CALGARY, March 3 /CNW/ - Gentry Resources Ltd. ("Gentry" or the
"Company") is pleased to provide an update on recent operational activities
and its 2008 capital spending plans.
The Company's Board of Directors recently approved a 2008 capital budget
of $47 million which is equivalent to 2008 estimated funds flow. Approximately
65% of the capital budget will be directed toward drilling and completions and
the remainder on land, facilities and seismic.
Gentry expects to drill approximately 60 gross wells (54 net) and operate
over 95% of these wells. Within its three core areas, Gentry has identified
over 100 additional drilling prospects for future development activity which
will be pursued in 2009. All of Gentry's core areas have significant
opportunities for continued growth, with the largest capital program being
focused on the Company's Princess property in southern Alberta.
Gentry's 2008 capital spending will focus on harvesting the Company's
exploration and land investments in 2007; converting these investments into
production gains. While the Company's 2007 capital program discovered a new
Pekisko oil bearing trend at Princess, delineated with 10 successful oil
wells, the program was largely focused on fulfilling earning provisions of the
large "Exploration Block". In 2008 the focus will shift from exploration to
building production through infill drilling and exploitation, facilitated by
the significant infrastructure investments made in Princess over the last
several years. Gentry has built or refurbished three facilities with capacity
of 10,000 barrels of fluid per day, including gas conservation, and has
constructed eight satellite stations and over 135 kilometers of pipelines.
In Princess alone, the 2008 budget contemplates 40 wells (38.5 net), with
the bulk of the locations close to existing infrastructure (one mile or less)
and based on 3D seismic and geologic trends. Current production from the
Princess area is 2,500 boe/d to 2,700 boe/d. Looking to 2009, the Company has
identified 60 additional wells that will be drilled in the Princess core area,
once again, with most of these wells close to existing infrastructure.
Gentry's dominance of the Pekisko oil play in southern Alberta has two
distinct advantages: first and foremost, 96% of the land base Gentry controls
in the Princess area (459 gross sections) is freehold land and therefore, is
not encumbered by Alberta's proposed New Royalty Framework. Secondly,
273 sections are largely contiguous undeveloped land. Under a farm-in
agreement, Gentry has the ability to add an additional 102 sections of
undeveloped land through the drilling of 18 exploration wells.
In addition to the Princess activities, approximately 35% of Gentry's
2008 capital spending will be divided between its two other core areas, West
Central Alberta and the Peace River Arch. Activity in these areas over the
past six months has entailed the tie-in of existing wells, recompleting new
horizons in producing wells and the drilling of eight new wells. Gentry has
also acquired new offsetting lands at recent Crown sales.
In the West Central area, Gentry has drilled four oil wells (1.6 net) and
installed a single-well oil battery to reactivate a suspended oil well
(1.0 net) at Gilby. One well (0.25 net) has been drilled at Willisden Green
and recently one well (1.0 net) was drilled in the Rosevear area.
In the Peace River Arch area, one oil well (1.0 net) has been drilled and
tied in at Oak, with plans to drill more offset locations. The Company has
also conducted a 3D seismic survey over the property and acquired key lands at
recent Crown sales. Several locations have been licensed which are planned for
the third and fourth quarters of 2008 at 100% working interests. At Mulligan,
one highly successful oil well (1 net) was drilled; and at Balsam, a producing
gas well (0.6 net) was recently completed in an uphole zone resulting in a
strong gas producer.
In 2008 in the Peace River Arch area, Gentry will follow-up recent oil
discoveries and step out wells at Oak, Balsam and Mulligan, and gas
discoveries at Pouce Coupe. In West Central Alberta Gentry will focus on gas
prospects at Rosevear and Gilby, and gas and oil prospects in the Red Willow
and Mikwan areas.
Production for the fourth quarter averaged 4,528 boe/d compared to
4,226 boe/d in the third quarter of 2007. For the month of December 2007,
production averaged 4,809 boe/d.
