Galleon announces record reserves and strong financial results in 2006



    CALGARY, March 13 /CNW/ - Galleon Energy Inc. ("Galleon" or the
"Corporation") announces record corporate reserves and strong financial
results in 2006.

    
    2006 Highlights

    -   Net present value of estimated future net revenue before tax from
        proved plus probable gross reserves based on forecast prices and
        costs discounted at 10% is $894 million, a 78% increase over
        December 31, 2005;
    -   Proved plus probable gross reserves grew to 50.4 million Boe, an
        increase of 54% over December 31, 2005 - over 80% of this increase
        was due to growth in light oil reserves;
    -   Proved gross reserves grew to 28.3 million Boe, an increase of 37%
        over December 31, 2005;
    -   Proved plus probable gross reserve life index of 12.7 years based on
        average Q4 2006 production;
    -   Replaced production 5.2 times based on proved plus probable gross
        reserves;
    -   Proved plus probable gross reserves comprise 36% light oil, 38%
        natural gas; 25% heavy oil and 1% natural gas liquids;
    -   Access to over 1 million gross acres of land, approximately 70% net
        owned;
    -   Funds from operations(1) of $85.2 million ($1.60/basic share), a 9%
        increase from 2005;
    -   Earnings of $13.8 million ($0.26/basic share);
    -   Average daily production of 9,370 Boe, an increase of 43% from 2005;
        natural gas - 32.6 Mmcf and crude oil and NGLs - 3,939 Bbl;
    -   Drilling of 118 gross wells resulting in 72 gross (59.9 net) natural
        gas wells and 34 gross (28.1 net) oil wells; a success rate of 90%;
    -   Capital expenditures of $283.3 million including $92.1 million on
        facilities, plus property acquisitions of $25.4 million;
    -   Share equity issuances for gross proceeds of $175.2 million and the
        issuance of 8,995,700 million Class A shares;
    -   Class A share three for two split in June 2006;
    -   Increase in the extendible revolving credit facility to $170 million;
    -   In February 2007, the extendible revolving facility was increased to
        $180 million and a $28.5 million non-revolving facility was approved
        to fund the acquisition of properties in the Dawson area of Alberta.
    -   (1)Funds from operations and funds from operations per share is not a
        standard measure under generally accepted accounting principles
        ("GAAP") and may not be comparable to similar measures presented by
        other companies. Management believes that funds flow per share is a
        useful supplementary measure that may assist investors in assessing
        the underlying per share value of the Corporation.
    

    Reserves

    The reserves of the Corporation were evaluated by Degolyer and
MacNaughton Canada Limited ("DeGolyer") as at December 31, 2006. The reserve
evaluation has been approved by the Board of Directors of Galleon.
    Gross reserves are the total of the Corporation's working interest share
before deduction of royalties owned by others. Net reserves are the total of
the Corporation's working interest reserves after deducting amounts
attributable to royalties owned by others, plus the Corporation's royalty
interest reserves.
    Galleon's proved plus probable gross reserve life index is 12.7 years
based on average fourth quarter 2006 production.

    
    In 2006, capital and reserve additions are as follows:

    -------------------------------------------------------------------------
                                                                 Proved plus
                                                          Proved    probable
                                             Capital     reserve     reserve
                                        expenditures   additions   additions
                                                 $MM       MMBoe       MMBoe
    -------------------------------------------------------------------------
    Exploration & development                  283.3        10.8        20.6
    Acquisitions                                25.4         0.3         0.5
    Change in future capital - proven           42.1           -           -
    Change in future capital - probable         26.4           -           -
    -------------------------------------------------------------------------
    Total                                      377.2        11.1        21.1
    -------------------------------------------------------------------------

    The aggregate of exploration and development costs incurred in the most
recent financial year and the change during that year in estimated future
development costs generally will not reflect total finding and development
costs related to reserves additions for that year.

