FYI
Choice Announces Second Quarter Financials
10/27/05
CALGARY, ALBERTA, Oct 27, 2005 (CCNMatthews via COMTEX) --
Choice Resources Corp. (TSX VENTURE:CZE):
Six months ended August 31, 2005
President's message:
For the six month period;
- Net debt inclusive of working capital deficiency is reduced by 75% to $4.31 million
- Bank Debt has been reduced 95% to $0.65 million.
- Interest expense has been reduced 49%
- The Pincher Creek horizontal well was spud in August and completion operations are underway.
- The Company sold 25% of the Pincher Creek field for $6.1 million.
- Earnings are $1.5 million or 3 cents per share.
- Cash flow from operations is up 8% to $4.7 million and on target at 9 cents per share.
- Production averaged 1,360 boe/d after the sale of a non-core property, essentially flat with the previous year period. (Pincher Creek had significant downtime due to a pipeline repair)
- Operating expenses are $3.2 million compared to $3.1 million (Expenses for the period would be reduced 10% without the one time expense of a pipeline repair).
- G&A has increased to$0.79 from $0.59 reflecting the addition of operations staff and an increased effort to significantly increase the play inventory.
- Three development wells and one exploratory well were drilled during the period.
Debt reduction combined with the drilling of the Pincher Creek horizontal well was the primary focus for the last three months. Progress on exploration was also achieved as the Company made plans for an active winter drilling season with drilling of 6 high impact exploratory wells in the Snipe/Wallace area (average working interest will be approximately 50%). The weather continued to cause a delay in the testing and completion of some wells. A 3D seismic program in the Viking area was planned and will be implemented for Q3. The Company expects to drill up to four wells after completion of this program. (average working interest will be 85%)
The Corporation finalized plans to drill a horizontal well at Pincher Creek and the well was spudded in early August. The capital interest is 19% with a before payout interest in production of 30% and an after payout interest of 52.5%. The well as of this report was being prepared for completion and testing after encountering natural gas.
Production was down slightly during the period at 1,360 boe/d after the sale of a 60 b/d property in December last year and repairing a pipeline at Pincher Creek that resulted in the field being shut in for 5 weeks. This was an unusual event and other parts of the field were tested for integrity with no significant corrosion present. Production came back on stream in the third week of August and, while average production was reduced for the period, the flush production combined with increased prices, had a minimal effect on cash flow.
Cash flow at 9 cents per share is essentially on target with internal projections. Significant price increases and approximately 200 bpd behind pipe will be added in the near term to increase cash flow for the remainder of the year. The estimate for the Pincher Creek well is not included in this number and will not be estimated until the well is completed and tested.
Our exploration play inventory continues to grow as land and prospects were added. The Company purchased a partner's interest in the Snipe Lake and Wallace of approximately 20% area for $2 million. The Company's interest in this area ranges from 20% to 70% and a minimum of 6 wells will be drilled this winter. An election was made with Vecta Energy Corp. to drill an Elkton test well at Chambers. This well is expected to spud prior to yearend with a Choice working interest of 25%. (The program uses proprietary acquisition, processing and interpretation).
At the Snipe Lake area, subsequent to the quarter end, road construction was completed into one well to provide year round access for production and to provide access for further drilling opportunities. This well was brought on stream in October at 50 boe/d.
Results to date are excellent and while weather kept production from increasing, several new plays were tested and have set up several exploitation opportunities. 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
