Bow Valley Energy Ltd. announces 2008 second quarter results



    CALGARY, Aug. 12 /CNW/ - Bow Valley Energy Ltd. (TSX - BVX) announces its
financial and operational results for the six months ended June 30, 2008.

    
    HIGHLIGHTS

    -   Sales volumes averaged 3,200 boe/d in the second quarter of 2008, an
        increase of 309% from the second quarter of 2007. Sales volumes
        averaged 3,959 boe/d in the first six months of 2008, an increase of
        394% from the first six months of 2007.

    -   Field production volumes averaged 3,355 boe/d in the second quarter
        of 2008, an increase of 278% from the second quarter of 2007. Field
        production volumes averaged 3,675 boe/d in the first six months of
        2008, an increase of 362% from the first six months of 2007.

    -   Field production decreased 16% from 3,995 boe/d in the first quarter
        of 2008 to 3,355 boe/d in the second quarter of 2008 as a result of
        facility downtime that was largely related to non-recurring events,
        including a workers' strike at the Grangemouth refinery that forced a
        shut-down of the Forties pipeline system and the installation of gas
        compression facilities on the Ula platform. Field production averaged
        approximately 3,850 boe/d in the month of June and daily production
        continues to average between 3,800 to 4,000 boe/d when all fields are
        producing at capacity.

    -   Funds flow in the second quarter of 2008 was $24.0 million ($0.28 per
        share), which represents a significant increase from funds flow of
        $0.5 million ($0.01 per share) in the second quarter of 2007. Funds
        flow in the first six months of 2008 was $55.9 million ($0.65 per
        share), representing an increase from funds flow of $3.5 million
        ($0.04 per share) in the first six months of 2007. Funds flow
        decreased from $31.9 million ($0.37 per share), in the first quarter
        of 2008 to $24.0 million ($0.28 per share), in the second quarter of
        2008. The decrease in funds flow from the first quarter of 2008 is
        mainly attributable to lower sales volumes being recorded in the
        second quarter.

    -   The Company recorded earnings of $9.8 million in the second quarter
        of 2008 (income of $0.11 per share), an increase over earnings of
        $4.2 million in the second quarter of 2007 (income of $0.05 per
        share). On a year-to-date basis, the Company has recorded earnings of
        $6.6 million (income of $0.07 per share), an increase over earnings
        of $4.7 million (income of $0.06 per share) in the first six months
        of 2007. Year-to-date earnings were negatively affected by an
        unrealized foreign exchange loss of $6.5 million due to the weakening
        of the Canadian dollar relative to the U.S. dollar and British pound
        sterling and by a $5.6 million unrealized fair value impairment
        recorded in respect of the Company's Asset Back Commercial Paper
        ("ABCP") holdings.

    -   Second quarter 2008 U.K. operating netbacks were robust, averaging
        $102.44 per boe, an increase of 88% from the operating netbacks in
        second quarter of 2007 and an increase of 25% from the operating
        netbacks in the first quarter of 2008. Operating and transportation
        costs averaged $7.38 per boe in the second quarter of 2008.

    -   The Company recorded capital spending of $33.9 million in the second
        quarter of 2008 and $74.7 million in the first six months of 2008.


    FINANCIAL AND OPERATING SUMMARY TABLE

    -------------------------------------------------------------------------
                    Three Months Ended June 30,     Six Months Ended June 30,
                      2008      2007  % Change      2008      2007  % Change
    -------------------------------------------------------------------------
    Financial
     ($000s except
     as noted)
    Gross oil and
     gas revenue    31,948     4,562       600    70,054     9,175       664
    Funds flow      23,982       491     4,784    55,858     3,461     1,514
      Basic and
       diluted per
       share
       ($/share)      0.28      0.01     2,700      0.65      0.04     1,525
    Earnings (Loss)  9,807     4,203       133     6,594     4,732       (39)
      Basic and
       diluted per
       share
       ($/share)      0.11      0.05       128      0.07      0.06       (17)
    Debt and
     working
     capital
     (deficiency) (155,127)  (91,023)      (70) (155,127)  (91,023)      (70)
    Capital
     expenditures
      Alaska         5,007     2,234       124    11,508    12,539        (8)
      United
       Kingdom      31,922   111,595       (71)   66,247   135,506       (51)
                  -----------------------------------------------------------
      Total         36,928   113,829       (68)   77,755   148,045       (47)
    Shares
     outstanding
     (000s)
      Basic         86,135    84,541         2    86,135    84,541         2
    Weighted
     average
     (000s)
      Basic         86,135    80,741         7    86,130    76,915        12
      Diluted       86,529    82,501         5    86,806    78,946        10