    Forecast price case - Remaining Reserves as of December 31, 2006
    -------------------------------------------------------------------------
    Reserve                  Light Oil         Heavy Oil         Sales Gas
     category                  (Mbbl)            (Mbbl)            (MMcf)
    -------------------------------------------------------------------------
                          Gross      Net    Gross      Net    Gross      Net
    -------------------------------------------------------------------------
    Proved Developed
     Producing            3,540    2,693    2,121    1,800   31,738   24,415
    Proved Developed
     Non-Producing          334      262      996      834   17,051   13,227
    Proved Undeveloped    4,075    3,035    4,506    3,889   25,380   20,105
    -------------------------------------------------------------------------
    Total Proved          7,949    5,989    7,622    6,523   74,169   57,746
    Probable             10,012    6,637    5,016    4,164   40,974   32,064
    -------------------------------------------------------------------------
    Total proved plus
     probable            17,961   12,627   12,638   10,687  115,143   89,810
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    -------------------------------------------------------
    Reserve                Natural Gas
     category             Liquids (Mbbl)     Total (Mboe)
    -------------------------------------------------------
                          Gross      Net    Gross      Net
    -------------------------------------------------------
    Proved Developed
     Producing              150      101   11,101    8,663
    Proved Developed
     Non-Producing           79       53    4,251    3,354
    Proved Undeveloped      137       91   12,948   10,366
    -------------------------------------------------------
    Total Proved            365      244   28,298   22,380
    Probable                257      174   22,114   16,319
    -------------------------------------------------------
    Total proved plus
     probable               622      418   50,412   38,700
    -------------------------------------------------------
    -------------------------------------------------------

    Gross proved plus probable reserves at Puskwa, Dawson Montney gas,
Eaglesham and Edam combined represent approximately 79% of corporate reserves
volumes and 80% of corporate reserves value.

    -------------------------------------------------------------------------
    Forecast Price Case         Future Net Revenue Before Income Taxes as of
                                December 31, 2006 ($M)
    -------------------------------------------------------------------------
                                            Discounted
                                                   at:
    Reserve category                 Undisc         5%         8%        10%
    -------------------------------------------------------------------------
    Proved Developed Producing      307,210    267,779    249,465    238,832
    Proved Developed Non-Producing   90,232     76,002     69,112     65,058
    Proved Undeveloped              279,270    198,760    165,685    147,836
    -------------------------------------------------------------------------
    Total Proved                    676,712    542,541    484,262    451,726
    Probable                        617,028    519,773    471,420    442,460
    -------------------------------------------------------------------------
    Total proved plus probable    1,293,740  1,062,314    955,682    894,186
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Note: Future net revenue does not represent fair market value

    DeGolyer used the following price assumptions in the forecast reserves
pricing and costs case as released by DeGolyer effective December 31, 2006.

                                      WTI Cushing     Edmonton       Alberta
    Pricing                              Oklahoma    Oil Price          Spot
    assumptions                        ($U.S./Bbl)  ($Cdn./Bbl)   ($Cdn./Mcf)
    -------------------------------------------------------------------------
    2007                                    65.00        75.12          7.32
    2008                                    65.52        75.71          7.91
    2009                                    64.27        74.26          7.72
    2010                                    61.73        71.30          7.48
    2011                                    59.07        68.20          7.68
    2012                                    59.11        68.25          7.77
    2013                                    60.29        69.62          7.92
    2014                                    61.50        71.01          8.07
    


    Production, operations and acquisition

    Production averaged 10,869 boepd during the fourth quarter of 2006.
Galleon expects that production growth will vary from 5-15% per quarter during
2007. Based on field receipt estimates and planned production additions,
production growth in Q1 and Q2 2007 is expected to be in the mid-range of this
guidance. Based on weekly field estimates, recent production has averaged
between 12,500 and 13,000 boepd. Estimated 2007 exit production is targeted
between 17,000 and 21,000 boepd (based on obtaining regulatory approvals
removing restrictions on production at Puskwa during 2007).
    During Q1 2007, production at Edam was affected by pump failures and cold
weather. At Puskwa, new pumps designed for two horizontal wells caused
temporary mechanical problems which have been resolved. At Dawson, in the
highly successful Montney gas play, initial flush decline rates were higher
than budgeted. Due to better performance on new wells, Eaglesham production
was higher than forecast.
    In Q1 2007, Galleon acquired an interest in a partnership holding
approximately 500 boepd (70% oil and 30% gas) in the Dawson area of Alberta.
Approximately 30,000 net acres of undeveloped land was included. Galleon has
identified significant upside in the undeveloped land for Montney gas and
plans to drill up to 10 wells in the next 12 months. Cash consideration of
$28.4 million including closing adjustments was paid.
    Galleon is considering an asset divestiture of approximately 500 boepd of
non-core assets in the near future.

    Puskwa update
    A vertical well located at 16-24-71-26W5M (100% interest) was drilled and
cased in Q1 2007. This well is located approximately 6.5 miles from the
original discovery well at 16-32-71-26W5M. The 16-24 well encountered 17 feet
of oil pay and completion operations are underway. The well located at
2-5-71-26W5M (100% interest) is currently drilling and is expected to be
finished drilling in late March or early April. The 2-5 well is located
approximately 9 miles from the 16-32 well.
    Depending upon the success of the drilling program, up to 25 wells are
planned at Puskwa in the remainder of 2007 and 2008.


