SPRY ANNOUNCES SECOND QUARTER FINANCIAL AND OPERATING RESULTS

CALGARY, Feb. 22 /CNW/ - Spry Energy Ltd. ("Spry") is pleased to announce the release of our financial and operating results for the three and six months ended December 31, 2010.

HIGHLIGHTS

  • Our production rate for the quarter increased 44 percent to 2,095 boes per day, up from 1,456 boes per day from the comparative quarter last year.  Light/medium oil and NGL production increased to 1,206 barrels per day, up from 659 barrels per day over the same quarter last year, as a result of our continued drilling success at East Pembina.  Natural gas production for the quarter increased to 4,452 mcf per day as compared to 4,005 mcf per day for the same quarter last year.  This increase was due to placing previously shut-in natural gas back on-stream and from the conservation of solution gas, associated with our oil production, at East Pembina.  Heavy oil production increased to 147 barrels per day versus 129 barrels per day for the comparative periods.

  • Production from East Pembina averaged of 1,026 boes per day for the three months ended December 31, 2010 as compared to 300 for the same period in 2009.  Light/medium oil and NGL production was 905 barrels per day and the balance of production was solution gas.   East Pembina accounted for 49 percent of our total production, but made up 74 percent of our operating net back (petroleum and natural gas revenues, less royalties, transportation and operating expenses).

  • Corporate production rates for January are approximately 2,650 boes per day (69 percent oil and NGLs) and of that total, East Pembina production rates are approximately 1,630 boes per day (85 percent oil and NGLs).

  • Funds from operations increased 92 percent to $6.8 million for the three months ended December 31, 2010 up from $3.5 million for the three months ended December 31, 2009 mainly due to the increase in light/medium oil and NGL production and commodity prices.  Realized losses on financial instruments for the three months ended December 31, 2010 were $37,000 versus realized losses of $91,000 for the three months ended December 31, 2009.

  • For the three months ended December 31, 2010, we recorded a net loss of $0.7 million versus a net loss of $0.2 million for the three months ended December 31, 2009.  Higher revenues from higher production during the current quarter were offset by higher unrealized losses on financial instruments as well as higher royalties and expenses.

  • Cash based capital expenditures for the quarter were $14.8 million as compared to $8.1 million for the same quarter in the previous year.  Substantially all of the activity was attributed to our East Pembina core area. 

  • During the quarter, we drilled six (5.1 net) oil wells at East Pembina with a 100 percent success rate.  Spry was the operator of all of the wells drilled during the quarter.  For the six months ended December 31, 2010 we drilled 14 (8.4 net) oil wells with a 100 percent success rate.  12 (7.9 net) were drilled at East Pembina and two (0.5 net) at Wordsworth, Saskatchewan.  Spry was the operator of 11 of the East Pembina wells that were drilled year to date.

  • Spry continues to expand its presence at East Pembina as we earned a 70 percent working interest in one section of mineral lands with the drilling of one of our East Pembina wells during the quarter.  We also acquired interest in a gas gathering pipeline that will be used to conserve natural gas at a newly planned oil battery and we acquired interest two suspended vertical wellbores that we recompleted in the Cardium zone placing them back on production in February 2011.

  • Subsequent to December 31, 2010, we have drilled four (3.1 net) successful oil wells at East Pembina and we are currently drilling one (0.8 net) heavy oil well at Northminster.  The Northminster well was originally planned to be drilled in December 2010, but was delayed until February 2011, pending regulatory approval which has now been received.

  • On January 13, 2011, we announced that we had engaged Peters & Co. Limited to provide financial advisory services, including assistance in identifying and evaluating possible liquidity events aimed at enhancing shareholder value.  Potential transactions Spry may pursue include, among others, a negotiated combination of Spry's business and operations with another oil and natural gas company or other entity by means of a take-over, merger, sale, recapitalization, arrangement, amalgamation, or a sale of assets, or any combination thereof.  There is no assurance that any agreement or transaction will occur, or if a transaction is undertaken, as to its terms or timing. Spry does not intend to disclose developments with respect to this process unless and until the Board has authorized the Company to enter into a definitive agreement for any such transaction.
  Three months ended Six months ended
  December 31, December 31,
  2010 2009 2010 2009
Financial        
($ thousands except per share amounts)        
Petroleum and natural gas revenue 10,990 6,925 20,178 11,357
Funds from operations(1) 6,762 3,513 11,918 6,144
  Basic per share 0.30 0.18 0.52 0.31
  Diluted per share (2) 0.29 0.17 0.51 0.31
Net loss (729) (205) (1,315) (864)
  Basic and diluted per share (0.03) (0.01) (0.06) (0.04)
Capital expenditures, cash based 14,848 8,065 23,416 14,425
Working capital deficit, before bank debt 9,792 4,410 9,792 4,410
Bank debt 24,715 14,572 24,715 14,572
Shares outstanding at end of period (000s) 22,776 19,974 22,776 19,974
Operations        
Production        
  Light/medium oil & liquids (bbls/d) 1,206 659 1,128 548
  Heavy oil (bbls/d) 147 129 134 131
  Natural gas (mcf/d) 4,452 4,005 4,571 3,841
  Total (boes/d) 2,095 1,456 2,024 1,319
Prices      
  Light/medium oil ($/bbl) 77.80 73.52 75.18 70.67
  Heavy oil ($/bbl) 59.06 62.62 58.53 61.29
  Natural gas ($/mcf) 3.80 4.67 3.72 3.89
Operating netback ($/boe)(3) 38.63 32.46 35.93 27.01
Realized financial instrument gains (losses) ($/boe) (0.19) (0.68) (0.10) 5.50
Funds from operations ($/boe) 35.08 26.23 32.00 25.32

(1)     Funds from operations is a non-GAAP measure and may not be comparable with similar measures for other companies.  Funds from operations          is defined as cash flow from operating activities before changes in non-cash working capital.
(2)     Diluted weighted average shares outstanding used for funds from operations is a non-GAAP measure and it may differ from diluted weighted          average shares outstanding used to calculate earnings per share.
(3)     Operating netback is petroleum and natural gas revenues less; royalties, operating expenses and transportation expenses.

A complete copy of the interim report for the three and six months ended December 31, 2010 along with the CEO and CFO certifications of interim filings can be found on the SEDAR website at www.sedar.com.  Information regarding Spry can also be found at Spry's website at www.spryenergy.ca.


SOURCE Spry Energy Ltd.

For further information:

Kenneth J. Bowie
President & CEO
(403) 984-6352

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