TRAFINA Energy Ltd.
TSX VENTURE : TFA.A

TRAFINA Energy Ltd.

August 15, 2008 13:09 ET

TRAFINA Energy Ltd. Announces Second Quarter 2008 Financial and Operational Results

CALGARY, ALBERTA--(Marketwire - Aug. 15, 2008) - TRAFINA Energy Ltd. ("TRAFINA" or the "Company") (TSX VENTURE:TFA.A) wishes to announce its financial and operating highlights for the six months ended June 30, 2008. Please refer to the list of abbreviations, on page 5, which are used throughout this news release.

- Net loss for the six months ended June 30, 2008 totaled $754,502 compared to net loss of $445,083 for the same period in 2007, which is an increase of $309,419. The amount of the loss was impacted significantly by a severance payment of $284,000 to an executive officer in the first quarter of 2008 and by the recording of a bad debt of $379,310 pertaining to the SemCanada Crude and SemCanada Energy exposure.

- On July 22, 2008 SemGroup, (the parent organization of the Canadian firms that market the majority of the company's oil and natural gas) filed under chapter 11 of the US Bankruptcy code. Subsequently, our marketers, SemCanada Energy (natural gas) and SemCanada Crude (oil) filed for creditor protection in Canada. In this regard, on July 28, 2008 the Company announced it has potential exposure of approximately $480,000 and that it is unable to quantify the portion if any that may be recovered. Potential exists for similar additional exposure of $260,000 if the Company's efforts to reallocate gas sales for the first 21 days of July, 2008 are unsuccessful. During the quarter, TRAFINA recorded a provision of $379,310 pertaining to the SemCanada Crude and SemCanada Energy exposure.

- During the quarter the Company participated in the drilling of two non operated heavy oil development wells, both at Jenner as to its 12.5% working interest. Both wells were successful and commenced initial production in July, 2008, adding approximately 18 Barrels (Bbls) per day (Bbl/d) for the Company. Based on preliminary estimates we believe that the Company's share of reserve additions from the wells will be approximately 8,900 Bbls of new oil reserves.

- Funds flow from operations (1) for the six months ended June 30, 2008 totaled $68,176 or $0.01 per share, which represents an 85% decrease from the comparative prior period.

- Capital expenditures for the six months ended June 30, 2008 totaled $1,809,766, which is an 11% decrease compared to the same 2007 period.

- As of June 30, 2008 TRAFINA had a working capital deficiency of $2,972,298, including bank debt of $1,389,496.

- For the six months ended June 30, 2008 oil sales volume increased 47% to 50.5 Barrels of oil equivalent per day BOE/d compared to 34.4 BOE/d in 2007 and gas sales decreased by 13% from 1.38 Mmcf/d to 1.20 Mmcf/d, resulting in an overall decrease of 5% from 267.4 BOE/d to 254.2 BOE/d.

- 79.1% of TRAFINA's total sales volume was represented by natural gas.

GOING FORWARD

At Wetaskiwin, by year end, we anticipate that the balance of the 2008 drilling program, consisting of five (5) additional Coal Bed Methane (CBM) Horseshoe Canyon (HSC) wells will be completed. Also by year end 2008, subject to completion by the operator of the 12 inch gas pipeline and successful test results, we are hopeful that an additional twenty three (23) wells will be tied in and on production, bringing the total number of additional producing wells to twenty eight (28). Based on preliminary production and test results and on the timing of completion of the gas gathering system we have reduced the production forecast for the balance of 2008 for the new HSC CBM wells by approximately 7%, from 2.1 Mmcf/d to 1.99 Mmcf/d. Depending on the successful results of the 2008 drilling program, we anticipate the operator may propose a further multi well drilling program for 2009.

At Bittern Lake, the 16-22 well was tied in to the multi well production facility at 12-23 and is awaiting installation of pumping equipment. We anticipate commencement of production in mid to late August, 2008 at an initial rate of approximately 30 barrels per day, with the Company share being 20 barrels per day.

The Corporation is capable of meeting its current commitments, but does not anticipate participating in new areas and or new asset acquisitions for the balance of the year, due to the lack of available capital.



