CALGARY, May 12 /CNW/ - Calvalley Petroleum Inc. (the "Company" or
"Calvalley"), an international junior oil and gas company based in
Calgary, Alberta, announces its financial and operating results for the
three months ended March 31, 2011.
The key financial indicators in the table below are discussed in more
detail in the following sections.
Three months ended
(in thousands of US dollars except per share amounts)
Revenue from crude oil sales (net of royalties and government share of
Funds flow from operations(2)
Cash flow from operating activities
(1) On January 1, 2011, the Company adopted International Financial
Reporting Standards ("IFRS") for financial reporting purposes, using a
transition date of January 1, 2010. The financial statements for the
three months ended March 31, 2011, including required comparative
information, have been prepared in accordance with International
Financial Reporting Standards.
Unless otherwise noted, 2010 comparative information has been prepared
in accordance with IFRS. The adoption of IFRS has not had an impact on
the Company's operations, cash flows or strategic decisions. The most
significant area of impact was the adoption of the IFRS upstream
accounting principles. Further information on the IFRS impacts is
provided in the Changes in Accounting Policies Section of the Company's
Q1 2011 Interim MD&A filed on www.sedar.com
(2) See "Non-GAAP, Non-IFRS Measures" disclosure in Q1 2011 Interim MD&A
filed on www.sedar.com
Calvalley's revenue from crude oil sales was $14.4 million (gross) and
$8.9 million (net) for the quarter ended March 31, 2011 (2009 - $14.4
million (gross) and $8.9 million (net)). While sales volume of
142,523bbls in the first quarter of 2011 was 25.1% lower than sales
volume of 190,350bbls during the first quarter of 2010, the decrease
was offset by a 33.2% increase in the sale price realized in 2011
($101.12/bbl) versus 2010 ($75.91/bbl). The decrease in sales volume is
partially due to the timing of lifts and is not directly correlated
with production for the quarter, which was 158,703 bbls in 2011 versus
206,885 bbls in 2010.
Comprehensive income was $4.1 million ($0.04 per share) for the three
months ended March 31, 2011, as compared to $3.6 ($0.04 per share) for
the same period in 2010.
Funds flow from operations was $5.2 million ($0.05/share) for the three
months ended March 31, 2011, as compared to $5.3 million ($0.05/share)
for the same period in 2010.
Operating costs, including transportation and facilities usage fees
during the first quarter of 2011 were $2.0 million ($14.32/bbl) as
compared to $3.6 million ($13.91/bbl) for the three months ended
December 31, 2010 and to $1.9 million ($9.92/bbl) for the quarter ended
March 31, 2010. Operating costs for the first quarter of 2011 include a
retrospective adjustment for facility usage fees related to 2010
deliveries in the amount of $0.2 million ($1.55/bbl).
Calvalley continues to be well financed and capitalized with no
outstanding debt and working capital of $67.4 million.
The following table sets forth key operating information:
Three months ended
(barrels of oil per day)
Total Block 9 production
Calvalley working interest (50.0%)
Average daily production from Block 9 for the three months ended March
31, 2011 was 3,527 gross barrels per day (Calvalley working interest
1,763 bopd), a decrease from the previous quarter's average of 4,334
bopd (2,167 bopd working interest share) and a decrease from 2010 first
quarter average production of 4,597 bopd (2,299 bopd working interest
share). All production came from the partially developed Hiswah oil
field, which produces high-quality sweet crude oil that is sold at a
price comparable to Dated Brent Crude.
During the fourth quarter of 2010, the Company conducted a detailed
review of its Hiswah field development plan and material requirements.
As a result of the review, the Company has chosen to contract with a
new supplier of superior downhole production equipment. While the
change in supplier will allow for long term optimization of production
rates, delays in receiving delivery of certain materials has resulted
in a total of 12 producing wells, including 2 new development wells, to
be shut-in at Hiswah. As a result of the above factors, overall
production rates have declined into 2011. The Company has ordered 14
electric submersible pumps, 2 of which have been received allowing the
re-activation of 2 wells. Production was curtailed further during late
March 2011 and early April 2011 as a result of interruptions to export
pipelines. On April 12, 2011, the Company commenced deliveries to
export facilities at Block 51. The Company's working interest oil
production is being restored and for May 2011 to date has averaged
With the completion of the Truck Offloading Facility at Block 51, the
Company has started the process of activating existing shut-in wells at
the Ras Nowmah and Al Roidhat fields. Calvalley has positioned itself
to gradually increase its production of blended crude to 10,000 bopd
(5,000 bopd net).
Calvalley continues development of the pressure maintenance program at
the Hiswah field by injecting water and gas into the reservoir. The
Company is currently injecting approximately 6,500 barrels per day of
water into two horizontal wells, both of which are performing better
than expected. These wells have large injection capacity but are
limited by the availability of source water at this time. Calvalley
has ordered two high volume down hole pumps, for the source water
wells, which will enable the Company to relieve this limitation. Up to
four additional water injection wells are included in the 2011 drilling
The Company is currently injecting more than 2MMcf/d of produced gas
into the Hiswah field. The Company expects to increase gas injection
volume to 5MMcf/d by the end of the year.
Truck Offloading Facility (TOF)
On April 12, 2011, the Company commenced delivery of Block 9 production
of crude oil into the Masila Export Pipeline System ("MEPS") through
the Company's Truck Offloading Facilities ("TOF") located at Block 51
on a temporary basis utilizing the spare metering system provided by
the operator of Block 51. Calvalley's metering system has been
installed and the commissioning of the TOF is nearing the final stage.
