/NOT FOR DISTRIBUTION TO UNITED STATES NEWSWIRE SERVICES OR FOR
DISSEMINATION IN THE UNITED STATES/
CALGARY, Nov. 8 /CNW/ - Trafalgar Energy Ltd. (TSX:TFL) ("Trafalgar" or
the "Company") is pleased to announce the interim unaudited financial results
for the three and nine months ended September 30, 2007.
Three Months Nine Months
September 30, September 30,
Petroleum and natural gas revenues ($) 2,825,226 9,571,280
Cash flow from operations ($) 1,078,559 4,312,008
Basic and diluted per share ($) 0.09 0.36
Net income (loss) ($) (997,887) 27,072
Basic and diluted per share ($) (0.08) -
Working capital ($) 1,768,023 1,768,023
Capital expenditures ($) 1,963,922 15,507,920
Weighted average number of shares
Basic and diluted 11,835,883 11,835,883
Shares outstanding as at September 30, 2007
Basic 11,835,883 11,835,883
Diluted 12,957,133 12,957,133
Light Oil (bbls/d) 39 44
Heavy Oil (bbls/d) 51 49
Total Oil (bbls/d) 90 93
Natural Gas (mcf/d) 5,550 4,940
BOE (boe/d) 1,015 916
Average Realized Prices(*)
Light Oil ($/bbl) 74.51 70.70
Heavy Oil ($/bbl) 50.19 44.08
Natural Gas ($/mcf) 4.88 6.35
$/boe (6:1) 32.05 39.96
Netback per boe ($)
Petroleum and natural gas revenue 32.05 39.96
Royalties 6.00 8.04
Operating expenses 8.84 8.98
Transportation expenses 1.77 1.69
Operating Netback 15.44 21.25
(*) Average realized prices are before transportation expenses.
LETTER TO SHAREHOLDERS
We are pleased to report on Trafalgar's progress through the third quarter
of 2007. Highlights include:
- Achieving record quarterly production of 1,015 boe/d.
- Delivering operating costs below guidance at $8.84 per boe.
- Maintaining our strong balance sheet with $1.8 million of positive
working capital and no debt.
- Increasing bank credit facility from $12 million to $15 million.
- Adding to our exploitation and exploration portfolio increasing
undeveloped land to 95,000 net acres.
Current production is averaging 1,000 boe/d and Trafalgar remains on
track to achieve its 2007 average and exit production forecasts of 900-950 and
950-1,050 boe/d, respectively.
Trafalgar's current oil and natural gas producing assets are located in
three primary areas: Grouard and MacKay, Alberta and Cypress, British
Grouard remains our largest asset producing 627 boe/d for the three
months ended September 30, 2007.
Primary activity in the third quarter concentrated on construction of
facilities for the Bluesky waterflood project. Water injection began in the
first week of November and with success we expect to see incremental oil
production in the first quarter of 2008. Estimated original oil in place in
the Bluesky pool is approximately 17 million barrels with cumulative recovery
to date of only 520,000 barrels or approximately three percent. Similar pools
in the area have shown significant success with the application of waterflood
Upcoming activity includes one 100% Gilwood exploratory location
currently scheduled for early 2008.
The Mackay property continues to exceed initial expectations. Production
in Q3 was 302 boe/d from our four producing wells drilled last winter. Through
a series of crown land sales during the third quarter, Trafalgar increased its
land position to 32 sections at an average 85% working interest. Additionally
we have reached farm-in terms on ten sections of prospective land and have
identified in excess of 20 locations on Trafalgar controlled lands.
Preparations for the winter drilling program are underway. We anticipate
drilling 8-10 locations through Q1 2008.
Cypress, British Columbia
Production remains on track at just under 90 boe/d. We attempted two
recompletions at Cypress during the quarter which proved to be unsuccessful.
No further capital expenditures are planned at this time.
Trafalgar has been assembling land positions on five new exploratory
prospects. These prospects have five bcf or greater reserve potential, are
close to existing, underutilized infrastructure, and have attractive risked
economics. Trafalgar's intent will be to evaluate two to three of these
prospects over the next 12 months.
Trafalgar has been actively evaluating prospective transactions over the
past year. We anticipate more assets, both corporate and property, to become
available over the next 6 to 9 months due to the downturn in gas prices and
the poor financial health of many juniors. Our evaluation strategy remains
consistent. We will look to acquire focused, operated, predictable, and
Capital expenditures for 2007 remain on guidance at $18.8 million.
Our disciplined approach to capital expenditures and project development
has resulted in Trafalgar maintaining an enviable balance sheet with no debt
and positive working capital at the end of the 3rd quarter while at the same
time growing our production base by approximately 55% since September 2006. We
have built a deep development and exploration inventory with over $35 million
dollars of defined projects on lands we now control. Our inventory is economic
at today's gas price forecasts, under both the old and new royalty frameworks,
and is expected to meet our 2:1 risked recycle ratio target.
