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Shona Energy Company, Inc. Announces Third Quarter 2012 Results

Monday, November 19, 2012 5:00 PM


CALGARY, Nov. 19, 2012 /CNW/ - Shona Energy Company, Inc. (TSXV: SHO) ("Shona" or the "Company"), today announced its financial results and operational highlights for the quarter ended September 30, 2012.

"We are very pleased with our third quarter results as our production increased 22% and EBITDA increased 43% over the second quarter of this year. The Letter of Intent with Altenesol and the Arrangement Agreement with Canacol which were signed subsequent to quarter end are reflective of our key initiatives to monetize our gas assets and pursue opportunities for mutually beneficial business combinations," said James L. Payne, Chairman and CEO of Shona Energy. "Shona is also planning a four- to five-well drilling program in 2013 on the Esperanza Block which is intended to establish significant additional reserves that will allow the Altenesol contract to be expanded and provide uncommitted reserves for new gas sales."

Operational Highlights

  • Entered into an Arrangement Agreement with Canacol Energy Ltd. ("Canacol") whereby Canacol will acquire 100% of the issued and outstanding common and preferred shares of Shona in exchange for a combination of common shares of Canacol and cash
  • Announced that its subsidiary, Geoproduction Oil and Gas Company of Colombia, had signed a Letter of Intent ("LOI") with Altenesol LNG Colombia, S.A.S. ("Altenesol") to supply natural gas for Altenesol's Nataly I liquefied natural gas project
  • Averaged gas sales volumes of 16.2 million cubic feet per day (Mmcf/d) in the third quarter of 2012
  • Generated US$5.3 million in EBITDA, or US$0.02 per share in the third quarter of 2012
  • Completed acquisition and processing of 103 square kilometers of 3-D seismic and 14 kilometers of 2-D seismic on the Esperanza Block

Outlook

Shona anticipates the following activities to occur in the remainder of 2012:

  • Shona Annual and Special Shareholder Meeting to be held on December 14, 2012 to approve the Plan of Arrangement with Canacol
  • Closing of the Plan of Arrangement with Canacol on or around December 20, 2012
  • Completion of a Definitive Agreement with Altenesol that will provide for the sale of 17 million cubic feet per day of natural gas for a period of ten years

Selected Financial and Operating Information

                                                            Three Months Ended September 30,
        2012   2011
FINANCIAL        
             
  Natural gas revenues   $           7,905,615   $            776,278
             
  Income (loss) from operations            3,845,618         (3,725,751)
             
  Net income (loss)             2,368,943          (4,169,706)
         Per share (basic and diluted)                      0.01                   (0.02)
  Total assets          87,520,383        108,129,636
             
  Long-Term Debt          20,549,529          16,211,423
             
  Share Capital        
    Common - voting        232,675,283   157,536,577
    Common - non-voting                           -     77,231,263
    Series A 10% Convertible Preferred               190,796   175,939
    Warrants          40,145,993   40,145,993
             
OPERATING        
             
  Production        
    Natural Gas - Mcf             1,492,894               190,764
    Natural Gas - Mcf/d                  16,227                   2,074
             
  Realized prices - $/Mcf   $                    5.30   $                  4.07
             
  Operating Netback ($/Mcf)        
    Natural Gas Revenue                      5.30                     4.07
    Royalties                 (0.42)                   (0.60)
    Production Expense                 (0.30)                   (2.10)
    Operating Netback   $                    4.57   $                  1.37

Financial Review

The increase in revenues in the third quarter of 2012 compared with 2011 is attributable to higher sales volumes from the Nelson field which commenced on December 1, 2011 and higher gas prices received from the gas sold from this field.  Higher gas sales price due to the redetermination of the La Guajira price to $5.80 on February 1, 2012 and $6.04 on August 1, 2012 accounted for $1.8 million of incremental natural gas revenue for the three months ended September 30, 2012 compared to 2011.  The increased volumes added $5.3 million of additional revenue in the third quarter of 2012 when compared to the same period in 2011. Similarly, for the year to date period of 2012 higher realized sales prices added $2.1 million and higher volumes added $16.6 million to revenues over the 2011 period.

The increase in production expense in the third quarter of 2012 compared with 2011 is due to increased production from the Nelson field, which commenced sales in December 2011. The increased royalty expense in the third quarter of 2012 was due to higher sales revenues.  Higher operating expense in the third quarter of 2012 is due to the additional costs associated with the higher sales volumes in 2012. The higher sales volumes resulted in an average operating expense of $0.30 per Mcf and $0.39 per Mcf sold in the third quarter and year to date period, respectively, of 2012 compared to $2.10 per Mcf and $1.24 per Mcf for the same periods in 2011.

