Compton reports second quarter 2009 results



    CALGARY, Aug. 6 /CNW/ - Compton Petroleum Corporation (TSX - CMT, NYSE -
CMZ) reports its financial and operating results for the three months ended
June 30, 2009.
    The full text of Management's Discussion and Analysis ("MD&A") and the
Corporation's audited consolidated financial statements can be found on the
Corporation's website at www.comptonpetroleum.com and at www.sedar.com

    
    Summary of Quarterly Performance

    -   Completion of the annual review of the credit facility with the
        borrowing base exceeding the Corporation's requirements for 2009
    -   Assembly of the new management team, who began to work on the go-
        forward strategy for the Corporation
    -   Funds flow from operations of $9.6 million, or $0.08 per diluted
        share
    -   Adjusted operational earnings for the quarter was a loss of
        $15.5 million, largely due to non-cash items such as unrealized
        foreign exchange and other gains
    -   Net earnings of $19.8 million, or $0.16 per diluted share
    -   Average production was 21,440 boe/d, a decrease of 30% relative to
        2008 due to property dispositions, natural declines and the lack of
        volume additions from drilling in the quarter
    -   Capital expenditures of $15.5 million
    

    Natural gas prices remain depressed with some of the lowest prices being
realized since 2002. Though management believes that the expected longer term
trend is for increased commodity prices through 2010, the current price level
has impacted Compton's financial results. In addition, capital markets
appeared to be showing indications of opening up, with new energy equity
issues increasing 52% in May and June compared to the first four months of the
year.
    In this environment, Compton remains focused on its recapitalization and
will continue with its defensive strategy of living within funds flow and
investing in projects that meet internal rate of return hurdles, until a clear
signal in the recovery of commodity prices is evident. Throughout the first
half of 2009, the Corporation strengthened its management team, began
improvements to systems and processes, and initiated strategies to optimize
asset development. Compton's revitalized culture is committed to delivering on
its promises and providing value-accretive results in all of its activities.
These efforts will be supported by the Corporation's disciplined investment
approach and allow for growth when supported by stronger commodity prices.
    Compton is taking a multi-faceted, staged approach to recapitalization,
which is intended to support the needs of all stakeholders. The objective is
to reduce the Corporation's debt level to achieve a debt to cash flow ratio of
less than 2:1 in a normalized pricing environment of mid-cycle natural gas
prices. At the Corporation's current production rates, the overall debt level
would approximate $400 million. The recapitalization approach considers
various alternatives to reduce the debt level including:

    
    -   conversion of debt to equity;
    -   issue of new capital and/or equity;
    -   sale of a Gross Overriding Royalty on properties; and/or
    -   mergers or acquisitions.
    

    Progress is being achieved on all fronts with advanced discussions taking
place in several areas, including ongoing discussions with the Corporation's
advisor and its note holders.

    
    Financial Review

                    Three Months Ended June 30    Six Months Ended June 30
                -------------------------------------------------------------
    (000s, except
     per share
     amounts)           2009       2008  % Change     2009      2008 % Change
    -------------------------------------------------------------------------
    Total
     revenue(1) $  54,124  $ 186,846     (71%) $ 123,023  $ 347,548     (65%)
    Funds flow
     from
     opera-
     tions(2)   $   9,572  $  76,651     (88%) $  31,613  $ 145,973     (78%)
    Per share
     - basic(2) $    0.08  $    0.59     (86%) $    0.25  $    1.13     (78%)
     - diluted
       (2)      $    0.08  $    0.58     (86%) $    0.25  $    1.10     (77%)
    Adjusted
     operational
     earnings
     (1)(2)     $ (15,511) $  24,948    (162%) $ (17,748) $  44,297    (140%)
    Net earnings
     (loss)     $  19,848  $  (8,561)    332%  $   2,480  $  (6,942)    136%
    Per share
     - basic    $    0.16  $   (0.07)    329%  $    0.02  $   (0.05)    140%
     - diluted  $    0.16  $   (0.07)    329%  $    0.02  $   (0.05)    140%
    Capital
     expenditures
     before
     acquisitions
     and divest-
     ments      $  16,651  $  63,464     (74%) $  33,034  $ 164,473     (80%)
    Total bank debt
     & term notes                              $ 853,945  $ 916,951      (7%)
    Shareholders equity                        $ 838,072  $ 873,293      (4%)
    Shares outstanding                           125,573    130,195      (4%)

