Vero gains 83% in production volumes and 66% in cash flow in the second quarter


    CALGARY, Aug. 8 /CNW/ - Vero Energy Inc. ("Vero" or the "Company")
(TSX-VRO) today filed with Canadian securities authorities its Financial
Statements and Management Discussion and Analysis in respect thereof for the
three and six month periods ended June 30, 2007 and 2006. Copies of the filed
documents may be obtained through or by visiting Vero's website
    Vero is pleased to report on its second quarter 2007 results. Significant
growth was realized in revenues, net earnings, cash flow and production. The
Company continues its march towards the exit rate of 5,000 - 5,200. Following
are some of the key highlights from the second quarter.

    Second Quarter 2007 Highlights

    -   Increased average daily production 83% to 4,290 boe/d in the second
        quarter of 2007 from 2,350 boe/d in the second quarter of 2006. For
        the year-to-date, there was a 131% increase in daily volumes to 4,359

    -   Average July production based on field estimates is approximately
        4,700 boe/d.

    -   Cash flow from operations increased 66% to $9.7 million or $0.32 per
        share (diluted).

    -   Production revenue increased to $20.1 million, an increase of 90%
        over the second quarter of 2006.

    -   Achieved an operating netback of $29.04 per boe and cash flow netback
        of $24.82 per boe.

    -   Closed a $19.2 million equity financing on April 5.

    -   Exited the quarter at just over $43 million in net debt yielding a
        1.1 times, annualized, debt to cash flow ratio.

    -   Added a new 100% owned compression facility in the Edson area.

    -   Upgraded the 100% owned Corbett compression facility.

    Financial and operating highlights for the three and six month periods of
2007 with comparisons to the three and six month periods of 2006 are as

                                      Three Months ended    Six months ended
                                             June 30,            June 30,
     Financial ($000's except   ---------------------------------------------
      per share amounts)         2007     2006     %     2007     2006     %
    Production revenue         20,051   10,571    90   40,459   17,667   129
    Cash flow from operations   9,693    5,854    66   20,197    9,988   102
      Per basic share            0.33     0.23    43     0.74     0.43    72
      Per diluted share          0.32     0.23    39     0.73     0.43    70
    Net earnings                  502       79   535    1,224      331   270
      Per basic share            0.02        -     -     0.04     0.01   300
      Per diluted share          0.02        -     -     0.04     0.01   300
    Capital expenditures, net   5,621   12,322   (55)  32,519   42,232   (23)
    Net debt                   43,172   30,133    43   43,172   30,133    43

    Share Capital (000's)
    Basic, weighted average    28,743   25,603    12   27,333   23,249    18
    Basic, end of period       28,911   25,907    12   28,911   25,907    12
    Fully diluted              31,347   28,083    12   31,347   28,083    12

    Daily Production
    Natural gas volumes
     (mcf/d)                   20,930   10,057   108   21,075    7,898   167
    Light oil (boe/d)             292      381   (23)     316      345    (9)
    Liquids (boe/d)               510      293    74      531      229   132
    Corporate (boe/d)           4,290    2,350    83    4,359    1,891   131

    Average Prices
    Natural gas ($/mcf)          7.99     6.70    19     8.11     7.34    10
    Light Oil ($/bbl)           68.28    80.61   (15)   65.02    74.06   (12)
    Liquids ($/bbl)             65.24    61.80     6    60.38    61.50    (2)
    Corporate ($/boe)           51.36    49.44     4    51.28    51.62    (1)

    Netbacks ($/boe)
    Operating                   29.04    30.00    (3)   29.42    31.93    (8)
    Cash flow                   24.82    27.38    (9)   25.60    29.18   (12)

    Wells drilled
    Gross                           1        8   (88)      18       16    13
    Net                           0.3      3.8   (92)    11.2      9.6    17

    (1) Cash flow from operations is calculated as cash provided by
        operating activities from the statement of cash flows, adding change
        in non-cash working capital and asset retirement expenditures. Cash
        flow from operations is used to analyze the Company's operating
        performance and leverage. Cash flow from operations does not have a
        standardized measure prescribed by Canadian Generally Accepted
        Accounting Principles and therefore may not be comparable with the
        calculations of similar measures for other companies.
    (2) All barrels of oil equivalent conversions use 6 mcf to 1 barrel of
    (3) Operating netback equals total revenue less royalties, transportation
        and operating costs calculated on a per boe basis. Operating netback
        and cash flow from operations netback do not have a standardized
        measure prescribed by Canadian Generally Accepted Accounting
        Principles and therefore may not be comparable with the calculations
        of similar measures for other companies.


