Petroflow Energy Ltd.
TSX VENTURE : PEF

Petroflow Energy Ltd.

April 18, 2008 18:38 ET

Petroflow Energy Ltd. Announces Financial and Operational Results for 2007

CALGARY, ALBERTA--(Marketwire - April 18, 2008) - Petroflow Energy Ltd. (TSX VENTURE:PEF) ("Petroflow" or the "Company") is pleased to announce that it has filed with Canadian securities regulatory authorities its audited consolidated financial statements for the year ended December 31, 2007, and the accompanying Management's Discussion and Analysis. These filings are available in their entirety at www.sedar.com. A summary of these results is given below.

2007 Highlights

- Drilled 24 wells in the Oklahoma Hunton Resource Play, with a 100% success rate.

- Raised $7.7 million in equity in 2007.

- Proved plus probable reserves increased to 26.2 million boe at December 31, 2007, compared to 12.9 million boe at December 31, 2006, an increase of 103%.

- Total proved reserves increased to 20.4 million boe at December 31, 2007, compared to 9.6 million boe at December 31, 2006, an increase of 113%.

- The value of before tax proved and probable reserves (NPV 10%) increased from $177.3 million at December 31, 2006 to $358.1 million at December 31, 2007, based on forecast prices, an increase of 102%.

- The value of before tax proved reserves (NPV 10%) increased from $145.1 million at December 31, 2006 to $300.6 million at December 31, 2007, based on forecast prices, an increase of 107%.

Summary of Results

Petroflow is pleased to report the results in comparison to the prior year with all amounts in Canadian dollars:



Summary by Year

2007 2006
Financial ($000's except per share amounts)

Oil and natural gas sales, net of
transportation 21,725,173 8,493,685

Net Income (loss) (756,905) (6,845,382)
Per share - basic & diluted (0.03) (0.29)

Total assets 111,650,427 65,491,189
Working capital deficiency (17,146,852) (33,250,770)
Total long term debt 60,776,518 5,459,805
Capital expenditures 55,652,477 43,138,253
Funds from operations 901,479 (2,872,456)
Per share - basic & diluted 0.03 (0.12)

Common shares outstanding 29,242,344 24,848,902
Basic weighted average common
shares outstanding 26,815,379 23,293,792
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Operational
Average daily sales volume (boed) 1,382 477
Average selling price ($/boe) 43.60 49.98
Average operating netback ($/boe) 21.34 21.04
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Sales volumes for the year ended December 31, 2007, increased over the year ended December 31, 2006 by 189%, primarily due to the drilling program in Oklahoma. This activity has resulted in continual volume increases as new wells are drilled and completed.

Gross revenues from oil, natural gas and natural gas liquids totalled $22.0 million for the year ended December 31, 2007, an increase of 153% compared to the year ended December 31, 2006. This increase is mostly attributable to a 189% increase in production due to the Company's drilling activity during 2007 and for the last two quarters of 2006. During 2007, the Company put an additional 27 wells on production (18 - Oklahoma; 1 - Texas; and 8 - New Mexico). Sales revenue on a per mcf of natural gas basis declined by 19% in 2007, compared to the same period in 2006 due to market pricing.

Operating expenses increased by 135% for the year ended December 31, 2007, as compared to the same period in 2006. However, on a per boe basis, operating expenses decreased by 19% to $12.23/boe in 2007 from $15.09/boe in 2006. This decrease is the result of economies of scale related to increased production. As well, in Oklahoma, operating expenses in the early stage of the economic life of wells tend to be high compared to conventional production because of the expense involved in dewatering the wells.

The total DD&A rate decreased to $12.50/boe for the year ended December 31, 2007, compared to $15.45/boe for the same period in 2006. Total proved reserves increased by 10.8 million boe, or 113% from December 31, 2006 to December 31, 2007.

