Winstar Resources extends strength of 2007 into first quarter of 2008
CALGARY, May 14 /CNW/ - Winstar Resources Ltd. ("Winstar" or "the
Company") (TSX:WIX) releases its operating and financial results for the first
quarter of 2008 and provides an overview of its plans and perspectives for the
remainder of the year.
Winstar is pleased with its first quarter results, which extend the
record results reported in 2007. Anticipated year over year growth has
continued with the successful drilling of the Chouech Essaida No.8 (CS No.8)
well during the first quarter. Operational and financial growth is projected
to build during the remainder of 2008 and beyond with, in particular, the
drilling of up to three new high-impact Tunisian wells.
The Company achieved its operational objectives in the first quarter of
2008. Winstar produced an average of 1,893 boepd during the first quarter,
including 1,317 boepd in Tunisia, 336 boepd in Canada and 240 boepd in
Hungary. Winstar is currently producing a total of about 2,000 boepd.
Because Winstar did not sell some of its first quarter production until
the second quarter, the Company's first quarter financial results do not fully
reflect Winstar's operational performance. During the first quarter, the
Company sold 1,640 boepd while producing 1,893 boepd. This resulted in funds
from operations of $7.3 million, higher than the average quarterly funds from
operations in 2007 of $7.0 million. At the end the first quarter of 2008,
27,225 barrels of light crude oil (net of royalty) remained in storage tanks
awaiting a tanker for shipment, compared with only 4,181 barrels in stock at
the beginning of the quarter. This crude oil inventory was sold subsequent to
the end of the quarter from April 8 to 10, 2008 for more than $110 per barrel.
Based on the average cash flow netback of $70.11 per barrel in Tunisia in the
first quarter, the Company estimates the Tunisian crude oil quarter-end
inventory could have added $1.9 million to funds from operations had it been
sold during the first quarter. The Company expects to have little or no crude
oil in inventory by the end of the second quarter of 2008.
Earnings for the first quarter were $1.4 million, as compared to the
average quarterly earnings for 2007 of $1.5 million. As of March 31, 2008, the
Company had working capital of $22.2 million, which maintains a strong balance
sheet.
During the first quarter of 2008, the Company spent $10.9 million on
capital expenditures, including $9.5 million in Tunisia. Winstar expects to
continue to focus its drilling in Tunisia, with 80% of its capital budget
dedicated to activities in this country. Capital expenditures for the
remainder of the year are expected to be funded through current working
capital and anticipated funds from operations during the next nine months.
Operating and Financial Summary:
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Quarterly
Three Months Ended March 31, Averages
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Highlights % %
(CDN $ thousands) 2008 2007 Change 2007 Change
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Production, Sales and Prices
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Production (boep/d) 1,893 2,083 (9) 1,948 (3)
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Sales
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Natural gas sales (Mcf/d) 3,491 5,876 (41) 4,275 (18)
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Oil and NGL sales (boep/d) 1,058 1,546 (32) 1,300 (19)
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Sales (boep/d) 1,640 2,525 (35) 2,013 (19)
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Average natural gas price ($/Mcf) 8.40 8.74 (4) 8.06 4
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Average oil and NGL price($/bbl) 97.54 67.08 45 74.98 30
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Financial ($)
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Oil and gas revenue 12,064 13,955 (14) 11,569 4
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Funds from operations 7,292 8,087 (10) 6,959 5
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Per share - basic 0.21 0.28 (23) 0.23 (7)
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diluted 0.21 0.28 (25) 0.22 (7)
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Net (loss)/income 1,368 4,520 (70) 1,490 (8)
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Per share - basic 0.04 0.16 (75) 0.05 (18)
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diluted 0.04 0.16 (75) 0.05 (18)
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Working capital at period end 22,223 3,149 606 25,391 (12)
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Long term debt at period end - - - - -
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Shareholders' equity at
period end 95,430 72,980 31 91,803 4
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Common Shares (thousands)
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Weighted average during the
period - Basic 34,022 28,740 18 30,294 12
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-Diluted 34,749 28,965 20 30,954 12
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Outstanding at period end 34,064 28,740 19 33,984 0
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Production
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Production during the first quarter of 2008 was as expected. Significant
production additions are projected for the third and fourth quarter of the
year when natural gas from several zones in existing wells and new Triassic
oil wells at Chouech Essaida are expected to be shipped to market. During the
first quarter, the Company drilled and completed CS No.8 and reported an
initial productive capacity of 555 boepd from two zones. During the second
quarter, the Company placed one zone at CS No.8 on production that appears to
have stabilized at 250 bopd. The second zone at CS No.8 is expected to be
placed on stream in July when the well is equipped with a dual completion
production assembly.
