CALGARY, March 28 /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, 2006.
Financial and Operating Summary
Year ended Quarter ended
December December % December December %
31, 2006 31, 2005 Change 31, 2006 31, 2005 Change
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Financial
($000s except
per share
amounts)
Petroleum
sales 26,010 9,254 181 8,472 3,213 164
Natural gas
sales 25,913 13,576 91 9,496 6,152 54
Processing
sales 376 30 nm 295 3 nm
Total petroleum
and natural
gas revenue 52,299 22,860 129 18,263 9,368 95
Funds from
operations(1) 26,760 12,223 119 9,132 5,282 73
Per share
basic ($) 0.91 0.65 40 0.25 0.29 (14)
Per share
diluted ($) 0.89 0.62 44 0.25 0.28 (11)
Net earnings 2,083 3,361 (38) 1,077 1,600 (33)
Per share
basic ($) 0.07 0.18 (61) 0.03 0.09 (67)
Per share
diluted ($) 0.07 0.17 (59) 0.03 0.08 (63)
Capital
expendi-
tures(2) 142,584 53,500 167 18,283 10,632 72
Net debt
(end of
period) 35,421 8,523 316 35,421 8,523 316
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Operating
Highlights
Production:
Crude oil
(bbls per
day) 1,039 383 171 1,472 523 181
Natural gas
(mcf per
day) 10,809 3,846 181 15,205 5,855 160
Total (boe
per day)
(6:1) 2,840 1,024 177 4,006 1,499 167
Average
realized
price:
Crude oil
($ per bbl) 68.62 66.19 4 62.56 66.77 (6)
Natural gas
($ per mcf) 6.57 9.67 (32) 6.79 11.42 (41)
Combined
average
($ per boe) 50.45 61.16 (18) 49.55 67.94 (27)
Netback
($ per boe)
Petroleum and
natural gas
sales 50.45 61.16 (18) 49.55 67.94 (27)
Royalties (7.64) (11.32) (33) (7.83) (10.80) (28)
Operating
expenses (10.56) (11.73) (10) (9.19) (12.06) (24)
Transportation
expenses (1.55) (1.72) (10) (1.56) (2.43) (36)
Operating
netback 30.70 36.39 (16) 30.97 42.65 (27)
G&A expenses (2.99) (3.54) (16) (3.45) (4.48) (23)
Interest
expense (0.85) (0.13) nm (0.94) 0.20 nm
Corporate
netback 26.86 32.72 (18) 26.58 38.37 (31)
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Common Shares
(000s)
Shares
outstanding,
end of period 35,745 20,462 75 35,745 20,462 75
Weighted
average
Class A
shares 27,889 17,208 62 34,845 19,562 78
Weighted
average
Class B
shares 900 900 - 900 900 -
Conversion of
Class B
shares
- weighted
average(3) 1,544 1,685 (8) 1,544 1,685 (8)
Weighted
average basic
shares out-
standing(3) 29,433 18,893 56 36,389 21,247 71
Stock option
dilution
(treasury
method) 703 801 (12) 700 880 (20)
Weighted
average
diluted
shares out-
standing(3) 30,136 19,694 53 37,089 22,127 68
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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 do 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, and capitalized general and administrative
expense.
(3) For the period ended December 31, 2006 the Class B shares are
converted at the quarter-end Class A share price of $5.83 and added
to the Class A shares to calculate basic shares outstanding. For the
period ended December 31, 2005 the conversion price was $5.34.
