Synenco Energy releases 2007 results



    Plans phased workforce reduction in 2008

    CALGARY, March 13 /CNW/ - Synenco Energy Inc. (TSX: SYN) today released
financial results and operating highlights for the year ended December 31,
2007.
    Synenco reported a net loss for the year ended December 31, 2007 of
$15.0 million ($0.30 per diluted share) compared with a net income of
$3.9 million ($0.07 per diluted share) in 2006. The net loss for 2007 includes
an impairment charge of $35.5 million for the Northern Lights upgrader
engineering and development costs. Synenco's share of the impairment charge,
after tax, was $15.3 million ($0.30 per share). The net loss for the year also
includes restructuring costs of $2.5 million resulting from reductions in
Northern Lights development activities announced in May. Synenco's share of
these restructuring costs was $1.5 million ($0.03 per share).
    Most costs incurred by Synenco relate to Northern Lights Partnership
(NLP) project development activities and are capitalized. As a
development-stage entity, Synenco expects it will mainly report net losses
until project development activities are complete and operations commence.
    In 2007, consolidated capital expenditures totaled $129.5 million and
were related to engineering, drilling operations, the extraction-process pilot
plant, the Fort MacKay/Firebag aerodrome, activities related to regulatory
submissions, technology licensing agreements and internal personnel and other
costs related to project development activities. The consolidated capital
expenditures include amounts incurred by the NLP, in which Synenco's ownership
participation is 60 percent. Synenco's net ownership interest in consolidated
capital expenditures was $78.9 million.
    Cash and cash equivalents were $299.1 million and $406.8 million as at
December 31, 2007 and 2006, respectively. Of the cash and cash equivalents
held by NLP, 60 percent is available to meet Synenco's share of future NLP
obligations. As at December 31, 2007, Synenco's share of the total
consolidated cash and cash equivalents available to meet its future
obligations was $267.8 million (2006 - $342.7 million).
    A summary of Synenco's consolidated financial results as at and for the
years ended December 31, 2007 and 2006 is included below:

    
    Selected Financial Information
    (In thousands except per share data)
    -------------------------------------------------------------------------
    For the years ended December 31,                      2007          2006
    -------------------------------------------------------------------------
    Interest income                                     15,283        16,503
    Downstream asset impairment charge                  35,548             -
    General and administrative and
     amortization costs                                 18,459        12,187
    Restructuring costs                                  2,489             -
    Non-controlling interest share in
     Partnership income (loss)                         (16,999)           74
    Income tax expense (recovery)                       (9,252)          342
    Net income (loss)                                  (14,962)        3,900
    Net income (loss) per share
      Basic                                              (0.30)         0.08
      Diluted                                            (0.30)         0.07
    Cash and cash equivalents                          299,124       406,795
    Total assets                                       654,548       670,346
    Shareholders' equity                               429,086       439,437
    Common shares outstanding                           50,456        50,251
    -------------------------------------------------------------------------
    

    2008 phased workforce reduction

    The company also announced its intention to implement a phased workforce
reduction plan that reflects the narrower focus of company activities. These
priority activities are: to advance the Northern Lights oil sands mining and
extraction application through the regulatory process, to complete the
resource analysis following the 2007/2008 drilling programs, to complete pilot
plant work, and to reinvigorate Synenco's strategic options review process.
The phased plan contemplates reducing the company's workforce, in accordance
with the completion of priority work, by 60 to 70 people from the current
level of approximately 100, by year end.
    Severance costs associated with the phased reduction are anticipated to
be approximately $5 million, and Synenco's planned 2008 cash expenditures are
expected to decline from $50 million to approximately $40 million.
    "As we concentrate the focus of Synenco's activities, we recognize and
appreciate the contribution of all employees," said Chairman, President and
CEO Mike Supple. "We will advocate for those who will be leaving the company
during the year, as they transition to new opportunities that can make use of
their talents and experience."

    2007 operating highlights

    Fourth quarter
    
    -   Synenco Energy updated the oil sands mining and bitumen extraction
        application now with Alberta regulators by filing a supplemental
        submission, which included a project description update, EIA update
        and responses to Supplemental Information Requests.

    -   The company announced results from the 2006/2007 winter drilling
        program on the Northern Lights Partnership (NLP) lands and the Best
        Estimate of Discovered Resources (subsequently redefined as
        Discovered Petroleum Initially-In-Place) on these lands. The Best
        Estimate of Discovered Petroleum Initially-In-Place, as provided by
        Norwest Corporation, an independent geology, engineering and
        environmental consultant, is 1.657 billion barrels (994 million
        barrels net to Synenco).

    -   Synenco announced the resignation of Idar Eikrem as Chief Financial
        Officer.

    Third quarter
    -   Synenco Energy started an extraction process pilot test at a new
        testing facility located at Fort MacKay, Alberta, operated by
        SGS Canada Inc.

    -   The company concluded that it is unlikely to build an upgrader on the
        Sturgeon County, Alberta site that would utilize certain previously
        completed engineering and development work. Accordingly, Synenco
        recorded an impairment charge of $35.5 million for property, plant
        and equipment.

    -   Synenco announced that the NLP would become a participant in the
        Fort MacKay/Firebag Aerodrome -- a private, full service airport
        located about 30 kilometres southeast of the proposed oil sands mine
        site. The aerodrome would be used to facilitate the transport of
        employees and contractors during construction and operation.

    Second quarter
    -   Synenco Energy announced an updated capital cost forecast for the
        proposed NLP upgrader project in Sturgeon County and that the company
        would suspend further activities on the project and seek a regulatory
        time-out from regulators (subsequently granted). The company also
        retracted previously announced timetables for first oil and reduced
        its capital expenditures estimate for 2007 from $235 million to
        $100 million.

