CALGARY, Aug. 8 /CNW/ - Breaker Energy Ltd. ("Breaker" or "Company") (TSX: WAV.A and WAV.B) is pleased to announce its financial and operating results for the three and six month periods ended June 30, 2007.
3 Months Ended 6 Months Ended
June 30, June 30, % June 30, June 30, %
2007 2006 Change 2007 2006 Change
-------------------------------------------------------------------------
Financials ($000s
except per share
amounts)
Petroleum sales 11,383 5,000 128 21,034 7,928 165
Natural gas sales 10,396 4,361 138 20,302 9,208 120
Processing sales 233 - nm 431 3 nm
Total petroleum and
natural gas revenue 22,012 9,361 135 41,767 17,139 144
Funds from
operations(1) 11,757 4,715 149 20,967 8,225 155
Per share basic 0.32 0.21 52 0.57 0.38 50
Per share diluted 0.32 0.20 60 0.57 0.37 54
Net earnings 1,523 26 nm 1,336 451 196
Per share basic 0.04 - nm 0.04 0.02 100
Per share diluted 0.04 - nm 0.04 0.02 100
Capital
expenditures (2) 7,088 105,182 (93) 27,025 112,572 (76)
Net debt 41,904 24,359 72 41,904 24,359 72
-------------------------------------------------------------------------
Operating, General and
Administrative (G&A)
Production
Crude oil (bbls/d) 1,806 756 139 1,745 629 177
Natural gas (mcf/d) 15,881 8,312 91 15,317 7,569 102
Total (boe/d) 4,453 2,141 108 4,298 1,890 127
Average realized price
Crude oil ($ per bbl) 69.26 72.68 (5) 66.60 69.66 (4)
Natural gas
($ per mcf) 7.19 5.77 25 7.32 6.72 9
Combined average
(incl. processing
revenue) ($ per boe) 54.32 48.04 13 53.70 50.09 7
Netback ($ per boe)
Petroleum and natural
gas sales 54.32 48.04 13 53.70 50.09 7
Royalties (8.92) (5.69) 57 (10.17) (7.52) 35
Operating expenses (9.91) (12.58) (21) (9.98) (12.16) (18)
Transportation
expenses (1.77) (1.11) 59 (1.77) (1.46) 21
Operating netback 33.72 28.66 18 31.78 28.95 10
G&A expenses (2.96) (3.33) (11) (2.86) (3.32) (14)
Interest expense (1.33) (0.57) 133 (1.36) (0.54) 152
Corporate netback 29.43 24.76 19 27.56 25.09 10
-------------------------------------------------------------------------
Common Shares (000s)
Class A Shares
outstanding, end of
period 35,124 34,845 1 35,124 34,845 1
Weighted average
Class A shares 35,124 21,202 66 35,054 20,388 72
Weighted average
Class B shares 900 900 - 900 900 -
Conversion of Class B
shares - weighted
average(3) 1,449 1,463 (1) 1,449 1,463 (1)
Weighted average
basic shares
outstanding(3) 36,573 22,665 61 36,503 21,851 67
Stock option dilution
(treasury method) 489 702 (30) 467 657 (29)
Weighted average
diluted shares
outstanding(3) 37,062 23,367 59 36,970 22,508 64
-------------------------------------------------------------------------
(1) Management uses funds from operations (before changes in non-cash
working capital) to analyze operating performance and leverage.
Funds from operations as presented does not have any standardized
meaning prescribed by Canadian GAAP and therefore it may not be
comparable with the calculation of similar measures for other
entities.
(2) Capital expenditures includes: cash additions for the period,
acquisition additions, capitalized general and administrative
expense.
(3) For the period ended June 30, 2007 the Class B shares are converted
at the quarter-end Class A share price of $6.21 and added to the
Class A shares to calculate basic shares outstanding. For the period
ended June 30, 2006 the conversion price was $6.15.
nm Not meaningful
Highlights
----------
- The second quarter of 2007 marked Breaker's eleventh consecutive
quarter of per share production growth.
- Production per share grew by 29 percent in the second quarter of
2007 as compared to the same period last year. Production per share
grew by eight percent in the second quarter of 2007 as compared to
the first quarter of 2007.
- Second quarter production grew by 108 percent to a quarterly record
of 4,453 boe/d from 2,141 boe/d in 2006.
