CALGARY, Nov. 6 /CNW/ - Breaker Energy Ltd. ("Breaker" or "Company") (TSX: WAV.A and WAV.B) has prepared an estimate of the effect on net asset value and cash flow of the announced Alberta royalty rate changes.
The Alberta New Royalty Framework (NRF) announced October 25, 2007 is estimated to have an impact on the net present value of Breaker of less than five percent and a maximum reduction in cash flow of six percent in 2009, the first year of the NRF. This estimate is based on the GLJ 2007-01 price forecast.
Breaker has been subject to significant changes in its operating business environments. These changes include proposed future increases in the provincial royalties, decreases in federal tax rates, decreases in natural gas prices, increases in oil prices and the Canadian to US dollar exchange rate and decreases in capital costs due to lowered operating activity in the Canadian oil and gas sector.
The changes are significant, complex, and affect the operating business in both positive and negative ways. Breaker is well positioned to capitalize on the changing fiscal environment it faces due to its strong balance sheet and asset base which consists of both excellent petroleum and human resources. Changes in the business environment can result in opportunities which a company like Breaker can capitalize upon.
The core of the NRF is available with further clarifications being released since the October 25th announcement. Breaker has investigated the changes internally and has also commissioned GLJ Petroleum Consultants (GLJ) to assess financial impacts to the best of their ability and using publicly available information on the NRF.
GLJ previously conducted the evaluation of Breaker, which formed the basis of Breaker's reserves disclosure effective December 31, 2006. The associated economic forecasts were modified by GLJ and rerun to include the provisions of the NRF (the NRF rerun).
A comparison of results from the base evaluation and the NRF rerun indicates that, if implemented, the NRF would have a negative impact on Breaker's net present value of less than five percent (based on 10% DCF pre-tax net present value of P+P reserves). The reduction in present value was also found to be less than five percent when the base and NRF projections were rerun utilizing October 30, 2007 strip prices.
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 35,130,258 Class A shares and 900,000 Class B shares outstanding.
Breaker trades on the TSX under the symbols WAV.A and WAV.B.
Forward-Looking Statements
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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, 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.
The TSX does not accept responsibility for the adequacy or accuracy of
this release.
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