Flagship Energy Inc. - Press release



    CALGARY, April 10 /CNW/ - Flagship Energy Inc. ("Flagship" or the
"Company") today filed with Canadian securities authorities its Audited
Financial Statements and Management Discussion and Analysis in respect thereof
for the year ended December 31, 2006. Copies of the filed documents may be
obtained by visiting Flagship's website at www.flagshipenergy.ca or through
www.sedar.com.

    
    2006 Selected information

    -   Operating netbacks(1) of $14.5 million, an increase of 326% over the
        fiscal 2005 amount of $3.4 million. On a BOE basis, netbacks were
        $24.73/BOE for 2006 compared to $36.75/BOE for 2005.

    -   Funds flow from operations(1) of $11.1 million, an increase of 313%
        over the fiscal 2005 amount of $2.7 million. On a per share basis,
        funds flow from operations was $0.17 for 2006 compared to $0.29 for
        2005 (per share amounts are based on Class A shares after taking into
        account the deemed conversion of Class B shares).

    -   Average production for the fourth quarter 2006 was 2,074 BOEPD,
        comprised of 830 bbls/d of crude oil and natural gas liquids and
        7.5 MMcf/d of natural gas. For the year, average production was
        1,604 BOEPD, made up of 558 bbls/d of crude oil and natural gas
        liquids and 6.8 MMcf/d of natural gas. 2006 production represents a
        529% increase over average 2005 production.

    -   Exploration and development expenditures totaled $33.7 million, with
        $20.4 million incurred on drilling, completions and workovers and
        $7.3 million on equipping, facilities and pipelines. Over
        100 development and exploration drilling locations remain in
        Flagship's project inventory.

    -   The acquisition of Hawk Energy Corp. for an aggregate cost of
        $121.8 million. Consideration included $33.6 million of cash,
        15 million Class A shares and 1.9 million Class B shares of Flagship
        at a deemed value of $4.80 per Class A share and $6.31 per Class B
        share plus the assumption of $15.8 million of net debt and
        $3.7 million of related transaction costs.

    -   Approximately $15 million raised in July 2006 in conjunction with the
        issuance of 2.2 million Class B shares on a flow-through basis.

    -   A before-tax write-down of property, plant and equipment of
        $70.3 million and a goodwill impairment loss of $34.5 million
        contributed to a net loss for the year of $91.0 million ($1.39 per
        basic Class A share after taking into account the deemed conversion
        of Class B shares). These write-downs, which represent non-cash
        charges, primarily relate to amounts initially recognized on the
        acquisition of Hawk Energy Corp., and were assessed for impairment as
        at December 31, 2006 following a significant reduction in estimated
        reserves.

    -   During 2006, 24 (22.2 net) wells were drilled and cased. On a net
        basis, 7.8 wells were drilled in S.E. Saskatchewan, 11.3 net wells
        were drilled in Alberta and 3.1 net wells were drilled in the Border
        area.

    -   The construction of a $3.7 million ($2.6 million net) Buck Lake sour
        gas pipeline. Flagship has retained a 70% working interest in the
        pipeline after a third party elected to participate in the project.


    (1) Operating netback, funds flow from operations and funds flow from
    operations per share are not standard measures under generally accepted
    accounting principles ("GAAP") and may not be comparable to similar
    measures presented by other companies.


    Flagship currently has 176,000 net undeveloped acres available.

    On March 14, 2007 the Company announced its first quarter 2007 activity
update and reserves information.


                                        4th        3rd        2nd        1st
                                    Quarter    Quarter    Quarter    Quarter
                                       2006       2006       2006       2006

    Sales volumes
    Oil (bbls/d)                        786        933        418          -
    Natural gas (Mcf/d)               7,462      8,148      5,993      3,434
    NGL's (bbls/d)                       44         16         13          8
    -------------------------------------------------------------------------

    BOE/d (6:1)                       2,074      2,307      1,430        581
    Daily BOE sales volumes per
     million Class A shares              66         73         59         35

    Prices
    Oil ($/bbl)                       52.89      64.20      66.12          -
    Natural gas ($/Mcf)                6.49       5.61       5.49       7.07
    NGL's ($/bbl)                     49.68     100.29      39.75      67.75

    Per BOE ($)
    Gross revenues                    44.78      46.59      42.91      43.52
    Royalties                         (6.65)     (7.03)     (7.97)     (9.61)
    Operating costs                  (13.47)    (12.55)     (7.43)     (8.17)
    Transportation charges            (2.19)     (1.49)     (0.77)     (1.04)
    -------------------------------------------------------------------------

    Operating netback                 22.47      25.52      26.74      24.70
    Other revenue                         -       0.03       0.11       1.68
    General and administrative        (3.05)     (1.68)     (3.19)     (3.82)
    Interest expense                  (3.82)     (2.81)     (3.39)     (0.11)
    Capital tax (expense) recovery    (0.64)     (0.17)      0.57      (0.78)
    -------------------------------------------------------------------------

    Funds flow from operations        14.96      20.89      20.84      21.67
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                                        4th        3rd        2nd        1st
                                    Quarter    Quarter    Quarter    Quarter
                                       2005       2005       2005       2005

    Sales volumes
    Oil (bbls/d)                          -          -          -          -
    Natural gas (Mcf/d)               3,359      2,116        479          -
    NGL's (bbls/d)                        7          6          6          -
    -------------------------------------------------------------------------

