Sure Energy announces year end 2009 financial and operating results

CALGARY, March 10 /CNW/ - Sure Energy Inc. ("Sure Energy" or the "Company") today announced its financial and operating results for the year ended December 31, 2009.

The Company's MD&A, Financial Statements and Notes, and AIF can be viewed or downloaded at www.sureenergyinc.com or www.sedar.com.

During 2009, Sure Energy accomplished the following:

    
    -   Corporate production increased year over year from 373 BOE/d to over
        662 BOE/d

    -   Peace River Arch natural gas discovery in late 2009 has now increased
        production to 950 BOE/d

    -   Sure Energy's proved plus probable reserves increased 114% from
        1.51 MMBOE's in 2008 to 3.25 MMBOE's in 2009

    -   Finding, development and acquisition costs (proved plus probable) for
        2009 came in at $14.99 per BOE (including future development costs)

    -   Net asset value per share increased substantially to $1.27 per share
        (PV 8%, before tax) despite lower natural gas prices

    -   Sure Energy's Redwater Viking light oil project has emerged as a
        significant growth driver for the Company with over 115 locations and
        8,741 net acres of undeveloped land


                                  Quarter Ended            Year Ended
    HIGHLIGHTS                     December 31,            December 31,
                                2009        2008        2009        2008
    -------------------------------------------------------------------------
    ($000 except share
     and per share amounts)
    Financial
    Petroleum and Natural
     Gas Revenues                  2,193       1,781       6,765       6,909
    Funds Flow from
     Operations(1)                   672         662       1,766       2,740
      Per Share, Basic
       and Diluted                  0.01        0.02        0.04        0.08
    Loss                            (828)       (561)     (3,760)     (1,234)
      Per Share, Basic
       and Diluted                 (0.02)      (0.01)      (0.09)      (0.04)
    Capital Expenditures           1,631       3,486      11,398      13,654
    Total Assets                                          37,908      37,068
    Net Debt(1)                                           (4,537)      2,239
    Shareholders' Equity                                  30,054      31,287
    Common Shares Outstanding
      Basic                                           46,873,962  37,659,208
      Diluted                                         50,112,962  40,898,208
      Fully Diluted with
       Performance Rights                             53,617,962  44,678,208
    Weighted Average Common
     Shares Outstanding
      Basic and Diluted                               41,168,388  33,802,021

    Share Trading
      High                          0.68        0.66        0.68        1.35
      Low                           0.37        0.18        0.21        0.18
      Close                         0.61        0.23        0.61        0.23
    Trading Volume             6,926,598   2,957,562  11,545,528   9,959,644
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                                  Quarter Ended            Year Ended
                                   December 31,            December 31,
    HIGHLIGHTS                  2009        2008        2009        2008
    -------------------------------------------------------------------------

    Operations
    Production
      Natural Gas (Mcf/d)          3,614       2,568       3,532       2,044
      Oil (bbls/d)                    66          15          42          13
      NGLs (bbls/d)                   39          21          31          19
      BOE/d                          708         463         662         373

    Average Selling Price
      Natural Gas ($/Mcf)           4.69        6.85        4.07        8.09
      Oil ($/bbl)                  73.73       61.52       65.87      100.11
      NGLs ($/bbl)                 50.98       41.72       44.66       53.03
      BOE ($/BOE)                  33.66       41.78       28.02       50.57

    Operating Netback ($/BOE)(1)   16.61       23.04       12.89       29.28
    Funds Flow Netback ($/BOE)(1)  10.33       15.57        7.31       20.06
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Please refer to Management's Discussion and Analysis for a definition
        of Non-GAAP measures.
    

RESERVES

Sure Energy engaged independent petroleum consultants Sproule Associates Limited ("Sproule") to evaluate reserves for all of Sure Energy's properties effective December 31, 2009. The Sproule report has been prepared in accordance with the standards contained in the COGE Handbook and the reserve definitions contained in NI 51-101 by Qualified Reserve Evaluators. Sproule has reviewed and consented to the information contained herein.

