Cork Exploration Inc. announces third quarter 2007 results and filing of third quarter 2007 report



    CALGARY, Nov. 8 /CNW/ - Cork Exploration Inc. (the "Corporation" or
"Cork") (TSX: CRK) today announced its financial and operational results for
the third quarter of 2007.
    Cork has filed with Canadian securities regulatory authorities its
unaudited financial statements and related Management's Discussion and
Analysis for the three months and nine months ended September 30, 2007. These
filings are available for review on the Corporation's SEDAR profile at
www.sedar.com.

    
    Highlights

                                Three months ended         Nine months ended
                                      September 30              September 30
    ($ except unit amounts)      2007         2006         2007         2006
    -------------------------------------------------------------------------
    Daily production
     (boe/d)                    2,241          730        2,301          609
    Total revenues          9,141,601    3,103,658   31,049,897    7,996,769
    Net earnings (loss)    (2,011,236)   1,267,070   (1,941,844)   1,571,477
    Net earnings (loss)
     per share - basic          (0.04)        0.03        (0.04)        0.04
    Net earnings (loss)
     per share - diluted        (0.04)        0.03        (0.04)        0.04
    Funds from
     operations(1)          2,798,870    2,073,756   13,868,147    4,614,783
    Funds from operations
     per share - basic(1)        0.05         0.05         0.27         0.12
    Funds from operations
     per share - diluted(1)      0.05         0.04         0.27         0.11
    Total assets          161,525,328   96,665,274  161,525,328   96,665,274
    Net debt(1)            47,736,617   13,657,738   47,736,617   13,657,738
    Capital expenditures    7,871,841   30,030,009   40,809,161   68,979,050
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Non-GAAP measures


    Key operational highlights for the quarter include:

    -   Drilling activity - In the third quarter of 2007, all of Cork's
        drilling activity was focused on the Carrot Creek area. The
        Corporation successfully tied-in 2 gross (0.7) net wells that had
        been completed in the second quarter and drilled and tied-in 1 gross
        (0.6 net) vertical well and 1 gross (0.8 net) horizontal well. On
        September 20, 2007, Cork spud 1 gross (0.6 net) vertical well in
        Carrot Creek, representing the final earning well on existing farm-in
        agreements, with completion and tie-in expected in the fourth
        quarter.

    -   Production - Production in the third quarter of 2007 reflected the
        negative impact of third party plant turnarounds and normal
        production declines offset by additional production from 4 gross
        (2.1 net) new wells that were tied in during the quarter. At Carrot
        Creek, production was restricted from September 6 to September 27,
        2007 when one of the two plants which process all of Cork's Carrot
        Creek production was undergoing a plant turnaround. From September 14
        to September 26, 2007, the plant to which Cork sends all of its
        Cochrane production was down for a plant turnaround. For the
        three months ended September 30, 2007, production averaged
        2,241 boe/d consisting of 9,769 mcf/d of natural gas and 613 bbls/d
        of oil and natural gas liquids. Production increased substantially
        compared to the 730 boe/d recorded in the same period for 2006. For
        the nine months ended September 30, 2007, production was 2,301 boe/d
        consisting of 10,142 mcf/d of natural gas and 611 bbls/d of oil and
        natural gas liquids.

    -   Land - At September 30, 2007, Cork's land base totaled approximately
        139 gross sections of developed, undeveloped and undeveloped right-
        to-earn land with an average working interest of 63%. This included
        35,483 acres of net undeveloped land, including 864 acres of right-
        to-earn lands.

    -   Bank Debt - at September 30, 2007, Cork had drawn $41.7 million on
        its available credit facilities of $47.0 million and was in
        compliance with all debt covenants. Net debt, including working
        capital deficit, at September 30, 2007 totaled $47.7 million.
    

    Strategic Combination with Profound Energy Ltd.

    On September 17, 2007, Cork and Profound Energy Ltd. ("Profound")
announced the signing of a pre-acquisition agreement (the "Transaction")
whereby Cork has agreed to purchase the Profound shares in consideration for
the issuance by Cork of 1.60 common shares of Cork for each issued and
outstanding Profound share. The combined entity will continue under the name
"Profound Energy Inc." ("New Profound"). Cork shareholders will own
approximately 53% of the shares of New Profound.
    The Transaction is an arms-length transaction resulting in Profound
owning approximately 47% of the issued and outstanding shares of New Profound
with a major shareholder of Profound owning 36% of the issued and outstanding
shares of New Profound. After the acquisition, the management team will be
comprised of the current management of Profound. The Board of Directors of New
Profound will consist of 6 directors, 5 of which are members of the current
Board of Directors of Profound. As a result of the share ownership, the change
in management and the composition of the Board of Directors, the Transaction
is being accounted for as a reverse take-over acquisition of Cork by Profound,
whereby Profound is considered to be the acquirer for accounting purposes.
    The Transaction will allow Cork shareholders to participate in a larger,
growth-oriented, junior oil and gas producer with less risk and an enhanced
ability to exploit its assets through financial strength and an expanded
inventory of drilling prospects. Specifically, management of Cork estimates
that the Corporation will, following completion of the Transaction, have:

