Iteration Energy (ITX) announces June 30, 2008 quarter end results



    (All amounts are in Canadian dollars, unless stated otherwise)

    CALGARY, Aug. 14 /CNW/ - Iteration Energy Ltd. (TSX-ITX) ("Iteration" or
the "Company") announced today its financial and operating results as at and
for the three and six months ended June 30, 2008. The financial statements,
together with Management's Discussion and Analysis (MD&A), have been filed on
the Company's SEDAR profile at www.sedar.com. They are also available on the
Company's website at www.iterationenergy.com.

    
    FINANCIAL AND OPERATIONAL HIGHLIGHTS

    The major highlights of the three months ended June 30, 2008 include:

    -   Increased quarter over quarter average production by 66% to
        approximately 18,150 boed. This represents a 188% increase over the
        corresponding quarter of 2007.

    -   Funds from operations of $52.8 million increased 86% over first
        quarter of 2008 and 265% when compared to the second quarter of 2007.
        Funds flow per diluted share remained at $0.31 per share for the
        first and second quarter of 2008 and increased by 39% when compared
        to the comparative quarter in 2007. Current quarter funds from
        operations includes reductions of $9.3 million for amounts receivable
        from SemCAMS and SemCanada as a result of their filing for protection
        under the Companies Creditor Arrangement Act (CCAA) and $9.7 million
        for stock options exercised for cash. Had these unusual events not
        occurred during the quarter, funds from operations for the quarter
        would have been $71.8 million.

    -   Drilled 6.1 net wells with a 100% success record (4.0 oil and
        2.1 gas)

    -   Acquired undeveloped lands in Alberta and British Columbia through
        landsales with significant horizontal drilling upside. Total landsale
        acquisitions were approximately $18 million during the quarter.

    -   Net debt on June 30, 2008 was $222 million resulting in a debt to
        annualized quarter funds flow ratio of 1.1 : 1.

    FINANCIAL SUMMARY

    Quarter over quarter comparative results are as follows:

                                            Three Months          Six Months
                                           ended June 30,      Ended June 30,
    -------------------------------------------------------------------------
                                          2008      2007      2008      2007
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Production
    -------------------------------------------------------------------------
      Natural gas (mcf/d)               76,563    35,719    62,180    34,260
    -------------------------------------------------------------------------
      Natural gas liquids (bbls/day)     1,377       171     1,237       173
    -------------------------------------------------------------------------
      Light oil (bbls/day)               3,840       129     2,725       138
    -------------------------------------------------------------------------
      Heavy oil (bbls/day)                 168        58       192        60
    -------------------------------------------------------------------------
      Total production (boed)           18,146     6,311    14,517     6,081
    -------------------------------------------------------------------------

