Canadian energy producers can't kick the natural gas habit despite oil price rally



    CALGARY, June 12 /CNW/ - While oil prices rally to seven-month highs, a
survey released Thursday shows that Western Canada's conventional energy
producers have actually been increasing their weighting towards natural gas.
    In the first quarter of 2009, the median junior oil and gas company's
production was weighted 76 percent to natural gas, an increase of five percent
compared with the same quarter of 2008. The median intermediate's first
quarter natural gas weighting also increased year over year from 63 percent in
2008 to 67 percent in 2009. This relative weighting is based on an energy
equivalency of six thousand cubic feet of natural gas to one barrel of oil.
    The conventional energy sector's increasing weighting towards natural gas
is just one of the findings in the latest iQ Report by Bryan Mills Iradesso, a
national communications and research firm. The quarterly iQ Report tracks the
performance of all junior and intermediate oil and gas companies and trusts
that operate primarily in Western Canada and trade on the TSX and TSX Venture
Exchange. The comparison, available free to investors at http://iq.bmir.com,
defines juniors as companies that produce between 500 and 10,000 barrels of
oil equivalent per day (boe/d) and intermediates as companies that produce
between 10,000 and 100,000 boe/d. Bryan Mills Iradesso's latest report
compares the results of 63 juniors and 23 intermediates for the first quarter
of 2009. Select information is also provided on oil sands players and emerging
producers.
    "Given that oil sells for much higher prices in the current market, this
weighting is a challenge to the industry," said Peter Knapp, editor of the iQ
Report and president of Bryan Mills Iradesso." The fact that oil prices have
recovered nicely in recent months while natural gas prices continue to
languish means any company leveraged to oil production should be experiencing
a comeback."
    Knapp said some conventional oil and gas producers are finding their
operations to be economically challenged while they're awaiting a recovery in
natural gas prices.
    "Markets have reached the point where the price of oil is about three
times that of natural gas based on the standard energy equivalency," Knapp
said. "With many of the costs still high in the sector after the run-up of
recent years, this has not been an easy time to make money on natural gas."
    In addition to outlining Western Canada's preference for natural gas
production, the latest iQ Report reveals the following:

    
    -   Of the 63 public junior oil and natural companies operating in
        Western Canada, only six reported profits for the first quarter of
        2009. Meanwhile, 10 of the 23 intermediates in the sector reported
        profits. This is a sign that the costs of Canadian oil and gas
        production - including finding, development and acquisition costs
        that are written down over time - are currently too high for the
        revenue being brought in.

    -   Seven junior companies reported negative cash flow for the first
        quarter of 2009. This is the highest number of companies that have
        reported negative cash flow since Bryan Mills Iradesso started
        publishing the iQ Report in 2003. Median cash flow netbacks for the
        first quarter of 2009 were $11.85 per boe for juniors and $20.43 per
        boe for intermediates. This compares with a cash flow netback of
        $28.33 per boe for the juniors and $30.06 for the intermediates for
        the same quarter of 2008. Cash flow netbacks in the oil and gas
        industry, determined by dividing the cash flow from operations by the
        total production for the period, are similar to cash flow margins in
        other industries. The discrepancy between the juniors and
        intermediates is related to hedging programs in place for most of the
        intermediates.

    -   With low cash flow netbacks, the median junior is trading at a
        reasonable enterprise value (market capitalization plus net debt) of
        8.3 times cash flow in the first quarter of 2009. This doesn't
        include the seven juniors that had negative cash flow where such a
        multiple is meaningless. Meanwhile, the median intermediate is
        trading at an enterprise value of 7.3 times cash flow. Share prices
        used for these multiples are from May 29, 2009.

    -   Using May 29, 2009 share prices and a year-end 2008 calculation of
        net asset value, the median junior is trading at a 62 percent
        discount to net asset value while the median intermediate is trading
        at a 26 percent discount.

    -------------------------------------------------------------------------
    The following tables show the percentage of each company's production that
is natural gas. Companies closer to the top of each chart are weighted more
towards oil and are likely to be experiencing the financing benefits of
producing a higher priced commodity.

