Press release from Marketwire
WestFire Announces Results for the Three Months Ended March 31, 2011
Thursday, May 12, 2011
WestFire Announces Results for the Three Months Ended March 31, 201118:32 EDT Thursday, May 12, 2011CALGARY, ALBERTA--(Marketwire - May 12, 2011) - WestFire Energy Ltd. ("WestFire" or "the Company") (TSX:WFE) is pleased to announce its financial and operating results for the three month period ended March 31, 2011. HighlightsMost active and successful quarter of drilling with 23 (23.0 net) oil wells drilled with no dry holes; Produced 2,773 boe per day during Q1 2011, compared to 2,436 boe per day during Q1 2010, an increase of 14%; Record quarterly funds flow from operations of $6,681 ($0.16 per share) in Q1 2011, an increase of 27% from $5,268 ($0.15 per share) in Q1 2010; Increased the mix of oil and NGL as a percentage of total production to a quarterly record of over 60 percent; and Maintained a strong financial position with net debt of $1.2 million at March 31, 2011 on a current bank line of $42 million. Financial ResultsIn addition to the "Financial and Operating Highlights" table below, the financial statements and related management's discussion and analysis (MD&A) for the period ended March 31, 2011 will be available on the company's website and on the SEDAR website. Three Months Ended March 31,($ thousands except share and production information)20112010FinancialsOil and gas revenues13,68510,818Cash provided by operating activities6,54612,647Funds flow from operations (1)6,6815,268Per share – basic and diluted (1)0.160.15Net income (loss)(1,869)2,418Per share – basic and diluted(0.05)0.07Bank Debt-4,303Working capital deficiency(2)1,19810,375Net debt(3)1,19814,678Capital expenditures (including non-cash)27,27817,450Common shares outstanding – basic44,81135,242Common shares outstanding – diluted45,49935,572Weighted average common shares – basic41,13035,191Weighted average common shares – diluted41,81935,499Sales VolumesOil and NGL (bbls per day)1,6761,076Natural gas (Mcf per day)6,5798,161Barrels of oil equivalent (boe per day) (4)2,7732,436Average selling prices(5)Oil and NGL ($/bbl)74.9871.10Natural gas ($/Mcf)4.015.36Total ($/boe)54.8449.35Netback ($/boe)Revenue54.8449.35Realized derivative gains1.020.94Royalties(5.57)(5.70)Operating expenses(17.42)(15.54)Transportation expenses(1.14)(1.13)Netback(1)31.7327.92(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 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. Operational ReviewWestFire Energy Ltd. embarked on an aggressive drilling program focused entirely on oil projects during the first quarter. Initial production from fifteen of these wells was not realized until the latter part of the quarter, while the remaining eight wells are awaiting completion. Oil volumes continued to build as the new oil wells were brought on stream translating into a quarter over quarter increase of 5%. In the meantime, given current economics, gas volumes were allowed to drop from year end 2010 peaks. Production rates will continue to increase as the remaining wells are brought on stream. On the Viking play 14 (14.0 net) horizontal wells were drilled in the first quarter. Two wells were drilled at Provost with the remainder being drilled at Redwater. The wells drilled at Provost were the initial test wells into this area. Production commenced from these wells the last week in March and rates after 30 days have stabilized at 80 and 40 barrels per day, respectively. At Redwater only nine wells were on production at the end of the quarter. After 30 days average rates of 60 barrels per day were recorded.At Lloydminster, four (4.0 net) Lloydminster horizontal wells and five (5.0 net) Sparky horizontal wells were drilled. The horizontal wells were placed on stream in mid-March.Drilling activities continued through breakup with a further nine (9.0 net) oil wells being drilled in April. Four horizontal oil wells were drilled at Lloydminster and five horizontal Viking oil wells at Redwater. At the same time, completion and tie-ins have continued. Current field reported production is in excess of 3,400 boe per day with oil making up 70 percent of the total. The nine wells drilled in April and four wells drilled in the first quarter will be brought on production over the next several weeks.OutlookThe Company has now developed the Viking resource play to the "manufacturing" stage. Multiple wells are being drilled from padsites which decreases on-stream timelines and increases cost efficiencies. WestFire has two drilling rigs under contract which are currently stacked in the field awaiting the end of spring break up, and a third is contracted and scheduled to start drilling in early June. At Redwater, 13 padsites and 40 well locations are in various stages of preparation while Provost has 11 padsites and 22 well locations in various stages of preparation. Another 27 well locations are being prepared in west central Saskatchewan. Upon completion of the spring break up, the Company is poised to continue executing its capital program. Cautionary StatementsForward-looking information and statements This 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.