/NOT FOR DISTRIBUTION TO U.S. NEWSWIRE SERVICES OR FOR DISSEMINATION IN
THE UNITED STATES./
CALGARY, July 29 /CNW/ - Angle Energy Inc. ("Angle" or the "Company")
(TSX : NGL) is pleased to announce its financial and operating results for the
three and six months ended June 30, 2008.
HIGHLIGHTS
-------------------------------------------------------------------------
Three Months Ended June 30, Six Months Ended June 30,
2008 2007 Change 2008 2007 Change
-------------------------------------------------------------------------
(000s, except
per share data) ($) ($) (%) ($) ($) (%)
Financial
Oil and gas
revenues 33,896 15,013 126 56,380 30,042 88
Funds from
operations(1) 18,970 7,300 160 33,096 15,430 114
Per share
- basic 0.55 0.22 150 0.95 0.47 102
Per share
- diluted 0.53 0.22 141 0.93 0.46 102
Net income 7,527 2,721 177 10,511 5,493 91
Per share
- basic 0.22 0.08 175 0.30 0.17 76
Per share
- diluted 0.21 0.08 163 0.30 0.16 88
Capital
expenditures 21,712 4,653 367 38,748 22,628 71
Net debt(2) 8,576 17,236 (50) 8,576 17,236 (50)
Shareholders'
equity 122,108 69,356 76 122,108 69,356 76
Shares
outstanding
(No.)
At end of
period 38,594 32,528 19 38,594 32,528 19
Weighted
average
- basic 34,721 32,528 7 34,656 32,526 7
Weighted
average
- diluted 35,601 33,787 5 35,471 33,785 5
-------------------------------------------------------------------------
(%) (%)
Operating
Sales
Crude oil
(bbls/d) 27 - 100 23 1 96
Natural gas
liquids
(bbls/d) 2,417 1,334 81 2,391 1,392 72
Natural gas
(mcf/d) 21,128 11,900 78 19,764 12,100 63
Total oil
equivalent
(boe/d) 5,965 3,326 79 5,708 3,409 67
Average wellhead
prices(3)
Crude oil
($/bbl) 132.46 67.90 95 121.27 64.05 89
Natural gas
liquids
($/bbl) 71.88 48.62 48 63.00 48.86 29
Natural gas
($/mcf) 9.81 7.82 25 8.93 7.80 14
Total oil
equivalent
($/boe) 64.49 47.61 35 57.80 47.63 21
Gross (net)
wells drilled
(No.)
Oil - - - 2 (1.5) - 100 (100)
Gas 5 (4.7) - 100 (100) 8 (6.6) 5 (4.6) 60 (43)
Dry and
abandoned 1 (1.0) - 100 (100) 2 (2.0) 2 (1.5) - (33)
-------------------------------------------------------------------------
Total 6 (5.7) - 100 (100) 12 (10.1) 7 (6.1) 71 (66)
-------------------------------------------------------------------------
Average working
interest (%) 95 - 100 84 87 (3)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(1) Funds from operations and funds from operations per share are not
recognized measures under Canadian generally accepted accounting
principles. Refer to the Management's Discussion and Analysis for
further discussion.
(2) Excluding derivative instrument and related future tax asset.
(3) Product prices include realized gains or losses from derivative
instruments.
Highlights
- We completed our initial pubic offering on June 30, 2008 and issued
3,875,000 common shares at a price of $8.00 per share, raising
$31 million ($28.3 million net of share issue expenses). As a result,
our common shares are listed for trading on the Toronto Stock
Exchange under the symbol "NGL."
- We drilled 6 gross (5.7 net) wells during the quarter with an 83%
success rate at an average working interest of 95% displaying
continued success in both the Harmattan and Ferrier core areas.
During the first half of the year, we drilled 12 gross (10.1 net)
wells with an 80% success rate and at an average working interest of
84%.
- We realized average sales of 5,965 boe/d for the second quarter of
2008, representing a 79% increase over the same three-month period in
2007. For the first six months of 2008, we averaged 5,708 boe/d, a
67% improvement over the same period a year ago.
