The Globe and Mail

Go to the Globe and Mail homepage

Jump to main navigationJump to main content

Globe Investor

News Sources

Take control of your investments with the latest investing news and analysis

Press release from CNW Group

Calvalley provides operations update and second quarter report for the three and six months ended June 30, 2011

Thursday, August 11, 2011

Calvalley provides operations update and second quarter report for the three and six months ended June 30, 201119:00 EDT Thursday, August 11, 2011CALGARY, Aug. 11, 2011 /CNW/ - Calvalley Petroleum Inc., (TSX: CVI.A)HighlightsMaintained production operations in the quarter notwithstanding that the Company's normal product delivery system, westward to the Ras Isa export terminal, was impacted by a pipeline rupture. Calvalley's share of production in the quarter of 1,157 bopd was restricted, initially due to the pipeline disruption, and subsequently to accommodate additional crude oil reprocessing activities at the Company's Central Processing Facility ("CPF").Established access to alternative crude oil marketing facilities to the east of Block 9 by completing the Company's Truck Offloading Facility ("TOF"). The TOF provides the Company an alternative marketing outlet and higher netbacks on its blended crude oil production by accessing the Masila Export Pipeline System ("MEPS") for crude oil exports.Subsequent to the end of the quarter, the Company finalized a crude oil marketing agreement with a third party on behalf of the working interest owners in Block 9. Exports of crude oil will resume in the third quarter.No sales of crude oil occurred in the quarter as product exports at the Ras Isa terminal were curtailed due to the pipeline disruption and access to other marketing outlets were not available to facilitate exports via the MEPS. The Company accumulated inventory both at the CPF as well as at the Masila export terminal.Reported cash flow from operating activities for the six months ended June 2011 of US$4.7 million includes a negative cash flow for the second quarter of 2011 of US$1.6mm (as a result of no crude oil exports in the period) which includes one-time general and administrative charges of US$0.5 million.  The deferred cash flow available from the crude oil inventory at the end of the second quarter is approximately US$4.9 million at current market prices.At Qarn Qaymah, the Company has finalized the assessment of the fractured basement and has identified a program for remedial action which has been prepared and submitted for regulatory approval.At Hiswah, results to date indicate a positive response to the pressure maintenance program initiated in 2010. The Company is now proceeding to obtain government approvals for additional water injection wells.At Ras Nowmah, subsequent to the end of the quarter, the Company brought the Ras Nowmah 2 well on production at a restricted production rate of 1,500 bopd.At Al Roidhat, subsequent to the end of the quarter, the Company has initiated production from two wells and is planning to put additional wells on production during the third quarter. Crude oil from this field is 15 degree API and is being blended with the light crude oil from the Hiswah and Ras Nowmah fields.The business environment in Yemen has been challenging throughout 2011 with supply chain disruptions and product shortages. The effect on Company operations has been mitigated by commissioning the eastern export infrastructure. During the political turmoil several service companies diverted resources to areas outside Yemen and were not available to provide the necessary services for Calvalley's capital projects. The Company has focused on production optimization activities with the Company's share of production volumes in July 2011 averaging approximately 1,900 bopd and in the period August-to-date averaging approximately 2,400 bopd. Subject to the availability of services, the Company plans to drill two development wells and one exploration well before the end of the year.The Company receives a price for its crude oil which is comparable to Dated Brent Crude Price ("Brent"). The price differential between the West Texas Intermediate Price ("WTI") and Brent has grown significantly over the last year with Brent commanding a premium of more than US$20 per barrel over WTI. This premium is providing a significant boost to the Company's netbacks which approximate US$40 per barrel at current market prices.Calvalley has a healthy balance sheet with approximately $60 million in working capital at June 30, 2011. The working capital balance increases to approximately $65 million with the inventory of crude oil valued at current market value rather than cost. As the Company expands its production base in Yemen, cash flow will continue to support increased investment activities and share repurchases.Financial informationSignificant financial information is included in the table below and is discussed further in the Company's Management Discussion and Analysis.(in thousands of US dollars except per share amounts)Three monthsended June 30(1)Six months ended June 302011201020112010Revenue (Gross)-7,49914,41221,948Revenue from crude oil sales (net of royalties and government share of profit oil)(82)4,5648,85813,485EBITDA(2)(1,668)2,2954,2548,366Operating income(2)(1,678)1,6013,4966,222Comprehensive income (loss)(2,613)1,0461,4614,669      Per share(0.03) expenditures4,5832,84211,0796,041Funds flow (used in) from operations(2)(1,541)1,9263,6137,195      Per share(0.02) flow from (used in) operating activities(1,641)3,4574,6868,579(1)On January 1, 2011, the Company adopted International Financial Reporting Standards ("IFRS") for financial reporting purposes, using a transition date of January 1, 2010. The financial statements for the three and six months ended June 30, 2011, including required comparative information, have been prepared in accordance with International Financial Reporting Standards. Unless otherwise noted, 2010 comparative information has been prepared in accordance with IFRS. The adoption of IFRS has not had an impact on the Company's operations, cash flows or strategic decisions. The most significant area of impact was the adoption of the IFRS upstream accounting principles. Further information on the IFRS impacts is provided in the Changes in Accounting Policies Section of the Company's Q2 2011 Interim MD&A filed on   See "Non-IFRS Measures" disclosure in Q2 2011 Interim MD&A filed on www.sedar.comFiling of Reports on SEDARCalvalley's Management's Discussion and Analysis and Unaudited Condensed Consolidated Financial Statements for the three and six months ended June 30, 2011 can be found for viewing by electronic means on The System for Electronic Document Analysis and Retrieval at They can also be found on the Company's website at is listed on the Toronto Stock Exchange, trading under the symbol "CVI.A".THE TORONTO STOCK EXCHANGE HAS NOT REVIEWED AND DOES NOT ACCEPT RESPONSIBILITY FOR THE ADEQUACY OR ACCURACY OF THIS RELEASE.This press release may contain forward-looking statements including, without limitation, financial and business prospects and financial outlooks, and such statements may be forward-looking statements which reflect management's expectations regarding future plans and intentions, growth, results of operations, performance and business prospects and opportunities. Words such as "may", "will", "should", "could", "anticipate", "believe", "expect", "intend", "plan", "potential", "continue", and similar expressions have been used to identify these forward-looking statements. These statements reflect management's current beliefs and are based on information currently available to management. Forward-looking statements involve significant risk and uncertainties. A number of factors could cause actual results to differ materially from the results discussed in the forward-looking statements including, but not limited to, changes in general economic and market conditions and other risk factors. Although the forward-looking statements contained herein are based upon what management believes to be reasonable assumptions, management cannot assure that actual results will be consistent with these forward-looking statements. Investors should not place undue reliance on forward-looking statements. These forward-looking statements are made as of the date hereof.Forward-looking statements and other information contained herein concerning the oil and gas industry and Calvalley's general expectations concerning this industry are based on estimates prepared by management using data from publicly available industry sources as well as from reserve reports, market research and industry analysis and on assumptions based on data and knowledge of this industry which Calvalley believes to be reasonable. However, this data is inherently imprecise, although generally indicative of relative market positions, market shares and performance characteristics. While Calvalley is not aware of any misstatements regarding any industry data presented herein, the industry involves risks and uncertainties and is subject to change based on various factors.   For further information: For additional information, please contact: Edmund Shimoon, Chairman & CEO Gerry Elms, CFO +1 (403) 297-0490