Point North Energy Ltd.

Point North Energy Ltd.

November 14, 2006 19:22 ET

Point North Energy Releases Third Quarter Results

CALGARY, ALBERTA--(CCNMatthews - Nov. 14, 2006) - Point North Energy (TSX:PNY) has now filed its operational and financial results for the third quarter of 2006. Complete versions of the Company's management's discussion and analysis and unaudited financial statements are available electronically on SEDAR through the Company's SEDAR profile at www.sedar.com, and on the Point North website at www.pointnorthenergy.com.

After careful consideration of all available alternatives, the Board of Directors of Point North Energy determined in the last few days of the third quarter that it was in the best interests of all their stakeholders to seek creditor protection under the Companies' Creditors Arrangement Act, or CCAA. While under CCAA protection, Point North continues with its day-to-day operations.

As at the end of Q3, Point North's financial and operational status is
summarized in the following table:

Three Months ended Nine Months ended
Q3 Highlights September 30, 2006 September 30, 2006
Net production 182 boepd 203 boepd
Net revenue $ 1,090,000 $ 2,822,000
Operating $ 1,145,000 $ 2,669,000
Transportation $ 555,000 $ 1,743,000
G & A $ 1,460,000 $ 2,471,000
Net income (loss) $ (4,059,000) $ (8,179,000)
Capital expenditures $ 550,000 $ 5,436,000
Working capital (deficiency) $ (10,600,000) $ (10,600,000)

Since its creation as the successor company to Purcell Energy in November 2005, Point North has been hampered by operational, financial and market challenges. After experiencing substantial cost over-runs with no increase in productivity in Fort Liard, NT, the Company struggled early in 2006. As well, the unanticipated and sizeable tax liability, arising from the Purcell Plan of Arrangement, discovered in March compounded the financial difficulties for Point North. The financial burden severely compromised the operational and financial flexibility of the Point North team from that point forward and directly impacted growth, development plans, and expectations. Efforts to refinance the Company were unsuccessful near the end of September, 2006, which made CCAA protection the most responsible remaining alternative.

CCAA protection affords Point North the opportunity to restructure its financial affairs through a court-approved Plan of Arrangement, while maintaining the status quo to ensure that creditors are treated fairly; Point North was initially granted CCAA protection for one month. This has now been extended by the courts until mid-December while the company continues restructuring activities.

While under CCAA protection, Point North continues to operate with the supervision of a court-appointed Monitor. The Monitor is responsible for reviewing the company's ongoing operations, assisting with the development and filing of the Plan of Arrangement, communicating with creditors and other stakeholders and reporting to the Court.

The Plan of Arrangement is the proposed compromise that, in due course, Point North may present to its creditors. This Plan will describe how the Point North team anticipates dealing with the debt owed at the time of seeking CCAA protection. A Plan of Arrangement can entail offers to creditors of a percentage of the total amount owing, shares in the company in exchange for debt, and in some cases, a combination of both cash and shares. All the creditors must approve any Plan of Arrangement for it to be implemented. At this time, Point North is still in the process of developing its Plan of Arrangement for review and approval by the courts and creditors in due course.

Although CCAA protection enables Point North to continue with its day-to-day operations until its CCAA status changes, the implications for the Point North shareholders are less clear. The interests of creditors and certain government obligations take priority over those of the shareholders. At the end of the restructuring process, whether the shares have any value will depend upon the terms of the Plan of Arrangement approved by creditors. Although matters could change, at present, there is substantial risk that Point North's shares will have no value. If the creditors do not approve the Plan of Arrangement, the Company will likely be placed into receivership or bankruptcy.

Managing the financial difficulties of the company has absorbed the majority of the staff resources available to Point North during the period. Despite ongoing and increasing severe financial issues, Point North was able to exit the third quarter with production of 235 boepd. However, the production average for the third quarter dropped to 182 boepd, from 231 boepd in Q2, largely as a result of a turnaround at the Duke Fort Nelson gas plant which shut-in a large portion of Point North's production for 19 days.

I appreciate the continued support from Point North's shareholders and other stakeholders through this difficult period. I am thankful for the patience and loyalty that my colleagues at Point North continue to show. Their technical abilities have permitted us to successfully maintain production, while operating on a very limited budget. The loyalty and support of our experienced and quality board of directors is also greatly appreciated.

On behalf of the management and board of directors

John Emery, CEO

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.


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)
    Iradesso Communications Corp.
    Stephanie K. Mesher
    Investor Relations Advisor
    (403) 503-0144 Ext: 216
    Point North Energy Ltd.
    2810, 605 - 5th Avenue SW
    Calgary, AB, T2P 3H5
    Website: www.pointnorthenergy.com