Heritage Oil reports 2006 year-end results


    CALGARY, March 30 /CNW/ - Heritage Oil Corporation (TSX: HOC) today
announced its financial and operating results for the fiscal year ended
December 31, 2006.
    The following table provides a summary of Heritage's financial results
for the three and 12 month periods ended December 31, 2006 and 2005.

    Year ended December 31, 2006, compared with year ended December 31, 2005

    All figures are in U.S. Dollars                     2006         2005
                                                    ------------ ------------
    Total revenue(1)                                  8,602,137    1,514,415
    Net loss from continuing operations             (11,863,126)  (7,320,886)
    Net loss per share from continuing
     operations (basic & diluted)                         (0.54)       (0.33)
    Gain on disposal of discontinued operations       9,950,968            -
    Net earnings (loss) for the year                  1,336,332   (3,799,813)
    Net earnings (loss) per share
     (basic and diluted)                                   0.06        (0.18)
    (1)Continuing operations

    Three months ended December 31, 2006, compared with three months ended
    December 31, 2005

    All figures are in U.S. Dollars                     2006         2005
                                                    ------------ ------------
    Total revenue(1)                                  1,869,463      498,666
    Gain on disposal of discontinued operations       9,950,968            -
    Net earnings (loss) for the period                4,264,820   (2,863,308)
    Net earnings (loss) per share
     (basic & diluted)                                     0.19        (0.14)
    (1)Continuing operations


    Results from Heritage's 2006 exploration and development campaigns far
exceeded expectations. The Heritage operated, 50%-owned Kingfisher deviated
well in Block 3A, Uganda test produced gross 13,893 bopd from four zones. In
Oman, the 10%-owned West Bukha-2 appraisal/development well in Block 8
produced a combined gross flow-rate from two zones of approximately 12,750
bopd and 26 MMscf/d of gas. In the West Chumpass field in Russia, significant
progress has been made in field preparations for commencement of the drilling
program, with one of the highlights being an above expectation test from well
No.226. Production from West Chumpass should commence in the second quarter.
    Heritage's operating and financial highlights from 2006 include the

    -   In Uganda, the Kingfisher deviated well in Block 3A (Heritage
        operator, 50% interest) spudded in August 2006 and was drilled to a
        total depth of 3,195 metres, which was close to the limit of the
        rig's operational capability. Four intervals were tested
        successfully, producing an overall cumulative flow rate of
        13,893 barrels of oil per day (bopd) through a one inch choke. A
        shallower interval, at a depth of 1,783 metres, was tested in
        November 2006, producing 4,120 bopd from a 10 metre interval. Three
        deeper intervals were tested in February 2007, from between
        2,260 meters to 2,367 meters, and produced a cumulative flow rate of
        9,773 bopd over a total net productive thickness of 44 metres. The
        tested oil is good quality light (between 30 degrees and 32 degrees
        API) and sweet with a low gas-oil ratio and some associated wax. The
        reservoirs are sandstones with high permeability of up to
        3,000 milliDarcies.

    -   Heritage signed a Production Sharing Agreement in the Democratic
        Republic of Congo (DRC) in the summer of 2006 for a 39.5% interest in
        Blocks I and II in the prospective Albert Basin. Blocks I and II
        cover over 6,000 square kilometres of onshore and offshore acreage in
        the DRC part of the Albert Basin that extends into neighbouring
        Uganda. The work program, including a seismic campaign, will commence
        when the DRC Presidential decree has been issued.

    -   In the last quarter of 2006, the West Bukha-2 appraisal/development
        well in Block 8 Oman (10% interest) test produced a combined flow-
        rate from two zones (Ilam/Mishrif/Mauddud and Thamama) of
        approximately 12,750 bopd and 26 MMscf/d. The oil was light
        (approximately 42 degrees API). Phase I of West Bukha development has
        commenced and includes design, fabrication and installation of the
        wellhead platform and pipeline. Production is targeted to commence in
        the first half of 2008.

    -   In the last quarter of 2006, Heritage entered into an agreement with
        TISE Holding Company to establish a jointly-owned company, TISE
        HERITAGE NEFTEGAS, to appraise and jointly acquire oil and gas
        opportunities in Russia and internationally. Shareholders of TISE
        Holding Company include Concord, Zarubejneft, Zarubejneftegas (a
        wholly-owned Gazprom subsidiary), Technopromexport and
        Zarubejstroymontaj. The profile, strength and stature of TISE and its
        shareholders ensures Heritage's operations in Russia are undertaken
        in an efficient and transparent manner.