All evaluations and future net cash flows are stated prior to any provisions for interest costs or general and administrative costs and after the deduction of estimated future capital expenditures and abandonment costs for wells to which reserves have been assigned. Values of future net revenues do not represent the fair market value of the reserves. Reserves data are based on judgments regarding future events; actual results will vary and the variations may be material. However, any variations should be consistent with the fact that reserves are categorized according to the probability of recovery.

Reserves and future net revenue have been made assuming that development of each property in respect of which the estimate is made will occur, without regard to the likely availability of Sure Energy of funding required for that development.

The following presentation should be read in conjunction with reserves information contained in Sure Energy's Annual Information Form ("AIF"). The AIF presents the Company's reserves according to Canadian Securities Administrators National Instrument 51-101 (NI 51-101") along with the related Forms and per the NI 51-101 Companion Policy.

The Company's total proved plus probable reserves increased by 114% in 2009 to 3.25 MMboe and proved reserves increased by 86% to 1.89 MMboe. These increases were largely the result of reserves attributed to 2009 drilling, additional undeveloped locations being assigned reserves, and to reserves acquired through the purchase of Conifer Exploration Ltd.

    
    Summary Of Oil And Gas Reserves
    Forecast Prices and Costs

                                      Light and Medium Oil        Gas
                                             (Mbbl)              (MMcf)
                                        Gross      Net      Gross      Net
    -------------------------------------------------------------------------
    Proved
      Developed producing                 99.6      86.0     6,809     5,105
      Developed non-producing                -         -       131       125
      Undeveloped                        531.0     417.0        34        32
    -------------------------------------------------------------------------
    Total Proved                         630.6     502.9     6,974     5,262
    Probable                             823.1     678.6     2,991     2,213
    -------------------------------------------------------------------------
    Proved plus probable(1)            1,453.7   1,181.5     9,965     7,474
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



                                              NGLs     2009 Total Reserves(1)
                                             (Mbbl)             MBOE
                                        Gross      Net      Gross      Net
    -------------------------------------------------------------------------
    Proved
      Developed producing                 81.7      51.0   1,316.1     987.9
      Developed non-producing             11.9       9.7      33.8      30.5
      Undeveloped                            -         -     536.6     422.3
    -------------------------------------------------------------------------
    Total Proved                          93.6      60.8   1,886.5   1,440.7
    Probable                              37.1      24.8   1,358.8   1,072.1
    -------------------------------------------------------------------------
    Proved plus probable(1)              130.7      85.5   3,245.3   2,512.7
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Columns may not add due to rounding


    Summary of Net Present Values of Future Net Revenue
    Forecast Prices and Costs ($000s)
    Before Income Taxes, Discounted at (% per year)(1)

                           0%       5%       8%      10%      15%      20%
    -------------------------------------------------------------------------
    Proved
      Developed
       producing         33,065   24,819   21,823   20,273   17,381   15,361
      Developed
       non-producing        567      456      404      373      309      260
      Undeveloped        17,340   11,787    9,495    8,263    5,920    4,300
    -------------------------------------------------------------------------
    Total Proved         50,972   37,062   31,721   28,909   23,611   19,921
    Probable             53,421   31,737   24,929   21,644   15,965   12,367
    -------------------------------------------------------------------------
    Proved plus
     probable           104,394   68,799   56,650   50,553   39,576   32,289
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Columns may not add due to rounding
    

Reserve Life Index

The reserve life index is calculated by dividing gross company reserves as at the effective date of the reports (December 31, 2009) by Sproule's estimate of average production for the following year. The reserve life index represents a measure of the amount of time production could be sustained at the assumed production rates based on the reserves at the applicable point in time.

