Breaker Energy Ltd. announces third quarter results and provides operational

CALGARY, Nov. 10 /CNW/ - Breaker Energy Ltd. ("Breaker" or "Company") (TSX: wav) is pleased to announce its financial and operating results for the quarter ended September 30, 2009.

Financial and Operating Summary

                                3 Months                    9 Months
                                   Ended      %                Ended       %
                      Sept  30,  Sept 30, Change  Sept  30,  Sept 30,  Change
                          2009      2008              2009      2008
    Financials ($000s
     except per
     share amounts)
    Oil and NGL sales   17,782    36,721     (52)   47,509    93,962     (49)
    Natural gas sales    6,627    13,778     (52)   26,188    40,119     (35)
    Processing sales        98       531     (82)      341     1,385     (75)
    Total oil, natural
     gas and NGL
     revenue            24,507    51,029     (52)   74,038   135,466     (45)

    Funds from
     operations(1)      10,309    30,216     (66)   25,745    80,571     (68)
      Per share
       basic ($)          0.20      0.76     (74)     0.54      2.06     (74)
      Per share
       diluted ($)        0.20      0.74     (73)     0.54      2.02     (73)
    Net earnings
     (loss)             (3,131)   11,078    (128)  (14,316)   31,845    (145)
      Per share
       basic ($)         (0.06)     0.28    (121)    (0.30)     0.81    (137)
      Per share
       diluted ($)       (0.06)     0.27    (122)    (0.30)     0.80    (138)
     expenditures(2)    24,322    99,773     (76)   53,988   149,299     (64)
    Net debt (end of
     period)           (87,391)  (86,418)      1   (87,391)  (86,418)      1
    Operating Highlights
      Oil & NGL (bbls
       per day)          2,847     3,402     (16)    2,957     3,019      (2)
      Natural gas (mcf
       per day)         22,617    18,408      23    23,333    16,804      39
      Total (boe per
       day) (6:1)        6,617     6,470       2     6,845     5,820      18
    Average realized
      Oil & NGL
       ($ per bbl)       67.88    117.34     (42)    58.86    113.59     (48)
      Natural gas
       ($ per mcf)        3.18      8.14     (61)     4.11      8.71     (53)
      Realized loss on
       ($ per boe)       (0.41)        -      nm     (0.83)        -      nm
      Combined average
       revenue) ($
       per boe)          39.85     85.73     (54)    38.79     84.95     (54)
    Netback ($ per boe)
    Oil, natural gas
     and NGL sales       39.85     85.73     (54)    38.79     84.95     (54)
    Royalties            (7.09)   (16.23)    (56)    (8.56)   (16.83)    (49)
    Operating expenses   (9.36)   (11.64)    (20)   (10.39)   (10.59)     (2)
     expenses            (2.17)    (2.58)    (16)    (2.18)    (2.81)    (22)
    Operating netback    21.23     55.28     (62)    17.66     54.72     (68)
    G&A expenses         (2.45)    (2.75)    (11)    (2.76)    (2.69)      3
    Interest expense     (0.95)    (1.69)    (44)    (0.74)    (1.34)    (45)
    Corporate netback    17.83     50.84     (65)    14.16     50.69     (72)
    Common Shares (000s)
    Class A Shares
     outstanding, end
     of period          52,143    40,204      30    52,143    40,204      30
    Weighted average
     Class A shares     52,128    39,713      31    47,806    39,120      22
    Weighted average
     basic shares
     outstanding        52,128    39,713      31    47,806    39,120      22
    Stock option
     (treasury method)       -       981    (100)        -       740    (100)
    Weighted average
     diluted shares
     outstanding        52,128    40,694      28    47,806    39,860      20

    (1) Management uses funds from operations (before changes in non-cash
        working capital) to analyze operating performance and leverage. Funds
        from operations as presented does not have any standardized meaning
        prescribed by Canadian GAAP and, therefore, may not be comparable
        with the calculation of similar measures for other entities.
    (2) Capital expenditures includes cash additions for the period including
        acquisition additions net of dispositions.

Overview and Highlights

    -   Breaker's operations continue to focus on developing its portfolio of
        large oil-in-place resource plays while reducing costs and
        maintaining financial and operational flexibility during the
        depressed natural gas price environment of the third quarter of 2009.

