Compton Petroleum Corporation interim operational update

    CALGARY, Nov. 1 /CNW/ - Compton Petroleum Corporation ("Compton" or the
"Company") is pleased to provide an interim operational update of activities
to the end of October 2007.
    In a news release dated July 11, 2007 we outlined our plans for the
remainder of 2007 and the longer term direction for the Company. At that time,
Mr. Sapieha, Compton's President and CEO, said, "2007 is the year during which
all the elements necessary for the Company's next phase of growth will be put
in place. We view 2007 as a transition year for Compton, a year in which the
stage is set for the large well counts that are necessary for production
growth and the realization of the value inherent in our natural gas resource
plays." Our overall strategy was that of focusing entirely on the four natural
gas resource plays in two core areas in southern and central Alberta.

    We also stated that industry conditions were such that mid 2007 was the
time to implement this initiative given:

    -   our increasing understanding and confidence in our natural gas
        resource plays,
    -   the strength of our resource teams and ability to attract talented
    -   an improving industry cost structure,
    -   favourable regulatory developments relating to down-spacing and
        production commingling,
    -   opportunities to expand in core areas at reasonable costs, and
    -   an expectation of strengthening natural gas prices.

    Key elements of this strategy included:

    -   an expanded drilling program,
    -   the hiring of essential technical and management staff to execute on
        our strategy,
    -   the longer term procurement of goods and services at favourable fixed
        costs, and
    -   the divestment of non-core properties and the redeployment of this
        capital to our core resource plays, including strategic acquisitions
        where available.

    Since July we have concentrated on the implementation of this strategy and
have successfully executed on a number of the key elements. We have made
considerable progress towards positioning Compton to realize on its potential
developed over the past years:

    -   we have demonstrated our ability to manage large drilling programs;
        we ramped-up our program during the third quarter, drilling 130 wells
        during the period, 57 of which were drilled in the month of
    -   we have added to our technical and professional teams necessary to
        manage increased activity,
    -   we have closed on 60% of our planned second half divestments, and
    -   through strategic acquisitions we have expanded our core areas
        including facilities, infrastructure, and seismic data.

    The continued weakness in natural gas prices, affecting the industry as a
whole, and uncertainty as to the timing of a recovery is currently a
restraining factor in the implementation of our longer-term plans.
Additionally, the very rapid appreciation of the Canadian dollar has
compounded commodity price weakness in Canada.
    Our industry has always been cyclical in nature and has experienced
downturns in the past. Compton remains very confident in the value inherent in
its properties and that our near and long-term strategy to realize on this
value is sound. We have the operational flexibility to adjust our activities
in response to changing industry and economic circumstances. We are bullish on
the longer term outlook for natural gas prices and our challenge is that of
managing our affairs to ensure that Compton is well positioned to realize on
the recovery when it occurs.
    The following summarizes our plans to meet this challenge and our
activities during the past four months.


    During the third quarter, with the onset of improving field conditions,
we ramped up our drilling program, drilling a total of 130 wells during the
quarter as compared to the 84 wells drilled in the entire first half of 2007.
To October 25, 2007 we have drilled a total of 265 wells, including 185 Belly
River wells of which 100 were drilled in the third quarter.
    The third quarter program included 15 wells targeting deeper formations
at Niton, Hooker, and Caroline with very positive results. In central Alberta,
we are expanding our horizontal drilling program. Two mid-year wells drilled
in this area are currently producing approximately 5.5 mmcf/d and 10.5 mmcf/d,
respectively. Recently, we have acquired another half township of land in the
Niton area, and we are currently completing two horizontal wells. We have just
finished one horizontal well that has set-up eight to ten further offset wells
for the company.
    Keying on our horizontal drilling success and knowledge gained at Niton,
we now plan to drill up to two horizontal wells at Hooker by year end, with
these wells supplying us with 13 offset locations. The two horizontal wells
could replace between three and four vertical wells.
    At Caroline, we drilled five successful wells during the third quarter.
Similar to Niton, these wells targeted the Gething and Rock Creek formations
and results to date indicate Caroline to be a promising development area for
the Company.
    On the facilities front we have been very active. In the Niton area we
completed the expansion of our gas handling systems including the installation
of compression and dehydration facilities and the twinning of a pipe line to
the Rosevear gas plant. This operation increased our gas handling capacity to
approximately 31 mmcf/d and will accommodate new production from the area
resulting from recent drilling success. In southern Alberta, we completed a
major river crossing pipeline project that will facilitate the tie-in of 21
standing Belly River gas wells as well as 25 additional wells planned for the
area in the fourth quarter. Additionally, key compression projects have been
completed at Clairsholm and are underway at Brant in southern Alberta. We have
tied-in 54 Belly River wells since July 1, 2007 and have an additional
existing 132 wells scheduled for tie-in prior to year-end. Currently 13
pipeline and facility crews are in the field working to place this production

