HOUSTON, TEXAS--(Marketwire - March 26, 2009) - Caza Oil & Gas, Inc. ("Caza" or the "Company") (TSX:CAZ)(AIM:CAZA) announces the Company's final audited results for the year ended December 31, 2008. Caza has hydrocarbon exploration, development and production assets, held through its subsidiary Caza Petroleum, Inc., in Texas, New Mexico and Louisiana USA.
Highlights of 2008 include:
- Revenues from oil and gas sales increased by 143% to $3,351,890 in 2008 from $1,380,133 in 2007. The average sales price increased by 34% in 2008 to an average price of $8.96 per Mcfe;
- Natural gas, natural gas liquids and crude oil production increased by 81% from 2007 to 2008, averaging 1,025 Mcfe/d in 2008 (includes associated condensate production), mainly as a result of drilling and completing 11 wells in Texas and New Mexico (eight were brought on line in 2008, and the remaining three will be brought on line in 2009);
- Caza had a 92% success rate on its 2008 drilling program with capital expenditures of $13,997,201;
- In July 2008, the Company completed a 50,000,000 common share private placement at $0.46 (23 pence) per common share for gross proceeds of $23,000,000;
- Increase of 112% in proved (1P) reserves at year end 2008 to 6,740.2 MMcfe and an increase of 58% in proved and probable (2P) reserves at year end 2008 to 28,117.5 MMcfe;
- Operating netbacks increased by 56 percent from 2007 to 2008 to $6.90 per Mcfe in 2008, reflecting increases in natural gas prices and operating efficiencies realized from production increases; and
- Caza's 2008 year-end cash totaled $14,103,827 in cash and cash equivalents.
W. Michael Ford, Chief Executive Officer' commented:
"I am pleased to announce continued success in Caza's exploration and production activities. Over the course of 2008, we have experienced a 92% success rate on our drilling program. As a result our production volumes were up 81% from the previous year and corresponding revenues were up 143% despite well publicized, difficult market conditions.
Our belief is the fundamentals of Caza's business are sound. We are taking advantage of the flexibility afforded by our long term leases, and a diverse project portfolio will allow us the flexibility to modify our drilling program during 2009 to take advantage of anticipated lower drilling costs, higher commodity prices and potential drilling successes."
Copies of the Company's financial statements for the year ended December 31, 2008, the accompanying management's discussion and analysis and the Company's Annual Information Form for the year ended December 31, 2008 (which contains further information about the Company, its principal properties and its crude oil and natural gas reserves), are available on SEDAR at www.sedar.com and the Company's website at www.cazapetro.com.
President/CEO Statement:
Caza has sufficient cash resources to ensure continued activity under difficult market conditions. In fact, management is restructuring the Company's strategic goals in order to take quick advantage of opportunities that present themselves as a result of these conditions.
Caza had a 92% success rate on its 2008 drilling program resulting in an 81% increase in natural gas, natural gas liquids and crude oil production from 2007 to 2008.
Caza finds itself in a small fraternity of companies that have zero debt. The Company's management and staff are united in making Caza stronger and more efficient during these tough times. The refocused Company is reducing its general and administrative overhead, while continuing to maintain and provide significant growth opportunities (for example, salary and benefits were reduced by approximately 20% in February 2009, resulting in annualized G&A cost savings of approximately $500,000). Caza is well positioned to acquire producing assets as they come available, utilize its prospect inventory through drilling or farmouts and take advantage of anticipated lower costs for drilling, producing and leasing.
Caza is considering drilling additional wells as costs come in line with product pricing and/or leveraging its working capital into a strategic joint venture(s), merger(s) or acquisition(s).
Reserve Data:
Caza reported an increase in proved (1P) reserves at year end 2008 to 6,740.2 MMcfe or an increase of 112%; proved plus probable (2P) reserves also increased at year end 2008 to 28,117.5 MMcfe or an increase of 58% (as depicted in the table below).
