GEOCAN Energy announces second quarter 2007 results



    CALGARY, Aug. 14 /CNW/ - GEOCAN Energy Inc. (TSX: GCA) announces
financial and operating results for the second quarter of 2007 and the six
month period ended June 30, 2007. Following an active drilling program in the
first quarter, GEOCAN focused in the second quarter on maintaining production
through spring breakup, reducing debt and lowering operating costs. On all
three fronts, the Company was successful.
    Wet conditions persisted well past breakup, into June in most of the
operating areas, causing some interruptions to production where access for
production, sales and routine workovers is essential to keep operations
running. Production was restored on most of these suspended wells in the later
part of June.
    To address GEOCAN's debt, a non-core asset disposition program was
undertaken. Eight non-core, predominantly non-operated properties,
representing approximately 229 boepd of production, were sold with an
effective date of May 1, 2007. Gross proceeds of the sale of these properties
total $8.55 million. At the end of the second quarter, the Company had closed
on the sale of the property, plant, equipment and associated asset retirement
obligations for six of the eight properties, with gross proceeds of $5,054,000
having been received. Another $3,000,000 closed in July with the final
$500,000 scheduled to close in mid-August.
    GEOCAN's weighting toward oil (63% oil, 37% natural gas) is serving it
well with current pressure on natural gas prices. Production averaged
2,608 boepd for the quarter, down 5% from 2,747 boepd for the second quarter
2006. The major impact on average production was the divestiture of
approximately 229 boepd through the Company's minor non-core properties as
described above. The sales were effective May 1, 2007 and all but two of the
transactions were closed during June. Six-month production averaged 2,650
boepd, down 9% from 2,918 boepd in the same period a year earlier.
    In anticipation of a soft natural gas market during the summer of 2007,
GEOCAN entered into two financial derivative instruments that came into effect
in the second quarter, commencing April 1, 2007. As a result, approximately
one-third of GEOCAN's natural gas is currently hedged. The derivative
instruments are for 1,000 gigajoules/day of natural gas production for the
period April 1 to October 31, 2007. The floor and cap of each instrument is
$6.50/$7.00 and $7.80/$8.25 respectively, based on AECO gigajoule (GJ) spot
prices. These derivative instruments are currently in gain positions.
    Two oil derivative instruments were also implemented during the second
quarter that will take effect in future quarters. On June 1, 2007 GEOCAN
initiated a US$72.15/bbl WTI fixed price swap for 125 boepd for a one year
term, July 1, 2007 to June 30, 2008. On June 13, 2007 GEOCAN initiated a
US$75.15/bbl WTI fixed price swap for 150 boepd for a one year term,
January 1, 2008 to December 31, 2008.
    Second quarter oil and gas revenues were down 11% to $10,675,529
($44.98/boe), compared with $11,932,660 ($47.73/boe) in the comparable quarter
in 2006, the major contributor being the aforementioned sale of the Company's
minor non-core properties combined with lower Canadian denominated oil prices,
eroded by a stronger Canadian dollar in 2007.
    Second quarter operating costs were $13.96/boe, up 7% from $13.09/boe in
the second quarter 2006, but down $3.76/boe (21%) from $17.72/boe in the first
quarter 2007. Several initiatives were undertaken in the second quarter that
resulted in significant operating cost reductions in the Entwistle, Chauvin,
Ribstone, Tomahawk and Lloydminster areas with regard to treating chemicals,
trucking and treating costs. An ongoing review of GEOCAN's major cost drivers
should result in continued operating cost reductions as the year progresses.
GEOCAN initiated new marketing arrangements earlier in the year that are also
now taking effect. For the six month period, operating costs were $16.38/boe
up 7% from the same period a year earlier. The increase was due primarily to
the increasing overall cost structure in the industry during the past year;
however, GEOCAN expects costs to come back into line for the balance of this
year.
    Cash flow from operating activities in the second quarter 2007 was
$4,200,237 ($0.08/share diluted) up 50% compared to $2,818,737 in the first
quarter 2007, but down 24% compared with $5,534,317 ($0.10/share diluted) in
second quarter 2006. Six month cash flow for 2007 was $7,018,974 ($0.13/share
diluted), compared to $10,285,268 ($0.19/share diluted) for the first six
months of 2006. Six month and second quarter cash flow was impacted by the
sale of the non-core properties.
    Earnings after income tax for second quarter 2007 were a loss of
$(674,678) or $(0.01)/share basic, compared to $1,569,914 or $0.03/share basic
in 2006. Six month earnings after income tax were $(3,656,655) or
$(0.07)/share basic, compared to $1,062,869 or $0.02/share basic in 2006.
    At the end of the second quarter, GEOCAN had a working capital deficit of
$3,824,951 compared to a working capital deficit of $5,688,241 at year-end
2006. On a combined basis, the Company had net debt from all sources of
$53,768,312 at the end of the second quarter, down from $62,779,931 at the end
of the first quarter 2007 and $59,900,234 at December 31, 2006. The reduction
was predominantly the result of the property sales, a suspension of drilling
during the second quarter and lower operating costs.


