Pacific Energy Resources Ltd.
TSX : PFE

Pacific Energy Resources Ltd.

April 03, 2009 09:00 ET

Pacific Energy Resources Ltd. Announces Fourth Quarter and Full Year 2008 Operating and Financial Results

LONG BEACH, CALIFORNIA--(Marketwire - April 3, 2009) - Pacific Energy Resources Ltd. (TSX:PFE) (the "Company") announces its fourth quarter and full year operating and financial results for the period ended December 31, 2008.

Fourth Quarter Highlights:

Net loss from continuing operations for the fourth quarter of 2008 was $185.1 million ($0.91 per diluted share), compared to net loss of $24.8 million ($0.12 per diluted share) in the third quarter of 2008, and a net loss of $60.2 million ($0.43 per diluted share) for the fourth quarter of 2007. Included in the fourth quarter results are impairment charges of $131.4 million, of which includes $126.1 million relates to certain Alaska petroleum and natural gas properties' net book value exceeding fair values. Also included in the impairment charges is a write down of oil inventories of $5.3 million as the market value of oil inventory was lower than its carrying value at December 31, 2008 and $0.3 million related to the expiration of certain exploration leases.

Production from continuing operations for the fourth quarter of 2008 was 7,083 barrels of oil equivalent per day ("boe/d"), down 4.4% from 7,412 boe/d in the third quarter of 2008, and up 15.3% from 6,144 boe/d from the year ago period. Fourth quarter 2008 benefited from additional wells being returned to production at the Beta Field's Platform Eureka, but this was more than offset by less production in Alaska. The increase from prior year is due to the return of the Platform Eureka to production in April 2008, partly offset by a decline in Alaska production in the fourth quarter of 2008 due to mechanical pump failures some of which are expected to be repaired in the late spring timeframe on the properties operated by Chevron. No decision has yet been made on two operated wells due to lacking of funding.

Oil and gas revenue for the fourth quarter of 2008, before the effects of hedging, was $36.5 million, down by 45.8% from $67.3 million for the third quarter of 2008, and down by 19.4% from $45.3 million from the fourth quarter of 2007. Revenue is impacted by production, discussed above, together with market prices and hedging impacts. The decline in revenue from the third quarter of 2008 is due to the dramatic decline in market prices in the fourth quarter of 2008. The realized average price per barrel of oil, before hedging effects, was $51 in the fourth quarter of 2008 compared to $111 for the third quarter of 2008, and $84 for the fourth quarter of 2007. The impact of hedging added $2.2 million in gains to the fourth quarter of 2008 compared to a loss from hedging of $16.1 million for the third quarter of 2008, and a hedging loss of $9.8 million for the fourth quarter of 2007. The realized average price per barrel of oil, after hedging effects, was $55 in the fourth quarter of 2008 compared to $84 for the third quarter of 2008, and $65 for the fourth quarter of 2007.

Lease operating expenses ("LOE") were $40/boe for the fourth quarter of 2008, $36/boe for the third quarter of 2008, and $38/boe in the fourth quarter of 2007. A significant decrease at the Beta Field was more than offset by increased LOE/boe in Alaska as further discussed below.

Royalty expense for the fourth quarter of 2008 was $7.1 million, compared to $16.8 million in the third quarter of 2008, and $9.5 million for the fourth quarter of 2007. Royalties vary with production and oil prices.

Fourth quarter 2008 general and administrative ("G&A") expenses of $5.8 million increased $2.2 million compared to the third quarter of 2008. The increase is primarily due to spending of $2.5 million as a result of the Company's forbearance agreement and restructuring efforts. G&A expenses decreased 3.8% from the same period a year ago when significant costs were incurred to integrate the Alaskan assets following their acquisition.