FINANCIAL HIGHLIGHTS

Three months ended June 30
2008 2007 % Change
--------------------------------------
Total gross oil and gas revenue ($) 1,505,335 1,109,274 +35
Oil and gas revenue, net
of royalties ($) 1,294,856 970,777 +33
Loss before income taxes ($) (483,464) (277,802) +74
Net loss ($) (417,464) (219,302) +90
Per common share - basic (0.07) (0.04) +75
Per common share - diluted (0.07) (0.04) +75
Funds flow from operations ($)(1) 80,645 288,472 -72
Per common share - basic 0.01 0.05 -80
Per common share - diluted 0.01 0.05 -80
Average shares outstanding - basic 5,759,848 5,782,472 +0
Average shares outstanding - diluted 5,759,848 5,804,110 -1
Capital expenditures ($) (18,093) 1,271,399 -101
Working capital (deficiency) ($) (2,972,298) (828,019) -259
--------------------------------------


Six months ended June 30
2008 2007 % Change
--------------------------------------
Total gross oil and gas revenue ($) 2,616,271 2,222,473 +18
Oil and gas revenue, net of
royalties ($) 2,257,644 1,943,631 +16
Loss before income taxes ($) (962,502) (652,083) +48
Net loss ($) (754,502) (445,083) +70
Per common share - basic (0.13) (0.08) +63
Per common share - diluted (0.13) (0.08) +63
Funds flow from operations ($)(1) 68,176 468,062 -85
Per common share - basic 0.01 0.08 -88
Per common share - diluted 0.01 0.08 -88
Average shares outstanding - basic 5,767,348 5,764,550 +0
Average shares outstanding - diluted 5,767,348 5,786,188 +0
Capital expenditures ($) 1,809,766 2,035,775 -11
Working capital (deficiency) ($) (2,972,298) (828,019) -259
--------------------------------------

(1) Funds flow from (used in) operations is a Non-GAAP Measure.
See "Non-GAAP Measures" in the attached Management's Discussion and
Analysis.


OPERATING HIGHLIGHTS

Three months ended June 30
2008 2007 % Change
--------------------------------------

DAILY SALES
Natural gas (Mcf/d) 1,305.9 1,383.1 -6
Heavy and light oil (Bbl/d) 60.6 30.5 +99
NGL (Bbl/d) 2.7 3.3 -18
Total BOE/d 281.0 264 +6

AVERAGE PRICE
Natural gas ($/Mcf) 9.52 8.00 +19
Heavy and light oil ($/Bbl) 63.69 31.53 +102
NGL ($/Bbl) 91.93 50.11 +83
Total $/BOE 58.88 46.14 +28
--------------------------------------


Six months ended June 30
2008 2007 % Change
--------------------------------------

DAILY SALES
Natural gas (Mcf/d) 1,204.8 1,378.0 -13
Heavy and light oil (Bbl/d) 50.5 34.4 +47
NGL (Bbl/d) 2.9 3.3 -12
Total BOE/d 254.2 267 -5

AVERAGE PRICE
Natural gas ($/Mcf) 8.93 7.87 +13
Heavy and light oil ($/Bbl) 67.54 36.86 +83
NGL ($/Bbl) 71.54 51.11 +40
Total $/BOE 58.54 45.93 +27
--------------------------------------


OPERATING ACTIVITY

All of the wells operated by the Company are located at Wetaskiwin and nearby Bittern Lake. All of the operated wells at Wetaskiwin are gas, and the two operated wells at Bittern Lake are oil. The remaining gas wells continue to flow within normal production and decline expectations. At Bittern Lake, the Company holds interests in two (2) oil wells: the 12-23 well which continues to produce in a satisfactory manner and the 16-22 well which, as stated above, was tied in to the 12-23 battery and awaits a pump installation.

With respect to non operated properties, substantially all of TRAFINA's CBM HSC interests at Wetaskiwin are non operated. The 2008 CBM HSC drilling program has been described in the HIGHLIGHTS section above. The Company also holds non operated interests in three (3) other areas; Jenner, Bindloss and Judy/Carson Creek. At Jenner the operator drilled two (2) development horizontal heavy oil wells and the Company participated as to its 12 1/2% working interest. No capital projects are expected for the other non operated areas during 2008.

DRILLING ACTIVITY

TRAFINA participated in the drilling of two (2) gross (.25 net) development oil wells at Jenner in the second quarter of 2008. Both wells commenced production in July, 2008.



