Waldron Energy Corporation

Waldron Energy Corporation

March 30, 2012 07:00 ET

Waldron Energy Corporation Announces 2011 Year End Results and Ferrybank Belly River Operations Update

CALGARY, ALBERTA--(Marketwire - March 30, 2012) - Waldron Energy Corporation (TSX:WDN) ("Waldron" or the "Corporation") is pleased to announce its financial and operational results for the year and three months ended December 31, 2011. The Corporation's audited year-end financial statements and Annual Information Form ("AIF") including a statement on reserves data and other information specified in NI 51-101 are available for review at www.sedar.com and on the Corporation's website at www.waldronenergy.ca.

Subsequent to year end, Waldron drilled two Belly River horizontal oil wells at Ferrybank, Alberta. The first well was drilled to a horizontal length of approximately 1,000 meters and the second well was drilled to a horizontal length of approximately 1,400 meters. The wells are currently being completed and Waldron expects both wells will be on production mid-April 2012. The Corporation intends to continue to shift its capital to the Belly River oil and Ellerslie oil projects at Ferrybank. Waldron is strategically positioned to allocate capital between oil projects and liquids rich projects as economic conditions dictate. Depending on the results of the two Belly River horizontal wells, the Corporation has over twenty horizontal oil wells identified in the Ferrybank Belly River oil pool which have not been recognized in the Corporation's 2011 reserves report. Additionally, Waldron has a large inventory of high impact liquids rich opportunities at Crystal, Strachan and Ricinus. Waldron's current production is approximately 2,900 boepd (26% oil and liquids).

2011 Financial Highlights

Three months ended December 31, Year ended December 31,
2011 2010 2011 2010
Financial (000's except for per share amounts)
Petroleum and natural gas sales $ 8,536 $ 7,653 $ 33,218 $ 24,615
Funds from operations(1) 4,200 3,361 14,559 8,834
Per share basic & diluted(1)(2) 0.12 0.12 0.44 0.34
Net income (loss) (14,319 ) 2,196 (14,482 ) (407 )
Per share basic & diluted(2) (0.42 ) 0.08 (0.44 ) (0.02 )
Capital expenditures(3) 6,284 10,845 46,795 24,447
Dispositions 456 6,300 456 6,300
Acquisitions - 53 - 44,629
Working capital deficiency (excluding bank debt) 5,846 7,666
Current bank debt (credit facilities $41 million) 29,200 9,600
Property and equipment 99,903 81,110
Exploration and evaluation assets 10,677 14,046
Shareholders' equity 62,871 64,426
Number of shares outstanding at period end 34,333 30,345
(1) Funds from operations is a non-GAAP term and the Corporation calculates this measure as cash provided from operations before changes in non-cash working capital and decommissioning expenses.
(2) At December 31, 2011 there were 3,281,500 (2010 - 2,395,000) options and 7,182,560 (2010 - 7,182,560) warrants outstanding that were not included in the calculation of weighted average shares outstanding as the effect would be anti-dilutive.
(3) Capital expenditures exclude acquisitions, dispositions, decommissioning expenditures and capitalized share based compensation.

2011 Operational Highlights

Three months ended December 31, Year ended December 31,
2011 2010 2011 2010
Natural Gas (mcf/d) 12,506 12,429 12,342 9,848
NGL (bbls/d) 559 400 444 274
Light crude oil (bbls/d) 167 209 186 192
BOE/day 2,810 2,681 2,687 2,108
Netback per boe
Sales price $ 33.01 $ 31.03 $ 33.87 $ 32.00
Royalties (4.13 ) (1.59 ) (4.22 ) (3.69 )
Operating expenses (6.50 ) (9.85 ) (8.81 ) (10.11 )
Transportation expenses (1.94 ) (2.00 ) (1.76 ) (1.73 )
Operating netback $ 20.44 $ 17.59 $ 19.08 $ 16.47

2011 Reserves Summary

Waldron is pleased to provide the following summary results from its annual independent reserve evaluation completed by GLJ Petroleum Consultants ("GLJ") for all of the Corporation's properties effective December 31, 2011 (the "GLJ Report"). These estimates were prepared in accordance with National Instrument 51-101 Standards of Disclosure for Oil and Gas Activities ("NI 51-101") and the full reserves information is included in the Corporation's AIF.

The following tables summarizes the Corporation's gross and net interests in proved and probable reserves at December 31, 2011 as assessed in the GLJ Report prepared in accordance with NI 51-101 using the GLJ January 1, 2012 forecast prices and cost assumptions.

