Cequence Energy Ltd. Announces Second Quarter 2009 Results

    CALGARY, Aug. 12 /CNW/ - Cequence Energy Ltd. ("Cequence" or the
"Company") (TSX: SAB; to be changed to "CQE" effective August 17, 2009), is
pleased to announce its operating and financial results for the second quarter
ended June 30, 2009. The unaudited financial statements and notes as well as
management's discussion and analysis pertaining to the period are available on
Cequence's website at www.cequence-energy.com and on SEDAR at www.sedar.com.


    (000s except share and                Three months            Six months
     per share amounts)                  ended June 30,        ended June 30,
                                       2009       2008       2009       2008
    Financial ($)
    Production revenue, net
     of royalties                 $   3,673  $  14,209  $   7,443  $  26,360
    Realized gain (loss) on
     derivative contracts             2,489     (2,331)     4,546     (2,411)
    Unrealized gain (loss)
     on derivative contracts         (1,326)    (4,715)     2,407    (12,698)
    Net income (loss)                (2,444)    (2,486)       996    (13,305)
    Funds flow from operations(1)     1,507      6,339      3,413     14,072

    Production volumes
    Natural gas (mcf/d)               8,077     12,422      8,031     14,098
    Crude oil (bbls/d)                  106        179        121        229
    Natural gas liquids (bbls/d)         96        107         99        116
    Total (boe/d)                     1,548      2,357      1,559      2,695

    Sales prices
    Natural gas, including
     realized hedges ($/mcf)      $    7.50  $    8.94  $    7.61  $    8.19
    Crude oil ($/bbl)                 68.00     125.19      57.91     102.31
    Natural gas liquids ($/bbl)       52.12     113.55      43.36      98.73
    Total, before ($/boe)         $   47.00  $   61.67  $   46.44  $   55.81

    Netbacks ($/boe)              $   26.65  $   40.88  $   24.69  $   35.33
    Operating costs                   15.88      12.97      15.86      12.12

    Net debt(2)                   $  34,983  $  61,042  $  34,983  $  61,042

    Total capital expenditures          209      9,522      4,976     22,126

    Undeveloped land (net acres)    142,000    119,700    142,000    119,700
    (1) Funds flow is calculated as net income plus non controlling interest,
        unrealized derivate gains and losses, depletion, accretion, future
        income taxes, stock compensation expense, valuation allowances and
        asset retirement expenditures.
    (2) Net debt is calculated cash, net working capital less derivative
        contract asset, bank debt and long term debt.


    On July 29, 2009, the shareholders of Sabretooth Energy Ltd. approved
reorganization transactions that resulted in a recapitalization of the
company, appointment of new management and directors and a name change to
Cequence Energy Ltd. Our business plan is to create cost effective per share
growth in reserves, production and cash flow through an integrated strategy of
acquiring, exploiting and exploring high quality, long life natural gas and
oil properties in Alberta and British Columbia. We believe the current
economic environment provides an excellent opportunity for acquisitions and
consolidation within the junior oil and gas marketplace.
    The new management team of Cequence is led by Howard Crone as President &
Chief Executive Officer, Richard Thompson as Executive Vice President, David
Gillis as Vice President, Finance and Chief Financial Officer, Hany Beshry as
Vice President, Exploration, Robin Bieraugle as Vice President, Operations,
Nathan MacBey as Vice President, Land and Erin Thorson as Controller. The
management team has worked together in various capacities in building three
successful oil and gas companies including Cyries Energy, Cequel Energy and
Cypress Energy. The new Board of Directors is comprised of Donald Archibald as
Chairman, Howard Crone, Richard Thompson, Paul Colborne, Peter Bannister,
Brent Perry and Hank Swartout.
    The Company has raised approximately $65 million from proceeds of the
reorganization transactions and subsequent subscription receipt financing. As
part of the reorganization the new management and employee group of Cequence
contributed $10 million of cash and assets in exchange for 27,027,027 shares
of Sabretooth at $0.37 per share. In addition, existing shareholders of
Sabretooth were granted a right to purchase up to $10 million of shares for
$0.37 per share. Finally, on July 30, 2009 the Company completed its
subscription receipts financing of 53,390,000 common shares at $0.86 per share
for total proceeds of approximately $46 million before deducting deal costs.
    On a consolidated basis, including our 71 percent owned HFG Holdings
("HFG") whose principle asset is approximately $10 million in cash and
ignoring our hedging asset, we expect to have approximately $22 million in
available cash and working capital after the completion of the transaction.
All of the transactions have closed as of the date of this press release
except for the rights offering to existing shareholders which rights expire on
August 14, 2009. The Company will continue to have $40 million available under
a revolving credit facility, $18 million available under a long term facility
and a $5 million acquisition facility.
    On August 17, 2009 our trading symbol will change to CQE on the TSX. In
addition, a four for one share consolidation will be also be effected on that
date. It is anticipated that the shares will commence trading on a
consolidated basis sometime later that week or early the following week.
    Cequence intends to add to its extensive drilling inventory both through
corporate / asset acquisitions and land purchases at Crown land sales. The
approved 2009 capital program will validate key lands and identify multiple
follow-up drilling locations. In response to low gas prices in the near term,
a conservative approach will be applied to the 2009 capital budget. We
currently plan to spend $20 million in the Peace River Arch with a focus on
Montney exploration in Northwestern Alberta through our 71 percent owned
subsidiary HFG Holdings Inc. This capital will preserve expiring land and
fulfill existing flow through commitments. Cequence will continue to monitor
natural gas prices over the second half of the year and adjust the budget to
properly allocate funds appropriately.
    Cequence's management believes that with its excellent balance sheet,
solid reserve base and a growing prospect inventory, the Company is well
positioned to continue to consolidate opportunities in a depressed commodity


