RedWater Energy Corp.
TSX VENTURE : RED

RedWater Energy Corp.

November 30, 2011 09:25 ET

RedWater Announces Financial and Operating Results for the Nine Months Ended September 30, 2011

OKOTOKS, ALBERTA--(Marketwire - Nov. 30, 2011) - RedWater Energy Corp. ("RedWater") (TSX VENTURE:RED) is pleased to report record financial and operating results for the three and nine month periods ended September 30, 2011. RedWater's interim condensed financial statements and related management's discussion and analysis for the three and nine months ended September 30, 2011 have been filed and are available on the SEDAR website at www.sedar.com and may also be obtained on RedWater's website at www.redwaterenergy.com.

Highlights

  • Begun its 4 well (4 net) Manville drilling program late in the third quarter at Redwater. One well was spudded at the end of the third quarter with the remaining three wells drilled in early October
  • Increased production to 123 barrels of oil equivalent per day ("boepd") or 68% percent higher than the second quarter of 2011. For the nine period, production was 93% percent higher than in the previous year
    • 66 boepd of oil in the third quarter vs. 34 boepd of oil in the second quarter of 2011
    • 342 Mcf per day of natural gas in the third quarter vs. 232 Mcf per day of natural gas in the second quarter of 2011
  • Fund flows from operations was ($136,976) for the third quarter compared to ($256,507) for second quarter of 2011
  • Credit facility increased from $500,000 to $1,200,000 during the quarter
  • Cash on hand at September 30, 2011 was $1,427,653. In addition, the Company had an unfunded bank line of $1,200,000 million
Three Months Ended
September 30,
Nine Months Ended
September 30,
2011 2010 2011 2010
Operations
Production
Oil (bbls/d) 66 21 53 34
Natural Gas (Mcf/d) 342 102 230 79
BOEPD 123 38 91 47
Average Selling Price
Oil ($/bbls) $68.20 $65.92 $72.99 $70.85
Natural Gas ($/Mcf) 3.53 3.41 3.60 3.87
BOE ($/BOE) $46.45 $45.53 $51.27 $57.53
Operating Netback ($/BOE) $11.77 $13.64 $16.38 $26.81

Three Months Ended
September 30,
Nine Months Ended
September 30,
2011 2010 2011 2010
Financial
Petroleum and Natural Gas Revenues, net of royalties $480,830 $155,326 $1,169,370 $699,441
Fund Flow from Operations (136,976 ) (187,941 ) (382,356 ) (288,625 )
Per Share, Basic & Diluted (0.01 ) (0.02 ) (0.02 ) (0.03 )
Income (loss) (413,952 ) (271,451 ) 371,797 (569,958 )
Per Share, Basic & Diluted (0.02 ) (0.02 ) 0.01 (0.07 )
Capital Expenditures 1,936,801 616,516
Total Assets 10,282,683 3,711,586
Shareholders' Equity 7,933,113 1,572,615
Common Shares Outstanding
Basic 26,030,092 11,450,938 25,081,956 8,649,912
Diluted 26,331,163 11,450,938 25,415,805 8,649,912
Share Trading
High 0.49 -- 0.55 --
Low 0.32 -- 0.32 --
Close 0.35 -- 0.35 --
Trading Volume 738,000 -- 4,134,300 --

Operational Review

RedWater was very active in the third quarter focused on increasing the number of producing wells, extending the Company's portfolio of drilling prospects and raising capital to exploit those opportunities and sustain future growth. The Company recompleted and tied-in 10 wells in the quarter. The majority of these came on production on in mid-August. In addition, the Company began its four well drilling program in the Redwater area targeting Manville light oil. The first well was spudded late in the third quarter with drilling completed early in the fourth quarter. These wells are currently in varying stages of completion and are expected to be brought on production in the fourth quarter. Drilling costs averaged $350,000 per well, below management estimates of $450,000 per well.

Additionally in the fourth quarter, management will continue its efforts to bring on tested production in Redwater. The Company expects to begin producing two recompleted Manville oil wells in mid-December once a pipeline has been completed to conserve solution gas. The Company also in the process of tying-in a recompleted Manville gas well over the next 30 to 60 days. These wells are expected to add 100 to 140 boepd.

Outlook

RedWater plans to continue to focus on developing its Manville and Viking assets in Redwater and accordingly will dedicate the majority of its capital spending towards these assets. The Company is in the process of updating its 2012 capital expenditure program. Finally, the Company continues to acquire complementary land positions in its core areas.

Business of RedWater Energy Corp.