Cash interest expense for the fourth quarter of 2008 was $8.9 million, compared to $17.7 million in the third quarter of 2008, and $26.7 million for the fourth quarter of 2007. The decrease of 66.7% from 2007 is due to cash interest being capitalized to the principal balance (including some from the prior quarter), more than offset by a $10.7 million required penalty fee accrued in the fourth quarter of 2008 given the expectation that the Alaskan loans would continue to be outstanding.

Adjusted EBITDA for the fourth quarter of 2008 was a negative $1.9 million, compared to positive $9.4 million in the third quarter of 2008, and a negative $6.7 million for the fourth quarter of 2007. Please see the end of this release for a definition of Adjusted EBITDA and a reconciliation of Adjusted EBITDA to net loss.

At current oil prices, the Company is dependent on its debtor-in-possession financing, discussed below. The Company's Beta hedge position was terminated in December 2008, and Alaska hedge position in March 2009. Accordingly, all production is now subject to changes in oil prices.

Full Year Operations:

The Company's net loss from continuing operations was $323.6 million ($1.59 per diluted share) for 2008 and $94.0 million ($0.67 per diluted share) for 2007. Included in the 2008 results are impairment charges of $131.4 million, an acceleration of expensing of accretion and amortization of deferred financing costs of $48.4 million, partly offset by a gain on sale of its onshore properties of $74.3 million.

Production, from continuing operations, for 2008 was 6,816 boe/d, which is an increase of 129.1% from 2,975 boe/d for 2007. The Beta Field operations were included in the Company's production beginning March 1, 2007, and the Alaskan assets were included in the Company's production beginning September 1, 2007. Increases are due to the return to production of Platform Eureka in the Beta Field and the inclusion of full year of production in 2008 for both Beta and Alaska assets.

Oil and gas revenue, before the effects of hedging, was $226.2 million for the full year 2008 which was an increase of 168.5% from the year ago period of $84.3 million. Revenue is impacted by production, discussed above, together with market prices and hedging impacts. The realized average price per barrel of oil, before hedging effects, increased 24.5% to $92 in 2008 from $74 for 2007. Hedging losses were $42.4 million for 2008 and $10.7 million for 2007. The realized average price per barrel of oil, after hedging effects, was $74 for 2008 compared to $64 for 2007.

Lease operating expenses decreased by 15.9% to $39/boe for the full year 2008 from $46/boe for the year ago period. The LOE for the Beta Field was $30/boe for 2008 and $42/boe for 2007. The LOE for Alaska was $44/boe for 2008 and $50/boe for 2007.

Royalty expense for 2008 was $49.5 million, compared to $15.3 million for 2007. The increase was due to a full year of operations in 2008, versus a partial year in 2007. Royalties also vary with production and oil prices.

General and administrative expense ("G&A") was up 49.5% at $15.2 million for the full year 2008 compared to $10.2 million for the year ago period. The increase is partially due to the fourth quarter 2008 spending of $2.5 million incurred as a result of the Company's restructuring efforts. The remaining increase is due to Alaska and Beta operations for a full year in 2008, as opposed to a partial year in 2007.

Cash interest expense was $65.1 million for the full year 2008, up 88.5% from the year ago period of $34.5 million due to the inclusion of full year Alaska indebtedness, and due to a total of $26.4 million in covenant default, syndication and penalty fees.

Adjusted EBITDA was income of $17.9 million for the year ended 2008, up from a loss of $7.1 million for the year ended 2007. Please see the end of this release for a definition of Adjusted EBITDA and a reconciliation of Adjusted EBITDA to net loss.

Operational Update:

Cook Inlet, Alaska:

Production in Alaska was 3,680 boe/d and 4,164 boe/d for the fourth quarter and full year 2008, respectively. The Alaskan properties were acquired on August 27, 2007. The fourth quarter production level is down 18.4% from the third quarter of 2008 and 17.6% from the fourth quarter of 2007. The decline is due to some mechanical pump failures. The failures are considered normal wear and tear and certain of the failures are expected to be repaired following the spring thaw; others for operated properties are dependent on additional funding. LOE for the Alaska properties was $55/boe and $44/boe for the fourth quarter and full year 2008, respectively. Fourth quarter 2008 LOE increased 36.1% from the third quarter of 2008 and 46.4% from the fourth quarter of 2007. The increase is due to the decline in production and increased maintenance projects at the properties operated by Chevron. Capital spending for the full year 2008 was $19.3 million.

