Traverse Energy Ltd.
TSX VENTURE : TVL

Traverse Energy Ltd.

April 23, 2012 16:57 ET

Traverse Energy Announces 2011 Year End Financial Results

CALGARY, ALBERTA--(Marketwire - April 23, 2012) - Traverse Energy Ltd. ("Traverse" or "the Company") (TSX VENTURE:TVL) presents financial and operating results for the year ended December 31, 2011. Unless otherwise stated, the volume conversion of natural gas to barrel of oil equivalent (BOE) is presented on the basis of 6 thousand cubic feet of natural gas being equal to 1 barrel of oil. This conversion ratio is based upon an energy equivalent conversion method primarily applicable at the burner tip and does not represent value equivalence at the wellhead. BOE figures may be misleading, particularly if used in isolation.

Three Months Ended
December 31 (unaudited
) Year Ended December 31
HIGHLIGHTS 2011 2010 2011 2010
Financial ($ thousands, except per share amounts)
Petroleum & natural gas revenue $ 1,569 $ 1,136 $ 4,561 $ 2,118
Funds flow from operations 936 636 2,398 795
Per share - basic and diluted 0.02 0.02 0.07 0.03
Cash flow from operations 814 244 2,358 487
Per share - basic and diluted 0.02 0.01 0.06 0.02
Net loss (584 ) (2,709 ) (1,822 ) (3,535 )
Per share - basic and diluted (0.01 ) (0.09 ) (0.05 ) (0.13 )
Capital expenditures 3,279 3,570 10,408 7,970
Total assets 19,781 12,035 19,781 12,035
Working capital 2,532 2,358 2,532 2,358
Common shares
Outstanding (millions) 42.2 31.9 42.2 31.9
Weighted average (millions) 40.3 30.1 36.5 27.4
Operations (Units as noted)
Production (BOE/d) 243 214 197 121
Natural gas (Mcf per day) 424 423 420 370
Oil and NGL (bbls per day) 172 143 127 59
Average sale price
Natural gas ($/Mcf) 3.28 3.73 3.82 3.91
Oil and NGL ($/bbl) 91.07 75.10 85.90 73.46
Netback per BOE ($/BOE)
Petroleum & natural gas revenue 70.27 57.73 63.50 47.98
Royalties 5.54 2.71 4.08 2.18
Operating costs 13.19 12.59 13.62 12.72
Transportation costs 1.15 1.76 1.61 1.63
Operating netback 50.39 40.67 44.19 31.45

Non-GAAP measures

Management uses funds flow from operations and operating netback to analyze operating performance. These measures are commonly utilized in the oil and gas industry and are considered informative for management and stakeholders. The reconciliation between cash flow from operations and funds flow from operations can be found in the statement of cash flows in the financial statements with funds flow from operations calculated before non-cash working capital and asset retirement expenditures. Management believes that in addition to net loss, funds flow from operations is a useful supplemental measure as it provides an indication of Traverse's operating performance. Operating netback reflects petroleum and natural gas revenues less royalties, operating and transportation costs and is calculated on a per unit basis. Investors should be cautioned, however, that these measures may not be comparable to measures reported by other companies nor should they be construed as an alternative to cash flow from operations or other measures of financial performance calculated in accordance with GAAP.

Financial and Operating Review

In 2011 Traverse participated in the drilling of 5 gross (4.93 net) wells all within the province of Alberta. This drilling resulted in 3.93 net oil wells and 1 net suspended potential natural gas well. Traverse acquired 46,200 net acres of undeveloped land in 2011, all within the province of Alberta. At December 31, 2011 undeveloped land holdings totalled 155,600 gross (152,200 net) acres.

Proved reserves at December 31, 2011 were 401.5 thousand barrels of oil equivalent (mBOE) compared to 198.6 mBOE at year end 2010. The net increase of 202.9 mBOE originated approximately 66% from the 2011 drilling program and 34% from the reserves associated with the new overriding royalty interests at Brazeau. Proved producing reserves at year end comprised 78% of the total proved reserves. Proved developed non-producing reserves at year end related to the well at Carbon which was tied in during the first quarter of 2012 and three additional wells at Brazeau which have since commenced production. The Company did not have any proved undeveloped reserves at year end.