    
    Q2/2007 Highlights
    (unaudited)
    -------------------------------------------------------------------------
                                     Three months    Three months
                                            ended           ended    Percent
                                    June 30, 2007   June 30, 2006     change
    -------------------------------------------------------------------------
    Light/medium oil
     price ($/bbl)                         $51.60          $60.15       -14%
    -------------------------------------------------------------------------
    Heavy oil price
     ($/bbl)                               $41.44          $49.94       -17%
    -------------------------------------------------------------------------
    Natural gas price
    ($/mcf)                                 $7.37           $5.91        25%
    -------------------------------------------------------------------------

    Oil and gas revenue               $10,675,529     $11,932,660       -11%
    -------------------------------------------------------------------------
    Net revenues                       $9,377,131     $10,395,591       -10%
    -------------------------------------------------------------------------
    Operating expenses                 $3,314,417      $3,272,020         1%
    -------------------------------------------------------------------------
      Per unit ($/boe)                     $13.96          $13.09         7%
    -------------------------------------------------------------------------
    G&A expense                          $868,799        $894,138        -3%
    -------------------------------------------------------------------------
      Per unit ($/boe)                      $3.66           $3.58         2%
    -------------------------------------------------------------------------
    Cash flow                          $4,200,237      $5,534,317       -24%
    -------------------------------------------------------------------------
      Per share (diluted)                   $0.08           $0.10       -20%
    -------------------------------------------------------------------------

    Depletion and
     accretion expense                 $5,183,119      $4,726,290        10%
    -------------------------------------------------------------------------
      Per unit ($/boe)                     $21.84          $18.90        16%
    -------------------------------------------------------------------------
    After tax net (loss) income         $(674,678)     $1,569,914
    -------------------------------------------------------------------------
      Per share (diluted)                  $(0.01)           0.03
    -------------------------------------------------------------------------

    Capital expenditures               $2,492,151      $5,348,132       -53%
    -------------------------------------------------------------------------
    Total capital assets
     (net of depletion)
    -------------------------------------------------------------------------

    Average production
     (boepd)                                2,608           2,747        -5%
    -------------------------------------------------------------------------

    Common shares
      Weighted average
      - basic                          55,942,292      55,332,113
      - diluted                        55,982,261      56,326,106
    -------------------------------------------------------------------------


    -------------------------------------------------------------------------
                                       Six months      Six months
                                            ended           ended    Percent
                                    June 30, 2007   June 30, 2006     change
    -------------------------------------------------------------------------
    Light/medium oil price
     ($/bbl)                               $50.86          $55.25        -8%
    -------------------------------------------------------------------------
    Heavy oil price ($/bbl)                $42.10          $39.24         7%
    -------------------------------------------------------------------------
    Natural gas price ($/mcf)               $7.16           $7.10         1%
    -------------------------------------------------------------------------

