Choice Announces Third Quarter Financials
21:42 EST Tuesday, January 30, 2007
CALGARY, ALBERTA--(CCNMatthews - Jan. 30, 2007) - Choice Resources Corp. (TSX VENTURE:CZE) -
President's message:
For the nine month period ended November 30, 2006;
- The Company participated in 6 wells (2.7 net) during the three month period;
- The success rate was 88% on a net basis;
- Several new discoveries were made in the period at Whitecourt. Two wells (0.8 net) were drilled with a 100% success rate;
- A follow-up well was drilled 100% at Killam and is producing over 200 bpd as of Jan 31st;
- Production averaged 1,739 BOE/d compared to 1,329 BOE/d for the three month period (a 31% increase);
- Production for the nine months averaged 1,565 BOE/d compared to 1,350 BOE/d for the same period last year (a 16% increase);
- Production exceeded 1,830 BOE/d at quarter end and the Company is on target to meet it's 2,100 BOE/d exit rate for its fiscal year end;
- Cash flow from operations was $6.6 mm or $0.09 per share for the nine month period;
- Cash flow for the quarter improved approximately 100% from the Q2 2006 report;
- Operating expenses were $12.53/BOE vs. $13.76/BOE last year for the three month period;
- G&A was $587 m vs. $247 m for the three month period due to costs associated with the merger and the integration of DEEP Resources for a full three month period;
- Bank Debt is $32.3 million due to the merger with DEEP Resources and the accelerated drilling of Killam and Whitecourt;
- The bank credit facility was increased to $42.5 million basic and a $10 million development and acquisition line;
- A 3D seismic program was completed over 60 square miles in the Samson area of Alberta with several drillable prospects defined;
During the quarter the Company focused on adding production and integrating the DEEP assets. The merger, in November contributed about 400 BOE/d to the bottom line and added a significant growth area at Whitecourt. In our exploration portfolio, several new prospects were outlined in the Samson area farm-in covering 39 sections. A second well was drilled at Killam and put on stream late in the quarter. (100% working interest) The previously shot 3D program over this area in combination with the successful drilling to date on the property, has led the Company to plan for the drilling of 2 multi-leg horizontals in the fourth quarter and to plan up to 10 wells in the area for 2007. A further section of land was acquired in the area and the Company now has seven sections of land. (one section is 50% and the remainder is 100% working interest) At Carson creek the Company drilled and cased one well to be completed in the 4th quarter. This is the first well in an 18 section block.
Production was up during the quarter by 31% to 1,739 BOE/d compared to Q3 2005. This is mainly due to the consolidated results for DEEP. For the 9 month period production was up 16%.
Operating costs showed improvement during the period with a reduction of 9% and would have been reduced 15% except for a one time charge of approximately $0.80/BOE. Cash flow at 9 cents per share is below target due to lower natural gas prices. Significant price increases have been experienced lately and the Company will focus on additional near term production in the Killam and Whitecourt areas.
Cash flow from operations decreased on a year over year basis but has doubled from the second quarter 2006 report due to significantly increased prices. As prices improve and additional production is brought on stream the Company should experience significantly increased cash flows.
Our exploration play inventory continues to grow with some exciting new plays in the Whitecourt, Carson Creek, Worsley and Samson areas.
New milestones are expected as new areas are developed and production is brought on stream. Enclosed are the financial statements. Please refer to the associated notes filed on Sedar (in particular the notes to the annual audited statements), the operations summary and the management discussion and analysis.