    Operating
    Sales
      Natural gas
       (mcf/d)       2,287     1,710        34     2,665     1,558        71
      Oil and NGL
       (bbl/d)       2,819       498       466     3,514       542       548
                  -----------------------------------------------------------
      Oil
       equivalent
       (boe/d)
       (6:1)         3,200       783       309     3,959       802       394

    Prices
      Natural gas
       ($/mcf)        3.97      7.02       (43)     3.58      7.76       (54)
      Oil and NGL
       ($bbl/d)     121.34     76.58        58    106.81     71.17        50
                  -----------------------------------------------------------
      Oil
       equivalent
       ($/boe)
       (6:1)        109.74     64.03        71     97.25     63.23        54

    Drilling
     activity
     (gross)
      Oil                -         2      (100)        -         2      (100)
      Natural gas        -         -         -         -         -         -
      Abandoned          -         -         -       1(1)        -       100
      Suspended          -         1      (100)      4(2)        1       300
      Service            1         -       100         1         -       100
                  -----------------------------------------------------------
      Total
       drilling
       activity
       (gross)           1         3       (67)        6         3       100

    Drilling
     activity
     (net)
      Oil                -      0.30      (100)        -      0.30      (100)
      Natural gas        -         -         -         -         -         -
      Abandoned          -         -       100    0.70(1)        -       100
      Suspended          -      0.20      (100)   0.90(2)     0.20       348
      Service         0.13         -         -      0.13         -       100
                  -----------------------------------------------------------
      Total
       drilling
       activity
       (net)          0.13      0.50       (75)     1.72      0.50       244
    -------------------------------------------------------------------------
    (1) The 16/27a-8 shallow exploration well did not encounter hydrocarbons
        and has been abandoned.
    (2) Includes the Ettrick E3 oil development well; the 9/28b-19a
        exploration well; the Tofkat No. 1 exploration well and Tofkat No. 1A
        sidetrack. The Ettrick E3 oil development well was suspended and will
        be sidetracked. The 9/28b-19a exploration well encountered 105 feet
        of gross oil column. The potential reserves associated with this well
        are smaller than anticipated and therefore the well has been
        suspended. The Tofkat No. 1 exploration well encountered ten feet of
        gross pay, six feet of net pay, however the wellbore has been plugged
        back to the bottom of the surface casing and suspended for possible
        re-entry and twinning as a future production well.
    

    COMPANY UPDATE

    UNITED KINGDOM
    --------------
    Net production during the quarter has remained relatively steady at
3,800 to 4,000 boe/d during producing days, however quarterly average
production volumes were negatively affected by several facility related
shut-downs that resulted in a significant number of non-producing days in
certain fields. The net result was average production of 3,355 boe/d and
average sales of 3,200 boe/d in the second quarter. These realized production
and sales volumes are less than the prior quarter, but are not fully
reflective of the underlying performance of the three producing fields, Kyle,
Blane and Enoch.
    Facility downtime was largely related to non-recurring events including a
workers' strike at the Grangemouth refinery that forced a shut-down of the
Forties pipeline system and the installation of gas compression facilities on
the Ula platform.
    Most of the down-time occurred in April and May and production capability
returned to more representative volumes in June. Production volumes from the
three fields averaged approximately 3,850 boe/d for the month of June and
daily production continues to average between 3,800 to 4,000 boe/d when all
three fields are producing at capacity.
    Additional production volumes will soon be added to the Company's
production profile when two new fields, Chestnut and Ettrick, are brought on
stream in the second half of 2008. At the Chestnut field, the Sevan
Hummingbird FPSO commissioning is nearing completion with first oil expected
shortly. The Chestnut field is expected to add approximately 1,500 boe/d of
additional net production.
    The partnership group in the Ettrick field development have been busy
drilling the development and water injection wells in anticipation of delivery
of the Aoka Mizu FPSO in the fourth quarter 2008. The Ettrick field
development has also been expanded to include an additional well to develop
the North Ettrick pod which was not included in the original Field Development
Plan. The Ettrick field is forecast to add approximately 2,400 boe/d to the
Company's production profile when the field reaches first oil near the end of
the fourth quarter.
    Significant planning, engineering and commercial work is underway to
design a Field Development Plan for the Peik field. A draft plan is expected
to be circulated amongst partners during the fourth quarter of 2008,
representing a significant first step toward developing the field. The Company
is wholly supportive of moving the Field Development Plan forward.
    The Company's financial performance continues to outperform budget
forecasts. U.K. field operating netbacks during the second quarter averaged
$102.44 per boe. This represents an increase of 88% from operating netbacks in
the second quarter of 2007 and 25% from the operating netbacks in the first
quarter of 2008. Robust netbacks are partially a result of the Company's low
cost structure. Operating and transportation costs averaged $7.38 per boe in
the second quarter of 2008.
    The Company has been active in its exploration effort during the second
quarter. The Company participated in the 25th U.K. offshore licensing round
and bid on several blocks of interest. It has been reported that this
licensing round received a level of participation not seen before since the
1970's. The Company eagerly awaits the government's announcement of successful
awards given licensing rounds are potentially a significant source of future
exploration activity. The Company has also been very active in evaluating
farm-in opportunities and has committed to participating in two additional
exploration wells in the U.K. North Sea within the next three to six months.
As a result of farm-in opportunities and the Company's operated exploration
prospects, the Company expects to participate in the drilling of four
exploration wells in the next nine months. The Blackbird exploration well is
an indicated discovery and the well results are currently being evaluated. An
announcement on the Blackbird well results will be made at the conclusion of
operations which is expected imminently.

