TUSCANY ENERGY LTD.
TSX VENTURE : TUS

TUSCANY ENERGY LTD.

November 21, 2006 09:00 ET

Tuscany Energy Announces Improved Financial and Operating Results for Nine Months Ended September 30th, 2006

CALGARY, ALBERTA--(CCNMatthews - Nov. 21, 2006) - Tuscany Energy Ltd. (TSX VENTURE:TUS)

Improved operating netbacks and a significant increase in daily sales, as a result of the acquisition of producing properties in the fourth quarter 2005, have lifted the Company's total revenue and cash flow for the nine months ended September 30, 2006 well above the same period in 2005. The Company's new properties at Evesham and Macklin combined to generate the majority of the Company's total revenue of $1,929,967 for the first three quarters of 2006 compared to total revenue of $22,659 for the same nine-month period of 2005. In addition, cash flow from operations for the first nine months of 2006 was $381,341 compared to a cash deficiency of $217,462 for the same period in 2005. Cash flow from operations for the third quarter of 2006 was $126,266 compared to a cash deficiency of $86,252 for the same three-month period in 2005.

Tuscany's sales averaged 165 Boe per day for the first nine months of 2006, comprised of 390 Mcf per day of gas and 100 Bbls per day of heavy oil, compared to 2 Boe per day for the same nine-month period in 2005. The Evesham property contributed 245 Mcf per day of gas and 77 Bbls per day of heavy oil or 72% of the Company's year-to-date daily sales. The majority of the Company's remaining sales came from the Macklin property comprised of 127 Mcf per day of gas and 23 Bbls per day of heavy oil. Third quarter 2006 heavy oil sales of 99 Bbls per day increased 14% from second quarter sales of 87 Bbls per day as product deliveries to Hardisty's sales terminal returned to normal levels.

During the third quarter of 2006, the Company continued to realize the benefits of increasing oil prices and a narrow price differential between light sweet crude at Edmonton and Hardisty's Bow River Blend. The benchmark price for crude at Edmonton was $79.63 per Bbl for the third quarter versus $74.10 per Bbl for the first six months of 2006. In addition, the price differential averaged $24.66 per Bbl over the three-month period compared to $31.41 in the first half of 2006. As a result, the Company received an average of $54.97 per Bbl for its crude in the third quarter compared to $42.69 per Bbl received in the first six months of 2006. The Company averaged a price of $46.79 per Bbl for its heavy oil in the first nine months of 2006. The Company experienced a decrease in its natural gas pricing, as the downward trend of natural gas prices continued through the first three quarters of 2006. As a result, the Company received $5.25 per Mcf for its natural gas for the third quarter compared to $5.70 per Mcf in the previous quarter, a quarter-over-quarter decrease of 8%. In the first three quarters of 2006, the Company's average gas price decreased 37% to $6.13 per Mcf from $9.72 per Mcf realized in the same nine-month period in 2005.

The Company's average royalty rate for the first three quarters of 2006 was 14% or $5.80 per Boe, reflecting the lower royalty rate of 9% ($4.25 per Boe) incurred on its heavy oil revenues. By comparison, the Company incurred a 20% ($8.69 per Boe) average royalty rate in the first nine months of 2005.

When combined, the properties at Evesham and Macklin incurred most of the total operating expenses of $693,648 or $15.40 per Boe, for the first three quarters of 2006. This compares to total expenses of $11,696 or $30.11 per Boe for the same nine-month period of 2005. The Company recorded a $17.93 per Boe operating expense in the third quarter of 2006, as the Company incurred $30,913 in property taxes and $21,541 on a well workover in Evesham. This compares to $13.58 per Boe for the same three-month period in 2005.

Total general and administrative expenses increased from $215,460 for the first three quarters of 2005 to $512,544 for the same nine-month period in 2006. The increased costs resulted from managing the Company's increased corporate and operational responsibilities, reflecting a rate of $11.38 per Boe.