    
    GALLEON ENERGY INC.
    Balance Sheets
    As at December 31

    ($000s)                                               2006          2005

    -------------------------------------------------------------------------
    ASSETS

    CURRENT
      Accounts receivable                                24,639       23,234
      Deposits and prepaid expenses                       1,839          961
      Fair value of financial derivative                    190            -
    -------------------------------------------------------------------------
                                                         26,668       24,195

    Goodwill                                             10,139       10,139
    Property and equipment                              577,758      318,285
    -------------------------------------------------------------------------
                                                        614,565      352,619
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    LIABILITIES

    CURRENT
      Accounts payable and accrued liabilities           54,695       42,677
      Bank loan                                         122,996       75,301
    -------------------------------------------------------------------------
                                                        177,691      117,978

    Asset retirement obligation                          21,432       11,186
    Future income taxes                                  32,287       26,395
    -------------------------------------------------------------------------
                                                        231,410      155,559
    -------------------------------------------------------------------------
    SHAREHOLDERS' EQUITY

    Share capital                                       339,869      174,463
    Contributed surplus                                  11,619        4,756
    Retained earnings                                    31,667       17,841
    -------------------------------------------------------------------------
                                                        383,155      197,060
    -------------------------------------------------------------------------
                                                        614,565      352,619
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    GALLEON ENERGY INC
    Statements of Earnings and Retained Earnings
    Years ended December 31
    ($000s, except per share amounts)                      2006         2005

    -------------------------------------------------------------------------
    REVENUE
      Petroleum and natural gas revenue                 157,931      135,050
      Royalties, net of ARTC and GCA                    (23,529)     (29,805)
      Other income                                            5           25
    -------------------------------------------------------------------------
                                                        134,407      105,270

    EXPENSES
      Operating                                          33,675       15,805
      Transportation                                      4,507        3,601
      General and administration                          5,590        4,438
      Interest                                            4,527        2,389
      Stock-based compensation                            7,713        3,950
      Accretion                                             631          363
      Depletion and depreciation                         60,929       40,920
      Gain on financial derivative                         (190)           -
    -------------------------------------------------------------------------
                                                        117,382       71,466

    Earnings before taxes                                17,025       33,804
    Income taxes
      Capital and other taxes                               957          958
      Future income taxes                                 2,242       13,226
    -------------------------------------------------------------------------
                                                          3,199       14,184

    NET EARNINGS                                         13,826       19,620
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    RETAINED EARNINGS (DEFICIT), BEGINNING OF YEAR       17,841       (1,779)
    -------------------------------------------------------------------------
    RETAINED EARNINGS, END OF YEAR                       31,667       17,841
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    NET EARNINGS PER SHARE
      Basic                                               $0.26        $0.45
      Diluted                                             $0.25        $0.42

    Weighted average Class A shares - basic          53,343,857   43,882,430
                                    - diluted        55,907,653   46,569,053
    -------------------------------------------------------------------------



    GALLEON ENERGY INC.
    Statements of Cash Flows
    Years ended December 31
    ($000s)                                                2006         2005

    -------------------------------------------------------------------------
    Cash provided by (used in):

    OPERATING ACTIVITIES
      Net earnings                                       13,826       19,620
      Items not requiring cash:
        Future income taxes                               2,242       13,226
        Depletion and depreciation                       60,929       40,920
        Accretion                                           631          363
        Stock-based compensation                          7,713        3,950
        Gain on financial derivative                       (190)           -
      Abandonment costs                                    (614)           -
      Change in non-cash working capital                    (39)      (6,125)
    -------------------------------------------------------------------------

                                                         84,498       71,954
    -------------------------------------------------------------------------
    FINANCING ACTIVITIES
      Issue of common shares                            178,300      103,878
      Share issue costs                                 (10,092)      (6,424)
      Bank loan                                          47,694       26,895
    -------------------------------------------------------------------------

                                                        215,902      124,349
    -------------------------------------------------------------------------
    INVESTING ACTIVITIES
      Additions to equipment inventory                   (1,429)        (272)
      Additions to oil and gas properties              (283,348)    (106,929)
      Acquisition of oil and gas properties             (25,396)    (103,462)
      Change in non-cash working capital                  9,773       14,360
    -------------------------------------------------------------------------