    ALASKA
    ------
    During the exploration phase, the Alaskan field operations are confined
mainly to the winter months. The Company's 2008 drilling program was complete
by the end of April which resulted in a new oil discovery at Tofkat. The well
results of the Tofkat discovery and the production test at the prior year's
Northshore discovery have been previously reported. Current activity is now
largely concentrated on geological and seismic interpretations in an effort to
establish new prospects and evaluate the existing discoveries. Decisions
regarding next winter's activity will not be made until the fourth quarter of
2008.

    OUTLOOK
    -------
    The Company's current production profile is diversified with a reliable
base from three producing fields. Not only is production anticipated to be
steady and predictable, but it is forecast to grow significantly with
additional production from the Chestnut and Ettrick field developments. The
Company has experienced delays in bringing new production on stream and has
been subject to cost escalation, but this is outweighed by the benefits of
higher oil prices. In addition, the delays are only delays, they do not
represent an erosion of reserves nor are they expected to alter the direction
or growth the Company can achieve.
    Higher oil prices have created an extremely competitive environment in
the world oil market, especially in the exploration effort to find new oil
resources. The increased competitive market is the primary reason for the time
delays and cost escalation that are being experienced by the entire industry.
    The Company has a strategic advantage over many of its competitors given
its established production and revenue base which provides excess funds flow
to support exploration efforts. The Company is transitioning into a full cycle
exploration and production company wherein there is a balanced exposure to
development, exploration and acquisition. In previous years, the Company's
focus and financial resources were directed toward developing the Kyle, Blane,
Enoch, Chestnut and Ettrick fields. As these fields have reached or are near
production, resources can be directed toward acquisitions such as the purchase
of an interest in the Peik field in 2007 and a more aggressive exploration
effort. In the past eight months, the Company operated its first offshore
exploration wells on Blocks 9/28b and 16/27a. The exploration effort continued
in the second quarter of 2008 with the drilling of the Blackbird prospect;
participation in four more exploration wells is planned in the next nine
months. The Company anticipates participating in approximately five
exploration wells per year at a level of activity self-financed from
internally generated cash flow.
    On June 16, 2008, the Company announced the resignation of Matthew L.
Janisch, Vice President Finance and Chief Financial Officer. The Company
wishes to thank Mr. Janisch for his many contributions to the Company over the
past few years and wish him well in any future endeavours. On July 23, 2008,
the Company announced the appointment of C.W. Leigh Cassidy, CA, CFA to the
position of Vice President, Chief Financial Officer. Mr. Cassidy will commence
employment with the Company on August 18, 2008. The Company has also added
technical and administrative staff to manage the expanding scope of its
activities. In the last quarterly report, the Company announced the addition
of Peter Gunn as Finance Director of Bow Valley Petroleum (UK) Limited and
Norman McLeod as Technical Director of Bow Valley Petroleum (UK) Limited. The
skill set of each of these individuals adds a new dimension to the capability
of the Company's management team and improves the ability to execute the
Company's business plan.
    Copies of the financial statements and notes and related management
discussion and analysis may be obtained on SEDAR at www.sedar.com, the Company
website at www.bvenergy.com or by contacting the Company directly.

    Bow Valley Energy Ltd. is an international oil and natural gas
exploration, development and production company with operations in the U.K.
sector of the North Sea and Alaska. The common shares of the Company trade on
the Toronto Stock Exchange under the symbol BVX.