General and administrative expenses for the year ended December 31, 2007, were $6.4 million compared to $6.8 million in 2006. General and administrative expense per boe decreased by 68% from $38.99 to $12.62 for the year, as a result of increased volumes in 2007, as well as a decrease in stock-based compensation. As at April 15, 2008, the Company had 2,526,200 options outstanding, amounting to 8.2% of total outstanding common shares and warrants.

Interest expense increased by 135% to $4,205,785 for the year ended December 31, 2007. This increase is a result of higher debt levels when compared to the same period in 2006. Interest expense did however, decrease on a per boe basis in 2007 by 19% as compared to the prior year, due to the significant growth in production volumes. The Company also had lower debt servicing costs in 2007 on a per dollar borrowed basis compared to 2006.

Capital expenditures increased by 29%, for the year ended December 31, 2007, from $43.1 million in 2006 to $55.7 million in 2007. In 2007, the Company spent a significant portion of its developmental drilling budget in Oklahoma where 24 wells were drilled in the Hunton dewatering play, and 18 wells were put on production during 2007. The Company also incurred capital expenditures in New Mexico where seven wells were completed and eight wells put on production.

Supplemental Information Concerning Constant Price Reserves

Petroflow also evaluated its reserves on a constant price basis, that is, assuming all anticipated future production would be realized at the commodity prices which were prevailing on December 31, 2007. The following is a summary of that information:

- Proved plus probable reserves increased to 26.1 million boe (21.1 million net revenue interest boe (nri) reserves) at December 31, 2007, from 12.5 million boe (10.1 million nri boe reserves) at December 31, 2006, an increase of 109%.

- Total proved reserves increased to 20.2 million boe (16.5 million nri boe reserves) at December 31, 2007 compared to 9.3 million boe (7.5 million nri boe reserves) at December 31, 2006, an increase of 117%.

- The value of before tax proved and probable reserves (present value discounted at 10%) increased from $102.2 million at December 31, 2006, to $309.3 million at December 31, 2007, an increase of 203%.

- The value of before tax proved reserves (present value discounted at 10%) increased from $87.4 million at December 31, 2006, to $260.2 million at December 31, 2007, an increase of 198%.

Forward-Looking Statements

This news release contains statements about oil and gas production and operating activities that may constitute "forward-looking statements" or "forward-looking information" within the meaning of applicable securities legislation as they involve the implied assessment that the resources described can be profitably produced in the future, based on certain estimates and assumptions.

Forward-looking statements are based on current expectations, estimates and projections that involve a number of risks, uncertainties and other factors that could cause actual results to differ materially from those anticipated by Petroflow and described in the forward-looking statements. These risks, uncertainties and other factors include, but are not limited to, adverse general economic conditions, operating hazards, drilling risks, inherent uncertainties in interpreting engineering and geologic data, competition, reduced availability of drilling and other well services, fluctuations in oil and gas prices and prices for drilling and other well services, government regulation and foreign political risks, fluctuations in the exchange rate between Canadian and US dollars and other currencies, as well as other risks commonly associated with the exploration and development of oil and gas properties. Additional information on these and other factors, which could affect Petroflow's operations or financial results, are included in Petroflow's reports on file with Canadian securities regulatory authorities. We assume no obligation to update forward-looking statements should circumstances or management's estimates or opinions change unless otherwise required under securities law.

BOEs derived by converting gas to oil in the ratio of six thousand cubic feet of gas to one barrel of oil (6 Mcf: 1 bbl). BOEs may be misleading, particularly if used in isolation. A BOE conversion ratio of 6 Mcf: 1 bbl 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 TSX Venture Exchange has not reviewed and does not accept responsibility for the adequacy or accuracy of this news release.

Contact Information

  • Macam Investor Relations
    Cameron MacDonald
    President & CEO
    (403) 695-1006 or Toll Free: 1-866-264-0743
    or
    Petroflow Energy Ltd.
    John Melton
    President & CEO
    (504) 453-2926
    or
    Petroflow Energy Ltd.
    Duncan Moodie
    CFO
    (403) 539-4311