CALGARY, May 17 /CNW/ - Breaker Energy Ltd. ("Breaker" or "Company")
(TSX-V: WAV.A and WAV.B) is pleased to announce its financial and operating
results for the quarter ended March 31, 2006.
Overview and Highlights
Breaker's achievements in the first quarter of 2006 include the
following:
- Production grew by 229 per cent to 1,637 boe per day in the first
quarter of 2006 from 498 boe per day in the same period last year.
- Funds from operations grew 251 per cent to $3.5 million in the first
quarter of 2006 from $1.0 million in the first quarter of 2005.
- Funds from operations per share grew 167 per cent to $0.16 per basic
share in the first quarter of 2006 from $0.06 per basic share in the
first quarter of 2005.
- Net income increased 237 percent to $0.4 million in the quarter from
$0.1 million in the same period of 2005.
- Net income per basic share increased by 100 percent to $0.02 in the
first quarter of 2006 from $0.01 in the same period of 2005.
As the majority of Breaker's land base allows for all-season access,
drilling is primarily carried out during the second and third quarters. As a
result, Breaker is less dependent on drilling in the highly competitive winter
drilling season than many other E&P companies. In the first quarter, Breaker
invested $7.4 million, drilling 5 (2.7 net) wells for a 79 percent success
rate. Subsequent to March 31, 2006 Breaker increased its bank credit facility
to $26.0 million.
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Quarter Ended
March March %
31, 31, Change
2006 2005
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Financials ($000s except per share amounts)
Petroleum sales 2,840 1,340 112
Natural gas sales 4,938 1,039 375
Total petroleum and natural gas revenue 7,778 2,379 227
Funds from operations(1) 3,510 1,001 251
Per share basic 0.16 0.06 167
Per share diluted 0.16 0.06 167
Net earnings 425 126 237
Per share basic 0.02 0.01 100
Per share diluted 0.02 0.01 100
Capital expenditures(2) 7,435 25,782 (71)
Net debt and working capital 12,402 18 nm
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Operating, General and Administrative (G&A)
Production
Crude oil (bbls per day) 500 242 108
Natural gas (mcf per day) 6,817 1,539 343
BOE per day (6:1) 1,637 498 229
Average realized price:
Crude oil ($ per bbl) 65.05 61.72 5
Natural gas ($ per mcf) 7.90 7.35 7
BOE ($ per boe, 6:1) 52.80 53.09 (1)
Netback per boe (6:1) ($)
Petroleum and natural gas sales 52.80 53.09 (1)
Royalties 9.96 11.18 (11)
Operating expenses 11.59 11.99 (3)
Transportation expenses 1.92 1.37 40
Operating netback 29.33 28.55 3
G&A expenses 3.30 5.50 (40)
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Common Shares (000s)
Shares outstanding, end of period 20,465 16,662 23
Weighted average Class A shares 19,564 13,849 41
Weighted average Class B shares 900 900 -
Conversion of Class B shares -
weighted average(3) 1,875 2,195 (15)
Weighted average basic shares outstanding(3) 21,439 16,044 34
Stock option dilution (treasury method) 857 779 10
Weighted average diluted shares outstanding(3) 22,296 16,823 33
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Operations Summary
Breaker's first quarter activity concentrated on the limited areas of the
company's portfolio that require winter conditions, primarily a portion of the
East Prairie land block. Breaker began the year at East Prairie with a
strategic pipeline expansion, by tying in one Gething gas discovery well and
two Viking oil wells that had been drilled in 2005. This provided a
significant boost to Breaker's production early in the quarter, and set the
stage for a two well drill program later in the quarter. Both wells were
successful Viking gas wells which were tied in by the end of the winter
season. One of the two was a significant new pool discovery testing in excess
of 1 mmcfd. Early in the second quarter, Breaker acquired 2,560 acres of land
at 100% working interest immediately adjacent to this discovery.
Within one year of acquiring the property, Breaker has increased
production from 70 boed to 550 boed, representing a 685% increase in
production. The midstream processor's gas plant expansion and field
compression project is scheduled to be completed near the end of June, which
should boost Breaker's net production to 800 boed, with an additional 250 boed
tested and available for potential tie-in next winter. Breaker has achieved
100% drilling success on the property to date, and is planning a multi-well
summer drill program to continue its growth in the area.
Breaker also drilled, cased, and tested gas at 2 wells (gross) in its
exploratory areas at Hamburg South and Widewater during the quarter.
Early in the second quarter, Breaker has had significant success in its
100% working interest, high-impact light oil exploratory program at
Girouxville.
