Point North Energy Ltd.
TSX : PNY

Point North Energy Ltd.

August 15, 2006 10:58 ET

Point North Energy Releases Second Quarter Results

CALGARY, ALBERTA--(CCNMatthews - Aug. 15, 2006) - In the second quarter of 2006, Point North Energy Ltd. (TSX:PNY) ("Point North" or the "Company") was able to grow production to an average daily rate of 231 boepd, 87 percent of which was weighted to natural gas. For the first six months of 2006, Point North produced 213 boepd on average, with a Q1 average production rate of 195 boepd.

During the second quarter of 2006, the Company's capital spending was limited, where possible, to reduce financial outlay and manage cash flow as the Company's management team and board of directors examined alternatives to address the Company's working capital deficiency, which was $9.6 million at June 30, 2006. Progress continued regarding the management of the tax liability determined in the 2005 financial audit process through a loss carry back and other transactions in the quarter. These transactions included the sale of the Company's wholly owned subsidiary, Cirque Energy U.K. Limited ("Cirque UK"), and the amalgamation of another wholly owned, dormant, subsidiary 421416 Alberta Ltd. ("421416") with the Company. Some of the gains made addressing the Canada Revenue Agency ("CRA") tax liability were offset by unavoidable capital spending and the continued underutilization of natural gas processing and transportation commitments entered into prior to the reorganization of Purcell Energy Ltd. at the end of 2005. As of November 1, 2006 these firm commitments will be reduced by 75% or $320,000 per month. This reduction is expected to result in a positive operating income for the production month of November, 2006.

The Company currently does not have any bank debt.

During the three months ended June 30, 2006, Point North sold Cirque UK for aggregate proceeds of $250,000 as part of a strategy to rationalize the Company's non-core non-producing assets. Cirque UK's assets included three suspended oil wells that will require significant capital to reactivate. Cirque UK's assets did not have any reserve value assigned to the Company's net asset value; therefore, the Company's reserve value is unaffected by the sale. Additionally, the sale of Cirque UK and the consolidation of 421416 will, subject to confirmation by CRA, result in a tax loss carry-back of approximately $0.6 million to offset a portion of the Company's tax liability. In total the corporate taxes payable were reduced from $6.3 million at the end of 2005 to $4.5 million at the end of the second quarter 2006.

The second quarter saw the completion of the Company operated Evie gas well tie-in for a cost of $1.6 million for the three months ended June 30, 2006, and $2.3 million for the six months ended June 30, 2006. The Evie well was brought on stream on June 1, 2006. Initially, both downhole issues and poor road conditions hampered Point North's ability to keep the well running. However, now the well is on production at net sales rates slightly above 100 boepd and road construction is almost complete.

In the second quarter, joint venture activity continued at Fort Liard. Compression was installed at the K29 facility which resulted in the start-up of the 2K29 well. By the end of June, 2006 the 2K29 well was producing at a net sales rate of 55 boepd. In the second quarter, capital expenditures in Fort Liard for the Company were $0.8 million. Compression at K29 accounted for about $0.5 million and over-expenditures on previous work accounted for about $0.2 million. For the six months ended June 30, 2006 a total of $2.7 million was incurred on joint venture activity in Fort Liard, of which $0.6 million represents an overrun of costs. Point North is not the operator of this property.

The Judy Creek gas well, tied in during the first quarter of 2006, came on production in the second quarter. The well is currently producing 40 boepd of net gas sales to Point North.



POINT NORTH Q2, 2006 HIGHLIGHTS

Net Production 231 boepd
Net Revenue $ 866,000
Expenses
Operating 919,000
Transportation 650,000
General & Administrative 585,000
Net Income (loss) (659,000)
Capital Expenditures 2,999,000
Working Capital (deficiency) (9,636,000)


As a result of the continued, sizeable working capital deficiency, the Company faces a serious liquidity challenge. Several steps have been taken by the Company's management and board of directors to address this issue, including the restriction of capital spending, tight cash controls, sale of assets and deferral and/or reduction of certain outstanding liabilities. The Company continues to actively pursue several alternatives aimed at dealing with this liquidity problem, including the pursuit of bridge financing, presentations to potential buyers and negotiation for the retention of one or more financial advisors to assist the Company with a sale process and to provide additional strategic advice.

Point North's Q2 financial statements and management's discussion and analysis will be available for review at www.sedar.com, or on the Company's website at www.pointnorthenergy.com.

About Point North

Point North is a northern-focused junior natural gas company with assets in Fort Liard, N.W.T., northeast B.C., and northwest Alberta. Point North is the successor company to Purcell Energy Ltd. after the reorganization completed on November 2, 2005.

Forward Looking Statements

Information in this press release contains forward-looking statements including expectations of future production and components of cash flow and earnings. Investors are cautioned that assumptions used in the preparation of such information may prove to be incorrect. Events or circumstances may cause actual results to differ materially from those predicted, a result of numerous known and unknown risks, uncertainties, and other factors, many of which are beyond the control of Point North Energy. These risks include, but are not limited to; the risks associated with the oil and gas industry, commodity prices and exchange rate changes. Industry related risks could include, but are not limited to; operational risks in exploration, development and production, delays or changes in plans, risks associated to the uncertainty of reserve estimates, health and safety risks and the uncertainty of estimates and projections of production, costs, expenses and working capital/liquidity. The risks outlined above should not be construed as exhaustive. Investors are cautioned not to place undue reliance on any forward-looking information. Point North Energy undertakes no obligation to update or revise any forward-looking statements.

Note

In this news release the term barrel of oil equivalent ("boe") may be misleading, particularly if used in isolation. A boe conversion ratio of one boe for 6,000 cubic feet of natural gas is based on an energy-equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. All boe conversions in this news release are derived by converting gas to oil in the ratio of six thousand cubic feet of gas to one barrel of oil.


Contact Information

  • Point North Energy Ltd
    John Emery
    President & CEO
    (403) 269-5803
    (403) 264-1336 (FAX)
    or
    Iradesso Communications Corp.
    Stephanie K. Mesher
    Investor Relations Advisor
    (403) 503-0144 Ext: 216
    or
    Point North Energy Ltd
    2810, 605 - 5th Avenue SW
    Calgary, AB, T2P 3H5
    Website: www.pointnorthenergy.com