Skope Energy Inc.

Skope Energy Inc.

June 29, 2011 18:30 ET

Skope Energy Announces the Filing of Its Annual Financial Statements, MD&A and Annual Information Form

CALGARY, ALBERTA--(Marketwire - June 29, 2011) - Skope Energy Inc. ("Skope" or the "Company") (TSX:SKL) is pleased to announce the filing of its annual audited consolidated financial results for the period from June 23, 2010 to March 31, 2011, the accompanying Management's Discussion and Analysis and its Annual Information Form.


FINANCIAL (Cdn$ except             Q4 Ended        Q3 Ended     Period from 
 share, per share and              March 31,    December 31,  June 23, 2010 
 operational data)                     2011            2010     to March 31,
Petroleum and natural gas         8,038,980       8,740,506      16,779,486 
 Royalties                          701,565         863,038       1,564,603 
 Realized (gain)/loss on            (11,271)         14,260           2,989 
  financial instruments                                                     
 Operating expenses               2,887,492       3,636,684       6,524,176 
Operating Netback                 4,461,194       4,226,524       8,687,718 
 G&A                                772,137         354,158       1,487,019 
 Financial charges                  781,103         713,621       1,414,550 
Operating income                  2,907,954       3,158,745       5,786,149 
Funds from Operations             2,951,782       3,537,694       6,128,752 

Net loss                         (4,409,874)     (3,130,005)     (7,805,011)
Per share - Basic and                 (0.55)          (0.39)          (1.44)
 diluted                      $               $               $             

Bank debt                        60,797,120      64,466,359      60,797,120 
Working capital                   5,910,584       9,463,091       5,910,584 
Net debt                         54,886,536      55,003,268      54,886,536 
Total assets                    145,028,775     150,502,590     145,028,775 
Total shares outstanding          8,078,281       8,078,281       8,078,281 
Weighted average shares                                                     
 - Basic and diluted              8,078,281       7,946,216       5,431,745 

                                                                Period from
                                     Q4 Ended       Q3 Ended  June 23, 2010
OPERATIONAL (Per boe amounts         March 31,   December 31,   to March 31,
 may not add due to rounding)            2011           2010           2011
Average daily production (1)                                                
 Natural gas (mcf/d)                   24,962         27,211         26,102
 Total (boe/d)                          4,160          4,536          4,350
Average prices received                                                     
 Natural gas ($/mcf)                     3.58           3.49           3.53

$ per mcf                                                                   
Petroleum and natural gas                                                   
 revenues                                3.58           3.49           3.53
 Royalties                               0.31           0.34           0.33
 Realized (gain)/loss on                                                    
  financial instruments                 (0.01)          0.01           0.00
 Operating expenses                      1.29           1.45           1.37
Operating netback                        1.99           1.69           1.83
 G&A                                     0.34           0.14           0.31
 Financial charges                       0.35           0.25           0.30
Operating income                         1.30           1.30           1.22

1.  Average daily production calculation for the period from June 23, 2010
    to March 31, 2011 is based on 182 days of actual production from Oct 1,
    2010 to March 31, 2011. 


Skope is pleased to report to shareholders the Company's activities for the period from incorporation on June 23, 2010 to March 31, 2011. Skope was incorporated in June 2010 and at that time established an innovative and ambitious business plan designed to take advantage of a cyclical low in conventional natural gas prices and to provide investors with a stable rate of return in the form of dividends.

Since incorporation, Skope has successfully achieved its short term goals and is now in a position to grow through further natural gas acquisitions. The major goals achieved to date include:

--  Raised over of $150 million of equity and debt capital; 
--  acquired $130 million of natural gas properties at favorable prices; 
--  appointed experienced and qualified management team and board; 
--  listed on the Toronto Stock Exchange under the symbol "SKL"; 
--  generated $17 million in revenue and over $6 million in funds from
--  paid over $2.8 million in quarterly dividends; 
--  established operational and drilling plans for the core operating areas;
--  drilled two shallow horizontal wells in the Pendor area of Alberta; and,
--  established a sophisticated commodity and interest rate risk management

Skope's assets consist of an 80% working interest in a package of high quality producing shallow natural gas assets, located in southeast Alberta and southwest Saskatchewan. Since acquiring these assets in September 2010, Skope has identified a large inventory of work-over and recompletion prospects which should contribute to relatively flat production. Most of these prospects are in the Pendor and Eagle Butte core areas where drilling will be concentrated in the summer months due to favourable weather and rig availability.

