TriOil confirms 2011 exit production guidance, reduces 2011 capital spending and net debt guidance and announces third quarter 2011 operational and financial results

CALGARY, Nov. 23, 2011 /CNW/ - TriOil Resources Ltd. ("TriOil" or the "Company") (TSXV:TOL) is pleased to announce that it has filed its interim financial statements and related Management's Discussion and Analysis ("MD&A") for the three and nine months ended September 30, 2011.  Selected financial and operational information is outlined below and should be read in conjunction with TriOil's interim financial statements and related MD&A, which are available for review at www.trioilresources.com and www.sedar.com.

Q3 2011 Financial Highlights:

  • Reported cash flow from operations of $2.6 million in the third quarter of 2011 compared to cash flow from operations of $2.2 million in the second quarter of 2011.
  • Production averaged 1,242 boe/d an increase from 1,212 boe/d in the second quarter of 2011.  Third quarter production was reduced by approximately 60 boe/d due to the disposition of the Coronation assets that closed at the end of the second quarter.
  • Reduced operating costs to $15.83/boe in Q3 compared $19.09/boe in the second quarter of 2011 and $16.97/boe in the third quarter of 2010.
  • Drilled 2 (1.5 net) wells at Lochend with a 100 percent success rate.
  • Maintained a strong balance sheet, exiting the third quarter of 2011 with net debt of $3.2 million.  This represents 10 percent of available bank lines at September 30, 2011 and 6 percent of current bank lines.

Subsequent Events

  • Increased total credit facilities by 51 percent to $50 million from $33 million.
  • On November 10, 2011, TriOil announced that it entered into an agreement with a syndicate of underwriters, which have agreed to purchase, on a bought deal basis 10,850,000 Class A common shares at a price of $2.10 per common shares for aggregate gross proceeds of $22.8 million.  In addition, the Underwriters have been granted an option (the "Over-Allotment Option") to purchase up to an additional 1,071,450 common shares to cover over-allotment, if any, at a price of $2.10 per Class A common share for gross proceeds of $2.3 million. If the Over-Allotment Option is fully exercised, gross proceeds from the offering will be $25.0 million. The Over-Allotment Option is exercisable in whole or in part for a period of 30 days following closing of the offering.

Lochend Cardium Operational Highlights

Central Lochend

  • On November 6, 2011, TriOil announced the completion of a Cardium horizontal well that was drilled in the third quarter.  This well was completed with a 20 stage slick water fracture stimulation and flowed hydrocarbons over an extended 6 day test period at an average rate of 1,180 Bopd and 0.85 Mmcf of natural gas per day, for a total average rate of 1,320 BOE/d, with a water cut of five percent (5%) and a final flowing wellhead tubing pressure of approximately 1,300 kPa. TriOil owns a twenty percent (20%) interest in this well and expects it to be on production in late November.
  • TriOil has identified 13 (6.9 net) horizontal development locations within Central Lochend trend. The Company is actively drilling on the Central Lochend trend, with 2 (1.35 net) horizontal wells drilled and waiting on completion, 1 (0.60 net) expected to commence drilling in late November and additional wells planned in 2012.

Western Lochend

  • On October 25, 2011 TriOil announced the completion of a Cardium horizontal well that was drilled in the third quarter. The well flowed hydrocarbons over a 101 hour period at an average rate of 593 Bopd and 1.1 Mmcf of natural gas per day, for a total average of 784 BOE/d, with a water cut of five percent (5%) and a final flowing wellhead tubing pressure of 2,750 kPa. TriOil owns a 50 percent working interest in this well. This well was the first well drilled on TriOil's land holdings on the Western Lochend Cardium trend and extends the play approximately 4 miles west of the majority of the drilling activity. The well produced high quality 45 degree API light oil during its test period. This well has been on production since November 7, 2011 and is still flowing at approximately 250-300 bbls/d of oil and 50 BOE/d of flared gas.
  • Based on this well result, offsetting core and log data, coupled with newly acquired geophysical data, the Corporation believes it has de-risked approximately 13 sections of land where TriOil owns working interests ranging from 50 to 100 percent. The Company's inventory of Cardium locations now includes to 49 (30 net) on its Western Lochend block.
  • Development drilling operations in Western Lochend are expected to commence in the first quarter of 2012.

