Arawak announces 2006 results, performance and operations review


    ANGUILLA, British West Indies, March 29 /CNW/ -


    (In US dollars unless otherwise stated)

    -   Arawak production averaged 7,905 bopd in 2006, an increase of 39%
        from average production of 5,667 bopd in 2005, with the strongest
        growth in output of 60% seen in Kazakhstan

    -   Sales rose 44% to 2.846 million barrels in 2006 at an average price
        of $45.83 per barrel, which was up 21% on the year, to generate a 74%
        rise in revenues to $130.5 million and a 96% increase in funds from
        operations to $40.3 million

    -   Net income for 2006 was $12.4 million, a increase of  46% from
        $8.5 million in 2005

    -   Gross production at the newly acquired Company-operated North Irael
        field was raised by 530% to 1,900 bopd in six months through
        workovers and successful appraisal drilling

    -   Acquired 2,127 sq km of new licence area in Kazakhstan and Russia in
        2006, representing an increase of 486% in the Company's net acreage
        position. The acreage consists of low risk development and appraisal
        drilling opportunities and exploration prospects for future reserve

    -   Arawak graduated to the main board of the Toronto Stock Exchange on
        November 1, 2006

    -   A significant bottleneck in Kazakhstan was removed in the first
        quarter of 2007 by the completion and commissioning of a central
        processing facility at Besbolek


    (In thousands, except per share amounts)
    For the year ended December 31                     2006        2005
    Crude oil sales                                   $  130,455  $   75,073
    Net income                                        $   12,439  $    8,498
      Per share - basic                               $     0.07  $     0.05
      Per share - diluted                             $     0.07  $     0.05
    Funds from operations(*)                          $   40,259  $   20,534
      Per share - basic                               $     0.23  $     0.12
      Per share - diluted                             $     0.23  $     0.12

    Capital expenditure (excluding acquisitions)      $   51,660  $   31,418
    Capital expenditure (acquisitions)                $   25,033  $   42,302
    Shareholders' equity                              $  128,052  $  109,222
    Shares outstanding - basic                           173,392     173,025
    Shares outstanding - diluted                         174,226     173,300
    Weighted average shares - basic                      173,240     165,625
    Weighted average shares - diluted                    174,074     165,900

    (*) Funds from operations is a non-GAAP measure that represents cash
        generated from operating activities before changes in non-cash
        working capital.


    For the year ended December 31                     2006        2005
    Production - barrels                               2,885,359   2,068,488
    Average daily production - barrels                     7,905       5,667
    Sales - barrels                                    2,846,338   1,978,597

    Revenue and expenses per barrel sold
    Crude oil sales                                   $    45.83  $    37.94
    Interest and other income                         $     0.46  $     0.14
    Royalties and taxes                                  ($10.61)     ($9.42)
    Production costs                                      ($3.96)     ($2.82)
    Transportation and selling expenses                   ($5.05)     ($3.71)
    Net operating income                              $    26.67  $    22.13