    
    -   An experienced and dedicated management team, which will be comprised
        of the current management of Profound (the former Find Energy Ltd.
        ("Find") management team, which grew Find to over 5,500 boe/d at the
        time of its sale to Shiningbank Energy Income Fund for $443 million
        in September 2006);

    -   A land base of approximately 42,237 net undeveloped acres, providing
        multi-year drilling inventory;

    -   An expanded and diversified portfolio of low risk multi-zone drilling
        and completion opportunities in Carrot Creek, North and South
        Pembina, and Cochrane;

    -   A strong balance sheet, low leverage and financial flexibility. At
        closing, New Profound expects to have approximately $19.9 million of
        debt (less than 1.0x debt/cash flow) on available bank lines of
        $47 million;

    -   An opportunity to realize administrative and operating efficiencies
        through considerable overlap of the asset bases and economies of
        scale; and

    -   A production base that is more than 90% operated.
    

    The Transaction is subject to certain conditions including the tendering
of a minimum of 67% of the Profound Shares to the Offer, receipt of the
Toronto Stock Exchange ("TSX") and Cork shareholder approval at a Shareholder
meeting on November 16, 2007, and other transaction specific and customary
conditions.
    The information circular outlining the Transaction was mailed to Cork
shareholders on October 22, 2007 and is available on the Corporation's profile
at www.SEDAR.com. An annual and special meeting will be held in the Viking
Room of the Calgary Petroleum Club, 319 - 5th Avenue S.W., Calgary, Alberta
T2P 0L5 at 10:00 am (Calgary time) on November 16, 2007 to approve the
Transaction. If approved, the Transaction is expected to close on November 19,
2007.

    Net Earnings (Loss)

    The Corporation incurred a net loss of $2,011,237 for the three months
ended September 30, 2007 compared to net earnings of $1,267,070 for the three
months ended September 30, 2006. For the nine months ended September 30, 2007
the Corporation incurred a net loss of $1,941,844 compared to net earnings of
$1,571,477 for the same period in 2006. Net earnings decreased substantially
in the three and nine months ended September 30, 2007 over the same periods in
the prior year due to higher operating and transportation expenses, severance
costs and depletion expense offset by future income tax recoveries. During the
third quarter of 2007, the Corporation incurred $850,048 of severance costs
paid to certain former members of senior management and certain former
employees of the Corporation.
    The following is a summary of the operating netbacks for the periods set
forth below:

    
                                Three months ended         Nine months ended
                                      September 30              September 30
    $/boe                        2007         2006         2007         2006
    -------------------------------------------------------------------------
    Revenues                    44.35        46.20        49.43        48.13
    Royalties                   (9.13)       (7.04)      (10.32)       (9.84)
    Operating expenses          (9.56)       (5.94)       (9.25)       (5.75)
    Transportation expenses     (2.09)       (1.20)       (1.63)       (1.09)
    -------------------------------------------------------------------------
    Operating netback           23.56        32.02        28.23        31.45
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    Revenue per boe realized in the three and nine months ended September 30,
2007 was $44.35 per boe and $49.43 per boe, respectively, compared to
$46.20 per boe and $48.13 per boe in the same periods, respectively of 2006.
Realized natural gas prices in the third quarter of 2007 reflected a decline
in the AECO-C spot price while realized natural gas liquids prices reflected
the impact of the escalating Canadian dollar offset by the increase in the
benchmark West Texas Intermediate oil prices. For the nine months ended
September 30, 2007 compared to the same period in 2006, higher realized gas
prices were offset by lower realized natural gas liquids prices, reflecting
the impact of the escalating Canadian dollar.
    Royalty rates of 23% in the third quarter of 2007 were higher than the
16% incurred in the third quarter of 2006, reflecting a lower proportion of
wells on royalty holiday. Royalty rates of 22% in the first nine months of
2007 increased from 21% in the same period of 2006 for the same reasons. The
Corporation expects royalty rates for the remainder of 2007 to be
approximately 24%.
    Operating costs of $9.56 per boe and $9.25 per boe in the three and nine
months ended September 30, 2007, respectively, increased from $5.94 per boe
and $5.75 per boe in the three and nine months ended September 30, 2006,
respectively. These costs have trended towards the industry average in 2007
and resulted primarily from new rental compression charges associated with the
Carrot Creek de-bottlenecking project, start-up costs of new wells as well as
increased chemical and repairs and maintenance costs. Operating costs per boe
were negatively impacted in the third quarter of 2007 by the aforementioned
production constraints due to plant turnarounds.
    Transportation charges per boe increased to $2.09 per boe and $1.63 per
boe in the three and nine months ended September 30, 2007, respectively,
compared to $1.20 per boe and $1.09 per boe in the same periods of 2006 due to
increased production volumes flowing through third party operated gathering
systems and pipelines.

