Petro-Reef Resources Ltd.
TSX VENTURE : PER

Petro-Reef Resources Ltd.

August 29, 2012 16:30 ET

Petro-Reef Resources Ltd. Announces 2012 Q2 Financial and Operating Results

CALGARY, ALBERTA--(Marketwire - Aug. 29, 2012) - Petro-Reef Resources Ltd. (TSX VENTURE:PER), ("Petro-Reef" or the "Company") is pleased to release its financial and operating results for the three and six month periods ended June 30, 2012. This press release should be read in conjunction with the Company's June 30, 2012 quarterly financial statements and MD&A filed on Sedar.

Financial Summary
Three months ended June 30
2012 2011 % Change
Oil and gas revenue $ 2,522,702 $ 2,249,472 12
Cash flow from operations (1) 511,217 953,248 (46 )
Per share - basic and diluted 0.01 0.02 (52 )
Net income 926,424 1,363 -
Per share - basic and diluted 0.01 0.00 -
Net debt (1) 12,695,625 13,793,310 (8 )
Capital expenditures $ 756,242 $ 2,368,000 (68 )
Shares outstanding - end of period 62,239,477 56,261,477 11
Six months ended June 30
2012 2011 % Change
Oil and gas revenue $ 5,378,595 $ 5,371,751 0
Cash flow from operations (1) 1,738,981 2,587,396 (33 )
Per share - basic and diluted 0.03 0.05 (44 )
Net income (loss) 815,042 (1,052,232 ) -
Per share - basic and diluted 0.01 (0.02 ) -
Net debt (1) 12,695,625 13,793,310 (8 )
Capital expenditures $ 1,602,074 $ 5,996,000 (73 )
Shares outstanding - end of period 62,239,477 56,261,477 11
(1) Non GAAP measure
Daily Production and Commodity Prices
Three months ended June 30 2012 2011 % Change
Daily production
Oil and NGLs (bbl/d) 341 163 109
Natural gas (mcf/d) 1,866 2,555 (27 )
Oil equivalent (boe/d @ 6:1) 652 589 11
Realized commodity prices ($CDN)
Oil and NGLs (bbl) 68.88 91.68 (25 )
Natural gas (mcf) 2.28 3.81 (40 )
Oil equivalent (boe @ 6:1) 41.53 42.15 (1 )

Average prices for oil and gas dropped sharply in Q2 2012 as the average oil price dropped 25% and the average gas price fell by 40%.However, the average price per boe remained level as oil production increased to 52% of total production from 28% in Q2 2011.

Daily production volumes increased by 11% to 652 boe/d in the three months ended June 30, 2012 as compared to 589 boe/d for the same period in 2011. Oil volumes increased by 109% quarter over quarter while gas production decreased by 27%. In Q2 2012 oil and NGL production comprised 52% of total production as compared to 28% in Q2 2011.

Six months ended June 30 2012 2011 % Change
Daily production
Oil and NGLs (bbl/d) 325 229 42
Natural gas (mcf/d) 2,303 2,808 (18 )
Oil equivalent (boe/d @ 6:1) 709 697 2
Realized commodity prices ($CDN)
Oil and NGLs (bbl) 75.19 81.06 (7 )
Natural gas (mcf) 2.28 3.94 (42 )
Oil equivalent (boe @ 6:1) 41.42 42.72 (3 )

Average prices for oil and gas decreased in the six months ended June 30, 2012 as the average oil price dropped 7% and the average gas price fell by 42%.However, the average price per boe only decreased by 3% as oil production increased by 42% as compared to the same period in 2011.

Daily production volumes increased by 2% to 709 boe/d in the six months ended June 30, 2012 as compared to 697 boe/d for the same period in 2011. Oil volumes increased by 42% while gas production decreased by 18%. In the six months ended June 30, 2012 oil and NGL production comprised 46% of total production as compared to 33% in 2011.

Revenue by product
Three months ended June 30 2012 2011 % Change
CDN $
Oil revenue 2,134,766 1,365,342 56
Natural gas revenue 387,936 884,130 (56 )
Total revenue 2,522,702 2,249,472 12

In Q2 2012 oil revenues comprised 85% of total revenue as compared to 61% in Q2 2011. Oil revenue increased by 56% while natural gas revenue decreased by 56%.

Six months ended June 30 2012 2011 % Change
CDN $
Oil revenue 4,429,626 3,427,498 29
Natural gas revenue 948,969 1,944,254 (51 )
Total revenue 5,378,595 5,371,752 0

For the six months ended June 30, 2012 oil revenues comprised 82% of total revenue as compared to 64% in the same period in 2011. Oil revenue increased by 29% while natural gas revenue decreased by 51%.