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2008 2007
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Mbbl MMcf MMcfe Mbbl MMcf MMcfe
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Proved Developed
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Producing 46.3 1,833.9 2,111.7 5.2 2,500.5 2,531.7
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Non Producing 105.2 258.1 889.3 0.5 136.8 139.8
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Undeveloped 118.9 3,025.8 3,739.2 0.1 505.0 505.6
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Total Proved (1P) 270.4 5,117.8 6,740.2 5.8 3,142.3 3,177.1
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Probable 745.7 16,903.1 21,377.3 273.9 12,945.6 14,589.0
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Total Proved + Probable
(2P) 1,016.1 22,020.9 28,117.5 279.7 16,087.9 17,766.1
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Possible 1,833.0 52,137.6 63,135.6 409.7 52,574.7 55,032.9
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Proved + Probable
+ Possible (3P) 2,849.1 74,158.5 91,253.1 689.4 68,662.6 72,799.0
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Present value cash flows of net proved and probable reserves as at December 31, 2008:
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Present value cash flow,
net proved plus PV 10% before PV 10% after
probable reserves income taxes income taxes
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(US$ millions) (US$ millions)
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Forecast price and cost assumptions 85.49 55.54
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In accordance with AIM Rules - Guidance Note for Mining, Oil and Gas Companies, the information contained in this announcement constituting a resource or drilling update has been reviewed and approved by Anthony B. Sam, Vice President Operations of Caza who is a Petroleum Engineer and a member of the Society of Petroleum Engineers.
The reserves data set out in this announcement (including in the above tables) have been extracted from the Company's Annual Information Form (available on SEDAR at www.sedar.com) and the NSAI Report (as defined below). The evaluation of the reserves data included in the Annual Information Form and in the NSAI Report (as defined below) complies with standards set out in the Canadian Oil and Gas Evaluation Handbook prepared jointly by the Society of Petroleum Evaluation Engineers (Calgary Chapter) and the Canadian Institute of Mining, Metallurgy & Petroleum (Petroleum Society). References to the NSAI Report are to the report prepared on the Company's reserves by Netherland Sewell & Associates, Inc. dated December 31, 2008 and entitled "12/31/08 year end reserve report".
Notes:
(1) "Net" reserves are Caza Petroleum's working interest (operating or non operating) share after deduction of royalty obligations, plus Caza Petroleum's royalty interests in reserves. "Gross" reserves are Caza Petroleum's working interest (operating or non operating) share before deduction of royalties and without including any royalty interests of Caza Petroleum.
(2) "Proved" reserves are those reserves that can be estimated with a high degree of certainty to be recoverable. It is likely that the actual remaining quantities recovered will exceed the estimated proved reserves.
(3) "Probable" reserves are those additional reserves that are less certain to be recovered than proved reserves. It is equally likely that the actual remaining quantities recovered will be greater or less than the sum of the estimated proved plus probable reserves.
(4) "Possible" reserves are those additional reserves that are less certain to be recovered than probable reserves. There is only a 10% probability that the quantities actually recovered will exceed the sum of the estimated proved plus probable plus possible reserves.
(5) "Developed" reserves are those reserves that are expected to be recovered from existing wells and installed facilities or, if facilities have not been installed, that would involve a low expenditure (e.g. when compared to the cost of drilling a well) to put the reserves on production.
(6) "Developed Producing" reserves are those reserves that are expected to be recovered from completion intervals open at the time of the estimate. These reserves may be currently producing or, if shut in, they must have previously been on production, and the date of resumption of production must be known with reasonable certainty.
(7) "Developed Non Producing" reserves are those reserves that either have not been on production, or have previously been on production, but are shut in, and the date of resumption of production is unknown.
(8) "Undeveloped" reserves are those reserves expected to be recovered from known accumulations where a significant expenditure (for example, when compared to the cost of drilling a well) is required to render them capable of production. They must fully meet the requirements of the reserves classification (proved, probable, possible) to which they are assigned.
(9) The pricing assumptions used in the NSAI Report with respect to net values of future net revenue (forecast) as well as the inflation rates used for operating and capital costs are set forth below. NSAI is an independent qualified reserves evaluator appointed pursuant to NI 51-101.
(10) Royalties include severance and ad valorem taxes.