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    Realized commodity price
    -------------------------------------------------------------------------
      Natural gas ($/mcf)               $10.50     $7.58     $9.62     $7.48
    -------------------------------------------------------------------------
      Natural gas liquids ($/bbl)       $58.68    $71.01    $53.09    $69.05
    -------------------------------------------------------------------------
      Light oil ($/bbl)                $129.54    $66.19   $119.31    $63.61
    -------------------------------------------------------------------------
      Heavy oil ($/bbl)                 $89.54    $56.27    $77.47    $48.32
    -------------------------------------------------------------------------
      Blended ($/boe)                   $77.02    $46.68    $69.16    $45.92
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Royalty expense ($/boe)             $16.47     $8.01    $14.71     $8.56
    -------------------------------------------------------------------------
    Production expense ($/boe)          $12.29     $8.55    $11.54     $8.26
    -------------------------------------------------------------------------
    Transportation expense ($/boe)       $1.20     $1.47     $1.31     $1.43
    -------------------------------------------------------------------------
    Operating netbacks ($/boe)          $47.06    $28.65    $41.60    $27.67
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    General and admin expense ($/boe)    $1.93     $2.37     $2.07     $2.23
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Production revenue before
     royalties ($M)                   $127,175   $26,806  $182,739   $50,550
    -------------------------------------------------------------------------
    Net earnings (loss) ($M)              $672     ($639)   $2,362   ($4,308)
    -------------------------------------------------------------------------
    Earnings (loss) per basic and
     diluted share ($)(2)                $0.00    ($0.01)    $0.02    ($0.07)
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Funds from operations ($M)(1)      $52,824   $14,464   $81,337   $26,842
    -------------------------------------------------------------------------
    Funds from operations per basic
     share ($)(2)                        $0.32     $0.23     $0.63     $0.45
    -------------------------------------------------------------------------
    Funds from operations per diluted
     share ($)(2)                        $0.31     $0.23     $0.62     $0.45
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Capital expenditures, property
     acquisitions ($ M)                 $2,929    $2,019    $4,546    $2,251
    -------------------------------------------------------------------------
    Capital expenditures, exploration
     and development ($M)              $28,479   $12,948   $68,635   $52,951
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Bank Indebtedness(3)
    -------------------------------------------------------------------------
      Bank loans                      $243,000   $50,370  $243,000   $50,370
    -------------------------------------------------------------------------
      Working capital deficiency
       (surplus)                       (20,801)   10,642   (20,801)   10,642
                                       --------   ------   --------   ------
    -------------------------------------------------------------------------
    Net bank indebtedness             $222,129   $61,012  $222,129   $61,012
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Net debt to annualized quarter
     funds flow                        1.1 : 1   0.6 : 1   1.1 : 1   0.6 : 1
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Net undeveloped land (acres)       748,000   230,000   748,000   230,000
    -------------------------------------------------------------------------

    (1) Management uses funds from operations and funds from operations per
        share (before changes in non-cash working capital and asset
        retirement expenditures) to analyze operating performance and
        leverage. Funds and funds per share as presented do not have any
        standardized meaning prescribed by Canadian GAAP and therefore they
        may not be comparable with the calculation of similar measures for
        other entities. Funds as presented is not intended to represent
        operating cash flow or operating profits for the period nor should it
        be viewed as an alternative to cash flow from operating activities,
        net earnings or other measures of financial performance calculated in
        accordance with Canadian GAAP. All references to funds and funds per
        share throughout this report are based on cash flow from operating
        activities before changes in non-cash working capital and asset
        retirement expenditures.

    (2) For periods with positive net earnings, per share amounts are based
        on weighted average basic and diluted common shares outstanding for
        the period. For periods with a net loss, per share amounts are based
        on basic common shares outstanding for the period.

    (3) Working capital deficiency (surplus) does not include stock based
        compensation payable.
    

    Outlook for 2008

    The acquisition of Cyries Energy Inc. closed on March 7, 2008, and
transformed the Company into an intermediate producer. The first quarter
production exit rate was approximately 21,000 boed. Average production for the
second quarter of 2008 was approximately 18,000 boed, as a result of
traditional plant turnarounds and normal production declines which cannot be
mitigated due to surface access restrictions associated with break-up.
Production rates are expected to increase as the major plant turn arounds are
now complete, surface access restrictions have been lifted and the Company is
continuing its planned drilling program.
    The Company has a large inventory of drilling prospects on its current
land base which is expected to drive future growth. For the balance of 2008,
the largest focus areas for the Company will be in the Deep Basin and Peace
River Arch areas of Western Alberta and North East British Columbia. These two
areas currently account for approximately two thirds of the Company's
production and are prospective for liquids rich gas and light oil. Production
from these areas will be complemented by exploration and exploitation
opportunities for dry gas and heavy oil in Eastern Alberta, as well as
additional light oil prospects in North West and South East Alberta. The range
of prospects provides a mixture of summer and winter access opportunities and
allows the Company flexibility to focus its activity in those areas which will
provide maximum return under prevailing commodity prices and conditions.
    Iteration routinely evaluates asset acquisition opportunities in its
focus areas and has already negotiated or closed a number of relatively small
purchases in 2008 totaling approximately 1,200 boed. The majority of the
acquired production is expected to close late in the third quarter and will
therefore not have a significant impact on 2008 average production. It will,
however, offset some drilling delays we have experienced and provide
opportunity for further production growth in 2009.