    In 2006, Arawak Energy Corporation ("Arawak" or the "Company") saw
significant growth in oil production, sales revenues, funds from operations
and net income, re-investing cash flow into growing the business via an
increased capital expenditure budget.
    Average production increased 39% to 7,905 bopd in 2006, up from
5,667 bopd in 2005. The peak rate, produced at the end of 2006, was 10,300
bopd. Year on year production grew most strongly in Kazakhstan, up 60% to
4,257 bopd in 2006 from 2,654 bopd in 2005.
    Sales increased by 44% in 2006 to 2.846 million barrels, from
1.979 million in 2005, at an average price per barrel of $45.83, which was up
21% from an average of $37.94 in 2005. This, and the rise in production,
generated a 96% increase in funds from operations to $40.3 million in 2006,
from $20.5 million in 2005. Net income rose 46% to $12.4 million, from $8.5
million in 2005, which translates into net income per share of $0.07 (basic
and diluted), up from $0.05 in 2005.
    The Company spent $51.7 million in capital expenditure in 2006 and a
further $25.0 million in acquisitions, compared with $31.4 million and
$42.3 million respectively in 2005.
    There was also a 486% increase in the Company's contracted net acreage
position which now stands at 2,565 sq km, up from 438 sq km at the beginning
of the year.
    In January 2006, Arawak expanded its major Akzhar field in Kazakhstan
from 3.8 sq km to 71.5 sq km. 3D has now been shot over the full expanded
Akzhar area and the interpretation phase is expected to be completed by the
middle of 2007.
    The purchase of LLC NK Recher-Komi ("Recher") in June 2006 added
production from the North Irael field which was quickly and economically
integrated into our neighbouring ZAO PechoraNefteGas ("PNG") business. Arawak
worked over six existing wells and drilled two new appraisal wells, raising
production by 530% to 1,900 bopd in six months.
    In December 2006, Arawak acquired two further blocks. First in
Kazakhstan, the 1,845 sq km East Zharkamys III block, in the vicinity of our
existing operations at Akzhar was bought from a local company, Agrostimul LLP.
East Zharkamys III is prospective for deep subsalt Lower Permian clastics, a
suprasalt Upper Permian-Triassic complex and Jurassic and Cretaceous clastic
    Secondly, Arawak purchased at auction the 177 sq km Kymbozhyuskaya block
in the Timan-Pechora Basin in the Komi Republic of Russia, 275 km from the
Company's existing business at Sotchemyu-Talyu and North Irael. Kymbozhyuskaya
is prospective for oil and gas reservoirs associated with the Permian
terrigenous and Middle Vizean Carboniferous sediments. Under Canadian NI
51-101 standards, there are no proved or probable reserves currently
attributable to either of these exploration blocks.
    In 2007, Arawak has already partially rectified the restrictions to
output in Kazakhstan, due to third party processing and storage issues, which
caused a dip in sales and net income in the fourth quarter of 2006. We have
completed and commissioned a central processing facility at Besbolek and the
construction of a Company-owned transfer facility into the KazTransOil system
is underway and scheduled for completion in the third quarter of 2007.
    Also in Kazakhstan, 3D seismic over the Besbolek field has been
interpreted and a number of new prospects identified which are scheduled to be
drilled in 2007. Prospects in the Alimbai block, acquired in December 2005,
and in the enlarged Akzhar area, where 3D seismic interpretation is underway,
will also be drilled in 2007.
    Production in Russia grew by 21% in 2006 to an average 3,648 bopd net to
Arawak, compared with 3,013 bopd in 2005. Drilling at North Irael has been
temporarily halted pending the acquisition of a 3D seismic survey over the
full 76 sq km contracted area.
    For 2007, we have three active rigs in Russia, and two rigs, increasing
to three or four, scheduled for Kazakhstan.
    Production from the South West Gobustan Exploration, Development and
Production Sharing Agreement ("EDPSA") in Azerbaijan, where Arawak is not the
operator, amounted to 7,563 barrels of oil and 140 million scf of gas net to
Arawak for 2006. The operator was unsuccessful in obtaining complete logs or
full test results from the deep Kyanizadag 101 exploration well due to
operational difficulties. The well has now been abandoned without conclusive
    The start up of high pressure wells in the Duvanny field have been
further delayed, mainly because of technical and operational problems related
to the gas processing facilities. The operator now expects start up in the
second quarter of 2007. Discussions regarding the current contractual gas
price continue. In January 2007, domestic gas prices in Azerbaijan were
increased from approximately $1.80 per mm Btu to approximately $3.50 per mm
    Meanwhile, the 3D seismic program over 219 sq km of the Coastal block in
the South West Gobustan EDPSA area is in the final stages and will be followed
by 480 km of 2D over the Central and Northern blocks, areas which are
prospective and as yet have had no modern seismic coverage.
    Arawak also announces that it has filed its 2006 Annual Information Form
("AIF"), including its Statement of Reserves Data and Other Oil & Gas
Information for the year ended December 31, 2006 pursuant to National
Instrument 51-101 Standards of Disclosure for Oil & Gas Activities of the
Canadian Securities Administrators. Arawak's 2006 Annual Report, including
audited consolidated financial statements and related Management's Discussion
and Analysis for the year ended December 31, 2006, has also been filed. Copies
of these documents may be accessed electronically on the website for the
System for Electronic Document Analysis and Retrieval ("SEDAR") at and Arawak's website at

    The TSX does not accept responsibility for the adequacy or accuracy of
    this release.

    Arawak's common shares are listed for trading on the TSX under the symbol
"ABG". The Company is engaged in the exploration, development and production
of oil and natural gas in Kazakhstan, Russia and Azerbaijan. The Company's
three producing fields and two exploration blocks in Kazakhstan are held
through its 100% wholly-owned subsidiary Altius Energy Corporation ("Altius").
Altius' main producing field is at Akzhar, recently extended from 3.8 to
71.5 sq km, with smaller fields at Besbolek and Karataikyz. The two
exploration blocks, Alimbai and the East Zharkamys III are also situated in
western Kazakhstan. Arawak's assets in Russia are held through ZAO
PechoraNefteGas ("PNG") and LLC NK Recher-Komi ("Recher-Komi") in which Arawak
has a 50% interest with the remaining interest being held by Lundin Petroleum
AB. Also in Russia, Arawak holds a 100% interest in the Kymbozhyuskaya
exploration block. In the Azerbaijan Republic, the Company's asset is its
interest in the South West Gobustan fields. Commonwealth Gobustan Limited
("CGL"), in which Arawak has a 37.17% interest, holds an 80% interest in the
EDPSA with the remaining 20% owned by SOCAR Oil Affiliate.

    This press release includes "forward looking statements", which are based
on the opinions and estimates of management at the date the statements are
made, and are subject to a variety of risks and uncertainties and other
factors that could cause actual events or results to differ materially from
those projected in the forward looking statements. These risks and
uncertainties include, but are not limited to, risks associated with the oil
and gas industry (including 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 in relation to
production, costs and expenses and health, safety and environmental risks),
the risk of commodity price and foreign exchange rate fluctuations, the
uncertainty associated with commercial negotiations and negotiating with
foreign governments and risks associated with international activity. Due to
the risks, uncertainties and assumptions inherent in forward-looking
statements, prospective investors in the Company's securities should not place
undue reliance on these forward-looking statements.

For further information:

For further information: Alastair D. McBain, President & Chief Executive
Officer, Phone: (44) 20 7973 4285, Fax: (44) 20 7824 8466, E-mail:; Charles R. A. Carter, Chief Financial Officer,
Phone:(44) 20 7973 4285, Fax: (44) 20 7824 8466,

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Arawak Energy Limited

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