Gordon D. Harris, President and CEO
Highlights
Third Quarter and Nine months ended November 30, 2006
Financial:
($000 except per unit and where noted)
(Per share #'s are based on the weighted average # of shares issued and
outstanding during the period)
Q3 Q3 YTD YTD
2006 2005 2006 2005
Gross Sales Revenue 6,954 7,892 17,383 19,302
Net Sales Revenue 5,840 6,280 14,390 15,281
Cash Flow 2,790 4,306 6,656 9,078
Per Share (basic) $ 0.03 $ 0.08 $ 0.09 $ 0.17
Per BOE $ 15.66 $ 35.61 $ 14.74 $ 24.46
Net Income 589 2,013 1,101 3,462
Per Share (basic) $ 0.01 $ 0.04 $ 0.02 $ 0.06
General & Administrative Expense 587 247 1,586 1,033
Capital Expenditures 10,839 8,100 22,884 14,074
Net Debt 36,187 8,392
Shares Outstanding (millions)
Weighted Average (basic) 82,303 57,733 72,913 54,822
Operations:
Production
Natural gas & sulphur (MCF/d) 9,474 7,511 8,757 7,679
Liquids (BBL/d) 160 77 106 70
BOE per day 1,739 1,329 1,565 1,350
Prices
Gas $/MCF $ 7.17 $ 10.43 $ 6.23 $ 8.36
Liquids $/BBL $ 44.68 $ 72.35 $ 70.70 $ 69.83
$/BOE $ 43.95 $ 65.27 $ 40.39 $ 52.01
CAUTION REGARDING FORWARD LOOKING STATEMENTS
Certain statements contained herein constitute forward-looking statements. The use of any of the words "anticipate", "continue", "estimate", "expect", "may", "will", "project", "should", "believe", 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. The Corporation believes the expectations reflected in those forward-looking statements are reasonable but no assurance can be given that these expectations will prove to be correct and such forward-looking statements included in this report should not be unduly relied upon. The Corporation does not undertake any obligation to publicly update or revise any forward-looking statements. The Corporation has adopted the standard of 6 Mcf:1 BOE when converting natural gas to BOE. BOEs may be misleading, particularly if used in isolation. A BOE conversion ratio of 6 Mcf:1 BOE is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.
Choice Resources Corp.
Consolidated Balance Sheets
As At November 30, 2006 and February 28, 2006
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November 30 February 29
2006 2006
unaudited audited
Assets
Current Assets
Accounts receivable and prepaid expenses $ 12,763,984 $ 11,327,949
Property, plant and equipment (note 3) 104,151,836 59,823,970
Goodwill 8,878,919 5,030,905
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$ 125,794,739 $ 76,182,824
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Liabilities
Current Liabilities
Cheques in transit $ 2,287,684 $ 1,824,843
Accounts payable and accrued liabilities 14,363,682 24,076,496
Obligation under capital lease - 463,805
Bank Loan 32,300,000 950,000
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48,951,366 27,315,144
Obligation under capital lease -
Asset retirement obligations (note 4) 2,670,541 1,525,300
Future income taxes 14,642,677 11,785,482
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66,264,584 40,625,926
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Shareholders' Equity
Equity instruments (note 5) 58,015,206 36,079,632
Contributed surplus (note 7) 2,612,770 1,676,862
Deficit (1,097,821) (2,199,596)
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59,530,155 35,556,898
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$ 125,794,739 $ 76,182,824
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The accompanying notes are an integral part of the financial statements.
Choice Resources Corp.
Consolidated Statements of Earnings (Loss) and Deficit
Nine Months Ended November 30, 2006 and 2005
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Three Months Ended Nine Months Ended
Nov 30, 2006 Nov 30, 2005 Nov 30, 2006 Nov 30, 2005
Revenue
Oil and
natural gas
sales $ 6,829,385 $ 7,631,728 $ 17,066,210 $ 18,984,516
Processing
Income 124,636 259,804 317,346 317,855
Royalties (1,114,304) (1,611,470) (2,993,713) (4,021,498)
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5,839,717 6,280,062 14,389,843 15,280,873
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Expenses
Production 1,982,482 1,664,016 5,439,311 4,888,999
General and
adminstrative 586,294 247,035 1,586,715 1,033,193
Interest on
bank loan,
loan payable
and capital
lease 480,165 63,230 706,945 281,144
Stock based
compensation
(note 6) 270,500 210,950 534,066 459,700
Depletion,
depreciation
and accretion 1,733,623 1,131,105 4,553,596 3,372,450
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5,053,064 3,316,336 12,820,633 10,035,486
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Earnings
before income
tax 786,653 2,963,726 1,569,210 5,245,387
Income taxes
Future Income
Tax 197,970 950,631 467,435 1,783,431
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Net earnings 588,683 2,013,095 1,101,775 3,461,956
Deficit,
beginning of
period (1,686,504) (5,729,908) (2,199,596) (7,178,767)
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Deficit, end
of period $ (1,097,821) $ (3,716,813) $ (1,097,821) $ (3,716,811)
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Net earnings
per share
Basic $ 0.01 $ 0.04 $ 0.02 $ 0.06
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Fully Diluted $ 0.01 $ 0.04 $ 0.02 $ 0.06
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Weighted
average
number
of shares
outstanding:
Basic 82,302,608 57,773,355 72,913,229 54,822,142
Fully Diluted 82,763,637 60,118,592 73,374,258 57,557,902
FOR FURTHER INFORMATION PLEASE CONTACT:
Choice Resources Corp.
Gordon D. Harris
President and CEO
(403) 216-5821
(403) 216-5828 (FAX)
Email: info@choiceresources.ca