Beta Field, California:

Including both Platforms Eureka and Ellen, total Beta Field production was 3,404 boe/d and 2,652 boe/d for the fourth quarter and full year 2008, respectively. The Beta Field was acquired on March 1, 2007. The fourth quarter production level is up 17.2% from the third quarter of 2008 and 102.6% from the fourth quarter of 2007. The production increase is attributable to returning Platform Eureka to production in April 2008 and returning additional wells on Platform Eureka to production since then. LOE for the Beta Field was $24/boe and $30/boe for the fourth quarter and full year 2008, respectively. Fourth quarter 2008 LOE decreased 15.1% from the third quarter of 2008 and 37.7% from the fourth quarter of 2007, as a result of the production increases. Capital spending for the full year 2008 was $18.0 million.

Corsair Project:

Pursuant to its lease obligations, the Company was required to submit to the state a contract for a heavy lift transport vessel to the Cook Inlet. The Company's contract terms were denied by the state of Alaska. As an alternate path forward, on effective February 1, 2009, the Company executed a farm out agreement with a third party to pool each company's lease interests into a single unit. The proposed unit is called Kitchen Lights. The proposed Kitchen Lights Unit, located in the Cook Inlet Basin, is approximately 83,000 acres and is the result of the consolidation of three offshore prospects with similar geology (the Company's Corsair prospect, and the third party's Northern Lights and Kitchen prospects). The unitization has been submitted to the state of Alaska, and if approved by approximately August 1, 2009, will entitle the Company to a 20% carried working interest, back-in working interest, net profits interest or other similar interest retained by the third party or from a sale or transfer of the new unit.

Insolvency Proceedings:

As previously announced, on March 9, 2009, the Company and its wholly-owned subsidiaries filed with the Delaware Bankruptcy Court voluntary petitions for reorganization under chapter 11. On March 10, 2009, the Bankruptcy Court entered Interim Order for In re: Pacific Energy Resources Ltd., et al., at (1) approving senior secured super priority post petition financing, (2) authorizing use of cash collateral, (3) granting liens and providing super priority administrative expense status, (4) granting adequate protection, (5) modifying automatic stay, and (6) scheduling a final hearing. A final hearing on the Debtor-In-Possession credit facility ("DIP Financing") is scheduled for April 15, 2009, and a final hearing on certain other matters is scheduled for April 8, 2009. The DIP Financing provides $44.0 million in new funding, $9.6 million of which was approved under the Interim Order above with the balance subject to this final hearing.

In addition to obtaining bankruptcy protection in the U.S., the Company obtained protection in Canada under the Companies' Creditors Arrangement Act ("CCAA") on March 12, 2009. The initial protection period under the CCAA is scheduled to expire April 9, 2009.

About Pacific Energy Resources Ltd.:

Pacific Energy Resources Ltd. is an oil and gas exploration and development company based in Long Beach, California, U.S.A. Additional information relating to the Company may be found on SEDAR at www.sedar.com.

ON BEHALF OF THE BOARD OF DIRECTORS

PACIFIC ENERGY RESOURCES LTD.