- We generated cash flow of $18,970,000 or $0.53 per diluted share
during the second quarter, a 160% gain over the comparable quarter in
2007. For the six-month period, we recorded cash flow of $33,096,000
or $0.93 per diluted share, a 114% year-over-year increase.
- We recorded net income of $7,527,000 or $0.21 per diluted share for
the second quarter of 2008, a 163% increase over the same three-month
period a year ago. For the six months, we recorded net income of
$10,511,000 or $0.30 per diluted share, a 91% improvement over the
first half of 2007.
- We exited June 30, 2008 with no bank debt and $8.6 million in working
capital deficiency on a $70 million credit facility that was
increased from $50 million in June 2008.
- We expanded our planned drilling activity for fiscal 2008 to 26 to
29 gross wells, up from 23 to 26 wells forecast previously.
Additionally, the Company's capital budget has been increased by 24%
to $83 million for the year from the prior forecast of $67 million.
Operations
Harmattan
At Harmattan, production averaged 4,481 boe/d during the three months
ended June 30, 2008, which was comprised of 14.5 mmcf/d of sales gas
production and 2,064 boe/d of NGLs and light crude oil. As discussed in our
first quarter 2008 report, Angle experienced a production outage at Harmattan
related to turnaround activities at the AltaGas (Taylor) complex during late
April and early May. Approximately 1,500 boe/d of production was shut-in
during a three-week period. Post turnaround, the Company experienced flush
production from shut-in wells being brought back on-stream. As well, in-line
production testing conducted in June contributed to a higher than anticipated
overall production rate for Harmattan during the second quarter. Angle brought
three area wells on production during the period: one Elkton gas well (100%
working interest), one Mannville oil well (100% working interest) and one
non-operated Viking oil well (50% working interest). During the second
quarter, three wells were drilled in the Harmattan area: 1 gross (1.0 net)
exploratory location and 2 gross (2.0 net) successful gas development
locations. The exploratory target was a step out extension of an existing
Elkton pool and did not encounter sufficient reservoir quality to complete the
well, and as a result, was dry and abandoned. The development locations
targeted a number of gas bearing sands in the Viking and Ellerslie, and have
been successfully production tested with tie-ins to occur in the third quarter
of 2008. At quarter-end, Angle had five total wells in the Harmattan area to
tie-in, which are anticipated to add a stabilized 350 boe/d to the Company's
total production. In late July, the AltaGas (Taylor) complex experienced a
fire, damaging a contained area of the plant and the facility was subsequently
taken off line. Consequently, Angle is expected to be impacted by a production
outage of approximately 2,800 boe/d for five days in July with additional
production in the Harmattan area continuing through alternate processing
facilities. This outage has been accounted for in the production guidance
provided and does not represent a material change to the Company's
expectations for production in the area over the second half of 2008. During
the third quarter, production rates for Harmattan are expected to average
4,800 boe/d. We anticipate drilling an additional nine wells at Harmattan
during the third and fourth quarters of 2008, an increase of three wells over
previous guidance.
Ferrier
Production in the Ferrier area averaged 1,484 boe/d during the second
quarter of 2008 (comprised of 6.2 mmcf/d of sales gas and 451 boe/d of NGLs)
compared to average production of 1,000 boe/d recorded during the first three
months of the year. During the second quarter, Angle tied in 4 gross (2.7 net)
Ellerslie gas wells and drilled 3 gross (2.7 net) development wells with a
100% success rate, targeting gas in the Ellerslie, Glauconitic and Ostracod
formations. As at the date of this report, production has increased to
2,200 boe/d from ten Ellerslie gas wells. A major compression project has been
designed to service three of these wells that are currently producing at high
pipeline pressures. During the second quarter, Angle was in the process of
constructing this compression facility, which will be operational by mid-third
quarter. As a result, it is expected that production will remain in the
2,200 boe/d range during the third quarter of 2008. During the balance of the
year, we expect to drill up to an additional five development wells at
Ferrier, an increase of four wells over previous guidance.
