Raven Energy Ltd.
TSX VENTURE : RVL

Raven Energy Ltd.

August 15, 2005 16:18 ET

Raven Energy Ltd. Announces Results for the Six Months Ended June 30, 2005

CALGARY, ALBERTA--(CCNMatthews - Aug. 15, 2005) - Raven Energy Ltd. (TSX VENTURE:RVL)

Raven presents financial and operating results for the six months ended June 30, 2005. Unless otherwise stated, the volume conversion of natural gas to barrel of oil equivalent (BOE) is presented on the basis of 6 thousand cubic feet of natural gas being equal to 1 barrel of oil.



------------------------------------------------------------------------
Three Months Ended Six Months Ended
June 30 June 30
($000's, except per share amounts) (unaudited) (unaudited)
------------------------------------------------------------------------
2005 2004 2005 2004
------------------------------------------------------------------------
Petroleum and natural gas revenue $ 4,878 $ 3,127 $ 9,669 $ 5,807
------------------------------------------------------------------------
Net income 983 312 1,645 549
------------------------------------------------------------------------
Per share - basic and diluted 0.03 0.01 0.05 0.02
------------------------------------------------------------------------
Cash flow from operations 3,366 2,107 6,348 3,721
------------------------------------------------------------------------
Per share - basic and diluted 0.10 0.07 0.19 0.13
------------------------------------------------------------------------
Net capital expenditures 3,292 6,581 9,304 12,390
------------------------------------------------------------------------
Shareholders' equity 31,705 26,910 31,705 26,910
------------------------------------------------------------------------
Working capital (deficiency) (5,819) (1,036) (5,819) (1,036)
------------------------------------------------------------------------
Natural gas production (Mcf/d) 4,393 3,785 4,598 3,701
------------------------------------------------------------------------
Oil and NGL production (bbl/d) 340 165 326 138
------------------------------------------------------------------------
Production (BOE/d) 1,072 796 1,092 754
------------------------------------------------------------------------
Natural gas selling price ($/Mcf) 7.56 6.91 7.52 6.87
------------------------------------------------------------------------
Oil and NGL selling price ($/bbl) 60.02 49.53 57.84 47.12
------------------------------------------------------------------------
BOE selling price ($) 50.01 43.15 48.92 42.29
------------------------------------------------------------------------
Operating expenses ($/BOE) 7.20 6.77 7.69 7.19
------------------------------------------------------------------------
Cash flow ($/BOE) 34.51 29.07 32.12 27.10
------------------------------------------------------------------------
Common shares
------------------------------------------------------------------------
Weighted average (millions) 33.4 31.1 33.4 29.3
------------------------------------------------------------------------
Outstanding (millions) 33.4 31.2 33.4 31.2
------------------------------------------------------------------------
------------------------------------------------------------------------


OPERATIONS REVIEW

During the first half of 2005, Raven participated in the drilling of six gross (5.1 net) wells resulting in three oil wells and three natural gas wells. Three net oil wells at Ante Creek were drilled, completed, equipped and placed on production by March. Raven now has 15 oil wells at Ante Creek and numerous infill locations on its existing land holdings. Three gross (2.1 net) natural gas wells were drilled in the Inland and Viking areas of east central Alberta. The spring breakup combined with the extended wet weather conditions restricted some of Raven's field operations. The three natural gas wells were completed later in the second quarter and are anticipated to be placed on production by the end of September once facilities and pipelines are installed.

Daily production, for the first half of 2005, averaged 1,092 BOE compared to 754 BOE per day for the first half of 2004. Production of 1,072 BOE per day in the second quarter declined modestly from the first quarter of 2005 (1,113 BOE per day) despite lost production due to weather in the Ante Creek area. Natural gas production increased to 4.6 million cubic feet per day in the first half of 2005 compared to 3.7 million cubic feet per day for the 2004 period. Oil and NGL production increased to 340 barrels per day during the quarter compared to 165 barrels per day in the 2004 period, reflecting the production of light oil from new wells at Ante Creek. Production from the Ante Creek property averaged 584 BOE per day in the first half of 2005 compared to 217 BOE per day in the comparable period of 2004.

At Narraway, (100% working interest) the Company completed the first phase of a re-entry in a 5,600 meter cased well. The well was re-entered to a depth of 3,900 meters and a zone in the Mannville was completed for natural gas. Gas flow rates and bottomhole pressures are currently being analyzed to determine whether the zone is economic for tie-in. A deeper potential natural gas zone in the well below 5,000 meters remains to be evaluated.

