Zapata Energy Corporation
TSX VENTURE : ZCO

Zapata Energy Corporation

August 29, 2007 09:00 ET

Zapata Releases Q2 Operating and Financial Results

CALGARY, ALBERTA--(Marketwire - Aug. 29, 2007) - Zapata Energy Corporation (TSX VENTURE:ZCO) announced its financial and operating results today for the three and six month periods ended June 30, 2007. Zapata earned $491,105 in the second quarter ($1.3 million for the first six months) of 2007, achieving cash flow from operations of $4.9 million ($10.3 million for the six months). The Corporation continued to execute its budgeted development and exploratory program in the second quarter, drilling two successful gas wells, recompleting several wells and optimizing facilities. In addition, by the end of the second quarter, Zapata had reduced its bank debt and working capital deficiency by $3.2 million since the beginning of 2007.



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Q2-2007 HIGHLIGHTS
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Three months Six months
ended June 30 ended June 30
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(Thousands unless
otherwise noted) 2007 2006 Change 2007 2006 Change
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FINANCIAL
Gross revenue $ 13,771 $ 14,659 (6%) $ 27,482 $ 27,730 (1%)
Cash flow from
operations 4,901 6,865 (29%) 10,302 12,545 (18%)
Per share (basic) 0.28 0.41 (32%) 0.59 0.76 (22%)
Per share (diluted) 0.28 0.40 (31%) 0.58 0.74 (21%)
Net income 491 2,979 (84%) 1,309 4,083 (68%)
Per share (basic) 0.03 0.18 (84%) 0.08 0.25 (70%)
Per share (diluted) 0.03 0.17 (84%) 0.07 0.24 (69%)
Capital expenditures 2,393 10,157 (76%) 7,743 21,926 (65%)
Bank debt 41,700 36,200 15% 41,700 36,200 15%
Bank debt and working
capital deficiency 43,017 40,053 7% 43,017 40,053 7%
Shares outstanding
(weighted average)
Basic 17,414 16,580 5% 17,414 16,545 5%
Diluted 17,598 17,073 3% 17,651 17,062 3%

OPERATIONAL
Natural gas sales
(mcf/d) 9,144 9,323 (2%) 9,774 9,128 7%
Average sales
price ($/mcf) 7.54 5.95 27% 7.47 6.88 9%
Field netback
($/mcf) 2.60 2.69 (3%) 3.16 3.32 (5%)
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Oil sales (bbls/d) 1,253 1,474 (15%) 1,266 1,501 (16%)
Average sales
price ($/bbl) 55.34 66.39 (17%) 54.03 55.88 (3%)
Field netback
($/bbl) 32.07 40.49 (21%) 28.41 31.43 (10%)
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NGL sales (bbls/d) 217 156 39% 189 149 27%
Average sales
price ($/bbl) 59.98 49.32 22% 54.74 43.70 25%
Field netback
($/bbl) 43.31 28.58 52% 37.85 25.94 46%
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Total sales
(boe/d 6:1) 2,994 3,184 (6%) 3,084 3,171 (3%)
Average sales
price ($/boe) 50.55 50.59 - 49.24 48.31 2%
Field netback
($/boe) 24.51 28.03 (13%) 24.03 25.65 (6%)
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Throughout the second quarter, Zapata's management was determined to grow the Corporation at a reduced rate, remaining within its cash flow limits. To date in 2007, production has been maintained at approximately 3,000 barrels of oil equivalent per day (boe/d) while the Corporation has been focusing on strengthening its balance sheet.

Production sales volumes, which were temporarily lower in the second quarter due to seasonal turnarounds, weather and unexpected delays, have returned to normal rates and are currently averaging 3,150 boe/d. Two gas wells drilled in the second quarter are expected to result in increased production in the third quarter of 2007. Additional production from well recompletions and workovers is expected to be tied in during the third quarter. Zapata has purchased additional land and is planning to drill a significant exploratory well in the latter part of the third quarter. New seismic programs are also planned for the remainder of the year. Zapata continues to maintain a balance of gas and oil production to moderate the effects of fluctuating commodity prices.

Zapata achieved cash flow of $4.9 million for the second quarter of 2007 and $10.3 million for the six-month period compared to $6.9 million and $12.5 million in 2006. More than half of the reduction in cash flow is due to the cancellation of the Alberta Royalty Tax Credit ("ARTC") program and non-recurring charges received and invoiced in the second quarter.

Gross revenues in the second quarter of 2007 totaled $13.8 million, six percent lower than the $14.7 million realized in the second quarter of 2006. For the six-month period ended June 30, gross revenues decreased one percent from $27.7 million in 2006 to $27.5 million in 2007. Zapata achieved net income of $491,105 for the second quarter and $1.3 million for the first half of 2007 compared to $3.0 million and $4.1 million in 2006, respectively. The Corporation's lower net income in 2007 was a result of reduced cash flow and high depletion charges. Zapata attributes the high depletion charges to the Corporation's greater cost base and the conservative reserve estimates required by National Instrument 51-101.

OPERATIONS UPDATE

To date in the third quarter, Zapata drilled two 100 % owned wells (one gas, one oil), reactivated two (one net) gas wells and recompleted one net oil well. All of these wells are expected to be on production by the end of September and add an additional 200 boe/d to daily production. Prior to year end, Zapata plans to drill at least three exploratory wells that may lead to new development opportunities. The Corporation's conservative capital expenditure program is expected to grow production while preserving debt capacity and providing a firm foundation for growth. Zapata is well positioned to participate in merger or acquisition opportunities as they arise in the current market cycle.

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.

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