Sea Dragon Energy Inc. First Quarter News Release

/NOT FOR DISTRIBUTION TO U.S NEWSWIRE OR FOR DISSEMINATION IN THE UNITED STATES/

CALGARY, May 31 /CNW/ - Sea Dragon Energy Inc. ("Sea Dragon") (TSX VENTURE:SDX) today filed its unaudited interim consolidated financial statements and related management's discussion and analysis ("MD&A") for the three months ended March 31, 2010 with Canadian securities regulatory authorities.

Copies of the filed documents may be obtained through Sea Dragon's web site at www.seadragonenergy.com, through SEDAR at www.sedar.com.

Sea Dragon Energy Inc. is a Calgary-based, growth-oriented oil and gas exploration and development company focused on the Middle East/North Africa region with production operations in the Arab Republic of Egypt.

During the first quarter of 2010 the company attained the following milestones:

    
    -   On January 20, 2010 the Company announced that Geyad 2 well in NW
        Gemsa tested 3,850 bopd oil and 4.62 MMscfd of solution gas. On
        February 4, 2010 Geyad 2 was put into production at 1,475 bopd oil.

    -   On January 25, 2010 the Company issued 22,730,000 special warrants
        ("the Special Warrant Offering") for gross proceeds of $12,501, less
        the Underwriters' fee of $625 and $236 in other expenses. Each
        special warrant entitled the holder thereof to receive one common
        share on the exercise of the special warrant for no additional
        consideration, subject to an adjustment whereby if the Company was
        not qualified to issue the common shares under this offering by
        April 1, 2010, each warrant would be exercisable for 1.05 common
        shares for no additional consideration. The Company qualified to
        issue the common shares on April 13, 2010 and as a result 23,866,500
        common shares were issued upon the exercise of the special warrants
        on April 13, 2010.

    -   On January 29, 2010, Sea Dragon paid an initial instalment of
        $US10,000 to Dana Gas Egypt ("DGE") pursuant to the terms of a
        farmout agreement ("the Farmout Agreement") with DGE that it had
        entered into on December 31, 2009, through its wholly-owned
        subsidiary, Sea Dragon Energy (Kom Ombo) Ltd., ("SD Kom Ombo"). Under
        the Farmout Agreement SD Kom Ombo is to acquire a fifty (50%) percent
        participating interest in the Kom Ombo Concession, Egypt for
        aggregate consideration of US$45,000 (subject to working capital
        adjustments). The CEO of the Sea Dragon is an independent director of
        Dana Gas PJSC (the parent company of Dana Gas Egypt). The effective
        date of the Kom Ombo Acquisition is July 1, 2009. Sea Dragon Energy
        (Kom Ombo) Ltd. received the Deed of Assignment for the 50%
        participating interest on January 28, 2010.

        The initial deposit on January 29, 2010 was funded through the net
        proceeds of the Special Warrant Offering. The balance of the farmout
        consideration was paid by a remittance of $US28,477 to DGE on April
        29, 2010 and a final remittance of $US2,089 made on May 19, 2010. The
        remittances in April and May were paid using a portion of the net
        proceeds of the April 2010 Common Share Offering, described below.

        In addition, SD Kom Ombo is required to pay $US4,000 of DGE's share
        of costs incurred after the Effective Date and also provide a Letter
        of Guarantee of up to $US4.5 million. Under the terms of the Farmout
        Agreement, approximately $US16.2 million of the aggregate
        consideration may be fully cost recoverable by SD Kom Ombo out of
        future production proceeds generated from the Kom Ombo Concession.

        For accounting purposes, the acquisition of the Kom Ombo working
        interest is considered to have occurred on April 29, 2010, when the
        consideration for the acquisition was substantially paid. At March
        31, 2010 Sea Dragon owed the remainder consideration of $30.5
        million, which was funded from the proceeds of the April 2010
        Offering, described below. As at March 31, 2010 the Company could not
        be certain that it would have the funds to complete the acquisition
        and, consequently, the recognition of the acquisition was deferred
        until April 29, 2010. Accordingly, these financial statements for the
        quarter ended March 31, 2010 do not include revenues from the sale of
        crude oil from the Kom Ombo joint venture, nor expenses for
        operations or overhead costs nor capital expenditures. Any net
        remittances during the quarter have been added to the acquisition
        deposit and will adjust the acquisition price and allocation when it
        is reported in the second quarter.

        The Company filed a Business Acquisition Report for this acquisition
        on April 12, 2010 which may be viewed on SEDAR.

    -   On February 4, 2010 the Company signed an alliance agreement with
        Tanmia Petroleum Company ("TPC"), a Company incorporated in Egypt and
        owned one hundred percent by the Egyptian General Petroleum
        Corporation. Under the terms of this agreement, the Company and TPC
        will have the exclusive right to jointly appraise, develop and
        produce hydrocarbons from certain undeveloped and under-developed oil
        and natural gas opportunities located in the Arab Republic of Egypt.

