Calvalley Petroleum - 2009 First Quarter Results



    Calvalley Petroleum Inc., (TSX: CVI.A)

    CALGARY, May 15 /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 first quarter
ended March 31, 2009.

    HIGHLIGHTS

    Financial

    These key financial indicators are discussed in more detail in the
Company's Management's Discussion and Analysis which is filed on SEDAR.

    
    -------------------------------------------------------------------------
                                                          Three months ended
                                                               March 31
    -------------------------------------------------------------------------
    (in thousands of US dollars)                           2009        2008
    -------------------------------------------------------------------------

    Revenue from crude oil sales (net of royalties)        4,160      12,456
    EBITDA(1)                                                (44)      9,309
    Operating income(1)                                   (1,794)      6,532
    Net income (loss)                                     (2,045)      5,599
    Capital expenditures                                   2,399       7,359
    Funds flow from operations(1)                           (149)      8,401
    Cash flow from operating activities                     (962)        309
    -------------------------------------------------------------------------
    (1) See "Non-GAAP Measures"


    -   Calvalley's revenue from crude oil sales net of royalties was $4.1
        million for the first quarter ended March 31, 2009 (2008 - $12.5
        million). The sales decline was due to soft commodity prices and the
        timing of lifts.

    -   Net loss was $2.0 million for the three months March 31, 2009, as
        compared to net income of $5.6 million for the same period of 2008.
        The net loss was largely attributable to a $1.1 million expense for
        facilities usage which was billed retroactively from the commencement
        of production at Block 9 by the Government of Yemen. A significant
        portion of this charge, $1.0 million, related to deliveries that
        occurred prior to January 1, 2009. Low sales volumes due to the
        timing of lifts also contributed to this loss.

    -   Funds flow from operations was $(0.1) million for the three months
        ended March 31, 2009, as compared to $8.4 million for the same period
        of 2008.

    -   Calvalley continues to be well financed and capitalized with no
        outstanding debt and working capital of $72.6 million.


    Operating

    -------------------------------------------------------------------------
                                                          Three months ended
                                                        March 31,   March 31,
    (barrels of oil per day)                               2009        2008
    -------------------------------------------------------------------------
    Total Block 9 production                               4,532       4,602
    Calvalley working interest (50.0%)                     2,266       2,301
    -------------------------------------------------------------------------

    -   Average daily production from the Block 9 for the three months ended
        March 31, 2009 was 4,532 gross barrels per day (Calvalley working
        interest 2,266 bopd), an increase from the previous quarter's average
        of 3,989 bopd (1,994 bopd working interest share) and comparable to
        4,602 bopd (2,301 bopd working interest share) for the first quarter
        of 2008.

    -   Construction of water and gas injection facilities at Hiswah
        continues with completion targeted for mid-2009.

    -   Calvalley is constructing a heavy crude blending facility at the CPF,
        which will enable the Company to produce from the currently shut-in
        Al Roidhat field. Wells at Al Roidhat are being worked over to
        prepare them for production.
    