Darren Katic, President

Forward Looking Statements:

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. In particular, statements by Pacific Energy Resources Ltd. and its subsidiaries (the "Company") regarding future events and developments and the Company's future performance, including statements regarding proceedings relating to the Company's petitions for relief under Chapter 11 of Title 11 of the United States Code and the Company's operations and funding during the chapter 11 process, as well as other statements of management's expectations, anticipations, beliefs, plans, intentions, targets, estimates, or projections and similar expressions relating to the future, are forward-looking statements within the meaning of these laws. Forward-looking statements in some cases can be identified by their being preceded by, followed by or containing words such as "estimate," "plan," "project," "forecast," "intend," "expect," "anticipate," "believe," "seek," "target" and other similar expressions. Forward-looking statements are based on assumptions and assessments made by the Company's management in light of their experience and their perception of historical trends, current conditions, expected future developments and other factors they believe to be appropriate. Any forward-looking statements are not guarantees of the Company's future performance and are subject to risks and uncertainties that could cause actual results, developments and business decisions to differ materially from those contemplated by any forward-looking statements. Except as required by law, the Company undertakes no obligation to update any forward-looking statements. Factors that could cause actual results to vary materially from results anticipated by such forward looking information include risk factors discussed in the Annual Information Form for the year ended December 31, 2008 for the Company available at www.sedar.com.
Additional factors that may cause actual results, developments and business decisions to differ materially from those contemplated by any forward-looking statements include the following: the ability of the Company to continue as a going concern; the ability of the Company to operate pursuant to the terms of its debtor-in-possession financing; the Company's ability to obtain court approval with respect to motions in the chapter 11 proceeding prosecuted by it from time to time, including approval of motions relating to the priority of the lender's security interest under any debtor-in-possession financing; the ability of the Company to develop, prosecute, confirm and consummate one or more plans of reorganization with respect to the chapter 11 cases; risks associated with third parties seeking and obtaining court approval to terminate or shorten the exclusivity period for the Company to propose and confirm one or more plans of reorganization, for the appointment of a chapter 11 trustee or to convert the cases to chapter 7 cases; the ability of the Company to obtain and maintain normal terms with vendors and service providers; the Company's ability to maintain contracts that are critical to its operations; the potential adverse impact of the chapter 11 cases on the Company's liquidity or results of operations; the ability of the Company to fund and execute its business plan; the ability of the Company to attract, motivate and/or retain key executives and employees; the ability of the Company to attract and retain customers and suppliers; the volatility and uncertainty of oil and other commodities prices; the Company's ability to generate sufficient liquidity to fund its operations and capital expenditures; the results of the Company's hedging transactions and other risk mitigation strategies; risk of potential goodwill and other intangible impairment; operational disruptions at the Company's facilities; the effects of vigorous competition and excess capacity in the industry in which the Company operates; the effects of mergers and consolidations in the industry in which the Company operates; the possibility of the market in which the Company competes being impacted by political, legal and regulatory changes or other external factors over which the Company has no control; changes in or elimination of governmental laws, credits, tariffs, trade or other controls or enforcement practices; the Company's ability to comply with various environmental, health, and safety laws and regulations; the success of the Company's marketing and sales efforts; the Company's reliance on key management personnel; the Company's ability to secure additional financing; the Company's ability to implement additional financial and management controls. Similarly, these and other factors, including the terms of any reorganization plan ultimately confirmed, can affect the value of the Company's various pre-petition liabilities and common stock.
No assurance can be given as to what values, if any, will be ascribed in the chapter 11 proceeding to each of these constituencies. Accordingly, the Company urges that the appropriate caution be exercised with respect to existing and future investments in any of these liabilities and/or securities.



Pacific Energy Resources Ltd.
Operating and Financial Highlights
As of and for the Three Months and Fiscal Years Ended December 31,
2008 and 2007
(thousands except volumes, per barrel and per share)
(US$) (Unaudited) (1,2)

As of or for the Three Months Ended % Change From
------------------------------------ ---------------
Septem- Decem-
December September December ber ber
31, 30, 31, 30, 31,
2008 2008 2007 2008 2007
------------------------------------ ---------------
Operating
---------
Total oil equivalent
production - boe/d
California 3,404 2,905 1,680 17.2% 102.6%
Alaska 3,680 4,508 4,464 -18.4% -17.6%
------------------------------------
Total 7,083 7,412 6,144 -4.4% 15.3%

