Pilot Energy Ltd.
TSX VENTURE : PGY

Pilot Energy Ltd.

April 30, 2007 19:36 ET

Pilot Energy Announces Its 2006 Fourth Quarter and Annual Financial Results and Disclosure Documents

CALGARY, ALBERTA--(CCNMatthews - April 30, 2007) - Pilot Energy Ltd. ("Pilot") (TSX VENTURE:PGY) is pleased to announce its financial and operating results for the three months and the year ended December 31, 2006.



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Summary of Financial Highlights Three Months Ended Year Ended
December 31 December 31
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2006 2005 % Chg 2006 2005 % Chg
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FINANCIAL
($ thousands, except per
share amounts)

Revenue 3,861 3,709 4 17,001 12,142 40

Funds from operations(1) 1,023 1,609 (36) 6,263 5,317 18
Per share - basic 0.05 0.09 (41) 0.32 0.30 5
Per share - diluted 0.05 0.09 (41) 0.31 0.30 5

Net income (loss) (190) 61 (411) 934 963 (3)
Per share - basic (0.01) 0.00 (390) 0.05 0.05 (14)
Per share - diluted (0.01) 0.00 (389) 0.05 0.05 (14)

Capital expenditures 1,633 3,897 (58) 11,429 16,774 (32)
Debt (including working
capital) 15,354 10,044 53
Shares outstanding(000's) 19,736 19,570 -
Weighted average shares
outstanding (000's)
basic 19,736 18,331 8 19,713 17,546 12
diluted 20,001 18,550 8 19,978 17,766 12

OPERATING

Daily production
Oil and NGLs (bbl/d) 724.6 666.0 9 740.3 561.5 32
Natural gas (mcf/d) 476.0 357.2 33 410.8 311.9 32
Oil equivalent (boe/d @ 6:1) 803.9 725.5 11 808.8 613.5 32

Operating netback($/boe)(2) 23.50 29.42 (20) 29.75 30.65 (3)

Funds from operations
($/boe)(1) 13.83 24.11 (43) 21.22 23.74 (11)
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Notes:
(1) Funds from operations is calculated as cash provided by operating
activities from the statement of cash flows, adding change in non-cash
working capital and asset retirement expenditures. Funds from
operations is used to analyze the Company's operating performance and
leverage. Funds from operations does not have a standardized measure
prescribed by Canadian Generally Accepted Accounting Principles and
therefore may not be comparable with the calculations of similar
measures for other companies.
(2) Netback is equal to total oil and natural gas revenue less royalties
and operating costs calculated on a boe basis. Netback does not have a
standardized measure prescribed by Canadian Generally Accepted
Accounting Principles and therefore may not be comparable with the
calculations of similar measures for other companies.


Reserves

Pilot increased its total proved plus probable reserves, as evaluated by Sproule Associates Limited, by 21 percent to 2,913 Mboe at December 31, 2006 from 2,411 Mboe at December 31, 2005. Reserve additions during 2006, including revisions, replaced production 2.7 times. Pilot has successfully added new reserves with finding and development costs which we estimate to be ranked in the top quartile based on publicly released information on other western Canadian producers. Pilot's proved plus probable reserve life index, based on annualized 2006 fourth quarter production is 9.9 years.



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Finding and Development Costs
2006 2005 Three Year Average
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Proved plus Probable ($/boe)(1) 19.14 12.21 12.76
Proved ($/boe)(2) 29.58 15.05 17.80
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Notes:
(1) Includes the change during the most recent financial year (or years)
to estimated future development costs relating to proved and probable
reserves as per NI 51-101 guidelines.
(2) Includes the change during the most recent financial year (or years)
to estimated future development costs relating to proved reserves as
per NI 51-101 guidelines.


Outlook

2006 was a challenging year for companies focused on value creation in the oil and gas industry in western Canada. Exceptionally high service industry costs led Pilot to curtail its capital spending this past year. Acquisitions, which form a core component of Pilot's growth strategy, saw metrics that pushed these opportunities beyond Pilot's tolerable range in 2006. As we head into 2007 we are seeing a change in the western Canadian oil and gas industry with both service costs and property acquisition costs trending lower. For value players like Pilot, it is a welcome change.

