company considers operating netback a key indicator of profitability relative to current commodity prices. The operating netback is calculated as the average per boe of the Company's oil and gas sales, less royalties, operating and transportation costs. There is no GAAP measure that is reasonably comparable to operating netbacks.

The reserves replacement ratio was calculated by subtracting the reserves balance at December 31, 2009 from the reserves balance at December 31, 2010; adding the production for 2010; and dividing the result by the 2010 production.

For the purposes of this press release, boe has been calculated on the basis of six thousand cubic feet of gas to one barrel of oil. The term boe may be misleading, particularly if used in isolation. A boe conversion ratio of six thousand cubic feet to one barrel is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. 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 the effects of aggregation.

Contact Information

  • Orion Oil & Gas Corporation
    Gary Guidry
    President and Chief Executive Officer
    (403) 297-1430
    (403) 237-9791 (FAX)
    Orion Oil & Gas Corporation
    Douglas Allen
    Chief Financial Officer
    (403) 297-1430
    (403) 237-9791 (FAX)
    Orion Oil & Gas Corporation
    Trevor Peters
    Vice President, Business Development and Corporate Planning
    (403) 297-1430
    (403) 237-9791 (FAX)