/NOT FOR DISTRIBUTION TO UNITED STATES NEWS WIRE SERVICES OR FOR
DISSEMINATION IN THE UNITED STATES/
CALGARY, March 28 /CNW/ - Upper Lake Oil and Gas Ltd. (TSX:UP) ("Upper Lake") is pleased to announce its financial, reserves and operating results for the year ended December 31, 2007.
Upper Lake also announces today that it has filed on SEDAR its Annual Information Form for the period ended December 31, 2007, which includes Form 51-101F1: Statement of Reserves Data and Other Oil and Gas Information, Form 51-101F2: Report of Independent Qualified Reserves Evaluator and Form 51-101F3: Report of Management and Directors under National Instrument 51-101 Standards of Disclosure for Oil and Gas Activities. Copies of the filings can be obtained electronically through SEDAR at www.sedar.com.
Year-End Financial and Operating Results
The following table provides a summary of Upper Lake's financial and operating results for the period from October 12, 2007 to December 31, 2007. Upper Lake's financial statements and management's discussion and analysis for the period ended December 31, 2007 have been filed on SEDAR.
Selected Period Information
Period ended December 31, 2007
(000's except per share amounts and production)
Production - barrels of oil equivalent per day (boe/d) .......... 731
Revenue ......................................................... $2,811
Revenue ($/boe) ................................................. 48.10
Funds flow from operations(1) ................................... 924
$ per share - basic and diluted ............................... 0.04
Net (loss) ...................................................... (905)
$ per share - basic and diluted ............................... (0.04)
Capital expenditures ............................................ 2,431
Bank debt and working capital deficiency ........................ 1,728
(1) Funds flow from operations is a "Non-GAAP" measure. See "Non GAAP
Financial Measures".
Highlights
- Achieved average daily production of 731 boe/d for the period
October 12 to December 31, 2007
- Realized funds flow from operations of $924 thousand ($0.04 per
share)
- Limited net debt to $1.7 million at December 31, 2007
- Achieved a net asset value before tax of $1.19 per basic share (using
a 10% discount rate)
- Drilled two (1.48 net) wells, resulting in one oil well and one dual
zone gas well.
Upper Lake's assets consist of exploration plays, producing properties, related tangibles and undeveloped lands that were acquired by Upper Lake from Diamond Tree Energy Ltd. on October 12, 2007 pursuant to an arrangement involving Diamond Tree, Crocotta Energy Inc. and Upper Lake.
Operations Summary
At the time of the arrangement with Crocotta, the assets transferred to Upper Lake were producing approximately 620 boe/d. Upper Lake took steps to increase production during the period ended December 31, 2007 to average 731 boe/d. Production as at December 31, 2007 was approximately 850 boe/d. Current production is approximately 900 boe/d.
Total sales revenue for the period ended December 31, 2007 was $2.8 million and funds flow from operations for the period was $924 thousand. Royalties for the period ended December 31, 2007 totaled $624 thousand and royalties as a percentage of sales averaged 22.2%. Operating expenses for the period ended December 31, 2007 totaled $694 thousand or $11.89 per boe. A net loss of $905 thousand was incurred for the period. The depletion, amortization and accretion provision for the period ended December 31, 2007 was $1.9 million. According to Canadian GAAP, the depletion rate must reflect a portion of the full cost pool of the assets coming from Diamond Tree. The commencement of operations late in the year and one-time start-up costs affected general and administrative costs.
Reserves Summary
Upper Lake's gas reserves, as assessed by GLJ Petroleum Consultants Ltd. ("GLJ") in its report dated effective December 31, 2007 ("the GLJ Report") and prepared in accordance with National Instrument 51-101 Standards of Disclosure for Oil and Gas Activities presents the following summary of Upper Lake's reserves, before the deduction of royalties, using forecast prices and costs. A full disclosure of Upper Lake's reserves can be found in the Annual Information Form on SEDAR.