The recent three zone discovery at 3-28-76-22W5M has been placed on
production from the Slave Point formation, and has produced for almost two
weeks at rates consistent with the predicted 'flush' rate of approximately
400 bbld of 46 API oil, with no significant formation water produced to date.
The well is expected to eventually stabilize at a longer-term rate of
150-200 bbld, similar to the original 7-29-76-22W5M discovery. Additional
potential pay zones remain behind pipe in the Granite Wash and Beaverhill Lake
formations. A short tie-in to the Breaker central battery is underway.
The newest well at 11-29-76-22W5M, an offset to the 7-29 discovery, has
recently been cased as a multi-zone oil well with potential pay zones
indicated in the Beaverhill Lake and Slave Point formations. Both formations
came in several meters higher structurally than 7-29, and have similar
reservoir quality and pay thicknesses in both formations. The well has been
completed in a Slave Point reef with 6.5 meters of net pay, has tested oil
with no apparent formation water, and is currently shut-in for pressure
buildup. Early indications are that the well should be capable of flush and
longer-term production rates similar to the 7-29 and 3-28 wells. The potential
pay zone in the Beaverhill Lake formation is very similar in reservoir quality
to the 7-29 offset, which Breaker is planning on twinning to access the
formation's behind-pipe productivity of approximately 150-200 bbld.
The 2005 Slave Point discovery at 7-29 continues to produce at a
stabilized rate of approximately 150 bbld of 46 API oil, at an approximate
water cut of 58%.
Encouraged by the significant multi-zone, high value success to date,
Breaker is continuing with its five well program with the third location at
3-6-76-22W5M expected to reach total depth within several days. The fourth
location is a high-impact new pool prospect located on lands recently acquired
at the April 6th landsale, with the location pinpointed by Breaker's
proprietary 3D seismic shot in late 2005. The fifth location is the twin of
the 7-29 well drilled last year.
Breaker has also begun its significant summer drill program in its
Southern focus area and has drilled and cased one well at Medicine Hat, with
another well currently drilling. The 2006 Provost program will begin drilling
by month's end, initially concentrating on oil development locations with a
larger gas infill program to follow later in the year. In late January,
Breaker had to shut in an 80 boe/d well at Provost and is currently awaiting a
new pool designation from the EUB in order to place the well back on
production. Breaker is scheduled to meet with the EUB later this month on this
issue.
Breaker's large drilling inventory, in excess of 100 light/medium oil and
natural gas locations, has enabled it to focus capital on its high netback,
light oil drilling opportunities to take advantage of strong oil prices.
Breaker's significant natural gas drilling program will be concentrated in the
second and third quarters, in anticipation of better gas prices later in the
year. Breaker is well positioned to meet or exceed its production targets with
the success it has experienced so far this year.
Financial Statements and Management's Discussion and Analysis
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Breaker has filed with Canadian securities regulatory authorities its
audited financial statements for the quarter ended March 31, 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 Energy trades on the TSX Venture Exchange under the symbols WAV.A
and WAV.B.
This press release does not constitute an offer to sell or the
solicitation of an offer to buy any securities of Breaker within the United
States. The securities of Breaker have not been and will not be registered
under the United States Securities Act of 1933, as amended (the "1933 Act"),
or any state securities laws. Accordingly, the shares may not be offered or
sold in the United States or to U.S. persons (as such terms are defined in
Regulation S under the 1933 Act) unless registered under 1933 Act and
applicable state securities laws or an exemption from such registration is
available.
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.
NOTE: Boe means barrel of oil equivalent on the basis of 1 Boe to
6,000 cubic feet of natural gas. Boe's may be misleading, particularly if
used in isolation. A Boe conversion ratio of 1 Boe for 6,000 cubic feet
of natural gas is based on an energy equivalency conversion method
primarily applicable at the burner tip and does not represent a value
equivalency at the wellhead. Boe/d means a Boe per day.
Forward-looking Statements
This press release contains forward-looking statements including
management's assessment of future plans and operations, expectations of future
production, cash flow and earnings. These statements are based on current
expectations that involve a number of risks and uncertainties, which could
cause actual results to differ materially 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 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 factors that could
affect Breaker's operations and/or financial results are included in Breaker's
reports on file with Canadian securities regulatory authorities.
Since forward-looking statements address future events and conditions, by
their very nature they involve inherent risks and uncertainties.
The forward-looking statements contained in this press release are made
as of the date hereof and Breaker 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.
The TSX Venture Exchange does not accept responsibility for the adequacy
or accuracy of this release.
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%SEDAR: 00021180E