    Certain statements included or incorporated by reference in this news
release constitute forward-looking statements or forward-looking information
under applicable securities legislation. Such forward-looking statements or
information are provided for the purpose of providing information about
management's current expectations and plans relating to the future. Readers
are cautioned that reliance on such information may not be appropriate for
other purposes, such as making investment decisions. Forward-looking
statements or information typically contain statements with words such as
"anticipate", "believe", "expect", "plan", "intend", "estimate", "propose",
"project" or similar words suggesting future outcomes or statements regarding
an outlook. Forward-looking statements or information in this news release
include, but are not limited to, statements or information with respect to:
business strategy and objectives; development plans; exploration plans;
acquisition and disposition plans and the timing thereof; reserve quantities
and the discounted present value of future net cash flows from such reserves;
future production levels; capital expenditures; net revenue; operating and
other costs; royalty rates and taxes.
    Forward-looking statements or information are based on a number of
factors and assumptions that have been used to develop such statements and
information but which may prove to be incorrect. Although the Company believes
that the expectations reflected in such forward-looking statements or
information are reasonable, undue reliance should not be placed on
forward-looking statements because the Company can give no assurance that such
expectations will prove to be correct. In addition to other factors and
assumptions which may be identified in this news release, assumptions have
been made regarding, among other things: the impact of increasing competition;
the general stability of the economic and political environment in which the
Company operates; the timely receipt of any required regulatory approvals; the
ability of the Company to obtain qualified staff, equipment and services in a
timely and cost-efficient manner; the ability of the operator of the projects
which the Company has an interest in to operate the field in a safe, efficient
and effective manner; the ability of the Company to obtain financing on
acceptable terms; field production rates and decline rates; the ability to
replace and expand oil and natural gas reserves through acquisition,
development or exploration; the timing and costs of pipeline, storage and
facility construction and expansion and the ability of the Company to secure
adequate product transportation; future oil and natural gas prices; currency,
exchange and interest rates; the regulatory framework regarding royalties,
taxes and environmental matters in the countries in which the Company
operates; and the ability of the Company to successfully market its oil and
natural gas products. Readers are cautioned that the foregoing list is not
exhaustive of all factors and assumptions which may have been used.
    Forward-looking statements or information are based on current
expectations, estimates and projections that involve a number of risks and
uncertainties which could cause actual results to differ materially from those
anticipated by the Company and described in the forward-looking statements or
information. These risks and uncertainties which may cause actual results to
differ materially from the forward-looking statements or information include,
among other things: the ability of management to execute its business plan;
general economic and business conditions; the risk of war or instability
affecting countries in which the Company operates; the risks of the oil and
natural gas industry, such as operational risks in exploring for, developing
and producing crude oil and natural gas; market demand; the possibility that
government policies or laws may change or governmental approvals may be
delayed or withheld; risks and uncertainties involving geology of oil and
natural gas deposits; the uncertainty of reserves estimates and reserves life;
the ability of the Company to add production and reserves through acquisition,
development and exploration activities; the Company's ability to enter into or
renew leases; potential delays or changes in plans with respect to exploration
or development projects or capital expenditures; the uncertainty of estimates
and projections relating to production (including decline rates), costs and
expenses; fluctuations in oil and natural gas prices, foreign currency,
exchange, and interest rates; risks inherent in the Company's marketing
operations, including credit risk; uncertainty in amounts and timing of
royalty payments; health, safety and environmental risks; risks associated
with existing and potential future law suits and regulatory actions against
the Company; uncertainties as to the availability and cost of financing; and
financial risks affecting the value of the Company's investments. Readers are
cautioned that the foregoing list is not exhaustive of all possible risks and
uncertainties. Additional risk factors affecting the Company and its business
are contained in the Company's Annual Information Form filed on SEDAR at
www.sedar.com.
    The forward-looking statements or information contained in this news
release are made as of the date hereof and the Company undertakes no
obligation to update publicly or revise any forward-looking statements or
information, whether as a result of new information, future events or
otherwise unless required by applicable securities laws. The forward-looking
statements or information contained in this news release are expressly
qualified by this cautionary statement.
    Where amounts are expressed on a barrel of oil equivalent (boe) basis,
natural gas volumes have been converted to barrels of oil equivalent at six
thousand cubic feet to one barrel of oil equivalent (6 mcf = 1 boe). This
conversion ratio is the conversion used in the oil and natural gas industry
and is based on an energy equivalency conversion method primarily applicable
at the burner tip and does not represent a value equivalency at the wellhead.
The use of boe's may be misleading, particularly if used in isolation.

    %SEDAR: 00008379E




For further information:

For further information: Bow Valley Energy Ltd., Robert G. Moffat,
President and Chief Executive Officer, Phone (403) 232-0292, website:
www.bvenergy.com

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BOW VALLEY ENERGY LTD.

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