Oil sales (bbls/d)
California 3,404 2,905 1,680 17.2% 102.6%
Alaska 4,048 3,550 4,109 14.0% -1.5%
------------------------------------
Total 7,452 6,455 5,789 15.4% 28.7%

Natural gas sales
(mcf/d)
Alaska 2,096 2,245 - -6.6% N/A

Total oil equivalent
sales (boe/d)
California 3,404 2,905 1,680 17.2% 102.6%
Alaska 4,397 3,924 4,109 12.1% 7.0%
------------------------------------
Total 7,801 6,829 5,789 14.2% 34.8%

Average NYMEX light
sweet crude oil per
barrel $ 58.73 $ 117.98 $ 90.68 -50.2% -35.2%
Realized price per
barrel of oil
Before hedging $ 51.35 $ 111.26 $ 83.86 -53.8% -38.8%
After hedging $ 54.63 $ 84.14 $ 64.75 -35.1% -15.6%

Lease operating
expenses (per boe
produced)
California $ 24.16 $ 28.44 $ 38.76 -15.1% -37.7%
Alaska $ 54.85 $ 40.29 $ 37.46 36.1% 46.4%
Weighted average $ 40.10 $ 35.65 $ 37.82 12.5% 6.0%

Income statement
and other
-----------------
Total revenue before
hedging gains
(losses) $ 36,480 $ 67,340 $ 45,250 -45.8% -19.4%
Hedging gains
(losses) 2,246 (16,105) (9,788) N/M N/M
------------------------------------
Total revenue after
hedging gains
(losses) $ 38,726 $ 51,235 $ 35,462 -24.4% 9.2%

Selected expenses
Royalties $ 7,050 $ 16,824 $ 9,538 -58.1% -26.1%
Production(5) 26,546 21,350 24,509 24.3% 8.3%
Transportation 1,281 1,130 2,344 13.4% -45.3%
General and
administrative 5,763 2,553 5,988 125.7% -3.8%
Interest - cash 8,916 17,746 26,749 -49.8% -66.7%
Interest - non-cash
- paid in kind 24,667 17,722 5,878 39.2% 319.6%
Interest -
accretion of
discounts and
amortization of
deferred financing
costs 1,096 (10,489) 10,567 -110.4% -89.6%
Impairment 131,407 - - N/A N/A

Net income
Net income (loss)
from continuing
operations, after
tax $ (185,115) $ (24,839) $ (60,190) 645.3% 207.6%
------------------------------------

Income (loss) from
discontinued
operations, after
tax - (383) 489 -100.0% -100.0%
Gain on sale of
discontinued
operations, after
tax (187) 74,441 - -100.3% N/A
------------------------------------
Total income (loss)
from discontinued
operations, after
tax (187) 74,058 489 -100.3% -138.2%
------------------------------------


Net income (loss),
after tax $ (185,302) $ 49,219 $ (59,701) -476.5% 210.4%
------------------------------------
------------------------------------
Weighted average
shares (basic and
diluted) 205,469 205,228 180,033 0.1% 14.1%

Basic and diluted
income (loss) per
share from
continuing
operations $ (0.91) $ (0.12) $ (0.43) 658.3% 111.6%
Basic and diluted
income (loss) per
share from
discontinued
operations - 0.36 - -100.0% N/A
------------------------------------
Basic and diluted
income (loss) per
share $ (0.91) $ 0.24 $ (0.43) -479.2% 111.6%

Adjusted EBITDA(6) $ (1,890) $ 9,435 $ (6,681) -120.0% -71.7%

Capital expenditures
California $ 699 $ 3,431 $ 2,254 -79.6% -69.0%
Alaska 5,635 7,531 731 -25.2% 670.9%
------------------------------------
Total $ 6,334 $ 10,962 $ 2,985 -42.2% 112.2%