Lone Pine Creek
The Company has successfully established a significant land position in
the Lone Pine Creek area that totals 26.25 sections (16,800 acres). Crown land
at 100% working interest comprises 11 sections (7,040 acres) with the
remainder of the land controlled via two freehold farm-ins on Exxon Mobil
Canada Energy (Exxon Mobil) lands. The second farm-in for eight sections was
signed during the second quarter of 2008. Currently, Angle has two commitment
wells to Exxon Mobil on these lands, which are anticipated to be drilled by
year-end, subject to surface access.
The drilling target in the Lone Pine Creek area is an internally
generated prospect targeting the Devonian Wabamun, extending a 500 bcf Wabamun
gas pool. The play is targeting a liquids rich, 5% hydrogen sulphide content
gas and, due to the sour gas status, regulatory issues may affect the
anticipated drilling schedule. We plan to drill a minimum of two wells in this
area during the second half of 2008.
Deanne/Rough
Since 2005, the Company has acquired 5,400 net acres of contiguous Crown
land (100% working interest) at Deanne. The prospect is an internally
generated, high impact Glauconitic sand prospect that offsets an existing gas
pool that has produced over 45 bcf to date. An exploratory well is planned for
the fourth quarter of 2008 that will be targeting a similar sized prospect.
The Glauconitic zone is at a depth of 3,500 metres and will involve drilling
capital of $4 million at 100% working interest. The initial drilling location
on these lands was selected during the second quarter and we are currently in
the process of acquiring a surface lease.
Outlook
Angle continues to expand its successful development projects at both
Harmattan and Ferrier, and as a result, our production base has doubled from
this time last year. The Harmattan light oil development will be of particular
focus during the second half of 2008, which is currently in the delineation
phase. The formation contains both light oil and natural gas, and the
delineation is critical in order to identify the respective saturations (oil
or gas) in the accumulation.
We currently have over 50 drill ready locations on Company controlled
lands with over half of these locations targeting light oil development. In
addition, the exposure to high impact and growth potential areas at Lone Pine
Creek and Deanne/Rough could provide material increases to Angle's value.
Subsequent to our successful equity placement through an initial public
offering completed in June, the Company enjoys an exceptionally strong
financial position to move forward into 2009.
More details on Angle's outlook and assumptions and uncertainties
associated with the outlook can be found in the Company's Management's
Discussion and Analysis, and shareholders are encouraged to read the Second
Quarter Interim Report in its entirety.
We are pleased with the achievements of our professional staff, the
guidance from our Board and the ongoing support of our shareholders. We look
forward to reporting the results of our efforts throughout the remainder of
the year.
On behalf of the Board of Directors,
(signed)
Gregg Fischbuch
President & Chief Executive Officer
July 28, 2008
MANAGEMENT'S DISCUSSION AND ANALYSIS
The following Management's Discussion and Analysis ("MD&A") reports on
the financial condition and the results of operations of Angle Energy Inc.
("Angle" or the "Company") for the three and six months ended June 30, 2008
and 2007 and should be read with the accompanying June 30, 2008 unaudited
interim financial statements and notes as well as the audited financial
statements for the year ended December 31, 2007. All financial measures are
expressed in Canadian dollars unless otherwise indicated. This commentary is
based on the information available as at, and is dated July 28, 2008.
Production information is commonly reported in units of barrel of oil
equivalent ("boe"). For purposes of computing such units, natural gas is
converted to equivalent barrels of crude oil using a conversion factor of six
thousand cubic feet of gas to one barrel of oil. This conversion ratio of 6:1
is based on an energy equivalent conversion for the individual products,
primarily applicable at the burner tip and does not represent a value
equivalency at the wellhead. Such disclosure of boes may be misleading,
particularly if used in isolation. Readers should be aware that historical
results are not necessarily indicative of future performance.