As previously announced, Skope has drilled two horizontal wells in the Pendor area of southern Alberta. The 11-23-4-11W4 well targeted the Second White Specks formation. The well was drilled to a vertical depth of 525 meters, and a horizontal leg of 800 meters, and completed using a nine-stage multi-stage frac. Skope also completed the 16-6-5-8 W4 well in the Medicine Hat formation. The well was drilled to a vertical depth of 325 meters, and a horizontal leg of 875 meters, and completed using an eight-stage multi-stage frac. These wells have recently been completed, are being tied in, and Skope is encouraged by the early results. Skope plans to report production rates as soon as meaningful information is available.

A third horizontal well at Pendor targeting the Bow Island formation is planned for drilling this summer. Following a more definitive assessment of the well performance, Skope will set its drilling and recompletion plans for the balance of the year. Skope has secured a drilling rig and, given the nature of the completion program, is well-positioned for access to pressure pumping and other services.

Despite very cold weather and low capital expenditures, average production for the fourth quarter ended March 31, 2011 was relatively stable at 25 mmcf/d compared to average production of 27 mmcf/d in the third quarter ended December 31, 2010. The reduction quarter over quarter is due to a combination of normal production decline of approximately 12-15% per year and temporary production disruptions associated with extremely cold weather. Current production remains at approximately 25 mmcf/d.

For the fourth quarter ended March 31, 2011, revenues were $8 million or $3.58 per mcf as compared to $8.7 or $3.49 per mcf for the third quarter ended December 31, 2010. The reduction in revenue in the fourth quarter compared to the third quarter is due to a combination of lower production levels partially offset by higher realized natural gas prices. For the period from June 23, 2010 to March 31, 2011 revenue was $16.8 million. Bank debt, net of working capital, as at March 31, 2010 was $55.0 million which is essentially unchanged from the previous quarter.

It is Skope's policy to actively manage commodity risk and interest rate risk, with the primary objective being the funding of capital expenditures and dividends. As a portion of our overall risk management position, as of today, we have an average of 14,833 Gj/d (14,065 mcf/d) of financial put and swap contracts (at an average price of $3.95/Gj) protecting the natural gas price downside for the next 12 months.

In addition, as of today, we have $43 million of financial interest rate swaps in place for various terms and maturities to 2013 and 2015. These interest rate swap contracts represent approximately 68% of Skope's outstanding bank debt as at March 31, 2011.


Despite continued low gas prices, Skope's asset base, structure and strategy are working to generate strong free cash flow and stable production. As new ideas are tested, such as shallow horizontal drilling, management will re-assess Skope's capital requirements, and provide more detailed guidance.

Skope is very well positioned for the acquisition of additional high quality natural gas assets and continues to be one of the very few dedicated buyers. Management continues to evaluate potential acquisition opportunities.

On behalf of the Board of Directors,

Henry Cohen, President and Chief Executive Officer


This news release contains forward-looking statements relating to the Company's plans and other aspects of the Company's anticipated future operations, management focus, strategies, financial and operating results and business opportunities. Forward-looking statements typically use words such as "anticipate", "believe", "project", "expect", "goal", "plan", "intend" or similar words suggesting future outcomes, statements that actions, events or conditions "may", "would", "could" or "will" be taken or occur in the future. In particular, this press release contains forward-looking statements relating, but not limited to:

--  plans to exploit the Company's inventory of workover and recompletion
    prospects and the expected results therefrom; 
--  results of drilling and completion activities at Pendor; 
--  plans to report production information from recent drilling
--  drilling plans and the timing thereof; 
--  expectations regarding drilling rig availability; 
--  plans to drill a Bow Island well at Pendor and the timing thereof; 
--  anticipated well productivity and declines; 
--  availability of acquisition opportunities; 
--  expectations regarding future economics in the Company's operating
    areas; and 
--  Skope's business strategy and management focus and the results

These forward-looking statements are based on various assumptions including: the outlook for petroleum and natural gas prices; estimated amounts and timing of capital expenditures; the timing, location and extent of future drilling operations; anticipated timing and results of capital expenditures; estimates of future production and operating costs; the state of the economy and the exploration and production business; results of operations; performance; business prospects and opportunities; future exchange and interest rates, Skope's ability to obtain equipment in a timely manner to carry out development activities, impact of increasing competition, ability to market oil and natural gas successfully and the ability of Skope to access capital. While Skope considers these assumptions to be reasonable based on information currently available to it, they may prove to be incorrect.

