|
Attention Business/Financial Editors
Iteration Energy (ITX) announces March 31, 2008 quarter end results
/NOT FOR DISSEMINATION IN THE UNITED STATES OR OVER UNITED STATES
NEWSWIRE SERVICES/
(All amounts are in Canadian dollars, unless stated otherwise)
CALGARY, May 14 /CNW/ - Iteration Energy Ltd. (TSX-ITX) ("Iteration" or
the "Company") announced today its financial and operating results as at and
for the three months ended March 31, 2008. The financial statements, together
with Management's Discussion and Analysis (MD&A), have been filed on the
Company's SEDAR profile at www.sedar.com. They are also available on the
Company's website at www.iterationenergy.com.
FINANCIAL AND OPERATIONAL HIGHLIGHTS
Acquisition of Cyries Energy Inc.
On March 7, 2008, Iteration acquired Cyries Energy Inc ("Cyries"), by
Plan of Arrangement, (the "Arrangement"). Under the Arrangement, Iteration
issued 93,990,604 Iteration common shares to acquire the issued and
outstanding common shares, warrants and performance shares of Cyries. The
value attributed to each Iteration common share was $5.99 per share,
representing the volume weighted average trading price on the Toronto Stock
Exchange for an Iteration common share for the period from February 27, 2008
to March 6, 2008. This period includes the three trading days before and after
Iteration's announcement on March 3, 2008 of the increase in the exchange
ratio.
Upon completion of the Arrangement, Cyries became a wholly owned
subsidiary of Iteration with the existing Iteration shareholders, option
holders and warrant holders holding approximately 47% of the combined entity.
Although Cyries shareholders held 53% of the Iteration Common Shares on a
diluted basis following the arrangement, the transaction has been accounted
for as an acquisition of Cyries by Iteration, recognizing that Iteration is
the surviving legal entity, Iteration paid a premium to acquire Cyries and
Iteration's existing management and Board of Directors retained their
positions. The March 31, 2008 financial statements and MD&A incorporate the
operations Iteration Energy Ltd., Iteration Energy Inc., Iteration Energy and
Iteration Energy 2007 Partnership for the period from January 1 to March 31,
2008 and the operations of Cyries Energy Inc. for the period from March 8 to
March 31, 2008.
The acquisition was accounted for using the purchase method and the
purchase equation to record the transaction on a preliminary basis was as
follows;
<<
-------------------------------------------------------------------------
($000's)
-------------------------------------------------------------------------
Furniture and equipment $821
Property, plant and equipment 599,448
Goodwill 196,815
Debt assumed (111,045)
Working capital deficiency (20,333)
Future income tax liability (77,081)
Asset retirement obligation (14,275)
-------------------------------------------------------------------------
Total purchase price $574,350
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Consideration was comprised of :
Common shares $563,004
Transaction costs $11,346
-------------------------------------------------------------------------
Total consideration $574,350
-------------------------------------------------------------------------
-------------------------------------------------------------------------
The major highlights of the three months ended March 31, 2008 include:
- Completed the acquisition of Cyries Energy Inc. on March 7, 2008.
- Increased quarter over quarter average production by 36% to
approximately 10,900 boed. This represents an 86% increase over the
first quarter of 2007.
- Increased quarter end exit production by approximately 150% to 21,300
boed as compared to the December 31, 2007 exit rate.
- Funds from operations of $28.5 million ($0.31 per share) increased
155 % over the fourth quarter of 2007 and 130 % compared to the first
quarter of 2007.
- Drilled 25.1 net wells with a 93.2 % success record (2.9 oil, 19.5
gas, 1.0 injectors and 1.7 D&A). This includes 5.7 net wells drilled
after March 7, 2008 on land acquired from Cyries.
- Prior to its acquisition by Iteration on March 7, 2008, Cyries
drilled 12.9 net wells with a 100 % success ratio (9.9 gas and 3.0
oil).
- Increased the Company's land base to approximately 1,030,000 net
acres, 722,000 of which were undeveloped. This represents a 170%
increase over undeveloped lands held at December 31, 2007 and a 237%
increase in undeveloped lands compared to March 31, 2007.