The average depletion, depreciation and amortization (DD&A) expense rate per Mcf decreased from $2.21 per Mcf in the third quarter of 2011 to $0.88 per Mcf in the third quarter of 2012 due to the commencement of sales from the Nelson field on December 1, 2011, which has larger natural gas reserves, and consequently a lower amortization expense rate per Mcf than the older fields.  This factor also contributed to the decreased average DD&A expense rate per Mcf from $2.30 per Mcf in the year to date period of 2011 to $0.89 per Mcf in the same period of 2012.

General and administrative (G&A) expense for the three month period ended September 30, 2012 decreased $2.0 million from the $3.5 million in the third quarter of 2011 to $1.5 million in 2012, primarily due to higher legal, consulting and other expenses in 2011 related to the reverse takeover transaction.  G&A expense for the nine months ended September 30, 2012 of $4.4 million was $5.1 million lower than expense for the same 2011 period for the same reasons.

At September 30, 2012, Shona had unrestricted cash of $14.6 million and current working capital of $17.7 million. The Company's total debt at September 30, 2012 of $22.1 million consisted principally of the debt portion of the Preferred shares ($19.5 million) and the balance of the new credit facility ($2.3 million) and the remaining balance on the loan for a seismic contract ($0.3 million).

About Shona

Shona is an international oil and natural gas exploration, development and production company focusing on South America, specifically Colombia and Peru. The Company's assets currently include interests in the Company-operated Esperanza block located in Colombia's Lower Magdalena Basin, the non-operated Serrania, Los Picachos and Macaya Blocks in Colombia's Caguan Basin, and the non-operated Block 102 in Peru's Maranon Basin. The common shares of the Company trade on the TSX Venture Exchange under the stock symbol "SHO". More information on the Company is available at www.shonaenergy.com.

Cautionary Statements

Certain information included in this press release constitutes forward-looking information under applicable securities legislation.  Such forward-looking information is provided for the purpose of providing information about management's current expectations and plans relating to the future. Readers are cautioned that reliance on such information may not be appropriate for other purposes, such as making investment decisions. Forward-looking information typically contains statements with words such as "anticipate", "believe", "expect", "plan", "intend", "estimate", "propose", "project" or similar words suggesting future outcomes or statements regarding an outlook. Forward-looking information in this press release may include, but is not limited to, expectations regarding future oil and gas production from the Company's properties, the production capacity of the Company's properties, the anticipated use of seismic data and exploration and development plans on properties in which the Company holds an interest.  Forward-looking information is based on a number of factors and assumptions which have been used to develop such information but which may prove to be incorrect.  Although Shona believes that the expectations reflected in such forward-looking information is reasonable, undue reliance should not be placed on forward-looking information because Shona can give no assurance that such expectations will prove to be correct. In addition to other factors and assumptions which may be identified in this press release, assumptions have been made regarding and are implicit in, among other things: the ability of Shona to complete transactions described in this press release, the timely receipt of any required regulatory approvals, the performance of existing wells and success obtained in drilling new wells, anticipated expenses, cash flow and capital expenditures, the application of regulatory and royalty regimes and prevailing commodity prices and economic conditions.  Readers are cautioned that the foregoing list is not exhaustive of all factors and assumptions which have been used. Shona undertakes no obligation to update forward-looking statements if circumstances or management's estimates or opinions should change, unless required by law. Actual results could differ materially from those currently anticipated due to a number of factors and risks. These include, but are not limited to, risks associated with the oil and gas industry in general (e.g., operational risks in development, exploration and production; delays or changes in plans with respect to exploration or development projects or capital expenditures; the uncertainty of reserve estimates; the uncertainty of estimates and projections relating to production, costs and expenses, and health, safety and environmental risks), commodity price and exchange rate fluctuations and uncertainties resulting from potential delays or changes in plans with respect to exploration or development projects or capital expenditures.

All dollar references in this press release are to U.S. Dollars.

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this press release. 

SOURCE: Shona Energy Company, Inc.

please contact either of the following individuals:


David Gian, Treasurer & Investor Relations  
Shona Energy Company, Inc.
Houston, Texas
713-622-8809

Shetal Mentlewski, VP Admin & Legal
Shona Energy Company, Inc.
Houston, Texas
713-622-8809

(Source: CNW )
(Source: Quotemedia)

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