Zapata Energy Corporation

Zapata Energy Corporation

April 30, 2007 09:31 ET

Zapata Releases 2006 Results and Annual Reserves Report

CALGARY, ALBERTA--(CCNMatthews - April 30, 2007) - Zapata Energy Corporation (TSX VENTURE:ZCO) is pleased to report strong operational and financial results for 2006. Zapata's financial statements, management's discussion and analysis (MD&A) and annual information form for the year ended December 31, 2006 will be available on SEDAR at

The Corporation's performance in 2006 was achieved despite a challenging business environment of significantly lower natural gas prices and higher service and operational costs. These higher costs were compounded by production limitations due to regulatory delays, weather and restricted field capacity.

Financially, gross revenues for 2006 totaled $54.9 million with a field net back of $29.0 million. Zapata realized cash flow of $23.8 million ($1.41 per share) and net income of $5.9 million ($0.35 per share). These results, although lower than 2005, were achieved as natural gas prices dropped 26%.

Zapata's operations continued to grow in 2006. Daily production increased 5% to 3,128 barrels of oil equivalent per day (boepd) evenly split between oil and natural gas. The Corporation's balanced portfolio of oil and gas helped offset the 26% sharp decline in gas prices as the net price received per boe was down only 11%. During 2006, Zapata drilled 45 (37 net) wells, resulting in 17 (11 net) natural gas wells, 22 (21 net) oil wells and 6 (5 net) abandonments.

($M except per unit and operational amounts)
Year Ended December 31
2006 2005
Gross sales revenue 54,886 58,940
Cash flow from operations 23,840 28,443
Per share (basic) 1.41 1.75
Per share (diluted) 1.37 1.68
Net income 5,931 9,901
Per share (basic) 0.35 0.61
Per share (diluted) 0.34 0.58
Capital expenditures 46,436 27,931
Bank debt 39,300 23,250
Bank debt and working capital deficit 46,262 30,581
Shareholders' equity 49,232 35,250
Shares outstanding (weighted average)
Basic 16,916 16,282
Diluted 17,368 16,975

Production Sales
Natural gas (mcf/d) 9,079 8,801
Oil (bbls.d) 1,465 1,366
NGL (bbls/d) 150 156
Combined (boe/d @ 6 mcf:1 bbl) 3,128 2,989
Natural gas ($/mcf) 6.68 9.01
Oil ($/bbl) 56.15 54.01
NGL ($/bbl) 49.38 53.74
Combined ($/boe @6 mcf:1 bbl) 48.08 54.02

Drilling activity (net wells) 37 27
Undeveloped land holdings (net hectares) 49,779 37,128


At December 31, 2006 Zapata had 10.5 million boe of proven and probable reserves (6.4 million boe proven) with an undiscounted value of $252 million based on forecast pricing. The net present value of Zapata's reserves before tax at a 10% discount rate using forecast pricing is $170.8 million. This estimate is based on the December 31, 2006 reserve report prepared by Sproule Associates Limited using procedures consistent with National Instrument 51-101. The report was reviewed by Zapata's Reserves Committee and approved by its directors. Zapata's Statement of Oil and Gas Reserves Data and Other Oil and Gas Information for the year ended December 31, 2006 is available on SEDAR at

Using Sproule's reserves report, Zapata's management has prepared an estimate of the Corporation's net asset value (NAV) as of December 31, 2006. Based on forecast pricing and discounted at 10%, Zapata's management estimates its NAV per share is $8.13 ($7.90 diluted). For a breakdown of Zapata's NAV calculation, please see the Corporation's 2006 MD&A on SEDAR. Zapata's shares closed at $4.00 on April 25, 2007.


Zapata's quality assets are expected to provide sustainable and profitable long-term growth. Expenditures incurred in 2006 should be reflected in higher production in 2007 at lower costs and a longer reserve life.

In 2006 Zapata did not achieve its production targets due to operational and regulatory delays, capacity restrictions and the failure of two exploratory programs at Misty and Buck Lake. Initial test wells at Misty were favorable but subsequent drilling did not confirm the expected aerial extent of the reservoir.

In the first quarter of 2007 the corporation averaged 3,150 boepd. Current production is averaging 3,150 to 3,300 boepd with 200 boepd restricted by capacity and 200 boepd behind pipe which should be on stream in the third quarter. Based on current pricing and production, the Corporation forecasts that 2007 will be a year of growth with increased cash flow and net income.

Zapata's 2007 cash flow will be more than sufficient to finance its 2007 capital program of which a portion will be used to maintain existing production and improve operational performance. The major portion of the capital budget, however, will be targeting high value projects with the potential to deliver strong reserves and additional production. These expenditures will occur in the third and fourth quarters and will lead to exit production exceeding 3,600 boepd. Zapata expects that its current years capital budget is adequate to achieve this growth while also allowing the company to reduce net debt by $11 million by the end of 2007. Zapata believes that a combination of growth and fiscal management is the best way to add to shareholder value.

Zapata is a junior oil and gas production company operating in western Canada and trades on the TSX Venture Exchange under the symbol "ZCO".

This press release may include forward-looking statements which are statements other than of historical fact, such as information regarding drilling potential and production forecasts. Factors that could cause actual results to differ materially from our expectations include exploration and development risks, commodity prices and operating hazards. A barrel of oil equivalent (boe), derived by converting gas to oil in the ratio of six thousand cubic feet of gas to one barrel of oil, may be misleading, particularly if used in isolation. A boe conversion is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.

The TSX Venture Exchange has neither approved nor disapproved of the information contained herein.

Contact Information