Action Energy Inc. Releases Q1-2009 Results


    TSX-V Symbol "AEC"

    CALGARY, May 29 /CNW/ - Action Energy Inc. ("Action" or the "Company")
announces its results for the first quarter ended March 31, 2009.


    Financial and Operating       Three Months   Three Months   Three Months
    Highlights:                       Ended          Ended          Ended
    (Unaudited)                    March 31/09    March 31/08  December 31/08
    Oil and Natural Gas Sales
     (000's)                            $3,731         $9,185         $5,854
    Funds Flow From (Used in)
     Operations (000's)                  ($827)        $3,815           ($99)
      Per Basic and Diluted
       Share                            ($0.01)         $0.07         ($0.00)
    Net Loss (000's)                   ($4,418)       ($3,107)       ($3,959)
      Per Basic and Diluted
       Share                            ($0.08)        ($0.05)        ($0.07)
    Average Production Rate
      Natural Gas (mcf/d)                3,513          4,183          3,660
      Heavy Oil (bbl/d)                    300            521            545
      Light Oil & Natural Gas
       Liquids (b/d)                       264            382            280
      Total Equivalents
       (boed @ 6:1)                   1,150          1,601          1,436
      Percent Natural Gas                  51%            44%            43%
    Natural Gas Price ($/mcf)            $5.46          $8.23          $7.06
    Heavy Oil Price ($/bbl)             $34.47         $65.88         $39.85
    Light & Medium Oil Price
     ($/bbl)                            $41.65         $87.82         $53.65
    Weighted Average Price
     ($/boe)                            $35.40         $63.75         $44.03
    Field Operating Netback
     ($/boe)                             $4.72         $36.72         $13.87
    Capital Expenditures (000's)          $374         $3,343         $2,204
    Drilling (Gross (Net) Wells)
      Oil                               1 (0.5)        1 (1.0)        1 (0.5)
      Gas                               0 (0.0)        0 (0.0)        1 (0.2)
      Standing & Service                0 (0.0)        1 (1.0)        0 (0.0)
      Dry & Abandoned                   0 (0.0)        1 (1.0)        1 (0.0)
                                        -------        -------        -------
      Total                             1 (0.5)        3 (3.0)        3 (0.7)
    Success Rate                          100%            67%            67%
    Undeveloped Land (Net Acres)
     (000's)                               121            167            145


