TRILOGY ENERGY CORP.
TSX : TET

TRILOGY ENERGY CORP.

May 19, 2011 16:01 ET

Trilogy Energy Corp. Announces Financial and Operating Results for the Three Months-Ended March 31, 2011 and May Dividend

CALGARY, ALBERTA--(Marketwire - May 19, 2011) -

Trilogy Energy Corp. (TSX:TET) ("Trilogy" or the "Company") is pleased to announce its financial and operating results for the three months ended March 31, 2011.

The Company also announces that its cash dividend for May 2011 will be $0.035 per share. The dividend is payable on June 15, 2011 to shareholders of record on May 31, 2011. The ex-dividend date is May 27, 2011.

FINANCIAL AND OPERATING HIGHLIGHTS


--  Sales volumes for the first quarter of 2011 averaged 25,362 Boe/d as
    compared to 21,544 Boe/d for the previous quarter, representing an 18
    percent increase quarter over quarter.  

--  Capital expenditures (excluding acquisitions and dispositions and
    including $36.3 million of undeveloped Crown land purchases) totaled
    $136.1 million for the first quarter of 2011 versus $46.3 million in the
    prior quarter. In total, 21 (15.1 net) wells were drilled in the
    quarter. 

--  Funds flow from operations increased to $45.6 million during the first
    quarter of 2011 as compared to $34.9 million for the previous quarter.
    The increase was attributed primarily to higher production levels and
    commodity prices, the impact of the previously announced Natural Gas
    Liquids Recovery Agreement with Aux Sable Canada LP (the "NGL Recovery
    Agreement") and lower royalties offset, in part, by increased operating
    costs on the higher volumes.  

--  Dividends to Shareholders for the first quarter of 2011 were $12.1
    million (26 percent of cash flow from operations) as compared to $12.1
    million in the prior quarter (42 percent of cash flow from operations). 

--  Income before tax for the first quarter was $0.3 million as compared to 
    a loss in the prior quarter of $9.5 million. The positive change was
    primarily a function of the aforementioned increase in funds flow, in
    addition to the absence of any impairment on Trilogy's assets in the
    current quarter. 

--  Operating costs for the quarter averaged $7.86 /Boe, a decrease of 3
    percent from the previous quarter of $8.13 /Boe. 

--  Realized additional economic value for the natural gas liquids in its
    liquids-rich natural gas stream originating from the Kaybob area
    effective January 1, 2011 under the NGL Recovery Agreement. 

--  Announced a significant Montney oil pool development in the Kaybob area.

--  Drilled and completed a horizontal Duvernay shale gas/oil well. 

FINANCIAL AND OPERATING HIGHLIGHTS TABLE

(In thousand Canadian dollars except per share amounts and where stated otherwise)



                                                 Three Months Ended         
                                            March 31,    Dec. 31,           
                                                2011        2010   Change %
----------------------------------------------------------------------------
FINANCIAL                                                                   
Petroleum and natural gas sales               79,998      67,033         19
Funds flow                                                                  
 From operations(1)                           45,586      34,886         31
 Per share - diluted                            0.39        0.30         30
Earnings                                                                    
 Earnings (loss) before tax                      262      (9,483)       103
 Per share - diluted                               -       (0.07)           
 Earnings (loss) after deferred                                          
  income tax                                    (211)     (7,576)        97
 Per share - diluted                               -       (0.07)         -
Dividends declared                            12,105      12,077          -
 Per share                                     0.105       0.105          -
Capital expenditures                                                        
 Exploration, development and land           135,826      46,286        193
 Acquisitions, (dispositions) and                                        
  other - net                                 (3,050)         15          -
 Net capital expenditures                    132,776      46,301        187
Total assets                               1,175,054   1,081,448          9
Net debt(1)                                  413,233     312,095         32
Shareholders' equity                         533,384     541,119         (1)
Total shares outstanding (thousands)                                        
    - As at end of period(3)                 114,925     114,741          -
----------------------------------------------------------------------------
OPERATING                                                                   
Production                                                                  
 Natural gas (MMcf/d)                            113         101         12
 Crude oil and natural gas liquids                                       
  (Bbl/d)                                      6,501       4,666         39
 Total production (Boe/d @ 6:1)               25,362      21,544         18
----------------------------------------------------------------------------
Average prices                                                              
 Natural gas (before financial                                         
  instruments) ($/Mcf)                          4.03        3.82          5
 Natural gas ($/Mcf)(2)                         4.03        3.96          2
 Crude oil and natural gas liquids                                         
  (before financial instruments)               66.53       73.24         (9)
  ($/Bbl)                                                                  
 Crude oil and natural gas liquids                                       
  ($/Bbl)(2)                                   66.08       73.24        (10)
----------------------------------------------------------------------------
Drilling activity (gross)                                                   
 Gas                                              19          12         58
 Oil                                               2           2          -
 D&A                                               -           -          -
 Total wells                                      21          14         50
 Success rate                                    100%        100%         -
----------------------------------------------------------------------------