Balance sheet
-------------
Cash $ 1,319 $ 6,746 $ 7,245 -80.4% -81.8%
Total assets 536,370 660,801 691,871 -18.8% -22.5%
Total notes payable 501,725 464,322 433,871 8.1% 15.6%
Shareholders' equity
(deficit) including
accumulated other
comprehensive
income (82,108) (24,722) 42,510 232.1% -293.1%
Shareholders' equity
(deficit) excluding
accumulated other
comprehensive
income (102,902) 80,828 125,226 -227.3% -182.2%



For the Year Ended % Change From
---------------------- -------------
December 31, December 31,
2008 2007 2007
---------------------- -------------
Operating
---------
Total oil equivalent production -
boe/d
California(3) 2,652 1,470 80.4%
Alaska(4) 4,164 1,505 176.6%
-------------------------
Total 6,816 2,975 129.1%

Oil sales (bbls/d)
California(3) 2,652 1,470 80.4%
Alaska(4) 3,933 1,633 140.9%
-------------------------
Total 6,585 3,103 112.2%

Natural gas sales (mcf/d)
Alaska 2,193 - N/A

Total oil equivalent sales (boe/d)
California(3) 2,652 1,470 80.4%
Alaska(4) 4,299 1,633 163.2%
-------------------------
Total 6,951 3,103 124.0%

Average NYMEX light sweet crude oil
per barrel $ 99.67 $ 72.31 37.8%
Realized price per barrel of oil
Before hedging $ 92.08 $ 73.96 24.5%
After hedging $ 74.47 $ 64.18 16.0%

Lease operating expenses (per boe
produced)
California $ 30.29 $ 42.44 -28.6%
Alaska $ 44.33 $ 49.92 -11.2%
Weighted average $ 38.87 $ 46.23 -15.9%

Income statement and other
--------------------------
Total revenue before hedging gains
(losses) $ 226,245 $ 84,257 168.5%
Hedging gains (losses) (42,440) (10,693) 296.9%
-------------------------
Total revenue after hedging gains
(losses) $ 183,805 $ 73,564 149.9%

Selected expenses
Royalties $ 49,457 $ 15,320 222.8%
Production(5) 96,868 53,212 82.0%
Transportation 4,581 2,359 94.2%
General and administrative 15,170 10,147 49.5%
Interest - cash 65,101 34,532 88.5%
Interest - non-cash - paid in kind 42,389 8,269 412.6%
Interest - accretion of discounts
and amortization of deferred
financing costs 10,084 11,630 -13.3%
Interest - accelerated expensing
of accretion and amortization
of deferred financing costs 48,398 - N/A
Impairment 131,407 - N/A

Net income
Net loss from continuing
operations, after tax $ (323,602) $ (94,040) 244.1%
-------------------------

Loss from discontinued operations,
after tax (8,260) (4,709) 75.4%
Gain on sale of discontinued
operations, after tax 74,254 - N/A
-------------------------
Total income (loss) from
discontinued operations, after tax 65,994 (4,709) N/M
-------------------------

Net loss, after tax $ (257,608) $ (98,749) 160.9%
-------------------------
-------------------------

Weighted average outstanding shares 203,697 140,632 44.8%
Fully diluted stock count 314,549 297,150 5.9%

Basic and diluted loss per share
from continuing operations $ (1.59) $ (0.67) 137.3%
Basic income (loss) per share from
discontinued operations 0.32 (0.03) N/M
Diluted income (loss) per share
from discontinued operations 0.21 (0.03) N/M
Basic and diluted loss per share (1.27) (0.70) 81.4%

Adjusted EBITDA(6) $ 17,866 $ (7,148) N/M

Capital expenditures
California $ 17,967 $ 14,265 26.0%
Alaska 19,277 731 2537.1%
-------------------------
Total $ 37,244 $ 14,996 148.4%


GAAP RECONCILIATION

In addition to net income (loss) determined in accordance with Canadian GAAP, we have provided in this release Adjusted EBITDA for recent periods. Adjusted EBITDA is a non-GAAP financial measure that we use as a supplemental measure of our performance.