Pilot's asset base has undergone a significant change in risk in the past year. We have assembled a land base which, through a combination of Pilot's drilling initiatives and increased industry drilling density, has altered the majority of our undeveloped land base from an exploration to a development risk.

In our Chauvin core area in Alberta, a 3-D seismic program shot in mid-2006, along with the successful drilling of an exploration well, led to the discovery of a Dina oil pool on 100 % company owned lands. The oil pool sits underneath an existing Pilot oil battery so additional facility costs to develop the pool are minimal.

The Bakken light oil play in the Viewfield area of southeast Saskatchewan continues to be one of the hottest plays in western Canada. With the large number of wells drilled in this area, drilling, completion and stimulation techniques continue to improve. The value of our land position in the Viewfield area has increased dramatically with successful Bakken drills offsetting most of our existing land position. In early 2007 land prices for Bakken rights directly offsetting Pilot lands exceeded $8,000 per hectare. Management is now confident in its understanding of both the drilling and completion technology associated with Bakken drilling as well as the risk of the zone being present on Company lands. We expect to commence drilling of our first Bakken location in late May.

Pilot has assembled an impressive inventory of seismically defined drilling locations for a company of its size. We have identified over 50 valid drilling locations on Company lands in the Bakken, Frobisher, Dina and GP zones. Pilot expects to drill a combination of wells in each of these 4 zones in 2007 without detracting from our 9 plus year reserve life index. To have a multi-year development drilling program at its disposal without incurring additional costs for land and seismic is quite unique for a junior oil and gas company.

Operating costs have historically been high over Pilot's growth to date. Management undertook several initiatives in late 2006 and will continue in 2007 to direct its resources to reduce overall operating costs. We feel we will be able to achieve industry average operating costs by year end through a combination of initiatives such as pipelining presently trucked oil, sale of high operating cost non-core properties and increasing sales volumes at some of our Saskatchewan oil batteries.

The current business environment for the oil and gas sector remains attractive. Although the prices for crude oil and natural gas have softened, longer term prices are expected to remain strong and the Company is well positioned to take advantage of higher commodity prices with over 90 percent of production comprised of crude oil and natural gas liquids.

Pilot will continue to focus on growth in cash flow, production, and reserves through drilling and acquisitions. With a solid production base, prudent management and significant inventory of drilling prospects, Pilot is on track to continue our strategy of low risk development in 2007.

Reader Advisory

Barrels of oil equivalent ("boe") amounts mentioned herein have been calculated using a conversion rate of six thousand cubic feet of natural gas to one barrel of oil. This conversion conforms to National Instrument 51-101 - Standards for Oil and Gas Activities of the Canadian Securities Administrators (NI 51-101). The term "boe" may be misleading, particularly if used in isolation. A boe conversion ratio of 6 mcf is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.

Certain statements in this press release are forward-looking statements. The reader is cautioned that assumptions used in the preparation of such information, although considered reasonable by Pilot at the time of preparation, may prove to be incorrect. Actual results achieved during the forecast period will vary from the information provided herein as a result of numerous known and unknown risks and uncertainties and other factors, many of which are beyond the control of Pilot. There is no representation by Pilot that actual results achieved during the forecast period will be the same, in whole or in part, as forecast.

This news release shall not constitute an offer to sell or the solicitation of an offer to buy the securities in any jurisdiction. The common shares of Pilot will not be and have not been registered under the United States Securities Act of 1933 and may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements.

Further Information

Pilot has filed its audited financial statements and accompanying notes for the years ended December 31, 2006 and 2005 and related Management's Discussion and Analysis and also its statement of reserves data, the report of its independent qualified reserves evaluator and the related report of management and directors with the securities regulatory authorities in Canada.

Pilot's disclosure documents can be viewed under the Company's SEDAR profile at www.sedar.com or copies can be obtained by e-mailing the Company at info@pilot-energy.com.

Issued and Outstanding Common Shares: 19,736,362

The TSX Venture Exchange does not accept responsibility for the adequacy or accuracy of this release.

Contact Information

  • Pilot Energy Ltd.
    Todd Lemieux
    President
    (403) 514-8115 ext. 226
    or
    Pilot Energy Ltd.
    Douglas Smith
    Chief Financial Officer
    (403) 514-8115 ext. 232
    Email: info@pilot-energy.com