Torquay Oil Corp.
TSX VENTURE : TOC.A
TSX VENTURE : TOC.B

Torquay Oil Corp.

August 29, 2012 18:18 ET

Torquay Oil Corp. Reports 2012 Second Quarter Results

CALGARY, ALBERTA--(Marketwire - Aug. 29, 2012) -

THIS NEWS RELEASE IS NOT FOR DISSEMINATION OR DISTRIBUTION IN THE UNITED STATES, TO UNITED STATES NEWS WIRE SERVICES OR TO UNITED STATES PERSONS.

Torquay Oil Corp. (TSX VENTURE:TOC.A) (TSX VENTURE:TOC.B) ("Torquay" or the "Corporation") is pleased to announce that it has filed its unaudited financial statements and related Management's Discussion and Analysis ("MD&A") as at and for the six months ended June 30, 2012. The Corporation's unaudited financial statements and related MD&A are available for review at www.torquayoil.com or www.sedar.com.

Highlights and Corporate Outlook

Year to date revenue was $6,359,895, which is a 25% increase over the same period in 2011. Production volume was up 31% year to date compared to the same period last year. The Corporation's quarterly production was also up 9% compared to Q2 2011. Average Q2 2012 production was reduced by approximately 90 boe/d due to an extended spring break-up at Queensdale.

Year to date netbacks have averaged $48.51 per boe for the first six months of 2012. Average year to date prices have declined $4.60 per boe as compared to the first six months of 2011. Prices remained volatile throughout the second quarter and have recovered substantially in the third quarter of 2012. One-time charges resulting in a net decrease in netbacks of $4.79 per boe year to date are not expected to reduce netbacks in future quarters.

Capital activity was reduced during the second quarter due to seasonal break-up and to maintain the balance sheet during this period of volatile commodity pricing.

Industry activity is moving towards applying the same fracture stimulation techniques that have been successfully used in the Bakken on other formations such as the Midale. The Midale Formation is well suited to this type of stimulation as it typically has low permeability and is sandwiched between two evaporite beds which help contain the fracture stimulation. Torquay has been monitoring successful stimulations in the Midale and is well positioned to apply this step change in technology on its lands at Alameda and Midale.

At Lake Alma, Saskatchewan, the Corporation holds over 57,000 net acres, the majority of which do not expire until March, 2016. Industry activity in North Dakota has become increasingly focused on the Three Forks Formation. The Three Forks is pervasive underneath Torquay's land block and is now productive within 35 km of its land position. The Corporation continues to evaluate the Bakken Formation along with the emerging Three Forks play.

Replacement of the damaged tank farm at the Viewfield battery is well under way. The Corporation expects production to resume by mid September 2012. The financial impact to Torquay is limited to insurance deductibles of approximately $136,000 which includes a $25,000 deductible on equipment replacement and fifteen days of net production.

Selected Financial and Operational Information

Selected financial and operational information is outlined below and should be read in conjunction with Torquay's unaudited condensed interim financial statements as at and for the three and six months ended June 30, 2012.

Three months ended
June 30
Six months ended
June 30
($000's except per share amounts) 2012 2011 2012 2011
Petroleum & natural gas revenue $ 2,326 $ 2,656 $ 6,360 $ 5,105
Funds flow from operations 566 998 2,824 1,998
Funds flow per share (basic and diluted) 0.01 0.03 0.06 0.05
Net loss (1,373 ) (328 ) (2,613 ) (3,290 )
Net loss per share (basic and diluted) (0.03 ) (0.01 ) (0.05 ) (0.09 )
Capital expenditures (net) 1,051 3,177 4,514 19,913
Weighted common shares outstanding (1) 48,373 38,491 48,270 36,992
Production
Crude oil (bbls/d) 312 275 402 281
NGL's (bbls/d) 25 33 27 41
Natural gas (mcf/d) 125 129 186 168
Total BOE/d 359 330 460 350
Pricing
Crude oil ($/bbl) $ 77.29 $ 98.19 $ 83.26 $ 91.13
NGL's ($/bbl) 47.71 48.63 44.57 45.21
Natural gas ($/mcf) 1.67 4.35 1.51 4.38
Average ($/BOE) $ 71.29 $ 88.55 $ 75.99 $ 80.59
Field netback ($/BOE)
Petroleum & natural gas revenue $ 71.29 $ 88.55 $ 75.99 $ 80.59
Royalties (13.99 ) (11.61 ) (12.38 ) (10.38 )
Operating costs (24.40 ) (17.78 ) (15.09 ) (14.95 )
Netback $ 32.90 $ 59.16 $ 48.51 $ 55.26
(1) Basic per share amounts are calculated by dividing net income or loss by the weighted average number of Class A outstanding during the period. In addition, for the purpose of calculating diluted per share amounts the effect of warrants, options and convertible Class B Shares are anti-dilutive and consequently are not included in the determination of diluted shares outstanding.

