CALGARY, March 26 /CNW/ - Breaker Energy Ltd. ("Breaker" or "Company") (TSX: WAV.A and WAV.B) is pleased to announce its financial and operating results for the quarter and year ended December 31, 2007.
Financial and Operating Summary
Year ended Quarter ended
December December % Change December December % Change
31, 31, 31, 31,
2007 2006 2007 2006
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Financial ($000s
except per
share amounts)
Petroleum sales 48,949 26,010 88 13,968 8,472 65
Natural gas
sales 36,623 25,913 41 8,966 9,496 (6)
Processing
sales 1,061 376 182 306 295 4
Total petroleum
and natural
gas revenue 86,633 52,299 66 23,240 18,263 27
Funds from
operations(1) 41,384 26,761 55 9,833 9,132 8
Per share
basic ($) 1.13 0.91 24 0.27 0.25 8
Per share
diluted ($) 1.11 0.89 25 0.26 0.25 4
Net earnings 3,999 2,083 92 2,057 1,077 91
Per share
basic ($) 0.11 0.07 57 0.06 0.03 100
Per share
diluted ($) 0.11 0.07 57 0.06 0.03 100
Capital
expend-
itures(2) 61,954 142,584 (57) 19,258 18,283 5
Net debt
(end of
period) 51,155 35,421 44 51,155 35,421 44
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Operating
Highlights
Production:
Crude oil
(bbls per
day) 1,833 1,039 76 1,845 1,472 25
Natural gas
(mcf per
day) 15,444 10,809 43 16,066 15,205 6
Total (boe
per day)
(6:1) 4,407 2,840 55 4,523 4,006 13
Average
realized price:
Crude oil
($ per bbl) 73.17 68.62 7 82.29 62.56 32
Natural gas
($ per mcf) 6.50 6.57 (1) 6.07 6.79 (11)
Hedging
($ per boe) (0.34) (0.05) 580 - (0.13) -
Combined
average
($ per boe) 53.52 50.40 6 55.85 49.42 13
Netback
($ per boe)
Petroleum and
natural gas
sales 53.52 50.40 6 55.85 49.42 13
Royalties (9.64) (7.64) 26 (9.25) (7.83) 18
Operating
expenses (11.52) (10.56) 9 (14.14) (9.19) 54
Transportation
expenses (1.87) (1.55) 21 (2.31) (1.56) 48
Operating
netback 30.49 30.65 (1) 30.15 30.84 (2)
G&A expenses (2.99) (2.97) 1 (3.36) (3.39) (1)
Interest
expense (1.41) (0.85) 66 (1.56) (0.94) 66
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Corporate
netback 26.09 26.83 (3) 25.23 26.51 (5)
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Common
Shares (000s)
Shares
outstanding,
end of period 37,114 35,745 4 37,114 35,745 4
Weighted average
Class A
shares 35,192 27,889 26 35,529 34,845 2
Weighted average
Class B
shares 900 900 - 900 900 -
Conversion of
Class B shares
- weighted
average(3) 1,500 1,544 (3) 1,500 1,544 (3)
Weighted average
basic shares
outstanding(3) 36,692 29,433 25 37,029 36,389 2
Stock option
dilution
(treasury
method) 469 703 (33) 351 700 (50)
Weighted
average diluted
shares
outstanding(3) 37,161 30,136 23 37,380 37,089 1
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(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, may not be comparable
with the calculation of similar measures for other entities.
(2) Capital expenditures includes cash additions for the period,
acquisition additions net of dispositions, and capitalized general
and administrative expense.
(3) For the periods ended December 31, 2007 the Class B shares are
converted at the quarter-end Class A share price of $6.00 and added
to the Class A shares to calculate basic shares outstanding. For the
periods ended December 31, 2006 the conversion price was $5.83.
Overview and Highlights
With its strong team and philosophy of maintaining financial and
operational flexibility while acquiring and developing dominant land positions
in high working interest, operated assets, Breaker Energy has grown production
from zero in late October 2004 to over 5,000 boe per day in early 2008 with
growth forecast to continue into the future. Breaker Energy is proud to have
continued its consistent track record of rapidly building shareholder value.
