Suroco Energy Inc.
TSX VENTURE : SRN

Suroco Energy Inc.

November 25, 2011 18:37 ET

Suroco Energy Inc. Announces Filing of Third Quarter Financial Statements and MD&A

CALGARY, ALBERTA--(Marketwire - Nov. 25, 2011) -

NOT FOR DISSEMINATION IN THE UNITED STATES OF AMERICA

Suroco Energy Inc. (TSX VENTURE:SRN) (the "Corporation") is pleased to announce that it has filed its Unaudited Interim Consolidated Financial Statements and related Management's Discussion and Analysis ("MD&A") for the quarter and nine months ended September 30, 2011 on the System for Electronic Document Analysis and Retrieval ("SEDAR").

Copies of these documents can be found on the SEDAR website at www.sedar.com.

Financial & Operating Highlights

(All references to $ are United States dollars unless otherwise noted)

3 months ended September 30 9 months ended September 30
2011 2010 2011 2010

Financial
Oil and gas revenue ($) 9,122,604 5,532,557 27,814,676 18,136,021
Funds flow from operations (1) ($) 2,569,672 768,337 8,781,239 6,026,666
Per share - basic ($) 0.02 0.01 0.07 0.05
Per share - diluted ($) 0.02 0.01 0.05 0.04
Net income (loss) ($) (1,105,709 ) (953,432 ) (162,067 ) 647,376
Net income (loss) attributable to shareholders ($) (1,553,695 ) (1,519,380 ) (2,342,025 ) (1,913,388 )
Per share - basic ($) (0.01 ) (0.02 ) (0.02 ) (0.02 )
Per share - diluted ($) (0.01 ) (0.02 ) (0.02 ) (0.02 )
Total assets ($) 53,713,914 47,199,630 53,713,914 47,199,630
Net working capital (1) ($) 7,115,051 17,590,900 7,115,051 17,590,900
Common shares outstanding, end of period
Basic 121,815,176 119,958,176 121,815,176 119,958,176
Diluted 160,105,729 157,854,489 160,105,729 157,854,489
Operational
Average daily net after royalty production (boe per day) 956 821 889 774
Average reference price - WTI ($ per barrel)
Operating Netback ($ per barrel)
Average realized price 90.07 69.28 89.65 69.80
Royalties 7.21 5.15 7.00 5.19
Production and transportation expenses 24.63 43.13 23.87 25.17
Operating Netback 58.23 21.00 58.78 39.44
  1. Non-GAAP measure. See "Non-GAAP Measures" section within the MD&A.

Highlights

  • Continued the Corporation's appraisal drilling program in the Suroriente Block, with the drilling on the Pinuna-4 well which encountered 21 feet of indicated oil pay on logs. The initial completion operation encountered mechanical difficulties and the well was temporarily suspended pending being worked over during the fourth quarter. The Pinuna-6 well was spudded in early August. The well encountered 41 feet of oil pay and was subsequently placed on production in October at 1,373 barrels of oil per day (200 barrels per day net after royalty).
  • Mobilized a rig into the Alea 1848A Block, where the Corporation holds a 50% working interest, to drill the Charapa-1 exploration well which spudded on October 2, 2011.
  • Drilled the Poyato-1 exploration well in the San Antonio Block, Llanos Basin, where the Corporation holds a 28% economic interest. The well tested predominantly water and oil at non-commercial rates and was subsequently abandoned. The gross drilling cost was approximately $7 million, however the Corporation's net drilling costs were limited to $0.68 million due to a fixed cost turnkey agreement with the operator. The Corporation's acquisition of a full 28% working interest in the San Antonio Block is pending approval from the Agencia Nacional de Hidrocarburos of Colombia.
  • Acquired an additional 25% interest in the Alea 1947C Block in the Putumayo Basin. The Corporation currently holds through its subsidiaries a 24.5% working interest in this block and has acquired an additional 25% economic interest in this block. The additional interest was acquired through the payment of 25% of the back-costs in the block and a commitment to carry an additional 8% interest in the drilling of the first exploration well, which is expected to be drilled around mid-2012. Upon approval by the Agencia Nacional de Hidrocarburos of Colombia, the 25% economic interest in this block will convert into a full 25% undivided working interest in the block, resulting in the Corporation holding a 49.5% working interest in the Alea 1947C Block. The Alea 1947C Block holds two large exploration prospects. The feature that is expected to be drilled has unbooked, unrisked "prospective resources" of 5.4 million barrels of oil to the Corporation on a "best estimate" basis, based upon its 49.5% working interest, before applicable royalties. See "Notes Regarding Prospective Resources for Alea 1947C Block" below.
  • Exited the quarter with approximately 59 days of unsold oil in inventory to be sold in the fourth quarter of 2011. Substantially all of this production was sold by November 2, 2011.