    (1) Prior periods have been revised to conform to current period
        presentation
    (2) Funds flow from operations and adjusted operational earnings
        are non-GAAP measures and are addressed in detail in the MD&A
    

    Revenue decreased by 71% over the second quarter of 2009 due to
significantly lower realized natural gas and liquids prices and reduced
production volumes.
    Compton recognized net earnings of $19.8 million for the three months
ended June 30, 2009, as compared to a net loss of $8.6 million during the
second quarter of 2008. The gain is largely attributable to unrealized foreign
exchange gains recognized on the US dollar denominated senior notes, which
more than offset the impact of lower commodity prices and production volumes.
For the year-to-date, Compton realized net earnings of $2.5 million for 2009,
as compared to a net loss of $6.9 million for 2008 due to unrealized foreign
exchange gains over 2009 and a future income tax recovery recognized in the
first quarter of 2009.
    Capital spending, before acquisitions, divestments and corporate expenses
decreased by 85% in 2009 compared to the comparable period in 2008 due to
decreased and delayed activity during 2009. The Corporation commenced drilling
one well in the second quarter of 2009 as compared to 34 in 2008. The decline
in commodity prices has adversely impacted economic returns on many of our
drilling projects. Until such time as natural gas prices improve and/or
reductions in service costs allow Compton to achieve its internal rate of
return objectives, the majority of the Corporation's field activities will
focus on optimizing production from existing wells.

    
    Operations Review

                       Three Months Ended June 30   Six Months Ended June 30
                       ------------------------------------------------------
                                            %                            %
                        2009     2008    Change     2009       2008   Change
    -------------------------------------------------------------------------
    Average daily
     production
      Natural gas
       (mmcf/d)       108        149     (28%)       113        160     (29%)

    Liquids
     (bbls/d)       3,428      5,643     (39%)     3,540      5,326     (34%)
    -------------------------------------------------------------------------
    Total (boe/d)  21,440     30,556     (30%)    22,312     31,915     (30%)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Realized
     prices
      Natural gas
       ($/mcf)   $   3.80    $  9.42     (60%) $    4.51  $    8.39     (46%)
      Liquids
       ($/bbl)      49.93     110.37     (55%)     43.99     103.13     (57%)
    -------------------------------------------------------------------------
      Total
       ($/boe)   $  27.74    $ 67.18     (59%) $   30.46  $   60.12     (49%)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Field
     netback(1)
     ($/boe)     $  18.05    $ 37.62     (52%) $   19.49  $   32.03     (39%)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Field netback is a non-GAAP measures and is addressed elsewhere in
        detail in the MD&A
    

    As anticipated, second quarter production volumes were lower compared to
the corresponding period in 2008 primarily due to asset sales in 2008 and
natural declines. In addition, volumes were affected by the impact of
turnarounds and minimal new production additions due to Compton's defensive
strategy limiting its capital expenditures.
    Activities during the quarter continued to focus on the Niton area,
targeting the Rock Creek formation. Compton commenced drilling a Niton
horizontal well (100% working interest) during the second quarter. The well
was rig released and is in the process of being completed in the third
quarter. Well cost is expected to be approximately 10% less than previous
horizontal wells drilled in the area due to the Corporation's focus on cost
reduction and lower industry rates.
    Compton is in the process of monitoring the Niton horizontal well drilled
in the first quarter to determine a six month production rate. The well had an
initial production rate (9.5 MMcf/d) that was higher than previous wells
drilled in the area and is currently flowing at 1.7 MMcf/d. Typically, these
wells experience a decline in the first two months of approximately 70%, from
which rates stabilize after six months. This will provide additional data in
evaluating the economics and design of future wells in the area.
    Compton focused on several initiatives with its new teams during the
second quarter to identify opportunities to add value. During the quarter the
Corporation:

    
    -   Launched an operating expense benchmarking study to better understand
        operating costs and identify cost savings opportunities, which is
        expected to be completed by the end of October;

    -   Continued the optimization study initiated in the first quarter by
        thoroughly reviewing properties and wellbores to identify workover
        and recompletion opportunities. Implementation is expected to
        commence during the second half of the year; and

    -   Prepared preliminary work to launch an updated multi-year strategic
        plan, which is expected to be completed by year-end.
    

    In establishing Compton's 2009 capital expenditure level, management's
objective is to limit spending to within funds flow generated from operations,
which is consistent with the Corporation's defensive operating strategy. The
majority of the year's expenditures were expected in the first half of the
year. As capital plans are assessed for the balance of the year, management
will consider additional activities as funds become available.