    OPERATIONS REPORT

    Production Overview

    During the first quarter of 2009, daily production from Block 9 averaged
4,532 barrels of oil per day ("bopd") (2007 - 4,602 bopd), with the Company's
working interest share being 2,266 bopd (2008 - 2,301 bopd). All of our
production came from the partially developed Hiswah oil field, which produces
high-quality, lighter sweet crude oil that is sold at a price comparable to
Dated Brent Crude.
    Despite expected performance from the existing producing wells at the
Hiswah field, production has been constrained due to the limitation of sales
volume that is accepted by the Safer Facilities at Block 18 ("Safer").
Production from the Hiswah field continues to be limited to an average of
sixteen of twenty-three existing horizontal wells due to this limitation. The
Facility Usage Agreement at Block 18 dictates that blended crude at the
facility shall not exceed 0.12% in sulfur content by weight. The sulfur
content of Safer production is 0.09%. After blending Safer production with the
production from Block 9, the sulfur content averages 0.12%. Increases or
decreases in Safer's production impact the sales volume that can be accepted
for blending from Block 9. Safer's production at Block 18 has been
continuously declining and consequently, Block 9 has been forced to reduce its
crude oil volume to keep overall sulfur content at Safer under 0.12%.
Calvalley's crude is sweet and has an average of 0.43% sulfur which is
comparable to 0.42% which is the standard for Dated Brent Crude.
    Calvalley has initiated a number of alternative solutions to sell blended
crude oil from all discoveries at Block 9 including production from wells that
are currently shut-in. Two of the alternative sales points are Block 14 or
Block 51. Discussions toward delivering Block 9 crude to one of these blocks
are proceeding with the operator. The Government of Yemen has formed a
"tie-committee" to oversee the progress of these discussions. Once an
agreement to evacuate all types of crude from Block 9 is signed, Calvalley
will commence the construction process of the main sales pipeline which has
been approved by the government.
    In anticipation of finding an alternative solution for all kinds of crude
discovered at Block 9, Calvalley has substantially completed a heavy crude
blending facility at the CPF. The blending facility will enable the Company to
process production from the currently shut-in Al Roidhat field. Currently,
four wells at Al Roidhat are fully equipped and ready to produce. An
additional four wells have been drilled and are undergoing completion. Once
fully developed, Al Roidhat is expected to reach peak production of 10,000
bopd based on the existing reserves. However, the Al Roidhat field will remain
shut-in until a marketing solution is finalized. We expect to produce from
this field prior to yearend.

    Hiswah Field Development

    During the first quarter, no development wells were drilled at the Hiswah
field. However, a number of workover programs were carried out to enhance well
performance. The 2009 budget includes the drilling of six horizontal
development wells expected to commence in July 2009.

    Facilities

    The CPF, with a 60,000 barrel per day processing capability, is now fully
functional. Construction of key components of water injection and gas
re-injection facilities for the Hiswah field has advanced significantly. Water
injection facilities have been constructed and delivered to Block 9. On-site
construction is expected to be completed during the second quarter and water
injection is expected to commence in the third quarter. The gas injection
facilities are currently being constructed in Dubai. The Hiswah field
currently produces approximately 5.5 mmcfd of solution gas which is being
flared and will be utilized for pressure maintenance once these facilities are
completed.

    Exploration Drilling Program

    No exploration wells were drilled during the third quarter. Testing of
the Qarn Qaymah 2 ("QQ-2") well was halted to due lack of specialized downhole
equipment including smaller diameter (2 7/8 inch) production tubing. All
required equipment has now been received and Calvalley will re-test the
fractured granitic basement at QQ-2 commencing in June. Upon full evaluation
of fractured basement, we will move up hole to perforate and test the Kohlan
sand gas condensate discovery. Completion of QQ-2 will enable us to high-grade
and then proceed with drilling a number of very attractive deep wells in the
greater Qarn Qaymah area.
    Calvalley plans to drill two exploration wells at shallower depths (less
than 1500 meters) during 2009. These wells are to be drilled in Ras Nowmah and
Salmin prospects, both of which are on a proven oil fairway. Salmin is
situated approximately five (5) kilometers northwest of the Auqban discovery
targeting a light oil carbonate structure with an estimated mean oil-in-place
volume of 45 million barrels. The Ras Nowmah structure is situated between
Hiswah and Al Roidhat with a potential of 149 million barrel of mean
oil-in-place.

    Future Plans

    During 2009, Calvalley plans to drill six horizontal development wells at
Hiswah, and two exploration wells at Ras Nowmah and Salmin prospects. Once
Calvalley resolves the marketing issue of all its crude from Block 9, we
expect to accelerate development and exploration activities substantially to
unlock the potential of the block.

    Filing of Reports on SEDAR

    Calvalley's Management's Discussion and Analysis and Unaudited Financial
Statements for the quarter ended March 31, 2009 can be found for viewing by
electronic means on The System for Electronic Document Analysis and Retrieval
at www.sedar.com.

    Calvalley is listed on the Toronto Stock Exchange, trading under the
symbol "CVI.A".

    
    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.





For further information:

For further information: investorrelations@calvalleypetroleum.com,
Edmund Shimoon, CEO; Memet Kont, COO; Bill Cummins, CFO, (403) 297-0490

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Calvalley Petroleum Inc.

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