    JUNIORS NATURAL GAS WEIGHTING
    Median = 76%

    -------------------------------------------------
    Glamis Resources Ltd.                          0
    -------------------------------------------------
    Canadian Phoenix Resources Corp.              10
    -------------------------------------------------
    Eagle Rock Exploration Ltd.                   12
    -------------------------------------------------
    West Energy Ltd.                              15
    -------------------------------------------------
    Arcan Resources Ltd.                          18
    -------------------------------------------------
    BlackPearl Resources Inc.                     20
    -------------------------------------------------
    Arsenal Energy Inc.                           25
    -------------------------------------------------
    Culane Energy Corp.                           27
    -------------------------------------------------
    Freehold Royalty Trust                        36
    -------------------------------------------------
    Bonterra Oil and Gas Ltd.                     38
    -------------------------------------------------
    Second Wave Petroleum Ltd.                    44
    -------------------------------------------------
    Zapata Energy Corporation                     45
    -------------------------------------------------
    Painted Pony Petroleum                        49
    -------------------------------------------------
    Rock Energy                                   50
    -------------------------------------------------
    Zargon Energy Trust                           51
    -------------------------------------------------
    Action Energy Inc.                            51
    -------------------------------------------------
    Buffalo Resources Corp.                       51
    -------------------------------------------------
    Midnight Oil Exploration Ltd.                 53
    -------------------------------------------------
    Breaker Energy                                54
    -------------------------------------------------
    Questerre Energy Corporation                  56
    -------------------------------------------------
    Angle Energy                                  58
    -------------------------------------------------
    Enterra Energy Trust                          58
    -------------------------------------------------
    True Energy Trust                             62
    -------------------------------------------------
    Crocotta Energy Ltd.                          63
    -------------------------------------------------
    Stonefire Energy Corp.                        64
    -------------------------------------------------
    Great Plains Exploration Inc.                 66
    -------------------------------------------------
    Redcliffe Exploration Inc.                    69
    -------------------------------------------------
    NuLoch Resources Inc.                         69
    -------------------------------------------------
    Bellamont Exploration Ltd.                    71
    -------------------------------------------------
    Twin Butte Energy Ltd.                        72
    -------------------------------------------------
    Profound Energy Inc.                          75
    -------------------------------------------------
    Wrangler West Energy Corp                     76
    -------------------------------------------------
    ProspEx Resources Ltd.                        77
    -------------------------------------------------
    Terra Energy Corp                             79
    -------------------------------------------------
    Canext Energy Ltd.                            79
    -------------------------------------------------
    Berens Energy Ltd                             80
    -------------------------------------------------
    Insignia Energy Ltd.                          80
    -------------------------------------------------
    Orleans Energy Ltd.                           80
    -------------------------------------------------
    Seaview Energy Inc.                           80
    -------------------------------------------------
    One Exploration Inc.                          80
    -------------------------------------------------
    Vero Energy Inc.                              80
    -------------------------------------------------
    Monterey Exploration Ltd.                     81
    -------------------------------------------------
    Trafalgar Energy Ltd.                         82
    -------------------------------------------------
    FairWest Energy Corp.                         82
    -------------------------------------------------
    Petro-Reef Resources Ltd.                     82
    -------------------------------------------------
    Pegasus Oil & Gas Inc.                        83
    -------------------------------------------------
    Anderson Energy Ltd.                          83
    -------------------------------------------------
    Sabretooth Energy Ltd.                        85
    -------------------------------------------------
    Grey Wolf Exploration Inc.                    86
    -------------------------------------------------
    Delphi Energy Corp.                           86
    -------------------------------------------------
    Storm Exploration Inc.                        86
    -------------------------------------------------
    Yoho Resources Inc.                           86
    -------------------------------------------------
    Diaz Resources Ltd.                           86
    -------------------------------------------------
    International Sovereign Energy Corp.          86
    -------------------------------------------------
    Argosy Energy Inc.                            87
    -------------------------------------------------
    Open Range Energy Corp                        89
    -------------------------------------------------
    Cinch Energy Corp.                            91
    -------------------------------------------------
    Sure Energy Inc.                              91
    -------------------------------------------------
    Triton Energy Corp                            93
    -------------------------------------------------
    Result Energy Inc.                            95
    -------------------------------------------------
    Fortress Energy Inc.                          99
    -------------------------------------------------
    Ironhorse Oil & Gas Inc.                      99
    -------------------------------------------------
    Twoco Petroleums                             100
    -------------------------------------------------

    INTERMEDIATES NATURAL GAS WEIGHTING
    Median = 67%

    -------------------------------------------------
    Crescent Point Energy Trust                   11
    -------------------------------------------------
    TriStar Oil & Gas Ltd.                        20
    -------------------------------------------------
    Baytex Energy Trust                           23
    -------------------------------------------------
    Highpine Oil & Gas Ltd.                       37
    -------------------------------------------------
    NAL Oil & Gas Trust                           48
    -------------------------------------------------
    Pengrowth Energy Trust                        49
    -------------------------------------------------
    ARC Energy Trust                              50
    -------------------------------------------------
    Bonavista Energy Trust                        56
    -------------------------------------------------
    Enerplus Resources Fund                       59
    -------------------------------------------------
    Advantage Energy Income Fund                  64
    -------------------------------------------------
    Galleon Energy Inc                            65
    -------------------------------------------------
    Crew Energy Inc.                              66
    -------------------------------------------------
    Daylight Resources Trust                      67
    -------------------------------------------------
    NuVista Energy Ltd                            71
    -------------------------------------------------
    Paramount Resources Ltd.                      71
    -------------------------------------------------
    Birchcliff Energy Ltd.                        72
    -------------------------------------------------
    Iteration Energy Ltd.                         72
    -------------------------------------------------
    Celtic Exploration Ltd                        73
    -------------------------------------------------
    Fairborne Energy Ltd.                         73
    -------------------------------------------------
    Trilogy Energy Trust                          78
    -------------------------------------------------
    Peyto Energy Trust                            84
    -------------------------------------------------
    Compton Petroleum Corporation                 84
    -------------------------------------------------
    Progress Energy Resources                     88
    -------------------------------------------------
    Paramount Energy Trust                       100
    -------------------------------------------------
    

    Bryan Mills Iradesso's complete iQ Report is available free to media and
investors who fill out an online form on the following website:
http://iq.bmir.com.





For further information:

For further information: Peter D. Knapp, President, Bryan Mills
Iradesso, 400, 805 10th Avenue SW, Calgary, Alberta, T2R 0B4, T: (403)
503-0144 x202, ircontact@bmir.com, http://iq.bmir.com

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