    Oil and gas revenue               $21,444,365     $23,118,412        -7%
    -------------------------------------------------------------------------
    Net revenues                      $18,589,072     $20,028,919        -7%
    -------------------------------------------------------------------------
    Operating expenses                 $7,853,795      $6,629,097        18%
    -------------------------------------------------------------------------
      Per unit ($/boe)                     $16.38          $12.55        30%
    -------------------------------------------------------------------------
    G&A expense                        $1,638,028      $1,701,952        -4%
    -------------------------------------------------------------------------
      Per unit ($/boe)                      $3.42           $3.22         6%
    -------------------------------------------------------------------------
    Cash flow                          $7,018,974     $10,285,268       -32%
    -------------------------------------------------------------------------
      Per share (diluted)                   $0.13           $0.19       -32%
    -------------------------------------------------------------------------

    Depletion and
     accretion expense                $11,133,292      $9,914,465        12%
    -------------------------------------------------------------------------
      Per unit ($/boe)                     $23.21          $18.77        24%
    -------------------------------------------------------------------------
    After tax net (loss) income       $(3,656,655)     $1,062,869
    -------------------------------------------------------------------------
      Per share (diluted)                  $(0.07)          $0.02
    -------------------------------------------------------------------------

    Capital expenditures              $11,648,586     $14,950,923       -22%
    -------------------------------------------------------------------------
    Total capital assets
     (net of depletion)              $139,640,387    $113,052,889        24%
    -------------------------------------------------------------------------

    Average production (boepd)              2,650           2,918        -9%
    -------------------------------------------------------------------------

    Common shares
      Weighted average
      - basic                          56,082,764      54,996,190
      - diluted                        56,122,732      55,990,183
    -------------------------------------------------------------------------
    

    GEOCAN continues to look at financing strategies for developing its steam
assisted gravity drainage (SAGD) property in the Lloydminster area. Various
financial institutions and potential partners continue to be interested in
projects of this nature, given the successful operation of two neighbouring
SAGD recovery schemes in the same geologic zone within seven miles of the
Company's property. An important step in the project's development was the
negotiation during the second quarter of a reduction to the freehold royalty
rates on these lands to 4% before payout and 6% after payout from the previous
15%. This reduction significantly increases the net present value and
corresponding rate of return of the overall project and accelerates the
ability to obtain the capital required to develop the 24.8 million barrels of
probable reserves assigned by independent reserves engineers DeGolyer and
MacNaughton Canada Limited.

    GEOCAN is an oil and gas company with operations in British Columbia,
Alberta and Saskatchewan. The Company explores for, develops and produces
crude oil and natural gas, operating 90% of its production. GEOCAN shares have
been publicly traded since 1998 and the Company has been listed on the Toronto
Stock Exchange under the symbol "GCA" since 2003. For complete financial
statements and the MD&A please refer to SEDAR at (www.sedar.com) or the
Company's website at (www.geocan.com).

    FORWARD-LOOKING STATEMENTS

    This news release may contain forward-looking statements including
expectations of future production, cash flow and earnings. This guidance is
based on current expectations that involve a number of risks and
uncertainties, which could cause actual results to differ from those
anticipated. These risks include, but are not limited to the risks associated
with the oil and gas industry (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, price and exchange rate fluctuation and uncertainties
resulting from potential delays or changes in plans with respect to
exploration or development projects or capital expenditures. GEOCAN's actual
results, performance or achievements could differ materially from those
expressed in, or implied by, these forward-looking statements and,
accordingly, no assurance can be given that any of the events anticipated by
the forward-looking statements will transpire or occur or, if any of them do,
to what benefit GEOCAN will derive therefrom. GEOCAN disclaims any intention
or obligation to update or revise any forward-looking statements whether as a
result of new information, future events or otherwise. For complete financial
statements and the MD&A please refer to SEDAR at (www.sedar.com) or the
Company's website at (www.geocan.com).

    BOE PRESENTATION: barrels of oil equivalent ("boe") may be misleading,
particularly if used in isolation. A boe conversion rate of 6 mcf per 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. All boe
conversions in the report are derived by converting gas to oil at the ratio of
six thousand cubic feet of gas to one barrel of oil.

    %SEDAR: 00010382E




For further information:

For further information: Wayne S. Wadley, President and CEO, (403)
539-5271, or Brad J.S. Farris, CFO and VP Finance, (403) 539-5272, Fax: (403)
261-3834, Email: wwadley@geocan.com, bfarris@geocan.com, Website:
www.geocan.com

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GEOCAN ENERGY INC.

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