    
                                                       2009
    -------------------------------------------------------------------------
                                               Proved   Proved plus Probable
    -------------------------------------------------------------------------
    2010 Forecast Production (BOE/d)             799             967
    Reserve Life Index (years)                   6.5             9.2
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

UNDEVELOPED LAND

For the year ended December 31, 2009 Sure Energy's total net undeveloped landholdings were 74,765 net acres as determined by Seaton-Jordan & Associates Ltd. The majority of Sure Energy's undeveloped land is located in the Plains area of Alberta. The Company's land acquisition strategy focuses primarily on acquiring lands to expand existing project areas and prospect inventory.

    
    2009                   Developed        Undeveloped           Total
    -------------------------------------------------------------------------
                         Gross     Net     Gross     Net     Gross     Net
    -------------------------------------------------------------------------
    Alberta              59,276   26,630  117,432   70,975  176,708   95,605
    Saskatchewan            160      160    3,870    3,790    4,030    3,950
    -------------------------------------------------------------------------
                         59,436   24,790  121,302   74,765  180,738   99,555
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

NET ASSET VALUE

The following table represents the net asset value ("NAV") of Sure Energy as at December 31, 2009 based on proved and probable reserves using forecast pricing (PV 8% discounted) as evaluated by Sproule, undeveloped land value as determined by Seaton Jordan & Associates Ltd., seismic value as determined by internal estimates, and internal estimates of value for tax pools.

    
                                                        Proved plus Probable
    -------------------------------------------------------------------------
    Present value of reserves (PV 8%) (before tax)                    56,650
    Undeveloped lands                                                  7,016
    Seismic                                                            1,188
    Proceeds from in-the-money stock options                             350
    Working capital deficit                                           (4,537)
    Tax pools (no value assigned)                                          -
    -------------------------------------------------------------------------
                                                                      60,667
    -------------------------------------------------------------------------
    NAV per share                                                   $   1.27
    Number of diluted shares outstanding as of
     December 31, 2009(1)                                         47,772,962
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) 2,340,000 options and 1,752,500 vested performance incentive rights
        have been excluded from diluted shares outstanding as they are anti-
        dilutive.
    

OPERATIONAL REVIEW

Drilling

For the year ended December 31, 2009, Sure Energy participated in one gross well (1.00 net). An exploration well was drilled in the Peace River Arch. The well commenced production in January 2010.

Sure Energy will be actively drilling in 2010 as described in the Outlook section.

    
                                   Three Months Ended          Year Ended
                                       December 31,            December 31,
    Capital Program Summary         2009        2008        2009        2008
    -------------------------------------------------------------------------
    ($000s)
    Land                               7         187         444         738
    Geological and geophysical       145         150       1,014         785
    Drilling                         683       1,814         821       2,977
    Completions                      575         191         616         747
    Recompletions and workovers       19          15         632         177
    Production equipment
     and facilities                  460         935         649       2,890
    Capitalized exploration G&A       98         154         426         427
    Drilling credits                (357)          -        (357)          -
    -------------------------------------------------------------------------
                                   1,630       3,446       4,245       8,741

    Asset disposition               (149)          -        (149)       (158)
    Corporate acquisitions            21           -       7,173       4,993
    Asset retirement obligation      129          43         129          73
    Other assets                       -          (3)          -           5
    -------------------------------------------------------------------------
                                   1,631       3,486      11,398      13,654
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

Acquisition Of Conifer Exploration Ltd.

On August 14, 2009 Sure Energy closed a purchase and sale agreement to acquire all issued and outstanding shares of Conifer Exploration Ltd. ("Conifer") for a total consideration of $8.9 million. Under the terms of the agreement Sure Energy paid $6.0 million in cash and issued 9,214,754 common shares for the issued and outstanding common shares of Conifer. The cash portion of the deal was financed from Sure Energy's existing working capital surplus and bank line. Concurrent with the closing, Sure Energy's credit facility was increased to $11.5 million consisting of a $10 million revolving operating demand loan and a $1.5 million non-revolving acquisition/development demand loan.