The Company's financing charges of $81,275 in the first three quarters of 2006 were substantially higher than the $10,831 incurred for the first nine months of 2005 as the Company materially expanded its capital expenditure program in the first quarter of 2006 by completing its first drilling program, resulting in two successful heavy oil wells.

The Company's Depletion and depreciation ("D&d") expenses reflect the acquisition of producing properties at Evesham and Macklin in October of 2005 and the Company's first quarter capital program. For the first nine months of 2006 the Company incurred a D&d charge of $835,832 or $18.56 per Boe. By comparison, the Company had total D&d expense of $12,733 or $32.73 per Boe for the same nine-month period in 2005.

Tuscany incurred a net loss of $306,167 during the nine months ended September 30, 2006 compared with a net loss of $328,349 during the same period in 2005. The Company incurred a net loss of $110,794 in the third quarter of 2006 compared to a net loss of $159,910 for the comparative period in 2005.

Capital expenditures for the first nine months of 2006 totaled $1,279,322 compared to $22,403 in the first three quarters of 2005. The increase was entirely attributed to the Company's winter drilling program including seismic, completing, testing and equipping of two wells. The capital program was financed from cash flow, proceeds from the issuance of flow-through shares completed in December 2005 and an increase to the Company's operating line. Currently, the Company has a $2.75 million operating line of which $2.09 million was drawn at September 30, 2006.

As Tuscany continues to evaluate asset based and corporate acquisition opportunities, the Company has focused on the development of its core property at Evesham, Saskatchewan. The interpretation of the Company's proprietary 3-D seismic has identified at least three drilling prospects over the Evesham property. As a result, Tuscany has licensed a new development well directly offsetting its producing well drilled in the first quarter, 2006. The well is expected to spud prior to November 30, 2006. The Company anticipates proceeding with licensing of the two follow-up drilling locations, in the first quarter of 2007, pending the results of the new well.

Tuscany also plans to pool and participate on an equalized basis with a major industry partner on the Evesham lands to recomplete a shallow gas zone uphole from the original targeted formation. Efforts to recomplete the well are scheduled for early December 2006.

Furthermore, Tuscany has participated in an exploration well (0.3 net) at Chip Lake, Alberta which has been cased as a potential gas well. The majority of the Company's fourth quarter expenditures qualify as either Canadian Development Expenses or Canadian Exploration Expenses as required by Revenue Canada and fulfills the Company's remaining 2005 flow-through obligation.



Financial and Operating Highlights

Three Months Ended Nine Months Ended
($ thousands except where noted) 2006 2005 2006 2005
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Financial
Total revenue 700 10 1,930 23
Natural gas revenue 200 0 654 0
Heavy oil revenue 500 10 1,276 23
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Cash flow (deficiency ) from operations 1266(1) (86) 381 (217)
Per share - basic & diluted ($) 0.005 (0.005) 0.015 (0.016)
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Net loss 111 160 306 328
Per share - basic & diluted ($) 0.004 0.009 0.012 0.023
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Capital expenditures - net 18 (1) 1,279 22
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Operating
Total sales (boe/d)(1) 168 2 165 2
Natural gas sales (mcf/d) 413 10 379 10
Heavy Oil sales (bbls/d) 99 0 100 0
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Natural gas price ($/mcf) 5.25 10.31 6.13 9.72
Heavy Oil price ($/bbl) 54.97 00.00 46.79 00.00
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(1) Boe Presentation - The term barrels of oil equivalent (Boe) may be misleading, particularly if used in isolation. A Boe conversion ratio of 6 million cubic feet (Mcf): 1 barrel (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.

Forward-looking statements - statements included in this press release that are not historical facts may be considered "forward-looking statements." Actual results could differ materially from the conclusions, forecasts or projections in the forward-looking information. Certain material factors and assumptions were applied in drawing the conclusions or making the forecasts or projection in the forward-looking information and the material factors or assumptions that were applied in drawing the conclusion or making the forecast or projection as reflected in the forward-looking information is contained in the press release.


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)