CALGARY, ALBERTA, Aug. 8, 2007 /CNW/ - Real Resources Inc. ("Real" or the
"Company"), ("RER" - "TSX") today disclosed its financial and operating
results for the quarter (unaudited) ended June 30, 2007.
HIGHLIGHTS Three months ended Six months ended
June 30 June 30
($ thousands, % %
except where noted) 2007 2006 change 2007 2006 change
Production revenue 46,795 54,712 (14) 99,945 107,608 (7)
Cash flow from
operations(*) 22,024 29,350 (25) 48,739 56,542 (14)
(basic)(*) $ 0.57 $ 0.78 (27) $ 1.25 $ 1.51 (17)
(diluted)(*) $ 0.57 $ 0.77 (27) $ 1.25 $ 1.48 (16)
Net earnings (2,541) 16,524 (115) (4,230) 21,980 (119)
Per share (basic) $ (0.07) $ 0.44 (116) $ (0.11) $ 0.59 (119)
Per share (diluted) $ (0.07) $ 0.44 (116) $ (0.11) $ 0.58 (119)
Net debt 145,278 163,363 (11)
Total assets 652,248 639,662 2
Shareholders' equity 371,056 346,090 7
expenditures 11,550 54,087 (79) 39,007 151,986 (74)
(thousands) 38,935 37,336 4 38,874 37,321 4
Crude oil and liquids
(bbls/d) 5,296 5,951 (11) 5,697 5,840 (2)
Natural gas (mcf/d) 24,543 30,697 (20) 26,955 31,748 (15)
Total oil equivalent
(boe/d)(xx) 9,386 11,069 (15) 10,190 11,131 (8)
Crude oil and liquids
($/bbl) 63.19 68.46 (8) 61.07 63.39 (4)
Natural gas ($/mcf) 7.23 6.27 15 7.52 7.02 7
Cash flow netback
($/boe) 25.91 29.18 (11) 26.57 28.27 (6)
Operating costs ($/boe) 12.84 8.88 45 11.11 8.68 28
administrative ($/boe) 3.88 2.13 82 3.43 2.06 67
Gross 4.0 14 (71) 24.0 73 (77)
Net 4.0 12.0 (67) 23.8 61.4 (61)
- (*) Cash flow from operations is defined as cash flow from operating
activities before changes in non-cash working capital. Cash flow from
operations, cash flow from operations per share and corporate
netbacks are non-GAAP terms that represent net earnings measures
adjusted for non-cash items on a boe and per share basis. The Company
evaluates its performance based on these measures. The Company
considers cash flow a key measure as it demonstrates the Company's
ability to generate cash flow necessary to fund future growth through
capital investment and to repay debt, and because it measures
profitability relative to current commodity prices. As a result,
these measures may not be comparable to similar figures presented by
- (xx) Natural gas converted to oil equivalent at six thousand cubic
feet to one barrel of oil equivalent.
Merger With TriStar Oil & Gas Ltd.
On March 29, 2007, the Company announced that the Board of Directors (the
"Real Board") had initiated a formal process to explore strategic alternatives
in an effort to enhance Real Shareholder value and that the Real Board had
engaged CIBC World Markets Inc. as its exclusive financial advisor in
connection with the process. This process continued through April and May
2007. As a result of this process, an Arrangement Agreement was entered into
between the Company and TriStar Oil & Gas Ltd. ("TriStar") effective May 22,
2007 and was subsequently amended and restated on June 27, 2007.
The proposed arrangement between the Company, TriStar and their
respective shareholders (the "Arrangement") will result in the combination of
the businesses of TriStar and the Company and the combined entity will
continue under the name "TriStar Oil & Gas Ltd." ("New TriStar"). Further to
the Arrangement, all of the issued and outstanding shares of TriStar (the
"TriStar Shares") will be exchanged for shares of New TriStar ("New TriStar
Shares") on the basis of 0.4762 of a New TriStar Share for each TriStar Share.