    Another quarter of solid financial results put Vero in a strong financial
position in the face of a volatile commodity price market. Daily sales volumes
rose to an average of 4,290 boe/d in the second quarter from 2,350 boe/d in
the same quarter of 2006. The largest contributor to the increase was a 108%
increase in natural gas production stemming from successive drilling efforts
in the Company's core areas. For the year-to-date, Vero realized a 131%
increase in production volumes, 129% increase in revenues and a 102% increase
in cash flows. As planned, Vero spent only $5.6 million during the second
quarter as the spending was more concentrated towards the first quarter. The
Company chose to spend aggressively on its drilling program in the first
quarter in anticipation of a lengthy break-up at the beginning of the second
quarter. By focusing more of our capital plan on the first quarter as opposed
to the second quarter, Vero was able to reduce costs by minimizing
inefficiencies associated with conducting major field operations during
periods when well sites were too wet to access or provincial roads bans
prevented us from accessing them.
    Cash flow for the second quarter was just under $9.7 million, yielding
$0.32 per share on a diluted basis. The significant increase in cash flow was
lead mainly by increased production levels. Furthermore, the higher levels of
production were instrumental in lowering our operating cost per boe from the
$6.05 in the second quarter of 2006 to $5.87 in the current quarter. The end
result for the quarter was net earnings of $502 thousand or $0.02 for the
quarter (basic and diluted).
    Vero has maintained a strong, but flexible balance sheet. Net debt of the
Company at June 30, 2007 was $43.2 million. The Company anticipates being well
within or better than the industry average with respect to the net debt to
cash flow ratio. Vero's net debt to cash flow ratio currently sits at
approximately 1.1 to 1 based on annualized second quarter cash flow. The clean
balance sheet gives Vero optimal flexibility to expand its organic drilling
program and to also take advantage of new opportunities as they present


    Edson, Alberta

    Edson is Vero's largest producing property where 1 (0.3 net) wells were
drilled and cased in the second quarter. Production in this area averaged
2,890 boe/d (86% natural gas) in the quarter. Production was slightly lower
than anticipated due to unexpected downtime at a non-operated plant through
which the majority of Vero's production is processed. In addition, a pipeline
leak occurred in the major sales transmission line leaving the area. The
production primarily targets the Rock Creek and Manville zones at 2,400-2,500
meters in depth and is characterized by gas with a very high liquid content,
which can generate volumes of up to 30 bbls/mmcf. We are planning to drill
approximately 22 (13.2 net) wells in 2007 which equates to at over 50% of our
capital program for the year.
    Currently there are 5 (4.4 net) horizontal producing wells and our plans
are to drill 5 (3.4 net) additional horizontal wells in 2007. During the
quarter Vero installed a 100% owned compressor to alleviate the increase in
pipeline pressures. Another compressor is currently planned to be installed
late in the second half of this year.
    Vero's acreage in the area consists of 29,920 gross (12,561 net)
developed acres and 21,440 (11,455 net) undeveloped acres. It is anticipated
that in due course, a majority of the acreage will have at least two wells per
section. Therefore, the undeveloped acreage does not tell the whole story of
the potential of this area. The Company moved 5,440 gross (3,824 net)
undeveloped acres into developed categories in the past year by drilling
successful wells. In addition, the Company has been successful in increasing
its future inventory with farm-in agreements for well commitments to earn
approximately 11,360 gross (5,680 net) undeveloped acres.

    Wilson Creek

    Wilson Creek is Vero's second largest producing area and is mainly an
exploitation property. Production was an average of 484 boe/d (56 % natural
gas) in the second quarter. The oil is light and sweet (42 degrees API). This
area has the highest netbacks in the Company's portfolio at approximately
$35/boe. Production from certain wells was down for over a month due to an
unanticipated turnaround of a midstream gas processing facility. Those wells
were back to their full productive capability in the first week of July.
    The future potential in this area is with the implementation of a
water-flood in the Belly River oil pool. Submissions and applications to the
regulatory bodies for the use of source water for the project have been made.
If approved, a submission for the water flood will follow. Equipment has been
purchased to start the flood which Vero believes will be implemented in late
2007 to early 2008. Vero believes this project has the potential to
substantially increase the current production and recoverable reserves from
this pool. Currently, no incremental production from this project is factored
into the Company's forecasted production for 2007. Furthermore, no incremental
reserves have been booked on any of the potential upside from the flood even
though simulations and reservoir analysis have shown a probability of
increased recovery factors.


    Production in the Whitecourt area for the second quarter of 2007 was an
average of 450 boe/d (92% natural gas). Both oil and gas wells that required
trucking of fluids were shut-in at various times in the quarter due to spring
    In the second half of this year we will reduce the number of originally
planned locations to approximately 4 (2.4 net) as we focus on our other major
core area. The area has a number of target zones ranging in depths from 500 to
1,700 meters. An application has been submitted to the regulators for reduced
spacing on some of the tighter sands in the area which would allow the Company
to produce from two wells per section.
    Vero has been able to expand its land base in Whitecourt over the past
year and currently has approximately 37,600 gross undeveloped acres with an
average working interest of 82%.


