CALGARY, Jan. 9 /CNW/ - Result is pleased to announce that its Board of Directors has approved an initial 2007 capital budget of $14 million. Current plans include the drilling of 10 wells during the first six months of 2007. An overview of the main corporate targets for 2007 include:
- Drill 23 wells in 2007 (at an overall average working interest of 50%). - Build production to average 1,650 boed for 2007, and exit the year with production of at least 1,800 boed. Result's field estimated production rate for the month of December, 2006 was approximately 1,300 boed. - Expand operating cash flow to at least $11 million, or $0.22 per share (based on 1,650 boed annual average and a $7.00 average Alberta natural gas spot price for 2007).
Operations Update
Central Alberta W5M
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At Pembina/Modeste, Result's volumes from two gas wells began flowing in July when a third party compression facility came on stream. These Viking gas wells have an estimated combined production capacity of 3,200 mcfd (266 boed net), but have initially produced at constrained rates ranging from 700 mcfd to 3,000 mcfd gross due to down-stream facility limitations. Result expects the capacity constraints at Modeste will be fully resolved in 2007 and upwards of 100 boed of net capacity will begin to flow on a daily basis at that time.
Going forward into 2007, Result has developed more Viking gas prospects in the Modeste area based on new 3-D seismic and plans to drill at least one exploratory well in Q1. The Company has also entered into a 5-section farmin which should provide additional prospect inventory through 2007.
At Windfall in Central Alberta, Result acquired interests in 4 sections of land, with farmin options on additional sections. The Company is pursuing liquids-rich Devonian gas targets based on 3-D seismic. At least one exploratory well is expected to be drilled in the first 6-months of 2007 (30% WI).
Peace River Arch
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At Clearhills, Result is producing 3,400 mcfd gross (265 boed net) from 4 gas wells. A new gas processing facility came on stream in September and is now handling this production. This new gas plant has provided momentum for Result to expand its exploration for Charlie Lake gas pools in the Clearhills area and, as a result, the Company plans to drill up to 4 new wells in Q1-07.
Just east of Clearhills at Worsley/Eureka, two additional Leduc gas wells (36.4% and 50% WI) were drilled in Q2-06, both of which commenced flowing in July. A third well (50% WI) was also drilled and successfully completed during Q3 and will commence production in early Q1-07 adding 125 boed net to Result.
Looking ahead to 2007, acquisition of 3-D seismic will cover new leases that were acquired in 2006. Additional 3-D seismic will cover prospect areas adjacent to a new pool discovery made in mid-2006 and completion operations are planned for several wells which were previously suspended. One step out well is planned in Q1 with 1 contingent well slated for early Q3.
The Company will also participate (20% WI) in a 3,300 meter exploration well at Kakwa during Q1-07.
Saskatchewan
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In the greater Dodsland core area, Result drilled 11 (7.1 net) wells in June. Of these, 5 Viking gas wells (2.5 net) came on stream in July, 1 oil and 1 gas well (1.5 net) commenced production in late Q4-06, 2 (1.5 net) gas wells are not yet on production, and 2 (1.6 net) wells were D&A.
The Q2 program included a 2-section pilot project in which Viking down-spacing was increased from 2 to 4 wells per section. This down-spacing program is very promising, and subject to satisfactory ongoing well performance, a field-wide 4 well down-spacing program could add up to 32 additional development locations for 2008.
Financing activities and commencement of Normal Course Issuer Bid
Result conducted an interim update of its oil & natural gas reserves, as at September 30, 2006. This update, which was performed by the Company's third party reserve evaluators, resulted in a significant increase to total proved plus probable additional reserves as compared to December 31, 2005. Result's revolving credit facility is currently being reviewed in conjunction with this significant increase in reserve volumes.
Based on preliminary discussions, Result expanded its credit line from a prior limit of $9.6 million to a revised initial limit of $12.5 million, with further expansion through Q1-07 up to $15 million as additional production comes on-stream. The expanded bank facility plus increasing production and related operating cash flows gives Result flexibility to pursue its 2007 exploration and development plans.
Result also announces that a Notice of Intention to Make an Issuer Bid has been filed with the TSX Venture Exchange, and Result has received all required regulatory approvals and is in compliance with applicable securities laws, rules and regulations, to permit Result to make a normal course issuer bid (the "Bid") for up to 4,403,087 of its Common Shares (the "Shares"). As at December 31, 2006, Result had 47,658,138 Shares issued and outstanding, and the 4,403,087 shares represent 10% of Result's "Public Float" as defined in the policies of the TSX Venture Exchange.
The Bid will commence on or about January 5, 2007 and shall terminate on or about January 5, 2008, or such earlier date as Result may complete its purchases under the Bid. Purchases pursuant to the Bid will be made from time to time by D & D Securities Company on behalf of Result through the facilities of the TSX Venture Exchange, with the purchase and payment for the Shares to be made in accordance with Exchange requirements at the market price of the Shares at the time of the acquisition. Result will make no purchases of Shares other than open market purchases, and all Shares purchased by Result under the Bid will be cancelled. During the preceding 12 months period, Result has not purchased any of its Shares.
The Company considers the normal course issuer bid to be in the best interests of Result and its shareholders. Due to the volatility in the financial markets and commodity pricing, Result believes that its Shares may trade in a price range which does not fully reflect the value of Result's business and its future business prospects. As a result, depending on market conditions and other factors, Result believes the purchase of its Shares may represent an appropriate and desirable use of its available funds.
Investors are cautioned that this news release contains forward looking information. Such information is subject to known and unknown risks, uncertainties and other factors that could influence actual results or events and cause actual results or events to differ materially from those stated, anticipated or implied in the forward-looking information. Readers are cautioned not to place undue reliance on forward-looking information, as no assurances can be given as to future results, levels of activity or achievements.
The term barrels of oil equivalent ("boe") may be misleading, particularly if used in isolation. A boe conversion ratio of six thousand cubic feet per barrel (6mcf/bbl) of natural gas to barrels of oil equivalence is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. All boe conversions herein are derived from converting gas to oil in the ratio mix of six thousand cubic feet of gas to one barrel of oil.
Result Energy Inc. is a publicly traded Canadian energy company involved in the exploration and development of oil and gas properties in western Canada. Result trades on the TSX Venture Exchange under the symbol "RTE".
The TSX Venture Exchange does not accept responsibility for the adequacy
and accuracy of this release.