Target production volumes for 2008 are approximately 5,100 boe/d which
include an estimate of three percent downtime for plant outages. Production is
expected to average approximately 5,000 boe/d in the first half, then ramp up
to approximately 5,400 boe/d in the fourth quarter. Oil volumes should
increase to approximately 55% of production, up from the current 43%, by year
end as drilling continues to emphasis oil projects. These higher volumes are
expected to carry over into the following year providing a strong start to
2009. These 2008 volumes do not reflect any acquisitions or dispositions.
The 2008 forecast is based on average commodity pricing for natural gas
of $7.00 AECO per thousand cubic feet and an average crude oil price of USD
$80.00 WTI per barrel. The forecast CAD/USD foreign exchange rate is 1:1. Year
end debt is anticipated to be approximately $63 million, yielding a projected
year end debt to estimated 2008 funds flow of less than 1.5:1. With
January 2008 production of 5,000 boe/d, the Company estimates 2008 capital
efficiency of $25,000 per boe/d.
Gentry has entered into a zero premium collar to hedge 500 bbls/d of oil
production. The floor of this collar is USD $85/bbl and the ceiling $104/bbl
WTI. The term is from March 1 through to December 31, 2008. The Company has
also entered into a gas swap for 4,000 GJs/d of gas at $7.51/GJ AECO price.
The term is from April 1 through to October 31, 2008.
Fourth Quarter Operations
Late in the fourth quarter Gentry closed two asset transactions. The
Company divested a minor non-operated light oil asset in South East
Saskatchewan; in the second transaction Gentry acquired non-operated partner
interests in the Princess area, notably in the Company's Tilley field. Gentry
now owns 100% of the primary producing trend in the Tilley to Tide Lake area
of Princess, a straight line distance of approximately 20 km. The net effect
of these transactions was an additional 62 boe/d plus a cash gain of $2.7
million which was applied against corporate debt.
In the Princess area, Gentry began flowing oil on January 11 of this year
through the Company's recently constructed Alderson facility, located in the
middle of the Princess core area. Construction of this new 10,000 bf/d
facility commenced in the 3rd quarter of 2007, with water disposal approvals
granted by the Energy Resources Conservation Board in late December. The
Company currently has 10 wells producing into this facility, most of which
were drilled in the second and third quarters of 2007. With completion of the
Alderson facility, Gentry's facility and gathering system now captures
approximately 66 square miles of Princess lands and is expected to result in a
material reduction in operating costs through a reduced reliance on trucking
expenses. Gentry's focus for the past several years has been earning farm-in
lands and extending its discoveries along the main Pekisko erosional edge.
Future expenditures will focus on maximizing oil and gas production through
existing facilities and continuing the farm-in earning.
In the fourth quarter, Gentry drilled eight wells (all 100%) resulting in
three oil wells, three cased wells waiting on completion and two abandoned
wells, resulting in a 75% success rate. Seven wells were drilled in the
Princess area, with three being the final exploration wells required under
farm-in earning provisions. One of these wells tested oil at high production
rates and is being equipped as a single well battery. Four wells were drilled
in the Alderson area; one has been completed as an oil well and the remaining
three wells will be tested shortly. The final well was drilled at Mulligan in
the Peace River Arch and has been cased and is awaiting tie-in to a Company-
Gentry is a Calgary-based oil and natural gas company active in the
exploration, development and production of crude oil and natural gas in
western Canada. The Company has grown primarily through aggressive exploration
and development of a core property in southern Alberta, and has recently
expanded into two additional high potential areas. Gentry trades on the TSX
under the symbol "GNY" and had 55,058,373 common shares outstanding as of
December 31, 2007.
Disclaimer: Statements in this press release contain forward-looking
statements, including management's assessment of future plans and operations
and including expectations of future production and capital expenditures.
These statements are based on current expectations that involved numerous
risks and uncertainties, which will cause actual results to differ from those
anticipated. These risks include, but are not limited to: the risks of the oil
and gas industry (e.g. operational risks in exploration, development and
production; potential delays or changes in plans with respect to exploration
or development projects or capital expenditures; the uncertainty of reserve
estimates; the uncertainty of estimates and projections relating to
production, costs and expenses, and health, safety and environmental risks),
and price fluctuation. As a consequence, actual results may differ materially
from those anticipated in the forward-looking statements.
For further information:
For further information: Hugh Ross, President & Chief Executive
(403) 264-6161; R. Gordon McKay, Chief Operating Officer, (403) 264-6161;
Ketan Panchmatia, Chief Financial Officer, (403) 264-6161; Roger Fullerton,
Manager, Investor Relations, (952) 929-7243; Website:
Email: firstname.lastname@example.org, TSX Symbol: GNY