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Press release from Marketwire

WestFire Announces Results for the Nine Months Ended September 30, 2010

Wednesday, November 10, 2010

WestFire Announces Results for the Nine Months Ended September 30, 201018:54 EST Wednesday, November 10, 2010CALGARY, ALBERTA--(Marketwire - Nov. 10, 2010) - WestFire Energy Ltd. ("WestFire" or the "Company") (TSX:WFE) is pleased to announce its financial and operating results for the three and nine month period ended September 30, 2010.FINANCIAL AND OPERATING HIGHLIGHTSIn addition to the "Financial and Operating Highlights" table below, the consolidated financial statements and related management's discussion and analysis (MD&A) for the period ended September 30, 2010 will be available on the company's website and on the SEDAR website.----------------------------------------------------------------------------Financial Three Months Ended Nine Months Ended September 30, September 30,($'s except share and production information) 2010 2009 2010 2009----------------------------------------------------------------------------Oil and gas revenues 9,956,500 4,270,959 30,065,092 13,272,125Cash provided by operating activities 5,851,961 1,671,070 15,621,430 3,997,073Funds flow from operations(1) 4,017,045 681,355 13,831,048 4,721,606 Per share - basic (1) 0.11 0.03 0.38 0.21 Per share - diluted 0.10 0.03 0.38 0.21Net income (loss) (2,303,709) (1,811,984) (1,918,725) (5,193,067) Per share - basic and diluted (0.06) (0.07) (0.05) (0.23)Bank Debt 7,959,883 4,732,139Working capital deficiency(2) 13,841,490 3,137,276Net debt(3) 21,801,373 7,869,415Capital expenditures (including non-cash) 25,033,406 6,749,855 65,164,884 16,080,945Common shares outstanding - basic 39,040,315 26,512,730 39,040,315 26,512,730Common shares outstanding - diluted 39,134,031 26,512,730 39,200,132 26,512,730Weighted average common shares - basic 39,035,858 26,512,730 37,009,179 22,967,349Weighted average common shares - diluted 39,129,574 26,512,730 37,168,996 22,967,349Sales Volumes Oil and NGL (bbls per day) 1,214 453 1,103 491 Natural gas (Mcf per day) 7,336 5,610 7,875 5,536 Barrels of oil equivalent (boe per day) (4) 2,437 1,388 2,415 1,414Average selling prices(5) Oil and NGL ($/bbl) 66.21 63.77 67.99 53.75 Natural gas ($/Mcf) 3.80 3.13 4.46 4.01 Total ($/boe) 44.42 34.99 45.59 34.39Netback ($/boe) Revenue 44.42 33.44 45.59 34.39 Realized derivative gains 3.59 3.45 2.47 6.84 Royalties (5.28) (3.37) (4.87) (4.01) Operating expenses (21.27) (23.12) (17.48) (18.67) Transportation expenses (0.99) (1.07) (1.11) (1.12)---------------------------------------------------------------------------- Netback(1) 20.47 9.33 24.60 17.43----------------------------------------------------------------------------1. Non-GAAP (generally accepted accounting principles) measure. See "Non- GAAP Measurements in WestFire's MD&A. 2. Working capital deficiency does not include the current portion of the risk management contracts or the future tax asset or the current portion of bank debt. 3. Net debt includes bank indebtedness and working capital deficiency. 4. Six thousand cubic feet of natural gas is equivalent to one barrel of oil. 5. The average selling prices reported are before realized derivatives gains (losses) and transportation charges. WestFire Energy Ltd. started to build production volumes during the third quarter of 2010 with a target year-end exit rate of approximately 3,600 barrels of oil equivalent per day (boepd) with greater than 60% being oil and NGL. Despite being slowed by unusually wet weather this summer, the Company was able to accomplish the following:-- Produced 2,437 boepd during Q3 2010, compared to 1,388 boepd during Q3 2009, an increase of 76%; -- Increased the mix of oil and NGL as a percentage of total production to 50% during Q3 2010 from 33% during Q3 2009. -- Funds flow from operations increased 489% to $4,017,045 ($0.11 per share) during Q3 2010 from $681,355 ($0.03 per share) during Q3 2009; -- Reduced net general and administration expenses per boe by 40% to $1.89 in Q3 2010 from $3.17 in Q3 2009; -- Successfully drilled 18 (16.3 net) wells with no dry holes during Q3 2010; -- Maintained a strong financial position with net debt of $21.8 million at September 30, 2010 on WestFire's $42 million bank line; -- Completed dispositions of non-core assets which resulted in net proceeds of $6.7 million of which $0.8 million of cash was received before September 30, 2010 and the remaining $5.9 million of cash was applied against net debt during October, 2010; -- Continued to advance Viking light oil horizontal drilling and completion techniques reducing net on-stream costs to $1.2 million per well, while improving well productivities; and -- Increased Viking play land inventory to 252 (237 net) sections from 183 (161 net) sections at year-end 2009 through acquisitions, Crown land sales and farm-in agreements. This translates into a future drilling inventory in excess of 900 potential horizontal Viking oil locations, based on four wells per section. Operational ReviewWestFire drilled a total of 18 (16.3 net) wells during the third quarter resulting in 17 (15.6 net) oil wells and one (0.7 net) gas well. Unusually wet weather this summer impeded field operations and delayed commencement of production from the new wells. Production rates will continue to increase as these wells are brought on stream.On the Viking play, ten (9.2 net) horizontal wells were drilled in the third quarter. The initial 30 day average production rate from five of these wells was 85 boepd per well which was limited by pumping equipment. The Company is monitoring the ongoing performance of these wells and will consider upsizing the pumping equipment as required.OutlookThe Company expects to complete its 2010 capital program of $80 million during the fourth quarter of 2010 by drilling an additional 14 (14 net) wells targeting oil. This will bring the total well count to 53 (47.7 net) wells drilled during 2010. Wet spring and summer weather delayed the production additions from these wells and consequently the Company revised its 2010 guidance for average production to 2,600 boepd from 2,750 boepd. The Company remains on track to exit 2010 at its forecasted production rate of 3,600 boepd (greater than 60% oil and NGL), which is 71% higher than our 2009 exit rate. This will result in year-end debt of approximately $29 million which should be less than one year's forward cash flow. WestFire has a bank line