    Technical Teams

    We have continued to strengthen our technical and professional teams.
Since July, we've added 25 new staff to bolster our engineering, land,
geology, and operations teams.

    Property Divestments

    Key to our overall strategy is the redeployment of capital from non-core
properties into our resource plays. On September 27, 2007 we closed the sale
of our Peace River Arch oil assets at Worsley, for total cash proceeds of
$270 million before closing adjustments. This sale price equates to
$77,143/boe/d of production and $23.49/boe of proved reserves and $17.88/boe
of proved plus probable reserves. These proceeds were used to pay down bank
    We continue to work on the divestment of our other major oil asset at
Cecil, as well as other minor property dispositions. We now target these
divestments to be completed by year end or early in the new-year. Sale of
these assets will initially reduce our bank debt and provide funding for our
ongoing programs. These divestments will also facilitate the redeployment of
personnel and other Company resources to our focus natural gas plays.


    The industry down-turn and changes to the Royalty Trust taxation
structure have resulted in opportunities within our core areas. Consistent
with our strategy of focusing on and expanding in these areas, we have
capitalized on these opportunities through two acquisitions: Stylus Energy
Inc. that closed during the 3rd quarter, and WIN Energy Inc. that is scheduled
to close later this month. These low cost, strategic acquisitions complement
our existing core assets in terms of land, production, and infrastructure.
Additionally, each of these additions further add to our existing in-house,
proprietary seismic database, and will assist in our Company's future growth.

    Liquidity and Capital Resources

    Our authorized syndicated credit facility remains at $500 million. The
facility is a borrowing based facility and, reflective of the quality of our
assets, has not been reduced as a result of the Worsley divestment. We have
drawn $245 million on the facility to the end of October 2007.
    Currently we have $450 million of US dollar denominated Senior Notes
outstanding. The notes were issued in 2005 and 2006 and are due in 2013. The
strengthening of the Canadian dollar, against that of the US, has resulted in
the Company recognizing an unrealized foreign exchange gain in relation to the
US dollar denominated notes. On October 26 and 31, 2007 we entered into
foreign exchange forward contracts to purchase US$450 million for
C$436 million, effectively crystallizing a total foreign exchange gain of
approximately $91.7 million.

    Q4 2007

    We have continued to execute on our business plan and are satisfied with
our progress to date. Our plans, as set out in July 2007, anticipated a
strengthening of natural gas prices. Although we remain bullish on the
longer-term outlook for natural gas, the current protracted weakness in prices
has negatively affected returns. This is particularly the case with our lower
productivity shallow Belly River play. As a result, we are taking a more
prudent approach to our drilling program for the fourth quarter of the year.
We are reducing our drilling program by approximately 75 wells, 70% of which
are Plains Belly River wells. While this is a very promising development area
for the Company with years of low cost, low risk drilling opportunities, it
offers only marginal returns at current prices.
    During the fourth quarter of 2007, we will focus on very low risk, higher
productivity development wells in areas where returns are the most favourable.
Additionally, building on recent success, we plan to expand our horizontal
drilling at Niton and Hooker which will replace a number of vertical wells
with fewer horizontal wells. Our revised plans will result in total
expenditures for the year, before acquisitions and divestment, being reduced
by approximately $75 million.
    Importantly, our focus on higher productivity drilling and the tie-in of
behind pipe production should enable us to meet our December 2007 exit
guidance rate of 36,000 to 37,000 boe/d.
    Our revised drilling program will allow us to move forward with the
development of our resource plays and position Compton for the future, while
concurrently protecting the Company's balance sheet. We are focused on
developing our resource base in a manner that will position Compton for the
future and allow us to capitalize on higher natural gas prices when this
commodity market recovers. We will continue with well selection and licensing
activities such that we can quickly expand our drill program when appropriate.