Southern Plains (Chinook)

The Company has had success exploring for gas in the Southern Plains of Alberta in the Lloydminster sand. In the Chinook area the Company produced 283 BOE/d in the current quarter of sweet gas from two wells and has another location to drill. Using the knowledge gained at Chinook the Company mapped the producing reservoir regionally and identified two similar prospects, one containing gas and one containing heavy oil. The gas prospect was drilled in January and was successful. This well will be tied in after break-up and is expected to add 40 BOE/d. A follow-up 2D seismic program is planned to optimize the development of the project. The heavy oil prospect is planned to be drilled in March. This well will target a resource of cold flow heavy oil which could significantly impact Sure Energy's reserves and production profile.

Peace River Arch

The Company produced 107 BOE/d from the Peace River Arch area in the current quarter. Production increased to approximately 380 BOE/d on January 1, 2010 when a successful well drilled in December was placed on stream. This well was the only well drilled by Sure Energy in 2009. It was drilled on proprietary 3D seismic data and was successful in the primary targeted zone. The Company will monitor the well's production performance before determining if follow-up locations exist.

Sure Energy has an inventory of five additional locations on the Peace River Arch, two of which are targeting new pools. One of these is a gas prospect and is programmed to be drilled in late 2010.

Plains (Redwater)

The Company owns 8,741 net acres of land on an emerging light oil resource play in the Viking formation. At Redwater the lower Viking sand is easily mappable in a regionally extensive northwest to southeast fairway, and is hydrocarbon bearing throughout. The sandstone is actually a finely laminated sand/shale sequence with relatively good horizontal permeability in the sands but with limited vertical permeability. Vertical wells typically produce at less than 7 BOE/d when stabilized, but exhibit low declines, indicating that they are accessing large reserves. Recent horizontal activity by other oil and gas companies in the area has significantly improved production rates, with some wells coming on at 100 to 275 BOE/d. The higher producing wells are exhibiting post flush rates of 50 to 70 BOE/d.

In the southern part of the trend Sure Energy owns 2,181 gross acres of land, most of which was acquired through the purchase of Conifer. The Company has four producing horizontal wells in the area (2.4 net wells) which came on production between 25 and 76 BOE/d. The Company is currently drilling two additional horizontal development wells from an inventory of at least 33 gross (18.4 net) wells in the immediate area.

In the northern extension of the trend the Company has 6,560 acres of Lower Viking rights in the prospective oil fairway (8.75 sections). The northern end of the trend is less drilled and therefore less proven, but older vertical wells drilled in the immediate area to Sure Energy's land produce similar to those to the south. Recent horizontal wells by other oil and gas companies in the area appear to be exhibiting similar initial production rates to wells to the south, most being in the 60 to 275 BOE/d range. Sure Energy's land is all 100% owned and the Company plans to drill one horizontal on the northern block in 2010 to investigate the area's production potential. Sure Energy would have a minimum of 80 development locations (drilling at 3 wells per quarter) should the area develop similar to the southern area.

Currently companies are using a variety of horizontal well technologies including multi-leg laterals, "packers-plus", multi-frac "monobores", and dual laterals. Sure Energy is monitoring the activity and results in the area to determine the best method to develop its resource. The play has compelling economics at current capital expenditures and will improve significantly as capital costs decrease with new technologies.

SE Saskatchewan

The Company owns 1,725 acres of land on a prospective light oil fairway at Queensdale in southeast Saskatchewan. After shooting 13 square kilometres of proprietary 3D seismic the Company has delineated two prospects on its land; one new pool and one pool extension. The exploration prospect was drilled in January and was dry and abandoned. The pool extension will be evaluated in June with a horizontal well and could lead to four follow-up wells. This light oil project could materially add to Sure Energy's production.

Tweedie

The Company currently produces 150 BOE/d of sweet gas from shallow Cretaceous reservoirs in the Tweedie area, just northeast of Edmonton. The production is from approximately 35 wells and declines at low rates. Sure Energy has an inventory of 17 locations at Tweedie, all defined by both geology and 2D seismic, but only intends to drill a maximum of 2 to 3 wells in the area per year, to maintain production levels.