Torquay is a uniquely positioned, oil focused, junior exploration Corporation formed to generate and develop its own prospects, acquire oil-weighted properties and participate with joint venture partners in oil exploration and development in the Western Canadian Sedimentary Basin. The Corporation's Class A Shares and Class B Shares trade on the TSX Venture Exchange under the symbols TOC.A and TOC.B. The Corporation currently has 48,659,448 Class A Shares and 1,260,000 Class B Shares outstanding.

READER ADVISORY:

This news release contains the term "funds flow from operations" which is defined as cash provided by (used in) operating activities before the change in non-cash working capital related to operating activities and decommissioning expenditures incurred and "netbacks" which is defined as oil and gas revenue less royalties and operating costs. Funds flow from operations and netbacks do not have any standardized meaning prescribed by International Financial Reporting Standards ("IFRS") and therefore may not be comparable with the calculation of similar measures for other entities. Management uses funds flow from operations and netbacks to analyze the operating performance of the business. Funds flow from operations as presented is not intended to represent cash flow from operations or operating profits for the period nor should it be viewed as an alternative to cash provided by operating activities, net earnings or other measures of financial performance calculated in accordance with IFRS. The financial information presented herein has been prepared on the basis of IFRS. All references to dollar amounts are in Canadian dollars.

This news release contains forward-looking statements and forward-looking information (collectively "forward looking information") within the meaning of applicable securities laws. Forward-looking information 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, forward looking information in this news release includes, but is not limited to: the potential effects of fracture stimulation techniques; and the expected results from the Corporation's operations. The forward-looking information is based on certain key expectations and assumptions made by Torquay, including expectations and assumptions concerning prevailing commodity prices, exchange rates, interest rates, applicable royalty rates and tax laws; one-time charges; future well production rates and estimates of operating costs; reserve and resource volumes; expected results of operating techniques; the state of the economy and the exploration and production business; business prospects and opportunities; the availability and cost of financing, labour and services; the impact of increasing competition; ability to market oil and natural gas successfully and the ability of the Corporation to access capital. Although Torquay believes that the expectations and assumptions on which the forward-looking statements are based are reasonable, undue reliance should not be placed on the forward-looking statements because Torquay can give no assurance that they will prove to be correct. Since forward-looking statements address future events and conditions, by their very nature they involve inherent risks and uncertainties. Actual results could differ materially from those currently anticipated due to a number of factors and risks. These include, but are not limited to: results from operations will not meet with expectations and risks associated with the oil and gas industry generally. Additional information on the foregoing risks and other factors that could affect Torquay' operations and financial results are included in Torquay's annual information form and other reports on file with Canadian securities regulatory authorities and may be accessed through the SEDAR website (www.sedar.com). The forward-looking statements contained in this news release are made as of the date hereof and Torquay undertakes no obligation to update publicly or revise any forward-looking statements or information, whether as a result of new information, future events or otherwise, unless so required by applicable securities laws.

The term "boe" may be misleading, particularly if used in isolation. A boe conversion of 6 Mcf: 1 bbl is based on an energy equivalency conversion method primarily applicable at the burner tip and does not necessarily represent a value equivalency at the wellhead.

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

Contact Information

  • Torquay Oil Corp.
    Mr. Terry McCallum
    President & Chief Executive Officer
    403 233 2444 ext. 32
    403 262 6991 (FAX)
    terry@torquayoil.com

    Torquay Oil Corp.
    Mr. Brent McKercher
    Executive Vice President & Chief Operating Officer
    403 233 2444 ext. 30
    403 262 6991 (FAX)
    brent@torquayoil.com
    www.torquayoil.com