Richards Oil & Gas Limited reports first quarter 2009 results



    CALGARY, May 28 /CNW/ - Richards Oil & Gas Limited (the "Company"), (TSX
Venture: RIX) has released its first quarter 2009 financial and operating
results for the three months ended March 31, 2009. The results include the
Company's unaudited financial statements and related Management's Discussion
and Analysis ("MD&A"). These filings are available on SEDAR (www.sedar.com)
and on the Company's website.

    
    SELECTED FINANCIAL INFORMATION
    $ Amount except for per share
     information                                 Three months ended March 31
    -------------------------------------------------------------------------
                                              2009         2008       Change
    -------------------------------------------------------------------------
    Production revenues                    533,295      949,144         (44%)
    Net income (loss)                  (11,502,246)    (551,198)      1,987%
    Net income (loss) per share              (0.16)       (0.01)      1,500%
    Property and equipment additions       400,960    1,495,077         (73%)
    Total assets                        12,395,252   22,927,300         (46%)
    Total liabilities                   11,817,167    9,039,476          31%
    Common shares outstanding
     - basic                            72,661,602   72,661,602         nil%
    Common shares outstanding
     - diluted                          96,648,038   96,931,003        (0.3%)
    -------------------------------------------------------------------------


    SELECTED OPERATIONAL INFORMATION

                                                 Three months ended March 31
    -------------------------------------------------------------------------
                                              2009         2008       Change
    -------------------------------------------------------------------------
    Natural gas (mcf/day)                    1,161        1,232          (6%)
    Oil and natural gas liquids (bbl/day)        8           12         (33%)
    Total (boe/day)                            202          217          (7%)
    Exit rate (boe/day)                        216          220          (2%)
    Natural gas price ($/mcf)                $4.87        $7.90         (38%)
    Oil price ($/bbl)                       $30.92       $60.17         (49%)
    Royalties ($/boe)                        $3.26        $7.58         (57%)
    Operating expenses ($/boe)              $22.06       $17.99          23%
    Operating netback ($/boe)                $4.04       $22.61         (82%)
    -------------------------------------------------------------------------
    

    FINANCIAL RESULTS

    The net loss for the first quarter of 2009 was $11,502,246 which compares
to a net loss of $551,198 in the first quarter of 2008. Included in the net
loss experienced in the first quarter of 2009 is an impairment charge of
$10,500,000 on the Company's oil and gas properties. This impairment charge is
due entirely to the considerable decline in forecasted natural gas prices as
at March 31, 2009.

    OPERATIONS

    Oil and gas production revenues decreased to $533,295 in the first
quarter of 2009 from $949,144 in the same period in 2008. This decrease is
primarily a result of lower natural gas prices received and slightly lower
production volumes achieved. Natural gas production year over year fell seven
percent as net production for the first quarter of 2009 was 202 BOE per day
compared with 217 BOE per day for the first quarter of 2008.
    Current natural gas production levels are considerably lower than
expected primarily as a result of operational issues experienced at the
Company's Thorsby property. Production from the Company's wells that targeted
the Edmonton sand intervals have formation water entering the wellbores and
therefore have inhibited gas flow. The Company is currently evaluating
production alternatives to remove this water from the wellbores and
re-configuring the gathering system to allow for the production of water in
association with the natural gas.
    The first quarter of the 2009 capital expenditures were minimal. The
Company spent $400,960 on completing and testing its Horseshoe Canyon CBM
wells and on the completion of the gathering system in the Thorsby area.
Currently at the Company's Thorsby area, four wells (3.6 net) that are tied-in
are awaiting further completion work and seven gross wells, (7.0 net) were
awaiting tie-in at March 31, 2009.