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Production Quarterly
Three Months Ended March 31, Averages
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% %
2008 2007 Change 2007 Change
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Production Area (boepd)
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Ferrier and other 256 333 (23) 311 (18)
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Taber 80 94 (15) 87 (8)
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Canada Total 336 427 (21) 398 (16)
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Torokkoppany 240 583 (59) 322 (25)
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Sabria 496 258 92 425 17
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Zinnia 15 101 (85) 62 (76)
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Sanrhar 102 30 240 82 24
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Chouech Essaida 704 684 3 659 7
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Tunisia Total 1,317 1,073 23 1,228 7
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Total boepd 1,893 2,083 (9) 1,948 (3)
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Plans and Perspectives for 2008
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Tunisia
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Winstar expects to drill one (100%) additional Triassic well at Chouech
Essaida during the second quarter. A new 100% owned 80 kilometer six-inch
natural gas pipeline from Chouech Essaida to El Borma is now approved and is
estimated to be operational by year end. All equipment to fulfill the above
program has been ordered and is in transit.
The Company began its 400 square kilometer 3D seismic program at Chouech
Essaida and Ech Chouech in February. The acquisition of the seismic data is
expected to be completed in June. The data will then require up to six months
for processing and an additional three to six months for interpretation, at
which time the Company will evaluate drilling additional high-impact Triassic
prospects and better evaluate Silurian exploration potential during the first
and second quarters of 2009.
Hungary
-------
Winstar's large (100%) Igal Exploration Permit and Mining Plot in Hungary
are very attractive. The Company's acreage is on trend with high-impact
shallow (1,500 meter) gas fields within Miocene sandstone. These fields have
recently been explored with a high success rate by other companies using 3D
seismic and AVO processing. Winstar believes its acreage has significant
potential and intends to continue the exploration cycle by drilling a first
well in early summer to confirm the reservoir quality of the target zone.
Further to this well's results, the Company is contemplating the acquisition
of 3D seismic data and the drilling of exploration wells. The entire process
is contemplated to take up to the end of 2009.
Canada
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Excluding possible acquisitions, the Company expects to produce in excess
of 400 boepd in Canada in 2008. In addition, Winstar will continue to evaluate
its 87,900 gross acres of undeveloped land. The Company anticipates minimal
impact from the Alberta Royalty Framework and expects to pay no tax in 2008,
having the benefit of approximately $34.7 million in tax pools.
Romania
-------
On April 10, 2008, Winstar announced a 1,100 square mile farm-in
agreement with the Rompetrol Group on the Satu Mare permit in northwestern
Romania. Results in oil and gas fields surrounding the block, together with
hydrocarbon tests from wells within the block, are encouraging. The European
oil industry was essentially started in Romania in the 19th century, and
Winstar hopes that applying new technology to known fields will pay long term
dividends through the drilling of new wells and the application of enhanced
exploration and production techniques.
Overall
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The addition of Romania to Winstar's portfolio is a strategic move
designed to ensure the Company has a number of high-impact opportunities at
different stages of development at all times. The Company remains focused on
developing its excellent prospects in Tunisia with multiple years of drilling
potential subject to continued success at Sabria and encouraging 3D results at
Chouech Essaida and Ech Chouech.
Winstar looks forward to operational and financial growth through
continued success in Tunisia from 2008 to 2012, high-impact prospects in
Hungary, development drilling in Canada and expectations of the Company's
first round of drilling in Romania.
We maintain our March 27, 2008 production guidance. The company perceives
that the risk is more in the possible delay of equipment and services, which
may affect the ability to meet short term production targets, rather than in
well deliverability and technical results.
Short term growth is affected by many uncontrollable events, including
but not limited to material and human resource shortages. The company is very
comfortable with its long term prospects and will emphasize these prospects in
additional disclosure in the upcoming months.
BOE
References herein to boe mean barrels of oil equivalent derived by
converting gas to oil in the ratio of six thousand cubic feet (Mcf) of gas to
one barrel (bbl) of oil. Boe may be misleading, particularly if used in
isolation. A boe conversion ratio of 6 Mcf:1 bbl is based upon an energy
conversion method primarily applicable at the burner tip and does not
represent a value equivalency at the wellhead.
