TRAFINA Energy Ltd.
TSX VENTURE : TFA.A
TSX VENTURE : TFA.WT.A

TRAFINA Energy Ltd.

November 21, 2011 09:00 ET

Trafina Announces Drilling of Fourth Vertical Evaluation Well at McMullen, Gross Overriding Royalty Agreement and Q3 2011 Results

CALGARY, ALBERTA--(Marketwire - Nov. 21, 2011) -

NOT FOR DISTRIBUTION TO U.S. NEWS WIRE SERVICES OR FOR DISSEMINATION IN THE U.S.

Trafina Energy Ltd. ("Trafina" or the "Company") (TSX VENTURE:TFA.A)(TSX VENTURE:TFA.WT.A) is pleased to announce that it has drilled a fourth vertical test well on its McMullen lands in northeastern Alberta to further evaluate the Wabasca A heavy oil zone and establish optimum future slant well drilling locations.

Trafina's fourth test well at 08-28-077-24 W4M was rig-released on November 20, 2011. The well encountered 10 metres of Wabasca A sand, has in excess of 32 percent porosity and, more importantly, bottom-hole pressure between 1,875 and 1,900 kilopascals (kpa). As previously discussed, optimum characteristics are more than five metres of Wabasca A sand, porosity greater than 25 percent and bottom-hole pressure greater than 1,200 kpa. The Company is very pleased with the results of this well. At this time, the only unknown characteristic is viscosity which will be determined in the next several days. The 8-28 well will be placed on production as soon as possible, given service rig availability. This fourth well completes Trafina's vertical test well drilling on Section 28. This past summer, the Company drilled and placed on production three wells at 16-28 and 05-28 and 11-28. Current production from the three wells is approximately 70 barrels of oil per day.

Although the Wabasca zone is not a homogenous reservoir, all three test wells demonstrated the pressure and viscosity necessary for commercial production. Based on the drilling results to date, instead of pursuing the original plan to drill up to eight slant wells from one vertical location, Trafina is considering drilling several slant wells from all four vertical well locations. The Company expects to begin its slant well program in the first quarter of 2012, after adequately production testing the 8-28 well and subject to slant drilling rig availability.

Additionally, Trafina has signed a binding letter of intent which grants a Gross Overriding Royalty (GORR) to an Alberta corporation that was instrumental in the Company acquiring the initial McMullen lands. The GORR is restricted to two of the 33 sections of land at McMullen and replaces a 20 percent right to participate in the two sections. The letter of agreement provides for payment of a 2.5 percent GORR, less deductions applicable to production of this type. The parties expect to enter into a definitive agreement prior to the end of November 2011. When this transaction is completed, Trafina will have 100 percent ownership in the McMullen lands and reserves.

Q3 2011 HIGHLIGHTS

During the three months ended September 30, 2011, Trafina took a major step forward developing its heavy oil play at McMullen. The Company drilled, completed, equipped and placed on production three vertical test wells. The coring results of all three wells were encouraging with zonal characteristics such as viscosity and pressure meeting or exceeding expectations. All three wells were placed on production in August 2011 and the Company began trucking oil for sale in September 2011.

In order to facilitate further development at McMullen, the Company sold its entire interest in its Cardium oil play at Pembina, Alberta in September 2011. Net proceeds from the sale were approximately $1.7 million.

SELECTED FINANCIAL INFORMATION

For the three months ended September 30,
2011 2010 % Change
Total petroleum and natural gas revenue ($) 1,182,204 1,110,876 +6
Royalties ($) 144,289 117,961 +22
Operating, processing, and transportation expenses ($) 912,349 810,167 +13
Funds flow used-in operations(1) ($) (230,435 ) (18,581 ) +1,140
per basic and diluted common share ($) --- --- ---
Weighted average basic shares outstanding 55,690,562 18,627,262 +199
Net loss ($) (2,802,144 ) (764,924 ) +266
per basic and diluted common share ($) (0.05 ) (0.04 ) ---
Net capital expenditures (dispositions) - cash ($) 1,462,006 (1,509,568 ) ---
Total assets ($) 17,846,426 17,140,762 +4
Net debt and working capital deficiency(2) ($) 3,145,267 5,195,863 -39
(1) Funds flow used in operations is a Non-IFRS Measure. See "Non-IFRS Measures" in Trafina's Management's Discussion and Analysis (MD&A) for the third quarter of 2011.
(2) Net debt and working capital deficiency consists of current assets minus current liabilities less effects of commodity contracts.

