Winstar Reports Q2 2009 Results

    CALGARY, Aug. 13 /CNW/ - Winstar Resources Ltd. ("Winstar" or "the
Company") (TSX: WIX) releases its operating and financial results for Q2 2009.
    Winstar's funds from operations improved significantly during Q2 2009,
relative to the first quarter, essentially because of improved commodity
prices and lower operating costs, as production for the full quarter was
comparable to the quarter before. However production results started to
improve by the end of the second quarter and reached between 2,000 and 2,200
boepd in July and early August.
    On August 11, 2009, the Company announced the execution of a Purchase and
Sale Agreement with a private Canadian company to sell substantially all of
Winstar's Canadian assets for cash consideration of $9.5 million. The sale is
effective September 1, 2009, and is scheduled to close on or about September
2, 2009.
    As at June 30, 2009, Winstar reclassified the Canadian assets as held for
sale. Accordingly, these assets will be reported as discontinued operations in
the second quarter's consolidated interim financial statements. Winstar has
recorded an impairment provision of approximately $2.2 million, primarily
related to the carrying value of the undeveloped land held in Canada. In
addition, Winstar has recorded a future income tax expense of approximately $5
million, which relates primarily to the tax pools which were transferred with
the assets.
    The following table illustrates the difference quarter over quarter in
production, revenue and expenses:

                                 Q2 2009          Q1 2009     Q2/09 vs Q1/09
    Production and sales       1,553 boepd      1,581 boepd         28 boepd
    Average sales price         $    58.00       $    54.00  Increased $7.00
                                $ 000s Cdn       $ 000s Cdn       $ 000s Cdn
    Oil and gas revenue              7,265            6,688    Increased 577
    Royalty (net of
     royalty income)                  (698)            (648)    Increased 49
    Operating cost                  (1,903)          (2,212)   Decreased 309
    General and administrative
     (excluding non-cash stock
     based compensation)            (1,170)          (1,222)    Decreased 53
    Cash income tax                   (485)            (212)   Increased 273
    Other                              460              (36)   Increased 496

    Funds from continuing
     operations                      3,471            2,357
    Funds from discontinued
     operations                        117              219
    Funds from Operations            3,588            2,577  Increased 1,011

    Winstar reported a Q2 loss of $8.1 million, as compared to a loss of $1.0
million for Q1 2009. The Q2 loss is primarily a result of the $7.8 million
loss for discontinued operations. As of June 30, 2009, the Company recorded a
negative working capital of $4.8 million, which is an improvement over the
negative working capital of $6.2 million reported as at March 31, 2009.
Further to the anticipated close of the Canadian asset disposition in
September 2009, the Company expects to have a positive working capital of at
least $7.0 million.
    During Q2 2009, the Company spent $2.3 million on capital expenditures
(all in Tunisia), as compared to $10.4 million (all in Tunisia) in Q1 2009.
Future capital expenditures will be dependent on internally generated cash
flow from operations, continued improvement of the Company's working capital
position, the sale of non-core assets and/or the successful farming out of a
select number of properties where Winstar has a 100% working interest

    Financial and Operating Summary:
    Financial and Operating Results from Continuing and Discontinued
                                Three Months Ended       Six Months Ended
                                      June 30,                June 30,
                              -------                 -------
                                                 %                       %
                                2009    2008  change    2009    2008  change

    Sales and Prices
    Oil and NGL sales (boepd)  1,127   1,634     (31)  1,189   1,346     (12)
    Natural gas sales (mcf/d)  2,556   2,112      21   2,269   2,802     (19)
    Average daily sales 6:1
     (boepd)                   1,553   1,986     (22)  1,567   1,813     (14)
    Average oil and NGL price
     ($/bbl)                   64.41  119.03     (46)  59.09  110.58     (47)
    Average natural gas price
     ($/mcf)                    6.95   11.16     (38)   7.71    9.44     (18)
    Financial from Continuing
     and Discontinued
     Operations ($ thousands,
     except as otherwise
    Oil and gas revenue        8,221  19,847     (59) 15,882  31,911     (50)
    Funds from operations      3,591  11,829     (70)  6,169  19,120     (68)
      Per share - basic and
       diluted                  0.10    0.35     (70)   0.18    0.56     (68)
    Net (loss)/income         (7,855)   (780)    907  (8,888)    588  (1,612)
      Per share - basic and
       diluted                 (0.23)  (0.02)  1,048   (0.26)   0.02  (1,398)
    Capital expenditures       2,295   4,798     (52) 12,704  15,665     (19)
    Working capital at period
     end                      (4,847) 23,044    (123) (4,847) 23,044    (123)
    Common Shares (thousands)
    Weighted average during
      basic                   34,223  34,074       -  34,223  34,048       -
      diluted                 34,223  34,744      (1) 34,223  34,726      (1)
    Outstanding at period
     end                      34,223  34,079       -  34,223  34,079       -