    -   Heritage commenced development of the West Chumpass field (Heritage
        operator, 95% interest) in West Siberia in 2006. A 200 km 2D seismic
        survey was acquired, civil works were undertaken and an existing well
        was re-entered culminating in a preliminary free-flow test of well
        No.226, which produced 124 barrels of oil over a five hour period,
        with no water, at a flowing wellhead pressure of 1,180 psi. This
        corresponds to approximately 600 bopd. Production testing of well
        No.226 and a drilling campaign is scheduled to commence in April

    -   Heritage completed the sale of its interests in the Republic of Congo
        (Congo) which generated a one-off gain in 2006 of $9,950,968.
        -  In November 2006, Heritage completed the sale of Heritage Congo
           Limited, which held a 14% working interest in the Noumbi
           Exploration Permit, to Afren PLC (Afren) for the following
           -  Cash of US$21,000,000, which has been received.
           -  1,500,000 Afren warrants, with a term of five years and an
              exercise price of (pnds stlg)0.60 GBP Sterling per share.
        -  On January 18, 2007, the Company finalized the statement of
           adjustments for the sale of its 25% and 30% working interests in
           the Kouakouala A and B licenses to Maurel et Prom and Burren
           Energy, for the following consideration:
           -  Cash of US$6,052,515, which has been received.
           -  An overriding royalty of 15% over a 30% working interest in the
              Mengo Field, which is not in production.

    Two notable events that occurred after year-end were:

    1.  On January 17, 2007, the Company gave notice that it had exercised
        its option to redeem the 550 outstanding 10% unsecured senior
        convertible bonds at 150% of par value for total proceeds of US
        $82,500,000, plus accrued interest. The bonds, issued on
        March 27, 2006, had a term of five years and one day and were
        convertible into Common Shares at a price of US$18.00 per share. All
        outstanding bonds were redeemed on March 28, 2007.

    2.  On February 16, 2007, the Company raised US$165,000,000 by completing
        a private placement of convertible bonds with J.P. Morgan Securities
        Ltd. acting as sole book runner. 1,650 unsecured senior convertible
        bonds were issued, each with a par value of US$100,000, with a term
        of five years and one day and an annual coupon of 8.00%. The bonds
        are convertible into Common Shares at a price of US$47.00 per share.
        The Company may redeem, in whole or part, the bonds for cash at any
        time on or before February 16, 2008, at 150% of par value. Proceeds
        were raised to finance the redemption of the outstanding $55 million
        of convertible bonds at a premium of 150% referred to above and for
        general corporate funding purposes.

    2006 Financial results
    (All figures are in US Dollars unless otherwise noted)

    Total revenue from continuing operations of $8,602,137 in 2006 was 468%
higher than in the previous year. Petroleum and natural gas revenue increased
by $3,096,746 (368%) in 2006 to $3,938,512. $2,208,665 of this increase
resulted from a 128% increase in sales volumes as a result of the periodic
nature of condensate sales and $888,081 from a 106% increase in the weighted
average commodity prices. The average sales price per barrel increased from
$24.51 in 2005 to $50.36 in 2006.
    Average production from continuing operations was 169 bpd in 2006, 21%
higher than in 2005. Average production in 2005 was 140 bpd.
    The results of operations in Congo were classified discontinued
operations in 2005 and 2006. Discontinued operations results are summarised in
the Company's consolidated financial statements and Management's Discussion
and Analysis.
    Earnings in the fourth quarter of 2006 were $4,264,820 (Cdn$4,974,712)
compared to a loss of $2,863,308 (Cdn$3,337,189) in the same period last year.
Earnings in the fourth quarter included the one-off gain on the sale of the
Congo interests of $9,950,968 and discontinued earnings of $831,175 (2005 -
    Earnings totalled $1,336,332 (Cdn$1,558,769) in 2006, compared to a net
loss of $3,799,813 (Cdn$4,428,686) in 2005. Net basic and diluted earnings per
Common Share were $0.06 (Cdn$0.09) in 2006, compared to net losses per Common
Share of $0.18 (Cdn$0.20) in 2005. Earnings in 2006 were stated after the
one-off gain on sale the Congo interests of $9,950,968 and discontinued
earnings of $3,248,490 (2005 earnings - $3,251,073).
    RPS Energy Canada Limited, trading as RPS Energy, an independent
geoscience consultancy firm, estimated proved and probable reserves, net to
Heritage of 69.5 million barrels with a value of $253.6 million (forecast
prices discounted at 10%) at December 31, 2006. This value was 5% higher than
at the previous year-end on an ongoing basis which excludes disposals made
during the year.
    Complete Financial Statements and Management's Discussion and Analysis
have been filed and are available on SEDAR at www.sedar.com.