SELECTED FINANCIAL INFORMATION

For the nine months ended September 30,
2011 2010 % Change
Total petroleum and natural gas revenue ($) 4,022,167 3,881,182 +4
Royalties ($) 401,796 452,934 -11
Operating, processing, and transportation expenses ($) 2,785,622 2,844,502 -2
Funds flow used-in operations(1) ($) (593,533 ) (434,629 ) +37
per basic and diluted common share ($) (0.01 ) (0.02 ) ---
Weighted average basic shares outstanding 45,221,191 18,449,943 +145
Net loss ($) (4,011,878 ) (2,721,561 ) +47
per basic and diluted common share ($) (0.09 ) (0.15 ) ---
Net capital expenditures - cash ($) 4,433,989 801,663 +453
Total assets ($) 17,846,426 17,140,762 +4
Net debt and working capital deficiency(2) ($) 3,145,267 5,195,863 -39
(1) Funds flow used in operations is a Non-IFRS Measure. See "Non-IFRS Measures" in Trafina's MD&A for the third quarter of 2011.
(2) Net debt and working capital deficiency consists of current assets minus current liabilities less effects of commodity contracts.

Trafina's third quarter 2011 financial statements and management's discussion and analysis have been filed on SEDAR at www.sedar.com and are also available on the Company's website at www.trafinaenergy.com.

About Trafina

Trafina is a junior oil and gas company based in Calgary, Alberta. The Company's main areas of interest are in the McMullen area of Alberta and in the Rangeview and Divide areas of southwest Saskatchewan with other operated and non-operated production in Wetaskiwin. Trafina's shares trade on the TSX Venture Exchange under the stock symbol TFA.A and warrants trade under the stock symbol TFA.WT.A.

Basis of Presentation and Cautionary Statement: Information in this press release expressed in boes is derived by converting natural gas to oil in the ratio of six thousand cubic feet (mcf) of natural gas to one barrel (bbl) of oil. Boes may be misleading, particularly if used in isolation. A boe conversion ratio of 6 mcf: 1 bbl is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.

Non-IFRS Measures: This news release uses the term "funds flow used in operations," which is not defined under IFRS and should not be considered an alternative to, or more meaningful than, cash flow from (used in) operating activities as determined in accordance with IFRS as an indicator of the Company's performance. Trafina's determination of funds flow used in operations may not be comparable to that reported by other companies. The Company also presents funds flow used in operations per share whereby per share amounts are calculated using weighted average shares outstanding consistent with the calculation of earnings per share. Management believes that in addition to cash flow from operating activities, funds flow used in operations is a useful supplemental measure as it demonstrates Trafina's ability to generate cash necessary to repay debt or fund future growth through capital investment before changes in non-cash working capital balances and decommissioning expenditures. Investors are cautioned, however, that the measure should not be construed as an alternative to cash flow from operating activities determined in accordance with IFRS as an indication of Trafina's performance. See Trafina's MD&A for the third quarter of 2011 for a reconciliation of cash flow used in operating activities to funds flow used in operations.

Forward Looking Statements: This news release contains forward looking statements and forward looking information based on management's current expectations regarding the evaluation results of the 8-28 vertical test well and the plans and timing if any of the future slant well program. Operational forward looking information is based on management's expectations regarding actual production rates from the three McMullen wells, future growth in reserves and cash flow, results of operations, future commodity prices and foreign exchange rates, future capital and other expenditures (including the amount, nature and sources of funding thereof), plans for and results of drilling activity, environmental matters, business prospects and opportunities and future economic conditions. Readers are cautioned that assumptions used in the preparation of such information, although considered reasonable at the time of preparation, may prove to be incorrect. Forward looking statements involves significant known and unknown risks and uncertainties. Reference is made to Trafina's revised annual information form for the year ended December 31, 2010 dated April 8, 2011 and management's discussion and analysis for the year ended December 31, 2010 for a description of some of the risks that could affect the Company's future results and could cause results to differ materially from those expressed in the Company's forward looking statements. The forward looking statements contained in this news release are made as at the date hereof and, except as required by applicable securities laws, Trafina does not undertake any obligation to update publicly or otherwise any such statements.

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.

Contact Information

  • Trafina Energy Ltd.
    Kelly J. Ogle
    President and Chief Executive Officer
    (403) 263-0800
    (403) 263-0811 (FAX)
    info@trafinaenergy.com

    Trafina Energy Ltd.
    Robert W. Lamond
    Chairman
    (403) 269-9889
    (403) 269-9890 (FAX)
    www.trafinaenergy.com.