    Action used funds flow for operations during Q1-2009 in the amount of
($0.8) million (($0.01) per basic and diluted share). The Q1-2009 funds flow
figure represents a $4.6 million decrease from the $3.8 million ($0.07 per
basic and diluted share) for the corresponding period in 2008, as a result of
decreased production rates and much lower netbacks.
    During the quarter ended March 31, 2009, the Company sold oil and natural
gas liquids at 564 bbl/d and natural gas at an average rate of 3.5 mmcf/d. On
an oil equivalency basis, the average product sales during the quarter was
1,150 boed, a decrease of 28% or 451 boed compared to Q1-2008 and a decrease
of 285 boed over the previous quarter. The reduction compared to Q4-2008 was a
result of a combination of: natural declines on all properties with no new
production brought on stream during the period, certain wells shut in at
Lloydminster/Lindbergh due to poor economics and production challenges related
to record cold weather in January and February, 2009.
    The weighted average price received by the Company for its production in
Q1-2009 was $35.40/boe (Q1-2008 - $63.75/boe, Q4-2008 $44.03/boe). The field
netback in Q1-2009 was $4.72 per boe compared to $36.72 in Q1-2008 and $13.87
in Q4-2008.
    Operating expenses for Q1-2009 were $2.6 million compared to $2.5 million
for Q1-2008 and $3.4 million for Q4-2008. These amounted to $25.09 per boe,
$17.09 per boe and $25.50 per boe respectively. Operating expenses are
expected to remain high on a per boe basis in the short term because of
anticipated pump change and workover costs on heavy oil properties at
Lloydminster and Lindbergh.
    Net general and administrative expenses in Q1-2009 were $1.4 million
compared to $1.0 million for Q1-2008 and $2.0 million for Q4-2008. Action
restructured many of its departments during Q1-2009 resulting in increased
costs for severances on a one-time basis. There were no provisions for bad
debts or other unusual items recorded in Q1-2009. General and administrative
expenses are expected to reduce on a quarterly basis for the balance of 2009.
    Depletion, depreciation and accretion ("DD&A") expense for Q1-2009 were
$4.6 million compared to $6.8 million for Q1-2008 and $5.7 million for
Q4-2008. These amounted to $44.03 per boe, $47.14 per boe and $43.39 per boe
respectively. DD&A dropped in Q1-2009 primarily as a result of lower
production compared to previous periods.
    The net loss for Q1-2009 was ($4.4) million (($0.08) per basic and
diluted share) compared to a net loss of ($3.1) million (($0.05) per basic and
diluted share) for the same three month period in 2008. The Q1-2009 net loss
was negatively impacted compared to Q1-2008 by substantially lower commodity
prices which lead to much lower field netbacks in Q1-2009.
    Gross capital expenditures for the three months ended March 31, 2009
totaled $0.4 million (Q1-2008 - $3.3 million). These expenditures were
recorded net of $0.3 million of accrued insurance proceeds related to the
abandonment of the first well at West Calais drilled in Q2-2008. In Q1-2009,
Action drilled 1 (0.5 net) successful new oil well at Bienfait, Saskatchewan.
This was drilled by Action's farm-in partner as the final commitment well
under the terms of the farmout agreement. Action was carried by the farm-in
partner for all costs of drilling and will be carried for the completion costs
after spring break up. Capital expenditures during the quarter were funded by
funds flow from operations, insurance proceeds, bank debt and working capital.
At March 31, 2009, the Company had a working capital deficiency of $31.9
million including bank debt of $32.9 million drawn against its Credit
Facility. Management has planned and budgeted for a conservative level of
capital expenditures for 2009 that will not require any significant sources of
new financing. The current commodity price environment is expected to improve
later in 2009 with respect to the Company's internal cash flow estimates and
capital expenditure forecast.
    On May 20, 2009, the Company received $1.8 million in outstanding
government receivables and made a principal reduction payment on its
non-revolving demand loan in the amount of $1.7 million. The Company's Credit
Facilities currently provide for borrowing capacity of $28.0 million under its
revolving demand loan and $4.3 million under its non-revolving demand loan.
The Company's banker has completed its April 30, 2009 interim review of the
Credit Facility and the Company is waiting for the approval of the bank's
credit department.
    Action has substantial tax pools and losses carried forward in the amount
totaling $117.3 million which will ensure that Action remains non-taxable for
the foreseeable future.


    Exploration Areas
    Southeast Saskatchewan - Light Oil Operating Area

    During Q2-2008 the Company farmed out a 50 percent working interest in
six sections of land in the Bienfait area of southeast Saskatchewan. In
Q1-2009, the farmee, at its sole cost, drilled the third and final commitment
well under the farmout agreement. This well will be completed and evaluated
after spring break up. At Bienfait, the Company has approximately twenty
sections of 50 percent working interest land that are prospective for Bakken
production. With full successful Bakken development, Action has the potential
for an additional 80 (40 net) potential wells that could be drilled on these
    Alberta - Light Oil and Natural Gas Operating Areas

    In Q4-2008, the Company and its partners re-drilled the West Calais well
from a step-out location. The new well was successfully completed and
production tested. The well was drilled into the Granite Wash formation and
production tested at 840 boed consisting of 3.25 mmcf of gas per day plus 297
barrels of condensate per day and 2.8 barrels of water per day during a six
day production test. It is anticipated that the well will be tied in during Q4
of 2009. Action has a 20 percent working interest in 16 contiguous sections of
land in this portion of its Peace River Arch core area. The Company has
complete 3D seismic coverage over this 16 section block and interpretation of
the seismic shows seven separate anomalies each with multiple potential
drilling locations. The Company is currently evaluating future drilling and
tie-in plans with its partners.

    Development Areas
    Lloydminster/Lindbergh - Heavy Oil Operating Area

    As a result of low heavy crude oil prices in December 2008 and because of
extreme cold weather for January and February 2009 the Company shut-in a
number of single well batteries at Lloydminster and Lindbergh because the cost
of royalties and operating expenses exceeded revenue from selling production.
With the recent improvement in crude prices and narrowing of heavy oil
differentials, management expects production to be restored on these wells
after spring breakup when trucking can recommence.
    At Lloydminster/Lindbergh, the Company has five sections of 100 percent
heavy oil rights and multiple drilling opportunities. In Q4-2008 and Q1-2009,
management has experimented with a new method for cleaning out sand that has
flowed into the horizontal well bores in the area. This method has been
successful at economically restoring a good portion of initial production
rates on the three wells that have been cleaned out so far. The Company has
determined that there are up to 23 of these horizontal well bores that can be
cleaned out when pump changes are required. Management plans to perform a
number of these operations as operating conditions permit. These clean out
operations cost between $25,000 and $50,000 each and Action has a 100 percent
working interest in this property.

