Waldron Energy Corporation
TSX : WDN

Waldron Energy Corporation

August 15, 2012 00:00 ET

Waldron Energy Corporation Announces Second Quarter 2012 Financial and Operational Results

CALGARY, ALBERTA--(Marketwire - Aug. 15, 2012) - Waldron Energy Corporation (TSX:WDN) ("Waldron" or the "Corporation") is pleased to provide its financial and operational results for the three and six months ended June 30, 2012. These reports are available for review at www.sedar.comand on the Corporation's website at www.waldronenergy.ca.

Financial and Operational Summary
Three months ended June 30 Six months ended June 30
2012 2011 2012 2011
Financial (000's except for per share amounts) (unaudited ) (unaudited ) (unaudited ) (unaudited )
Petroleum and natural gas sales $ 5,741 $ 8,953 $ 12,477 $ 16,234
Funds from operations(1) $ 1,907 $ 4,073 $ 4,090 $ 6,994
Net income (loss) $ (1,479 ) $ 346 $ (8,075 ) $ 147
Per share basic & diluted(2) $ (0.04 ) $ 0.01 $ (0.24 ) $ 0.00
Capital expenditures(3) $ 2,471 $ 14,966 $ 5,978 $ 29,154
Working capital deficiency (excluding bank debt) $ 1,457 $ 11,671 $ 1,457 $ 11,671
Current bank debt (credit facilities of $41 million) $ 34,415 $ 13,600 $ 34,415 $ 13,600
Total assets $ 108,682 $ 124,440 $ 108,682 $ 124,440
Shareholders' equity $ 55,108 $ 76,890 $ 55,108 $ 76,890
Operating
Production
Natural Gas (mcf/d) 11,069 12,808 12,065 12,065
NGL (bbls/d) 485 406 536 385
Light crude oil (bbls/d) 191 182 170 188
BOE/day 2,520 2,722 2,663 2,584
Netback per boe (6:1)
Sales price $ 25.03 $ 36.14 $ 25.75 $ 34.72
Realized gain on commodity contracts $ 0.27 $ $ 0.11 $
Royalties $ (1.41 ) $ (3.54 ) $ (2.30 ) $ (3.98 )
Operating expenses $ (8.84 ) $ (9.05 ) $ (8.19 ) $ (9.47 )
Transportation expenses $ (1.78 ) $ (1.72 ) $ (1.86 ) $ (1.68 )
Operating netback $ 13.27 $ 21.83 $ 13.51 $ 19.59
(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, transaction costs and decomissioning expenditures.
(2)At June 30, 2012, there were 2.4 million options and 7.2 million warrants outstanding that were not included in the calculation of weighted average shares outstanding as the effect would be anti‐dilutive.
(3) Capital expenditures include cash exploration & evaluation expenditures plus cash property & equipment expenditures net of dispositions.

Summary

Waldron is pleased to report that its disciplined financial strategy of capital spending within cash flow has resulted in executing on the Corporation's technical strategy of combining strong drilling success while enhancing our prospect inventory. This strategy has set the stage for a continued disciplined capital program for the remainder of 2012. Subsequent to the second quarter, Waldron raised approximately $3.2 million (net) in flow‐through equity which results in net debt of $32.7 million leading into the third quarter of 2012. Additionally, the Corporation has focused on an intense technical review of its prospect inventory and has confirmed and increased a number of high torque projects with reduced technical risk within its opportunity base. Significant oil upside has been identified in the Belly River and Duvernay Formations in the Ferrybank area and Glauconite oil and liquids‐rich opportunities in the Crystal area. Additionally, the Corporation has enhanced its seismic models in the Strachan area which resulted in significantly lower risk, multi‐zone drilling and workover prospects in the Ellerslie, Glauconite and Cardium.

Update

A successful Glauconite well Crystal 1‐32‐44‐03W5 ("Crystal 1‐32") was drilled during the second quarter of 2012. This 60% working interest well was subsequently completed in July 2012 and is currently recording gross working interest production rates averaging 235 boe per day (split evenly between oil/liquids and natural gas). Additional upside has been identified and is under review.