                                                       (300,400)    (196,303)
    -------------------------------------------------------------------------
    CHANGE IN CASH                                            -            -
    CASH, BEGINNING OF YEAR                                   -            -
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    CASH, END OF YEAR                                         -            -
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    SUPPLEMENTARY INFORMATION
      Cash interest paid                                  5,040        2,389
      Cash taxes paid                                     1,208          958
    -------------------------------------------------------------------------



    Performance by Property

    Years ended
    December 31                2006                    2005
    ----------------------------------------- ----------------------- 2006
                                       Oper-                  Oper-   Funds
                                       ating                  ating   from
                                       net-                   net-    oper-
                                       backs/                 backs/  ations
                       Production      BOE(1)  Production     BOE(1)    (2)
    -------------------------------------------------------------------------
                       BOE/d     %       $     BOE/d     %       $       %
    Puskwa               657       7   55.55       -       -       -      15
    Dawson Montney
     gas               1,120      12   23.18     200       3   43.29      11
    Eaglesham            280       3   35.42       -       -       -       4
    Dawson             4,010      43   28.62   4,123      63   39.06      48
    Calais             1,002      11   26.62     815      13   33.28      12
    Edam and other
     heavy oil         1,846      20    7.57     788      12   10.89       6
    Other                455       4   22.32     613       9   32.62       4
    -------------------------------------------------------------------------
                       9,370     100   25.39   6,539     100   34.46     100
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
        1. Operating netbacks/BOE exclude ARTC and GCA and are calculated by
           subtracting royalties and operating costs from revenues.
        2. Funds from operations and funds from operations per share is not a
           standard measure under GAAP and may not be comparable to similar
           measures presented by other companies. Management believes that
           funds flow per share is a useful supplementary measure that may
           assist investors in assessing the underlying per share value of
           the Corporation.



    Quarterly Highlights                                2006
    -------------------------------------------------------------------------
                                            Q4        Q3        Q2        Q1
                                      ---------------------------------------
    Production
    Light oil (Bbl/d)                    2,419     1,823     1,753     1,859
    Heavy oil (Bbl/d)                    2,100     1,984     1,705     1,580
    Natural Gas (Mcf/d)                 36,733    33,068    30,014    30,445
    Liquids (Bbl/d)                        230       102       100        93
                                      ---------------------------------------
    BOE/d                               10,869     9,420     8,560     8,606
                                      ---------------------------------------
    Total BOE produced                 999,982   866,646   778,992   774,578
    Daily BOE of production per
     million Class A shares
     - basic                               191       172       165       173

    Prices (net of transportation)
    Light oil ($/Bbl)                    61.12     75.65     75.63     65.66
    Heavy oil ($/Bbl)                    31.16     47.01     42.69     24.71
    Crude oil ($/Bbl)                    47.19     53.35     59.39     46.78
    Natural Gas ($/Mcf)                   6.84      5.58      5.97      7.36
    NGLs ($/Bbl)                         56.02     69.83     65.71     57.62

    Per BOE ($)
    Revenues                             45.26     46.06     46.88     46.77
    Royalties, net of ARTC & GCA         (6.02)    (7.20)    (4.34)   (10.18)
    Transportation costs                 (1.37)    (1.25)    (1.22)    (1.43)
    Operating costs                      (9.65)   (10.66)    (9.91)    (9.12)
                                      ---------------------------------------
    Net                                  28.22     26.95     31.41     26.04
    Other revenue                            -         -         -         -
    G&A                                  (2.67)    (0.80)    (1.37)    (1.50)
    Interest                             (1.49)    (1.39)    (1.41)    (0.95)
    Capital and other taxes              (0.21)    (0.33)    (0.30)    (0.29)
                                      ---------------------------------------
    Funds from operations(1)             23.85     24.43     28.33     23.30
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
        1. Funds from operations and funds from operations per share is not a
           standard measure under GAAP and may not be comparable to similar
           measures presented by other companies. Management believes that
           funds flow per share is a useful supplementary measure that may
           assist investors in assessing the underlying per share value of
           the Corporation.