- Breaker achieved record funds from operations per basic share of
$0.32, an increase of 52 percent from $0.21 per basic share in the
same period of 2006. Funds from operations grew by 149 percent to
$11.8 million in the second quarter of 2007 from $4.7 million in the
second quarter of 2006.
- Breaker attained net income of $1.5 million in the second quarter of
2007 as compared to net income of $26,159 in the second quarter of
2006. Net income per share increased to $0.04 per basic share in the
second quarter of 2007 as compared to net income of nil per basic
share in the second quarter of 2006.
- In the second quarter, the company achieved a 100 percent success
rate drilling five gross (4.5 net) wells. Breaker invested
$7.1 million concentrating its capital investments on high netback
light oil projects at Irricana, Girouxville and East Prairie as well
as continuing to advance its farm-in in the Medicine Hat area.
- At quarter-end, Breaker had access to approximately 345,000 net
acres of land. Breaker's management believes that access to a
significant land base fuels future growth opportunities.
- Breaker continued its focus on reducing operating costs in the
second quarter resulting in a reduction of 21 percent to $9.91 per
boe from $12.58 per boe in the same period of 2006 and down two
percent as compared to the first quarter of 2007.
- Breaker's operations in the second quarter of 2007 resulted in an
average operating netback (defined as revenue; less royalties,
operating and transportation expenses on a per boe basis) of $33.72
per boe, an 18 percent increase from the same period last year.
- At the end of the second quarter, Breaker's net debt to annualized
second quarter 2007 cash flow ratio was 0.9. Breaker's bank line is
$74 million and management forecasts a conservative level of
leverage at year-end with a net debt to annualized fourth quarter
2007 cash flow ratio of 0.9.
Operational update
------------------
Throughout the second and into the third quarter, Breaker has concentrated its capital investments on its high netback light oil projects at Irricana, Girouxville and East Prairie. Breaker's results to date include: encouraging early production rates at its first horizontal light oil well in Irricana; 100 percent success on 2.5 net exploratory wells at Girouxville, adding restricted light oil production rates of 250 bbls/d from tested capacity greater than 500 bbls/d (net) and confirmation of approximately 10 million bbls of original oil in place and substantial reserve adds via discovery of a new shallow light oil pool at East Prairie. Breaker is also continuing with selective high-return, low cost gas development projects at Irricana, Medicine Hat, and Provost.
Irricana
After an unusually long four month breakup period due to wet ground conditions, Breaker's first horizontal light oil infill well at Irricana was recently placed on production. The well was completed with a multiple fracture treatment, which included the injection of more than three thousand bbls of water-based fluid and acid into the formation. Having retrieved most of this load fluid, the well is currently producing at approximately 400 boe/d. Breaker recently finished drilling its second horizontal light oil infill well where similar completion operations have commenced. Later this quarter, the Company plans to apply this multiple fracturing technique on one of the 25 horizontal wells drilled prior to Breaker acquiring the Irricana asset. If successful, this operation will yield numerous high rate of return opportunities on the remaining wellbores.
A low-cost program of recompleting standing wells for uphole hydrocarbon zones is continuing at Irricana. The program is ongoing, with initial recompletion results testing at approximately 300 boe/d (net before payout). These wells are in close proximity to company-owned infrastructure.
Girouxville
In its deep light oil exploratory property, Breaker attained a 100 percent success rate this year, with three gross (2.5 net) new wells now on production from the Granite Wash. Based on initial test rates, new light sweet oil deliverability net to the company exceeds 500 bbls/d. Total initial production rate will be limited by EUB regulations at approximately 250 bbls/d (net). As discovery wells, the majority of the new production will benefit from a royalty holiday, significantly increasing the already high netback enjoyed at this property. Two of the three wells also contain apparent pay behind pipe in uphole zones, including the Beaverhill Lake Sand.
After one year of production, Breaker's dual zone discovery at 13-15 has produced approximately 180,000 bbls of oil and continues to produce light sweet oil at an MRL-limited rate of 600 bbls/d. Apparent pay in the Beaverhill Lake remains behind pipe in the well. Breaker has three, 100 percent working interest offset locations remaining to be drilled within one mile of the 13-15 well.
