TUSCANY ENERGY LTD.
TSX VENTURE : TUS

TUSCANY ENERGY LTD.

May 25, 2006 10:00 ET

Tuscany Announces First Quarter Results

CALGARY, ALBERTA--(CCNMatthews - May 25, 2006) - Tuscany's (TSX VENTURE:TUS) first quarter 2006 capital expenditure program reflects the increased level of activity resulting from the acquisition of two producing properties in west-central Saskatchewan in the fourth quarter of 2005. On January 3, 2006, Tuscany commenced its winter drilling program with the spudding of its first well in Evesham, Saskatchewan. A second well was spudded on January 7, 2006 in Macklin, Saskatchewan approximately two miles southwest of the Evesham well. Both wells were successful, resulting in two (2.0 net) heavy oil wells that were completed, equipped and placed on production before the end of January. Production from the two wells has averaged approximately 35 barrels (Bbl) of 16 degree API oil. In addition, 30-50 Mcfd of solution gas is expected to be tied into nearby facilities in June 2006.

The Company's first quarter 2006 capital expenditure program was funded 18% by cash flow from operations, 75% from an increase in the Company's operating line and the remainder from a decrease in working capital.

In March, Tuscany entered into a strategic farmin agreement on approximately 900 acres that immediately offset Tuscany's land block. Consequently, Tuscany has licensed two new wells on the farmin block. Fieldwork is underway and the Company is scheduling the drilling of one vertical well (100% working interest) by June 30, 2006, targeting Sparky oil. The second well to be drilled is a horizontal well targeting Dina oil. Tuscany is evaluating joint participation with an industry partner for this particular well.

In October 2005, the Company closed the acquisition of the two producing properties at Evesham and Macklin in west-central Saskatchewan. As a result of the acquisition, Tuscany's oil and gas sales averaged 188 barrels of oil equivalent (Boe) per day for the first quarter of 2006 compared to 2 Boe per day for the same three-month period in 2005. The Evesham property contributed 83% of the Company's daily sales comprised of 309 Mcf per day of gas and 104 Bbl of heavy oil per day. The majority of the Company's remaining sales came from the Macklin property comprised of 131 Mcf per day of gas and 10 Bbl of heavy oil per day.

The Company's average price for crude is tied to Hardisty Bow River blend reflecting an average heavy oil price of $33.26 per Bbl, which was realized in the first quarter of 2006. This discounted price or heavy oil differential of $33.42 per Bbl reflects the Company's average density (16 degree API) quality (1% sulphur content) and a hauling charge ($2.08 per Bbl) for its heavy crude. The heavy oil differential relative to the light oil reference price at Edmonton is expected to narrow during the summer asphalt season and for the remainder of the year due to recent Canadian pipeline expansions into the U.S. mid-west, resulting in higher netbacks to the Company. In the first quarter of 2006, the Company's average gas price increased 8% to $7.28 per Mcf from $6.77 per Mcf realized over the same three-month period in 2005.

The two new properties at Evesham and Macklin combined to generate the majority of the Company's total revenue of $633,042 for the first three months of 2006, composed of $340,489 of heavy oil revenue and $292,553 of natural gas revenue resulting in a 54/46 oil/gas revenue ratio. This compares to total revenue of $8,176 for the comparative period of 2005. The Company's average royalty rate for the first quarter of 2006 was 14% reflecting the lower royalty rate of 7% incurred on its heavy oil revenues. By comparison, the Company incurred a
32% average royalty rate in the first three months of 2005.

The Company's two properties at Evesham and Macklin combined, incurred total operating expenses of $189,553 or $11.20 per Boe, for the first quarter of 2006. This compares to $5,514 or $30.63 per Boe for the same three-month period of 2005. $28,559 or $1.69 per Boe was spent on two workovers at Evesham in the first quarter of 2006.

Tuscany incurred a net loss of $73,437 during the three months ended March 31, 2006 compared with a net loss of $52,856 during the same period in 2005. Cash flow from operations for the first three months of 2006 was $195,963 compared to a cash deficiency of $49,214 for Q1 2005.

Total general and administrative expenses increased from $43,230 for the first quarter 2005 to $147,097 for the same three-month period in 2006. The increased costs resulted from managing the Company's increased corporate and operational responsibilities. As a result, on a per Boe basis, the rate decreased to $8.69 for the first quarter 2006, compared to $240.17 for the same three-month period in 2005.

The Company's financing charges of $14,833 in the first quarter 2006 were higher than the $5,991 incurred for the first three months of 2005 as the Company materially expanded its capital expenditure program in Q1 2006 by completing its first drilling program, resulting in two successful heavy oil wells.

Depletion and depreciation ("D&d") charges calculated on a unit of production method are based on total proved reserves. The Company's D&d expenses reflect the acquisition of producing properties at Evesham and Macklin in October of 2005. For the first quarter of 2006 the Company incurred a D&d charge of $297,489 or $17.59 per Boe. By comparison, the Company had total D&d expense of $3,204 or $17.80 per Boe for the same three-month period in 2005.



Operational and Financial Highlights

Three Months Ended March 31
($ thousands except where noted) 2006 2005
------------------------------------------------------------------------
Natural gas sales (Mcf/d) 447 13
Natural gas revenue 292,553 8,176
Natural gas price ($/Mcf) 7.28 6.77
------------------------------------------------------------------------
Heavy oil sales (Bbls/d) 114 0
Heavy oil revenue 340,489 0
Heavy oil price ($/bbl) 3.26 0.00
------------------------------------------------------------------------
Total sales (Boe/d) (1) 188 2

Cash flow (deficiency) from operations 195,963 (49,214)
Per share - basic and diluted ($) 0.01 (0.00)
------------------------------------------------------------------------
Net earnings (loss) (73) (53)
Per share - basic ($) and diluted ($) (0.00) (0.00)
------------------------------------------------------------------------
Capital expenditures - net 1,117 21

(1) BOE Presentation - The term barrels of oil equivalent (BOE) 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. All BOE conversions in this
report are derived by converting gas to oil in the ratio of six Mcf
of gas to one Bbl of oil.


As Tuscany continues to evaluate asset and corporate acquisition opportunities, management continues to be very committed to the future growth and success of the Company. Tuscany is reviewing several opportunities, which are considered to be "large scale" which may possibly create significant growth potential for Tuscany. Tuscany is also working to solidify its management team by filling key positions to ensure that the Company is well positioned to capitalize on growth opportunities for the near term and into the future.

Forward-looking statements - statements included in this press release that are not historical facts may be considered "forward-looking statements." All estimates and statements that describe the Company's objectives, goals or future plans are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties where actual results could differ materially from those currently anticipated.

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

Contact Information

  • TUSCANY ENERGY LTD.
    Greg T. Busby
    President & CEO
    (403) 264-2398
    (403) 264-2399 (FAX)
    or
    TUSCANY ENERGY LTD.
    Robert W. Lamond
    Chairman
    (403) 269-9889
    (403) 269-9890 (FAX)