    Production averaged 330 boe/d (65% natural gas) in the first quarter.
Production was down slightly in the quarter due to an expected turnaround of
the third party sales gas transmission system in the area; an unexpected shut
down in the sales gas line due to a break; and wells temporarily shut-in due
to an inability to haul sales products during break-up. In the second quarter
the company upgraded compression at our 100% owned facility. Construction
started on a water disposal facility as we received approval from the
regulatory body for our water disposal well. When the facility becomes fully
operational operating costs in the area will be reduced.
    The company is planning an active program here in the second half of the
year where three, 100% working interest wells are planned and two wells will
be contingent on those results. The 100% owned facility in Corbett is the only
one of its kind in the area and Vero is already generating third party revenue
from it. These other operators are predominately drilling for coal bed methane
("CBM") and while this is not Vero's primary focus in this area, the results
of these projects will be monitored as the Company does own the CBM rights on
the majority of the Company's lands in the area.
    Vero currently controls 26,398 gross acres in this area.

    Alberta - Other

    Total current production in Vero's non-core areas averaged 136 boe/d (67%
natural gas) in the second quarter. Vero plans to drill approximately 5 (3.6
net) wells during the rest of 2007. One well with a depth of approximately
3,600 meters has recently been spudded. Vero's lands in Central Alberta have
low-risk; shallow gas targets with potential for up to thirteen follow up
locations once the reduced spacing applications are approved.
    Vero also has higher risk, higher reward exploration plays of various
depths in its portfolio. There is geophysical and geological work currently
being done on the Company's high impact Devonian Leduc prospect. This work
includes the purchase of 25.6 km(2) of three-dimensional seismic data, which
is currently being evaluated. The prospect is structurally complex, due to the
proximity of the Rocky Mountains. With the significant cost of a 4,700 meter
well, Vero will require additional geological work to be done prior to
drilling. A recent discovery in the area is currently producing 88 mmcfd; has
recovered 50 bcf in less than two years, and is estimated to contain
approximately 250 bcf.
    Vero has 32,154 gross acres in its non-core areas in Alberta.


    After a longer and more severe spring break-up than expected, Vero is
pleased to report it is back on track and July production (based on field
estimates) averaged over 4,700 boe/d (81% natural gas).
    The Company plans an aggressive second half of the year as demonstrated
by the drilling and casing of 5 (3.2 net) wells in the third quarter.
Currently we have two operated drilling rigs working, one in Edson, and one in
Corbett There is one non-operated rig drilling in Whitecourt. We are planning
on keeping the Edson rig busy for the remainder of the year. In Corbett, we
have received down-spacing approval and coupled with continuation of lands, we
have started a three well program with two contingent wells. The Company has
been busy completing the recently drilled wells and tieing-in the previously
completed wells. In mid-June Vero sent out notification to build a 20 mmcfd
gas facility in Edson, with a potential start up date in the fourth quarter.
This project is in the final application and evaluation phases.
    Vero has approximately 25 (16.2 net) wells to drill over the remainder of
the year and is expected to spend its board approved $60 million exploration
and development capital budget. This includes the Company increasing the
number of planned, gross, horizontal wells in Edson from three to four wells
to six to eight wells. Accelerating our horizontal well projects is based on
the attractive returns realized from the five currently producing horizontal
wells in the area. One horizontal well that was drilled in the first quarter
is currently producing and a second well is currently in the final drilling
stages. We continue to high-grade our projects to ensure that we get the best
return on capital and maintain one of the strongest balance sheets within our
peer group.
    Doug Bartole, President and CEO of Vero, stated that "In these
challenging times, sticking to the game plan of per share growth is of
paramount importance. We heavily weighted our capital program to the first
quarter wherein we spent in excess of $24 million, followed by a slower second
quarter where our cash flow exceeded our spending. We were therefore able to
exit the second quarter at just over $43 million in net debt." He also adds
"We continue to be in the top quartile in controllable costs and with the
completion of the equity financing in April and the strong cash flow from the
second quarter, we are well positioned both financially and operationally to
continue with the game plan of reaching our year-end exit rate of 5,000 -
5,200 boe/d."
    We appreciate the continued support of our shareholders, Board of
Directors, and employees and look forward to your continued support and
reporting our results in the future.

    Douglas J. Bartole
    President and Chief Executive Officer


    Below is selected financial statement information for the three and six
month periods ended June 30, 2007 and 2006. For full disclosure of financial
statements with their accompanying notes and the Management, Discussion and
Analysis, please visit our website or SEDAR.

