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Press release from Marketwire

Trilogy Energy Corp. Announces Financial and Operating Results for the Quarter and Year-Ended December 31, 2011

Monday, March 05, 2012

Trilogy Energy Corp. Announces Financial and Operating Results for the Quarter and Year-Ended December 31, 201117:08 EST Monday, March 05, 2012 CALGARY, ALBERTA--(Marketwire - March 5, 2012) - Trilogy Energy Corp. (TSX:TET) ("Trilogy") is pleased to announce its financial and operating results for the quarter and year-ended December 31, 2011.FINANCIAL AND OPERATING HIGHLIGHTSTrilogy added 20.6 MMBoe of proved plus probable reserves (including technical revisions) during 2011, replacing 202 percent of produced reserves (190 percent on a proved basis). Reported sales volumes for the 2011 year averaged 28,012 Boe/d compared to 22,788 Boe/d in 2010 representing a 23 percent increase over the annual sales volumes for the prior year. The increase is a result of Trilogy's ongoing success with its Montney horizontal drilling program. Trilogy's production from the Montney oil pool has increased from 5,000 Bbl/d in December 2011 to approximately 10,000 Bbl/d in February 2012, pursuant to the installation of 2 - 8 inch field pipelines. Completion of oil battery expansion projects in the second quarter of 2012 will increase processing capacity in this area to approximately 20,000 Bbl/d. As at the date hereof, total corporate production is over 35,000 Boe/d. Oil volumes increased 57 percent quarter-over-quarter (94 percent 2011 over 2010). Combined oil and natural gas liquids volumes increased to 36 percent of total volumes from 28 percent in the prior quarter (28 percent 2011 from 20 percent in 2010). Net capital expenditures totaled $101.6 million for the fourth quarter of 2011, bringing the year-to-date net capital spending to $349.9 million (including approximately $29.3 million in costs related to the expansion of the Kaybob Montney oil pool infrastructure and $35.3 million in land expenditures for the Kaybob Montney oil and Duvernay mineral rights) compared to $166.0 million in 2010 (which included $31.5 million related to Trilogy's Presley pipeline and Kaybob North Sour Gas Plant expansion projects). In total, 68 (45.7 net) wells were drilled in the year. The estimated value of Trilogy's undeveloped land base increased $66.7 million from $149.1 million in 2010 to $215.8 million in 2011. Finding and development costs(1) were $18.52/Boe for total proved reserves and $17.23/Boe for proved plus probable reserves on net capital expenditures of $349.9 million. Finding and development costs(1) were $14.29/Boe for total proved reserves and $13.25/Boe for proved plus probable reserves on net capital expenditures of $349.9 million less $81.9 million for land and facilities capital related to Trilogy's Montney oil pool and Presley gas pool. Funds flow from operations(1) remained consistent at $60.5 million for the fourth quarter of 2011 as compared to $60.3 million for the previous quarter. Annual funds flow from operations totaled $218.5 million compared to $153.5 million in 2010, representing a 42 percent increase year over year. Trilogy realized a benefit of approximately $20 million from the Aux Sable Liquid Recovery Agreement in 2011. Dividends to Shareholders for the fourth quarter of 2011 were $12.2 million or 20 percent of cash flow from operations ($48.7 million for year-to-date 2011 or 23 percent of cash flow from operations). (1) Refer to Non-GAAP measures in this release and MD&A FINANCIAL AND OPERATING HIGHLIGHTS(In thousand Canadian dollars except per share amounts and where stated otherwise)Three Months EndedYears Ended December 31December 31,September 30,20112011Change%20112010Change%FINANCIALPetroleum and natural gas sales106,478100,4666380,998290,84131Funds flowFrom operations(1)60,49460,312-218,502153,51942Per share - diluted0.510.51-1.841.3338EarningsEarnings (loss) before tax(5,247)19,049(128)25,042145,623(83)Per share - diluted(0.04)0.16(125)0.211.27(83)Earnings (loss) after tax(4,651)14,404(132)17,415178,242(90)Per share - diluted(0.04)0.12(133)0.151.55(90)Dividends declared12,20012,179-48,65649,816(2)Per share0.1050.105-0.4200.435(5)Capital expendituresExploration, development, land, and facility101,72671,47842351,744165,564112Acquisitions (dispositions) and other - net(67)9842(1,865)480(489)Net capital expenditures101,65971,57642349,879166,044111Total assets1,260,3641,209,48741,260,3641,081,44817Net debt(1)490,945424,60416490,945312,09557Shareholders' equity530,445542,010(2)530,445541,119(2)Total shares outstanding (thousands)- As at end of period (2)116,118115,853-116,118114,7171OPERATINGProductionNatural gas (MMcf/d)109125(13)12010910Oil (Bbl/d)6,0893,886573,7591,93594Natural gas liquids (Boe/d)4,0954,397(7)4,2872,70758Total production (Boe/d @ 6:1)28,28829,035(3)28,01222,78823Average prices before financial instrumentsNatural gas ($/Mcf)3.454.04(15)3.884.35(11)Crude Oil ($/Bbl)88.7285.85389.2177.8915Natural gas liquids ($/Bbl)59.1657.96256.9963.53(10)Drilling activity (gross)Gas731333445(24)Oil1511363311200D&A1-1001-100Total wells231464685621(1) Funds flow from operations and net debt are non-GAAP terms. Funds flow from operations represents cash flow from operating activities before net changes in operating working capital accounts. Net debt is equal to long-term debt plus/minus working capital. Please refer to the advisory on Non-GAAP measures below.