Breaker's achievements in its second full year of operation include the
following:
- Increased reserves by more than 155 percent from 4.9 million boe to
12.5 million boe;
- On a per share basis Breaker grew proved plus probable reserves by
approximately 49 percent from 230 boe of proved plus probable
reserves per thousand shares at year end 2005 to 342 boe of proved
plus probable reserves per thousand shares at year end 2006;
- Invested $142.6 million in 2006, which resulted in proved plus
probable Finding, Development and Acquisition (FD&A) costs of
$16.56 per boe, excluding future capital and $19.87 per boe including
future capital (discounted at 10 percent). Excluding acquisitions
Breaker achieved Finding and Development (F&D) costs of $14.21 per
boe (before future development capital) in 2006;
- Grew production by more than 177 percent to 2,840 boe per day from
the 2005 average of 1,024 boe per day, exceeding a target exit rate
of 4,300 boe per day and averaging 4,006 boe per day in the fourth
quarter;
- On a per share basis production grew by 56 percent from 70.6 boe per
million shares in the fourth quarter of 2005 to 110.1 boe per million
shares in the fourth quarter of 2006;
- Based on fourth-quarter 2006 average production of 4,006 boe per day
and proved plus probable reserves of 12.5 million boe, Breaker's
reserve life index is 8.5 years;
- Funds from operations grew 119 percent to $26.8 million in 2006 from
$12.2 million in 2005. On a per share basis funds from operations
grew 40 percent to $0.91 per basic share in 2006 from $0.65 per basic
share in 2005. Primarily as a result of an increase in DD&A and a
decrease in commodity prices, net income was $2.1 million, a decrease
of 38 percent from $3.4 million in 2005. On a per share basis net
income was $0.07 per basic share in 2006 as compared to $0.18 per
basic share in 2005;
- Achieved a gross drilling success rate of 93 percent, drilling
41 (36.5 net) wells;
- Reduced operating costs by 24 percent from $12.06 per boe in the
fourth quarter 2005 to $9.19 per boe in the same period of 2006;
- Made two significant asset acquisitions, which added approximately
1,320 boe per day. The assets are operated with high working interest
and have all-season access, providing year-round operational
flexibility;
- Through farm-in, doubled access to exploratory acreage in the
Girouxville Area, where Breaker has had numerous significant light
oil discoveries;
- Added approximately 25,000 net acres of 100 percent working interest
land at East Prairie, which is on-trend with recent Viking
discoveries and significant production additions;
- Maintained access to a significant land base in the Western Canada
Sedimentary Basin, which was approximately 345,000 net acres at year-
end 2006. This was primarily achieved through acquisitions and
farm-ins;
- Completed two equity issues in 2006 for total gross proceeds of
$93.5 million and increased its bank line from $21 million at year
end 2005 to $71 million in March 2007; and
- Maintained a conservative level of leverage at year-end with a debt
to annualized fourth quarter cash flow ratio of 1.0 and more than
$35 million of unused debt capacity at year end.
- Graduated from the TSX Venture Exchange to the Toronto Stock
Exchange; and
- Issued upwardly revised guidance twice in 2006 and exceeded exit
production guidance of 4,300 boe per day.
Operations Update
-----------------
Breaker is near the end of its most active winter drill program ever. A total of 11 gross (9.75 net) wells have been drilled at East Prairie, doubling the total number of wells drilled there to date by Breaker. The Viking sand target was encountered in 9 of the 11 wells which are in various stages of completion. Notable successes so far include: a 100% working interest stepout well currently on production at sustained rates exceeding 2.5mmcf/d; 4 successful offset wells to the 200bbls/d light oil discovery announced in January; a new 50 bbls/d light oil discovery with significant offset potential; and a gathering system upgrade which will lower system pressure and result in an increase in production. At Irricana, the company has drilled its first horizontal light oil well, on schedule and under budget, intersecting over 1400 metres of dolomite pay.
East Prairie
------------
Breaker has been very successful in extending its Viking trend to the north onto recently-acquired 100% working interest land. Three newly-drilled gas wells will be tied into a gathering system which was significantly expanded in the first quarter. These wells include the highest productivity gas well yet drilled on the trend, which is currently producing at stable rates in excess of 2.5mmcf/d ((greater than)400 boed) net to Breaker. These wells represent an extension of the previously-known Viking gas trend, adding significant reserves.