    Heritage is an international oil and gas corporation with a diversified
portfolio of properties, including a producing property in the Sultanate of
Oman, a development property in Russia and exploration projects in the
Republic of Uganda and the Democratic Republic of Congo. The Company is also
pursuing opportunities in the Kurdistan region of Iraq and in other areas of
    The Company's Common Shares trade on the Toronto Stock Exchange under the
symbol HOC.

    If you would prefer to receive press releases via email contact Ana
    Augusta (ana@chfir.com) and specify "Heritage press releases" in the
    subject line.


    Except for statements of historical fact, all statements in this news
release - including, without limitation, statements regarding production
estimates and future plans and objectives of Heritage - are forward-looking
statements that involve various risks and uncertainties. There can be no
assurance that such statements will prove to be accurate; actual results and
future events could differ materially from those anticipated in such
statements. Factors that could cause actual results to differ materially from
anticipated results include risks and uncertainties such as: risks relating to
estimates of reserves and recoveries; production and operating cost
assumptions; development risks and costs; the risk of commodity price
fluctuations; political and regulatory risks; and other risks and
uncertainties as disclosed under the heading "Risk Factors" in its AIF and
elsewhere in Heritage documents filed from time-to-time with the Toronto Stock
Exchange and other regulatory authorities. Further, any forward-looking
statement is made only as of a certain date and the Company undertakes no
obligation to update any forward-looking statement or statements to reflect
events or circumstances after the date on which such statement is made or
reflect the occurrence of unanticipated events, except as may be required by
applicable securities laws. New factors emerge from time to time, and it is
not possible for management of the Company to predict all of these factors and
to assess in advance the impact of each such factor on the Company's business
or the extent to which any factor, or combination of factors, may cause actual
results to differ materially from those contained in any forward-looking

    Consolidated Balance Sheets

    December 31, 2006 and 2005
    (U.S. dollars)

                                                          2006          2005


    Current assets:
      Cash and cash equivalents                   $ 46,861,146  $  8,583,321
      Accounts receivable                            9,839,506       580,664
      Inventories                                       50,552       193,361
      Prepaid expenses                                 531,273       219,222
      Assets of discontinued operations                      -       760,899
                                                    57,282,477    10,337,467

    Property, plant and equipment                   98,311,833    61,053,053
    Deferred financing fees                          2,539,726             -
    Investment in warrants                             719,380             -
    Deferred development costs                       1,574,039     1,187,371
    Assets of discontinued operations                        -    13,676,487

                                                  $160,427,455  $ 86,254,378

    Liabilities and Shareholders' Equity

    Current liabilities:
      Accounts payable and accrued liabilities    $ 12,715,381  $  4,438,649
      Current portion of long-term debt                147,720       248,045
                                                    12,863,101     4,686,694

    Long-term debt                                   8,409,793     7,520,438
    Convertible bonds                               57,115,731             -
    Asset retirement obligations                        62,322             -
    Future income tax liability                      2,346,605     2,346,605
    Liabilities of discontinued operations                   -       434,849

    Shareholders' equity:
      Share capital                                 24,580,984    22,854,418
      Contributed surplus                            2,533,532       517,209
      Convertible bonds equity component             3,284,890             -
      Retained earnings                             49,230,497    47,894,165
                                                    79,629,903    71,265,792

    Commitments and contingencies
    Subsequent events

                                                  $160,427,455  $ 86,254,378

    Consolidated Statements of Earnings (Loss) and Retained Earnings

    Years ended December 31, 2006 and 2005
    (U.S. dollars)