(11) The product prices used in the constant price and cost evaluations in the NSAI Report were as follows:
SUMMARY OF PRICING AND INFLATION RATE ASSUMPTIONS
AS OF DECEMBER 31, 2008
FORECAST PRICES AND COSTS
Light and
Medium Crude Oil Price Natural Gas
(WTI) Price (Henry Hub) Inflation(1)
(US$/bbl) (US$/Mcf) (%/year)
---------------------- ---------------- -----------
Period Ending
12/31/2009 57.08 6.85 2
12/31/2010 67.60 7.52 2
12/31/2011 75.58 8.05 2
12/31/2012 84.93 8.86 2
12/31/2013 93.81 9.68 2
12/31/2014 95.70 9.87 2
12/31/2015 97.62 10.07 2
12/31/2016 99.56 10.27 2
12/31/2017 101.53 10.47 2
12/31/2018 103.59 10.69 2
12/31/2019 105.65 10.89 2
Thereafter, esc. 2% on Jan. 1 of each year.
Note:
(1) In the forecast case all lease, well operating and capital costs have been escalated at the indicated rate.
2008 Business Development Activities:
A. Exploratory Drilling Program
Drilling operations were commenced on the Wilcox 116 property on January 15, 2008, and the Jonell Cerny G.U. #1 reached a total depth of 16,510 feet on March 3, 2008. Analysis of log data indicated the well encountered Wilcox Sand pay at multiple intervals from 13,500 feet to 16,400 feet. Completion operations began on April 2, 2008, but the operations encountered difficulties and the well was subsequently plugged back and completed in the Yegua formation. The well was fracture stimulated on August 25, 2008, and is producing from perforated intervals between 10,966 and 10,991 feet. Caza is evaluating further opportunities to access additional Yegua intervals.
Drilling operations were commenced on the Lynch property on January 12, 2008, and reached a total depth of 13,513 feet on March 2, 2008. Analysis of log data indicated the well encountered Morrow Sand Pay at multiple intervals from 13,040 feet to 13,160 feet. Completion operations were commenced on April 30, 2008, and the well is currently producing from the Morrow formation.
Drilling operations were commenced on the Eland property on April 19, 2008, and the Hinton #1501 well reached a total depth of 6,719 feet on April 25, 2008 in the Frio formation. Analysis of log data indicated the well encountered Frio sand pay and the well was perforated at an interval from 5,024 feet to 5,039 feet. The well was shut in to conduct a gravel pack completion and is currently shut in awaiting further evaluation.
Drilling operations were commenced on the Puku property on April 29, 2008, and the Andel #2201 well reached a total depth of 6,310 feet on May 6, 2008 in the Frio formation. Analysis of log data indicated the well encountered Frio sand pay at depths ranging from 5,670 feet to 5,836 feet. The well was perforated and completed at an interval from 5,728 feet to 5,731 feet and is currently producing natural gas from the perforated interval.
Drilling operations were commenced by Momentum Energy Corp. on the Glass Ranch property on June 17, 2008, in the Wolfberry trend in the Permian Basin. Four wells (the Glass Ranch A #1, A #3, B #1 and B #3) have been drilled, fracture stimulated, completed and are producing across multiple pay sections in the Wolfcamp and Sprayberry formations (Wolfberry).
B. Commercial Transactions
In two separate commercial transactions which closed on December 30, 2007 and January 11, 2008, respectively, Caza Petroleum purchased participation rights from Austex Enterprises and Midland Oil & Gas, Inc., equal to 25% of Caza Petroleum's potential working interest in all projects located under certain transition zone seismic data volumes covering approximately 2,300 square miles located in South Louisiana and the Texas Gulf Coast Regions. As a result of the transactions, Caza Petroleum has increased its potential working interest and will have the controlling interest in projects derived from these data volumes.
On June 1, 2008, Caza executed an exploration agreement with Wise Oil & Gas No. 8, Ltd., naming Caza as operator to jointly and exclusively (subject to certain conditions) lease acreage in Lea, Eddy and Chaves Counties of southeast New Mexico on a 50/50 basis. Under the exploration agreement the parties thus far have leased approximately 7,362 gross acres in three separate properties located in the developing Wolfcamp horizontal oil and gas play in Lea County, New Mexico. Caza refers to the properties as Moore Cap (3,642 gross acres), Sombrero (1280 gross acres) and Bada-Bing (2,440 gross acres). Caza, as operator, is currently evaluating future work schedules for the properties. Caza and Wise will continue the leasing effort into 2009.
Following the success of the Glass Ranch wells, Caza has acquired leases on three additional properties located within the Wolfberry trend: (i) the Windham Wolfberry property (1,317 gross/net acres) in Upton County, Texas; (ii) the Sheep Mountain property (487 gross/net acres) in Crockett County, Texas; and (iii) Grierson property (320 gross/net acres) in Reagan County, Texas.