West Central

Sure Energy produces 110 BOE/d of low decline, liquids rich gas in West Central Alberta. The Company owns 12,160 net acres of undeveloped land in the area and has an inventory of three drillable prospects.

Production

Production for the period by major property is as follows:

    
                      Three Months Ended                          Year Ended
                       December 31, 2009                   December 31, 2009
              ---------------------------        ----------------------------
                Gas   Oil   NGLs   Total            Gas   Oil   NGLs   Total
              Mcf/d Bbls/d Bbls/d  BOE/d          Mcf/d Bbls/d Bbls/d  BOE/d
    -------------------------------------        ----------------------------
    Peace
     River      511      7     16    107            546      9     16    116
    Plains       29     54      -     58             32     30      -     35
    Southern
     Plains   1,661      -      6    283          1,746      -      8    299
    Tweedie     868      -      -    145            999      -      -    166
    West
     Central    545      5     17    115            209      3      7     46
    -------------------------------------        ----------------------------
    Total     3,614     66     39    708          3,532     42     31    662
    -------------------------------------        ----------------------------
    -------------------------------------        ----------------------------
    

Outlook

Sure Energy has a solid asset base of oil and natural gas reserves and production to build on, while at the same time providing its shareholders with an extensive inventory of over 160 prospects to grow from.

The proved plus probable reserve base has grown to over 3.25 million BOE's with approximately 50% oil and liquids weighting, while production has increased to 950 BOE/d.

Redwater has emerged through the acquisition of Conifer and consolidation of the area to be the significant growth driver with over 115 light oil locations on 8,741 acres of undeveloped land.

The Company continues to remain in a strong financial position and has approved a $10 million capital budget to be financed with cash flow and our balance sheet. Prospects to be drilled in 2010 include wells at Sedalia (gas), Hatton (heavy oil), Peace River Arch (gas), and Queensdale, Sask. (oil) along with a minimum of five light oil horizontal wells at Redwater.

In addition to this, the market is now starting to recognize the true value and growth potential of our business.

ADVISORIES

Forward-looking Information

Certain statements contained in this release constitute forward-looking information. These statements relate to future events or Sure Energy's future performance. The use of any of the words "could", "expect", "believe", "will", "projected", "estimated" and similar expressions and statements relating to matters that are not historical facts are intended to identify forward-looking information and are based on Sure Energy's current belief or assumptions as to the outcome and timing of such future events. Actual future results may differ materially. In particular, Sure Energy's stated exploration and development intentions for its principal oil and natural gas properties, land acquisition strategy and statements under "Outlook" contain forward looking information. Sure Energy's Annual Information Form and other documents filed with securities regulatory authorities (accessible through the SEDAR website www.sedar.com) describe the risks, material assumptions and other factors that could influence actual results and which are incorporated herein by reference. Sure disclaims any intention or obligation to publicly update or revise any forward-looking information, whether as a result of new information, future events or otherwise, except as may be expressly required by applicable securities laws.

Use of BOEs

In this press release the calculation of barrels of oil equivalent (BOE) is calculated at a conversion rate of 6,000 cubic feet (Mcf) of natural gas for one barrel (bbl) of oil based on an energy equivalency conversion method. BOEs 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.