Wells Drilled Three months ended June 30 Six months ended June 30
2008 2007 2008 2007
---------------------------------------------------------
GROSS NET GROSS NET GROSS NET GROSS NET
---------------------------------------------------------
Natural gas 0 0 1 1.0 19 8.2 1 1.0
Oil 2 0.25 0 0.0 2 0.25 0 0.0
Dry and abandoned 0 0 0 0.0 0 0 1 1.0
---------------------------------------------------------
Total Wells Drilled 2 0.25 1 1.0 21 8.45 2 2.0
---------------------------------------------------------
---------------------------------------------------------


CAPITAL EXPENDITURES

For the three months ended June 30, 2008 capital expenditures decreased to ($18,093) from $1,271,399 as compared to the same period for 2007 due to over accrual of drilling expenditures in the first quarter of 2008. For the six months ended June 30, 2008 capital expenditures decreased to $1,809,766 from $2,035,775 as compared to the same period of 2007. The above noted decreases were due to a relatively lower cost activity program at Wetaskiwin.



----------------------------------------------------------------------------
Three months Three months Six months Six months
ended June 30 ended June 30 ended June 30 ended June 30
2008 2007 2008 2007
($) ($) ($) ($)
----------------------------------------------------------------------------
Land Acquisitions 0 (3,275) 0 (912)
----------------------------------------------------------------------------
Seismic 0 11,744 0 15,127
----------------------------------------------------------------------------
Drilling, Completions
and Recompletions (97,375) 806,778 1,556,123 1,308,389
----------------------------------------------------------------------------
Production Facilities 79,282 433,326 253,643 645,975
----------------------------------------------------------------------------
Other 22,826 0 67,196
----------------------------------------------------------------------------
TOTAL CAPITAL
EXPENDITURES (18,093) 1,271,399 1,809,766 2,035,775
----------------------------------------------------------------------------


SALES VOLUMES

Net sales for the three months ended June 30, 2008 averaged 281 BOE/d, up 6% from 264 BOE/d in the comparable period of 2007.Three months ended June 30, 2008 natural gas sales were down 6% to 1,306 Mcf/d from 1,383 Mcf/d in the comparable period of 2007. Three month ended June 30, 2008 heavy and light oil sales were up 99% to 60.6 Bbl/d from 30.5 Bbl/d in the comparable period of 2007. Three month ended June 30, 2008 NGL sales decreased 18% to 2.7 Bbl/d from 3.3 Bbl/d in the comparable period of 2007.

Net sales for the six months ended June 30, 2008 averaged 254 BOE/d, down 5% from 267 BOE/d in the comparable period of 2007. These decreases were the result of normal decline of gas wells and extreme cold weather which caused wells to temporarily shut in in the Wetaskiwin area. Net sales for six months ended June 30, 2008 of natural gas were down 13% to 1,205 Mcf/d from 1,378 Mcf/d in the comparable period of 2007. Net sales for six months ended June 30, 2008 of heavy and light oil were up 47% to 50.5 Bbl/d from 34.4 Bbl/d in the comparable period of 2007. Net sales for six months ended June 30, 2008 of NGL decreased 12% to 2.9 Bbl/d from 3.3 Bbl/d in the comparable period of 2007. Production on June 30, 2008 was approximately 294 BOE/d.



Sales Volumes by Area (Three months ended June 30)

Natural Gas Oil and NGL
----------------------------------------------------------
AREAS 2008 2007 Change 2008 2007 Change
----------------------------------------------------------
Mcf/day Mcf/day % Bbl/day Bbl/day %
Bindloss 132 132 0 0 0 0
Carson/ Judy Creek 133 159 -16 0 0 0
Jenner 230 160 +44 43 20 +115
Wetaskiwin 811 932 -13 20 14 +43
----------------------------------------------------------
TOTAL 1,306 1,383 -6 63 34 +87
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Total Volumes
----------------------------------------------------------
AREAS 2008 2007 Change
----------------------------------------------------------
BOE/d BOE/d %
Bindloss 22 22 +0
Carson/ Judy Creek 22 27 -19
Jenner 81 46 +76
Wetaskiwin 155 169 -8
----------------------------------------------------------
TOTAL 281 264 +6
----------------------------------------------------------
----------------------------------------------------------


Sales Volumes by Area (Six months ended June 30)

