Vero Energy Inc. delivers on its guidance and announces its financial results for the year ended December 31, 2006


    CALGARY, March 12 /CNW/ - Vero Energy Inc. ("Vero" or the "Company")
(TSX-VRO) today filed with Canadian securities authorities its Audited
Financial Statements and Management Discussion and Analysis in respect thereof
for the year ended December 31, 2006. Copies of the filed documents may be
obtained by visiting Vero's website at or through

    2006 Highlights

    -   Fourth consecutive quarter of growth in production, production per
        share, cash flow and cash flow per share.
    -   Vero increased its average daily production from 980 boe/d in the
        fourth quarter of 2005 to 3,301 boe/d in the fourth quarter of 2006
        yielding an increase of 237%.
    -   Exited 2006 at approximately 3,900 boe/d representing a 239% increase
        over the 2005 exit rate of 1,150 boe/d.
    -   Cash flow was $7.8 million ($0.31 per share) for the fourth quarter
        of 2006 and $24.1 million ($0.98 per share) for the year.
    -   Operating netback of $30.04 per boe and cash flow netback of
        $26.92 per boe.
    -   Net earnings were $1.0 million resulting in $0.04 (basic and diluted)
        earnings per share.
    -   Drilled 35 wells (21.0 net) in 2006 with a 91% success rate.
    -   Proved reserves of 6,037 mboe at December 31, 2006 resulting in
        finding and development costs of $18.06 per boe.
    -   Proved plus probable reserves of 8,120 mboe at December 31, 2006 or
        $14.39 per boe in finding and development costs.

    2007 UPDATE

    -   Currently ahead of Company forecasts for the first quarter. We now
        expect the first quarter average production to be 4,200 to
        4,300 boe/d.
    -   Currently producing approximately 4,400 boe/d based on field
    -   Received preliminary approval to increase the bank line of credit to
        $70 million.

    Financial and operational highlights for the quarter and year ended
December 31, 2006 with data for the sixty days of operations ended December
31, 2005 were as follows:

    Financial                                                    (60
    ($000's except                Q4      Q3       %     YTD    days)      %
    per share amounts)          2006    2006  Change    2006    2005  Change
    Production revenue        14,846  11,436      30  43,948   4,212     943
    Cash flow from
     operations                7,835   6,280      25  24,103   1,896   1,171
      Per basic share           0.31    0.24      29    0.98    0.20     390
      Per diluted share         0.31    0.24      29    0.98    0.20     390
    Net earnings                 688      16   4,200   1,035     665      56
      Per basic share           0.03       -       -    0.04    0.07     (43)
      Per diluted share         0.03       -       -    0.04    0.07     (43)
    Capital expenditures
     (net)                    17,966  15,556      15  56,867  13,875     310
    Net debt                  49,540  39,409      26  49,540   8,031     517

    Share Capital (000's)
    Basic, weighted average   25,907  25,907       -  24,145   9,379     157
    Basic, end of period      25,907  25,907       -  25,907  19,021      36
    Fully diluted             28,228  28,228       -  28,228  20,621      37

    Daily Sales Volumes
    Natural gas volumes
     (mcf/d)                  15,247  12,424      23  10,891   3,786     188
    Light oil (boe/d)            299     306      (2)    324     271      20
    Liquids (boe/d)              460     336      37     314      78     303
    Corporate (boe/d)          3,301   2,713           2,453     980     150

    Average Prices Realized
    Natural gas ($/mcf)         7.77    6.21      25    7.17   12.60     (43)
    Light Oil ($/bbl)          62.32   77.52     (20)  72.15   63.84      13
    Liquids ($/bbl)            52.63   69.70     (24)  60.43   66.83     (10)
    Corporate ($/boe)          48.89   45.82       7   49.08   71.65     (32)

    Netbacks ($/boe)
    Operating                  29.27   28.38       3   30.04   44.88     (33)
    Cash flow                  25.80   25.16       3   26.92   32.24     (17)

    Wells drilled
    Gross                          8      11     (27)     35       6     483
    Net                          5.3     6.2     (15)   21.0     3.8     453

    (1) 2005 data is for the sixty days of operations from November 2, 2005
        to December 31, 2005.