    -   The Company took advantage of the Alberta government's royalty
        incentive programs during the third quarter, achieving a 79 percent
        success rate drilling 14 gross (14.0 net) wells and investing $24.3
        million of capital.

    -   Breaker shut-in approximately 2.5 mmcf/d of production for a portion
        of the third quarter due to the depressed natural gas price
        environment. Even with the impact of the shut-in natural gas
        production, Breaker averaged 6,617 boe/d in the third quarter of
        2009, a two percent increase over the third quarter of 2008
        production rate of 6,470 boe/d. Breaker realized a 43 percent
        production weighting to oil and natural gas liquids in the third
        quarter of 2009.

    -   The Company continues its strategic shift to oil and expects to
        achieve a balanced production weighting of oil and natural gas
        liquids to natural gas in the fourth quarter of 2009. Breaker re-
        started its shut-in natural gas wells in October resulting in a
        projected fourth quarter average production of more than 7,000 boe/d.

    -   Breaker continued to develop its resource plays during the third
        quarter. At Irricana, Breaker drilled four gross (4.0 net) horizontal
        wells and completed the wells using horizontal multi-frac technology.
        Resource development continued at Provost with eight gross (8.0 net)
        wells. Breaker continued its exploration activities in the
        Girouxville area drilling two gross (2.0 net) wells. The Company also
        made two new oil pool discoveries, one at Girouxville and one at

    -   Breaker obtained cost savings in recent projects compared with prior
        quarters and remains focused on finding further operational
        efficiencies. Breaker achieved a six percent operating cost reduction
        during the third quarter of 2009 as compared to the second quarter of
        2009 and a 20 percent reduction compared to the same period of 2008.
        Operating costs were $9.36 per boe in the third quarter of 2009 as
        compared to $9.95 per boe in the second quarter of 2009 and $11.64
        per boe in the same period of 2008.

    -   Subsequent to September 30, 2009, Breaker reaffirmed its $125 million
        bank line. At the end of the third quarter, Breaker had $87.4 million
        of net debt, leaving $37.6 million available on its credit facility.

    -   On October 13, 2009 Breaker and NAL Oil & Gas Trust (NAL) jointly
        announced they have entered into an arrangement agreement pursuant to
        which NAL will acquire all of the issued and outstanding Class A
        shares of Breaker (the "Transaction") by way of Plan of Arrangement
        under the Business Corporations Act (Alberta). The total
        consideration for the Transaction is approximately $403 million which
        will be paid through the issuance of approximately 24.7 million NAL
        trust units representing $310 million at a deemed price of $12.54 per
        trust unit and the assumption of an estimated $93 million in Breaker
        net debt. Based on an exchange ratio of 0.475 NAL trust units for
        each Breaker Class A share, the consideration represents a price of
        approximately $5.96 per Breaker Class A share and a 12 percent
        premium using the preceding 20-day volume weighted average trading
        prices for Breaker Class A shares and NAL trust units. In certain
        circumstances, a non-completion fee of $12 million may be payable by
        the Corporation to NAL. The Transaction is subject to the approval of
        the Corporation's shareholders, the Court of Queen's Bench of the
        Province of Alberta and regulatory authorities, and is expected to
        close on or about December 11, 2009.

        Breaker has filed with Canadian securities regulatory authorities its
        Information Circular dated November 6, 2009 which is available for
        review at

        The Board of Directors of Breaker have unanimously approved the
        Transaction and determined it is in the best interest of Breaker's
        shareholders. Breaker's Board of Directors considered many factors in
        the decision; including the fairness opinion provided by FirstEnergy
        Capital Corp. that the consideration offered under the Transaction is
        fair, from a financial point of view, to Breaker shareholders.

        The Board of Directors of Breaker recommend that Breaker shareholders
        vote their Breaker shares in favour of the Transaction at the special
        meeting of Breaker shareholders scheduled to take place on
        December 9, 2009.

        Breaker believes that the Transaction presents an attractive
        opportunity for shareholders to realize the value of their Breaker
        Class A shares by receiving NAL trust units which will provide the
        opportunity to continue to participate in the development of
        Breaker's existing assets while gaining exposure to an entity with a
        lower cost of capital and a larger producing asset base.