    Outlook

    As Compton faces the challenge presented by low natural gas prices, the
Corporation is taking a prudent approach to financial management by
establishing appropriate return on investment requirements, reducing its
internal cost structure, managing its capital structure to suitable levels,
and re-evaluating its depletion strategy to optimize asset value. In addition,
Compton increased its risk management activities by expanding its natural gas
price hedging position to reduce cash flow volatility as natural gas prices
are not expected to recover until late 2009 or the first half of 2010.
Approximately 60% of the Corporation's production is hedged for 2009 and
beyond at prices between AECO $4.50 per giga joule and $7.18 per giga joule,
safeguarding a portion of revenue.
    Management is progressing with its various recapitalization options.
During the third quarter of 2009, the Corporation expects to address its
leverage concerns, realigning capital structure and reducing overall financial
risk. When this process is complete, Compton expects to emerge as a stronger
company, poised to capitalize on its assets and growth in production and cash
flow.
    Over the first half of 2009, Compton continued to make progress in
controllable areas such as reduced operating, G&A and drilling costs. Due to
negative movement in foreign exchange and natural gas prices, downward
pressure is being experienced on the Corporation's cash flow; as a result,
cash flow may range between $50 and $60 million for 2009.
    Compton's asset base provides solid growth potential through a large
focused land position and significant impact from horizontal multi-stage
fracture wells in the Niton and Hooker/High River properties. With a continued
focus on lowering well cost, management believes that these horizontal wells
may represent the best opportunity for return on investment. Once the capital
restructuring is complete, the strength of the team as it implements a
multi-year strategic plan will position the Corporation to deliver long-term
value to its shareholders.

    Additional Information

    Compton has filed its audited Consolidated Financial Statements for the
three months ended June 30, 2009 and related Management's Discussion and
Analysis with Canadian securities regulatory authorities. Copies of these
documents may be obtained via www.sedar.com or the Corporation's website,
www.comptonpetroleum.com. To order printed copies of the filed documents free
of charge, email the Corporation at investorinfo@comptonpetroleum.com.

    2009 Second Quarter Conference Call

    Compton will host a conference call and web cast on Thursday, August 6,
2009 at 8:00 a.m. MST (10:00 a.m. EST) to discuss the Corporation's 2009
second quarter financial and operating results. To participate in the
conference call, please contact the Conference Operator ten minutes prior to
the call at 1-888-231-8191 or 1-647-427-7450. To participate in the web cast,
please visit: www.comptonpetroleum.com. The web cast will be archived two
hours after the presentation at the website listed above. For a replay of this
call, please dial: 1-888-562-2819 or 1-402-220-7737 and enter access code
22903567 until August 13, 2009.

    Advisories

    Non-GAAP Financial Measures

    Included in the news release are references to terms used in the oil and
gas industry such as funds flow from operations, funds flow per share,
adjusted operational earnings, adjusted EBITDA, field netback, debt and
capitalization. These terms are not defined by GAAP in Canada and consequently
are referred to as non-GAAP measures. Non-GAAP measures do not have any
standardized meaning and therefore reported amounts may not be comparable to
similarly titled measures reported by other companies.
    Funds flow from operations should not be considered an alternative to, or
more meaningful than, cash provided by operating, investing and financing
activities or net earnings as determined in accordance with Canadian GAAP, as
an indicator of the Corporation's performance or liquidity. Funds flow from
operations is used by Compton to evaluate operating results and the
Corporation's ability to generate cash to fund capital expenditures and repay
debt.
    Adjusted operational earnings (loss) is used by the Corporation to
facilitate comparability of earnings between periods. Adjusted operational
earnings (loss) represents net earnings excluding certain items that are
largely non-operational in nature, primarily of a non-cash nature or one-time
non-recurring items, and should not be considered an alternative to, or more
meaningful than, net earnings as determined in accordance with Canadian GAAP.
    Adjusted EBITDA is a non-GAAP measure defined as net earnings, before
interest and finance charges, income taxes, depletion and depreciation,
accretion of asset retirement obligations, and foreign exchange and other
gains and losses.
    Field netback equals the total petroleum and natural gas sales, including
realized gains and losses on commodity hedge contracts, less royalties and
operating and transportation expenses, calculated on a $/boe basis. Funds flow
netback equals field netback including general and administrative costs and
interest costs. Field netback and funds flow netback are non-GAAP measures
that management uses to analyze operating performance.
    Debt is comprised of floating rate bank debt and fixed rate senior term
notes. Capitalization is defined as bank debt plus shareholder's equity.