MANAGEMENT'S DISCUSSION AND ANALYSIS

This management's discussion and analysis (M D & A) dated August 15, 2005 should be read in conjunction with the unaudited interim financial statements for the six months ended June 30, 2005 and 2004 and the audited financial statements for the years ended December 31, 2004 and 2003.

The M D & A contains the terms cash flow from operations and cash flow per share. Cash flow, as used by the Company, is before changes in non-cash working capital. Cash flow and cash flow per share as presented are not defined by generally accepted accounting principles (GAAP) and therefore are referred to as non-GAAP measures. These non-GAAP measures may not be comparable to the calculation of similar measures for other entities.

Where amounts are expressed on a barrel of oil equivalent basis (BOE), natural gas volumes have been converted to barrels of oil at six thousand cubic feet per barrel. BOE's 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.

Revenue and Production

Petroleum and natural gas revenue increased 56 percent to $4.9 million in the second quarter of 2005 compared to the second quarter of 2004 due to increased production and commodity pricing. Production volume increases contributed 62 percent of the revenue growth. Average daily production volumes increased 35 percent to average 1,072 BOE per day (68 percent natural gas) in the second quarter of 2005 compared to the 2004 period.

Natural gas production increased 16 percent over the comparable period due to new production from the Ante Creek and Inland areas. Production of oil and natural gas liquids increased 106 percent to 340 barrels per day, from 165 barrels per day in the second quarter of 2004, as the result of new oil production from the Ante Creek area. Ante Creek production represented 54 percent of total production in 2005 versus 29 percent in the 2004 period. Production in the second quarter of 2005 of 1,072 BOE per day decreased slightly from first quarter production of 1,113 BOE per day.

The average sales price received increased 16 percent to $50.01 per BOE in the second quarter of 2005 from $43.15 per BOE in the comparable period of 2004. Natural gas prices increased nine percent to average $7.56 per Mcf in the second quarter of 2005 compared to $6.91 per Mcf in the same period of 2004 while prices received for oil and natural gas liquids increased 21 percent to average $60.02 per barrel.

The Company enters into physical contracts for the sale of natural gas at fixed prices and terms to protect cash flow against price volatility. The price realized on the sale of natural gas decreased by $0.24 per Mcf in the second quarter of 2005 (decreased by $0.40 per Mcf in the 2004 period) as a result of these contracts compared to daily spot prices. Currently, the Company has contracted an average of 1.8 MMcf of natural gas per day for the period from July 1, 2005 to March 31, 2006 at an average price of approximately $8.16 per Mcf. The Company has not contracted any natural gas liquids or oil.



Operations Summary

Three months ended June 30 (a)
------------------------------------------------
2005 2004
----------------------- ------------------------
$000's $/BOE % $000's $/BOE %
----------------------------------------------- ------------------------
Petroleum & natural
gas revenue $ 4,878 $ 50.01 100.0 $ 3,127 $ 43.15 100.0
Royalties, net of ARTC 601 6.16 12.3 434 5.99 13.9
Operating costs 702 7.20 14.4 490 6.77 15.7
----------------------------------------------- ------------------------
Field netback $ 3,575 $ 36.66 73.3 $ 2,203 $ 30.39 70.4
General &
administrative (1) 154 1.58 3.2 123 1.70 3.9
Current taxes - - - (11) (0.15) (0.3)
Cash interest 55 0.57 1.1 (16) (0.22) (0.5)
----------------------------------------------- ------------------------
Cash flow from
operations $ 3,366 $ 34.51 69.0 $ 2,107 $ 29.07 67.4
Stock based
compensation 24 0.25 0.5 18 0.25 0.6
Depletion,
depreciation
& accretion 2,047 20.99 42.0 1,690 23.32 54.0
Future income taxes 311 3.19 6.4 86 1.18 2.7
----------------------------------------------- ------------------------
Net income $ 983 $ 10.08 20.2 $ 312 $ 4.31 10.0
----------------------------------------------- ------------------------
----------------------------------------------- ------------------------

(a) Columns may not add in the above table due to rounding
(1) Net of non-cash stock based compensation expense


Royalties, net of ARTC, on a barrel of oil equivalent basis, increased three percent from $5.99 in the second quarter of 2004 to $6.16 in the second quarter of 2005. This increase resulted mainly from higher commodity pricing received in the 2005 period and the higher crown royalty rates at Ante Creek. Operating costs increased to $7.20 per BOE for the second quarter of 2005 versus $6.77 per BOE in the comparable period ($8.16 per BOE in the first quarter of 2005). Operating costs decreased in the second quarter of 2005, from the first quarter of 2005, due to higher costs incurred in the first quarter associated with the start up of new wells at Ante Creek.

