Turnkey E&P Inc.
TSX : TKY

Turnkey E&P Inc.

March 27, 2007 19:10 ET

Turnkey E&P Inc Announces Fourth Quarter and Year End 2006 Results

CALGARY, ALBERTA--(CCNMatthews - March 27, 2007) - Turnkey E&P Inc. ("Turnkey") (TSX:TKY), today announced it's financial and operating results for the quarter and year ending December 31, 2006

The figures presented below are expressed in thousands of U.S dollars, except where otherwise stated.



Selected Consolidated Financial Information
Three Months and the Year Ended December 31, 2006

Three Months Ended Year Ended
December 31, December 31,
------------------- -------------------
2006 2005 2006 2005
$ $ $ $
-------- -------- -------- --------
Financial Results
Revenue 2,791 1,026 19,135 1,026
Operating expenses 3,692 1,047 18,858 1,047
Financial items (547) (386) (2,644) (386)
Net loss (3,677) (297) (5,352) (504)
Loss per share - basic and diluted (0.15) (0.16) (0.22) (0.34)

December 30, December 31,
2006 2005
$ $
------------- -------------
Financial Position
Cash and cash equivalents 47,519 58,591
Working capital 46,462 59,464
Long-term debt Nil Nil
Shareholders' equity 93,623 98,204


Operating and Financial Highlights

Turnkey reported a net loss of $3,677 for the fourth quarter ending December 31, 2006, and $5,352 for the year ending on the same date, as compared to a net loss of $297 for same three month period in 2005, and a net loss of $504 for the year ending December 31, 2005.

During the three months ended December 31, 2006, there were 141 third party rig revenue days representing a utilization rate of 38%. In addition, 5 revenue days were eliminated as rigs were drilling on the Corporation's own oil and gas properties. The drilling rigs generated $2,526 of third-party revenue and $204 of revenue accrued from the Rig Personnel Supply agreement. During the year ended December 31, 2006, there were 816 third party revenue days. In addition, 63 revenue days were eliminated as rigs were drilling on the Corporation's own oil and gas properties. The total rig utilization for the year was 60%. The drilling rigs generated $14,852 of third-party revenue and $4,222 of revenue accrued from the Rig Personnel Supply Agreement. During the fourth quarter, $105 of drilling revenue and $289 of operating expenses relating to drilling on the Corporation's own properties were eliminated for accounting purposes. During the year ended December 31, 2006, $1,290 of drilling revenue and $1,285 of operating expenses relating to drilling on the Corporation's own properties were eliminated for accounting purposes.

Turnkey's business plan is to use its available funds to pursue a drilling program using Casing Drilling® technology to exploit oil and natural gas reserves. The continuing strong demand for hydrocarbons and the past successful applications of the technology make management enthusiastic about Turnkey's business plan. Although it is anticipated that reported results from contract drilling operations will continue to be marginal due to the fact that the Corporation only owns four drilling rigs, management is looking to exploitation activities to provide future earnings and growth.

Turnkey currently has one significant active project area which is an 8,000-acre Gulf Coast oil play designed to develop underexploited reservoirs within the confines of a previously abandoned oil field. In addition, there is further potential to be realized from secondary and tertiary recovery application of the previously abandoned field pay as well as deeper, untested prospective reservoirs. Casing Drilling® is expected to add value by effectively addressing documented partial depletion in one of the sands that produced for approximately 50 years. The field also has a history of completion and production problems indicative of poor cementing. Casing Drilling® will provide for significantly better borehole conditions resulting in improved cementing and more effective completions.

Clear Creek and Hurricane Creek Fields

Turnkey has drilled its first well in the Clear Creek Field in Beauregard Parish, Louisiana which tested significant quantities of oil and gas from the Cockfield formation. The W. Cox No. 1 flowed 595 barrels of oil per day, 1.1 million cubic feet per day of gas and no water on a 14/64 inch choke with a flowing tubing pressure of 1,996 psig for two hours from 18 feet of perforations in the C Sand. The well averaged 435 barrels of oil per day, 881 thousand cubic feet of gas per day and no water on a variable choke from 14/64 inch to 12/64 inch with a flowing tubing pressure of 2,005 psig over a twelve-hour period. The well was drilled to 9,590 feet and logged over 56 feet of net pay in multiple zones over the entire 1,000-foot Cockfield column. The Casing Drilling® process yielded excellent borehole conditions and contributed to excellent cementing results. The drilling of a second well, the Richard E. Doornbos No. 1, approximately two miles east of the W. Cox No. 1 well, has commenced with an on going development program to follow.