We define Adjusted EBITDA as net income (loss) from continuing operations before (i) interest expense, cash and non-cash, (ii) interest income, (iii) income tax provision (benefit), (iv) depreciation, depletion and amortization expense, (v) stock compensation expense, (vi) non-cash liquidated damage expense for shares issued for the delay in registering certain securities, (vii) general exploration expense, (vii) impairment and (viii) loss from equity investment. Because the use of Adjusted EBITDA facilitates comparisons of our historical operating performance on a more consistent basis, we use this measure for business planning and analysis purposes and in determining how potential external financing sources are likely to evaluate our business.

We present Adjusted EBITDA because we consider it to be an important supplemental measure of our performance. Adjusted EBITDA is not a measurement for financial performance under GAAP and it should not be considered as an alternative to net income (loss), operating income or any other performance measure derived in accordance with GAAP, as an alternative to cash flow from operating activities or as a measure of our liquidity. You should not assume that the Adjusted EBITDA amount shown is comparable to similarly named measured disclosed by other companies.



For the Three Months Ended For the Year Ended
----------------------------------- ------------------------
Adjusted EBITDA December September December December
31, 30, 31, 31,
2008 2008 2007 2008 2007
----------------------------------- ------------------------
Net income
(loss)
from continuing
operations $ (185,115) $(24,839) $ (60,190) $(323,602) $ (94,040)
Interest
expense -
cash 8,916 17,746 26,749 65,101 34,532
Interest
expense -
non cash -
paid in kind 24,667 17,722 5,878 42,389 8,269
Interest -
accretion of
discounts and
amortization of
deferred financing
costs 1,096 (10,489) 10,567 10,084 11,630
Interest -
accelerated
expensing of
accretion and
amortization
of deferred
financing costs - - - 48,398 -
Interest income (1,121) (1,142) (57) (5,919) (2,916)
Income tax
expense - - (35) - -
Depreciation,
depletion and
amortization
expense 15,212 6,959 (8,161) 35,601 14,482
Stock
compensation
expense 1,572 1,564 1,173 6,339 3,468
Liquidated
damages
expense - 840 6,050 4,080 6,050
General
exploration 434 701 11,024 2,125 11,056
Impairment 131,407 - - 131,407 -
Loss from
equity
investment 1,042 373 321 1,863 321
----------------------------------- ------------------------
Adjusted EBITDA $ (1,890) $ 9,435 $ (6,681) $ 17,866 $ (7,148)
----------------------------------- ------------------------
----------------------------------- ------------------------


NOTES
-----
(1) For further information, see Financial Statements and Management's
Discussion & Analysis on www.sedar.com.
(2) Excludes discontinued operations, except where indicated.
(3) Production and sales for the year ended December 31, 2007 for Beta is
from the date of acquisition, March 1, 2007, divided by 365 days in the
year. Beta sales and production from March through December 2007 was
1,753 bbls/d.
(4) Production and sales for the year ended December 31, 2007 for Alaska is
from the date of acquisition, August 27, 2007, divided by 365 days in
the year. Alaska production from September through December 2007 was
4,504 bbls/d and sales for the same period were 4,885 bbls/d.
(5) Production expenses include lease operating expenses, direct costs and
inventory change.
(6) Reference "GAAP Reconciliation" above - reconciliation of net income
from continuing operations to Adjusted EBITDA.


DEFINITIONS
-----------
bbls/d barrels per day
boe barrels of oil equivalent with natural gas converted at 6:1
boe/d barrels of oil equivalent per day with natural gas converted
at 6:1
mcf/d thousand cubic feet per day
NYMEX New York Mercantile Exchange
N/A Not applicable
N/M Not meaningful


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