Non-GAAP Measurements
This MD&A contains the terms "funds from operations" and "funds from
operations per share," which should not be considered an alternative to or
more meaningful than net earnings or cash flow from operating activities as
determined in accordance with Canadian generally accepted accounting
principles ("GAAP") as an indicator of the Company's performance. These terms
do not have any standardized meaning as prescribed by GAAP. Angle's
determination of funds from operations and funds from operations per share may
not be comparable to that reported by other companies. Management uses funds
from operations to analyze operating performance and leverage, and considers
funds from operations to be a key measure as it demonstrates the Company's
ability to generate cash necessary to fund future capital investments and to
repay debt. Funds from operations is calculated using cash flow from operating
activities as presented in the statement of cash flows before changes in
non-cash working capital and settlement of retirement costs. Angle presents
funds from operations per share, which is prohibited under GAAP. Per share
amounts are calculated using weighted average shares outstanding consistent
with the calculation of earnings per share. The following table reconciles
funds from operations to cash flow from operating activities, which is the
most directly comparable measure calculated in accordance with GAAP:
-------------------------------------------------------------------------
Three Months Ended Six Months Ended
June 30, June 30,
2008 2007 2008 2007
-------------------------------------------------------------------------
(000s) ($) ($) ($) ($)
Cash flow from operating
activities 16,172 4,154 27,655 7,553
Changes in non-cash working
capital 2,798 3,146 5,441 7,877
-------------------------------------------------------------------------
Funds from operations 18,970 7,300 33,096 15,430
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Future Outlook and Forward-Looking Information
Certain statements contained in this MD&A constitute forward-looking
statements. Forward-looking information is often, but not always, identified
by the use of words such as "anticipate," "believe," "could," "estimate,"
"expect," "forecast," "guidance," "intend," "may," "plan," "predict,"
"project," "should," "target," "will," or similar words suggesting future
outcomes or language suggesting an outlook. These statements involve known and
unknown risks, uncertainties and other factors that may cause actual results
or events to differ materially from those anticipated in such forward-looking
statements. Management believes the expectations reflected in those
forward-looking statements are reasonable but no assurance can be given that
these expectations will prove to be correct and such forward-looking
statements included in this MD&A should not be unduly relied upon.
Production and Sales Rates
For the second quarter ended June 30, 2008, we had expected to average
5,500 boe/d but recorded 5,965 boe/d in sales volumes primarily due to flush
production post facility turnaround as well as in-line production testing in
the Harmattan area. For the 2008 fiscal period, Angle expects production and
sales of crude oil, natural gas liquids ("NGLs") and natural gas will average
between 5,900 boe/d to 6,100 boe/d, which is unchanged from our previous
guidance. We expect to exit 2008 between 6,700 boe/d to 6,900 boe/d. There are
many factors that could result in production levels being less than
anticipated including: greater than anticipated declines in existing
production due to poor reservoir performance, mechanical failures or inability
to access production facilities; the unanticipated encroachment of water or
other fluids into the producing formation; and the inability to drill,
complete and tie-in wells on schedule due to a lack of oilfield services being
available on a cost efficient basis, poor weather, the inability to negotiate
surface access with the landowners, or regulatory delays in obtaining all
necessary drilling and production approvals.
Production Mix
The Company anticipates that its mix of light oil production as a
percentage of total production will begin to increase beginning later in 2008.
This is based on the assumption that production commences as expected from two
oil pools, one at Harmattan and one at Ferrier. This expectation will not be
met if the wells are not drilled when expected (see "Drilling Program" below)
or if the wells do not produce as expected (see "Production Rates" above). At
present, netbacks from light and medium crude oil (combined) are superior to
those from NGLs or natural gas, and should the Company not achieve a higher
mix of light oil, then the financial performance will fall short of
expectations.
Commodity Prices
For purposes of its remaining forecast for 2008, the Company has assumed
that the Edmonton Par crude oil price will average $115/bbl (increased from
$93/bbl) and that the average natural gas price at AECO for spot delivery will
average $9.15/mcf (increased from $7.75/mcf). There are many risks that may
result in commodity price assumptions being less than expected. The price of
crude oil is set in U.S. dollars on the world market and is influenced by
global supply and demand factors as well as exogenous events, such as
terrorist activity in oil exporting countries. While global demand for crude
oil has been growing strongly over the past several years, a slowdown in
economic growth in one or more of the world's major economies could reduce
both the demand and price for crude oil.