Summary of Oil and Gas Reserves
(Forecast Prices and Costs)
Light
and Medium Natural Natural Gas
Oil Gas Liquids BOE
--------------------------------------------------------
Reserves Gross Net Gross Net Gross Net Gross Net
Category (Mbbl) (Mbbl) (MMcf) (MMcf) (Mbbl) (Mbbl) (Mboe) (Mboe)
--------------- ------ ------ ------ ------ ------ ------ ------ ------
PROVED
Developed
Producing 75 58 2,719 2,217 107 82 636 509
Developed
Non-Producing 137 104 605 451 25 18 263 196
Undeveloped 0 0 0 0 0 0 0 0
--------------------------------------------------------
TOTAL PROVED 213 162 3,324 2,667 132 99 900 706
PROBABLE 106 81 1,538 1,232 54 40 416 326
------- ------------- ------------- ------------- ------
TOTAL PROVED
PLUS PROBABLE 318 243 4,862 3,899 186 139 1,316 1,032
------- ------------- ------------- ------------- ------
------- ------------- ------------- ------------- ------
Reserves Values
The estimated net present values of future net revenue before income taxes
associated with Upper Lake's reserves as set out in the GLJ Report, based on
forecast costs and prices, are summarized in the following table:
Net Present Values of Future Net Revenue
(Forecast Prices and Costs)
Before Income Taxes Discounted at (%/Year)
-----------------------------------------------------
Reserves 0 5 10 15 20
Category (M$) (M$) (M$) (M$) (M$)
------------------ --------- --------- --------- --------- ---------
PROVED
Developed
Producing 16,863 15,638 14,621 13,760 13,021
Developed
Non-Producing 8,464 7,579 6,860 6,267 5,772
Undeveloped 0 0 0 0 0
TOTAL PROVED 25,327 23,216 21,480 20,027 18,793
PROBABLE 11,224 9,083 7,556 6,427 5,567
--------- --------- --------- --------- ---------
TOTAL PROVED PLUS
TOTAL PROBABLE 36,550 32,299 29,036 26,454 24,360
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Price Forecast
The GLJ price forecast used in the GLJ Report for the next five years is
as follows:
Natural
Light and Medium Natural Gas Inflation Exchange
Crude Oil Gas Liquids Rate Rate
----------------------- ---------- ---------- ---------- ---------
Edmonton
WTI Par Price Edmonton
Cushing 40 degrees AECO Gas Pentanes
Oklahoma API Price Plus
($US/bbl) ($Cdn/bbl) ($Cdn/Mcf) ($Cdn/bbl) %/year $US/$Cdn
----------- ----------- ---------- ---------- ---------- ---------
Year
2008 92.00 91.10 6.75 92.92 2.0 1.000
2009 88.00 87.10 7.55 88.84 2.0 1.000
2010 84.00 83.10 7.60 84.76 2.0 1.000
2011 82.00 81.10 7.60 82.72 2.0 1.000
2012 82.00 81.10 7.60 82.72 2.0 1.000
Net Asset Value
Upper Lake's net asset value ("NAV") as at December 31, 2007, based on
GLJ's price forecast, is as follows:
(000's except per share amounts)
Net present values of future net revenue (before income tax)
of proved & probable reserves discounted at 10% ................ 29,036
Undeveloped land (18,837 net acres)(1) .......................... 2,957
Bank debt and working capital deficiency ........................ (1,728)
Net asset value ................................................. 30,265
Shares outstanding (basic) ...................................... 25,337
Net asset value per share ....................................... 1.19
Note:
(1) Land value has been calculated at cost - $157/acre.
GLJ prepared a sensitivity analysis on the effect on the net present value of Upper Lakes reserves as set out in the GJL report under the new royalty framework as proposed by the Alberta Government. The analysis shows that the net present value would be negatively affected by less than 5%.
Tupper-Triassic Montney Play
Upper Lake has now assembled 11,300 (3,374 net) acres of land on the Tupper-Triassic Montney resource play in northeast British Columbia. Upper Lake recently re-entered a vertical well and testing of the Montney is underway. Although very preliminary, results to date have been promising. This play is expected to be developed using vertical delineation wellbores and horizontal producing wells. Current area development utilizes four horizontal wells per section.