    Funds from Operations

    Funds from operations for the three and nine months ended September 30,
2007 increased to $2,798,870 and $13,868,147 respectively. Excluding the
effects of the one-time severance costs of $850,048, funds from operations was
$3,648,918 and $14,718,195 for the three and nine months ended September 30,
2007, respectively, compared to $2,073,756 and $4,614,783 during the same
periods, respectively, in 2006. The increase in funds from operations is due
primarily to the increase in production volumes and related revenues in the
current year.
    On a per boe basis funds from operations for the three and nine months
ended September 30, 2007 decreased to $13.57 and $22.08, respectively.
Excluding the effects of the one-time severance costs, funds from operations
was $17.69 per boe and $23.43 per boe for the three and nine months ended
September 30, 2007 compared to $30.87 and $27.77 in the same periods in 2006.
The decrease is primarily due to higher royalties, operating and
transportation expenses and interest and financing charges.

    Capital Expenditures

    The following is a summary of capital expenditures for the periods set
forth below:

    
                                Three months ended         Nine months ended
                                      September 30              September 30
    ($)                          2007         2006         2007         2006
    -------------------------------------------------------------------------
    Drilling and
     completions            6,232,021   24,895,928   17,619,745   50,681,754
    Equipment and
     facilities             1,450,819    4,415,812   12,513,320   14,267,269
    Land, acquisitions
     and maintenance                -      309,121    9,755,193    1,907,460
    Capitalized G&A           184,326      399,324      811,026    1,089,472
    Seismic                     4,676        9,824      109,877    1,033,095
    -------------------------------------------------------------------------
    Total net capital
     investment             7,871,841   30,030,009   40,809,161   68,979,050
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    Total capital investment for the three and nine months ended
September 30, 2007 was $7,871,840 and $40,809,161, respectively, compared to
$30,030,009 and $68,979,050 for the same periods, respectively, in 2006. The
decreased expenditures on drilling and completions activity reflects a lower
number of wells drilled in the first nine months of 2007 compared to the same
period in 2006. In the third quarter of 2007, Cork drilled 3 gross (2.4 net)
new wells compared to 13 gross (7.3 net) wells drilled in the third quarter of
2006. For the nine months ended September 30, 2007, Cork drilled 11 gross (7.8
net) wells compared to 32 gross (18.3 net) wells for the same period in 2006
reflecting a lower level of drilling and completions activity in the current
year compared to prior year.

    Outlook

    In the fourth quarter of 2007, Cork anticipates closing of the Profound
acquisition announced September 17, 2007 and expects that its drilling focus
will continue to be on fulfilling its $15.0 million CEE obligations from its
November 8, 2006 flow through share issuance with such expenditures funded by
operating cashflow. As of September 30, 2007, approximately $11.0 million of
qualifying expenditures had been incurred. From September 30, 2007 to
November 7, 2007, an estimated additional $2.1 million of CEE qualifying
expenditures have been incurred. The Corporation expects to meet the 2006
related flow-through share CEE obligations by December 31, 2007.
    Since September 30, 2007, Cork finished drilling and successfully
completed the 1 gross (0.6 net) well spud on September 20, 2007 and has
drilled an additional 2 gross (1.3 net) well in Carrot Creek and Pembina with
completion to occur in the fourth quarter of 2007. Cork also successfully
recompleted 1 gross (1.0 net) well in West Pembina and unsuccessfully
recompleted 1 gross (1.0 net) well in Cochrane.
    On October 25, 2007, the Alberta Government released The New Royalty
Framework which summarizes the government's decision on Alberta's new royalty
regime pertaining to oil and gas resources, including oil sands, convention
oil and gas and coalbed methane. This is response to recommendations recently
put forth by an Alberta Royalty Review Panel. This new royalty regime will
take effect on January 1, 2009. Cork is continuing to assess the impact of the
new royalty regime. It is anticipated that higher royalties could result in
reduced project economics and the consequent impact on future capital and
cashflow is yet to be determined.