The price of natural gas in North America is primarily related to the
domestic supply and demand equation. Demand is primarily affected by heating
requirements in winter and cooling requirements in summer, with warm winters
and/or cool summers having a negative demand influence. Supplies are generally
domestic and respond to prices, but an increase in the deliverability of
global NGLs into the North American market can also influence the supply
situation at times.
Canadian producers realize a Canadian dollar price for crude oil, NGLs
and natural gas, all of which are determined in large part by the U.S. dollar
price for such products adjusted for the U.S. to Canadian dollar exchange
rate. The exchange rate is influenced by many factors, which results in high
volatility.
Royalty Rates
Angle expects that royalty rates for 2008 will average approximately 33%
(increased from 30%) of gross revenue before any unrealized derivative gains
or losses. This increased royalty rate expectation has resulted from the
anticipated increase in commodity prices and increased sales from Crown lands.
Total royalties are the combination of Crown royalties paid on Crown lands and
freehold royalties paid on freehold lands. In addition, gross overriding
royalties are payable on lands in which the Company has earned an interest by
way of farm-in, whether the lands are Crown or freehold. Total royalties
payable are a function of the mix between Crown and freehold lands as the
rates are different.
Generally, our freehold royalty rates are higher than the Crown royalty
rate that would be applicable currently had the lands been Crown lands.
However, under the proposed new Alberta royalty rate program scheduled to come
into effect in 2009, the Company's freehold royalty rates will, in certain
cases, be less than the Crown royalty rates that would have applied had the
lands been Crown-owned.
In the first half of 2008, the royalty mix was 62% Crown royalties and
38% freehold and gross overriding royalties, and the combined royalty rate was
32%. The actual combined royalty rate in any period will be a function of the
mix between Crown and freehold production. Crown royalty rates are determined
by the depth of the well, production rates and the price of crude oil or
natural gas. As both Crown and freehold royalties are calculated as a
percentage of revenue, royalties will vary directly with revenue and tend to
mitigate the risk of declining revenues from lower production levels and/or
lower commodity prices.
The Company has determined that the effect of the proposed changes to the
Alberta Crown royalty rates effective in 2009 on the operating income for that
year as calculated in the 2007 GLJ Petroleum Consultants Ltd. ("GLJ") Report
would be a reduction of less than 3%.
Operating Costs
The Company expects operating and transportation costs to average
$4.75/boe for 2008, up slightly from previous guidance of $4.50/boe.
Generally, operating costs in the Harmattan area are slightly lower than in
the Ferrier area, and as Ferrier production grows in proportion to the
Company's total, the blended operating costs are expected to increase
marginally.
Risks to operating cost increases relate to general oilfield service
costs, which tend to increase in periods of high industry activity and
decrease as activity levels decline. With the recent improvement in natural
gas prices and continuing strong crude oil prices, industry activity is on the
upswing and operating cost pressure may develop, as was the case in the
2004/2005 period.
General and Administrative ("G&A") Costs
Angle anticipates that G&A expenses for 2008 will be approximately
$3.5 million (up from $3.3 million), net of capitalized amounts, and reflects
the assumption that the Company will hire up to three additional full time
employees in the remainder of 2008. Risks that G&A costs will exceed this
amount relate to higher than expected employee costs necessarily incurred by
the Company to retain key employees in a competitive market, the need to hire
more staff than originally anticipated and general cost inflation, which is a
growing problem in the Calgary market where Angle maintains its head office.
Funds From Operations
The Company expects that funds from operations will be in the range of
approximately $75 to $78 million in fiscal 2008 based on the assumptions as to
production, commodity prices, royalty rates, operating costs and G&A costs
discussed above. The risk that funds from operations are less than expected is
the aggregate of all risks affecting the individual components thereof.
