Twoco Petroleums Ltd.
TSX VENTURE : TWO

Twoco Petroleums Ltd.

April 26, 2011 18:46 ET

Twoco Petroleums Ltd. 2010 Highlights and 2011 Update

CALGARY, ALBERTA--(Marketwire - April 26, 2011) -

THIS NEWS RELEASE IS NOT FOR DISSEMINATION OR DISTRIBUTION IN THE UNITED STATES, TO UNITED STATES NEWS WIRE SERVICES OR TO UNITED STATES PERSONS

Twoco Petroleums Ltd. ("Twoco" or the "Company") (TSX VENTURE:TWO) is pleased to announce financial and operating results for 2010 and an update of its 2011 activities.

Twoco has filed the following documents on the System for Electronic Document Analysis and Retrieval (SEDAR):

  1. Annual information form for the year ended December 31, 2010, which includes the disclosure and reports relating to reserves data and other oil and gas information required pursuant to National Instrument 51-101 – Standards of Disclosure for Oil and Gas Activities of the Canadian Securities Administrators;

  2. Audited financial statements as at and for the year ended December 31, 2010, together with the notes thereto and the report of the auditors thereon; and

  3. Management's discussion and analysis of financial condition and results of operations for the year ended December 31, 2010.

Copies of these documents may be obtained via SEDAR at www.sedar.com.

Highlights of 2010 include:

  • Average production of 720 boe per day – a 37% decrease from the year ended December 31, 2009 – a result of shut-in volumes due to low natural gas prices, a lack of drilling activity and natural production declines;

  • Participation in the drilling of 3 gross (2.03 net) wells. One gross (0.06 net) natural gas well commenced production in the fourth quarter, 2010. Due to continuing depressed prices for natural gas, the Company has determined to strategically diversify its commodity mix by targeting exploration towards oil prospects it has identified on its existing lands. The Company drilled and completed 2 gross (1.97 net) horizontal oil wells on the Company's Sparky heavy oil property in the Warspite area of Alberta. The oil wells commenced production on December 19, 2010;

  • Petroleum and natural gas sales revenue of $5,559,978 – a 40% decrease from the year ended December 31, 2009 – due to lower production and lower natural gas prices;

  • Cash used by operations of $338,441 – due predominantly to lower natural gas production;

  • Net Loss of $18,509,056 ($0.23 per share) – a result primarily from lower petroleum and natural gas revenues combined with higher net interest and general and administrative cost plus a ceiling test impairment of $10,501,000 included in depletion, depreciation and accretion expenses;

  • Capital expenditures of $2,863,575;

  • Current land position of 119,267 gross (86,894 net) acres;

  • Operating costs of $10.24 per boe;

  • Operating netback of $10.08 per boe;

  • General and administrative expenses of $5.03 per boe;

Highlights of Twoco's anticipated 2011 work program and summary of operations for the year to date include:

  • Current production of approximately 750 boe per day;

  • Twoco estimates current shut-in and behind pipe production capability of approximately 150 boe per day;

  • On March 29, 2011, the Company and the Alberta Treasury Branches (the "Bank") entered into an indicative term sheet (the "Term Sheet") further amending the terms of the Company's $18,000,000 revolving credit facility. On April 5, 2011, the Company and the Bank entered into a formal agreement (the "Commitment Letter") based on the terms and conditions set forth in the Term Sheet. In particular, the Company is required to: (i) complete an equity issuance for a minimum of $3,000,000 in gross proceeds on or before April 30, 2011 of which not more than $1,000,000 may consist of common shares ("Common Shares") in the capital of the Company issued on a "flow-through" basis within the meaning of the Income Tax Act (Canada) ("Flow-Through Common Shares"), which includes the Equity Financing (as defined below); and (ii) complete the issuance of a minimum principal amount of $3,000,000 of unsecured debentures on or before April 1, 2011 and apply the proceeds toward the repayment and cancellation of the outstanding $2,780,000 principal amount of unsecured debentures of the Company (the "2009 Debentures") and all accrued and unpaid interest thereon. The next review date of the credit facility was also extended in connection with the Term Sheet to March 31, 2012 but may be changed at any time at the sole discretion of the Bank. In connection with the entering into of the Commitment Letter, the Company has paid the Bank $50,000 and is required to pay an additional $350,000 to the Bank no later than April 30, 2011 by way of issuance of 1,296,297 Common Shares (the "Bank Payment Shares") at a deemed price of $0.27 per share;

  • On March 30, 2011, the Company announced that it had entered into an agreement with Macquarie Private Wealth Inc. (the "Agent") to issue up to 12,963,000 Common Shares and up to 3,225,800 Flow-Through Common Shares on a private placement basis at a price of $0.27 per Common Share and $0.31 per Flow-Through Common Share for gross proceeds of up to $4,500,008 (the "Equity Financing"). In addition, the Agent has been granted an option exercisable prior to closing to increase the size of the Equity Financing by up to an additional 3,240,750 Common Shares at a price of $0.27 per Common Share for additional gross proceeds of approximately $875,000 which would increase the total Equity Financing to approximately $5,375,000 if fully exercised. The Company intends to use the proceeds of the Equity Financing to develop the Company's Sparky heavy oil property in the Warspite area of Alberta and for general corporate purposes. The Equity Financing is expected to close on or about April 29, 2011;