Gross general and administrative expenses, before overhead recovered and stock based compensation expense, increased in 2005 compared to 2004 as a result of increased staffing and the increasing costs of the annual independent evaluations. Gross general and administrative expenses on a per unit basis decreased to $2.09 per BOE in the second quarter of 2005 compared to $2.70 in the comparable period. Overhead recovered by the Company as operator of drilling and construction activities decreased in the second quarter of 2005 in accordance with activity. General and administrative expenses, net of overhead recovered and stock based compensation expense, decreased to $1.83 per BOE in the second quarter of 2005 versus $1.95 per BOE in the comparable period.

Interest expense exceeded interest income by approximately $55,000 in the second quarter of 2005. Interest income, net of interest expense, of approximately $16,000 was earned in the comparable period of 2004. The Company is not currently taxable on income and does not have any operations outside of Alberta.

Cash flow from operations increased 60 percent to $3.4 million in the second quarter of 2005 ($2.1 million in the 2004 period) mainly as a result of increased production. On a barrel of oil equivalent basis, cash flow from operations increased 19 percent to $34.51 per BOE in the 2005 period ($29.07 per BOE in 2004). Cash flow per share for the second quarter of 2005 increased 43 percent to $0.10 per share compared to $0.07 per share in the 2004 period. The weighted average number of shares outstanding increased seven percent to 33,378,552 for the second quarter of 2005 (31,145,036 for the second quarter of 2004) due to the private placement of 2,000,000 shares in December 2004. As at August 15, 2005 total common shares outstanding are 33,378,552 and 750,000 options are outstanding.

Depletion, depreciation and accretion decreased to $20.99 per BOE in the second quarter of 2005 versus $23.32 per BOE in the comparable period of 2004. Depletion, depreciation and accretion decreased on a per unit basis due to reserve additions resulting from the first quarter drilling program. The provision for future income taxes increased in the second quarter of 2005 versus the 2004 period due to the increase in pre-tax income and the impact of income tax rate reductions in the comparable period.

Net income for the second quarter of 2005 was $983,389 compared to $312,489 in the 2004 period mainly as a result of increased production offset by the provisions for depletion and future income taxes. Net income per share for the period was $0.03 per share ($0.01 in 2004).

Capital expenditures of $3.3 million in the second quarter were funded with cash flow. At June 30, 2005 the Company had a working capital deficiency of $5.8 million. Bank facilities of $10 million were available at June 30, 2005. Additional capital expenditures in 2005 will be financed through cash flow and the utilization of credit facilities.



Summary of quarterly results

September 30, December 31, March 31, June 30,
Quarter Ended 2004 2004 2005 2005
------------- ------------ ----------- ----------
Revenue before
royalties $ 3,695 $ 4,032 $ 4,791 $ 4,878
Cash flow from
operations 2,444 2,479 2,983 3,366
Per share - basic
and diluted 0.08 0.08 0.09 0.10
Net income 266 559 662 983
Per share - basic
and diluted 0.01 0.02 0.02 0.03
Production (BOE/d) 963 984 1,113 1,072

September 30, December 31, March 31, June 30,
Quarter Ended 2003 2003 2004 2004
------------- ------------ ----------- ----------
Revenue before
royalties $ 2,717 $ 2,196 $ 2,680 $ 3,127
Cash flow from
operations 1,702 1,391 1,614 2,107
Per share - basic
and diluted 0.08 0.06 0.06 0.07
Net income 667 (151) 236 312
Per share - basic
and diluted 0.03 (0.01) 0.01 0.01
Production (BOE/d) 793 660 712 796


Quarterly revenues and cash flows in 2004 increased to reflect higher production volumes and commodity pricing. Net income decreased in the final quarter of 2003 due to increases in non-cash provisions for depletion and future income taxes as a result of reserve revisions.

OUTLOOK

Raven's capital budget for 2005 is $20 million. These expenditures will be financed from cash flow and existing lines of credit. At June 30, 2005 the Company had a working capital deficiency of $5.8 million and a current banking facility of $10 million. We will resume drilling at Ante Creek in October with six additional wells scheduled on low risk infill locations. This drilling program can be expanded on our large undeveloped land position. The existing facilities and associated infrastructure constructed in 2004 allows for the quick tie-in of new production to take advantage of the current high commodity prices. We plan to continue activities on the Company's east central Alberta properties, to maximize natural gas production. Two to three wells are planned for the Inland area in the third quarter. Raven also has an inventory of other prospects on existing land holdings in west central Alberta. One well is planned by year end for each of the Bigstone and Goose River areas.