Capital Expenditures
Angle has budgeted $83 million (increased from $67 million) for capital
expenditures in 2008, consisting of expenditures on drilling, completions,
equipment, tie-ins, land and seismic. This is based on the revised key
assumption that the Company drills in the range of 26 to 29 wells during 2008
(increased from 23 to 26 wells). Increases in capital costs from budgeted
amounts can occur for the following reasons: general cost inflation in the
industry, resulting from high utilization rates; poor weather that can delay
activity and subject the Company to stand-by charges; and problems encountered
in drilling a well that can result in additional drilling time or, in some
cases, losing the well entirely.
Drilling Program
The Company now expects to drill 26 to 29 wells in 2008, which is a key
assumption in the production estimates for the year discussed above. The risk
that Angle will not meet its drilling targets are attributable to the
following: lack of access to drilling rigs and related equipment at reasonable
prices due to high industry demand; poor weather preventing access to the
drill sites; delays in obtaining landowner consent for surface access; and
delays in obtaining well licenses and drilling permits.
Drilling Success
The Company expects to add reserves in 2008 from its drilling activities
at Harmattan, Ferrier, Lone Pine and Deanne. In arriving at such expectations,
Angle undertakes a risking process where each well is assigned a probability
of success and the expected reserves that would be added in a success case.
The basis for such assessment is a combination of geological, geophysical and
reservoir engineering analysis, including reviewing analog reserves in the
area of interest. There are many risks that a well may not add the reserves
anticipated including: poor reservoir rock due to low permeability and/or low
porosity that inhibits production; the non-existence of the targeted zone due
to erosion; the lack of an effective reservoir seal preventing the migration
of hydrocarbons; presence of water in the zone; damage to the zone from the
drilling process; and competitive drainage from offsetting acreage not owned
by the Company.
Developing Future Prospects
The Company intends to continue generating and developing its own
prospects and acquiring lands directly and through farm-ins as part of its
business strategy. To do so requires that appealing opportunities become
available within the timeframe suitable to the Company, that Angle has the
necessary human and financial resources to pursue and capture such
opportunities, and that the Company is able to prevail over its competitors
pursuing the same projects. Risks in achieving such growth plans relate to a
lack of adequate staffing or capital, or to an overly competitive market where
other industry participants are prepared to pay more for a prospect than what
Angle would consider prudent.
Year-End Debt
The Company anticipates that its combined bank debt and working capital
deficit position at year-end 2008 will be in the range of approximately
$8 million to $11 million. This assumes that capital expenditures are
$83 million and that funds from operations are in the range of approximately
$75 to $78 million in fiscal 2008. The risk that debt levels are higher than
expected would result from capital expenditures exceeding budget and/or funds
from operations being less than budget, both of which have been addressed
above.
Tax Horizon
Angle may become marginally taxable in 2008 based on the assumption the
Company generates funds from operations in the range of approximately $75 to
$78 million and incurs capital expenditures of $83 million. Liability for
current income tax is a function of the amount of revenues and expenses
recognized for tax purposes, including deductions for capital expenditures. As
such, taxable income is affected by many factors, including production levels
and commodity prices, as well as the level and classification for tax purposes
of capital spending into one of several categories with each being deductible
at different rates. The liability for current income tax could be higher than
expected if revenues exceed Angle's budget, if capital spending is lower than
expected, or if a greater proportion of capital spending is allocated to a
lower deduction category.
General
Statements relating to "reserves" are also deemed to be forward-looking
statements, as they involve the implied assessment, based on certain estimates
and assumptions, that the reserves described can be profitably produced in the
future.
The actual results could differ materially from those anticipated in
these forward-looking statements as a result of the risk factors and
assumptions set forth above and elsewhere in this MD&A.
These factors should not be considered as exhaustive. The reader is
cautioned that these factors and risks are difficult to predict and that the
assumptions used in the preparation of such information, although considered
reasonably accurate at the time of preparation, may prove to be incorrect.
Accordingly, readers are cautioned that the actual results achieved will vary
from the information provided herein and the variations may be material.