  • On March 31, 2011, the Company announced that it had closed a private placement financing through the issuance of $3,400,000 in aggregate principal amount of redeemable, convertible, unsecured 8% debentures ("2011 Convertible Debentures") of Twoco (the "Debenture Financing"). The 2011 Convertible Debentures bear interest at the rate of 8% per annum, payable commencing June 30, 2011 and quarterly thereafter and will mature on December 31, 2012 (the "Maturity Date"). The Company shall have the option to pay interest accrued on the 2011 Convertible Debentures in Common Shares at a deemed price per Common Share based on the market price of the Common Shares at the time of payment of such interest. The 2011 Convertible Debentures are convertible into Common Shares at the holder's option at any time prior to the Maturity Date at a conversion price equal to $0.324 per share. The Company will have the ability to redeem the 2011 Convertible Debentures in certain circumstances where an offer or business combination is made to acquire Common Shares. The proceeds from the Debenture Financing were used to repay the outstanding $2,780,000 principal amount of the 2009 Debentures and all accrued and unpaid interest thereon and for general corporate purposes; and

  • Subject to the completion of the Equity Financing, the Company has approved an $11,800,000 capital budget which will include the drilling of 10 gross (9.72 net) horizontal oil wells on the Company's Sparky heavy oil property in the Warspite area of Alberta.

Twoco is an oil and gas company engaged in the exploration for, and the acquisition, development and production of, oil and natural gas reserves primarily in the Province of Alberta. Twoco has 58,625,108 Common Shares issued and outstanding as at today's date.

In this news release the calculation of barrels of oil equivalent (boe) is calculated at a conversion rate of six thousand cubic feet (Mcf) of natural gas for one barrel (Bbl) of oil based on an energy equivalency conversion method. Boes may be misleading particularly if used in isolation. A boe conversion ratio of 6 Mcf: 1Bbl is based on an energy equivalency conversion method primarily applicable to the burner tip and does not represent a value equivalency at the wellhead.

Forward-Looking Statements:

Certain information set forth in this news release contains forward-looking statements or information ("forward-looking statements"), including the timing and closing of the Equity Financing, the receipt of applicable regulatory approvals, the anticipated use of the net proceeds of the Equity Financing, behind pipe production capability, the Company's capital budget and the drilling of wells. The closing of the Equity Financing and the issuance of the Bank Payment Shares could be delayed if the Company is not able to obtain the requisite regulatory and TSX Venture Exchange approvals on the timelines it has planned. The Equity Financing and the issuance of the Bank Payment Shares will not be completed at all if these approvals are not obtained or some other condition to closing the Equity Financing is not satisfied and meeting the requirements of the Commitment Letter. Accordingly, there is a risk that the Equity Financing and the issuance of the Bank Payment Shares will not be completed within the expected timeframe or at all. The intended use of the net proceeds of the Equity Financing by the Company might change if the board of directors of the Company determines that it would be in the best interests of the Company to deploy the proceeds for some other purpose. By their nature, forward-looking statements are subject to numerous risks and uncertainties, some of which are beyond Twoco's control, including the impact of general economic conditions, industry conditions, volatility of commodity prices, currency fluctuations, imprecision of reserve estimates, environmental risks, operational risks in exploration and development, competition from other industry participants, the lack of availability of qualified personnel or management, stock market volatility and the ability to access sufficient capital from internal and external sources. Although Twoco believes that the expectations in our forward-looking statements are reasonable, our forward-looking statements have been based on factors and assumptions concerning future events which may prove to be inaccurate. Those factors and assumptions are based upon currently available information. Such statements are subject to known and unknown risks, uncertainties and other factors that could influence actual results or events and cause actual results or events to differ materially from those stated, anticipated or implied in the forward-looking statements. As such, readers are cautioned not to place undue reliance on the forward-looking statements, as no assurance can be provided as to future results, levels of activity or achievements. The risks, uncertainties, material assumptions and other factors that could affect actual results are discussed in our Annual Information Form and other documents available at www.sedar.com. Furthermore, the forward-looking statements contained in this document are made as of the date of this document and, except as required by applicable law, Twoco does not undertake any obligation to publicly update or to revise any of the included forward-looking statements, whether as a result of new information, future events or otherwise. The forward-looking statements contained in this document are expressly qualified by this cautionary statement.

This news release is not an offer of securities for sale in the United States. Securities may not be offered or sold in the United States or to or for the account or benefit of U.S. persons (as such terms are defined in Regulation S under the United States Securities Act of 1933, as amended (the "U.S. Securities Act")), absent registration or an exemption from registration. The securities offered have not been and will not be registered under the U.S. Securities Act or any state securities laws and, therefore, may not be offered for sale in the United States, except in transactions exempt from registration under the U.S. Securities Act and applicable state securities laws.

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

Contact Information

  • Twoco Petroleums Ltd.
    Wayne A. Malinowski
    President and Chief Executive Officer
    (403) 231-8653
    (403) 237-6048