Western Alberta Light Oil Resource Play

  • TriOil drilled its initial well in a new light oil reservoir and project area for the Company in western Alberta in the third quarter.  On October 25, 2011, TriOil announced that it had successfully completed this well with encouraging initial results. The well was completed with an 18 stage, water-based foam fluid system and flowed hydrocarbons over a 68 hour period at an average rate of 1,630 Bopd and 1.4 Mmcf of natural gas per day, for a total of 1,870 BOE/d, with a water cut of 1% and a final flowing wellhead tubing pressure of 2,000 kPa. TriOil owns a thirty percent (30%) working interest in this well and owns, or has the right to earn, interests ranging from thirty percent (30%) to one hundred percent (100%) in eight prospective sections of land in close proximity to the discovery well in the play. The Company plans to commence drilling its second horizontal well in the area in December of 2011 and is in the early planning stages for a 2012 development drilling program.

TriOil Confirms 2011 Exit Production Guidance, Reduces 2011 Capital Spending and Year end Debt Guidance

  • TriOil is on track to meet its exit production guidance of 1,900-2,100 Boe/d with revised capital spending of approximately $40-45 million (previous guidance - $45-50 million).  Capital spending was reduced in the Sweeney and Pouce Coupe areas in order to focus on the high impact Lochend and new western Alberta light oil resource plays.
  • Prior to giving effect to the $22.8 million financing scheduled to close on November 30, 2011, the Company now estimates its year end net debt at approximately $17-19 million versus our previous guidance of $22-24 million.  Upon closing of the financing, assuming exercise of the Over-Allotment Option, TriOil estimates its year-end working capital to be approximately $5-7 million.
  • With active winter drilling programs underway on 2 high impact light oil resource plays, TriOil is very well positioned to deliver strong operational and financial growth in 2012.

TriOil is a publicly traded junior oil resource player in Western Canada. Substantial land positions have been acquired on early stage light oil resource opportunities to capitalize on improvements in horizontal drilling and multi-stage fracture stimulation technologies, specifically targeting opportunities in the emerging Cardium oil trends in Alberta. TriOil has successfully executed its business plan and has positioned the Company for solid growth in production, reserves and shareholder value.

TriOil trades on the TSX Venture Exchange under the symbol "TOL". As of November 23, 2011, there were approximately 31.3 million shares issued and outstanding (35.4 million fully diluted).

Financial and Operating Results (1)            
      Three months ended September 30,     Nine months ended September 30,
  2011 2010 % Change 2011 2010 % Change
($, except share numbers)            
Financial            
Total revenue 5,879,818 5,677,146 4 18,246,394 13,104,881 39
Funds from operations (2) 2,579,217 1,098,776 135 6,324,743 1,948,728 225
  Per share - diluted 0.08 0.04 84 0.20 0.11 86
Net income (loss) 120,835 (2,107,195) (106) (2,209,879) (1,902,150) 16
  Per share - basic and diluted 0.00 (0.09) (104) (0.07) (0.11) (33)
Net debt (3) 3,232,198 12,576,418 (74) 3,232,198 12,576,418 (74)
Total assets   142,406,381   151,943,631 (6)   142,406,381   151,943,631 (6)
Capital expenditures(4) 7,972,411 19,653,313 - 23,269,783 43,393,950 (46)
Weighted average shares outstanding (5)            
Basic 31,317,726 24,484,574 28 31,317,726 17,968,495 74
Diluted 31,317,726 24,484,574 28 31,317,726 18,151,164 73
Operating            
Average daily production            
Crude oil and NGLs (bbls/d) 599 630 (5) 600 541 11
Natural gas (mcf/d) 3,860 5,133 (25) 3,879 4,307 (10)
Total (boe/d) 1,242 1,486 (16) 1,247 1,259 (1)
Average sales prices            
Crude oil and NGLs ($/bbl) 81.38 66.70 22 85.00 66.75 27
Natural gas ($/mcf) 3.94 3.93 0 4.08 4.13 (1)
Total ($/boe) 51.46 41.54 24 53.62 42.82 25
Wells drilled - gross (net)             
Exploration 1(1.0) 3(1.4) - 2(1.3) 6(2.4) -
Development 1(0.5) 2(0.9) - 6(3.1) 6(2.0) -
Total 2(1.5) 5(2.3) - 8(4.4) 12(4.4) -
Drilling success rate (%) 100 80 - 88 82 -
Operating netback ($/boe)            
Oil and natural gas sales 51.46 41.54 24 53.62 42.82 25
Realized gain on financial instruments 1.62 -  - 0.37 -  - 
Royalties (6.72) (6.66) 1 (8.29) (5.25) 58
Operating costs (15.83) (16.97) (7) (17.74) (18.12) (2)
Transportation (1.58) (2.33) (32) (1.68) (1.59) 6
Operating netback 28.95 15.58 86 26.28 17.86 47