Thus, management expects the TOF to be fully commissioned mid-May at
which time blended crude from all fields from Block 9 will be delivered
through this facility.
Calvalley has recently completed its initial interpretation of an
Aeromagnetic survey at the Matema Block in Ethiopia. The
interpretation, combined with previous completed surface geological
maps, indicate the presence of three sub-basins with thick sedimentary
sections. Calvalley will further refine the interpretation to design
the next phase of the capital work program for the Matema Block.
Drilling, Completion, and Testing
Site preparation for the Ras Nowmah 4 well is currently under way with
drilling scheduled to commence within the next two weeks.
Calvalley also continues its evaluation of the Qarn Qaymah-3 ("QQ-3")
well. As previously announced, QQ-3 was drilled to a total depth of
4,460 meters, including a highly deviated openhole section of
approximately 1,000 meters in the Fractured Granitic Basement ("FGB").
As per the evaluation reports from two independent petrophysical
consulting firms, in Calgary, the wellbore image logs and electrical
logs indicate that the FGB reservoir is extensively fractured and fully
oil saturated. QQ-3 intersected a total hydrocarbon column of 434
meters, including 172 meters of condensate rich gas and 262 meters of
oil column. The oil column could be potentially thicker, as no oil
water contact has been encountered. These independent petrophysical
evaluations also highlight that average fracture porosity, which is a
direct indicator of storage capacity or reserve potential of the
reservoir, was significantly higher than QQ-2. This interpretation is
in line with the improved rate of penetration experienced while
drilling QQ-3, as compared to QQ-2.
During the QQ-3 initial testing phase, the test recovered a significant
volume of drilling fluid which was used in drilling of the adjacent
well (QQ-2) but this gradually turned to oil flow. However, the oil
production was unsustainable due to limited inflow. Having produced the
drilling loss fluid of QQ-2 from QQ-3 indicates that there is open
communication between QQ-2 and QQ-3, which confirms the presence of a
wide network of interconnected fractures in the FGB. However, as
intermittent flow and build-up testing proceeded, the permeability of
the formation gradually declined, indicating impairment to fluid inflow
to the well-bore from the formation due to a potential precipitation of
hydrocarbon solids (such as Paraffin and Asphaltene), in the openhole
section of the QQ-3 well-bore. A number of fluid samples were collected
for lab analysis.
While Calvalley is encouraged with the increased hydrocarbon column and
presence of an extensive network of natural fractures in the basement
of the Qarn Qaymah structure, the key challenge ahead for the Company
is to remove any impairment that limits oil inflow. The Company is
optimistic that the pending lab test results will indicate the
potential of down-hole chemical treatment to prevent the future deposit
of paraffinic and asphaltenic compounds, which is a common production
impairment phenomenon in many oil fields around the globe.
Calvalley's plan, going forward, includes the completion of the
currently proceeding laboratory analyses of formation fluids, followed
by the design of a remedial stimulation program to enhance oil inflow.
The Company is in communication with a number of experienced global oil
services companies to assist in designing a suitable stimulation
program for QQ-3.
FILING OF REPORTS ON SEDAR
Calvalley's Management's Discussion and Analysis and Unaudited Condensed
Consolidated Financial Statements for the three months ended March 31,
2011 can be found for viewing by electronic means on The System for
Electronic Document Analysis and Retrieval at www.sedar.com. They can also be found on the Company's website at www.calvalleypetroleum.com.
Calvalley is listed on the Toronto Stock Exchange, trading under the
THE TORONTO STOCK EXCHANGE HAS NOT REVIEWED AND DOES NOT ACCEPT
RESPONSIBILITY FOR THE ADEQUACY OR ACCURACY OF THIS RELEASE.
This press release may contain forward-looking statements including,
without limitation, financial and business prospects and financial
outlooks, and such statements may be forward-looking statements which
reflect management's expectations regarding future plans and
intentions, growth, results of operations, performance and business
prospects and opportunities. Words such as "may", "will", "should",
"could", "anticipate", "believe", "expect", "intend", "plan",
"potential", "continue", and similar expressions have been used to
identify these forward-looking statements. These statements reflect
management's current beliefs and are based on information currently
available to management. Forward-looking statements involve significant
risk and uncertainties. A number of factors could cause actual results
to differ materially from the results discussed in the forward-looking
statements including, but not limited to, changes in general economic
and market conditions and other risk factors. Although the
forward-looking statements contained herein are based upon what
management believes to be reasonable assumptions, management cannot
assure that actual results will be consistent with these
forward-looking statements. Investors should not place undue reliance
on forward-looking statements. These forward-looking statements are
made as of the date hereof.
Forward-looking statements and other information contained herein
concerning the oil and gas industry and Calvalley's general
expectations concerning this industry are based on estimates prepared
by management using data from publicly available industry sources as
well as from reserve reports, market research and industry analysis and
on assumptions based on data and knowledge of this industry which
Calvalley believes to be reasonable. However, this data is inherently
imprecise, although generally indicative of relative market positions,
market shares and performance characteristics. While Calvalley is not
aware of any misstatements regarding any industry data presented
herein, the industry involves risks and uncertainties and is subject to
change based on various factors.
SOURCE Calvalley Petroleum Inc.
For further information:
Edmund Shimoon, Chairman & CEO
Zacharie Magnan, Acting CFO +1 (403) 297-0490