FINANCIAL SUMMARY
Quarter over quarter comparative results are as follows:
-------------------------------------------------------------------------
Three Months Ended Mar 31,
-------------------------------------------------------------------------
2008 2007
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Production
-------------------------------------------------------------------------
Natural gas (mcf/d) 47,808 32,846
-------------------------------------------------------------------------
Natural gas liquids (bbls/day) 1,097 166
-------------------------------------------------------------------------
Light oil (bbls/day) 1,609 147
-------------------------------------------------------------------------
Heavy oil (bbls/day) 216 63
-------------------------------------------------------------------------
Total production (boed) 10,890 5,850
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Realized commodity price
Natural gas ($/mcf) $8.22 $7.37
-------------------------------------------------------------------------
Natural gas liquids ($/bbl) $46.08 $67.07
-------------------------------------------------------------------------
Light oil ($/bbl) $94.89 $61.01
-------------------------------------------------------------------------
Heavy oil ($/bbl) $68.11 $40.28
-------------------------------------------------------------------------
Blended ($/boe) $56.08 $45.09
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Royalty expense ($/boe) $11.79 $9.22
-------------------------------------------------------------------------
Production expense ($/boe) $10.29 $7.95
-------------------------------------------------------------------------
Transportation expense ($/boe) $1.48 $1.38
-------------------------------------------------------------------------
Operating netbacks ($/boe) $32.52 $26.53
-------------------------------------------------------------------------
-------------------------------------------------------------------------
General and admin expense ($/boe) $2.30 $2.07
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Production revenue before royalties ($M) $55,564 $23,744
-------------------------------------------------------------------------
Net earnings (loss) ($M) $1,689 $(3,669)
-------------------------------------------------------------------------
Earnings (loss) per basic and diluted share ($)(2) $0.02 $(0.06)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Funds from operations ($M)(1) $28,511 $12,379
-------------------------------------------------------------------------
Funds from operations per basic share ($)(2) $0.31 $0.22
-------------------------------------------------------------------------
Funds from operations per diluted share ($)(2) $0.30 $0.22
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Capital expenditures, property acquisitions ($ M) $1,618 $232
-------------------------------------------------------------------------
Capital expenditures, exploration and
development ($M) $40,156 $40,003
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Net undeveloped land (acres) 722,000 215,000
-------------------------------------------------------------------------
(1) Management uses funds from operations and funds from operations per
share (before changes in non-cash working capital and asset
retirement expenditures) to analyze operating performance and
leverage. Funds and funds per share as presented do not have any
standardized meaning prescribed by Canadian GAAP and therefore they
may not be comparable with the calculation of similar measures for
other entities. Funds as presented is not intended to represent
operating cash flow or operating profits for the period nor should it
be viewed as an alternative to cash flow from operating activities,
net earnings or other measures of financial performance calculated in
accordance with Canadian GAAP. All references to funds and funds per
share throughout this report are based on cash flow from operating
activities before changes in non-cash working capital and asset
retirement expenditures.
(2) For periods with positive net earnings, per share amounts are
based on weighted average basic and diluted common shares outstanding
for the period. For periods with a net loss, per share amounts are
based on basic common shares outstanding for the period.
>>
Outlook for 2008
The acquisition of Cyries Energy Inc. closed on March 7, 2008, and has
transformed the Company into an intermediate producer. The exit rate of
production for March 31, 2008 was approximately 21,000 boed. The average
production rate for the month of April, 2008 was lower, at approximately
20,000 boed, as a result of traditional plant turnarounds and normal
production declines which cannot be mitigated due to surface access
restrictions. Production rates will rebound once surface access restrictions
are lifted and the Company can continue its planned drilling program in June.
In addition, substantially all of the Company's British Columbia production
will be down for three weeks in June, due to the scheduled turnaround of the
McMahon gas plant.
The Company has a large inventory of drilling prospects on its current
land base which is expected to drive future growth. For 2008, the largest
focus areas for the Company will be in the Deep Basin and Peace River Arch
areas of Western Alberta and North East British Columbia. These two areas
currently account for approximately two thirds of the Company's production and
are prospective for liquids rich gas and light oil. Production from these
areas will be complemented by exploration and exploitation opportunities for
dry gas and heavy oil in Eastern Alberta, as well as additional light oil
prospects in North West and South East Alberta. The range of prospects
provides a mixture of summer and winter access opportunities and allows the
Company flexibility to focus its activity in those areas which will provide
maximum return under prevailing commodity prices and conditions. The following
guidance reflects the currently planned program and does not include capital
for any acquisitions we may pursue beyond that for minor partner interest
buy-ups.
<<
-------------------------------------------------------------------------
Expected 2008 Program Iteration(1)
-------------------------------------------------------------------------
Average 2008 production (boed) 17,500
Year end 2008 exit production (boed) 22,000 to 24,000
Capital program ($ million) 212
Funds from operations ($ million)(2) 243
Year end net debt ($ million) 187
Debt to annualized Q4 funds flow ratio 0.6
Net wells 115
-------------------------------------------------------------------------
(1) Includes results of operations of Iteration Energy Inc. for the
period from January 1 to December 31, 2008 and Cyries Energy Inc. for
the period from March 8 to December 31, 2008.
(2) Includes the net cost of approximately $16 million for the Company
to repurchase in September 2008 the remaining 3.7 million outstanding
warrants for the amount market value exceeds exercise price,
calculated assuming a market value of $7.25 per common share. The
repurchase of the warrants is subject to approval by the Company's
shareholders at the 2008 Annual General Meeting of amendments to the
terms of the warrants. The proposed amendments are more fully
described in the Company's Information Circular regarding the Annual
General Meeting. The 2008 program is expected to include a number of
multi frac horizontal wells which will allow for the evaluation of
production and reserve uplift potential that may be realized in
several Cretaceous and Triassic reservoirs which are present on the
Company's lands.
