Strategic Oil & Gas Ltd
TSX VENTURE : SOG

Strategic Oil & Gas Ltd

November 11, 2010 15:59 ET

Strategic Oil & Gas Ltd. Announces 2010 Third Quarter Results

CALGARY, ALBERTA--(Marketwire - Nov. 11, 2010) - Strategic Oil & Gas Ltd. (TSX VENTURE:SOG) ("Strategic" or the "Corporation") announces its financial results for the three and nine month periods ended September 30, 2010:

OVERVIEW OF PERFORMANCE AND DISCUSSION OF OUTLOOK

The nine months ended September 30, 2010 showed an increase in volumes over the comparable period of 2009. Average daily sales volumes increased by 63% to 298 boe/d in 2010 versus 183 boe/d in 2009. Revenues also increased by 148% to $4,495,408 for 2010 versus $1,815,552 in 2009. The increase was the result of the acquisition of the Taber and Conrad properties in 2009, a significant recovery in crude oil prices during 2010, and production from Maxhamish in the third quarter of 2010. Natural gas prices remain depressed and at similar levels to 2009. The Corporation received a combined average price of $55.03 per boe versus $34.57 in 2009 which is an increase of 59%.

For the three months ended September 30, 2010, average daily production was 314 boe/d versus 266 boe/d for the second quarter of 2010, an increase of 18%. The increase in production was primarily due to new production being brought on at Maxhamish, as well as at Taber and Conrad. Revenues for the third quarter of 2010 also increased by 16% to $1,507,595 versus $1,298,172 in the second quarter. The Corporation received an average price of $52.08 per boe in the third quarter of 2010 versus $53.18 in the second quarter, which is a slight decrease of 2%.

For the nine months ended September 30, 2010, the Corporation had a net loss of $2,908,595 or $0.04 per share (basic and diluted) as compared to a net loss of $2,304,279 or $0.07 per share for the nine months ended September 30, 2009. The increased loss in 2010 arises from the stock-based compensation expense of $736,755 primarily as a result of the issuance of stock options in the year. Funds used in operations for the nine months ended September 30, 2010 was $648,743 as compared to $733,064 for the nine months ended September 30, 2009.

Financing

On September 16, 2010, Strategic announced that it had entered into a financing agreement with a syndicate of underwriters to issue, and sell on a "bought-deal" basis, common shares and flow-through common shares of Strategic.

The financing closed on October 7, 2010 on the following terms:

  • 18,300,000 common shares of Strategic at a price of $0.90 per share, and
  • 5,232,500 flow-through common shares at a price of $1.10 per share, for gross proceeds of $22,225,750.

The flow-through common share proceeds of $5,755,750 will be used to incur eligible Canadian exploration expenditures that will be renounced to subscribers effective on or before December 31, 2010, and will be required to be spent by December 31, 2011.

Maxhamish

As previously announced, Strategic entered into a purchase and sale agreement with its partner to acquire from a major Canadian independent energy corporation the remaining 35% working interest in the Maxhamish, northeast British Columbia oil resource play, for a total purchase price of $13.0 million ($5.0 million net to Strategic). This transaction closed on October 1, 2010. As a result of this transaction, the current farmout agreement with respect to Maxhamish has been eliminated providing Strategic with an undivided 38.5% working interest in all the lands in the Maxhamish area.

The current plan for the remainder of the fourth quarter is to continue to work with the partner at Maxhamish to finalize the capital program for the coming winter season. The current plan for the next twelve to eighteen months is likely to include:

  1. Multi-pad development with up to 8 wells per pad
  2. Drill up to 4 wells in the first quarter of 2011, with completions to occur in the second quarter
  3. Build a year-round access road into the area in the first or second quarter of 2011 to improve access to the area.
  4. Build necessary infrastructure where necessary, including battery, pipelines, etc.

Conrad

In early July, at Conrad in southern Alberta, Strategic spudded a horizontal well (8-23 Hz). This well was drilled as a multi-leg horizontal well, targeting the Sawtooth formation. This well was tied in and is producing 30 bop/d of medium API oil. The technical team is currently assessing the North Conrad area and has plans to drill two wells in the fourth quarter of 2010. Success may open up over ten 100 percent owned additional locations for future drilling.

Summary

Based on the recent financing described above, plus funds received from the exercising of warrants, the Corporation anticipates having in excess of $30 million cash at year-end, not including the unutilized line of credit. This cash will be used to fund the 2011 development program at Maxhamish, drilling opportunities at Taber and Conrad, and for new opportunities the Corporation is currently assessing.

About Strategic

Strategic is a junior oil and gas company with producing properties located in Maxhamish, northeast BC and Southern and Central Alberta. Production capability is currently over 350 boe/d.

Strategic's highly regarded subsurface technical team is primarily focused on implementing development plans for the Maxhamish project and its southern Alberta properties, while continuing to review other high impact prospects.

Complete financial statements, with accompanying management discussion and analysis are available for review at www.sedar.com. Further information with respect to the Corporation can be found on its website at www.sogoil.com.

Forward-looking information

Certain information set forth in this document, including management's assessment of future plans and operations, contains forward-looking statements. By their nature, forward-looking statements are subject to numerous risks and uncertainties, some of which are beyond our control. Those risks include, without limitation, the effect of general economic conditions, risks associated with oil and gas exploration, development, production, marketing and transportation, loss of markets, industry conditions and competition, volatility of commodity prices, currency fluctuations, imprecision of reserve estimates, environmental risks, competition from other industry participants, the ability to access qualified personnel and oilfield services, decisions by regulators and the ability to access sufficient capital from internal and external sources. Readers are cautioned not to place undue reliance on the forward-looking statements as the assumptions used in the preparation of such information, although considered reasonable at the time of preparation, may prove to be imprecise and actual results, performance or achievements could materially differ from those expressed or implied in such forward-looking statements and accordingly, no assurance can be given that any of the events anticipated by forward looking statements will transpire or occur, or if any of them do so, what benefit Strategic will derive therefrom.

Boe presentation

Barrel ("bbl") of oil equivalent ("boe") amounts may be misleading particularly if used in isolation. All boe conversions in this report are calculated using a conversion of six thousand cubic feet of natural gas to one equivalent barrel of oil (6 mcf=1 bbl) and is based on an energy conversion method primarily applicable at the burner tip and does not represent a value equivalency at the well head.

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

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