    2006 was the first full year of operations for Vero. In 2006 the Company
grew average daily production 239% from 1,150 boe/d at the beginning of the
year to exit the year at 3,900 boe/d. The majority of this production growth
was through the drill bit. It was also partially attributable to the corporate
acquisition completed in February which brought approximately 850 boe/d to the
production base. Gas production averaged 10.9 mmcf/d and the associated
liquids averaged 314 boe/d while crude oil averaged 324 boe/d. Even though the
industry faced the challenges of a extended break-up, a environment of higher
than normal service costs, and declining gas prices, the Company turned in a
very productive year. Vero averaged 2,453 boe/d for the year and exited the
year meeting its latest, increased, 2006 guidance of 3,800 to 4,000 boe/d. The
successful drilling program yielded significant growth in proved and probable
reserves and this translated directly into Vero's strong financial results.
Operating netbacks averaged just over $30 per boe during the year resulting in
$24.1 million in cash flow and $0.98 in cash flow per basic weighted average
share. The reduction in netbacks from 2005 was almost exclusively attributable
to the decline in gas prices during 2006.
    Capital expenditures totaled $56.9 million with $36.1 million of this
amount being spent on drilling. A portion of this amount reflects the
inflationary pressures exerted by the service sector on the industry due to
high activity levels. $5.3 million was invested in land and seismic data
during the year. This is a continuation of the Company's strategy of
developing prospects internally and achieving growth through the drill bit.
Facility spending totaled $15.6 million, which was indicative of the Company's
drilling success. Vero's finding and development costs (before future capital)
were $18.06 per boe for total proved reserve additions and $14.39 per boe for
total proved plus probable reserve additions (see Management Discussion and
Analysis for full finding and development costs).

    2007 OUTLOOK

    Vero continues to have a solid financial and operational base going
forward into 2007. Guidance for 2007 is to spend $50 million and increase
production 20-25% over the 2006 year end exit rate which equates to a 2007
exit of 4,700 - 4,900 boe/d. The first quarter will be our busiest to date as
we are drilling approximately 17 (10.9 net) wells. Production is expected to
average between 4,200 and 4,300 boe/d and exit the quarter between 4,450 and
4,550 boe/d. This equates to an increase of approximately 30% from the fourth
quarter of 2006 in terms of production volumes and production per share. This
growth profile has allowed Vero to stand out amongst its peers. In the second
quarter the company will strategically suspend non critical field work in an
effort to control costs due to an expected long break up, and then return to
its capital program in the second half of the year. In total the company plans
to drill approximately 40 (24 net) wells in the year.
    Expanding Vero's drillable inventory is a priority. To this end, current
net undeveloped land stands at approximately 68,000 acres. In addition, Vero
has recently entered into various farm-in deals, with well commitments, that
provide access to an additional 16,500 gross acres of undeveloped land focused
primarily in our main core area of Edson. Subsequent to the earning
commitment, Vero will have approximately 50% net working interest in these
lands. The Company has increased its undeveloped land base throughout 2006 and
2007 while moving in excess of 17,000 net acres to the developed category.
Vero has therefore been able to maintain its two years or more of drilling
    With significant reserve additions in 2006 and 2007 to date, the Company
has recently concluded discussions with its bank, the Canadian Imperial Bank
of Commerce, to increase its operating line of credit to $70 million subject
to final approvals. In addition, Vero recently entered into a costless collar
for 5,000 gigajoules per day covering the period from April 1 through
October 31, 2007. The floor is $7.00 per gigajoule and the ceiling is $8.80
per gigajoule and will assist in securing the capital program. Vero will
continue to manage its cash flows to ensure we maintain financial flexibility.
The Company currently estimates that it has sufficient resources to meet its
2007 capital program.