    Non-GAAP Measures

    This Press Release contains the terms "funds from operations", "netbacks"
and "net debt" which are not defined under GAAP. The Corporation uses these
measures to help evaluate its performance. Management considers netbacks an
important measure as it demonstrates Cork's profitability relative to current
commodity prices. Management uses funds from operations to analyze operating
performance and leverage and considers funds from operations to be a key
measure as it demonstrates the Corporation's ability to generate the funds
necessary to finance future capital investments and to repay debt. Funds from
operations should not be considered an alternative to, or more meaningful
than, cash flow from operating activities as determined in accordance with
GAAP as an indicator of the Corporation's performance. Therefore, references
to funds from operations or funds from operations per share (basic and
diluted) may not be comparable with the calculation of similar measures for
other entities. The reconciliation between funds from operations and cash flow
from operations can be found in the statements of cash flow in the audited
financial statements. Funds from operations per share is calculated using the
basic and diluted weighted average number of shares for the period. Net debt
is calculated as the total current assets less total current liabilities of
the Corporation.

    Boe Presentation

    Certain disclosure may be presented on a per barrel of oil equivalent
(boe) basis. Boe's may be misleading, particularly if used in isolation. A boe
conversion ratio of 6 thousand cubic feet (mcf) to 1 barrel (bbl) is based on
an energy equivalency conversion method primarily applicable at the burner tip
and does not represent a value equivalency at the wellhead.

    Cork Exploration Inc. is a Canadian junior oil and gas company engaged in
the exploration, development and production of natural gas in the Western
Canadian Sedimentary Basin. The Corporation currently has 53.4 million shares
common shares outstanding and 7.5 million stock options and performance
warrants outstanding.

    CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

    Certain statements in this news release may constitute "forward-looking
information" or "forward-looking statements" which involve known and unknown
risks, uncertainties and other factors which may cause the actual results,
performance or achievements of the Corporation, or industry results, to be
materially different from any future results, performance or achievements
expressed or implied by such forward-looking information. When used in this
news release, such information uses such words as "estimates", "expects",
"plans", "anticipates" and other similar terminology. This information
reflects the Corporation's current expectations regarding future events and
operating performance and speaks only as of the date of this news release.
Forward-looking information involves significant risks and uncertainties,
should not be read as a guarantee of future performance or results, and will
not necessarily be an accurate indication of whether or not such results will
be achieved. A number of factors could cause actual results to differ
materially from the results discussed in the forward-looking information,
including, but not limited to, the factors discussed below. Although the
forward-looking information contained in this news release is based upon what
management of the Corporation believes are reasonable assumptions, the
Corporation cannot assure investors that actual results will be consistent
with this forward-looking information. This forward-looking information is
provided as of the date of this news release, and, subject to applicable
securities laws, the Corporation assumes no obligation to update or revise
such information to reflect new events or circumstances.
    In particular, this news release contains forward-looking information
pertaining to the following: production rates, netbacks, royalty rates and
operating costs, drilling plans, capital spending and capital efficiency.
    The Corporation's actual results could differ materially from those
anticipated in the forward-looking information as a result of several factors,
including the following: general economic conditions in Canada and
internationally; volatility in market prices for oil and natural gas;
competition; liabilities and risks, including environmental liabilities and
risks, inherent in oil and natural gas operations; sourcing, pricing and
availability of materials, equipment, suppliers, drilling services,
facilities, and skilled management, technical and field personnel; ability to
integrate technological advances and match advances of competition;
availability of capital; uncertainties in weather and temperature affecting
the duration of the oil and gas operations, drilling and the activities that
can be completed; changes in legislation and the regulatory environment,
including uncertainties with respect to implementing the Kyoto Protocol; and
the other factors considered under "Risk Factors" in the Corporation's Annual
Information Form dated March 28, 2007.

    %SEDAR: 00023712E




For further information:

For further information: Cork Exploration Inc., 380, 435 - 4th Avenue
S.W., Calgary, Alberta, T2P 3A8; Raymond G. Smith, Interim President and Chief
Executive Officer and Chairman, or Geoffrey D. Krause, Vice-President, Finance
and Chief Financial Officer, Telephone: (403) 531-1695, Fax: (403) 531-1696,
Website: www.corkexploration.com

Organization Profile

CORK EXPLORATION INC.

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