In 2007 production, reserves and funds from operations all increased.
- Production grew by more than 55 percent to an average of 4,407 boe
per day from the 2006 average of 2,840 boe per day. Production per
share grew by 24 percent.
- Funds from operations grew by 55 percent to $41.4 million in 2007
from $26.8 million in 2006. Funds from operations per share grew by
24 percent.
- Net income increased 92 percent to $4.0 million in 2007 from
$2.1 million in 2006. On a per share basis net income increased
57 percent to $0.11 per basic share in 2007 compared to $0.07 per
basic share in 2006.
- Achieved a gross drilling success rate of 92 percent, drilling 37
gross (32.2 net) wells.
- Light oil reserves (proved plus probable) more than doubled per fully
diluted share, increasing by 112%.
- Proved plus probable reserves grew by 46 percent, from 12.3 million
boe entering the year to 18.0 million boe at year-end. Proved plus
probable reserves per share grew by 41 percent.
- Breaker's proved plus probable finding, development and acquisition
(FD&A) costs before change in future development capital for 2007
were $8.49 per boe. Including the change in future development
capital estimated at $43.9 million, Breaker's FD&A costs were $14.51
per boe in 2007. Breaker's capital program for 2007 totalled
$62.0 million and the Company added 7.3 million boe of proved plus
probable reserves in 2007.
- Based on fourth quarter 2007 average production of 4,523 boe per day
and proved plus probable reserves of 18.0 million boe, Breaker's
reserve-life-index was 10.9 years at year-end 2007.
- Breaker's oil weighting has moved from 30 percent in the first
quarter of 2006 to a forecast of 51 percent in 2008.
- Breaker's focus on high quality assets with the flexibility to switch
between oil and gas results in one of the highest netbacks in its
peer group. In 2007 the Company's average operating netback (defined
as revenue net of commodity derivatives per boe, less royalties per
boe, operating costs per boe and transportation costs per boe) was
$30.49 per boe.
- Breaker's recycle ratio (defined as the average operating netback
divided by FD&A costs) in 2007 was 3.6 times excluding future
development capital and 2.1 times including future development
capital.
- Breaker maintained one of the best balance sheets of its peer group
with a conservative level of leverage at year-end and a debt to
annualized fourth quarter 2007 funds from operations ratio of 1.3.
- Breaker completed one flow-through equity issue in 2007 for total
gross proceeds of $5.5 million.
- Breaker increased its bank line from $74 million to $95 million in
2007. With net debt of $51.2 million Breaker had $43.8 million of
borrowing capacity at year-end.
The Company is excited as it looks forward to 2008. In the first quarter Breaker has continued to focus its drilling on high netback light oil projects at Irricana, Girouxville, and East Prairie. The company has also commenced its 3-D seismic program at its high impact exploration program in British Columbia.
Operations Update
Irricana
Breaker capitalized on early success in the large light oil pool at Irricana by drilling six more wells since mid December 2007, all of which will be on production by the end of the first quarter or early in the second quarter of 2008. The first two wells were completed in late January and brought onstream in February at rates exceeding 350 and 250 boe per day post clean-up of load fluid. The next two wells were completed in late February and early March, one of which has cleaned up and is producing over 250 boe per day, the fourth is still recovering load fluid. The fifth well has cleaned up very quickly and is currently flowing unassisted up casing at estimated rates of approximately 600 boe per day, as of March 26th. The sixth well should be completed within a week. Overall the new drills have performed above expectations due to the successful application of multiple fracture treatments along the long reach horizontal wellbores. Furthermore, operational efficiencies have been realized through more experience and service cost reductions, resulting in savings of approximately $1.0 million per well as compared to the initial wells drilled less than one year ago.
Breaker is currently surveying and licensing a number of future wells in excess of current budget plans, to provide flexibility should the company wish to more aggressively develop the pool. A waterflood study and initial design is underway, and a pilot injection scheme is expected to commence later in 2008 which could significantly increase light oil recovery in this large pool.