 

Notes:
(1) 2010 results have been restated to conform with International Financial Reporting Standards.
(2) Funds from (used in) operations is a non-GAAP measure and is calculated as cash flow from operating activities before the change
in non-cash working capital, abandonment expenditures and transactions costs.
(3) Working capital excludes unrealized gains and losses from financial derivative contracts and flow through share liability.
(4) Capital expenditures include property acquisitions and are presented net of proceeds of disposals, but exclude corporate acquisitions.
(5) On April 7, 2010, TriOil Resources Ltd. consolidated its outstanding class A common shares on a 20 to 1 basis as approved by
shareholders. Comparative figures have been presented as if this share consolidation occurred on January 1, 2010.

Forward Looking Statements

This news release contains forward-looking information and forward-looking statements within the meaning of applicable securities laws. The use of any of the words "expect", "anticipate", "continue", "estimate", "believe", "plans", "intends", "confident", "may", "objective", "ongoing", "will", "should", "project", and similar expressions are intended to identify forward-looking information. More particularly, this document contains forward looking statements which include, but are not limited to, expected future drilling and completion plans, expected economics of future projects, expected future operating costs, expected future commodity prices, expected production and reserves growth, expected year end debt/working capital levels and the future operations of TriOil.

The forward-looking statements contained in this document are based on certain key expectations and assumptions made by TriOil, including with respect to the anticipated exploration and development opportunities and the outlook for the fiscal year ending December 31, 2011, expectations and assumptions concerning the success of future exploration and development activities, production guidance, the performance of new wells, prevailing commodity prices and the availability of additional capital if and when required by the Corporation.

Any references in this news release to initial and/or final raw test or production rates and/or "flush" production rates or 30, 60 and 90 day production rates are useful in confirming the presence of hydrocarbons, however, such rates are not determinative of the rates at which such wells will continue production and decline thereafter. Additionally, such rates may also include recovered "load oil" fluids used in well completion stimulation. While encouraging, readers are cautioned not to place reliance on such rates in calculating the aggregate production for the Company.

Although TriOil believes that the expectations and assumptions on which the forward-looking statements are based are reasonable, undue reliance should not be placed on the forward-looking statements because TriOil can give no assurance that they will prove to be correct. Since forward-looking statements address future events and conditions, by their very nature they involve inherent risks and uncertainties. Actual results could differ materially from those currently anticipated due to a number of factors and risks. These include, but are not limited to, the failure to satisfy the conditions to closing the transaction, risks associated with the oil and gas industry in general (e.g., operational risks in development, exploration and production; delays or changes in plans with respect to exploration or development projects or capital expenditures; the uncertainty of reserve estimates; the uncertainty of estimates and projections relating to production, costs and expenses, and health, safety and environmental risks), commodity price and exchange rate fluctuations and uncertainties resulting from potential delays or changes in plans with respect to exploration or development projects or capital expenditures. Certain of these risks are set out in more detail in TriOil's Annual Information Form which has been filed on SEDAR and can be accessed at www.sedar.com and TriOil's other public disclosure documents which have been filed on SEDAR and can be accessed at www.sedar.com.

The forward-looking statements contained in this press release are made as of the date hereof and TriOil undertakes no obligation to update publicly or revise any forward-looking statements or information, whether as a result of new information, future events or otherwise, unless so required by applicable securities laws.

Meaning of BOE

The term "boe" may be misleading, particularly if used in isolation. A boe conversion 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.

NEITHER THE TSX VENTURE EXCHANGE NOR ITS REGULATION SERVICES PROVIDER (AS THAT TERM IS DEFINED IN THE POLICIES OF THE TSX VENTURE EXCHANGE) ACCEPTS RESPONSIBILITY FOR THE ADEQUACY OR ACCURACY OF THIS RELEASE.


 

 

SOURCE TriOil Resources Ltd.

For further information:

Russell J. Tripp, President & CEO, TriOil Resources Ltd.; Cheryne Johnson, VP Finance & CFO, TriOil Resources Ltd.; Andrew Wiacek, VP Exploration, TriOil Resources Ltd.; Corporate Phone: (403) 265-4115

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