    Financial and Operating Results - Continuing Operations (excludes
    Canadian Operations)
                                Three Months Ended       Six Months Ended
                                      June 30,                June 30,
                              -------                 -------
                                                 %                       %
                                2009    2008  change    2009    2008  change

    Sales and Prices
    Oil and NGL sales (boepd)  1,014   1,507     (33)  1,078   1,216     (11)
    Natural gas sales (mcf/d)  1,507     960      57   1,202   1,616     (26)
    Average daily sales 6:1
     (boepd)                   1,265   1,667     (24)  1,278   1,485     (14)
    Average oil and NGL price
     ($/bbl)                   64.98  119.43     (46)  59.92  111.79     (46)
    Average natural gas price
     ($/mcf)                    9.25   10.72     (14)  10.41    8.98      16
    Financial from Continuing
     Operations ($ thousands,
     except as otherwise
    Funds from operations      3,563  10,791     (67)  6,159  17,528     (65)
      Per share - basic and
       diluted                  0.10    0.31     (66)   0.18    0.50     (64)
    Net (loss)/income            (94)   (575)    (52)   (868)  1,517    (151)
      Per share - basic and
       diluted                     -   (0.02)      -   (0.03)   0.04    (190)
    Capital expenditures       2,296   4,524     (49) 12,677  14,095     (10)

                                 Q2 2009                    Q1 2009
                        Oil and                    Oil and
                         liquid      Gas    Total   liquid      Gas    Total
                         (bbl/d)  (mcf/d)  (boepd)  (bbl/d)  (mcf/d)  (boepd)
    Hungary                   -      294       49        -      453       75
      Chouech Essaida/
       Ech Chouech          689      802      823      827        -      827
      Sabria                237      411      306      209      441      283
      Zinnia/Sanrhar         88        -       88      106        -      106
    Tunisia Total         1,014    1,213    1,216    1,142      441    1,216
    Production from
     Operations           1,014    1,507    1,265    1,142      894    1,291
    Canada                  113    1,050      288      109    1,084      290
    Total Production      1,127    2,556    1,553    1,251    1,978    1,581

    Production during Q2 2009, as expected, was consistent with Q1 2009 but
lower than the 1,719 produced during Q2 2008.
    Production from Winstar's properties in Tunisia during both the first and
second quarters of 2009 averaged 1,216 boepd. Current production of 1,750 to
1,900 boepd is the result of improved gas sales from Chouech Essaida, and
better well performance and reliability.
    Production from Winstar's properties in Alberta during both the first and
second quarters of 2009 was approximately 290 boepd compared with 325 boepd
during Q2 2008.
    Production in Hungary during Q2 2009 averaged 49 boepd compared to 95
boepd in Q2 2008. The propane gas enrichment system installed early in the
first quarter continued to function well. Production continued until June 20
and then it was shut-in during the summer months. Re-starting production by Q4
2009 is subject to reservoir conditions improving and gas prices stabilizing.

    Results, Plans and Perspectives for 2009:

    During Q2 2009, Winstar's capital investment program was lower as the
Company cancelled any discretionary spending in response to continuing and
deepening weakness in natural gas prices. Funds were spent to complete the
Chouech Essaida gas sales pipeline and the associated compression and sales
measurement facilities in April 2009 and the installation of an electrical
submersible pump at Chouech Essaida No. 9 well (CS No. 9).
    The interpretation of the 400 square kilometers of new, high quality 3D
seismic acquired over Winstar's 100% working interest Chouech Essaida and Ech
Chouech concessions has continued to yield excitement and optimism. Today
Winstar has identified over 12 leads and prospects, including the Silurian
Acacus, which are significantly more than was hoped for originally. The
Company has made the strategic decision to find partner(s) for the Ech Chouech
concession to help fund the required drilling campaign to prove up the
potential targets identified by the seismic program.


    Further to the close of the sale of the Canadian assets, Winstar (with
the exception of retaining varying ownership in six gross sections of land in
the Sturgeon Lake area of north central Alberta, with three wells capable of
production) will be exclusively an international production and exploration


    In Hungary, Winstar has identified new and potentially significant
exploration targets within its Igal 11 exploration permit. The Igal 11 acreage
is in the same geologic setting and trend as numerous proven gas and oil
fields directly to the west. Given the large acreage position Winstar holds in
the area, the Company is seeking partners to jointly conduct this exploration


    There were no field operations in the Satu Mare Exploration Permit during
Q2 2009. The Company is actively pursuing the accumulation and interpretation
of available technical data with the intent to be ready for seismic and
drilling operations in 2010.

    Other Matters:
    Stock Option Grant

    On August 13, 2009, the Board of Directors approved the issuance of
355,000 options to employees, officers and directors. The granting and pricing
of the options will be in accordance with the Company's stock option policy
and the requirements of the Toronto Stock Exchange.