Girouxville
At Girouxville, Breaker's high netback exploratory oil property, the company has recently demonstrated a 100 percent success rate at discovering high rate light oil pools. The 100 percent working interest 1-21 offset to the nearby Breaker 13-15 well, which has produced in excess of 275,000 bbls, discovered a new light oil Granite Wash pool and is currently producing under Good Production Practice (GPP) at rates of 280 bopd. The company drilled a direct offset to the 1-21 discovery at 3-21 (50 percent interest), and is producing 75 bopd net from a separate new pool. All of these wells along with the second quarter 2007 discovery at 14-19 have been tied in to Breaker's 100 percent working interest battery. These new pipelines will result in 2008 operating cost savings of approximately $2 million net through the elimination of costly trucking.
Breaker drilled the first well on recently acquired undeveloped lands several miles east of its 2006/2007 farmin discoveries. The well discovered a new Granite Wash light oil pool that swab tested at rates in excess of 250 bopd (112 bopd net). This well will be placed on production before the end of first quarter 2008. Breaker also recently drilled two 50 percent working interest discoveries in new Granite Wash pools, which are currently producing at combined rates of 90 bopd net of 43degrees API oil.
All of the recent wells drilled in Girouxville should qualify for new pool royalty holidays. Armed with an inventory of 19 drilling prospects, Breaker is well positioned to continue growing this high netback property. Plans are in place to aggressively develop these opportunities immediately after breakup to take advantage of the current royalty structure.
East Prairie
At East Prairie, the company successfully drilled three Viking oil wells in December, extending its significant light oil discovery. This was followed with the recent drilling of a further two wells targeting the Viking oil pool and one 100 percent working interest Viking gas well north of the East Prairie Metis Settlement.
Five of the six new wells are expected to contribute an additional 250 boe per day net of predominantly light oil to Breaker near the end of the first quarter 2008. One of the six wells was drilled with the intention of converting it to a water injector upon receiving ERCB approval of the Enhanced Recovery Scheme application submitted in January 2008. Implementation of the waterflood is planned for the fall of 2008, pending ERCB approval. Additional exploration initiatives are underway along this trend.
Provost
At Provost three gas wells were completed and placed on stream by mid March. The wells are producing at a restricted combined rate of 500 mcf/d. A medium gravity oil well was swab tested at rates exceeding 40 bopd and will be placed on production before the end of March. Breaker has recently commenced waterflood injection at its sizeable medium gravity oil pool, and will shortly begin injection at its innovative enhanced recovery scheme on its large heavy oil pool.
Monias, British Columbia
The company commenced its 3-D seismic program in early March. The program is advancing on schedule and is expected to be completed before April. Monias is a high impact exploration project targeting a 100 percent working interest Leduc reef prospect that has an unrisked potential target size of 1 TCF.
Outlook and 2008 Guidance
Breaker's prospects for continued per share growth in reserves, production and cash flow are excellent. The Company is well positioned with a base of operated, long-life natural gas and light oil reserves and production.
- High quality assets strategically focused in 2 core areas, with
operatorship (more than 95 percent) and high working interests (an
average of approximately 90 percent).
- Access to more than 300,000 net acres of land to fuel future growth.
- Drilling inventory of more than 300 net drilling locations.
- Forecast capital expenditures of $70 million to drill 41 gross
(37.7 net) wells in 2008.
- Forecast production to average 5,900 boed in 2008.
- Forecast production for 2008 balanced approximately 51 percent to oil
and 49 percent to natural gas.
- An excellent balance sheet with a conservative debt to cash flow
ratio.
Breaker has had an excellent start to 2008 with the operations it performed in the first quarter and is well positioned to meet its production targets.
Financial Statements, Management's Discussion and Analysis and Annual
Information Form
Breaker has filed with Canadian securities regulatory authorities its audited financial statements for the quarter and year ended December 31, 2007 and the accompanying Management's Discussion and Analysis. The Company has also filed its Annual Information Form ("AIF") in respect of fiscal year 2007, which includes its reserves data and other oil and gas information for the period ended December 31, 2007, as mandated by National Instrument 51-101 Standards of Disclosure of Oil and Gas Activities. 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 36,269,504 Class A shares and 900,000 Class B shares outstanding as at March 26, 2008.
Breaker Energy trades on the TSX under the symbols WAV.A and WAV.B.
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. 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.
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 barrel of oil per day.
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