The light oil discovery well announced in January has been producing at stable rates of approximately 90bbls/d gross (Breaker 75%), at low GOR and with no appreciable water. GPP was recently obtained on this well, and the company is in a position to increase the well's production toward the original test rate of 200bbls/d gross. All four wells drilled offsetting this discovery were successful. Three of these wells have defined an oil column exceeding 10m, while the fourth has defined a potential gas cap, which would lead to very high recovery factor in this high perm zone. Two of the three offsets are each producing at stable rates between 50-100bbls/d gross (Breaker 75%), with no appreciable water, and are currently waiting on GPP determination. The third well is awaiting equipping operations. This shallow, light oil discovery in high perm rock is yet to be fully delineated, with another 3-4 outpost locations being planned in summer accessible areas.
A similar, new light oil discovery was made 2 miles along trend to the southwest. Currently being tied in, this well is capable of steady production of 50 bbls/d gross (Breaker 75%) of light oil production with no appreciable water. Up to four offset locations have been identified, approximately half of which are summer accessible.
In addition to extending its operated gathering system to new wells, Breaker also twinned over 4 miles of existing pipeline to handle its higher gas volumes. This facility expenditure will also lower the gathering system pressure on its oil wells, allowing for higher production rates upon receipt of GPP.
Since acquisition of the East Prairie property two years ago, Breaker has grown net production from 70 boed to an estimated post-breakup rate of more than 1,300 boe/d, an 18-fold increase. Some additional oil production may be added throughout the year upon receipt of GPP on several wells. An additional 300 boed of gas deliverability in winter access areas remains behind pipe. The company has discovered and developed large new gas reserves, and has just begun delineation and development of new light oil pools with internally estimated original oil in place of 5 to 10 million bbls gross.
Irricana
--------
Breaker has successfully drilled its first horizontal light oil well at Irricana, intersecting over 1400m of net dolomite pay. Breaker's deepest and most complex well yet was finished on time and under budget. Completion operations, including a multiple-frac program, are currently waiting on dry weather, and the removal of road bans.
Outlook
-------
Breaker anticipates a busy oil-weighted Q2 drilling program after breakup, with another horizontal well at Irricana, 1.5 (net) exploratory wells at Girouxville, and a three well program at Medicine Hat. The Girouxville wells include a 50% working interest follow-up to the first successful farmin well drilled in late 2006, and the first high-impact well on new 100% acreage acquired at a Crown landsale in January.
Breaker maintains an inventory of more than 200 predominantly medium to low risk, year round accessible drill locations. This high quality inventory is comprised of a balanced blend of both oil and natural gas opportunities. With these attributes Breaker has the rare flexibility to quickly shift capital expenditures between its oil and natural gas opportunities in response to any significant fluctuations to commodity prices, should they occur.
Outlook and 2007 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 medium/light oil reserves and production.
- High quality assets strategically focused in 2 core areas, with
operatorship (more than 95%) and high working interests (an average
of approximately 90%).
- Access to approximately 345,000 net acres of land to fuel future
growth.
- Drilling inventory of more than 200 drilling locations.
- Forecast capital expenditures of $46 million to drill 41 gross
(37.7 net) wells in 2007.
- Forecast production to average 4,750 boed in 2007 with a year-end
exit of 5,250 boed.
- Current production is balanced approximately 57% to natural gas and
43% to oil.
- An excellent balance sheet with a conservative debt to cash flow
ratio.
Breaker has had an excellent start to 2007 with the operations it performed in the first quarter and is well positioned to meet or exceed its production targets.
Financial Statements, Management's Discussion and Analysis and Annual
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Information Form
----------------
Breaker has filed with Canadian securities regulatory authorities its audited financial statements for the quarter and year ended December 31, 2006 and the accompanying Management's Discussion and Analysis. The Company has also filed its Annual Information Form ("AIF") in respect of fiscal year 2006, which includes its reserves data and other oil and gas information for the period ended December 31, 2006, 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 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