Shareholders of the Company will continue to hold one New TriStar Share for
each share of the Company held prior to the Arrangement.
On August 2, 2007, the shareholders of TriStar Oil & Gas Ltd. ("TriStar")
and Real approved the Arrangement. The close of the transaction is anticipated
to take place on August 16, 2007 upon which the current shareholders of
TriStar will own approximately 42 percent of New TriStar and the current
shareholders of the Company will own approximately 58 percent of New TriStar.
Senior management of the combined entity will be the officers of TriStar
and the board of directors will be comprised of seven TriStar directors and
three directors from Real. Accordingly, the transaction will be accounted for
as a reverse takeover whereby TriStar is deemed to be the acquirer of Real,
using the purchase method of accounting.
Our total production averaged 9,386 boe/d in the second quarter of 2007,
down 15% from the first quarter of 2007 production of 11,002 boe/d, and also
down 15% from 11,067 boe/d in the second quarter of 2006. Overall production
has decreased during the quarter mainly due to third party facility
turnarounds as well as production issues at Sakwatamau and Carnduff/Hastings.
The production issues at Sakwatamau and Carnduff/Hastings limited production
by approximately 400 boe/d as compared to the first quarter. In addition
production decreased due to expected declines and restricted drilling during
spring breakup. We exited the second quarter of 2007 at approximately
10,000 boe/d once the production issues were resolved and the turnarounds were
Our production revenue for the second quarter of 2007 was $46.8 million,
lower than the $54.7 million in the second quarter of 2006, mainly due to
lower production. Average realized crude oil and liquids price decreased by
8%, from $68.46/bbl in the second quarter of 2006 to $63.19/bbl in the second
quarter of 2007. The impact of lower production and average crude oil and
liquids price was partially offset by the increased realized natural gas price
of $7.23/mcf in the second quarter of 2007 as compared to $6.27/mcf in the
second quarter of 2006, an increase of 15%.
Operating expenses were $11.0 million in the second quarter of 2007, up
23% from $8.9 million a year earlier, primarily reflecting increased treating
and processing costs, workover costs, and higher equipment rental costs.
Transportation costs were also slightly higher due to enhanced natural gas
processing that resulted in increased transportation costs.
Non-operating expenses were also higher, especially interest expenses,
depletion, depreciation and accretion (DD&A) expenses and general and
Interest expenses were $1.8 million in the second quarter of 2007, up 35%
from $1.4 million a year earlier due to higher average debt levels and
slightly higher borrowing costs.
DD&A expenses were $25.3 million in the second quarter of 2007, up 34%
from $18.9 million a year earlier. DD&A rose substantially because the
elevated capital spending rate of 2006 did not produce a corresponding net
increase in proved reserves. While the Company added 9.7 million proved
barrels of oil equivalent in 2006, this gain was almost completely offset by a
downward revision of approximately 9.4 million proved barrels of oil
equivalent in the 2006 reserves report. This downward revision in proved
reserves was based on 2006 production performance, particularly in our gas
properties. Sproule Associates Limited was retained as the new reserve
evaluator for 2006.
General and administrative expense was $3.3 million in the second quarter
of 2007, up 55% from $2.1 million a year earlier. The increase is mainly due
to costs related to the evaluation of strategic alternatives announced by Real
on March 29, 2007. Additional costs include professional services costs
required during the evaluation and Arrangement process with TriStar as
announced on May 22, 2007.
Cash flow from operations for the second quarter of 2007 was
$22.0 million, down 25% from $29.4 million a year earlier. The Company
incurred a net loss of $2.5 million or $0.07 per share (basic) in the second
quarter of 2007 compared with net income of $16.5 million or $0.44 per share
(basic) a year earlier.
The Company continued the transition to a more conservative strategy of
maintaining capital spending within cash flow from operations for 2007. In the
second quarter of 2007, Real significantly reduced capital spending to
$11.6 million, down 77% from $50.9 million a year earlier.