Readers are also cautioned that the foregoing list of factors is not
exhaustive. Consequently, there are no representations by the Company that
actual results achieved will be the same in whole or in part as those set out
in the forward-looking information. Furthermore, the forward-looking
statements contained in this MD&A are made as of the date hereof, and the
Company undertakes no obligation, except as required by applicable securities
legislation, to update publicly 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 herein are
expressly qualified by this cautionary statement.
Basis of Presentation
Angle is a public company that was incorporated under the laws of Alberta
on January 23, 2004 and commenced active oil and gas operations in 2005. This
MD&A focuses on the Company's operations for the three and six months ended
June 30, 2008 and 2007.
Operating Results
Drilling Activity
-------------------------------------------------------------------------
Exploration Development Total
Gross Net Gross Net Gross Net
-------------------------------------------------------------------------
January 1 to June 30, 2008
Crude oil and NGLs 1.0 0.5 1.0 1.0 2.0 1.5
Natural gas - - 8.0 6.6 8.0 6.6
Dry and abandoned 2.0 2.0 - - 2.0 2.0
-------------------------------------------------------------------------
Total wells 3.0 2.5 9.0 7.6 12.0 10.1
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Success rate (%) 20 100 80
Average working interest (%) 83 84 84
-------------------------------------------------------------------------
-------------------------------------------------------------------------
January 1 to June 30, 2007
Crude oil and NGLs - - - - - -
Natural gas 2.0 2.0 3.0 2.6 5.0 4.6
Dry and abandoned 2.0 1.5 - - 2.0 1.5
-------------------------------------------------------------------------
Total wells 4.0 3.5 3.0 2.6 7.0 6.1
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Success rate (%) 57 100 75
Average working interest (%) 88 87 87
-------------------------------------------------------------------------
-------------------------------------------------------------------------
To June 30, 2008, we drilled 12 gross (10.1 net) wells of which 6 gross
(5.5 net) wells were in the Harmattan core area and 6 gross (4.6 net) wells
were in the Ferrier area. Our success rate is calculated on a net working
interest completion basis.
Capital Expenditures
Capital expenditures for the three and six months ended June 30, 2008 and
2007 are summarized in the following table:
-------------------------------------------------------------------------
Three Months Ended Six Months Ended
June 30, June 30,
2008 2007 2008 2007
-------------------------------------------------------------------------
(000s) ($) ($) ($) ($)
Drilling and completions 14,825 2,095 25,807 13,222
Equipment and facilities 5,962 1,864 10,943 6,215
Geological and geophysical 4 37 332 230
Land and lease retention 833 572 1,295 2,808
Head office 20 20 42 23
Capitalized G&A and other 68 65 329 130
-------------------------------------------------------------------------
Total 21,712 4,653 38,748 22,628
-------------------------------------------------------------------------
-------------------------------------------------------------------------
For the second quarter of 2008, drilling and completions expenditures
totaled $14,825,000 (2007 - $2,095,000) that involved the drilling of 6 gross
(5.7 net) wells of which 5 gross (4.7 net) wells were successful and 1 gross
(1.0 net) well was dry for a 82% net success rate. In the comparative
three-month period of 2007, the Company was not able to complete drilling
operations of any wells as a result of wet surface conditions.
Drilling and completions expenditures totaled $25,807,000 for the six
months ended June 30, 2008 (2007 - $13,222,000), which involved the
participation in 12 gross (10.1 net) wells. Of the 12 wells, 10 gross
(8.1 net) wells were cased while the remaining 2 gross (2.0 net) wells were
not successful. In the comparative period of 2007, the Company drilled 7 gross
(6.1 net) wells of which 5 gross (4.6 net) wells were successful and 2 gross
(1.5 net) wells were dry.
For the three months ended June 30, 2008, the Company's expenditures on
facilities totaled $5,962,000 (2007 - $1,864,000) primarily for wellsite
facilities and related gathering pipelines. For the six months ended June 30,
2008, the Company's expenditures on facilities totaled $10,943,000 (2007 -
$6,215,000) primarily for wellsite facilities and related gathering pipelines.
Land purchases and lease retention costs incurred in the second quarter
of 2008 totaled $833,000 (2007 - $572,000).