Operations Update

During the third quarter of 2009 Breaker continued to yield excellent oil drilling results at its large OOIP Irricana and Provost properties. Four horizontal multi-frac wells were drilled during the quarter at Irricana and two horizontal oil wells at Provost. Breaker also drilled a horizontal multi-frac gas well at Provost during the quarter. Late in the quarter Breaker spudded its third horizontal multi-frac well at Fireweed. Prior to year-end, the Company plans to have this liquids-rich natural gas on production through its facilities which were expanded during the third quarter of 2009. In addition, Breaker made a new oil discovery at each of Girouxville and Provost.

Irricana, Alberta

Breaker continues to increase its significant light oil production with its horizontal multi-frac drilling development. During the second quarter of 2009, the Company drilled its first well down-spaced to approximately 200 metre inter-well spacing. The well averaged approximately 270 and 285 boe/d respectively for its first two full months of production and continues to produce approximately 165 boe/d into its fourth month of production. Following on this success, Breaker drilled four more wells at 200 metre inter-well spacing in the third quarter and all have performed above initial internal expectations. The four wells are on production and producing between 325 and 375 boe/d, averaging approximately 340 boe/d. Breaker spud a fifth well in the third quarter of 2009 which should be completed and on production in November of this year. After three years of significantly increasing light oil production at Irricana through technological improvements, Breaker believes that development at tighter inter-well spacing will maximize reserve recovery and value. Early well results and pressure data are confirming this hypothesis. The 11 remaining locations at 400 metre inter-well spacing and additional 52 locations at 200 metre inter-well spacing provide many years of future light oil development.

Breaker plans to drill, complete and test prior to year-end 2009 its first Irricana Viking horizontal multi-frac gas well. In the third quarter of 2009, Breaker acquired approximately 7,000 acres of additional undeveloped land on this trend.

Provost, Alberta

During the third quarter of 2009, Breaker drilled two horizontal wells into its large oil-in-place Leduc oil pool and brought two wells drilled in the second quarter on production at restricted rates of approximately 70 bbls/d each. Ongoing field optimization has increased production from both of these wells to over 100 bbls/d after approximately 3.5 months of production. The Company's first well drilled in the third quarter of 2009 averaged approximately 135 bbls/d for its first two months of production and continues to produce at a similar rate during its third month. The second well drilled in the third quarter continues to produce approximately 70 bbls/d with a low 16 percent watercut. Drilling costs in this area have been significantly reduced from those experienced in recent years, which combined with royalty incentives and high heavy oil prices has led to expected rates of return that are higher than previous years. New undeveloped acreage totaling approximately 1,100 acres adjacent to recent successful wells was acquired in the third quarter.

Breaker continued work in the extensive Viking resource play by conducting completion operations on the second and third multi-frac horizontal wells recently drilled into the play, which came on-stream in July and August. The third well was an offset to Breaker's first well on the play and has exhibited better initial productivity of both oil and gas with a first-month average production rate of more than 150 boe/d, approximately 20 percent of which is light oil (calendar-day average from field estimates). The second well had a lower initial rate of approximately 75 boe/d, but with a higher ratio of oil to gas (approximately 30 percent light oil). Breaker will equip this well with a pump in the fourth quarter of 2009 to allow efficient lifting of produced oil and load fluid which may increase its total production rate on a boe/d basis.

Breaker made a heavy oil discovery in the third quarter, with initial production obtained from the Cummings formation. Reservoir thickness and quality is similar to the nearby Cummings S pool. Subsequent to drilling the discovery well, Breaker drilled a step-out well approximately one mile away and acquired additional, nearby acreage that is prospective for the Cummings formation. The step-out well has a potential pay zone that is thinner and poorer quality but structurally higher than the discovery well.

Fireweed, British Columbia

Breaker continues to realize strong production performance from its Fireweed liquids-rich natural gas resource play in northeast British Columbia. The Company's two horizontal multi-frac wells have entered into their shallow decline profile as forecasted. The third horizontal multi-frac well is planned to be drilled, completed and tested prior to year-end 2009. The gathering system loop was also completed in September, allowing the Company to fully realize the benefit of new high pressure production anticipated from the new well.

The Company's first horizontal multi-frac well at Fireweed continues to perform with a flattening decline rate. After the first eight months of production ending September 30, 2009, the well had produced approximately 200 mboe of cumulative production and had an average raw production rate of approximately 560 boe/d for September. Breaker notes that the shallower decline rate is consistent with the Company's interpretation that the well has tapped into a large resource.

