West Energy announces second quarter 2009 results



    
    /NOT FOR DISTRIBUTION TO UNITED STATES NEWSWIRE SERVICES OR DISSEMINATION
    IN THE UNITED STATES./
    

    CALGARY, Aug. 12 /CNW/ - West Energy Ltd.("West") (TSX: WTL) announces
its financial and operational results for the three and six months ended June
30, 2009. West has filed its unaudited Consolidated Financial Statements for
the period ended June 30, 2009 and related Management's Discussion and
Analysis ("MD&A"). Copies of West's materials may be obtained on www.sedar.com
and on its website at www.westenergy.ca.
    Certain selected financial and operational information for the three and
six months ended June 30, 2009 and the 2008 comparatives are set out below and
should be read in conjunction with West's Consolidated Financial Statements
and MD&A.

    
    OPERATING AND FINANCIAL HIGHLIGHTS

                                    Three months ended     Six months ended
                                          June 30,              June 30,
                                       2009       2008       2009       2008
                                        (unaudited)           (unaudited)
    Operating Units as noted

    Production
      Crude oil (Bbls/d)              2,432      3,594      2,979      3,527
      NGLs (Bbls/d)                     704      1,225        802      1,225
      Natural gas (Mcf/d)             5,732      7,893      5,215      7,273
      Barrels of oil equivalent
       (Boe/d at 6:1)                 4,092      6,135      4,650      5,964
    Prices
      Crude oil (per Bbl)         $   65.21  $  124.23  $   54.74  $  110.10
      NGLs (per Bbl)              $   52.32  $   97.27  $   46.89  $   89.74
      Natural gas (per Mcf)       $    3.58  $   11.67  $    4.58  $   10.17
    Revenue (per Boe)             $   54.08  $  108.80  $   48.96  $   96.80
    Royalties (per Boe)           $    6.51  $   26.37  $   12.15  $   25.29
    Operating costs (per Boe)     $   11.06  $    9.07  $   10.25  $    9.54
    Operating netback
     (per Boe)(1)                 $   36.51  $   73.36  $   26.56  $   61.97
    General and administrative
     (per Boe)                    $    4.11  $    2.02  $    3.80  $    2.01
    Interest expense (per Boe)    $       -  $    0.08  $       -  $    0.16
    Corporate netback
     (per Boe)(1)                 $   32.40  $   71.26  $   22.75  $   59.80
    Wells drilled - gross/net
      Oil                            1/1.00     2/0.70     4/2.36     3/0.74
      Gas                            1/0.40        -/-     2/0.80        -/-
      Service (water source
       and injection)                   -/-        -/-        -/-        -/-
      Abandoned                         -/-        -/-        -/-     1/0.04
      Total                           2/1.4     2/0.70     6/3.16     4/0.78
      Drilling success rate
       (excluding service wells)  100%/100%  100%/100%  100%/100%    75%/95%

    Financial (000s, except
     per share amounts)

    Oil and gas revenues          $  20,135  $  60,740  $  41,204  $ 105,079
    Funds from operations(1)      $  12,062  $  39,778  $  19,148  $  64,916
      Per share - basic           $    0.15  $    0.55  $    0.23  $    0.82
                - diluted         $    0.15  $    0.53  $    0.23  $    0.79
    Cash flow from
     operating activities         $   3,475  $  42,291  $  11,870  $  66,540
      Per share - basic           $    0.04  $    0.53  $    0.15  $    0.84
                - diluted         $    0.04  $    0.51  $    0.15  $    0.81
    Net income (loss)             $     604  $   8,709  $  (1,898) $   7,027
      Per share - basic           $    0.01  $    0.11  $   (0.02) $    0.09
                - diluted         $    0.01  $    0.11  $   (0.02) $    0.09
    Working capital               $  75,346  $  41,197  $  75,346  $  41,197
    Capital expenditures          $   6,517  $   7,425  $  15,496  $  17,395
    Total assets                  $ 269,025  $ 273,091  $ 269,025  $ 273,091
    Common shares
     - Outstanding                   82,245     79,437     82,245     79,437
       Weighted average - basic      81,808     79,437     81,723     79,432
                        - diluted    81,993     82,393     81,823     82,151