The Corporation is a Calgary-based junior oil and gas company, which explores for, develops, produces and sells crude oil, natural gas liquids and natural gas in Colombia. The Corporation's common shares trade on the TSX Venture Exchange under the symbol "SRN".

Any references herein to barrels of oil equivalent mean barrels of oil equivalent derived by converting gas to oil in the ratio of six thousand cubic feet of gas to one barrel of oil. Barrels of oil equivalent may be misleading, particularly if used in isolation. A barrels of oil equivalent conversion ratio of six thousand cubic feet of gas to one barrel of oil is based on an energy conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.

Notes Regarding Prospective Resources for Alea 1947C Block

The estimate on the Alea 1947C Block of unbooked, unrisked "prospective resources" on a "best estimate" basis that is described above is pursuant to the evaluation of the Alea 1947C Block conducted by David Monroe, the Vice-President, Engineering of the Corporation and Richard Harris, Manager of Geology of the Corporation, both qualified reserves evaluators, effective October 26, 2011. The prospective resources estimated in that evaluation have not been risked for the chance of discovery nor the chance of development. There is no certainty that any portion of the resources will be discovered. If discovered, there is no certainty that it will be commercially viable to produce any portion of the resources. If a discovery is made there is no certainty it will be developed or, if it is developed, there is no certainty as to the timing of such development.

The aforementioned evaluation has been prepared in accordance with the standards contained in the COGE Handbook and the reserves definitions contained in NI 51-101.

For the foregoing discussions of estimated prospective resources in this press release, the following terms have the following respective meanings:

  • "prospective resources" are those quantities of petroleum estimated, as of a given date, to be potentially recoverable from undiscovered accumulations by application of future development projects. Prospective resources have both an associated chance of discovery and a chance of development. Prospective Resources are further subdivided in accordance with the level of certainty associated with recoverable estimates assuming their discovery and development and may be subclassified based on project maturity.
  • "best estimate" is considered to be the best estimate of the quantity that will actually be recovered. It is equally likely that the actual remaining quantities recovered will be greater or less than the best estimate. If probabilistic methods are used, there should be at least a 50 percent probability (P50) that the quantities actually recovered will equal or exceed the best estimate.

Forward Looking Statements

This press release contains forward-looking statements relating to the operational and exploration activities for the Corporation, evaluation of certain prospects in which the Corporation holds an interest or may acquire an interest, estimated reserves and resources and other statements that are not historical facts. Readers are cautioned not to place undue reliance on forward-looking statements, as there can be no assurance that the plans, intentions or expectations upon which they are based will occur. By their nature, forward-looking statements involve numerous assumptions, known and unknown risks and uncertainties, both general and specific, that contribute to the possibility that the predictions, estimates, forecasts, projections and other forward-looking statements will not occur, which may cause actual performance and results in future periods to differ materially from any estimates or projections of future performance or results expressed or implied by such forward-looking statements. These assumptions, risks and uncertainties include, among other things, the state of the economy in general and capital markets in particular; fluctuations in oil prices; the results of exploration and development drilling, recompletions and related activities; the uncertainty of reserve and resource estimates; changes in environmental and other regulations; risks associated with oil and gas operations and future exploration activities; the risk that the conversion of the Corporation's 25% economic interest in the Alea 1947C Block into a full 25% undivided working interest in the Alea 1947C Block will not occur if the necessary approvals are not obtained; the risk that the conversion of the Corporation's 28% economic interest in the San Antonio Block into a full 28% undivided working interest in the San Antonio Block will not occur if the necessary approvals are not obtained; and other factors, many of which are beyond the control of the Corporation. You can find an additional discussion of those assumptions, risks and uncertainties in the Corporation's Canadian securities filings.

The forward-looking statements contained in this press release are made as of the date of this press release. Except as required by law, the Corporation disclaims any intention and assumes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Additionally, the Corporation undertakes no obligation to comment on the expectations of, or statements made by, third parties in respect of the matters discussed above.

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

Contact Information

  • Suroco Energy Inc.
    Alastair Hill
    President and Chief Executive Officer
    (403) 232-6784
    (403) 264-7455 (FAX)

    Suroco Energy Inc.
    Travis Doupe
    VP Finance and Chief Financial Officer
    (403) 232-6784
    (403) 264-7455 (FAX)
    www.suroco.com