    Operations in the second quarter were limited in response to a low
commodity price environment and spring break up. Production averaged 1,548
boepd compared to production of 1,605 boepd in the first quarter of 2009. No
wells were drilled in the second quarter and capital spending was minimal. The
capital program for the remainder of 2009 is budgeted to be $20 million and
will focus on Montney exploration in the Peace River Arch. The current
estimate of average production for the third quarter is 1,300 boepd which
includes our best estimate of facility downtime and the expected shut in of
approximately 150 boepd of natural gas production in mid-August due to low
    With natural gas prices at low levels the Company intends to restrict
capital spending to land expiries and commitments. A more extensive drilling
program is expected to resume when gas prices recover.
    The Company's net undeveloped acreage in the Peace River Arch at June 30,
2009 was approximately 138,000 net acres. As previously described any material
expiries have been addressed or will be addressed through future budgeted
drilling within our subsidiary HFG Holdings.
    Net undeveloped acreage at Gunnell, BC is approximately 3,700 net acres.
Cequence has been working with the operator to manage the timing of any new
drilling given the current pricing environment.


    Low natural gas prices resulted in lower funds flow and net income in the
period when compared to 2008. Overall, the Company recorded a net loss in the
quarter of $2.4 million compared to a loss of $2.5 million in the second
quarter of 2008. Funds flow from operations for the quarter was $1.5 million
compared to $6.3 million in the second quarter of 2008. Total capital
expenditures in the quarter were limited to $0.2 million in response to lower
gas prices.
    Consolidated net debt calculated as current assets, less derivative
commodity contract asset, less accounts payable and bank debt at June 30, 2009
was $35.0 million compared to $33.3 million at December 31, 2008.
    The financial information in the quarterly results does not reflect the
reorganization transactions that occurred subsequent to quarter end. The cost
structure of Sabretooth was high and our expectation is to improve these costs
beginning in the third quarter.
    The Company's financial statements and management's discussion and
analysis for the three and six month periods ended June 30, 2009 will be
available the SEDAR system by accessing Cequence's public filings under
"Search for Public Company Documents" within the "Search Database" module at

    Boes are presented on the basis of one Boe for six Mcf of natural gas.
Disclosure provided herein in respect of Boes may be misleading, particularly
if used in isolation. A Boe conversion ratio 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.

    The Toronto Stock Exchange has neither approved nor disapproved the
    contents of this press release.

    Forward looking Statements or Information

    Certain statements included or incorporated by reference in this press
release constitute forward-looking statements or forward-looking information
under applicable securities legislation. Such forward-looking statements or
information are provided for the purpose of providing information about
management's current expectations and plans relating to the future. Readers
are cautioned that reliance on such information may not be appropriate for
other purposes, such as making investment decisions. Forward-looking
statements or information typically contain statements with words such as
"anticipate", "believe", "expect", "plan", "intend", "estimate", "propose",
"project" or similar words suggesting future outcomes or statements regarding
an outlook. Forward-looking statements or information in this press release
may include, but are not limited to, statements or information with respect
to: business strategy and objectives; development, exploration, acquisition
and disposition plans and the timing thereof; reserve quantities and the
discounted present value of future net cash flows from such reserves; future
production levels. Forward-looking statements or information are based on a
number of factors and assumptions which have been used to develop such
statements and information but which may prove to be incorrect. Although the
Company believes that the expectations reflected in such forward-looking
statements or information are reasonable, however, undue reliance should not
be placed on forward-looking statements because the Company can give no
assurance that such expectations will prove to be correct. In addition to
other factors and assumptions which may be identified in this press release,
assumptions have been made regarding, among other things: the impact of
increasing competition; the timely receipt of any required regulatory
approvals; the ability of the Company to obtain qualified staff, equipment and
services in a timely and cost efficient manner; the ability of the operator of
the projects which the Company has an interest in to operate the field in a
safe, efficient and effective manor; the ability of the Company to obtain
financing on acceptable terms; field production rates and decline rates; the
ability to replace and expand oil and natural gas reserves through
acquisition, development of exploration; the timing and costs of pipeline,
storage and facility construction and expansion and the ability of the Company
to secure adequate product transportation; future oil and natural gas prices;
currency, exchange and interest rates; the regulatory framework regarding
royalties, taxes and environmental matters; and the ability of the Company to
successfully market its oil and natural gas products. Readers are cautioned
that the foregoing list is not exhaustive of all factors and assumptions which
have been used.
    Forward-looking statements or information are based on current
expectations, estimates and projections that involve a number of risks and
uncertainties which could cause actual results to differ materially from those
anticipated by the Company and described in the forward-looking statements or
information. These risks and uncertainties which may cause actual results to
differ materially from the forward-looking statements or information. The
material risk factors affecting the Company and its business are contained in
the Company's Annual Information Form which is available at SEDAR at
    The forward-looking statements or information contained in this press
release are made as of the date hereof and the Company 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 required by applicable securities laws. The forward looking
statements or information contained in this press release are expressly
qualified by this cautionary statement.

    %SEDAR: 00023788E

For further information:

For further information: Howard Crone, Chief Executive Officer, (403)
229-3050, hcrone@cequence-energy.com; or David Gillis, Chief Financial
Officer, (403) 229-3050, dgillis@cequence-energy.com

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