    (1) Non-GAAP Measures
    

    The above table contains the terms "Operating Netback" and "Corporate
Netback". These terms are non-GAAP measures which the Company believes provide
useful and relevant information, but should not be considered an alternative
to, or more meaningful than "cash flow from operating activities" as
determined in accordance with GAAP as an indicator of the Company's financial
performance.
    The second quarter of 2009 was challenging for most junior energy
producers as the reality of lower gas prices have dramatically lowered cash
flow and capital spending for the industry. Predicting when gas prices will
rebound is the focus of most corporate business plans. West Energy Ltd. (West)
has differentiated itself from its peer group by maintaining a very strong
balance sheet, and has significant cash flow from its light oil production
base. The Company is working on a two prong strategy to develop its oil
projects that can provide a reasonable rate of return at existing commodity
prices and to utilize its cash on-hand and healthy balance sheet for merger
and acquisition activities to create an intermediate energy company.
    Production during the quarter averaged 4,092 Boe/d which was at the lower
end of the range of our guidance for the quarter. The Company chose to reduce
production from the Nisku OOO pool in Crossfire 13-02-50-6W5 to optimize the
oil recovery from the pool. A pipeline inspection and maintenance program shut
down production from the Violet Grove field longer than expected. Two
non-operated gas wells in the Monias area were brought on-stream early in the
quarter. West holds a 40 percent working interest in these gas wells which are
producing a total of 2.2 mmcf/d to the Company. The Nisku C2C oil pool in
9-1-50-6W5 which produced over 1000 Boe/d to the company in Q4 2008 remained
shut-in throughout the quarter pending EOR approval. On August 12, 2009 the
ERCB approved the EOR project for the pool and West will ramp up production
over the next few days. Current production is approximately 3600 BOEPD and the
production target for the quarter is 4,000 Boe/d. The Company will continually
adjust oil production from its Nisku wells to optimize the sweep efficiency
and maximize oil recovery from the pools.
    Oil and natural gas liquids (mostly condensate) represent 77% of West's
total production. The Company benefited from a dramatic rise in oil prices
during the quarter. The average price received was $65.21 per bbl which was
based on an average WTI price of $59.51 US per bbl. Funds from operations were
up 70% over the first quarter because of the rise in the oil price. The
Company sells its production in the current market and has no control over the
price that it receives. Some companies mitigate this risk by hedging a portion
of their production to provide cash flow certainty. Since West has no debt or
capital commitments to mitigate, it does not have hedges in place.
    West spent $6.5 million in the second quarter which is typically a slow
period for the industry due to spring breakup. During the quarter, the Company
was active in the following areas;

    
    -   Crossfire 9-1-50-6W6 EOR project:
        -  Dually completed the well to be both a water injector and an oil
           producer and setup the wellsite facilities to commence an EOR
           project.
    -   Lodgepole Nisku TT Pool
        -  Converted 6-6-48-9W5 (W.I. 100%) to an injector and whipped
           2-6-48-9W6 to 1-6. As expected, the 1-6 whip encountered the Nisku
           reef 3 metres higher than 2-6 and the strip log indicated high
           porosity and the presence of hydrocarbons. Upon production test,
           the openhole Nisku completion at 1-6 tested 100% water with
           similar characteristics to the Pekisko water that the Company has
           been using as source water for this Nisku pool. The company is
           evaluating these test results to formulate a further testing and
           remedial program for this pool.
    -   Actively licensing 11 Nisku Locations
        -  New higher H2S content information from other operator's Nisku
           wells has required that West re-consult area residents with this
           new information has resulted in additional delays for licensing
           the drilling program. The Company anticipates that it will receive
           two new Nisku well licenses by year end.
    -   Crossfire Manville Light Oil Discovery
        -  Commenced a three well development drilling program
        -  Applied for a special 100 Boe/d maximum rate limitation (MRL) to
           double its production currently at 56 Boe/d for the discovery well
           at 11-3-50-6W5 (W.I. 100%)
    -   Monias Gas project
        -  Drilled, completed and tested Monias 12-15-082-21W6 (W.I. 40% BPO,
           26% APO) at a rate of 400 Mcf/d
        -  Commenced tie-in of Montney horizontal well 7-5-82-21W6 (W.I.
           100%) for the purposes of conducting a long term production test.
    - Two Rivers Light Oil Discovery
        -  Commenced long term production test of 15-31-82-14W6 (W.I. 100%).
    