Natural Gas Oil and NGL
----------------------------------------------------------
AREAS 2008 2007 Change 2008 2007 Change
----------------------------------------------------------
Mcf/day Mcf/day % Bbl/day Bbl/day %
Bindloss 130 133 -2 0 0 +0
Carson/ Judy Creek 139 158 -12 0 0 +0
Jenner 172 186 -8 32 20 +60
Wetaskiwin 764 901 -15 21 18 +17
----------------------------------------------------------
TOTAL 1,205 1,378 -13 53 38 +39
----------------------------------------------------------
----------------------------------------------------------


Total Volumes
----------------------------------------------------------
AREAS 2008 2007 Change
----------------------------------------------------------
BOE/d BOE/d %
Bindloss 22 22 +0
Carson/ Judy Creek 23 26 -13
Jenner 61 51 +20
Wetaskiwin 148 168 -13.5
----------------------------------------------------------
TOTAL 254 267 -5
----------------------------------------------------------
----------------------------------------------------------


PRICES

Three months ended June 30, 2008 natural gas prices were up 19% to $9.52/Mcf from $8.00/Mcf in the comparable period of 2007. Three month ended June 30, 2008 heavy and light oil prices were up 102% to $63.69 /Bbl from $31.53/Bbl in the comparable period of 2007. Three month ended June 30, 2008 NGL prices increased 83% to $91.93 /Bbl from $50.11/Bbl in the comparable period of 2007.

Natural gas prices during the six months ended June 30, 2008 averaged $8.93 per thousand cubic feet, an increase of 13% over the comparable period of 2007. TRAFINA's average monthly natural gas prices in the second quarter of 2008 were $8.75, $9.96 and $10.91 per thousand cubic feet for April, May and June respectively. Average heavy and light oil prices for the six months ended June 30, 2008 were up 83% to $67.54 per barrel from $36.86 per barrel in the comparable period of 2007. Average natural gas liquids prices for the six months ended June 30, 2008 were up 40% to $71.54 per barrel from $51.11 per barrel in the comparable period of 2007.

SUMMARY OF THE SECOND QUARTER FINANCIAL RESULTS

Funds flow from operations in the three months and six months ended June 30, 2008 was $80,645 ($0.01 per share) and $288,472 ($0.05 per share) respectively, compared to $68,176 ($0.01 per share) and $468,062 ($0.08 per share) for the same period last year, largely due to an increase in administration expenses relating to a severance payment of $284,000 to an executive officer in the first quarter of 2008 and a provision of $379,310 relating to the situation of SemGroup, the parent company of TRAFINA's oil and gas marketers.

79.1% of TRAFINA's total sales volume was represented by natural gas. Net loss in the three months and six months was $417,464 ($0.07 per share) versus $219,302 ($0.04 per share) and $754,502 ($0.13 per share) versus $445,083 ($0.08 per share) for the same period in 2007. Bank debt including overdraft at the second quarter end June 30, 2008 was $1,389,496 compared to no bank debt as at June 30, 2007. Working capital deficiency at June 30, 2008 was $2,972,298 compared to $828,019 at June 30, 2007.

BOEs Cautionary Statement: In this press release TRAFINA references BOEs. BOEs may be misleading, particularly if used in isolation. A BOE conversion ratio of 6 Mcf: 1 Bbl is based on energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the well head.

Forwarding Looking Statements: This press release contains forward-looking statements, including statements relating to management's approach to operations, expectations relating to the number of wells, amount and timing of capital projects including, without limitation, unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. The reader is cautioned that assumptions used in the preparation of such information, although considered reasonable by TRAFINA at the time of preparation, may prove to be incorrect.

TRAFINA is an oil and gas company based in Calgary, Alberta. TRAFINA's shares trade on the TSX Venture Exchange under the stock symbol TFA.A.

The Company's financial statement and the management's discussion and analysis for the six months ended June 30, 2008 will be filed on SEDAR and can be viewed at www.sedar.com.

The TSX Venture Exchange does not accept responsibility for the adequacy or accuracy of this release.

Contact Information

  • TRAFINA Energy Ltd.
    Thomas R. Holland
    (403) 263-0800
    (403) 263-0811 (FAX)
    or
    TRAFINA Energy Ltd.
    #688, 505 - 3rd Street SW
    Calgary, Alberta T2P 3E6
    Email: info@TRAFINAenergy.com