    
    The following guidance reflects the currently planned program and
    includes capital for acquisitions we have already negotiated this year.

    -------------------------------------------------------------------------
    Expected 2008 Program                   Iteration(1)      Iteration(1)
                                              Current           Previous
                                              Guidance          Guidance
    -------------------------------------------------------------------------

    Average 2008 production (boed)              17,500            17,500
    Year end 2008 exit production (boed)  22,000 to 24,000  22,000 to 24,000
    Capital program ($ million)(2)                 244               212
    Funds from operations
     ($ million)(3)(4)                             196               223
    Year end net debt ($ million)(5)(6)            265               197
    Ratio of Debt to annualized 2008 Q4
     funds flow                                1.0 : 1           0.6 : 1
    Net wells                                      115               115

    -------------------------------------------------------------------------

    (1) Includes results of operations of Iteration Energy Inc. for the
        period from January 1 to December 31, 2008 and Cyries Energy Inc. for
        the period from March 8 to December 31, 2008.
    (2) Current guidance includes $38 million for Western Canada oil and gas
        property acquisitions that the Company has either closed in 2008 or
        has contracted and expects to close later in the third quarter.
    (3) Current guidance includes the following:
        a) Cost of exercising 1,642,000 options for $9.7 million
        b) Provision of $16 million representing the Company's exposure to
           the CCAA filing of SemCAMS and SemCanada.
        Had the above noted items not been included, funds from operations
        would have been $222 million.
    (4) Previous guidance includes the cost of exercising 3.7 million
        warrants for approximately $20 million. Had this item not been
        included, funds from operations would have been $243 million. The
        decrease in funds from operations is due to the reduction in
        commodity prices.
    (5) Current guidance includes the amounts described in(3)(a)and(b) above
        plus the cash consideration paid on exercising 3,605,000 warrants of
        $20.9 million.
    (6) Previous guidance includes the amounts described in 4 above.
    

    The 2008 projected capital program has increased by approximately
$32 million due to the acquisition of certain Alberta oil and natural gas
properties which have already closed or have been contracted and are expected
to close in the third quarter. However, the drilling of several of our planned
wells has been delayed due to surface issues so the expected average
production for the year remains at 17,500 boed. Projected funds from
operations have decreased with a corresponding increase in year end debt, due
to commodity price reductions and the unusual items described above.
    The 2008 program is expected to include a number of multi frac horizontal
wells which will allow for the evaluation of production and reserve uplift
potential that may be realized in several Cretaceous and Triassic reservoirs
which are present on the Company's lands. Much of the production growth from
these wells is now expected to occur at the end of 2008 and early in 2009.
    As has been recently evident, both commodity prices and costs of services
can change rapidly so we are prepared to adjusted capital spending
appropriately so as not to compromise the Company's balance sheet and thereby
restrict the Company's ability to pursue additional accretive acquisitions
should they arise to further enhance production growth.