(1) Funds flow from operations and net debt are Non-GAAP terms. Please
    refer to the advisory on Non-GAAP measures below. 
(2) Includes realized but excludes unrealized gains and losses on
    financial instruments. 
(3) Excluding shares held in trust for the benefit of Trilogy's officers
    and employees under the Company's Share Incentive Plan. Includes Common
    Shares and Non-voting Shares. Refer to the notes to the interim
    consolidated financial statements for additional information. 

EVENTS AFTER THE BALANCE SHEET DATE

In April 2011 Trilogy executed a forward sales contract for 500 Bbl/d from May 2011 through to December 2011 at a price of U.S. $110.22/Bbl.

On May 17, 2011, Trilogy executed an amended and restated credit facility agreement with its lenders. Commitments under this credit facility total $470 million. Refer to the long-term debt section of the MD&A for additional information.

OUTLOOK

Trilogy's revised guidance for 2011 is as follows:


Average production                                30,000 Boe/d              
Average operating costs                           $7.75 /Boe                
Capital expenditures excluding acquisitions       $285 million              

ADDITIONAL INFORMATION

A copy of Trilogy's March 31, 2011 quarterly report to the Shareholders, including the Management's Discussion and Analysis and unaudited interim consolidated financial statements and related notes can be obtained at http://media3.marketwire.com/docs/519tet.pdf. This report will also be made available through Trilogy's website at www.trilogyenergy.com and SEDAR at www.sedar.com.

ABOUT TRILOGY

Trilogy is a petroleum and natural gas-focused Canadian energy corporation that actively acquires, develops, produces and sells natural gas, crude oil and natural gas liquids. Trilogy's geographically concentrated assets are primarily low-risk, high working interest, lower-decline properties that provide abundant infill drilling opportunities and good access to infrastructure and processing facilities, many of which are operated and controlled by Trilogy. Trilogy's common shares are listed on the Toronto Stock Exchange under the symbol "TET".

NON-GAAP MEASURES

Certain measures used in this document, including "funds flow from operations", "operating income", "net debt", "finding and development costs", "operating netback" and "payout ratio" collectively the "Non-GAAP measures" do not have any standardized meaning as prescribed by IFRS and previous GAAP and, therefore, are considered Non-GAAP measures. Non-GAAP measures are commonly used in the oil and gas industry and by Trilogy to provide shareholders and potential investors with additional information regarding the Company's liquidity and its ability to generate funds to finance its operations. However, given their lack of standardized meaning, such measurements are unlikely to be comparable to similar measures presented by other issuers.

"Funds flow from operations" refers to the cash flow from operating activities before net changes in operating working capital. The most directly comparable measure to "funds flow from operations" calculated in accordance with IFRS is the cash flow from operating activities. "Funds flow from operations" can be reconciled to cash flow from operating activities by adding (deducting) the net change in working capital as shown in the consolidated statements of cash flows.

"Operating income" is equal to petroleum and natural gas sales before financial instruments and bad debt expenses minus royalties, operating costs, and transportation costs. "Operating netback" refers to petroleum and natural gas sales plus realized financial instrument gains and losses and other income minus royalties, operating costs, transportation costs and actual decommissioning and restoration costs incurred in the year. "Net debt" is calculated as current liabilities minus current assets plus long-term debt. The components described for "operating income", "operating netback" and "net debt" can be derived directly from Trilogy's consolidated financial statements.

"Finding and development costs" refers to all current year capital expenditures excluding property acquisitions, property dispositions and corporate office expenditures and including changes in future development capital on a proved and proved plus probable basis (as applicable). "Finding and development costs per Barrel of oil equivalent" ("F&D $/Boe") is calculated by dividing finding and development costs by the current year's reserve extensions, discoveries and revisions on a proved or proved plus probable reserve basis (as applicable).

"Recycle ratio" is equal to "Operating netback" on a production barrel of oil equivalent for the year divided by "F&D $/Boe" (computed on a proved or proved plus probable reserve basis as applicable).