(2) Excluding shares held in trust for the benefit of Trilogy's officers and employees under the Company's Share Incentive Plan. Includes Common Shares and Non-voting Shares. Refer to the notes to the annual consolidated financial statements for additional information.OUTLOOKAs at the date hereof, production is over 35,000 Boe/d. Trilogy will see approximately half of its capital expenditure budget spent in the first quarter of 2012, as it is currently operating seven rigs and is participating in a number of non-operated joint venture projects. Assuming the continued success of its exploration and development program, Trilogy reaffirms its guidance for 2012 as follows:Average production 40,000 Boe/d Average operating costs $7.00 /Boe Capital expenditures $300 million ADDITIONAL INFORMATIONA copy of Trilogy's 2011 annual report to the Shareholders, including the Management's Discussion and Analysis and audited annual consolidated financial statements and related notes can be obtained at http://media3.marketwire.com/docs/305TET_AR.pdf. This report will also be made available at a later date through Trilogy's website at www.trilogyenergy.com and SEDAR at www.sedar.com.ABOUT TRILOGYTrilogy is a petroleum and natural gas-focused Canadian energy corporation that actively acquires, develops, produces and sells natural gas, crude oil and natural gas liquids. Trilogy's geographically concentrated assets are primarily low-risk, high working interest, lower-decline properties that provide abundant infill drilling opportunities and good access to infrastructure and processing facilities, many of which are operated and controlled by Trilogy. Trilogy's common shares are listed on the Toronto Stock Exchange under the symbol "TET".NON-GAAP MEASURESCertain measures used in this document, including "funds flow from operations", "operating income", "net debt", "finding and development costs", "operating netback" and "payout ratio" collectively the "Non GAAP measures" do not have any standardized meaning as prescribed by IFRS and previous GAAP and, therefore, are considered Non-GAAP measures. Non-GAAP measures are commonly used in the oil and gas industry and by Trilogy to provide shareholders and potential investors with additional information regarding the Company's liquidity and its ability to generate funds to finance its operations. However, given their lack of standardized meaning, such measurements are unlikely to be comparable to similar measures presented by other issuers."Funds flow from operations" refers to the cash flow from operating activities before net changes in operating working capital. The most directly comparable measure to "funds flow from operations" calculated in accordance with IFRS is the cash flow from operating activities. "Funds flow from operations" can be reconciled to cash flow from operating activities by adding (deducting) the net change in operating working capital as shown in the consolidated statements of cash flows. "Operating income" is equal to petroleum and natural gas sales before financial instruments and bad debt expenses minus royalties, operating costs, and transportation costs. "Operating netback" refers to Operating income plus realized financial instrument gains and losses and other income minus actual decommissioning and restoration costs incurred. "Net debt" is calculated as current liabilities minus current assets plus long-term debt. The components described for "operating income", "operating netback" and "net debt" can be derived directly from Trilogy's consolidated financial statements. "Finding and development costs" refers to all current year net capital expenditures, excluding property acquisitions and dispositions with associated reserves, and including changes in future development capital on a proved and proved plus probable basis. "Finding and development costs per Barrel of oil equivalent" ("F&D $/Boe") is calculated by dividing finding and development costs by the current year's reserve extensions, discoveries and revisions on a proved or proved plus probable reserve basis. "Recycle ratio" is equal to "Operating netback" on a production barrel of oil equivalent for the year divided by "F&D $/Boe" (computed on a proved or proved plus probable reserve basis as applicable). Investors are cautioned that the Non-GAAP measures should not be considered in isolation or construed as alternatives to their most directly comparable measure calculated in accordance with IFRS, as set forth above, or other measures of financial performance calculated in accordance with IFRS.FORWARD-LOOKING INFORMATIONCertain information included in this news release constitutes forward-looking statements under applicable securities legislation. Forward-looking statements or information typically contain statements with words such as "anticipate", "believe", "expect", "plan", "intend", "estimate", "propose", "budget" or similar words suggesting future outcomes or statements regarding an outlook. Forward-looking statements or information in this news release pertain to, without limitation: expected average production, average operating costs and capital expenditures for 2011; drilling and construction plans and the timing, cost and expected benefits thereof; among others. Such forward-looking statements or information are based on a number of assumptions which may prove to be incorrect. Such assumptions include: current commodity price forecasts for petroleum, natural gas and natural gas