    Advisory - Forward-Looking Information

    Natural gas is converted to crude oil equivalent at a ratio of six
thousand cubic feet to one barrel of energy equivalent ("boe"). Boe's 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.
    This press release was prepared on August 14, 2008 and is management's
assessment of Iteration's historical financial and operating results. The
reader should be aware that historical results are not necessarily indicative
of future performance. This press release contains forward-looking statements
relating to future events or future performance. In some cases,
forward-looking statements can be identified by terminology such as "may",
"will", "should"," expects", "projects", "plans", "anticipates" and similar
expressions. These statements represent management's expectations or beliefs
concerning, among other things, future operating results and various
components thereof affecting the economic performance of Iteration. Undue
reliance should not be placed on these forward-looking statements which are
based upon management's assumptions and are subject to known and unknown risks
and uncertainties, including the business risks discussed below, which may
cause actual performance and financial results in future periods to differ
materially from any projections of future performance or results expressed or
implied by such forward-looking statements. Accordingly, readers are cautioned
that events or circumstances could cause results to differ materially from
those predicted. The Company undertakes no obligation, except as required by
applicable securities legislation, to update publicly or to revise any of the
included forward looking statements, whether as a result of new information,
future events or otherwise.
    The forward looking statements contained herein are expressly qualified
by this cautionary statement. Readers are cautioned that the following list of
risk factors is not exhaustive.

    
    In particular, this discussion contains forward-looking statements and
information pertaining to the following:

    -   The quantity and recoverability of our reserves;
    -   The timing and amount of future production;
    -   Prices for natural gas produced;
    -   Operating and other costs;
    -   Business strategies and plans of management;
    -   Supply and demand of natural gas;
    -   Expectations regarding our ability to raise capital and to add to our
        reserves through acquisitions as well as exploration and development;
    -   The focus of capital expenditures on development activity rather than
        exploration;
    -   The sale, farming in, farming out or development of certain
        exploration properties using third party resources;
    -   The use of development activity and acquisitions to replace and add
        to reserves;
    -   The impact of changes in natural gas prices on cash flow after
        hedging;
    -   Drilling plans;
    -   The existence, operation and strategy of the commodity price risk
        management program;
    -   The approximate and maximum amount of forward sales and hedging to be
        employed;
    -   The Company's acquisition strategy, and the criteria to be considered
        and the benefits to be derived;
    -   The impact of Canadian federal and provincial governmental regulation
        on the Company relative to other issuers of similar size;
    -   Our treatment under governmental regulatory regimes;
    -   The goal to sustain or grow production and reserves through prudent
        management and acquisition;
    -   The emergence of accretive growth opportunities; and
    -   The Company's ability to benefit from the combination of growth
        opportunities and the means to grow through the capital markets.

    Iteration's actual results could differ materially from those anticipated
in our forward-looking statements as a result of the risk factors set forth
below and noted elsewhere in this MD&A which include but are not limited to:

    -   Volatility in market prices for natural gas;
    -   Risks inherent in our operations;
    -   Uncertainties associated with estimating reserves;
    -   Competition for, among other things: capital, acquisitions of
        reserves, undeveloped lands and skilled personnel;
    -   Incorrect assessments of the value of acquisitions;
    -   Geological, technical, drilling and process problems;
    -   General economic conditions including fluctuations in the price of
        natural gas;
    -   Royalties payable in respect of Iteration's production;
    -   Governmental regulation of the oil and gas industry, including
        environmental regulation;
    -   Fluctuation in foreign exchange or interest rates;
    -   Unanticipated operational events that can reduce production or cause
        production to be shut-in or delayed;
    -   Stock market volatility and market valuations;
    -   Counterparty credit risk;
    -   The need to obtain required approvals from regulatory authorities;
    -   Environmental risks;
    -   Insurance limitations risks;
    -   Risks inherent in replacing reserves;
    -   Reliance on operators and key employees;
    -   Access to funding and issuance of debt;
    -   Aboriginal claims; and
    -   Availability of drilling equipment, access restrictions and cost
        inflation.

    Many of these risk factors and uncertainties are discussed in further
detail in the Management's Discussion and Analysis and the Annual Information
Form for the year ended December 31, 2007.

    The TSX has not reviewed this press release and does not accept
    responsibility for the accuracy of any of the data presented here-in.
    

    %SEDAR: 00002576E




For further information:

For further information: Mr. Brian Illing, President and CEO; or Mr.
Sean Johnson, CFO at (403) 261-6883

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ITERATION ENERGY LTD.

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