    Below is selected financial statement information for 2006. For full
disclosure of financials statements with notes and the Management, Discussion
and Analysis, please visit our website or SEDAR.


    Consolidated Statements of Operations and Retained Earnings
    (thousands, except per share data)
                                                  For the
                                                 year ended    September 23
                                                December 31,  to December 31,
                                                    2006           2005

      Production revenue                             43,948            4,212
      Royalties                                     (10,749)          (1,083)
      Interest                                           94                -
                                                     33,293            3,129

      Operating                                       5,564              401
      Transportation                                    734               90
      General and administrative                      1,750              439
      Stock-based compensation                        2,056              103
      Interest and bank charges                       1,434               11
      Depletion, depreciation and accretion          22,125              876
                                                     33,663            1,920

    (LOSS) INCOME BEFORE INCOME TAXES                  (370)           1,209

      Current                                          (292)             292
      Future                                         (1,113)             252
                                                     (1,405)             544

    NET EARNINGS                                      1,035              665

    RETAINED EARNINGS, BEGINNING OF PERIOD              665                -


    RETAINED EARNINGS, END OF PERIOD                  1,700              665
      Basic                                            0.04             0.07
      Diluted                                          0.04             0.07


    Consolidated Balance Sheets
    As at December 31,

                                                      2006             2005
      Cash and cash equivalents                           -           12,523
      Accounts receivable                            15,308            6,013
      Prepaid expenses and deposits                   1,089              155
                                                     16,397           18,692

    Property and equipment                          135,427           34,207
    Future income tax benefit                             -              232
    Goodwill                                         15,034
                                                    166,858           53,131

      Accounts payable and accrued
       liabilities                                   30,286            9,988
      Taxes payable                                       -              292
      Bank debt                                      35,651                -
                                                     65,937           10,280

    Asset retirement obligations                      1,785              380
    Future income taxes                              10,567                -
                                                     78,289           10,660
      Share capital                                  84,710           41,703
      Contributed surplus                             2,159              103
      Retained Earnings                               1,700              665
                                                     88,569           42,471
                                                    166,858           53,131


    Consolidated Statements of Cash Flows
                                                  For the
                                                 year ended    September 23
                                                December 31,  to December 31,
                                                    2006           2005

      Net earnings                                    1,035              665
      Adjustments for:
        Depletion, depreciation and accretion        22,125              876
        Future income taxes                          (1,113)             252
        Stock-based compensation                      2,056              103
                                                     24,103            1,896

      Changes in non-cash working capital            (7,883)          (4,037)
                                                     16,220           (2,141)

      Increase in bank debt                          17,131                -
      Proceeds from private placement, net of
       share issue costs                             12,061            6,052
      Proceeds from warrant exercises                     -           14,338
                                                     29,192           20,390

      Corporate acquisition                         (18,887)               -
      Additions to petroleum and natural
       gas properties                               (57,026)         (13,847)
      Disposals of petroleum and natural
       gas properties                                   300                -
      Additions to administrative assets               (141)             (27)
      Changes in non-cash working capital            17,819            8,148
                                                    (57,935)          (5,726)
     AND CASH EQUIVALENTS                           (12,523)          12,523

     OF PERIOD                                       12,523                -

    CASH AND CASH EQUIVALENTS, END OF PERIOD              -           12,523

    Vero Energy Inc. is a Calgary based oil and natural gas exploration and
development company. Vero's common shares trade on The Toronto Stock Exchange
under the symbol "VRO". The latest corporate presentation will be posted in
the next few days on the Vero Energy Inc. website at
    This press release shall not constitute an offer to sell or a
solicitation of an offer to buy the securities in any jurisdiction. The common
shares of Vero will not be and have not been registered under the United
States Securities Act of 1933, as amended, and may not be offered or sold in
the United States, or to a U.S. person, absent registration or applicable
exemption therefrom.

