Petrosearch Energy Provides Second Quarter Update
HOUSTON--(BUSINESS WIRE)--Petrosearch Energy Corporation (OTCBB:PTSG - News) filed its Form 10-Q for the quarter ended June 30, 2008 yesterday. While we encourage you to read the entire filed document, this release is intended to summarize some of the significant information and accomplishments since the end of the first quarter of 2008 which are disclosed in our filing.
Accomplishments Since the End of the 1st Quarter – 2008:
Revolving Credit Facility - In April 2008 our revolving credit facility with Fortuna Energy, LP matured and was paid in full to the lender through a payment of $1,602,500. The Company no longer has an outstanding debt related to the revolving credit facility.
Colorado County, Texas - Project Financing - In May 2008 the Company received a full release of all the liens, security interests, rights, claims and benefits of every kind in, on and under the November 2006 Secured Term Note of approximately $7.9 million related to the Kallina 46#1. The debt related to this financing was extinguished and the Company recorded approximately $1 million in ordinary income as a result of derecognizing the interest expense associated with the financing.
Barnett Shale Project – In June, 2008 the Company’s wholly owned subsidiary, Barnett Petrosearch L.L.C., sold its 5.54455% limited partnership interest in DDJET Limited LLP (“DDJET”) to Cinco County Barnett Shale LLC (“Cinco”), one of the other two partners in DDJET, for a cash purchase price of $36,000,000 (an implied value of $650 million for 100% of the DDJET interest). By utilizing the strategic value of the preferential purchase rights associated with their DDJET interest the Company received a significant premium from Cinco versus the initial offer the Company received from a third party offeror. The $36,000,000 purchase price for DDJET equates to a 242% return of the Company’s original investment of $14.9 million in less than 18 months from the formation of the DDJET partnership.
Convertible Note Repayment – In July, 2008 the Company used part of the proceeds from the sale of its DDJET interest to repay all of the $18,775,000 outstanding Convertible Notes.
Summary Financial Result*:
The following is a summary of certain historical financial information from the Form 10-Q for the six months ended June 30, 2008 and 2007:
Six Months Ended June 30 Six Months Ended June 30
2008 2007
Gross Revenues $1,099,898 $736,520
Operating Loss $(1,230,044) $(1,419,632)
Net Income (Loss) $16,454,547 $(3,232,639)
As of June 30, 2008 As of December 31,
2007
Working Capital $35,046,864 $2,238,922
Shares Outstanding 41,770,779 40,941,841
* For more detailed information see our June 30, 2008 Form 10-Q
Operational Update – Water Flood:
North Texas Panhandle Water Flood – The Company is in the first phase of the water flood project which entails the conversion of four existing wells to water injection wells. These conversions will allow the Company to begin enhanced oil recovery and to satisfy its water injection obligations. Two of the first four injection wells for the initial flood pattern have successfully been converted for water injection and the conversion of the final two wells needed to complete the initial pattern is in process. The producing oil well needed for the first phase of the water flood is already in place in the center of the pattern. The water treatment facility that will provide the necessary water for the water flood is nearing completion.
Below is a summary of the estimates of reserves, undiscounted cash flows and present value of the undiscounted cash flows discounted at 10% (PV-10). Based on the third party reserve engineers forecast of production and reserves, and December 31, 2007 capital and lease operating costs and product prices of $120/bo and $10/Mcf, our internal estimate of undiscounted and discounted cash flows net of capital cost, net to Petrosearch as of June 1, 2008 is:
Reserve Category Reserves Net to Petrosearch Interesta
(boe)
Undiscounted Cash Flow net of Capital Cost Cash Flow after Capital Cost Discounted at 10%
(PV-10)
Proved Undeveloped 1,576,664 $ 128,389,000 $ 66,037,000
Probable 2,909,987 $ 304,423,000 $ 142,942,000
Possible 2,530,366 $ 261,839,000 $ 67,123,000
a As of December 31, 2007 - estimated by third party engineering firm
President and CEO of Petrosearch Richard Dole stated, “We are pleased with the financial condition of the Company after the sale of our Barnett Shale project and the other significant transactions we have implemented over the past few months. These transactions provide the Company with a strong balance sheet; including a significant cash balance, no debt obligations (other than current trade payables) and positive stockholders equity. Our financial condition coupled with our significant proved, probable and possible oil and gas reserves puts us in an excellent position to develop our water flood project while we continue to pursue strategic alternatives for the Company.”
