Trafina Energy Ltd.
TSX VENTURE : TFA.A

Trafina Energy Ltd.

April 11, 2011 08:30 ET

Trafina Energy Announces 2010 Annual Financial and Operating Results and Increased Maximum Proceeds Under Best Efforts Unit Offering

CALGARY, ALBERTA--(Marketwire - April 11, 2011) -

NOT FOR DISTRIBUTION TO UNITED STATES NEWS WIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES

Trafina Energy Ltd. ("Trafina" or the "Company") (TSX VENTURE:TFA.A) is pleased to announce its financial and operating results for the year ended December 31, 2010. Trafina's 2010 financial statements and management's discussion and analysis will be available on the Company's website at www.trafinaenergy.com and on SEDAR at www.sedar.com.

2010 HIGHLIGHTS

  • Maintained average production levels of 400 barrels of oil equivalent per day ("boe/day") despite disposing of 40 boe/day of non-core producing assets.

  • Increased year over year oil and liquids production 104 percent.

  • Raised gross proceeds of approximately $3.9 million through non-brokered private placements and issued approximately 11.2 million Class A common Shares and approximately 6.3 million warrants to purchase Class A common shares.

  • Acquired a relatively large undeveloped land position in northeastern Alberta with the potential of Wabiskaw heavy oil production, subsequently doubling the land position in February 2011.

  • Tied-in and placed on production a Cardium oil well in Pembina, Alberta that has averaged approximately 168 (42 net) boe/day since January 1, 2011.

  • Drilled, completed and tied-in an Upper Shaunavon horizontal oil well in southwest Saskatchewan which has produced approximately 44 (35 net) boe/day since January 1, 2011.
SUMMARY OF FINANCIAL AND OPERATING RESULTS
For the years ended December 31
20102009% Change
Total gross petroleum and gas revenue ($)5,166,9614,122,70425
Liability settlement ($)---533,716---
Royalties ($)611,567486,74026
Operating expenses ($)3,956,0572,291,71773
Funds flow from (used-in) operations(1) ($)(890,327)117,022---
per basic common share ($)(0.05)0.01---
Weighted average basic shares outstanding19,694,60411,845,63166
Loss before income taxes ($)(5,392,939)(3,590,850)50
Net loss ($)(4,167,758)(2,659,572)57
per basic and diluted common share ($)(0.21)(0.22)---
Net capital expenditures ($)5,421,7673,355,05962
Total assets ($)21,043,59119,011,18811
Net debt and working capital deficiency(2) ($)(6,228,982)(3,887,476)60
Production:
Natural gas (mcf/day)1,7852,111(15)
Oil and natural gas liquids (bbls/day)10250104
Total production (boe/day)400402---
(1) Funds flow from operations is a Non-GAAP Measure. See NON-GAAP MEASURES.
(2) Net debt and working capital deficiency excludes commodity contact liability.

2010 was a busy year for Trafina as the Company began its transformation from having primarily gas-focused, non-operated properties to having an inventory of oil-focused, operated properties. This period of transition presented challenges, including start-up costs after acquiring shut-in properties out of receivership and weather-related delays drilling key oil wells. As oil prices started to recover, Trafina sold non-core producing assets and focused on oil production in the Rangeview/Divide area of southwest Saskatchewan. Net oil production in the area increased from 32 barrels per day ("bbls/day") in the first three months of 2010 to 68 bbls/day in the last three months of 2010, with a newly drilled horizontal well commencing production in late December. Trafina expects to drill up to two (1.6 net) Upper Shaunavon wells at Rangeview/Divide in 2011.

In addition to operations in southwest Saskatchewan, Trafina commenced the drilling of a Cardium oil well in Pembina. The well was placed on production in December 2010 and is still producing at a steady rate of approximately 42 boe/day (net). As a result of this success, Trafina expects to drill up to three wells (0.73 net) targeting the Cardium zone in 2011.

Continuing the shift to oil, the Company purchased 32 sections of undeveloped property in northeastern Alberta in November 2010 and February 2011 with the potential for Wabiskaw heavy oil production. To fund this purchase and execute the plan, Trafina raised gross proceeds of approximately $3.9 million on a non-brokered private placement basis by issuing approximately 11.2 million Class A common shares and approximately 6.3 million warrants to purchase Class A common shares.

INCREASED MAXIMUM PROCEEDS UNDER BEST EFFORTS UNIT OFFERING

On April 5, 2011, Trafina announced a public offering of units on a best efforts basis to issue a minimum of 14,286,000 units and a maximum of 22,858,000 units, at a price of $0.35 per unit, for gross proceeds of between $5.0 million and $8.0 million. Each unit will consist of one Class A common share and one transferable common share purchase warrant to acquire an additional Class A common share at an exercise price of $0.45 for a period of 18 months from the date of closing. On April 8, 2011 the board of directors of the Company approved an increased maximum under the offering to $9 million. Assuming the minimum offering is received, a minimum of 14,286,000 units and up to a maximum of 25,715,000 units will be issued.

OUTLOOK

After a period of transition in 2010, Trafina is excited about its prospects for 2011. The Company believes its heavy oil play in northeastern Alberta and follow-up drilling at Pembina and in southwest Saskatchewan have the potential to deliver significant growth in reserves, production and cash flow.

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/Twin Lakes and Pembina areas of Alberta and in the Rangeview and Divide areas of southwest Saskatchewan with other operated production in Wetaskiwin, 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.

This press release shall not constitute an offer to sell or the solicitation of an offer to buy any securities, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful. This press release is not an offer of securities for sale into the United States. No offering of securities shall be made in the United States or to or on behalf of a US person except pursuant to registration under the US Securities Act of 1933, as amended, or an applicable exemption therefrom.

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 including, without limitation, with regard to the public offering of units (including satisfaction of the minimum offering and the number of units that may be sold) and relating to the Company's northeastern Alberta lands, Pembina and southwest Saskatchewan including the number and type of and timing for wells to be drilled and the potential for significant growth in reserves, production and cash flow. 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 involve significant known and unknown risks and uncertainties. Reference is made to Trafina's annual information form and management's discussion and analysis 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.

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