    Use of Boe Equivalents

    The oil and natural gas industry commonly expresses production volumes
and reserves on a barrel of oil equivalent ("boe") basis whereby natural gas
volumes are converted at the ratio of six thousand cubic feet to one barrel of
oil. The intention is to sum oil and natural gas measurement units into one
basis for improved measurement of results and comparisons with other industry
participants. We use the 6:1 boe measure which is the approximate energy
equivalency of the two commodities at the burner tip. However, boes do not
represent a value equivalency at the well head and therefore may be a
misleading measure if used in isolation.

    Forward-Looking Statements

    Certain information regarding the Corporation contained herein
constitutes forward-looking information and statements and financial outlooks
(collectively, "forward-looking statements") under the meaning of applicable
securities laws, including Canadian Securities Administrators' National
Instrument 51-102 Continuous Disclosure Obligations and the United States
Private Securities Litigation Reform Act of 1995. Forward-looking statements
include estimates, plans, expectations, opinions, forecasts, projections,
guidance, or other statements that are not statements of fact, including
statements regarding (i) cash flow and capital and operating expenditures,
(ii) exploration, drilling, completion, and production matters, (iii) results
of operations, (iv) financial position, and (v) other risks and uncertainties
described from time to time in the reports and filings made by Compton with
securities regulatory authorities. Although Compton believes that the
assumptions underlying, and expectations reflected in, such forward-looking
statements are reasonable, it can give no assurance that such assumptions and
expectations will prove to have been correct. There are many factors that
could cause forward-looking statements not to be correct, including risks and
uncertainties inherent in the Corporation's business. These risks include, but
are not limited to: crude oil and natural gas price volatility, exchange rate
fluctuations, availability of services and supplies, operating hazards, access
difficulties and mechanical failures, weather related issues, uncertainties in
the estimates of reserves and in projection of future rates of production and
timing of development expenditures, general economic conditions, and the
actions or inactions of third-party operators, and other risks and
uncertainties described from time to time in the reports and filings made with
securities regulatory authorities by Compton. Statements relating to
"reserves" and "resources" are deemed to be forward-looking statements, as
they involve the implied assessment, based on estimates and assumptions, that
the reserves and resources described exist in the quantities predicted or
estimated, and can be profitably produced in the future.
    The forward-looking statements contained herein are made as of the date
of this news release solely for the purpose of generally disclosing Compton's
views of its financial and operational results as of June 30, 2009, and
prospective activities. Compton may, as considered necessary in the
circumstances, update or revise the forward-looking statements, whether as a
result of new information, future events, or otherwise, but Compton does not
undertake to update this information at any particular time, except as
required by law. Compton cautions readers that the forward-looking statements
may not be appropriate for purposes other than their intended purposes and
that undue reliance should not be placed on any forward-looking statement. The
Corporation's forward-looking statements are expressly qualified in their
entirety by this cautionary statement.

    About Compton Petroleum Corporation

    Compton Petroleum Corporation is a public company actively engaged in the
exploration, development and production of natural gas, natural gas liquids,
and crude oil in western Canada. Our strategy is focused on creating value for
shareholders by providing appropriate investment returns through the effective
development and optimization of assets. The Corporation's operations are
located in the deep basin fairway of the Western Canada Sedimentary Basin. In
this large geographical region, we pursue three deep basin natural gas plays:
the Basal Quartz sands at Hooker in southern Alberta, the Gething/Rock Creek
sands at Niton and Caroline in central Alberta, and the shallower Plains Belly
River sand play in southern Alberta. In addition, we have an exploratory play
at Callum/Cowley in the Foothills area of southern Alberta. Natural gas
represents approximately 86% of reserves and production. Compton's shares are
listed on the Toronto Stock Exchange under the symbol CMT and on the New York
Stock Exchange under the symbol CMZ.

    %CIK: 0001043572




For further information:

For further information: Susan J. Soprovich, Director, Investor
Relations, Ph: (403) 668-6732, Fax: (403) 237-9410, Email:
investorinfo@comptonpetroleum.com, Website: www.comptonpetroleum.com

Organization Profile

MFC Energy Corporation

More on this organization


Custom Packages

Browse our custom packages or build your own to meet your unique communications needs.

Start today.

CNW Membership

Fill out a CNW membership form or contact us at 1 (877) 269-7890

Learn about CNW services

Request more information about CNW products and services or call us at 1 (877) 269-7890