liquids; current reserves estimates; current production forecasts; geology regarding the extent and development potential of Trilogy's assets including, without limitation, the Kaybob area Montney oil pool; the natural gas liquids content of Trilogy's natural gas; continuity of the mutually beneficial agreement with Aux Sable Canada LP; assumptions regarding royalties and expenses and the continuity of government incentive programs and their applicability to Trilogy; operating and other costs; estimates of deferred tax amounts, tax assets and tax pools; drilling results consistent with our expectations; the ability of Trilogy to obtain equipment, services and supplies in a timely manner to carry out its activities; geology applicable to Trilogy's land holdings; the ability of Trilogy and its partners to obtain drilling success consistent with expectations; the ability of Trilogy to market oil and natural gas successfully to current and new customers; the timing and costs of pipeline and facility construction and expansion; the ability to secure adequate product processing, transmission and transportation; and the timely receipt of required regulatory approvals: among others.Although Trilogy 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 Trilogy can give no assurance that such expectations will prove to be correct. Forward-looking statements or information are based on current expectations, estimates and projections that involve a number of risks and uncertainties which could cause actual results to differ materially from those anticipated by Trilogy and described in the forward-looking statements or information. These risks and uncertainties include, but are not limited to: fluctuations of oil, natural gas and natural gas liquids prices; foreign currency, exchange rates and interest rates; volatile economic and business conditions; the ability of management to execute its business plan; the risks of the oil and gas industry, such as operational risks in exploring for, developing and producing crude oil, natural gas and associated by- products and market demand; risks and uncertainties involving geology of oil and gas deposits; risks inherent in Trilogy's marketing operations, including credit risk; the uncertainty of reserves estimates and reserves life; the uncertainty of estimates and projections relating to future production, costs and expenses; uncertainty in amounts and timing of royalty payments and applicability of and change to royalty regimes and government incentive programs including, without limitation, the Natural Gas Deep Drilling Programs and the Drilling Royalty Credit Program; potential delays or changes in plans with respect to exploration or development projects or capital expenditures; the availability of financing; Trilogy's ability to secure adequate product, processing, transmission and transportation; Trilogy's ability to enter into or renew leases; health, safety and environmental risks; the ability of Trilogy to add production and reserves through development and exploration activities; weather conditions; the possibility that government policies, regulations or laws, including without limitation those relating to the environment and taxation, may change or regulatory approvals may be delayed or withheld; risks associated with existing and potential future lawsuits and regulatory actions against Trilogy; uncertainty regarding aboriginal land claims and co-existing local populations; hiring/maintaining staff; the impact of market competition; and other risks and uncertainties described elsewhere in this document or in Trilogy's other filings with Canadian securities authorities.The forward-looking statements and information contained in this news release are made as of the date hereof and Trilogy undertakes no obligation to update publicly or revise any forward-looking statements or information, whether as a result of new information, future events or otherwise, unless so required by applicable securities laws.Refer to Trilogy's Management's Discussion and Analysis for additional information on forward-looking information.OIL AND GAS ADVISORYThis news release contains disclosure expressed as "Boe", "Boe/d", "Mcf/d", "MMcf/d", "Bbl" and "Bbl/d ". All oil and natural gas equivalency volumes have been derived using the ratio of six thousand cubic feet of natural gas to one barrel of oil. Equivalency measures may be misleading, particularly if used in isolation. A conversion ratio of six thousand cubic feet of natural gas to one barrel of oil is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the well head. For fiscal 2011, the ratio between the average price of West Texas Intermediate ("WTI") crude oil at Cushing and NYMEX natural gas was approximately 24:1 ("Value Ratio"). The Value Ratio is obtained using the 2011 WTI average price of $95.12 (US$/Bbl) for crude oil and the 2011 NYMEX average price of $4.05 (US$/MMbtu) for natural gas. This Value Ratio is significantly different from the energy equivalency ratio of 6:1 and using a 6:1 ratio would be misleading as an indication of value.FOR FURTHER INFORMATION PLEASE CONTACT: J.H.T. (Jim) RiddellTrilogy Energy Corp.Chief Executive OfficerORJ.B. (John) WilliamsTrilogy Energy Corp.President and Chief Operating OfficerORM.G. (Michael) KohutTrilogy Energy Corp.Chief Financial OfficerOR1400 - 332 - 6th Avenue S.W.Trilogy Energy Corp.Calgary, Alberta T2P 0B2(403) 290-2900(403) 263-8915 (FAX)www.trilogyenergy.com