Waldron continues to exercise financial prudence in this challenging current low natural gas price environment. Production for the second quarter averaged 2,520 boe per day resulting in cash flow of $1.9 million. Production levels were lower than previously expected due to unscheduled third party gas plant downtime and the impact of wet weather access restrictions. Lower than expected commodity prices were recorded, but this was partially offset by the Corporation's oil hedge. Capital expenditures were undertaken in the quarter in a careful, conservative manner and totalled approximately $2.5 million which was funded significantly by cash flow. The second quarter program consisted primarily of a successful well at Crystal 1‐32 and a number of workovers complemented with an intense technical review resulting in risk reduction of the Corporation's prospect inventory which has confirmed upside and a large number of drill‐ready locations.

Waldron is currently planning to drill two wells in the second half of 2012: a vertical Belly River light oil prospect at Ferrybank 14‐36‐42‐1W5 which is expected to spud in the next few weeks; and a horizontal Crystal Glauconite well at 15‐33‐43‐3W5 which is drill‐ready and expected to spud late in the third quarter. Both wells have well managed technical risk and have immediate production potential with an established, available infrastructure in place. Additionally, the Corporation has identified a number of low cost recompletions targeting the Cardium at Strachan.

Guidance

Third quarter production levels are expected to remain relatively flat compared to the second quarter; however, production levels are expected to average 2,900 boepd during the fourth quarter (30% oil and liquids) as a result of the second half development based capital program.

The Corporation is committed to continuing to conduct its second half 2012 capital program in a fiscally responsible manner, resulting in Waldron undertaking a cash flow capital budget (based on strip pricing) of approximately $6 million. Year‐end net debt levels are anticipated to approximate $33 million which represents an improved debt to fourth quarter annualized cash flow ratio of approximately 2.1:1 (based on an estimated cash flow for the fourth quarter of $4 million).

Management Additions

Waldron is pleased to announce the following management additions.

Mr. John (Jack) Marsh, P. Eng. has been appointed VP Engineering. Mr. Marsh has been in the oil and gas business for over 36 years primarily in a reservoir and production engineering capacity. More recently, Mr. Marsh was president of a private junior oil and gas company. In conjunction with Mr. Marsh's appointment, he will be resigning from Waldron's board of directors.

Ms. Pamela Orr, CA, CFA is joining Waldron as VP Finance and CFO as Mr. Dean Schultz will be leaving to pursue another opportunity. Ms. Orr brings in excess of 30 years of oil and gas experience to Waldron, the last 15 years of which have been with a number of significant junior oil and gas companies. Ms. Orr and Mr. Schultz have been working through an orderly transition of responsibilities. Ernie Sapieha and the Board of Directors wish to thank Dean for his lengthy and valuable service to Waldron, including his instrumental contribution in the recapitalization of the Corporation in 2009, and wish him the best in his future opportunity.

Mr. Sapieha is pleased to announce that with these experienced, proven management appointments, the Corporation is aggressively working towards being well positioned to take advantage of its large inventory of drill‐ready prospects and other technical opportunities and plans to continue to expand its technical resources.

Summary

Waldron is committed to weathering the current soft natural gas pricing environment. The oil and liquids component of Waldron's production has mitigated the Corporation's exposure to soft natural gas prices. Waldron has undertaken a thorough review of its prospect inventory and has identified a number of exciting, high‐torque opportunities, in particular Duvernay light oil in the East Shale Basin, Belly River light oil in Ferrybank and the Strachan multi‐zone liquids rich targets. Additionally, Waldron continues to review other debt reduction strategies, including property dispositions.

Investor Information

Currently, Waldron has 40.0 million common shares, 7.2 million common share purchase warrants and 2.4 million options outstanding.

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 TSX 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 whether or not prospects are high‐torque and the number thereof; whether or not the prospect inventory has confirmed upside and the number of locations; risk levels of prospects, plays and opportunities; timing and nature of operations; expected production levels; estimated capital expenditures; whether or not debt to cash flow ratio improves; estimated fourth quarter cash flow; and year end net debt. 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; 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 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.

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