    Southeast Saskatchewan - Light Oil Operating Area

    In 2008, at Lake Alma, the Company farmed out a 50 percent working
interest in its deeper Bakken mineral rights to an industry partner. During
Q3-2008, the Company drilled and completed the first Bakken exploratory well
on this property. At Lake Alma, Action has six sections of Bakken mineral
rights at a 50 percent working interest. With future drilling success and
higher oil prices, there are an additional 24 potential drilling locations in
the Bakken formation.
    In addition, Action owns a 100 percent working interest in the up-hole
rights for the six sections of land at Lake Alma. Action has existing
production from two Midale zone wells drilled in 2008 and there is seismically
defined potential for an additional five Midale development wells and two
additional exploration prospects on this acreage.


    Action's business plan is to explore for, develop and produce light oil,
heavy oil and natural gas reserves in western Canada. Action's strategy has
shifted to develop and enhance heavy oil production through low cost pump
changes and utilizing a new sand clean-out method. In addition, the Company
has identified other low cost operations that are expected to increase gas
production through adding compression at Teepee Creek in the Company's Peace
River Arch core area and to increase light oil production related to pump
re-configuration at Lake Alma in southeast Saskatchewan. Action is in an
enviable position to have attractive light oil exploration plays, low risk
heavy oil development plays and a high impact potential natural gas play all
with significant undeveloped land positions and potential follow-up drilling
    For the first half of 2009, the Company's activities will be primarily
focused on low cost enhancement and development opportunities. Drilling and
development plans for the second half of 2009 will be determined at a later
date when the Company has more certainty regarding commodity prices and
resulting funds flow available to finance such programs.
    On May 20, 2009, the Company announced that its Board of Directors has
appointed a special committee comprised of independent directors with a
mandate to undertake a process to evaluate the various strategic alternatives
available to Action with the goal of maximizing shareholder value. These
alternatives may include a sale, merger or other business combination
involving Action or the sale of some or all of the assets of the Company.
Action has retained an independent investment banking firm to act as its
exclusive financial advisor to assist in the review process.


    The Company's Annual General and Special Meeting of the Shareholders will
be held at First Canadian Centre, The Chambers Conference Room, Lower Level,
350 - 7th Avenue SW, Calgary, Alberta, T2P 3N9 at 9:00 am on June 25, 2009.


    This press release may contain forward-looking statements including
expectations of future production, cash flow and earnings. These statements
are based on current expectations that involve a number of risks and
uncertainties, which could cause actual results to differ from those
anticipated. These risks include, but are not limited to: the risks associated
with the oil and gas industry (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, price and exchange rate fluctuation and uncertainties
resulting from potential delays or changes in plans with respect to
exploration or development projects or capital expenditures. Additional
information on these and other factors that could affect Action's operations
or financial results are included in Action's reports on file with Canadian
securities regulatory authorities.

    Production information is commonly reported in units of barrels of oil
equivalent or boe. A boe conversion ratio of six thousand cubic feet per
barrel (6mcf/bbl) of natural gas to barrels of oil equivalence is based upon
an energy equivalency conversion method primarily applicable at the burner tip
and does not represent a value equivalency for the individual products at the
wellhead. Such disclosure of boe's may be misleading, particularly if used in
    For further information, the full 2007 Audited Financial Statements,
Management Discussion and Analysis and the Annual Information Form have been
posted on the Company's website: or, alternatively, can
be viewed at
    As at March 31, 2008, the Company had 57,256,792 common shares
outstanding and 4,676,083 options outstanding at an average exercise price of

    Action Energy Inc. is a publicly traded Calgary, Alberta based junior oil
and natural gas exploration and production company with operations
concentrated in core areas in southern Saskatchewan and central and southern


For further information:

For further information: ACTION ENERGY INC., Kelly D. Kerr, Vice
President, Finance & Chief Financial Officer, Suite 800, 350 - 7th Avenue
S.W., Calgary, Alberta, T2P 3N9, Phone: (403) 264-1112, Fax: (403) 264-1116,
E-mail:, Website:

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