>>
The recent rise in commodity prices coupled with increased production
from operations has led to a significant increase in the projected funds from
operations for the balance of the year. However, both commodity prices and
costs of services can change rapidly so we are prepared to adjusted capital
spending appropriately. The Company's very strong balance sheet will allow us
to pursue accretive acquisitions should they arise to further enhance
production growth.
Advisory - Forward-Looking Information
Natural gas is converted to crude oil equivalent at a ratio of six
thousand cubic feet to one barrel. Boe's may be misleading, particularly if
used in isolation. A boe conversion ratio of 6 mcf:1 bbl is based on an energy
equivalency conversion method primarily applicable at the burner tip and does
not represent a value equivalency at the wellhead.
This press release was prepared on May 14, 2008 and is management's
assessment of Iteration's historical financial and operating results. The
reader should be aware that historical results are not necessarily indicative
of future performance. This press release contains forward-looking statements
relating to future events or future performance. In some cases,
forward-looking statements can be identified by terminology such as "may",
"will", "should"," expects", "projects", "plans", "anticipates" and similar
expressions. These statements represent management's expectations or beliefs
concerning, among other things, future operating results and various
components thereof affecting the economic performance of Iteration. Undue
reliance should not be placed on these forward-looking statements which are
based upon management's assumptions and are subject to known and unknown risks
and uncertainties, including the business risks discussed below, which may
cause actual performance and financial results in future periods to differ
materially from any projections of future performance or results expressed or
implied by such forward-looking statements. Accordingly, readers are cautioned
that events or circumstances could cause results to differ materially from
those predicted. The Company undertakes no obligation, except as required by
applicable securities legislation, to update publicly or to revise any of the
included forward looking statements, whether as a result of new information,
future events or otherwise.
The forward looking statements contained herein are expressly qualified
by this cautionary statement. Readers are cautioned that the following list of
risk factors is not exhaustive.
In particular, this discussion contains forward-looking statements and
information pertaining to the following:
<<
- The quantity and recoverability of our reserves;
- The timing and amount of future production;
- Prices for natural gas produced;
- Operating and other costs;
- Business strategies and plans of management;
- Supply and demand of natural gas;
- Expectations regarding our ability to raise capital and to add to our
reserves through acquisitions as well as exploration and development;
- The focus of capital expenditures on development activity rather than
exploration;
- The sale, farming in, farming out or development of certain
exploration properties using third party resources;
- The use of development activity and acquisitions to replace and add
to reserves;
- The impact of changes in natural gas prices on cash flow after
hedging;
- Drilling plans;
- The existence, operation and strategy of the commodity price risk
management program;
- The approximate and maximum amount of forward sales and hedging to be
employed;
- The Company's acquisition strategy, and the criteria to be considered
and the benefits to be derived;
- The impact of Canadian federal and provincial governmental regulation
on the Company relative to other issuers of similar size;
- Our treatment under governmental regulatory regimes;
- The goal to sustain or grow production and reserves through prudent
management and acquisition;
- The emergence of accretive growth opportunities; and
- The Company's ability to benefit from the combination of growth
opportunities and the means to grow through the capital markets.
Iteration's actual results could differ materially from those anticipated
in our forward-looking statements as a result of the risk factors set forth
below and noted elsewhere in this MD&A which include but are not limited to:
- Volatility in market prices for natural gas;
- Risks inherent in our operations;
- Uncertainties associated with estimating reserves;
- Competition for, among other things: capital, acquisitions of
reserves, undeveloped lands and skilled personnel;
- Incorrect assessments of the value of acquisitions;
- Geological, technical, drilling and process problems;
- General economic conditions including fluctuations in the price of
natural gas;
- Royalties payable in respect of Iteration's production;
- Governmental regulation of the oil and gas industry, including
environmental regulation;
- Fluctuation in foreign exchange or interest rates;
- Unanticipated operational events that can reduce production or cause
production to be shut-in or delayed;
- Stock market volatility and market valuations;
- The need to obtain required approvals from regulatory authorities;
- Environmental risks;
- Insurance limitations risks;
- Risks inherent in replacing reserves;
- Reliance on operators and key employees;
- Access to funding and issuance of debt;
- Aboriginal claims; and
- Availability of drilling equipment, access restrictions and cost
inflation.
>>
Many of these risk factors and uncertainties are discussed in further
detail in the Management's Discussion and Analysis and the Annual Information
Form for the year ended December 31, 2007.
The TSX has not reviewed this press release and does not accept
responsibility for the accuracy of any of the data presented here-in.
-30-
/For further information: Mr. Brian Illing, President and CEO, or Mr.
Sean Johnson, CFO, at (403) 261-6883/
|
NEWS RELEASES