TRAFINA Energy Ltd.
TSX VENTURE : TFA.A

TRAFINA Energy Ltd.

November 19, 2010 08:49 ET

Trafina Announces Q3 2010 Financial and Operating Results; Company Increases Revenue and Oil Weighting

CALGARY, ALBERTA--(Marketwire - Nov. 19, 2010) -

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) is pleased to announce its financial and operating results for the three and nine months ended September 30, 2010. Trafina's third quarter 2010 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.

RECENT HIGHLIGHTS

  • Maintained production levels above 400 barrels of oil equivalent per day (boepd) for the nine months ended September 30, 2010 despite disposing of 30 boepd of producing assets and having 48 boepd of production shut in for September 2010 due to a third party transmission line failure. The Company estimates its current production to be in excess of 450 boepd.

  • Increased oil production in the nine months ended September 30, 2010 by 113 percent over the same period in 2009.

  • Reduced operating expenses from $30.03/boe in the three months ended March 31, 2010 to $23.88/boe in the three months ended September 30, 2010.

  • Drilled a non-operated Cardium well in Pembina, Alberta in July 2010. After numerous weather-related delays, Trafina announced completion of the well on November 16, 2010 with production expected to come on stream in December. The Company expects to drill up to three follow-up wells in 2011.

  • On November 5, 2010, raised $1.5 million by issuing 3,750,000 shares of the Company at $0.40 on a flow-through basis.

  • Announced on November 8, 2010 an agreement to raise an additional $1.9 million by issuing units at $0.30 per unit.

  • Entered into a definitive agreement with a private oil and gas company on November 18, 2010 to purchase a 100 percent working interest in 15,680 acres in northeastern Alberta. The agreement also provides the opportunity to earn a 25 percent interest in 8,320 acres.

SUMMARY OF FINANCIAL AND OPERATING RESULTS
For the three months ended September 30  
2010 2009 % Change
Total gross petroleum and gas revenue ($) 1,110,876 803,263 +38
Royalties ($) 117,960 77,824 +52
Operating, processing, and transportation expenses ($) 810,167 508,587 +59
Funds flow used in operations(1) ($) 18,580 28,572 (35)
  per basic and diluted common share ($) --- ---  
Weighted average basic shares outstanding 18,627,262 11,304,641 +65
Loss before income taxes ($) (1,048,156) (999,031) +5
Net loss($) (789,592) (763,808) +3
  per basic and diluted common share ($) (0.04) (0.07)  
Net capital expenditures ($) 1,509,568 309,572 +388
Total assets ($) 17,911,836 17,050,557 +5
Net debt and working capital deficiency(2) ($) (5,195,863) (3,444,260) +51
       
Production:      
    Natural gas (Mcf/d) 1,635 2,102 (22)
    Oil and Natural gas liquids (bbls/d) 96 42 +129
Total production (boepd) 369 392 (6)
       
  1. Funds flow from (used in) from operations is a Non-GAAP Measure. See "Non-GAAP Measures" in this MD&A.
  2. Net debt and working capital deficiency consists of current assets and current liabilities less commodity contracts.

 

For the nine months ended September 30  
2010 2009 % Change
Total gross petroleum and gas revenue ($) 3,881,182 2,896,994 +34
Liability settlement gain ($) --- 533,716  
Royalties ($) 452,934 319,576 +42
Operating, processing, and transportation expenses ($) 2,844,502 1,611,341 +77
Funds flow from (used in) operations(1) ($) (434,629) 107,520  
  per basic common share ($) (0.02) 0.01  
Weighted average basic shares outstanding 18,449,943 11,289,340 +63
Loss before income taxes ($) (3,464,536) (2,336,682) +48
Net loss ($) (2,629,640) (1,788,600) +47
  per basic and diluted common share ($) (0.14) (0.16)  
Net capital expenditures ($) 963,663 870,744 +11
Total assets ($) 17,911,836 17,050,557 +5
Net debt and working capital deficiency(2) ($) (5,195,863) (3,444,260) +51
       
Production:      
    Natural gas (Mcf/d) 1,823 2,166 (16) %
    Oil and Natural gas liquids (bbls/d) 98 46 113 %
Total production (boepd) 402 407 (1) %
       
  1. Funds flow from (used in) operations is a Non-GAAP Measure. See "Non-GAAP Measures" in this MD&A.
  2. Net debt and working capital deficiency consists of current assets and current liabilities less commodity contracts.

Trafina is well on the way to achieving its objectives for 2010. At the beginning of the year, the Company set out to manage its debt while maintaining production, increase its oil weighting during a time of robust oil prices and raise the capital necessary to pursue high-impact drilling opportunities.

The Company accomplished its first order of business by divesting of certain non-core assets in February 2010 and May 2010 for net proceeds of $2.6 million while bringing on production from newly acquired assets in southwest Saskatchewan. Over the first nine months of 2010, Trafina held production steady at an average of 402 boepd compared with 407 boe/day over the same period of 2009.

The second order of business was to take advantage of steady oil prices by transforming from an almost exclusively natural gas producer to a more balanced oil and gas producer. Trafina moved in this direction by increasing its oil weighting by 113 percent in the nine months ended September 30, 2010 compared with the same period in 2009. The Company expects its oil weighting to increase further after production comes on stream in December 2010 from its recently completed Cardium well in west Pembina and if drilling is successful on the Company's Shaunavon horizontal well in southwest Saskatchewan in late November 2010.

The third order of business was to raise sufficient capital to pursue multiple high-impact horizontal drilling opportunities, including the Shaunavon horizontal well and the possibility of three additional Cardium wells at Pembina. To this end, Trafina has succeeded in raising $1.5 million of flow-through funds and expects to raise an additional $1.9 million by the end of November 2010.

OUTLOOK

Trafina's management believes the Company is well positioned to take advantage of stronger oil prices by optimizing its oil producing assets, drilling potentially high-impact oil wells and continually evaluating oil-focused properties. The Company is committed to pursue these growth opportunities in ways that maximize shareholder value.

About Trafina

Trafina is a junior oil and gas company based in Calgary, Alberta. The Company's main areas of interest are in the Rangeview and Divide areas of southwest Saskatchewan and in the Pembina area of Alberta with other operated production in Wetaskawin, Retlaw and Ronalane in Alberta. Trafina also has non-operated production in Viking/Kinsella, Alberta and minor interests in Carson Creek/Judy Creek, Alberta. Trafina's shares trade on the TSX Venture Exchange under the stock symbol TFA.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-GAAP Measures: This news release uses the term "funds flow from (used in) operations," which is not defined under Canadian GAAP ("GAAP") and should not be considered an alternative to, or more meaningful than, cash flow from (used in) operating activities as determined in accordance with Canadian GAAP as an indicator of the Company's performance. Trafina's determination of funds flow from (used in) operations may not be comparable to that reported by other companies. The Company also presents funds flow from (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 from (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 GAAP as an indication of Trafina's performance. See Trafina's MD&A for a reconciliation of cash flow from (used in) operating activities to funds flow from (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 proposed unit private placement including, without limitation, with respect to the date for closing, the satisfaction of conditions to closing and the number of units that may be sold pursuant to the private placement, and also with respect to expected completion and success of the Company's first Cardium well, the drilling of three additional Cardium wells, the success of drilling of the Company's Shaunavon well and the expected timing for drilling such wells. 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, 2009 dated April 30, 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
    or
    Trafina Energy Ltd.
    Robert W. Lamond
    Chairman
    (403) 269-9889
    (403) 269-9890 (FAX)