    
    SURE ENERGY INC.
    BALANCE SHEETS

    As at December 31                                     2009          2008
    ($000's)
    -------------------------------------------------------------------------

    Assets
    Current assets
      Cash and cash equivalents                     $        -    $    6,043
      Accounts receivable                                1,829           870
      Prepaid expenses                                     457           241
    -------------------------------------------------------------------------
                                                         2,286         7,154

    Property, plant and equipment                       35,622        29,914
    -------------------------------------------------------------------------
                                                        37,908        37,068
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Liabilities and Shareholders' Equity
    Current liabilities
      Accounts payable and accrued liabilities           3,777         4,915
      Bank debt                                          3,046             -
    -------------------------------------------------------------------------
                                                         6,823         4,915

    Asset retirement obligations                         1,031           866
    -------------------------------------------------------------------------
                                                         7,854         5,781

    Shareholders' equity
      Share capital                                     35,732        33,718
      Contributed surplus                                3,152         2,639
      Deficit                                           (8,830)       (5,070)
    -------------------------------------------------------------------------
                                                        30,054        31,287
    -------------------------------------------------------------------------
                                                    $   37,908    $   37,068
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    SURE ENERGY INC.
    STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS AND DEFICIT

                                                    Year Ended    Year Ended
                                                   December 31,  December 31,
    ($000's, except per share amounts)                    2009          2008
    -------------------------------------------------------------------------

    Revenue
      Petroleum and natural gas revenues            $    6,765    $    6,909
      Royalties                                           (940)       (1,283)
      Interest income                                       15            78
    -------------------------------------------------------------------------
                                                         5,840         5,704
    -------------------------------------------------------------------------
    Expenses
      Operating                                          2,363         1,433
      Transportation                                       348           192
      General and administration                         1,330         1,339
      Interest on bank debt                                 33             -
      Stock compensation                                   513           625
      Depletion, depreciation and accretion              5,763         3,349
    -------------------------------------------------------------------------
                                                        10,350         6,938
    -------------------------------------------------------------------------
    Loss before future income tax recovery              (4,510)       (1,234)
    Future income tax recovery                             750             -
    -------------------------------------------------------------------------

    Loss and comprehensive loss                         (3,760)       (1,234)
    Deficit, beginning of year                          (5,070)       (3,836)
    -------------------------------------------------------------------------
    Deficit, end of year                                (8,830)       (5,070)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Loss per common share
      Basic and diluted                             $    (0.09)   $    (0.04)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    SURE ENERGY INC.
    STATEMENTS OF CASH FLOWS

                                                    Year Ended    Year Ended
                                                   December 31,  December 31,
    ($000's)                                              2009          2008
    -------------------------------------------------------------------------

    Cash provided by (used in):
    Operating
    Loss                                            $   (3,760)   $   (1,234)
    Items not affecting cash:
      Depletion, depreciation and accretion              5,763         3,349
      Stock compensation                                   513           625
      Future income tax recovery                          (750)            -
    Abandonment expenditures                              (132)          (53)
    Changes in non-cash working capital                     24          (532)
    -------------------------------------------------------------------------
                                                         1,658         2,155
    -------------------------------------------------------------------------
    Investing
    Drilling and development of petroleum
     and natural gas properties                         (4,245)       (8,741)
    Corporate acquisitions, net of cash acquired        (4,513)       (2,055)
    Disposition of petroleum and
     natural gas properties                                149           158
    Other asset purchases                                    -            (5)
    Changes in non-cash working capital                 (2,138)        3,251
    -------------------------------------------------------------------------
                                                       (10,747)       (7,392)
    -------------------------------------------------------------------------
    Financing
    Increase in bank debt                                3,046             -
    Issue of common shares for cash, net of
     share issue costs                                       -         7,837
    -------------------------------------------------------------------------
                                                         3,046         7,837
    -------------------------------------------------------------------------

    Net change in cash and cash equivalents             (6,043)        2,600

    Cash and cash equivalents, beginning of year         6,043         3,443
    -------------------------------------------------------------------------

    Cash and cash equivalents, end of year          $        -    $    6,043
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

Sure Energy is a public company traded on the Toronto Stock Exchange under the symbol SHR.

%SEDAR: 00024118E

SOURCE Sure Energy Inc.

For further information: For further information: Mr. Jeff Boyce, President and CEO or Mr. Lance Wirth, Vice President Finance and CFO, Phone: (403) 410-3100, Email: info@sureenergyinc.com

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