    -   On March 8, 2010 the Company announced Al Amir 5x well on the NW
        Gemsa concession tested 6,150 bopd and 6.9 MMscfd solution gas on a
        full choke. On March 14, 2010 the well went into production at 1,500
        bopd oil.

    -   On March 26, 2010 the Company announced it had obtained an
        independent engineering report published by Ryder Scott effective
        December 31, 2009 on its interest in NW Gemsa. According to the Ryder
        Scott report, the Company's share of P1 and P2 barrels for NW Gemsa
        stood at 1,674,46 bbls of oil with a value of $US20,773 net to the
        Company with a 10% discount.

    -   On April 19, 2010, Sea Dragon completed an issuance of 142,500,000
        Common Shares ("the April 2010 Common Share Offering") on a bought
        deal basis pursuant to a short form prospectus at a price of $0.40
        per common share for gross proceeds of approximately $57 million less
        the Underwriters fee of $2,850 and other expenses of the Offering
        estimated to be $375. The net proceeds of the Offering will primarily
        be used by the Company to fund the balance of consideration of
        approximately $US34,500 for the acquisition of a fifty (50%) percent
        participating interest in the Kom Ombo concession, described above.

    -   On May 8, 2010 Sea Dragon commenced spudding Al Baraka 6, the first
        of its 30 well program on Kom Ombo. Sea Dragon intends to drill up to
        10 development wells during 2010.


    Selected quarterly information

    $C 000, except
     share and per
     share
     information    2010                          2009
                 ------------------------------------------------------------
                     1st Qtr     4th Qtr     3rd Qtr    2ndt Qtr     1st Qtr
    -------------------------------------------------------------------------
    Average Daily
     Production
     volumes (Bopd)      786         614           -           -           -
      Average Price
       ($US/Bopd)      75.94       72.39           -           -           -
    Oil production,
     gross (bbls)     70,699       6,143           -           -           -
    Cash balance at
     end of period     5,283       2,092       1,969       2,118       5,885
    Working capital
     (deficiency)      4,272       3,432       6,729       1,839      (9,386)
    Restricted cash
     and deposits        115         325       4,442       6,613      18,678
    Total assets      35,637      22,229       8,602      10,639      26,902
    Shareholders'
     equity           32,005      21,168       8,196      10,237      11,286
    Share capital     56,087      54,942      44,522      44,444      44,444
    Common shares
     outstanding
      Basic      208,429,858 206,131,405 144,702,905 144,509,405 144,509,405
      Diluted    274,231,108 253,607,742 161,991,076 158,491,076 158,491,076
    Weighted
     average
     common
     shares
     outstanding
      Basic      225,337,118 153,717,257 144,517,039 144,509,405 144,509,405
      Diluted    227,040,167 153,738,451 158,978,255 158,491,076 158,491,076
    Retained
     earnings
     (Deficit)       (41,684)    (39,848)    (38,033)    (35,818)    (34,678)
    Cash flow
     from
     operations(1)        28      (2,309)     (1,567)     (1,028)       (836)
    Basic, per
     share(1)(2)       (0.00)      (0.01)      (0.01)      (0.01)     ($0.01)
    Capital
     expenditures      8,939         802         668         564      17,098
    Net loss          (1,836)     (1,814)     (2,215)     (1,141)    (11,665)
    Basic, per
     share(2)          (0.01)      (0.01)      (0.01)      (0.01)     ($0.08)


    (1) See discussion concerning non-GAAP measures in the MD&A for the
        period ended March 31, 2010 as posted on SEDAR.
    (2) Funds flow from operations per share and Net income (loss) per share
        are not calculated on a diluted basis as they are anti-dilutive.
    

For further information please see the website of the Company at www.seadragonenergy.com or the Company's filed documents at www.sedar.com.

Statements in this release that are forward-looking statements are subject to various risks and uncertainties concerning the specific factors disclosed under the heading Risk Factors and elsewhere in the Company's filings with Canadian securities regulators. Specifically that there is no assurance that any hydrocarbon reserves will be discovered nor is there any assurance that any hydrocarbons encountered will be in commercially recoverable quantities. Such information contained herein represents management's best judgment as of the date hereof based on information currently available. The Company does not assume any obligation to update any forward-looking statements, save and expect as may be required by applicable securities laws.

The TSX.V Venture Exchange has neither approved nor disapproved of the information contained herein.

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

SOURCE Sea Dragon Energy Inc.

For further information: For further information: Said Arrata, President, CEO and Director, (403) 457-5035; David Thompson, Senior Vice President and Director, (403) 457-5035; Scott Koyich, President, Brisco Capital Partners, (403) 262-9888, skoyich@briscocapital.com; Graeme Dick, Brisco Capital Partners, (403) 561-8989, graeme@briscocapital.com

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