RESERVES CATEGORY Gross Net Gross Net Gross Net
(Mbbl) (Mbbl) (Mmcf) (Mmcf) (Mboe) (Mboe)
Producing 985 738 17,339 15,337 3,876 3,293
Developed Non-Producing 89 65 2,270 2,042 468 404
Undeveloped 510 394 6,675 5,682 1,623 1,341
TOTAL PROVED 1,585 1,195 26,283 23,061 5,966 5,039
PROBABLE 1,243 898 24,796 21,389 5,377 4,463
TOTAL PROVED PLUS PROBABLE 2,830 2,093 51,079 44,450 11,343 9,502
(1) Numbers in this table are subject to rounding.
(2) Natural gas volumes include solution gas volumes associated with the Corporation's light and medium crude oil reserves.
(3) Natural gas is converted to barrels of oil equivalent ("boe") at a ratio of six thousand standard cubic feet to one barrel of oil.

Net Present Values of Future Net Revenue

The following table summarizes Waldron's share of the net present value of future net revenue attributable to its reserves before taxes but prior to the provision for interest and general and administrative expenses:

(M$) (M$) (M$) (M$)
Producing 77,899 61,897 52,260 45,661
Developed Non-Producing 9,433 6,342 4,623 3,545
Undeveloped 19,135 12,576 8,410 5,613
TOTAL PROVED 106,467 80,814 65,293 54,819
PROBABLE 94,009 54,988 35,339 23,935
TOTAL PROVED PLUS PROBABLE 200,476 135,803 100,632 78,754
(1) Gross reserves are the Corporation's total interest share before the deduction of royalties and without including any royalty interest of the Corporation.
(2) Utilizes GLJ Petroleum Consultants escalated price forecasts as of January 1, 2012.
(3) Natural gas volumes include solution gas volumes associated with the Corporation's light and medium crude oil reserves.
(4) Natural gas is converted to barrels of oil equivalent ("boe") at a ratio of six thousand standard cubic feet to one barrel of oil.
(5) Numbers in this table are subject to rounding.

Waldron's December 31, 2011 Proved Producing reserves increased by 30% on a reserves basis and increased 20% on net present value basis discounted at 10%, respectively, over the December 31, 2010 Proved Producing reserves. Typically, proved producing reserves form the basis of determining lending values. Waldron's credit facility is anticipated to be renewed by the April 30, 2012 semi-annual review date. The Corporation's gross and net interests in proved and probable reserves and net present value of future net revenue attributable to its reserves before taxes at December 31, 2011 were lower than at December 31, 2010, respectively, due to lower natural gas pricing and reduction in undeveloped and probable reserves at Ricinus. The Corporation is directing its efforts to increase the oil production and add oil reserves in Waldron's Ferrybank Belly River oil prospect by infill drilling of horizontal wells and re-evaluating the waterflood management program.

Net Asset Value

The following table summarizes the Corporation's net asset value at December 31, 2011:

Net Asset Value (December 31, 2011) 2011
Proved plus Probable NI 51-101 discounted at 10% $ 100,632
Undeveloped Land, Seismic and Other Assets (internal estimate) 18,000
Net Debt (35,046 )
Net Asset Value - Basic $ 83,594
Basic Common Shares Outstanding (at Dec. 31, 2011) 34,333
Net Asset Value - Basic (per share)(1) $ 2.43
Net Asset Value - Basic $ 83,594
Funds Received from Exercise of Dilutives 19,889
Net Asset Value - Fully Diluted $ 103,483
Diluted Shares Outstanding (at Dec. 31, 2011) 44,797
Net Asset Value - Fully Diluted (per share)(1) $ 2.31
(1) Net Asset Value numbers are at December 31, 2011 and do not incorporate drilling results during the first quarter of 2012 and do not incorporate changes in dilutives post December 31, 2011.
(2) The estimated values do not represent fair market value.

Update and Outlook

During the fourth quarter of 2011, Waldron produced on average 2,810 boepd (26% oil and liquids), resulting in $4.2 million in funds from operations. The Corporation exited 2011 with $29.2 million drawn on its credit facilities of $41 million with $5.8 million working capital deficiency (excluding debt) and a net debt to annualized fourth quarter funds from operations ratio of 2.1 to 1.

The Corporation originally budgeted for drilling a second Glauconite gas well at Crystal given the success of the first liquids rich well. However, due to strong oil prices and recent successful industry results of Belly River oil, Waldron revised its plans and has drilled two Belly River horizontal light oil wells at Ferrybank. As a result of a shift towards light oil opportunities and low natural gas pricing, the Corporation will continue to execute a cash flow budget and will update guidance when the Belly River horizontal well results have been determined.

The Corporation has established a core area with a top tier asset base of multi-zone high value prospects. Waldron's core areas are characterized by light oil and high deliverability liquids rich opportunities, with high working interests, operatorship, infrastructure, access to production facilities and year round access.