    Total BOE/d (6:1)                   567        358         86          -
    Daily BOE sales volumes per
     million Class A shares issued       39         32         22          -

    Prices
    Oil ($/bbl)                           -          -          -          -
    Natural gas ($/Mcf)               10.86       9.25       7.68          -
    NGL's ($/bbl)                    112.55      74.71      63.98          -

    Per BOE ($)
    Gross revenues                    66.40      56.44      47.32          -
    Royalties                        (16.82)    (14.36)    (13.42)         -
    Operating costs                  (10.31)     (5.03)     (2.50)         -
    Transportation charges            (1.21)     (1.07)         -          -
    -------------------------------------------------------------------------

    Operating netback                 38.06      35.98      31.40          -
    Other revenue                      1.37       0.29       2.31          -
    General and administrative        (5.65)     (8.11)    (16.08)       N/A
    Interest expense                  (0.22)     (0.54)     (1.06)         -
    Capital tax (expense) recovery    (1.78)         -          -          -
    -------------------------------------------------------------------------

    Funds flow from operations        31.78      27.62      16.57        N/A
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    NET ASSET VALUE (AS AT DECEMBER 31, 2006)

    The Company has calculated its net asset value, which does not represent
fair market value, as follows:

                                                               (000's except
                                                                   per share
                                                                      amount)

    Proved Plus Probable reserve value, discounted at 10%          116,810.8
    Land value, as estimated by management - 182,000 net
     undeveloped acres (based on recent sales in the area
     or on similar properties in the same general area)             18,490.8
    10% of tax pools, as estimated by management
     (based on total pools of $99.3 million)                         9,927.3
    Debt, net of working capital, as estimated by management       (50,003.0)
    Proceeds from the future exercise of in-the-money
     stock options                                                     194.3
                                                               --------------
    Total estimated net asset value                                 95,420.2
    Less value of Class B shares, assuming immediate
     conversion at $10/Class B share (see below for terms
     of conversion). Based on 5,149,869 Class B shares             (51,498.7)
                                                               --------------
                                                                    43,921.5
    No. of Class A shares (after exercise of
     in-the-money options)                                          32,108.5
                                                               --------------

    Net Asset Value per Class A share                                  $1.37
                                                               --------------
                                                               --------------
    

    As noted above, the calculated net asset value per Class A share was
based on converting the Class B shares immediately, with a full value of
$10/Class B share assigned.

    Flagship is an emerging oil and gas company focused on the acquisition,
exploration, exploitation and development of oil and natural gas in Western
Canada. Flagship's business plan is to grow reserves and production to
increase shareholder value through a focused and balanced exploration program,
strategic acquisitions and value-added exploitation.
    The Company has 31,553,495 Class A shares and 5,149,869 Class B shares
issued and outstanding which trade on the TSX Venture Exchange under the
symbols "FG.A" and "FG.B". The Class B shares are convertible, at the option
of the Company, at any time after December 31, 2008 and before December 31,
2010, into Class A shares. The conversion rate is calculated by dividing $10
by the greater of $1 and the then current market price of the Class A shares.
If conversion has not taken place by December 31, 2010, the Class B shares
become convertible, at the option of the shareholder, into Class A shares on
the same basis. Effective February 1, 2011, all remaining Class B shares will
be deemed to be converted to Class A shares on the same basis.

    ADVISORY: Certain information regarding Flagship Energy Inc. in this news
release including management's assessment of future plans and operations,
reserves and production estimates, prospective drilling locations and wells to
be drilled, timing of drilling and tie in of wells, productive capacity of new
wells, capital expenditures and timing thereof, may constitute forward-looking
statements under applicable securities laws and necessarily involve risks
including, without limitation, risks associated with oil and gas exploration,
development, exploitation, production, marketing and transportation, loss of
markets, volatility of commodity prices, currency fluctuations, imprecision of
reserves estimates, environmental risks, competition from other producers,
inability to retain staff, drilling rigs and other services, incorrect
assessment of the value of acquisitions, failure to realize the anticipated
benefits of acquisitions, delays resulting from or inability to obtain
required regulatory approvals and ability to access sufficient capital from
internal and external sources. As a consequence, actual results may differ
materially from those anticipated in the forward-looking statements. Readers
are cautioned that the foregoing list of factors is not exhaustive. Additional
information on these and other factors that could affect Flagship's operations
and financial results are included in reports on file with Canadian securities
regulatory authorities and may be accessed through the SEDAR website
(www.sedar.com), or Flagship's website (www.flagshipenergy.ca).
    Furthermore, the forward-looking statements contained in this news
release are made as at the date of this news release and Flagship does not
undertake any obligation to update publicly or to revise any of the
forward-looking statements, whether as a result of new information, future
events or otherwise, except as may be required by applicable securities laws.

    The TSX Venture Exchange does not accept responsibility for the adequacy
    or accuracy of this release.

    %SEDAR: 00003847E




For further information:

For further information: see www.flagshipenergy.ca or contact: Glenn R.
Carley, Executive Chairman, (403) 513-8300, gcarley@flagshipenergy.ca; Bradley
Maynes, President and Chief Operating Officer, (403) 513-8301,
bmaynes@flagshipenergy.ca; Stuart Jaggard, Vice President Finance and Chief
Financial Officer, (403) 513-8302, sjaggard@flagshipenergy.ca

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FLAGSHIP ENERGY INC.

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