                                                          2006          2005

      Petroleum and natural gas                   $  3,938,512  $    841,766
      Drill rig                                      2,895,727       342,359
      Interest                                       1,767,898       330,290
                                                     8,602,137     1,514,415

      Petroleum and natural gas operating              723,611       465,110
      Drilling rig operating                         2,291,585       196,804
      General and administrative                     8,977,345     5,249,649
      Financing charges                              5,996,553       491,824
      Foreign exchange losses                          798,194     1,170,906
      Depletion, depreciation and accretion            691,011       536,093
      Impairment of unproved petroleum and
       natural gas interest                            986,964       724,915
                                                    20,465,263     8,835,301

    Loss from continuing operations                (11,863,126)   (7,320,886)

    Gain on disposal of discontinued operations      9,950,968             -

    Earnings from discontinued operations            3,248,490     3,521,073

    Net earnings (loss)                              1,336,332    (3,799,813)

    Retained earnings, beginning of year            47,894,165    52,434,857

    Premium on purchase and cancellation of
     Common Shares                                           -      (740,879)

    Retained earnings, end of year                $ 49,230,497  $ 47,894,165

    Net loss per share from continuing
      Basic and diluted                           $      (0.54) $      (0.33)

    Net earnings (loss) per share:
      Basic and diluted                           $       0.06  $      (0.18)

    Consolidated Statements of Cash Flows

    Years ended December 31, 2006 and 2005
    (U.S. dollars)

                                                          2006          2005

    Cash provided by (used in):
      Net loss from continuing operations         $(11,863,126) $ (7,320,886)
      Items not involving cash:
        Depletion, depreciation and accretion          691,011       536,093
        Financing charges                              860,895             -
        Foreign exchange losses                        593,837       480,253
        Stock-based compensation                     1,483,945       625,365
        Impairment of unproved petroleum and
        natural gas interests                           986,964       724,915
      Changes in non-cash operating working
       capital                                        (415,755)    1,617,348
                                                    (7,662,229)   (3,336,912)

    Discontinued operations:
      Earnings from discontinued operations          3,248,490     3,521,073
      Depletion, depreciation and accretion            843,562     1,099,915
      Changes in non-cash operating working
       capital                                        (343,199)     (586,953)
                                                    (3,913,376)      697,123

      Shares issued for cash                         1,318,945     1,423,011
      Convertible bonds, net of issue costs         57,000,000             -
      Long-term debt                                         -     8,577,350
      Purchase of common shares for cancellation             -      (876,217)
      Repayment of long-term debt                     (287,759)     (103,997)
                                                    58,031,186     9,020,147

      Property, plant and equipment expenditures   (37,996,758)  (17,863,537)
      Development expenditures                        (386,668)     (174,359)
      Changes in non-cash investing working
       capital                                       4,484,371     1,573,765
                                                   (33,899,055)  (16,464,131)

    Discontinued operations:
      Proceeds from the disposal of discontinued
       operations                                   27,052,515             -
      Discontinued operations - repayment of
       note receivable                                       -     4,210,538
      Discontinued operations property, plant
       and equipment expenditures                   (4,848,821)   (2,690,928)
      Changes in non-cash investing working
       capital of discontinued operations           (4,627,578)   (1,239,828)
                                                   (16,322,939)  (16,184,349)

    Foreign exchange gains (losses) on cash held
     in foreign currency                               482,954    (1,185,123)

    Increase (decrease) in cash and cash
     equivalents                                    38,277,825    (7,652,202)

    Cash and cash equivalents, beginning of year     8,583,321    16,235,523

    Cash and cash equivalents, end of year        $ 46,861,146  $  8,583,321

    Supplementary information:
      Interest received                           $  1,665,998  $    397,640
      Interest paid                               $  5,032,919  $    491,824

    %SEDAR: 00010129E

For further information:

For further information: Investors Relations Contacts: CHF Investor
Relations, Cathy Hume, Tel (416) 868-1079 x231, Email cathy@chfir.com; Heather
Colpitts, Tel (416) 868-1079 x223, Email heather@chfir.com; Heritage Oil
Corporation, Contact Details: Tony Buckingham, Paul Atherton, Tel +41 91 973
1800, +44 870 011 5555, (403) 234-9974, Email info@heritageoilcorp.com

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