All geological targets were encountered by the W. Cox No. 1 well as predicted by subsurface mapping. Formation evaluation has confirmed geological expectations as to the nature of the reservoirs and lithological characteristics. Virgin reservoir pressures were found in all zones except the A Sand which was partially depleted as expected. The success of the W. Cox No. 1 well helps to confirm the project potential and sets up offset proved undeveloped locations for various Cockfield reservoirs in the Clear Creek Field.

Turnkey has leased or optioned approximately 5,260 gross acres in the Clear Creek area and has entered into a separate farm-out agreement for an additional 2,800 gross acres in the Hurricane Creek Field approximately two miles to the north of Clear Creel Field. Turnkey plans to drill a well in the Hurricane Creek Field immediately following the second well in the Clear Creek Field. Turnkey owns a 100% working interest in the W. Cox No. 1 well and the project area. Turnkey's average net revenue interest in the project area is approximately 74%.

Tumlinson Project, Texas

Turnkey participated in the drilling of the Tumlinson #1 well located in Goliad County, Texas, with a 10 % working interest in approximately 280 gross acres. The well was drilled by a third party drilling contractor and reached a total depth of 13,202 feet in August, 2006. The well logged over 100 feet of net pay from multiple zones in the Wilcox formation. The well was completed in the D sand in the Lower Wilcox and tested 2 million cubic feet per day of gas and 40 barrels per day of condensate at 4,400 psig flowing tubing pressure. The production has declined to less than one million cubic feet per day and the operator is planning to add an additional zone to increase production. The operator is planning to review options to accelerate production from the area.

Big Wells Project, Texas

Turnkey participated in the re-entry of the Heitz 73-1H well in the Big Wells Project area in Zavala and Dimmit Counties, Texas. The well initially produced about 125 barrels of oil per day and 300 thousand cubic feet of gas per day. Turnkey has approximately a 13.2 percent working interest in the 2,530-acre play which directly offsets a commercial well that Turnkey recently drilled for the same operator. There are five additional wells to be re-entered in the block. The operator expects to begin the re-entry program in March. Turnkey has been drilling for the same operator for most of last year applying their technique to re-enter or re-drill old abandoned wells and drill one or more lateral extensions in the Austin Chalk formation.

Fetter Project, Wyoming

Turnkey participated in the drilling of the State 4-36-H well in the Fetter Field in Wyoming. Turnkey paid 60 per cent to casing point and 40 per cent thereafter to earn a 40 per cent working interest in the 640-acre unit. The well was drilled to a total depth of 12,498 feet and turned over to the operator for completion and testing on October 5, 2006. Because the well had not been tested by December 5, 2006 (the date by which Turnkey was required to spud the second well), Turnkey negotiated an option to purchase five per cent of the approximate 51,000 acres in the play for US$ 2.6 million which expired on February 5, 2007. On February 5, 2007, the operator was advised that Turnkey would not be exercising its option.

The Management Discussion and Analysis and the December 31, 2006 Year Ended Financial Statement for Turnkey are posted on www.sedar.com.

Turnkey has also filed an Annual Information Form for the year ended December 31, 2006, which includes the following reports required under National Instrument 51-101 "Standard of Disclosure for Oil and Gas Activities": Form 51-101F1, Statement of Reserves Data and Other Oil and Gas Information; Form 51-101F2, Reports of Reserve Data by Independent Qualified Reserves Evaluators; and Form 51-101F3, Report of Management and Directors on Oil and Gas Disclosure. The Annual Information Form is also posted on www.sedar.com.

Turnkey is an independent oil and gas company that is focusing its oil and natural gas acquisition, exploitation, development and production activities in the continental United States using Casing Drilling® technologies. Additional information about Turnkey can be found at its website: www.turnkeyep.com.

This release and Turnkey's website referenced in this release contain forward-looking statements including expectations of future production and components of cash flow and earnings. Investors are cautioned that assumptions used in the preparation of such information may prove to be incorrect. Events or circumstances may cause actual results to differ materially from those predicted, a result of numerous known and unknown risks, uncertainties, and other factors, many of which are beyond the control of Turnkey. These risks include, but are not limited to; the risks associated with the oil and gas industry, commodity prices and exchange rate changes. Industry related risks could include, but are not limited to; operational risks in exploration, development and production, delays or changes in plans, risks associated to the uncertainty of reserve estimates, health and safety risks including, without limitation, blowouts and spills, and the uncertainty of estimates and projections of production, costs and expenses. The risks outlined above should not be construed as exhaustive. Investors are cautioned not to place undue reliance on any forward-looking information. Turnkey undertakes no obligation to update or revise any forward-looking statements.

Contact Information

  • Turnkey E&P Inc.
    Dale W. Bossert
    President and Chief Executive Officer
    (403) 828-5720
    Website: www.turnkeyep.com