Upper Lake is a Calgary-based corporation engaged in the exploration, development and production of oil and natural gas in western Canada. Upper Lake was incorporated on August 1, 2007 to participate in the arrangement (completed on October 12, 2007) involving Diamond Tree Energy Ltd., Crocotta Energy Ltd. and Upper Lake, whereby all the securities of Diamond Tree were acquired by Crocotta and certain of the oil and gas assets of Diamond Tree were sold to the Corporation. Pursuant to the arrangement, Upper Lake acquired from Diamond Tree certain oil and gas assets at a purchase price of $30 million, which was paid by the issuance of a non-interest bearing promissory note to Diamond Tree. These oil and gas assets constituted substantially all of the assets of Upper Lake on October 12, 2007. Additional information concerning Upper Lake is available on its website at www.upperlake.ca or on SEDAR at www.sedar.com.
Non-GAAP Financial Measures
This press release includes information concerning "funds flow from operations", which is a non-GAAP financial measures that do not have any standardized meaning prescribed by Canadian Generally Accepted Accounting Principles ("GAAP") and are therefore unlikely to be comparable to similar measures presented by other issuers. Management and the directors of Upper Lake believe that "funds flow from continuing operations", "funds flow from operations" and "field netback" provide useful information to investors and management since they are an indicator of the Company's ability to fund future capital expenditures, which drives growth, and to repay debt. Funds flow from continuing operations and funds flow from operations are calculated before changes in non-cash working capital. See the "Reconciliation of Non-GAAP Financial Measures" section of the MD&A for the period ended December 31, 2007 for a reconciliation of funds flow from operations to net earnings from continuing operations, the most comparable measure calculated in accordance with GAAP. Other financial data has been prepared in accordance with GAAP.
Boe
All calculations converting natural gas to a crude oil equivalent have been made using a ratio of six mcf of natural gas to one barrel of crude oil equivalent. A boe may be misleading, particularly if used in isolation. A boe conversion ratio of six mcf of natural gas to one barrel of crude oil equivalent is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.
Forward Looking Statements
This press release contains certain forward-looking statements and forward-looking information (collectively referred to herein as "forward-looking statements") within the meaning of Canadian securities laws. All statements other than statements of historical fact are forward-looking statements. Forward-looking information typically contains statements with words such as "anticipate", "believe", "plan", "continuous", "estimate", "expect", "may", "will", "project", "should", or similar words suggesting future outcomes. This press release contains forward-looking statements pertaining to the following: forecast capital expenditures, future exploration and development plans, forecast operating costs, general and administration expenses and anticipated production rates and production mix, royalty rates, funds flow from operations and reserves. Statements relating to "reserves" are forward-looking statements, as they involve the implied assessment, based on certain estimates and assumptions that the reserves described exist in the quantities predicted or estimated and can profitably be produced in the future.
The forward-looking statements are based on the Upper Lake's current beliefs as well as assumptions made by, and information currently available to, the Upper Lake. Forecast capital expenditures are based on Upper Lake's current budgets and development plans which are subject to change based on commodity prices, market conditions, drilling success, potential timing delays and changes in royalty rates. Additionally, forecast capital expenditures do not include capital required to pursue future acquisitions. Anticipated production and product mix have been estimated based on the proposed drilling program with a success rate based upon historical drilling success and an evaluation of the particular wells to be drilled. Operating costs and general and administration expenses have been projected based on historical information and anticipated increases in the cost of equipment and services. Funds flow from operations are based on the Upper Lake's current budget and development plans. Although management considers these assumptions to be reasonable based on information currently available to it, they may prove to be incorrect.
By their very nature, forward-looking statements involve inherent risks and uncertainties (both general and specific) and risks that forward-looking statements will not be achieved. Undue reliance should not be placed on forward-looking statements, as a number of important factors could cause the actual results to differ materially from the beliefs, plans, objectives, expectations and anticipations, estimates and intentions expressed in the forward-looking statements. These factors may be found under the heading "Risk Factors" in the Annual Information Form for the year ended December 31, 2007. Readers are cautioned that the foregoing list of factors that may affect future results is not exhaustive.
The forward-looking statements contained in this press release are made as of the date hereof and the Upper Lake's does not undertake any obligation to update publicly or to revise any of the included forward-looking statements, except as required by applicable law. The forward-looking statements contained herein are expressly qualified by this cautionary statement.