    Recently the new Nisku well located at 14-33-50-5 W5M (W.I. 60%) was
completed and tested at a final rate of 2,000 BOPD of 34 degree API oil plus
1.2 MMcf/d of associated gas with a 6% H2S content. The well was drilled in
March of 2009 and has a 12 metre oil column with an average porosity of 15
percent. West is working to tie-in this well into the Crossfire Battery to be
on stream during the first half of 2010. This pipeline will also be used to
tie-in the West Nisku discovery located at 11-12-51-5W5 (W.I. 40%) which had
similar test results to 14-33.
    The Drilling Royalty Credit ("DRC"), announced by the Alberta Government
provides an attractive opportunity for the Company to offset the rise in
royalties payable under the new royalty framework. The DRC grants companies a
$200 per metre credit on new wells drilled on crown lands to reduce corporate
crown royalties payable during the period from April 1, 2009 to March 31,
2011. During the second quarter of 2009, West earned $2.5 million of credits
based on its royalties payable and is eligible to receive credits to a maximum
of 50% of the crown royalties payable by West over the life of the program.
    The New Well Royalty Reduction ("NWRR") was also announced recently and
provides for a flat 5% royalty on new wells brought on production after March
31, 2009. This program applies to all new wells brought on production prior to
April 1, 2011. The 5% royalty remains in effect for twelve producing months or
for the first 50,000 barrels of oil produced, whichever first occurs. New
Nisku and Ellerslie wells drilled in the Crossfire area will benefit
significantly from this program.
    West is committed to keep capital expenditures on its active projects
inline with cash flow. West has $72.9 million of cash on hand and a working
capital of $75.3 million at June 30, 2009. During the second quarter West also
secured credit facilities of $89.4 million with a Canadian bank consisting of
a $47 million revolving operating demand facility, a $20 million non-revolving
acquisition/development demand facility and a $22.4 million facility
associated with its restricted cash.
    The Company continues to review corporate merger and property
acquisitions to grow the company and offset the short reserve life index of
its production base and to diversify its Nisku program. The expected
consolidation of the junior ranks has not happened as quickly as pundits
expected but it is still early relative to the new market conditions. West has
focused its review on capital projects that are economic under current
commodity prices and gas projects that have relatively low costs to develop.
    West has had an opportunity to strengthen its technical, operating and
support teams during the industry downturn. We have a dedicated team of
employees that are up to the challenges facing the industry.
    On behalf of the Board of Directors I would like to thank our
shareholders for the continued support and patience you have shown in West.

    Reader's Advisory:

    Certain information regarding West Energy Ltd. in this news release
including management's assessment of the future plans and operations and their
timing may constitute forward-looking statements under applicable securities
laws and necessarily involve risks including, without limitation, risks
associated with oil and gas exploration, development, exploitation,
production, marketing and transportation, changes to the proposed royalty
regime prior to implementation and thereafter, loss of markets, volatility of
commodity prices, currency fluctuations, imprecision of reserve estimates,
environmental risks, competition from other producers, inability to retain
drilling rigs and other services, incorrect assessment of the value of
acquisitions, failure to realize the anticipated benefits of acquisitions,
delays resulting from or inability to obtain required regulatory approvals and
ability to access sufficient capital from internal and external sources. As a
consequence, actual results may differ materially from those anticipated in
the forward-looking statements. Readers are cautioned that the foregoing list
of factors is not exhaustive. Additional information on these and other
factors that were applied in drawing a conclusion or making a forecast or
projection as reflected in the forward-looking information and that could
cause actual results to differ materially from those anticipated in the
forward-looking statements are included in reports on file with Canadian
securities regulatory authorities and may be accessed through the SEDAR
website (www.sedar.com) or at the Corporation's website (www.westenergy.ca).
Furthermore, the forward-looking statements contained in this news release are
made as of the date of this news release and the Corporation does not
undertake any obligation to update publicly or to revise any of the included
forward-looking statements, whether as a result of new information, future
events or otherwise, except as may be required by applicable securities laws.





For further information:

For further information: Ken McCagherty, President and Chief Executive
Officer, Email: mccagherty@westenergy.ca, Direct Phone: (403) 716-3458; Scott
Bridge, Vice President Finance and Chief Financial Officer, Email:
sbridge@westenergy.ca, Direct Phone: (403) 716-3457

Organization Profile

WEST ENERGY LTD.

More on this organization


Custom Packages

Browse our custom packages or build your own to meet your unique communications needs.

Start today.

CNW Membership

Fill out a CNW membership form or contact us at 1 (877) 269-7890

Learn about CNW services

Request more information about CNW products and services or call us at 1 (877) 269-7890