Undeveloped land holdings within Alberta totaled 87,800 gross (81,200 net) acres at an average 92 percent working interest.

Certain statements throughout this interim report, including management's assessment of the Company's future plans and operations are forward-looking statements that involve substantial known and unknown risks and uncertainties. These risks and uncertainties include, among others: risks associated with oil and gas exploration, production, marketing, and transportation such as loss of market, volatility of commodity prices, currency fluctuations, uncertainty of reserve estimates, environmental risks, competition from other producers and ability to access sufficient capital from internal and external sources. Accordingly, events or circumstances could cause actual results to differ materially from those predicted.



RAVEN ENERGY LTD.
Balance Sheets

June 30, December 31,
2005 2004
------------- ------------
(unaudited) (audited)
------------- ------------
Assets
Current assets
Cash and cash equivalents $ 613 $ 621,293
Accounts receivable 2,011,989 2,106,947
Prepaid expenses and deposits 99,404 113,411
------------- ------------
2,112,006 2,841,651

Petroleum and natural gas properties 45,603,502 40,024,437
------------- ------------

$47,715,508 $42,866,088
------------- ------------
------------- ------------

Liabilities and Shareholders' Equity
Current liabilities
Accounts payable and accrued liabilities $ 3,751,859 $ 5,705,124
Bank debt (note 1) 4,179,000 -
------------- ------------
7,930,859 5,705,124

Asset retirement obligations 2,047,700 1,772,800

Future income taxes 6,032,000 4,194,700

Shareholders' equity
Share capital (note 2) 23,374,278 24,546,378
Contributed surplus 303,473 264,937
Retained earnings 8,027,198 6,382,149
------------- ------------
31,704,949 31,193,464
------------- ------------

$47,715,508 $42,866,088
------------- ------------
------------- ------------

See accompanying notes to financial statements.


RAVEN ENERGY LTD.
Statements of Income and Retained Earnings
(unaudited)

Three Months Ended Six Months Ended
June 30, June 30,
-------------------------- -------------------------
2005 2004 2005 2004
-------------------------- -------------------------

Revenue
Petroleum and
natural gas $ 4,878,345 $ 3,127,069 $ 9,669,087 $ 5,806,866
Royalties, net of
Alberta Royalty
Tax Credit (600,946) (434,079) (1,370,097) (876,866)
-------------------------- -------------------------
4,277,399 2,692,990 8,298,990 4,930,000

Expenses
Operating 702,029 490,280 1,519,379 987,086
General and
administrative 178,465 141,607 386,055 276,430
Interest 55,416 (16,286) 83,807 (23,640)
Depletion,
depreciation and
accretion 2,047,100 1,689,750 3,999,500 3,216,500
-------------------------- -------------------------
2,983,010 2,305,351 5,988,741 4,456,376
-------------------------- -------------------------
Income before
income taxes 1,294,389 387,639 2,310,249 473,624

Income taxes
Current - (10,650) - -
Future 311,000 85,800 665,200 (75,015)
-------------------------- -------------------------
311,000 75,150 665,200 (75,015)
-------------------------- -------------------------
Net income 983,389 312,489 1,645,049 548,639

Retained earnings,
beginning of period 7,043,809 5,244,084 6,382,149 5,007,934
-------------------------- -------------------------
Retained earnings,
end of period $ 8,027,198 $ 5,556,573 $ 8,027,198 $ 5,556,573
-------------------------- -------------------------
-------------------------- -------------------------

Earnings per share
- basic and diluted $ 0.03 $ 0.01 $ 0.05 $ 0.02
-------------------------- -------------------------
-------------------------- -------------------------

Weighted average
number of common
shares outstanding
- basic 33,378,552 31,145,036 33,378,552 29,290,640
-------------------------- -------------------------
-------------------------- -------------------------
Weighted average
number of common
shares outstanding
- diluted 33,604,133 31,524,785 33,607,771 29,689,272
-------------------------- -------------------------
-------------------------- -------------------------

See accompanying notes to financial statements


RAVEN ENERGY LTD.
Statements of Cash Flows
(unaudited)

Three Months Ended Six Months Ended
June 30, June 30,
-------------------------- -------------------------
2005 2004 2005 2004
-------------------------- -------------------------

Cash provided by
(used in):