Earnings and Cash Flow Summary
Three months ended June 30 2012 2011 % Change 2012 2011 % Change
CDN $ ($/boe) ($/boe)
Gross Revenue 2,522,702 2,249,472 12 41.53 42.15 (1 )
Royalties (347,700 ) (369,899 ) (6 ) (5.72 ) (6.93 ) (17 )
Revenue after royalties 2,175,002 1,879,573 16 35.81 35.22 2
Operating expenses 827,282 831,653 (1 ) 13.62 15.58 (13 )
Operating netback (1) 1,347,720 1,047,920 29 22.19 19.64 13
Realized gain (loss) on financial derivative instruments (19,354 ) 304,819 - (0.32 ) 5.71 -
General & administrative expenses 660,246 303,152 118 10.87 5.68 91
Interest expense 156,903 96,339 63 2.58 1.81 43
Cash flow from operations (1) 511,217 953,248 (46 ) 8.42 17.86 (53 )
Unrealized gain (loss) on financial derivative instruments 1,594,928 394,883 304 26.26 7.40 -
Other income - - - 0.00 0.00
Stock based compensation 33,208 192,717 (83 ) 0.55 3.61 (85 )
Accretion 10,996 17,386 (37 ) 0.18 0.33 (44 )
Depletion and depreciation 1,135,517 1,229,832 (8 ) 18.70 23.04 (19 )
Income before income taxes 926,424 (91,804 ) - 15.25 (1.72 ) -
Deferred income tax (recovery) - (93,167 ) - 0.00 (1.75 ) -
Net Income 926,424 1,363 - 15.25 0.03 -
Per Share - Basic 0.01 0.00
Per Share - Diluted 0.01 0.00
Six months ended June 30 2012 2011 % Change 2012 2011 % Change
CDN $ ($/boe) ($/boe)
Gross Revenue 5,378,595 5,371,751 0 41.42 42.72 (3 )
Royalties (623,225 ) (882,957 ) (29 ) (4.80 ) (7.02 ) (32 )
Revenue after royalties 4,755,370 4,488,794 6 36.62 35.70 3
Operating expenses 1,646,413 1,677,727 (2 ) 12.68 13.34 (5 )
Operating netback (1) 3,108,957 2,811,067 11 23.94 22.36 7
Realized gain (loss) on financial derivative instruments (117,292 ) 479,954 - (0.90 ) 3.82 -
General & administrative expenses 961,284 507,876 89 7.40 4.04 83
Interest expense 291,400 195,749 49 2.24 1.56 44
Cash flow from operations (1) 1,738,981 2,587,396 (33 ) 13.39 20.58 (35 )
Unrealized gain (loss) on financial derivative instruments 1,523,909 (508,790 ) - 11.74 (4.05 ) -
Other income 230,252 250,919 (8 ) 1.77 2.00 (11 )
Stock based compensation 120,579 333,253 (64 ) 0.93 2.65 (65 )
Accretion 21,960 34,329 (36 ) 0.17 0.27 (38 )
Depletion and depreciation 2,535,561 2,867,450 (12 ) 19.53 22.80 (14 )
Income (loss) before income taxes 815,042 (905,507 ) - 6.28 (7.20 ) -
Deferred income tax expense - 146,725 - 0.00 1.17 -
Net Income (loss) 815,042 (1,052,232 ) - 6.28 (8.37 ) -
Per Share - Basic 0.01 (0.02 )
Per Share - Diluted 0.01 (0.02 )
(1) Non-GAAP measure

Forward-Looking Statements: All statements, other than statements of historical fact, set forth in this news release, including without limitation, assumptions and statements regarding reservoirs, resources and reserves, future production rates, exploration and development results, financial results, and future plans, operations and objectives of the Corporation are forward-looking statements that involve substantial known and unknown risks and uncertainties. Some of these risks and uncertainties are beyond management's control, including but not limited to, the impact of general economic conditions, industry conditions, fluctuation of commodity prices, fluctuation of foreign exchange rates, environmental risks, industry competition, availability of qualified personnel and management, availability of materials, equipment and third party services, stock market volatility, timely and cost effective access to sufficient capital from internal and external sources. The reader is cautioned that assumptions used in the preparation of such information, although considered reasonable by the Corporation at the time of preparation, may prove to be incorrect. There can be no assurance that such statements will prove to be accurate and actual results and future events could differ materially from those anticipated in such statements.

Reference is made to barrels of oil equivalent (BOE). Barrels of oil equivalent may be misleading, particularly if used in isolation. In accordance with National Instrument 51-101, a BOE conversion ratio for natural gas of 6 Mcf: 1 bbl has been used, which is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.

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

Contact Information

  • Petro-Reef Resources Ltd.
    Hugh M. Thomson
    Vice-President Finance and Chief Financial Officer
    (403) 523-2505
    (403) 264-1348 (FAX)

    Petro-Reef Resources Ltd.
    970, 10655 Southport Road S.W.
    Calgary, Alberta T2W 4Y1
    info@petro-reef.ca
    www.petro-reef.ca