Non-GAAP Measures
The Company uses the terms "funds from operations," "funds from
operations per share" and "netbacks" which are not recognized measures under
Canadian generally accepted accounting principles. The Company uses these
measures to help evaluate its performance. Management considers netbacks an
important measure as it demonstrates the Company's profitability relative to
current commodity prices. Netbacks are calculated as revenue plus
international royalty income net of royalties, operating, transportation,
general and administrative and current tax expenses. Management uses funds
from operations to analyze performance and considers it a key measure as it
demonstrates the Company's ability to generate the cash necessary to fund
future capital investments and to repay debt. Funds from operations have been
defined by the Company as cash flow from operating activities excluding the
change in non-cash working capital related to operating activities, geological
and geophysical expenses and expenditures on asset retirement obligations and
reclamation. The Company also presents funds from operations per share whereby
amounts per share are calculated using weighted average common shares
outstanding consistent with the calculation of earnings per share. Winstar's
determination of funds from operations may not be comparable to that reported
by other companies 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.
Sales and Seasonality
Oil and natural gas production is not necessarily equal to sales.
Tunisian oil is transported or pipelined to a terminal for periodic offloading
onto oil tankers. Revenue from tanker sales is recognized only when the sale
occurs. Production during the period is carried in inventory until sold.
Hungarian natural gas is sold on a monthly basis into the local market.
Monthly sales are subject to local market product demand which increases
during the heating seasons of fall and winter and curtails over the warmer
spring and summer seasons.
Forward-Looking Statements
This press release contains forward-looking statements. These statements
relate to future events or future performance of Winstar. When used in this
press release, the words "may", "would", "could", "will", "intend", "plan",
"anticipate", "believe", "estimate", "predict", "seek", "propose", "expect",
"potential", "continue", and similar expressions, are intended to identify
forward-looking statements. These statements involve known and unknown risks,
uncertainties, and other factors that may cause actual results or events to
differ materially from those anticipated in such forward-looking statements.
Such statements reflect the Company's current views with respect to certain
events, and are subject to certain risks, uncertainties and assumptions. Many
factors could cause the Company's actual results, performance, or achievements
to materially differ from those described in this press release. Should one or
more of these risks or uncertainties materialize, or should assumptions
underlying forward-looking statements prove incorrect, actual results may vary
materially from those described in this press release as intended, planned,
anticipated, believed, estimated, or expected. Specific forward-looking
statements in this press release include, among others, statements pertaining
to the following: factors upon which Winstar will decide whether or not to
undertake a specific course of action; and estimated volumes and timing of
future production; business plans for drilling, exploration and development;
and other expectations, beliefs, plans, goal, objectives, assumptions,
information and statements about possible future events, conditions, results
of operations or performance. The risks to which Winstar is subject include
those of the oil and gas industry in general including operational risks in
exploring for, developing and producing crude oil and natural gas; risks and
uncertainties involving geology of oil and gas deposits; volatility in global
market prices for oil and natural gas; general economic conditions;
competition; liabilities and risks, including environmental liability and
risks, inherent in oil and gas operations; uncertainties as to the
availability and cost of financing and changes in capital markets;
alternatives to and changing demand for petroleum products; and changes in
legislation and the regulatory environment, including uncertainties with
respect to the Kyoto Protocol. Furthermore, statements relating to "reserves"
or "resources" are deemed to be forward-looking statements, as they involve
the implied assessment, based on certain estimates and assumptions that the
resources and reserves described can be produced profitably in the future. The
forward-looking statements contained in this press release are expressly
qualified in their entirety by this cautionary statement. These statements
speak only as of the date of this press release. The Company does not intend
and does not assume any obligation, to update these forward-looking statements
to reflect new information, subsequent events or otherwise, expect as required
by law.
Winstar Resources Ltd. is a Calgary-based junior oil and gas company,
which explores for, develops, produces, and sells crude oil, natural gas
liquids and natural gas in Tunisia, Canada, Hungary and Romania. Winstar's
common shares trade on the Toronto Stock Exchange under the symbol WIX.
For further information: Mr. David Monachello, President and Interim
CFO, Phone (403) 513-4200, Email dmonachello@winstar.ca; or Mr. Charles de
Mestral, Chief Executive Officer, Phone: Toll-free (Canada and USA)
1-800-875-1217, (Note: Mr. de Mestral is based in Europe, in a time zone eight
hours ahead of Calgary time), Email: cdemestral@winstar-resources.ch
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