Operating activities
Net income $ 983,389 $ 312,489 $ 1,645,049 $ 548,639
Items not involving
cash:
Stock based
compensation 24,085 18,465 38,536 30,507
Depletion,
depreciation and
accretion 2,047,100 1,689,750 3,999,500 3,216,500
Future income taxes 311,000 85,800 665,200 (75,015)
-------------------------- -------------------------
Funds from
operations 3,365,574 2,106,504 6,348,285 3,720,631
Change in non-cash
working capital (119,396) (246,242) 59,357 (169,234)
-------------------------- -------------------------
3,246,178 1,860,262 6,407,642 3,551,397

Financing activities
Bank debt 1,422,000 - 4,179,000 -
Issue of share
capital, net of
issuance costs - 40,000 - 6,595,596
Change in non-cash
working capital 6,064 (19,261) (3,136) (11,253)
-------------------------- -------------------------
1,428,064 20,739 4,175,864 6,584,343

Investing activities
Petroleum and natural
gas properties (3,292,346) (6,581,470) (9,303,664) (12,390,074)
Change in non-cash
working capital (1,382,113) 2,567,395 (1,900,522) 142,354
-------------------------- -------------------------
(4,674,459) (4,014,075) (11,204,186) (12,247,720)
-------------------------- -------------------------
Decrease in cash and
cash equivalents (217) (2,133,074) (620,680) (2,111,980)
Cash and cash
equivalents,
beginning of period 830 4,640,914 621,293 4,619,820
-------------------------- -------------------------
Cash and cash
equivalents, end
of period $ 613 $ 2,507,840 $ 613 $ 2,507,840
-------------------------- -------------------------
-------------------------- -------------------------

See accompanying notes to financial statements


RAVEN ENERGY LTD.
Notes to Financial Statements
Six months ended June 30, 2005
(unaudited)


The interim financial statements of Raven Energy Ltd. ("Raven" or the "Company") have been prepared by management in accordance with accounting principles generally accepted in Canada. The interim financial statements have been prepared following the same accounting policies and methods of application as the financial statements for the fiscal year ended December 31, 2004, except as noted below. The disclosures provided below are incremental to those included with the annual financial statements. The interim financial statements should be read in conjunction with the financial statements and notes thereto in the Company's annual report for the year ended December 31, 2004.

1. Bank debt:

The Company has access to a demand revolving facility of $10,000,000 from a Canadian chartered bank. The credit facility bears interest at the bank's prime rate plus 0.50% per annum and is secured by a general security agreement constituting a first ranking security interest in all personal property and a first ranking charge on all real property.

2. Share capital:

(a) Authorized:

The authorized share capital consists of an unlimited number of common shares without nominal or par value and an unlimited number of preferred shares, issuable in series. No preferred shares have been issued.

(b) Common shares issued:



Number of Shares Amount
---------------------- --------------
Balance, December 31, 2004 33,378,552 $ 24,546,378
Income tax effect of
flow-through shares - (1,172,100)
---------------------- --------------
Balance, June 30, 2005 33,378,552 $ 23,374,278
---------------------- --------------
---------------------- --------------


(c) Stock option plan:

The Company has a stock option plan as described in note 7(d) of the December 31, 2004 financial statements. There were no changes in the Company's stock option plan during the first six months of 2005. The following table summarizes information about the stock options outstanding at June 30, 2005:



Options Outstanding Options Exercisable
------------------------------------- ----------------------
Weighted
Average Weighted Weighted
Range of Remaining Average Average
exercise Number Contractual Exercise Number Exercise
prices Outstanding Life (Years) Price Exercisable Price
------------------------------------------------- ----------------------
$1.00 - 1.39 450,000 2.5 $1.00 450,000 $1.00
$1.40 - 1.79 200,000 1.0 $1.40 200,000 $1.40
$1.80 - 2.00 100,000 3.7 $1.80 100,000 $1.80
------------------------------------------------- ----------------------
$1.00 - 2.00 750,000 2.3 $1.21 750,000 $1.21
------------------------------------------------- ----------------------
------------------------------------------------- ----------------------


3. Financial instruments:

The Company has a price risk management program whereby the commodity price associated with a portion of its future production is fixed. The Company has entered into fixed price sales contracts for a portion of its future gas production resulting in an average contracted volume of 2.5 million cubic feet per day for the period July 1 to October 31, 2005 at a weighted average contract price of $6.90 per thousand cubic feet and 1.5 million cubic feet per day for the period November 1, 2005 to March 31, 2006 at a weighted average contract price of $9.86 per thousand cubic feet.

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

Contact Information

  • Raven Energy Ltd.
    Laurie Smith
    President & Chief Executive Officer
    (403) 264-9058