C. Corporate Transactions
On May 22, 2008, Millennium Global Natural Resources Fund ("MGNR") agreed to surrender 2,000,000 Warrants to the Corporation and to donate to Caza a portion of the proceeds resulting from the future disposition of 2,846,550 Common Shares. MGNR also agreed to refrain from voting 646,550 Common Shares and to certain restrictions on the transfer of such Common Shares.
On July 3, 2008, Caza completed a private placement of 50,000,000 Common Shares for gross proceeds of approximately $23 million. The Corporation used the net proceeds from the private placement to acquire 17,857 Caza Petroleum Shares in accordance with the Share Purchase Agreement.
D. Additional Property Activities
The Perez #1 well, located on the Rosita Creek property, reached its target depth of 3,616 feet in the Jackson Bar Sands formation on August 27, 2008. The well was logged but did not encounter hydrocarbons. Caza currently has no additional plans for this property.
The Bell Minerals #1 Well, located on the Alligator property, reached its target depth of 9,400 feet in the Hackberry Section on January 16, 2008. The well was then logged but did not encounter hydrocarbons. Caza has no further plans for this property.
On January 15, 2008, Caza Petroleum elected not to participate in drilling on the Northwest Raptor Property in Lea County, New Mexico and surrendered its interest in this property as a result.
The FEM 14-12 well, located in the Sawyer (Canyon) Field on the Aldwell Ranch property, reached its target depth of 7,855 feet on August 27, 2008. Electric logs indicated multiple potential pay sands in the Canyon formation. The well has been fracture stimulated and is currently producing gas from the fractured interval. However, production rates are lower than anticipated and Caza and Foundation Energy Management, LLC (operator) decided not to renew the farmout agreement on this property and it expired under its own terms on or about February 19, 2009. Caza still maintains an interest in approximately 6,961.47 gross acres (1,246.36 net acres) in this property.
The Thisco #3 well, operated by Key Operating and located on the Haakon property in St. Landry Parish, Louisiana, reached a total depth of 8,232 feet on October 17, 2008. Based on electric logs and sidewall core data the well was completed in the Frio formation and production testing commenced. Instantaneous flow rates up to 173 gross barrels of oil per day were seen during testing, and the well is currently producing.
The Dorothy Hite Gas Unit #3 (Wilcox) well ("DHGU #3"), operated by Forest Oil and located in the Wharton West Wilcox Field in Wharton County, Texas, successfully encountered hydrocarbons. On March 3, 2009, the DHGU #3 was successfully fracture stimulated. The DHGU #3 was originally completed naturally flowing at a gross rate of 4.4 MMcfe/d through a 12/64 choke at 5,075 psi. Following the recent stimulation, the well is flowing at approximately 7.84 MMcfe/d through a 16/64 choke at 6,400 psi. The DHGU #3 has confirmed the extension of productive limits within the Wharton West Wilcox Field, which supports additional development drilling offsetting Caza's Matthys-McMillan Gas Unit #1 well. It also supports the possibility of significantly increased production profiles through fracture stimulation within the field. Due to current market conditions and to take advantage of anticipated lower drilling costs and higher commodity prices, as well as conserving capital, Caza has not scheduled further development drilling at this time.
E. Developments since Year-End
Effective March 1, 2009, Caza entered into an exploration agreement (the "EA") with Prolithic Energy Company, L.P. ("Prolithic") covering portions of Caza's Las Animas property in Duval County, Texas, to jointly develop the property. Caza and Prolithic each had obtained leasehold within the prospective limits of the property and felt the most efficient way forward was to combine the leasehold for joint exploration. Among other things the EA names Caza as the operator of the property and gives each company the right to participate in an initial test well on a 50/50 basis. The EA with Prolithic significantly reduces Caza's exposure to the cost of drilling a test well, while maintaining its larger interest in future development locations.