Breaker's second horizontal multi-frac well has performed up to expectations set by its closest vertical legacy offsets. Breaker drilled this well in the north end of the property where wells historically produce at lower rates. This well has a cumulative total production of approximately 55 mboe after six months of production, and averaged approximately 200 boe/d for the month of September 2009.

Both horizontal wells measured initial bottom hole pressures exceeding 16 MPa at a true vertical depth of approximately 1,645 metres, indicating only a small amount of drainage from more than 20 vertical legacy wells which have cumulative production of more than 17 bcf.

Due to the high pressure and flow rates of Breaker's two recent horizontal wells, a portion of Breaker's pre-existing production was curtailed before the two new wells stabilized at a flowing pressure similar to that observed prior to horizontal drilling. To mitigate future production curtailments from new wells, new pipeline infrastructure has been installed to allow both high and low pressure production to be sent to the Company-operated compression and dehydration facilities. Going forward, this should allow Breaker to realize the full production benefit from all of its new high pressure, high rate volumes from horizontal development wells.

Breaker's third horizontal multi-frac well is located in the historically more prolific southern area of the pool. In addition to the value of the natural gas liquids produced at Fireweed, the high heat content of the gas enables Breaker's Fireweed natural gas production to obtain a sales price approximately 10 percent higher per mcf than typical dry gas.

Girouxville, Alberta

Breaker continued drilling deep light oil exploratory prospects to take advantage of the Alberta Government's new drilling incentive program in addition to the $1.0 million maximum royalty holiday on new deep oil pool discoveries. Two 100 percent working interest wells were drilled during the quarter with a 50 percent success rate. The discovery well swabbed clean oil at an unstabilized rate of 200 bopd and will be on production in the fourth quarter at an expected stabilized rate of 50-100 bopd.

Financial Statements and Management's Discussion and Analysis

Breaker has filed with Canadian securities regulatory authorities its unaudited financial statements for the three and nine-month periods ending September 30, 2009 and the accompanying Management's Discussion and Analysis. These filings are available for review at

Breaker Energy Ltd. is a junior oil and gas company focused on creating shareholder value by growing per share production and reserves through acquisitions and a focused exploration, development and exploitation plan.

Breaker has 52.1 million Class A shares and 4.8 million stock options outstanding at September 30, 2009.

Breaker Energy trades on the TSX under the symbol WAV.

Forward-looking Statements

This press release contains forward-looking statements. More particularly, this press release contains statements concerning Breaker's anticipated: (i) production weighting for 2009, (ii) changes to the Alberta royalty regime regulations in force, (iii) effect on Breaker of changes to the Alberta royalty structure, (iv) capital expenditures for 2009 and (v) exploration and development activities and results. This press release also contains forward-looking statements including, among others, statements regarding: the Transaction, the completion of the Transaction and the outcome of the Transaction.

The forward-looking statements are based on certain key expectations and assumptions made by Breaker, including expectations and assumptions concerning the performance of existing wells and success obtained in drilling new wells, anticipated expenses, cash flow and capital expenditures and the application of regulatory and royalty regimes.

Although Breaker 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 Breaker 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, 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 Breaker's Annual Information Form which has been filed on SEDAR and can be accessed at

The forward-looking statements contained in this press release are made as of the date hereof and Breaker 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.

Note: Boe means barrel of oil equivalent on the basis of 1 boe to 6,000 cubic feet of natural gas. Boe may be misleading, particularly if used in isolation. A boe conversion ratio of 1 boe for 6,000 cubic feet of natural gas is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. Boe/d means barrel of oil equivalent per day.

In this press release: (i) mcf means thousand cubic feet; (ii) bopd means barrels of oil per day; (iii) mmcf means million cubic feet; (iv) mmcf/d means million cubic feet per day; (v) bbl means barrel; (vi) bbls means barrels; (vii) bbls/d means barrels per day; (viii) mboe means thousand barrels of oil equivalent; (ix) MPa means million pascals; and * bcf means billion cubic feet.

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


For further information: For further information: Dan O'Neil, President & Chief Executive Officer, (403) 215-5264; or Max Lof, Vice President, Finance & Chief Financial Officer, (403) 215-5264,,

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