By their nature, forward-looking statements involve numerous assumptions, known and unknown risks and uncertainties and other factors that contribute to the possibility that the predicted outcome will not occur, including, without limitation: risks associated with oil and gas exploration, development, exploitation, production, marketing and transportation; loss of markets; volatility of commodity prices; currency fluctuations; imprecision of reserve estimates; environmental risks; competition from other producers; inability to retain drilling rigs and other services; incorrect assessment of the value of acquisitions; failure to realize the anticipated benefits of acquisitions; general economic conditions in Canada, the U.S. and globally; and ability to access sufficient capital from internal and external sources. Readers are cautioned that the foregoing list of factors is not exhaustive.

Although Skope believes that the expectations represented in such forward-looking statements are reasonable, there can be no assurance that such expectations will prove to be correct. As a consequence, actual results may differ materially from those anticipated in the forward-looking statements and you should not unduly rely on forward-looking statements. The forward-looking statements contained in this news release are made as the date of this new release and the company does not undertake any obligation to update publicly or to revise any of the included forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by applicable securities laws.


Skope uses the following terms for measurement within this press release that do not have a standardized prescribed meaning under GAAP and these measurements may not be comparable with the calculation of similar measurements of other entities.

The terms "funds from operations", "operating netback" and "operating netback per mcf" in this press release are not recognized measures under Canadian generally accepted accounting principles (GAAP). Management of Skope believes that in addition to net earnings and cash flow from operating activities as defined by GAAP, these terms are useful supplemental measures to evaluate operating performance and assess leverage. Users are cautioned however, that these measures should not be construed as an alternative to net earnings or cash flow from operating activities determined in accordance with GAAP as an indication of Skope's performance.

Skope considers funds from operations to be an important measure of its ability to generate the funds necessary to finance capital expenditures and repay debt. All references to funds from operations throughout this press release are based on cash provided by operating activities before the change in non-cash working capital and actual asset retirement expenditures since Skope believes the timing of collection, payment or incurrence of these items involves a high degree of discretion and as such may not be useful for evaluating Skope's operating performance. Skope's method of calculating funds from operations may differ from that of other companies and, accordingly, may not be comparable to measures used by other companies.


In this press release, the following terms are defined as follows:

"bbl"      Barrel                                                           
"boe"      Barrel(s) of oil equivalent                                      
"boe/d"    Barrel(s) of oil equivalent per day                              
"mcf"      Thousand cubic feet                                              
"mcf/d"    Thousand cubic feet per day                                      
"mmcf"     Million cubic feet                                               
"mmcf/d"   Million cubic feet per day                                       


In conformity with National Instrument 51-101, Standards for Disclosure of Oil and Gas Activities ("NI 51-101"), natural gas volumes have been converted to barrels of oil equivalent using a conversion rate of six thousand cubic feet of natural gas to one barrel of oil. This ratio is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.

Readers are cautioned that the term "boe" may be misleading, particularly if used in isolation.


Skope has filed with Canadian securities regulatory authorities its audited financial statements for the period from incorporation on June 23, 2010 to March 31, 2011 and the accompanying Managements' Discussion and Analysis ("MD&A"). Skope has also filed its Annual Information Form dated June 22, 2011. These filings are available under Skope's SEDAR profile at Full pdf versions of the financial statements and the accompanying MD&A are available on our website at


Skope is a Canadian public company in the business of oil and natural gas exploration, development and production in Western Canada with a focus on shallow natural gas. Skope's assets consist of an 80% working interest in a package of producing shallow gas assets, located in southeast Alberta and southwest Saskatchewan.

Skope's common shares are listed on the TSX under the symbol "SKL".

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