Diaz announces first quarter 2010 results

CALGARY, May 17 /CNW/ - Diaz Resources Ltd. (TSX: DZR) announces that it has filed its Interim Report for the three months ended March 31, 2010.

The strategic plan which Diaz intends to implement during 2010 focuses on:

    -   Development drilling of its Lloydminster heavy oil pool,
    -   Building an inventory of acreage, prospective for heavy oil
        accumulations, and
    -   Continuing to reduce the Company's balance sheet leverage.

In furthering this plan, three horizontal oil wells were drilled at Lloydminster, during the quarter, and are expected to be placed on production in June.

During the quarter, Diaz acquired oil and gas leases on four additional prospects, in Saskatchewan, resulting in the Company's heavy oil prospect inventory increasing to seven projects.

Diaz also completed an equity financing, raising $1.3 million. This financing, coupled with cashflow, enabled the Company to closely maintain its level of bank debt, and reduce its bank debt by $2.8 million from the prior year.

    Exploration and Development

With the decline of natural gas prices in Canada, to unacceptable levels, Diaz has changed its exploration focus exclusively to oil prospects.

    Lloydminster, Alberta - Working Interest 50%

Diaz has a 50% working interest in 7 heavy oil wells (3.5 net wells). The Lloydminster field is the primary development focus of the Company. Four are currently on production at rates varying from 15 to 60 bopd. Three new wells were drilled during Q1 2010 and are expected to be on production early in Q2 2010.

Diaz believes the Lloydminster heavy oil play may support up to 35 wells on its section, with initial production rates of approximately 60 Bopd per well. On the next page is a gross pay map of the Lloydminster pool, showing Diaz's four producing wells and the three horizontal wells drilled during Q1 2010. Diaz believes the project has very attractive economics with oil prices in the range of $80 per barrel, the Alberta drilling royalty credit and a 5% royalty for the first year of production.

Diaz currently plans to continue development drilling at the Lloydminster field starting in the summer of 2010.

Lloydminster field development economic assumptions include:

    -   Average gross well cost $750,000 drilled plus $200,000 for completion
        and production facilities.
    -   New well initial production - 60 bopd with a 20% annual decline.
    -   Revenue based on $65 per barrel.
    -   Operating costs - $15 per barrel.
    -   Alberta royalty rate of 5% for the first year of production
    -   Alberta drilling credits - $200 per meter drilled prior to March 31,

The following Lloydminster gross pay map includes average production for January 2010 for Sections 30 and 19. You can view the map on line at:


    Lloydminster, Alberta - Lands

In addition to Section 18-48-1W4 Diaz has acquired an 80% WI in 2,000 acres of prospective lands in the Lloydminster area.

The following map shows the acquired lands with bypassed zones in comparison to Section 19-48-1W4. You can view the map on line at:


    Saskatchewan Oil Plays

Diaz has acquired an interest in 14,208 acres in Saskatchewan on the Birdbear, Shaunavon, Viking and other heavy oil developments. Below is a map showing Diaz's land position in its South Shaunavon oil play. You can view the map on line at:



Revenue for the first quarter ended March 31, 2010 decreased to $1.7 million compared with $2.2 million for Q1 2009. Cash flow from operations for the first quarter of 2010 decreased to $384,000 or nil per share compared with $614,000 or $0.01 per share for Q1 2009. Diaz reported a loss for the first quarter of $1.5 million or ($0.02) per share versus a loss of $9.8 million or ($0.15) per share in Q1 2009. The Company took an impairment of $11.4 million in Q1 2009.

Net capital expenditures in Q1 2010 totalled $2.1 million compared with $836,000 in Q1 2009. Capital expenditures were financed with cash flow from operations and the proceeds of an equity financing.

At March 31, 2010, Diaz had net current debt of $5.9 million versus $8.7 million one year earlier, a reduction of $2.8 million. Diaz also had convertible debentures outstanding of $7.1 million (face value) that mature on March 26, 2012.


The Company's total production for Q1 2009 decreased 33% to 532 BOEd compared with the prior year Q1 2009 average of 791 BOEd. However, production for the quarter equalled the previous quarter, Q4 2009, average rate. With the addition of new production from the Lloydminster heavy oil field in Q1 2010 and new wells coming on stream in Q2 2010 we anticipate oil production rates should increase going forward.

    Business Outlook

We expect oil prices to hold above $75 per barrel (WTI) during 2010 as industrial activity in North America recovers. Due to current high natural gas storage levels and significant volumes of gas being developed on North American shale gas projects there is still considerable uncertainty as to when natural gas prices will improve to satisfactory levels. To mitigate the uncertainty in natural gas prices, Diaz has put in place fixed gas price contracts for approximately half of the Company's anticipated 2010 gas production, at prices in excess of $5.75 per Mcf.

The Company will continue to focus on its Lloydminster heavy oil development program and if results are successful Diaz should exit 2010 with almost half of its production derived from oil sales.

    Corporate Summary

    (Thousands, except shares and                 Three Months Ended March 31
     per share amounts)                                2010          2009
      Revenue (net of royalty expense)             $     1,690   $     2,248
      Cash flow from operations*                         384           614
        per share, diluted                                   -          0.01
      Loss for the period                               (1,486)       (9,754)
        per share, diluted                               (0.02)        (0.15)

      Net capital additions                              1,692           836

      Net current debt                                   5,908         8,657
      Convertible debentures(xx)                         6,451         6,163

      Total assets                                      36,876        43,264
      Total shares outstanding at period end        86,001,252    67,177,752

        Gas (MMcfd)                                        2.6           4.1
        Oil (Bopd)                                          98           111
        BOEd (6 Mcf equals 1 Bbl)                          532           791
      Product Prices
        Gas ($/Mcf)                                      $5.23         $6.01
        Oil ($/Bbl)                                     $67.68        $35.13

    *    Non-GAAP measure. Please see the reconciliation of "cash flow from
           operations" to "cash flow from operating activities" after the
           shareholders message.

    (xx)   Convertible debentures have a face value of $7.1 million and
           mature on March 26, 2012. See Note 7, "Convertible Debentures", in
           the notes to the financial statements for the three months ended
           March 31, 2010.

Diaz is an oil and gas exploration and production company based in Calgary, Alberta. Diaz's current focus is on oil development and exploration in Alberta and Saskatchewan.

ADVISORY: This press release contains forward looking statements. Although Diaz believes that the expectations reflected in these forward looking statements are reasonable, undue reliance should not be placed on them because Diaz 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.

The forward looking statements contained in this press release are made as of the date hereof and Diaz undertakes no obligations 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.

Where amounts are expressed on a barrel of oil equivalent (boe) basis, natural gas volumes have been converted to barrels of oil at six thousand cubic feet (mcf) per barrel (bbl). Boe figures may be misleading, particularly if used in isolation. A boe conversion of six thousand cubic feet per barrel is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. References to oil in this discussion include crude oil and natural gas liquids (NGLs).



For further information: For further information: Robert W. Lamond, Chairman - or - Donald K. Clark, Chief Operating Officer, DIAZ RESOURCES LTD., Telephone: (403) 269-9889, Fax: (403) 269-9890, Website: www.diazresources.com, Email: info@diazresources.com, TSX: DZR

Organization Profile


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