of $42 million which will be reviewed in May 2011 for possible increase.WestFire will continue its methodical approach in advancing its Viking horizontal drilling and completion techniques. To date, the Company has drilled 35 (31.5 net) horizontal wells. Sufficient production history has been established from 30 of these wells to determine an initial 30 day average production rate of 60 boepd, comprised of 95% oil. In addition, net on-stream costs have been reduced even though the average number of frac stages has been increased. WestFire continues to believe that technological advancement, improvement in operational techniques and overall knowledge of the resource will lead to further productivity gains and cost improvements.The Company is well positioned to execute its business strategy with an extensive, resource-based drilling inventory focused on the Viking formation.Cautionary StatementsForward-looking information and statementsThis news release contains certain forward-looking information and statements within the meaning of applicable securities laws. The use of any of the words "expect", "anticipate", "continue", "estimate", "may", "will", "project", "should", "believe", "plans", "intends" and similar expressions are intended to identify forward-looking information or statements. In particular, but without limiting the forgoing, this news release contains forward-looking information and statements pertaining to the following; the timing for completion and equipping of wells; the volume and product mix of WestFire's oil and gas production; 2010 production guidance, per share growth, the number of wells to be drilled and potential development drilling and number of potential horizontal Viking oil development locations.In addition, forward-looking statements or information are based on a number of material factors, expectations or assumptions of WestFire which have been used to develop such statements and information but which may prove to be incorrect. Although WestFire believes that the expectations reflected in such forward-looking statements or information are reasonable, undue reliance should not be placed on forward-looking statements because WestFire can give no assurance that such expectations will prove to be correct. In addition to other factors and assumptions which may be identified herein, assumptions have been made regarding, among other things: results from drilling and development activities consistent with past operations; the continued and timely development of infrastructure in areas of new production; continued availability of debt and equity financing and cash flow to fund WestFire's current and future plans and expenditures; the impact of increasing competition; the general stability of the economic and political environment in which WestFire operates; the timely receipt of any required regulatory approvals; the ability of WestFire to obtain qualified staff, equipment and services in a timely and cost efficient manner; drilling results; the ability of the operator of the projects in which WestFire has an interest in to operate the field in a safe, efficient and effective manner; the ability of WestFire to obtain financing on acceptable terms; field production rates and decline rates; the ability to replace and expand oil and natural gas reserves through acquisition, development and exploration; the timing and cost of pipeline, storage and facility construction and expansion and the ability of WestFire to secure adequate product transportation; future commodity prices; currency, exchange and interest rates; regulatory framework regarding royalties, taxes and environmental matters in the jurisdictions in which WestFire operates; the ability of WestFire to successfully market its oil and natural gas products that all necessary regulatory approvals will be obtained as and when required, that there will be no material adverse change in the Company's affairs or laws, rules or regulations relating to the Company, its securities or business, there will be no regulatory proceedings involving the Company or any of its directors or officers, or any cease trade or other order prohibiting or restricting trading in the Company's securities, no major national or international event will have occurred that has or would reasonably be expected to have a material adverse effect on financial markets or the business, operations or affairs of the Company.The forward-looking information and statements included in this news release are not guarantees of future performance and should not be unduly relied upon. Such information and statement, including the assumptions made in respect thereof, involve known and unknown risks, uncertainties and other factors that may cause actual results or events to defer materially from those anticipated in such forward-looking information or statements including, without limitation: changes in commodity prices; changes in the demand for or supply of WestFire's products; unanticipated operating results or production declines; changes in tax or environmental laws, royalty rates or other regulatory matters; changes in development plans of WestFire or by third party operators of WestFire's properties, increased debt levels or debt service requirements; inaccurate estimation of WestFire's oil and gas reserve and resource volumes; limited, unfavorable or a lack of access to capital markets; increased costs; a lack of adequate insurance coverage; the impact of competitors; and certain other risks detailed from time-to-time in WestFire's public disclosure documents, (including, without limitation, those risks identified in this news release and WestFire's Annual Information Form filed on SEDAR).The forward-looking information and statements contained in this news release speak only as of the date of this news release, and WestFire does not assume any obligation to publicly update or revise any of the included forward-looking statements or information, whether as a result of new information, future events or otherwise, except as may be expressly required by applicable securities laws.BOE EquivalentBarrel of oil equivalents or BOEs 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.FOR FURTHER INFORMATION PLEASE CONTACT: Lowell JacksonWestFire Energy Ltd.President and CEO(403) 718-3601(403) 261-9658 (FAX)ORStephen BurttWestFire Energy Ltd.Vice President Finance and CFO(403) 718-3603(403) 261-9658 (FAX)The Toronto Stock Exchange has neither approved nor disapproved the information contained herein.