Currently, a non-core asset disposition process is ongoing and the Corporation is continually seeking opportunities to optimize its portfolio of assets through asset sales, swaps, farm-ins, farm-outs and other value creating activities. Waldron has 75 net sections of land in the greater Pembina Area which is prospective for liquids rich gas reserves in the Duvernay shale resource play. With current industry activity and recent land sales in the area, Waldron's land position has the potential to increase in value significantly. Additionally, Waldron has identified over 125 horizontal drilling locations on its lands targeting a mix of deep basin light oil and liquids rich opportunities in the Belly River, Ellerslie, Glauconite, and Falher zones.

Additionally, Waldron's current production is approximately 2,900 boepd (26% oil and liquids).

Investor Information

Waldron is a Calgary, Alberta based corporation engaged in the exploration, development and production of petroleum and natural gas. The Corporation's common shares are currently listed on the Toronto Stock Exchange under the trading symbol "WDN." Additional information regarding Waldron is available under the Corporation's profile at www.sedar.com or at the Corporation's website, www.waldronenergy.ca.

Forward Looking and Cautionary Statements

This news release contains forward-looking statements relating to the Corporation's plans and other aspects of the Corporation's anticipated future operations, strategies, financial and operating results and business opportunities. These forward-looking statements may include opinions, assumptions, estimates, management's assessment of value, reserves, future plans and operations.

Forward-looking statements typically use words such as "will," "anticipate," "believe," "estimate," "expect," "intend," "may," "project," "should," "plan," and similar expressions suggesting future outcomes, and include statements that actions, events or conditions "may," "would," "could," or "will" be taken or occur in the future. Specifically, this press release contains forward-looking statements relating to the results and timing of operations; number of follow-up locations; whether or not recent industry results are favorable; whether or not additional light oil reserves are recognized; whether or not the Corporation achieves guidance; the character and nature of the Corporation's asset base; whether or not the asset base is prospective; value of Duvernay rights; and number of horizontal drilling locations and opportunities. The forward-looking statements are based on various assumptions including expectations regarding the success of current or future drill wells; the outlook for petroleum and natural gas prices; estimated amounts and timing of capital expenditures; estimates of future production; assumptions concerning the timing of regulatory approvals; whether or not proved producing reserves form the borrowing base; the state of the economy and the exploration and production business; results of operations; business prospects and opportunities; future exchange and interest rates; the Corporation's ability to obtain equipment in a timely manner to carry out development activities; and the ability of the Corporation to access capital and credit. While the Corporation considers these assumptions to be reasonable based on information currently available to it, they may prove to be incorrect.

Forward-looking statements are subject to a wide range of assumptions, known and unknown risks and uncertainties and other factors that contribute to the possibility that the predicted outcome will not occur, including, without limitation: risks associated with oil and gas exploration, development, exploitation, production, marketing and transportation; loss of markets; volatility of commodities prices; currency fluctuations; imprecision of reserves estimates; environmental risks; competition from other producers; inability to retain drilling rigs and other services; incorrect assessment of the value of acquisitions; failure to realize the anticipated benefits of acquisitions; general economic conditions; delays resulting from or inability to obtain required regulatory approvals and to satisfy various closing conditions; and ability to access sufficient capital from internal and external sources. Readers are cautioned that the foregoing list of factors is not exhaustive.

Although Waldron believes that the expectations represented by such forward-looking statements are reasonable, there can be no assurance that such expectations will be realized. As a consequence, actual results may differ materially from those anticipated in the forward-looking statements and you should not rely unduly on forward-looking statements. The forward-looking statements contained in this news release are made as of the date of this news release. Except as required by applicable law, Waldron does not undertake any obligation to publicly update or revise any forward-looking statements.

Note Regarding Non-GAAP Financial Measures

Funds from operations and operating netback are not recognized measures under IFRS as issued by the International Accounting Standards Board. Management believes that in addition to net earnings, funds from operations and operating netback are useful supplemental measures as they demonstrate the Corporation's ability to generate the cash necessary to fund future growth through capital investment or repay debt if incurred in future periods. Investors are cautioned, however, that these measures should not be construed as an alternative to cash flow from operating activities or net earnings determined in accordance with IFRS as an indication of the Corporation's performance. The Corporation's method of calculating these measures may differ from other entities and, accordingly, they may not be comparable to measures used by other entities. For these purposes, the Corporation defines funds from operations as cash flow from operations before changes in non-cash operating working capital, financing expenditures related to the costs of acquisitions and decommissioning expenditures and defines operating netback as revenue less royalties, operating and transportation expenses. Net debt is defined as current assets less current liabilities.

Note Regarding BOEs

The term barrel of oil equivalent ("boe") may be misleading, particularly if used in isolation. A conversion ratio for gas of 6 mcf:1 boe is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. Given that the value ratio based on the current price of crude oil as compared to natural gas is significantly different from the energy equivalency conversion ratio of 6:1, utilizing a conversion on a 6:1 basis is misleading as an indication of value.

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