RedWater Energy Corp. is an emerging oil and gas exploration and development company. RedWater is engaged in the acquisition, enhancement and exploration of conventional oil and gas projects in Western Canada with a focus on developing high working interest light oil opportunities. RedWater's core properties are located in Redwater, Westlock, Fairydell-Bon Accord and Long Coulee areas of Alberta. www.redwaterenergy.com.

Cautionary Statements

Forward-looking information and statements

This news release contains certain forward-looking information and statements within the meaning of applicable securities laws. The use of any of the words "expect", "anticipate", "continue", "estimate", "may", "will", "project", "should", "believe", "plans", "intends" and similar expressions are intended to identify forward-looking information or statements. In particular, but without limiting the forgoing, this news release contains forward-looking information and statements pertaining to the following; the timing for completion and equipping of wells; the volume and product mix of RedWater's oil and gas production and its ability to develop RedWater's oil resource properties, the use of the RedWater's cash flow from operations and expanded credit facilities; the number of wells to be drilled and potential development drilling and number of potential oil development locations.

In addition, forward-looking statements or information are based on a number of material factors, expectations or assumptions of RedWater which have been used to develop such statements and information but which may prove to be incorrect. Although RedWater believes that the expectations reflected in such forward-looking statements or information are reasonable, undue reliance should not be placed on forward-looking statements because RedWater can give no assurance that such expectations will prove to be correct. In addition to other factors and assumptions which may be identified herein, assumptions have been made regarding, among other things: results from drilling and development activities consistent with past operations; the continued and timely development of infrastructure in areas of new production; continued availability of debt and equity financing and cash flow to fund RedWater's current and future plans and expenditures; the impact of increasing competition; the general stability of the economic and political environment in which RedWater operates; the timely receipt of any required regulatory approvals; the ability of RedWater to obtain qualified staff, equipment and services in a timely and cost efficient manner; drilling results; the ability of the operator of the projects in which RedWater has an interest in to operate the field in a safe, efficient and effective manner; the ability of RedWater to obtain financing on acceptable terms; field production rates and decline rates; the ability to replace and expand oil and natural gas reserves through acquisition, development and exploration; the timing and cost of pipeline, storage and facility construction and expansion and the ability of RedWater to secure adequate product transportation; future commodity prices; currency, exchange and interest rates; regulatory framework regarding royalties, taxes and environmental matters in the jurisdictions in which RedWater operates; the ability of RedWater to successfully market its oil and natural gas products that all necessary regulatory approvals will be obtained as and when required, that there will be no material adverse change in RedWater's affairs or laws, rules or regulations relating to RedWater, its securities or business, there will be no regulatory proceedings involving RedWater or any of its directors or officers, or any cease trade or other order prohibiting or restricting trading in RedWater's securities, no major national or international event will have occurred that has or would reasonably be expected to have a material adverse effect on financial markets or the business, operations or affairs of RedWater.

The forward-looking information and statements included in this news release are not guarantees of future performance and should not be unduly relied upon. Such information and statement, including the assumptions made in respect thereof, involve known and unknown risks, uncertainties and other factors that may cause actual results or events to defer materially from those anticipated in such forward-looking information or statements including, without limitation: changes in commodity prices; changes in the demand for or supply of RedWater's products; unanticipated operating results or production declines; changes in tax or environmental laws, royalty rates or other regulatory matters; changes in development plans of RedWater or by third party operators of RedWater's properties, increased debt levels or debt service requirements; inaccurate estimation of RedWater's oil and gas reserve and resource volumes; limited, unfavorable or a lack of access to capital markets; increased costs; a lack of adequate insurance coverage; the impact of competitors; and certain other risks detailed from time-to-time in RedWater's public disclosure documents, (including, without limitation, those risks identified in this news release and RedWater's public company documents filed on SEDAR).

The forward-looking information and statements contained in this news release speak only as of the date of this news release, and RedWater does not assume any obligation to publicly update or revise any of the included forward-looking statements or information, whether as a result of new information, future events or otherwise, except as may be expressly required by applicable securities laws.

Funds flow from operations are not measures that have any standardized meaning prescribed by IFRS or Canadian GAAP and accordingly are referred to as non - GAAP measures. Therefore, these measures may not be comparable to similar measures presented by other issuers. These measures have been described and presented here and in our MD&A in order to provide shareholders and potential investors with additional information regarding the Corporation's liquidity and its ability to generate funds to finance its operations. Management utilizes "Funds flow from operations" as a key measure to assess the ability of the Corporation to finance operating activities and capital activities. All references to funds flow from operations throughout this report are calculated based on cash flows from operating activities before changes in non-cash working capital. Cash flows from operating activities are the closest comparable figure which is calculated in accordance with IFRS and Canadian GAAP.

BOE Equivalent

Barrel of oil equivalents or 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.

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