Stonefire Energy Corp.
TSX VENTURE : SFE.A
TSX VENTURE : SFE.B

Stonefire Energy Corp.

November 20, 2006 16:00 ET

Stonefire Energy Corp. Announces Third Quarter Results

CALGARY, ALBERTA--(CCNMatthews - Nov. 20, 2006) - Stonefire Energy Corp. (the "Corporation" or "Stonefire") (TSX VENTURE:SFE.A)(TSX VENTURE:SFE.B) is pleased to announce that it has filed on SEDAR its unaudited financial statements and related management discussion and analysis ("MD&A") for the three and nine-month periods ended September 30, 2006. Selected operational and financial results are outlined below and should be read in conjunction with Stonefire's unaudited financial statements and related MD&A which can be found at www.sedar.com.



Financial and Operating Highlights

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Three months Nine months
ended ended
(Unaudited) September 30, 2006 September 30, 2006
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($ except share amount)

FINANCIAL

Petroleum and natural gas revenues $ 269,610 $ 289,746
Cash flow from (used in) operations(1) 15,739 (199,794)
Per share, basic and diluted 0.00 (0.02)
Capital expenditures 4,690,005 10,815,123
Working capital (deficit) (58,096)
Shareholders' equity $ 10,620,899
Shares outstanding
Class A 9,750,000
Class B 1,012,000
Options 871,000
Weighted average shares outstanding
Class A 9,750,000 8,557,326
Class B 1,012,000 737,685
Conversion of Class B shares(2) 4,048,000 2,950,740
Weighted average shares
outstanding - basic 14,810,000 12,245,751
Class A share trading
High $ 4.00
Low 2.00
Close $ 2.00
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OPERATIONS
Production
Natural gas liquids(bbls/d) 11 4
Natural gas(mcf/d) 374 135
Total(boe/d @ 6:1) 74 27
Reference prices
WTI(US$ per bbl) $ 70.48 $ 68.22
AECO(Cdn$ per GJ) 5.35 6.07
Average selling price
Natural gas liquids(per bbl) 66.99 65.55
Natural gas(per mcf) 5.81 5.81

Operations netback(per boe @ 6:1) 18.13 17.94
Cash flow netback(per boe @ 6:1) $ 2.31 $ (27.11)
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(1) Management uses cash flow from operations (before changes in non-cash
working capital) to analyze operating performance and leverage.
Cash flow from operations as presented does not have any standardized
meaning prescribed by Canadian GAAP and therefore it may not be
comparable with the calculation of similar measures for other
entities.
(2) For the period ended September 30, 2006, the Class B shares are
converted at the period-end Class A share price of $2.00 and added to
the Class A shares to calculate basic shares outstanding.


THIRD QUARTER HIGHLIGHTS:

- The Corporation's second full quarter of operations saw net production increase to an average of 74 boe per day, comprised of 85 percent natural gas and 15 percent natural gas liquids.

- Stonefire experienced positive cash flow from operations of $15,700 for the quarter.

- Stonefire completed a four-well (2.5 net) exploration drilling program in the Edson exploration area. All four wells have been cased and three have been completed to date, two of which are natural gas pool discoveries and are awaiting tie-in.

- Stonefire's gross land position increased by 68 percent during the quarter, from 8,960 acres to 15,040 acres, all in the Edson exploration area.

- At the end of the third quarter the Corporation's exploration drilling inventory stands at 12 gross wells, with working interests ranging from 50-100 percent.

OUTLOOK

The third quarter of 2006 was the second full quarter of operations for Stonefire. The Corporation achieved increases in drilling activity and production. Stonefire completed a four-well (2.5 net) exploration drilling program in the Edson area. All wells encountered multiple natural gas-bearing pay zones at depths of 2,300 - 2,500 meters and were cased. Completion of the first three wells resulted in two natural gas pool discoveries, and both of these wells are now awaiting tie-in. The third well was completed but encountered natural gas at rates too low to be economically produced. The fourth well has two potential natural gas pay zones awaiting completion at the time of this report. Meanwhile, Stonefire realized its first full quarter of production, with volume averaging 74 boe per day as a result of our first successful well being on-stream.

Stonefire's Q3 program included capital expenditures of $4.7 million, bringing our total capital expenditures at the end of Q3 to $10.8 million. The current quarter's capital expenditures were funded from the initial public offering conducted in March, 2006. Our Q3 cash flow of $15,700 was our first positive cash flow since inception and, although modest in amount, represents a milestone for the Corporation.

Late in the quarter Stonefire established access to debt capital of up to $1.5 million with a Canadian chartered bank, which remains undrawn at the end of the quarter. Subsequent to the end of the quarter the Corporation conducted a private placement of equity, raising gross proceeds of just over $5 million. These two measures should provide Stonefire with sufficient capital to fund its planned exploration program through year-end 2006 and into Q1 2007.

Stonefire continues to add lands and drillable prospects in the Edson exploration area through a combination of Crown land sales and farm-ins. The Corporation's gross land position increased by 68 percent over the quarter, helping to generate a drilling inventory of 12 gross wells with working interests of 50-100 percent. Upcoming Crown land sales and ongoing farm-in negotiations are expected to continue increasing the Corporation's land base and drilling inventory in the Edson exploration area.

Going forward we will remain focused on executing our business plan of growing reserves and production in the Edson exploration area primarily through exploration drilling. Planned drilling activity for Q4 2006 is three (1.5 net) exploration wells along with one to three (0.5-1.5 net) well recompletions. Activity in Q4 will also involve the completion and tie-in of previously drilled successful wells as quickly as possible, in order to meet or exceed our forecast 2006 exit production rate of 200 boe per day.

As referred to above, to view a full copy of the Corporation's unaudited interim financial results for the three-month and nine-month periods ended September 30, 2006, including the Corporation's unaudited financial statements and accompanying MD&A, please refer to the SEDAR website at www.sedar.com.

Statements in this document may contain forward-looking statements. Forward-looking statements are subject to known and unknown risks, uncertainties and other factors that could influence actual results or events and cause actual results or events to differ materially from those stated, anticipated or implied. Such forward-looking statements necessarily involve risks associated with oil and natural gas exploration, property development, production, marketing and transportation, such as dry holes and non-commercial wells, facility and pipeline damage, loss of markets, volatility of commodity prices, currency fluctuations, imprecision of reserve estimates, environmental risks, competition from other producers and the ability to access sufficient capital from internal and external sources. Readers are cautioned not to place undue reliance on forward-looking statements, as no assurances can be given as to future results, levels of activity or achievements.

To request a free copy of Stonefire's interim report or if you would like to be put on Stonefire's mailing list please contact Ronald Williams, Vice President, Finance and CFO at rwilliams@stonefire-energy.com.


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

Contact Information

  • Stonefire Energy Corp.
    Mr. Richard Dahl
    President and CEO
    (403) 262-9885
    (403) 262-9887 (FAX)
    or
    Stonefire Energy Corp.
    Mr. Ronald Williams
    Vice President, Finance and CFO
    (403) 262-9885
    (403) 262-9887 (FAX)