    Balance Sheet
    (in thousands of dollars)
                                                     June 30,   December 31,
                                                        2007           2006
                                                  (unaudited)      (audited)
      Accounts receivable                             11,094          15,308
      Prepaid expenses and deposits                    1,074           1,089
      Risk management asset                              733               -
                                                      12,901          16,397

    Property and equipment                           150,442         135,427
    Goodwill                                          15,034          15,034
                                                     178,377         166,858

      Accounts payable and accrued liabilities       17,301           30,286
      Bank debt                                      38,772           35,651
                                                     56,073           65,937

    Asset retirement obligations                      1,954            1,785
    Future taxes                                     11,336           10,567
                                                     69,363           78,289

      Share capital                                 103,080           84,710
      Contributed surplus                             2,970            2,159
      Retained Earnings                               2,964            1,700
                                                    109,014           88,569
                                                    178,377          166,858


    Statement of Operations, Comprehensive Income and Retained Earnings
    For the three and six months ended June 30,
    (in thousands of dollars, except per share data)(unaudited)
                                     Three months ended      Six months ended
                                           June 30               June 30
                                       2007       2006       2007       2006
      Production revenue             19,896     10,571     40,304     17,667
      Realized gain on risk
       management activities            155          -        155          -
                                     20,051     10,571     40,459     17,667
      Royalties                      (5,816)    (2,712)   (11,462)    (4,345)
      Unrealized gain on risk
       management activities            733          -        733          -
      Interest and other                  -          -          -         89
                                     14,968      7,859     29,730     13,411

      Operating                       2,292      1,293      4,804      2,107
      Transportation                    603        153        978        286
      General and administrative      1,108        566      1,803        859
      Stock based compensation          392        520        818        892
      Interest and bank charges         539        301      1,215        463
      Depletion, depreciation
       and accretion                  8,766      6,106     17,673      9,496
                                     13,700      8,939     27,291     14,103

     TAXES                            1,268     (1,080)     2,439       (692)

      Current                             -       (308)         -       (292)
      Future                            726       (851)     1,175       (731)
                                        726     (1,159)     1,175     (1,023)

     COMPREHENSIVE INCOME               542         79      1,264        331

     OF PERIOD                        2,422        917      1,700        665

     PERIOD                           2,964        996      2,964        996

      Basic                            0.02          -       0.05       0.01
      Diluted                          0.02          -       0.05       0.01

    Statement of Cash Flows
    For the three and six months ended June 30,
    (in thousands of dollars, except per share data)(unaudited)
                                    Three months ended      Six months ended
                                           June 30               June 30
                                       2007       2006       2007       2006

      Net earnings                      542         79      1,264        331
      Adjustments for:
        Unrealized gain on risk
         management activities         (733)         -       (733)         -
        Depletion, depreciation
         and accretion                8,766      6,106     17,673      9,496
        Future income taxes             726       (851)     1,175       (731)
        Stock-based compensation        392        520        818        892
                                      9,693      5,854     20,197      9,988
      Changes in non-cash working
       capital                         (269)      (440)    (4,662)    (5,197)
                                      9,424      5,414     15,535      4,791

      Increase (decrease) in
       bank debt                     (9,477)    (3,745)     3,121      3,033
      Proceeds from issuance of
       common shares, net of share
       issue costs                   17,935     12,102     17,935     12,061
      Stock option exercises             21          -         21          -
                                      8,479      8,357     21,077     15,094

      Corporate acquisition               -          -          -    (18,887)
      Additions to petroleum and
       natural gas properties        (5,603)   (12,573)   (30,016)   (23,520)
      Purchase of petroleum and
       natural gas properties             -          -     (2,478)         -
      Disposal of petroleum and
       natural gas properties             -        300          -        300
      Additions to administrative
       assets                           (17)       (49)      (24)       (125)
      Changes in non-cash working
       capital                      (12,283)    (1,449)   (4,094)      9,824
                                    (17,903)   (13,771)  (36,612)    (32,408)

     EQUIVALENTS                          -          -         -     (12,523)

     BEGINNING OF PERIOD                  -          -         -      12,523

     END OF PERIOD                        -          -         -           -

    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". Please view the Vero Energy website at for the latest corporate presentation and details of
anticipated 2007 operations.
    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. The Company considers corporate netbacks as a key
measure as it demonstrates its profitability relative to current commodity
prices. 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 outstanding consistent
with the calculation of net earnings per share, which per share amount is
calculated under GAAP.

    %SEDAR: 00022902E

For further information:

For further information: Doug Bartole, President & CEO, at (403)
213-2063; Gerry Gilewicz, Vice-President Finance & CFO, at (403) 693-3170;
Scott Koyich, Investor Relations, (403) 215-5979; Internet:

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