Trafina Energy Ltd.
TSX VENTURE : TFA.A

Trafina Energy Ltd.

May 28, 2012 08:30 ET

Trafina Announces Q1 2012 Financial and Operating Results

CALGARY, ALBERTA--(Marketwire - May 28, 2012) -

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) announces its financial and operating results for the three months ended March 31, 2012. Trafina's first quarter 2012 financial statements and management's discussion and analysis have been filed on SEDAR at www.sedar.com and are available on the Company's website at www.trafinaenergy.com.

OUTLOOK

Generating sufficient funds flow from operations was a challenge in the first quarter of 2012, as natural gas prices continued to decline and heavy oil differentials widened significantly. As a result, management's focus became clear: reduce overhead, streamline operations going forward and explore all strategic alternatives available to the Company. These initiatives may result in the sale of other producing assets, the issuance of equity and/or possible mergers or acquisitions.

At March 31, 2012 the Company had net debt and working capital deficiency of approximately $3.371 million, excluding the fair value of its commodity contracts. The Company's current maximum available lending amount on its revolving operating demand facility is $3.5 million. The Company anticipates a reduction of its current lending facility which will increase the risk that the Company may not be able to fulfill its obligations to its creditors. As mentioned, the Company has taken steps, such as reducing overhead, streamlining operations and selling various assets in an effort to alleviate its current debt problem. Effective April 30, 2012, Mr. Ben VanRootselaar resigned his position as Vice President, Engineering and Mr. Edward Marcinew resigned his position as Vice President, Exploration of the Company. The Company has also entered into an agreement to sell its southwest Saskatchewan properties for approximately $1.35 million. The sale is expected to close May 31, 2012. Management has also entered into discussions with its lender to jointly develop a plan to pay down its obligations.

The Company's McMullen property continues to show positive results as production has remained steady at 70 bbl/day. Additionally, approval has been received to drill up to 24 slant wells and the Company may apply for an additional eight slant well locations in the second quarter. Water production is a normal operational challenge in the area, and the Company has commenced application for a salt water disposal well. Approval is expected in approximately six to eight months. Elimination of third party water disposal charges will dramatically reduce field operating costs. However, these operations will depend on the Company's ability to raise additional capital. The Company has also commenced its application to the Alberta Crown for oil sands royalty rate reduction. Once approved, the Crown royalty rate as a percentage of oil sales is expected to be below five percent.

SELECTED FINANCIAL INFORMATION
For the three months ended March 31
2012 2011 % Change
Total petroleum and natural gas revenue ($) 1,071,996 1,537,110 -30
Royalties ($) 108,812 140,177 -22
Operating, processing, and transportation expenses ($) 1,004,825 1,063,145 -5
Funds flow used-in operations(1) ($) (443,254 ) (217,074 ) +104
per basic and diluted common share ($) (0.01 ) (0.01 )
Weighted average basic shares outstanding 55,690,562 29,941,262 +86
Net loss ($) (786,748 ) (936,238 ) -16
per basic and diluted common share ($) (0.01 ) (0.03 )
Net capital (dispositions) expenditures - cash ($) (235,285 ) 1,996,919 ---
Total assets ($) 14,373,167 18,985,901 -24
Net debt and working capital deficiency(2) ($) 3,371,449 8,427,247 -60
(1) Funds flow used in operations is a Non-IFRS Measure. See "Non-IFRS Measures".
(2) Net debt and working capital deficiency consists of current assets minus current liabilities less effects of commodity contracts.

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 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.

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. 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 a reconciliation of cash flow from 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 effectiveness of reducing overhead and streamlining operations and the outcome of strategic alternatives. There can be no assurance that the Company will identify viable alternatives, sell various producing assets, raise additional capital, or complete any merger on terms acceptable to the Company or at all. There can be no assurance that the sale of its southwest Saskatchewan properties will be completed as proposed or at all. In addition there can be no assurance that applications for a salt water disposal well and Crown royalty reduction will be approved. Operational forward looking information is based on management's expectations regarding future growth, results of operations, production, 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 annual information form for the year ended December 31, 2011 dated April 23, 2012 and management's discussion and analysis for the year ended December 31, 2011 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