    Forward Looking Statements: Certain information regarding the Company in
this news release including management's assessment of future plans and
operations, production estimates, drilling inventory and wells to be drilled,
timing of drilling and tie-in of wells, productive capacity of new wells,
capital expenditures and the timing thereof, may constitute forward-looking
statements under applicable securities laws and necessarily involve risks
including, without limitation, risks associated with oil and gas exploration,
development, exploitation, production, marketing and transportation, loss of
markets, volatility of commodity prices, currency fluctuations, imprecision of
reserve estimates, environmental risks, competition from other producers,
inability to retain drilling rigs and other services, the timing and length of
plant turnarounds and the impact of such turnarounds and the timing thereof,
delays resulting from or inability to obtain required regulatory approvals and
ability to access sufficient capital from internal and external sources. As a
consequence, the Company'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
events anticipated by the forward-looking statements will transpire or occur,
or, if any of them do so, what benefits the Company will derive therefrom.
Readers are cautioned that the foregoing list of factors is not exhaustive.
Additional information on these and other factors that could effect the
Company's operations and financial results are included in reports on file
with Canadian securities regulatory authorities and may be accessed through
the SEDAR website (, and the Company's website
( Furthermore, the forward-looking statements contained in
this news release are made as at the date of this news release and the Company
does not undertake any obligation to update publicly or to revise any of the
included forward-looking statements, whether as a result of new information,
future events or otherwise, except as may be required by applicable securities
    BOE Disclosure: Disclosure provided herein in respect of barrels of oil
equivalent (boe) may be misleading, particularly if used in isolation. A boe
conversion ratio of 6 Mcf: 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. Mboe means thousands of barrels of oil
    Non-GAAP terms: this press release contains the terms "cash flow from
operations" and "netbacks" which are not terms recognized under Generally
Accepted Accounting Policies ("GAAP"). The Company uses these measures to help
evaluate its performance as well as to evaluate acquisitions. The Company
considers cash flow from operations a key measure as it demonstrates the
Company's ability to generate funds necessary to repay debt and to fund future
growth through capital investment. Funds generated from operations should not
be considered as an alternative to, or more meaningful than, cash flow from
operating activities as determined in accordance with Canadian GAAP as an
indicator of Vero's performance. Vero's determination of cash flow from
operations may not be comparable to that reported by other companies. The
reconciliation between net income and cash flow from operations can be found
in the statement of cash flows in the financial statements. Vero also presents
funds generated from operations per share whereby per share amounts are
calculated using weighted average shares (basic and diluted) outstanding
consistent with the calculation of net earnings per share, which per share
amounts are calculated under GAAP. The Company considers netbacks as a key
measure as it demonstrates its profitability relative to current commodity
prices. Operating netbacks are calculated by taking total revenues and
subtracting royalties, operating expenses and transportations costs on a per
boe basis. Cash flow netbacks are calculated by taking the operating netback
and subtracting interest costs, and general and administrative costs on a per
boe basis.
    Finding and Development Costs: NI 51-101 gives direction on how finding
and development ("F&D") costs are calculated. The requirement is that
exploration and development costs incurred in the year, plus the change in
estimated future development costs be combined and then divided by the
applicable reserve additions. The calculation excludes the effects of
acquisitions and dispositions on both reserves and costs. Due to the timing of
capital costs and the subjectivity in the estimation of future costs, the
aggregate of the exploration and development costs incurred in the most recent
financial year and the change during that year in estimated future development
costs generally will not reflect total finding and development costs related
to reserve additions for that year. F&D costs (excluding future
capital)exclude the effects of the estimated costs to develop the associated

    %SEDAR: 00022902E

For further information:

For further information: Doug Bartole, President & CEO, at (403)
218-2063; Gerry Gilewicz, Vice-President Finance & CFO, at (403) 693-3170;
Scott Koyich, Investor Relations, (403) 215-5979; Internet:

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