Real reduced spending on drilling and completions in the second quarter
of 2007 to $5.4 million, down 73% from $20.0 million a year earlier, and
reduced spending on facilities and equipment to $4.1 million, down 80% from
$20.4 million. Real also reduced spending on geological and geophysical data
acquisition to $0.7 million in the second quarter of 2007, down 79% from
$3.6 million a year earlier, and lease acquisitions totaled $1.2 million, down
81% from $6.5 million in the second quarter of 2006.
During the second quarter of 2007 Real participated in drilling 4 wells
(4.0 net) compared with 14 wells (12.0 net) a year earlier. Results during the
first quarter included 4 (4.0 net) oil wells.
Management's Discussion and Analysis and Financial Statements
The complete second quarter 2007 Management's Discussion and Analysis and
Financial Statements document for Real Resources Inc. is available on the Real
web site at www.realres.com and will be available on SEDAR at www.sedar.com.
About Real Resources Inc.
Real Resources Inc. is a Calgary based oil and natural gas company active
in the exploration, development and production of crude oil and natural gas in
Note: Disclosure provided herein in respect of boe may be misleading,
particularly if used in isolation. A boe conversion ratio of 6 mcf is based on
an energy equivalency conversion method primarily applicable at the burner tip
and does not represent a value equivalency at the wellhead.
About Forward-Looking Information and Statements
This news release contains forward-looking statements, within the meaning
of applicable securities laws that address goals, expectations or projections
about the future. The use of any of the words "expect," "anticipate,"
"continue," "estimate," "objective," "ongoing," "may," "will," "project,"
"should," "believe," "plans," "intends," "might," and similar expressions are
intended to identify forward-looking information or statements. In particular,
but without limiting the foregoing, this news release contains forward-looking
statements with regard to cash flow, capital spending, debt and debt
repayment, strategic alternatives, drilling opportunities and business plans.
The forward-looking information and statements included in this news release
are not guarantees of future performance and should not be unduly relied upon.
Statements which discuss business plans for drilling, exploration and
development in 2007 and beyond assume that the extraction of crude oil,
natural gas and natural gas liquids remains at current economic levels. The
forward-looking statements contained in this news release are based on Real's
current goals, expectations, estimates, assumptions and projections and
involve a number of risks and uncertainties that could cause actual results to
differ materially from those anticipated and described in the forward-looking
statements. Such risks and uncertainties include, without limitation:
volatility in market prices for oil and natural gas; volatility or fluctuation
in oil and natural gas production levels; volatility in currency exchange
rates; liabilities and risks inherent in oil and natural gas operations,
including geological, technical, drilling and processing problems;
uncertainties associated with estimating reserves; competition for, among
other things, capital, acquisitions, reserves, undeveloped land and skilled
personnel; incorrect assessments of the value of acquisitions; Real's success
at the acquisition, exploration and development of reserves; changes in
market, economic and business conditions; actions by governmental or
regulatory authorities including changes in tax laws or incentive programs;
availability of acceptable strategic alternatives; Real's ability to
successfully implement any particular strategic alternative; and any such
strategic alternative's yield of the anticipated benefits. The foregoing list
of assumptions, risks and uncertainties is not exhaustive. Additional
information on these and other factors which could affect operations or
financial results are included under the heading "Risk Factors" in Real's
Annual Information Form as filed under Real's profile on www.sedar.com.
Additional information may also be found in Real's other reports on file with
Canadian securities regulatory authorities.
The forward-looking information and statements included in this news
release speak only as of the date of this news release, and we assume no
obligation to publicly update or revise them to reflect news events or
circumstances, except as may be required pursuant to applicable laws.
For further information:
For further information: Lowell E. Jackson, President & Chief Executive
Officer and Acting Chief Financial Officer, Real Resources Inc., Telephone:
(403) 262-9077, Fax: (403) 262-6403