We will maintain our disciplined approach to capital expenditures in 2008
spending $10-11 million dollars in the first quarter drilling 10-12 wells
(8-10 at Mackay and 2 exploration targets). Based upon Q1 activity our 2008
production is forecast to increase to an average of 1,225-1,325 boe/d
representing a 25% to 40% increase over 2007 average levels. Our balance sheet
will remain conservatively managed such that we can and will be opportunistic
in following up exploration successes and become a more active acquirer as
asset prices continue to soften.
Our finding and development targets for gas projects are $2.00/mcf
($12/boe), for light oil projects $16-$18 per barrel; levels that industry in
general has failed to achieve for several years but those that the Trafalgar
team has consistently met or beaten. We believe these are the targets required
to generate reasonable investment returns. Our Mackay project has delivered
roughly $10/boe finding and development costs to date. This winter, helped
with the softening in industry service costs, our deep inventory of moderate
risk development locations, our execution expertise, and our surface and
subsurface understanding of the Mackay area we anticipate delivering top
quartile F&D at Mackay again. Trafalgar's exploratory projects on a risked
basis have similar finding and development cost expectations.
We expect gas prices will remain weak over the next six to nine months
and then strengthen later in 2008 associated with a decline in Canadian gas
production in general and Alberta gas production in particular.
We have completed an initial evaluation the new royalty framework.
Preliminary analysis applying the price forecast used in our midyear GLJ
report indicates the net asset value (10% discount) of our existing proven
plus probable reserve base would increase from $40.0 to $40.8 million dollars
(effective July 1, 2007). Based upon our internal analysis the new royalty
framework will marginally increase time to achieve payout but overall have a
minimal economic impact on Trafalgar's current prospect inventory at current
Our analysis indicates the new royalty framework most negatively impacts
companies pursuing mid depth high risk/high reward projects. It will result in
less activity in Alberta and will decrease the overall opportunity paths for
growth in the junior oil and gas sector.
The oil and gas industry is notoriously cyclical. In our experience over
the past 20 years cyclical lows have been the best times to build long term
value. Trafalgar is well positioned to grow and to build value for our
On behalf of the Management, Staff and Board of Directors,
November 8, 2007
President and CEO
Trafalgar has filed with Canadian securities regulatory authorities its
financial statements for the three and nine months ended September 30, 2007
and the accompanying Managements' Discussion and Analysis. These filings will
be available under Trafalgar's SEDAR profile at www.sedar.com. A full pdf
version of our third quarter report will be available on our website at
In conformity with National Instrument 51-101, Standards for Disclosure
of Oil and Gas Activities ("NI 51-101"), natural gas volumes have been
converted to barrels of oil equivalent ("boe") using a conversion rate of six
thousand cubic feet of natural gas to one barrel of oil. This ratio is based
on an energy equivalency conversion method primarily applicable at the burner
tip and does not represent a value equivalency at the wellhead. Readers are
cautioned that the term "boe" may be misleading, particularly if used in
DESCRIPTION OF COMPANY
Trafalgar is a Calgary, Alberta based oil and natural gas exploration,
production and development company, with operations in the Canadian provinces
of Alberta and British Columbia. Trafalgar was established in April 2006 and
began trading on the Toronto Stock Exchange ("TSX") on September 26, 2006
under the symbol TFL.
This discussion and analysis contains forward-looking statements related
to future events or future performance. Certain statements regarding Trafalgar
include management's assessment of future plans and operations and may
constitute forward-looking statements under applicable securities laws and
necessarily involve known and unknown risks and uncertainties, most of which
are beyond Trafalgar's control. These risks may cause actual financial and
operating results, performance, levels of activity and achievements to differ
materially from those expressed in, or implied by, such forward-looking
Such factors include, but are not limited to: the impact of general
economic conditions in Canada and the United States; industry conditions
including changes in laws and regulations including adoption of new
environmental laws and regulations, and changes in how they are interpreted
and enforced; competition from other producers, the lack of availability of
drilling rigs and other field services, the lack of availability of qualified
personnel; fluctuations in commodity prices, the results of exploration and
development drilling related activities; imprecision in reserve estimates; the
production and growth potential of Trafalgar's various assets; fluctuations in
foreign exchange or interest rates; the ability to access sufficient capital
from internal and external sources; and obtaining required approvals of
Accordingly, Trafalgar gives no assurance nor makes any representations
or warranty that the expectations conveyed by the forward-looking statements
will prove to be correct and actual results may differ materially from those
anticipated in the forward-looking statements. Readers should not place undue
reliance on any such forward-looking statements, which speak only as of the
date they were made. Trafalgar disclaims any intention or obligation to update
or revise any forward-looking statements, whether as a result of new
information, future events or otherwise except as required by law.
Additional information regarding Trafalgar is available under the
Company's profile on SEDAR at www.sedar.com or on the Company's website at
For further information:
For further information: TRAFALGAR ENERGY LTD.: Robert Wollmann,
President and CEO, Telephone (403) 216-2706, Email
firstname.lastname@example.org; Daniel Belot, Vice President Finance and CFO,
Telephone (403) 216-2707, Email email@example.com, or visit
www.trafalgarenergy.ca, Toll-free: 1-877-216-2705; Investor Relations,