    References herein to boe mean barrels of oil equivalent derived by
converting gas to oil in the ratio of six thousand cubic feet (mcf) of gas to
one barrel (bbl) of oil. Boe may be misleading, particularly if used in
isolation. A boe conversion ratio of 6 mcf:1 bbl is based upon an energy
conversion method primarily applicable at the burner tip and does not
represent a value equivalency at the wellhead.

    Non-GAAP Measures

    The Company uses the terms "funds from operations," "funds from
operations per share" and "field operating netbacks" which are not recognized
measures under Canadian generally accepted accounting principles. The Company
uses these measures to help evaluate its performance. Management considers
field operating netbacks an important measure as they demonstrate the
Company's profitability from field operations, before general and
administrative costs, relative to current commodity prices. Field operating
netbacks are calculated as revenue plus international royalty income net of
royalties, operating and current tax expenses. Management uses funds from
operations to analyze performance and considers it a key measure as it
demonstrates the Company's ability to generate the cash necessary to fund
future capital investments and to repay debt. Funds from operations have been
defined by the Company as cash flow from operating activities excluding the
change in non-cash working capital related to operating activities, geological
and geophysical expenses and expenditures on asset retirement obligations and
reclamation. The Company also presents funds from operations per share whereby
amounts per share are calculated using weighted average common shares
outstanding consistent with the calculation of earnings per share. Winstar's
determination of funds from operations may not be comparable to that reported
by other companies nor should it be viewed as an alternative to cash flow from
operating activities, net earnings or other measures of financial performance
calculated in accordance with Canadian GAAP.

    Sales and Seasonality

    Oil and natural gas production is not necessarily equal to sales.
Tunisian oil is transported or pipelined to a terminal for periodic offloading
onto oil tankers. Revenue from tanker sales is recognized only when the sale
occurs. Production during the period is carried in inventory until sold.
Hungarian natural gas is sold on a monthly basis into the local market.
Monthly sales are subject to local market product demand which increases
during the heating seasons of fall and winter and curtails over the warmer
spring and summer seasons.

    Forward-looking Statements

    This press release contains forward-looking statements. These statements
relate to future events or future performance of Winstar. When used in this
press release, the words "may", "would", "could", "will", "intend", "plan",
"anticipate", "believe", "estimate", "predict", "seek", "propose", "expect",
"potential", "continue", and similar expressions, are intended to identify
forward-looking statements. These statements involve known and unknown risks,
uncertainties, and other factors that may cause actual results or events to
differ materially from those anticipated in such forward-looking statements.
Such statements reflect the Company's current views with respect to certain
events, and are subject to certain risks, uncertainties and assumptions. Many
factors could cause the Company's actual results, performance, or achievements
to materially differ from those described in this press release. Should one or
more of these risks or uncertainties materialize, or should assumptions
underlying forward-looking statements prove incorrect, actual results may vary
materially from those described in this press release as intended, planned,
anticipated, believed, estimated, or expected. Specific forward-looking
statements in this press release include, among others, statements pertaining
to the following: factors upon which Winstar will decide whether or not to
undertake a specific course of action; and estimated volumes and timing of
future production; business plans for drilling, exploration and development;
and other expectations, beliefs, plans, goals, objectives, assumptions,
information and statements about possible future events, conditions, results
of operations or performance. The risks to which Winstar is subject include
those of the oil and gas industry in general, including operational risks in
exploring for, developing and producing crude oil and natural gas; risks and
uncertainties involving geology of oil and gas deposits; volatility in global
market prices for oil and natural gas; general economic conditions;
competition; liabilities and risks, including environmental liability and
risks, inherent in oil and gas operations; uncertainties as to the
availability and cost of financing and changes in capital markets;
alternatives to and changing demand for petroleum products; and changes in
legislation and the regulatory environment, including uncertainties with
respect to the Kyoto Protocol. Furthermore, statements relating to "reserves"
or "resources" are deemed to be forward-looking statements, as they involve
the implied assessment, based on certain estimates and assumptions that the
resources and reserves described can be produced profitably in the future. The
forward-looking statements contained in this press release are expressly
qualified in their entirety by this cautionary statement. These statements
speak only as of the date of this press release. The Company does not intend
and does not assume any obligation, to update these forward-looking statements
to reflect new information, subsequent events or otherwise, expect as required
by law.

    Winstar Resources Ltd. is Calgary-based junior oil and gas company, which
explores for, develops, produces, and sells crude oil, natural gas liquids and
natural gas in Tunisia, Canada, Hungary and Romania. Winstar's common shares
trade on the Toronto Stock Exchange under the symbol WIX.
    Winstar's second quarter management discussion and analysis and unaudited
financial statements and notes can be obtained at

For further information:

For further information: Mr. David Monachello, President, Phone (403)
513-4200, Email; or Mr. Charles de Mestral, Chief
Executive Officer, Phone: Toll-free (Canada and USA) 1-800-875-1217 (Note: Mr.
de Mestral is based in Europe, in a time zone eight hours ahead of Calgary
time), Email:; or Mr. Bradley Giblin, Chief
Financial Officer, Phone (403) 513-4207, Email

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