    OUTLOOK

    Production challenges experienced on start-up at the Company's Thorsby
property has resulted lower than expected initial production volumes
negatively impacting the expected initial cashflows from this property. When
the effect of these lower than expected initial production volumes are
combined with the current natural gas prices, the result is that only nominal
cashflow is currently being generated from the Company's operating areas.
    Until natural gas prices recover considerably and the Company is in a
position to undertake a capital program to increase production at Thorsby, the
Company will continue to generate negative cashflow from operations. To
mitigate the impact on cashflow from operations in the near term, some of the
Company's less economic wells are being evaluated for shut-in as this may be
the most appropriate course of action while natural gas pricing remains
depressed.
    At March 31, 2009, the Company has a net working capital deficit of
$3,966,701. The working capital deficit is due to drawings on the Company's
credit facilities and accounts payable associated with the large capital
program undertaken in the last quarter of 2008. The Company has, at present,
total credit facilities of $3,600,000. Subsequent to March 31, 2009, the
Company has realized cash proceeds of $220,000 from the sale of certain
non-core heavy oil assets in an effort to reduce its net working capital
deficit.
    Recent market events, including disruptions in credit markets and other
financial systems and the deterioration of global economic conditions have
resulted in significant declines in commodity prices. As a result of the
current commodity price and credit environment, management is considering
financing opportunities to fund its future prospects and commitments, farming
out interests in its oil and gas properties, further asset dispositions and
strategic alternatives to continue operations. The Company will also consider
its option to pay the interest payment on its convertible debenture obligation
due on June 30, 2009 in common shares of the Company.

    About Richards Oil & Gas Limited

    Richards Oil & Gas Limited is a Calgary-based exploration company,
involved in the development of crude oil and natural gas, with an emphasis on
the exploitation of shallow natural gas resources including coal bed methane
(CBM). With a significant land base and experience in the development of CBM
and conventional natural gas projects, the Company is able to capitalize on
opportunities that create both short-term cash flow and long-term value for
its shareholders.
    Coalbed Methane ("CBM") or Natural Gas from Coal ("NGC") is technically
defined as gas produced naturally by coalification, and found within coal
natural gas reservoirs consisting predominately of methane, with smaller
amounts of higher hydrocarbons, water vapor, nitrogen, carbon dioxide, or
other non-hydrocarbons. The majority of gas is usually physically sorbed
within the microporosity and mesoporosity within the organic matrix.

    ADVISORIES

    BOEs may be misleading, particularly if used in isolation. A BOE
conversion ratio of 6 Mcf:1bbl is based on an energy equivalency conversion
method primarily applicable at the burner tip and does not represent a value
equivalency at the wellhead.

    Statements in this news release contain forward-looking information
including expectations of future production, estimates of proven and probable
reserves, procurement of drilling permits, plans for and results of
exploration and development activities and other operational developments. The
reader is cautioned that assumptions used in the preparation of such
information may prove to be incorrect. Events or circumstances may cause
actual results to differ materially from those predicted, as a result of
numerous known and unknown risks, uncertainties, and other factors, many of
which are beyond the control of the Company. These risks include, but are not
limited to; the risks associated with the oil and gas industry, commodity
prices, and exchange rate changes. Industry related risks include, but are not
limited to; operational risks in exploration, development and production,
availability of skilled personnel and services, failure to obtain industry
partner, regulatory and other third party consents and approvals, delays or
changes in plans, risks associated with the uncertainty of reserve estimates,
health and safety risks and the uncertainty of estimates and projections of
reserves, production, costs and expenses. The reader is cautioned not to place
undue reliance on this forward-looking information. The forward-looking
statements contained herein are subject to change. Except as required by
applicable securities laws, the Company assumes no obligation to update or
revise any forward-looking statements should circumstances or management's
opinions or estimates change.

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

    %SEDAR: 00021365E




For further information:

For further information: Brad Turner, President & CEO, Richards Oil &
Gas Limited, Tel: (403) 265-8444, E-Mail: bturner@richardsoilandgas.com; Lonn
Bate, CFO, Richards Oil & Gas Limited, Tel: (403) 265-8444, E-Mail:
lbate@richardsoilandgas.com; Corporate website address:
http://www.richardsoilandgas.com

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