Light, sweet oil production at Girouxville now exceeds 1,000 bbls/d, a more than four-fold increase since acquisition in late 2004. With many uphole zones behind pipe, its five most productive gross wells currently rate-limited by the EUB, and approximately ten drilling locations in the exploration and development inventory, Breaker is well positioned to continue growing this high netback property.
East Prairie
After tie-in of the successful first quarter drilling program, East Prairie produced at record rates in the second quarter, including the first substantial light oil production from the property since acquisition in early 2005. Due to early drilling success, Breaker obtained a mid-year East Prairie reserves update from its external evaluator. The new report confirms the discovery of approximately 10 million bbls (gross) of light original oil in place (OOIP). Breaker is currently surveying three summer-accessible outpost locations offsetting this pool which could substantially increase the OOIP and reserves. This discovery is only one of several oil pools recently discovered by Breaker at East Prairie, all of which still have significant room to grow via further delineation drilling.
Medicine Hat and Provost
Both areas contain a large number of gas drilling locations that are still commercially viable under current industry conditions; however the company has deferred most of these activities in favour of light oil opportunities which are currently realizing a higher netback.
At Medicine Hat, the company drilled three farmin wells in the second quarter, two of which successfully delineated an aerially extensive gas bearing sand first produced by the company in late 2006. Both wells are now on production. Breaker continues to cost effectively acquire land and meet its low-cost area farmin commitments on this sizeable gas trend, significantly increasing its gas drilling inventory for future growth.
At Provost, several standing wells will be completed and tied in, adding production at low cost and providing pilot production information in areas with substantial tight gas resource but limited production history.
Guidance
--------
Breaker's prospects for continued per share growth in reserves, production and cash flow are excellent. Breaker re-iterates its guidance of average production of 4,750 boe/d and exit production of 5,250 boe/d in 2007.
Financial Statements and Management's Discussion and Analysis
-------------------------------------------------------------
Breaker has filed with Canadian securities regulatory authorities its unaudited financial statements for the three and six month periods ended June 30, 2007 and 2006 and the accompanying Management's Discussion and Analysis. These filings are available for review at www.sedar.com.
Breaker Energy Ltd. is a junior oil and gas company focused on creating shareholder value by growing per share production and reserves through acquisitions and a focused exploration, development and exploitation plan.
Breaker has 35,123,674 Class A shares and 900,000 Class B shares outstanding.
Breaker Energy trades on the TSX under the symbols WAV.A and WAV.B.
Forward-Looking Statements
--------------------------
This press release contains forward-looking statements concerning the Company's expectations of future production, cash flow, earnings and expansion of its oil and gas property interests and concerning the Company's exploration and development drilling, seismic operations, regulatory applications, payout estimates, capital expenditures, number and drilling locations for 2007, seismic acquisitions and facility upgrades. These statements are based on current expectations that involve a number of risks and uncertainties, which could cause actual results to differ from those anticipated. These risks include, but are not limited to: the risks associated with the oil and gas industry (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), acquisitions, commodity price, price and exchange rate fluctuation and uncertainties resulting from competition from other producers and ability to access sufficient capital from internal and external sources. Additional information on these and other risk factors that could affect the Company's operations and/or financial results are included in the Company's reports on file with Canadian securities regulatory authorities.
The forward-looking statements or information contained in this news release are made as of the date hereof and the Company undertakes no obligation to update publicly or revise any forward-looking statements or information, whether as a result of new information, future events or otherwise, unless so required by applicable securities laws.
Oil and Gas Advisory
--------------------
This press release contains disclosure expressed as "Boe/d". Boe means barrel of oil equivalent and Boe/d means Boe per day. All oil and natural gas equivalency volumes have been derived using the ratio of 6,000 cubic feet of natural gas to 1 barrel of oil. Boe equivalency measures may be misleading, particularly if used in isolation. A conversion ratio of 6,000 cubic feet of natural gas to 1 barrel of oil is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the well head.
In this press release: (i) mmboe means million boe; (ii) boe/d means boe per day; (iii) bbls/d means barrels per day; (iv) mcf means thousand cubic feet; (v) mmcf means million cubic feet; (vi) mcf/d means thousand cubic feet per day; and (vii) mmcf/d means million cubic feet per day.
The TSX does not accept responsibility for the adequacy or accuracy of
this release.
%SEDAR: 00021180E