Investors are cautioned that the Non-GAAP measures should not be considered in isolation or construed as alternatives to their most directly comparable measure calculated in accordance with IFRS, as set forth above, or other measures of financial performance calculated in accordance with IFRS.

FORWARD-LOOKING INFORMATION

Certain information included in this news release constitutes forward-looking statements under applicable securities legislation. Forward-looking statements or information typically contain statements with words such as "anticipate", "believe", "expect", "plan", "intend", "estimate", "propose", "budget" or similar words suggesting future outcomes or statements regarding an outlook. Forward-looking statements or information in this news release pertain to, without limitation: expected average production, average operating costs and capital expenditures for 2011; among others. Such forward-looking statements or information are based on a number of assumptions which may prove to be incorrect. Such assumptions include: current commodity price forecasts for petroleum, natural gas and natural gas liquids; current reserves estimates; current production forecasts; geology regarding the extent and development potential of the Kaybob area Montney oil pool; the natural gas liquids content of Trilogy's natural gas; continuity of the mutually beneficial agreement with Aux Sable Canada LP; assumptions regarding royalties and expenses and the continuity of government incentive programs and their applicability to Trilogy; drilling results consistent with our expectations; the ability of Trilogy to obtain equipment, services and supplies in a timely manner to carry out its activities; the ability of Trilogy and its partners to obtain drilling success consistent with expectations; the ability of Trilogy to market oil and natural gas successfully to current and new customers; the timing and costs of pipeline and storage facility construction and expansion and the ability to secure adequate product processing, transmission and transportation and the timely receipt of required regulatory approvals: among others.

Although Trilogy believes that the expectations reflected in such forward-looking statements or information are reasonable, undue reliance should not be placed on forward-looking statements because Trilogy can give no assurance that such expectations will prove to be correct. Forward-looking statements or information are based on current expectations, estimates and projections that involve a number of risks and uncertainties which could cause actual results to differ materially from those anticipated by Trilogy and described in the forward-looking statements or information. These risks and uncertainties include, but are not limited to: fluctuations of oil, natural gas and natural gas liquids prices, foreign currency, exchange rates and interest rates, volatile economic and business conditions, the ability of management to execute its business plan; the risks of the oil and gas industry, such as operational risks in exploring for, developing and producing crude oil, natural gas and associated by-products and market demand; risks and uncertainties involving geology of oil and gas deposits; risks inherent in Trilogy's marketing operations, including credit risk; the uncertainty of reserves estimates and reserves life; the uncertainty of estimates and projections relating to future production, costs and expenses; uncertainty in amounts and timing of royalty payouts and applicability of and change to royalty regimes and government incentive programs including, without limitation, the Natural Gas Deep Drilling Programs and the Drilling Royalty Credit Program; potential delays or changes in plans with respect to exploration or development projects or capital expenditures; the availability of financing; Trilogy's ability to secure adequate product transmission and transportation; Trilogy's ability to enter into or renew leases; health, safety and environmental risks; the ability of Trilogy to add production and reserves through development and exploration activities; weather conditions; the possibility that government policies, regulations or laws, including without limitation those relating to the environment and taxation, may change or regulatory approvals may be delayed or withheld; risks associated with existing and potential future lawsuits and regulatory actions against Trilogy; uncertainty regarding aboriginal land claims and co-existing local populations; hiring/maintaining staff; the impact of market competition; and other risks and uncertainties described elsewhere in this document or in Trilogy's other filings with Canadian securities authorities.

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

Refer to Trilogy's Management's Discussion and Analysis for additional information on forward-looking information.

OIL AND GAS ADVISORY

This news release contains disclosure expressed as "Boe", "Boe/d", "Mcf/d", "MMcf/d", "Bbl" and "Bbl/d". All oil and natural gas equivalency volumes have been derived using the ratio of six thousand cubic feet of natural gas to one barrel of oil. Equivalency measures may be misleading, particularly if used in isolation. A conversion ratio of six thousand cubic feet of natural gas to one barrel of oil is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the well head.

Contact Information

  • Trilogy Energy Corp.
    J.H.T. (Jim) Riddell
    Chief Executive Officer

    Trilogy Energy Corp.
    J.B. (John) Williams
    President and Chief Operating Officer

    Trilogy Energy Corp.
    M.G. (Michael) Kohut
    Chief Financial Officer

    Trilogy Energy Corp.
    1400 - 332 - 6th Avenue S.W.
    Calgary, Alberta T2P 0B2
    (403) 290-2900
    (403) 263-8915 (FAX)
    www.trilogyenergy.com