ADVISORY REGARDING FORWARD LOOKING STATEMENTS
This announcement contains forward-looking statements. These statements relate to future events or future performance of Caza. When used in this announcement, the words "may", "would", "could", "will", "intend", "plan", "anticipate", "believe", "estimate", "predict", "seek", "propose", "expect", "potential", "continue", and similar expressions, are intended to identify forward-looking statements. 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. Such statements reflect the Corporation's current views with respect to certain events, and are subject to certain risks, uncertainties and assumptions. Many factors could cause the Corporation's actual results, performance, or achievements to vary from those described in this announcement. Should one or more of these risks or uncertainties materialize, or should assumptions underlying forward-looking statements prove incorrect, actual results may vary materially from those described in this announcement as intended, planned, anticipated, believed, estimated, or expected. Specific forward-looking statements in this announcement include, among others, statements pertaining to the following:
- factors upon which Caza will decide whether or not to undertake a specific course of action;
- world wide supply and demand for petroleum products;
- expectations regarding Caza's ability to raise capital;
- treatment under governmental regulatory regimes; and
- commodity prices.
With respect to forward-looking statements in this announcement, Caza has made assumptions, regarding, among other things:
- the current global credit crisis and recession;
- commodity prices;
- the impact of increasing competition;
- Caza's ability to obtain additional financing on satisfactory terms; and
- Caza's ability to attract and retain qualified personnel.
Caza's actual results could differ materially from those anticipated in these forward-looking statements as a result of the risk factors set forth below and elsewhere in this announcement:
- current global credit crisis and recession;
- changes in the general economic, market, and business conditions;
- volatility in global market prices for oil and natural gas;
- competition;
- liabilities and risks, including environmental liability and risks, inherent in oil and gas operations;
- the availability of capital;
- alternatives to and changing demand for petroleum products; and
- the other factors considered under "Risk Factors" herein.
Furthermore, statements relating to "reserves or "resources" are deemed to be forward-looking statements, as they involve the implied assessment, based on certain estimates and assumptions, that the resources and reserves described can be profitable in the future. Future flow rates from wells may vary from the flow rates disclosed herein, perhaps materially, and the wells in question may prove to be technically or economically unviable. Any future flow rates will be subject to the risks and uncertainties set out herein.
Financial outlook information contained in this announcement about prospective results of operations, financial position or cash flows is based on assumptions about future events, including economic conditions and proposed courses of action, based on management's assessment of the relevant information currently available. Readers are cautioned that such financial outlook information contained in this announcement should not be used for purposes other than for which it is disclosed herein.
The forward-looking statements contained in this announcement are expressly qualified in their entirety by this cautionary statement. These statements speak only as of the date of this announcement. The Corporation does not intend and does not assume any obligation, to update these forward-looking statements to reflect new information, subsequent events or otherwise, except as required by law.
Auditors' Report
To the Shareholders of Caza Oil & Gas, Inc.
We have audited the consolidated balance sheets of Caza Oil & Gas, Inc. as at December 31, 2008 and 2007, the consolidated statements of net loss, comprehensive loss, and deficit, and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with Canadian generally accepted auditing standards. Those standards require that we plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.
In our opinion, these consolidated financial statements present fairly, in all material respects, the financial position of the Company as at December 31, 2008 and 2007 and the results of its operations and its cash flows for the years then ended, in accordance with Canadian generally accepted accounting principles.
(signed) "Deloitte & Touche LLP"
Chartered Accountants
Calgary, Canada
March 6, 2009
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Caza Oil & Gas, Inc.
Consolidated Balance Sheets
(In United States Dollars)
As at December 31, 2008 2007
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Assets
Current
Cash and cash equivalents (Note 9) $ 14,103,827 $ 13,194,589
Accounts receivable 3,346,720 3,270,633
Prepaid and other 215,301 334,516
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17,665,848 16,799,738
Petroleum and equipment (Note 3) 37,112,470 20,353,626
Future income tax asset (Note 5) - 426,082
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$ 54,778,318 $ 37,579,446
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Liabilities
Current
Accounts payable and accrued liabilities $ 6,853,800 $ 6,876,645
Asset retirement obligations (Note 4) 493,919 286,019
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7,347,719 7,162,664
Shareholders' Equity
Share capital (Note 6(b)) 51,481,597 30,810,788
Contributed surplus (Note 6(f)) 4,217,135 2,787,434
Deficit (8,268,133) (3,181,440)
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47,430,599 30,416,782
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$ 54,778,318 $ 37,579,446
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Note 1 Basis of Presentation and Going Concern
See accompanying notes to the consolidated financial statements
On behalf of the Board:
(signed) "John Rooney" (signed) "William M.