    Quarterly Highlights                                2005
    -------------------------------------------------------------------------
                                            Q4        Q3        Q2        Q1
                                      ---------------------------------------
    Production
    Light oil (Bbl/d)                    2,271     2,213     1,393       670
    Heavy oil (Bbl/d)                    1,135     1,205       594       206
    Natural Gas (Mcf/d)                 32,212    27,452    21,813    15,511
    Liquids (Bbl/d)                         99        71        21        37
                                      ---------------------------------------
    BOE/d                                8,874     8,064     5,643     3,499
                                      ---------------------------------------
    Total BOE produced                 816,420   741,917   513,535   314,887
    Daily BOE of production per
     million Class A shares
     - basic                               186       169       130        96

    Prices (net of transportation)
    Light oil ($/Bbl)                    67.44     73.64     65.35     59.72
    Heavy oil ($/Bbl)                    29.31     48.19     32.21     26.45
    Crude oil ($/Bbl)                    54.73     62.54     54.86     51.91
    Natural Gas ($/Mcf)                  11.16      9.13      6.99      6.51
    NGLs ($/Bbl)                         58.84     56.64     53.94     44.75

    Per BOE ($)
    Revenues                             63.68     59.99     48.18     43.86
    Royalties, net of ARTC & GCA        (15.01)   (11.69)   (11.11)   (10.08)
    Transportation costs                 (1.48)    (1.64)    (1.37)    (1.51)
    Operating costs                      (7.73)    (6.98)    (5.31)    (5.04)
                                      ---------------------------------------
    Net                                  39.46     39.68     30.39     27.23
    Other revenue                            -         -      0.03      0.02
    G&A                                  (1.82)    (1.58)    (2.01)    (2.38)
    Interest                             (0.91)    (0.90)    (1.09)    (1.33)
    Capital and other taxes              (0.40)    (0.38)    (0.49)    (0.32)
                                      ---------------------------------------
    Funds from operations(1)             36.33     36.82     26.83     23.22
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
        1. Funds from operations and funds from operations per share is not a
           standard measure under GAAP and may not be comparable to similar
           measures presented by other companies. Management believes that
           funds flow per share is a useful supplementary measure that may
           assist investors in assessing the underlying per share value of
           the Corporation.



    Capital Expenditures

    ($000s)
    -------------------------------------------------------------------------
    Property & equipment balance at December 31, 2005                318,285
    Additions to equipment inventory                                   1,429
    Additions to property and equipment                              283,348
    Acquisition of property and equipment                             25,396
    Asset retirement obligation                                       10,229
    Depletion and depreciation                                       (60,929)
    -------------------------------------------------------------------------
    Property & equipment balance at December 31, 2006                577,758
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    Year ended December 31                2006                2005
    -------------------------------------------------------------------------
    ($000s)                                            %                   %
                                                ---------           ---------
    Land                                31,385        11     5,735         5
    Geological and geophysical          22,947         8    11,882        11
    Drilling and completion            136,740        48    57,748        55
    Plant and facilities                92,144        33    31,189        29
    Other assets                           132         -       375         -
    -------------------------------------------------------------------------
    Exploration and Development
     Expenditures                      283,348       100   106,929       100
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    Galleon is a technically oriented high growth oil and gas company with
focused operations in the Peace River area of Alberta. Galleon has access to
over 1 million gross acres of land.
    Galleon has approximately 57.9 million Class A shares and 922,500 Class B
shares issued and outstanding which trade on the TSX under the symbols "GO.A"
and "GO.B".

    ADVISORY: Certain information regarding Galleon Energy Inc. in this news
release including management's assessment of future plans and operations,
number, type and timing of wells to be drilled, the plan and development of
certain prospects, production estimates, and expected production growth may
constitute forward-looking statements under applicable securities laws and
necessarily involve risks including, without limitation, risk that regulatory
approval to allow increased production at Puskwa will not be obtained or be
delayed for an extended period of time, risks associated with oil and gas
exploration, development, exploitation, production, marketing and
transportation, loss of markets, volatility of commodity prices, currency
fluctuations, imprecision of reserve estimates, environmental risks,
competition from other producers, inability to retain drilling rigs and other
services, capital expenditure costs, including drilling, completion and
facilities costs, whether the potential sale of non-core assets will be
completed, unexpected decline rates in wells, wells not performing as
expected, 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 effect Galleon'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), at Galleon's website
(www.galleonenergy.com). Furthermore, the forward-looking statements contained
in this news release are made as at the date of this news release and Galleon
does not undertake any obligation to update publicly or to revise any of the
included forward-looking statements, whether as a result of new information,
future events or otherwise, except as may be required by applicable securities
laws.

    Disclosure provided herein in respect of barrels of oil equivalent (boe)
may be misleading, particularly if used in isolation. A boe conversion ratio
of 6 Mcf: 1 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.





For further information:

For further information: www.galleonenergy.com OR CONTACT: Steve
Sugianto, President and Chief Executive Officer, (403) 261-9287,
steves@galleonenergy.com; Glenn R. Carley, Executive Chairman, (403) 261-9277,
glennc@galleonenergy.com; Shivon Crabtree, Vice President and Chief Financial
Officer, (403) 261-9276

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