    2007 Budget Update Summary
                                                      2007         June 2007
                                            Revised Budget            Budget
                                          ----------------- -----------------
    Capital expenditures (before
     acquisitions & dispositions), $mm                $375              $450
    Total planned wells, gross                         355               435
    Cash flow from operations, $mm             $200 - $210       $210 - $220
    Average production, boe/d             31,000 to 32,000  31,000 to 32,000
    December 2007 average production,
     boe/d                                36,000 to 37,000  36,000 to 37,000

    The Company's revised projected cash flow from operations is based upon
the following commodity price assumptions for the fourth quarter of 2007.

                                          Benchmark Prices   Realized Prices
                                          ----------------- -----------------
    Natural gas, $/mcf                      AECO Cdn $6.23         Cdn $6.13
    Crude oil, $/bbl                       WTI U.S. $79.83        Cdn $64.28

    2008 and Beyond

    We are currently in the process of preparing our operational budgets for
2008 and will announce our plans for 2008 by mid December. We will also update
our longer term plans at that time.

    Royalty Review

    The Government of Alberta recently announced proposed changes to the
Crown Royalty structure for the province. The changes will come into effect on
January 1, 2009 and relate to royalties payable on production from Crown
mineral rights owned by the province. Although all details relating to the new
structure are not as yet available, we have assessed their impact on Compton
based upon current publicly available information.
    In very general terms, royalties will be calculated on a sliding scale
basis giving effect to well production rates and commodity prices. At current
price levels, Compton would realize a reduction in Crown royalties on shallow
gas production from that currently assessed up to a price of approximately
$9.00 per mcf. Higher productivity wells will attract higher rates even at
current price levels. There is no change in royalties and mineral taxes
relating to production from freehold mineral rights. Looking forward, the
increase in royalties for higher productivity wells will be somewhat mitigated
by a deep gas royalty reduction based upon the measured depth of the well.
    Based upon our assessment to date and subject to further clarification by
the Department of Energy as to the details of the program, we believe the new
royalty regime will have a relatively minor impact on the Company. We estimate
that we will experience an increase in royalty expense in a range of 3% to 5%
at current price levels. As more details become available, we will update our
assessment and advise accordingly.

    Forward-Looking Statements
    Certain information regarding the Company contained herein constitutes
forward-looking statements under the meaning of applicable securities laws,
including the United States Private Securities Litigation Reform Act of 1995.
Forward-looking statements include estimates, plans, expectations, opinions,
forecasts, projections, guidance, or other statements that are not statements
of fact, including statements regarding (i) capital and operating expenditures
(ii) exploration, drilling, completion, and production matters and (iii) other
risks and uncertainties described from time to time in the reports and filings
made by Compton with securities regulatory authorities. Although Compton
believes that the expectations reflected in such forward-looking statements
are reasonable, it can give no assurance that such expectations will prove to
have been correct. There are many factors that could cause forward-looking
statements not to be correct, including risks and uncertainties inherent in
the Company's business. These risks include, but are not limited to: crude oil
and natural gas price volatility, exchange rate fluctuations, availability of
services and supplies, operating hazards, access difficulties and mechanical
failures, weather related issues, uncertainties in the estimates of reserves
and in projection of future rates of production and timing of development
expenditures, general economic conditions, and the actions or inactions of
third-party operators. Compton may, as considered necessary in the
circumstances, update or revise forward-looking information, whether as a
result of new information, future events, or otherwise. The Company's
forward-looking statements are expressly qualified in their entirety by this
cautionary statement.

    Compton Petroleum Corporation is a Calgary-based public company actively
engaged in the exploration, development, and production of natural gas,
natural gas liquids, and crude oil in the Western Canada Sedimentary Basin.
Compton's shares are listed on the Toronto Stock Exchange under the symbol CMT
and on the New York Stock Exchange under the symbol CMZ.

    %SEDAR: 00003803E          %CIK: 0001043572

For further information:

For further information: Compton Petroleum Corporation, E.G. Sapieha,
President & CEO, N.G. Knecht, VP Finance & CFO, or Lorna Klose, Manager,
Investor Relations, Telephone: (403) 237-9400, Fax (403) 237-9410, Website:, Email:

Organization Profile

MFC Energy Corporation

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