    -   Synenco announced a plan to assess options for a strategic
        repositioning of the company and described a range of possible
        outcomes, including restructuring of the NLP, alternative downstream
        commercial ventures, and other corporate-level options. As part of
        the strategic review of its operations, the company eliminated
        46 employee positions.

    -   The company announced the first independent estimate of coal
        resources on NLP's coal lease application area. The indicated coal
        resource was estimated at 62,950 kilotonnes and the inferred coal
        resource was estimated at an additional 78,658 kilotonnes. On behalf
        of the NLP, Synenco holds five coal lease applications in
        northeastern Alberta covering 60,160 hectares.

    First quarter
    -   Synenco concluded the 2006/2007 winter drilling program on NLP's
        Western Lease to advance mine planning in the area where the initial
        Northern Lights mine pit is planned to be located.
    

    About Synenco Energy
    Synenco Energy is a Calgary-based oil sands company which, with a
60-percent interest, is the managing partner of the Northern Lights
Partnership and operator of the Northern Lights mineable oil sands project.
(SinoCanada Petroleum Corporation, an indirect wholly owned subsidiary of
China-based Sinopec, owns the remaining 40 percent of the partnership and
project.) Synenco also holds a 100-percent interest in the McClelland oil
sands lease adjacent to the Northern Lights project lands. Visit Synenco's
website at www.synenco.com.

    About Northern Lights
    The Northern Lights project consists of a planned oil sands mining and
bitumen extraction project about 100 kilometres northeast of Fort McMurray,
Alberta and a proposed heavy oil upgrader project in Sturgeon County near
Edmonton. The project is designed to produce 114,500 barrels per day of
bitumen for an estimated 28 years. Regulatory applications for the project
were first filed with the Alberta Energy and Utilities Board (now the Energy
Resources Conservation Board) and Alberta Environment in 2006.
    The Northern Lights Partnership also holds coal lease applications in the
Athabasca region of northeastern Alberta.

    Cautionary note regarding forward-looking statements

    This news release contains forward-looking statements that are expressly
qualified, in their entirety, by this cautionary statement. Forward-looking
statements are often, but not always, identified by words such as "believe",
"expect", "estimate", "intend", "plan", "seek", "anticipate", "projected",
"scheduled", "continue", "potential", "will", "may", "might", "should",
"would", "could" and similar expressions. Undue reliance should not be placed
on forward-looking statements, which are inherently uncertain, are based on
estimates and assumptions, and are subject to known and unknown risks and
uncertainties. There can be no assurance that the plans, intentions or
expectations upon which forward-looking statements are based will in fact be
realized. Actual results may differ from those expressed or implied in the
forward-looking statements.
    As the Northern Lights project is only in the early stages of engineering
and design and has not yet received regulatory approvals or sought or obtained
project financing, all statements about the proposed project and anticipated
production are forward-looking statements. Specific forward-looking statements
contained in this news release include, among others, statements regarding:
scope and anticipated severance costs associated with the planned workforce
reduction; the expectation that Synenco will mainly report net losses until
project development activities are complete and operations commence; resource
estimates in respect of the NLP lands; the likelihood of the upgrader project
proceeding as originally contemplated; usage of the Fort MacKay/Firebag
Aerodrome facility; the estimated capital cost to construct the upgrader; and
the intended design, construction and future capabilities of the Northern
Lights project, including anticipated bitumen production and estimated project
life. All other statements suggesting future plans and outcomes, including
without limitation any statements regarding possible transactions, are
forward-looking statements.
    With respect to forward-looking statements contained in this news
release, Synenco has made assumptions regarding, among other things: future
natural gas and crude oil prices; the viability of the current project design
(which is subject to change), including the successful application of the
technologies proposed to be used in the Northern Lights project; its ability
to obtain all required regulatory approvals on a timely basis and subject to
satisfactory terms and conditions; its ability to obtain qualified staff,
equipment and supplies in a timely and cost-efficient manner; the prevailing
regulatory framework within which Synenco it will operate and conduct its
business, including with respect to royalties, taxes and environmental
matters; the impact of increasing competition and escalating costs; and its
capital requirements in the near, medium and long term.
    Factors that cause actual results to differ materially from those
expressed or implied in the forward-looking statements contained herein
include, without limitation: further significant increases in capital and/or
operating costs; the impact of market competition for equipment, labour and
materials necessary to advance the Northern Lights project, and any unexpected
increases in the cost of, or delays in obtaining, such items; changes to
project design or execution strategy; unforeseen engineering, environmental or
geological problems; the ability to obtain all required regulatory approvals
on a timely basis and subject to satisfactory terms and conditions; changes in
laws and governmental regulations; materially lower than expected bitumen
resources; and the effectiveness of the technology contemplated for use in the
Northern Lights project. Readers should also review the risk factors and
uncertainties described in Synenco's annual information form dated March 12,
2008 and annual MD&A for the year ended December 31, 2007, copies of which are
available electronically at www.sedar.com and at www.synenco.com.
    The forward-looking statements contained herein are made as of the date
of this news release and are not guarantees of future performance or outcomes.
Synenco undertakes no obligation to update or revise any forward-looking
statements, except as may be required by law.





For further information:

For further information: Investment community: Mike Supple, Chairman,
President and CEO, Telephone: (403) 261-1990; Media: Scott Ranson, General
Manager, Public Affairs, Telephone: (403) 451-5212, Cellular: (403) 619-5038,
scott.ranson@synenco.com

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SYNENCO ENERGY INC.

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