Proved and probable reserves increased to 566.1 mBOE at year end 2011 compared to 279.9 mBOE at December 31, 2010. Total proved reserves comprised 71% (2010 - 71%) of the Company's reserves. Probable reserves at year end included two additional overriding royalty interest wells at Brazeau which have since been drilled and tested. The remaining probable reserves relate to well production performance on existing wells. Additional information relating to reserves is located in the Company's Annual Information Form within the "Statement of Reserves Data and Other Oil and Gas Information" section.

In the Turin area, production increased with the addition of 2 net oil wells and the expansion of the natural gas sweetening unit. Further expansion of the Turin battery was completed in the first quarter of 2012 with the addition of an injection facility for water disposal and the addition of a treater capable of handling up to 2,500 barrels of fluid per day. Future drilling in the Turin area can now be accommodated at the facility without further expansion. One net natural gas well resulted from the current drilling program, however the well is suspended until the economics for gas production improve. Traverse's land holdings in the area total 9,555 gross (9,104 net) acres. The majority of recently acquired land in the area is exploratory and will require further evaluation. Seismic surveys (2D and 3D) shot during the first quarter of 2012 resulted in a number of new exploration targets. Several exploratory wells are scheduled to be drilled in the second quarter of 2012.

In the Alliance area, Traverse drilled one horizontal well (0.93 net) in June targeting Viking oil. A 1,075 meter horizontal leg was drilled, completed and tied-in. The well was placed on production in early August with initial rates of 50 BOE/d (90% oil). The well continues to produce at a rate of approximately 30 BOE/d (75% oil). An application has been approved by the ERCB to allow for an additional horizontal well to be drilled on the 320 acre spacing unit.

Traverse drilled a horizontal well targeting Pekisko oil during the fourth quarter of 2011. The well was projected to drill a 1,000 meter horizontal section in the Pekisko formation but was completed in a 450 meter open hole section. The well was placed on production in January 2012 and is currently producing 45 BOE/d (30% oil). Traverse's land holdings in the Carbon area total 12,200 acres at a 100% working interest.

In the Brazeau area of West Central Alberta, an industry partner commenced production in September from three horizontal Cardium wells in which the Company has a gross overriding royalty interest and a fourth well commenced production in November. Traverse's royalty is 5 to 10 percent on oil, dependent on production rates, and 10 percent on natural gas and associated liquids in 10 sections (6,400 acres). The operator has recently drilled five additional wells on the Traverse lands. By the end of the first quarter of 2012, the five additional wells were placed on production. The production from this property is light oil with associated natural gas and natural gas liquids. The March 2012 oil production was 125 BOE/d net to Traverse. This is a high net back property for Traverse.

In 2012 the Company will focus on its existing light oil properties in Central and Southern Alberta. Drilling is planned in the Turin and greater Carbon areas, targeting light to medium gravity oil with associated natural gas. Seismic surveys were completed in the first quarter of 2012 and additional seismic activities are planned during the year. Further drilling in other areas will depend on the availability of working capital. The Company has set an initial budget of up to $15 million for 2012 to be funded from working capital, cash flow and new equity issues and debt where appropriate.

Forward-looking information

This press release contains forward-looking information. Forward-looking information is based upon the opinions, expectations and estimates of management as at the date the information is provided and, in some cases, information received from or disseminated by third parties. In particular, the Company's statements with respect to the drilling of scheduled exploratory wells at Turin; the Company's focus in 2012 on its existing light oil properties in central and southern Alberta; planned drilling for the remainder of 2012; and additional seismic activities contain forward-looking information. This forward-looking information is subject to a variety of substantial known and unknown risks and uncertainties and other factors that could cause actual events or outcomes to differ materially from those anticipated or implied by such forward-looking information. The Company's Annual Information Form filed with securities regulatory authorities (accessible through the SEDAR website www.sedar.com) describes the risks, material assumptions and other factors that could influence actual results and which are incorporated herein by reference.

The forward-looking information contained in this press release is made as of the date hereof and the Company undertakes no obligation to update publicly or revise any forward-looking information, whether as a result of new information, future events or otherwise, unless so required by applicable securities laws.

Further details on the Company including the 2011 year end audited financial statements, the related management's discussion and analysis and Annual Information Form are available on the Company's website and SEDAR.

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accept responsibility for the adequacy or accuracy of the content of this release.

Contact Information