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AvenEx Energy Corp. Announces Fourth Quarter and Year End 2011 Results, Reserve Information & April 2012 Monthly Dividend Declaration
Thursday, March 29, 2012
AvenEx Energy Corp. Announces Fourth Quarter and Year End 2011 Results, Reserve Information & April 2012 Monthly Dividend Declaration21:05 EDT Thursday, March 29, 2012CALGARY, ALBERTA--(Marketwire - March 29, 2012) - FOURTH QUARTER & YEAR END 2011 RESULTS SUMMARYAvenEx Energy Corp. ("AvenEx" or the "Company") (TSX:AVF) is pleased to announce the financial and operational results for the fourth quarter and year ended December 31, 2011 and to announce they have filed the complete Management Discussion and Analysis, the Audited Consolidated Financial Statements and the Annual Information Form. Certain selected financial and operational information is set out below and should be read in conjunction with AvenEx's consolidated financial statements and related Management Discussion and Analysis. These filings will be available on the Corporation's SEDAR profile at www.sedar.com.TOTAL CONSOLIDATED FINANCIAL SUMMARYFor the three months endedFor the year endedDecember 31December 31(in thousands of dollars except for per share%%amounts)20112010Change20112010ChangeTotal Revenue$278,487$179,15955$1,009,548$628,14761Funds From Operations (FFO)1$14,251$13,1388$52,999$44,47819FFO Per Share1 - Basic$0.27$0.270$1.00$1.01(1)Dividends$7,217$5,68127$31,085$28,7688Dividends Per Share - Basic$0.14$0.1217$0.58$0.65(11)Dividend Payout Ratio251%43%1959%65%(9)Net Income$(30,066)$(26,885)(12)$(2,744)$(21,693)87Net Income Per Share - Basic$(0.56)$(0.56)0$(0.05)$(0.49)90Total Assets$491,280$423,14416$491,280$423,14416Working Cap. excluding assets held for sale$(51,024)$(30,026)(70)$(51,024)$(30,026)(70)Mortgages (assets held for sale)$3,141$5,634(44)$3,141$5,634(44)Wtd. Avg. Shares Outstanding - Basic53,454,02148,386,7631053,140,50944,148,42920Shares Outstanding53,475,54652,783,690153,475,54652,783,69011 Funds from Operations ("FFO"), FFO per share are not recognized measures under International Financial Reporting Standards ("IFRS"). FFO is calculated by taking cash provided by operating activities on the statement of cash flows adjusted for the effect of changes in non-cash working capital and asset retirement costs incurred. Management believes that these measures are useful supplemental measures to analyze operating performance as they demonstrate AvenEx Energy Corp.'s ("AvenEx" or the "Corporation") ability to generate the FFO necessary to fund future dividends and capital investments. AvenEx's method of calculating these measures may differ from other issuers, and accordingly, they may not be comparable to measures used by other issuers. Investors should be cautioned that these measures should not be construed as an alternative to net income, cash flow from operating activities or other measures of financial performance calculated in accordance with IFRS.2 Dividend Payout Ratio is calculated by dividing the Monthly Dividends by the FFO. During the year ended 2011 there were thirteen dividends declared versus eleven in 2010. In the fourth quarter of 2011 there were three dividends declared versus two in the fourth quarter of 2010.3As a result of the conversion from a trust to a corporation AvenEx now refers to common shares, shareholders and dividends which were formerly referred to as trust units, unitholders and distribution under the trust structure.The Corporation's fourth quarter 2011 operating results were ahead of the prior year as higher oil prices and strong crude-by-rail activity offset significantly lower natural gas prices and lower natural gas production volumes in the fourth quarter. For the quarter ended December 31, 2011, the Corporation had net loss of $30.1 million, Funds from Operations of $14.3 million and dividends of 51% of Funds from Operations. This compares to the fourth quarter of the previous year, where the Corporation had net loss of $26.9 million, Funds from Operations of $13.1 million and distributions of 43% of Funds from Operations. For the year ended December 31, 2011, the Corporation had a net loss of $2.7 million (2010 - net loss of $21.7 million), Funds from Operations of $53.0 million (2010 - $44.5 million) and dividends of 59% (2010 - 65%) of Funds from Operations. The payout ratio continued to track our annual 60% target. For the year ended 2011, the Oil & Gas Division provided 70% of the Funds from Operations, with 29% coming from Elbow River and 1% from the Real Estate and the Corporate Divisions. The Corporation's net loss was primarily due to the recognition of an impairment charge of $23.9 million in the fourth quarter reflecting the impact of forecasted lower natural gas prices on gas weighted cash-generating units (CGU's) under IFRS.In the Oil and Gas Division, fourth quarter 2011 production averaged 2,235 Bbls/d of crude oil and natural gas liquids (NGL) up 3% from the 2,170 Bbls/d in the corresponding quarter of 2010, as 2011 drilling replaced production and natural decline. For the year ended 2011, crude oil and natural gas liquids production averaged 2,256 Bbls/d versus the 2010 average production of 1,646 Bbls/d reflecting the impact of the Great Plains acquisition in the fourth quarter of 2010. Natural gas production however, was down 15% at 15,540 Mcf/d from the prior year's fourth quarter 2010 levels of 18,192 Mcf/d, as flush production declines and limited capital expenditures on natural gas projects impacted production volumes. For the year ended 2011, natural gas averaged 16,737 Mcf/d up 20% from the prior year average reflecting the impact of the fourth quarter acquisition in 2010. On a BOE/D basis production averaged 4,825 BOE/D flat to the previous quarter of 4,888 BOE/D but down from the 5,201 BOE/D in the fourth quarter of 2010. Quarterly production volumes were split 46% oil and NGL and 54% natural gas. Fourth quarter 2011 oil and NGL prices were $88.56 up 21% over the previous year corresponding quarter. For the fourth quarter of 2011, after hedging, natural gas prices were $3.77 per Mcf down 17% from the previous year. Natural gas prices for the year ended December 2011 averaged $4.20 per Mcf for natural gas down 21% from 2010. 2010 benefited from a natural gas hedging program at a significantly higher price than currently available and in place in 2011. The Corporation was able to benefit from a hedging program that added approximately an 11% premium to the 2011 average market price of around $3.77 per Mcf. The Corporation was able to hedge about 25% of its 2012 natural gas production at average prices of $5.25 but a portion of those hedges come off in the second quarter of 2012. Operating netbacks for the fourth quarter of 2011 increased to $25.20 per BOE versus $24.39 per BOE in the comparable period last year as higher oil prices were offset by lower natural gas prices, higher royalties and operating costs. The Great Plains properties acquired in late 2010 have higher royalties and incurred a large third party processing adjustment in the quarter that increased costs by about $0.72 per BOE for the quarter.In 2011, capital activity was focused on oil opportunities with 27 out of 28 gross wells drilled for oil targets predominately in the Beaverhill Lake, Viking, Cardium and Slave Point formations. AvenEx participated in the non- operated horizontal drilling of the Beaverhill Lake in Deer Mountain Unit #2 and the Viking in the Eagle Lake Unit for a total of 16 gross (1.2 net) wells. In East Pembina, three horizontal (2 net) horizontal Cardium wells were placed on production in mid-October having met the Corporation's expectations with average daily rates of 155 BOE/D in the first 90 days of production. In the Randell area, delineation of the Slave Point resource was initiated in the first quarter of 2011 with the drilling of two 600 meter horizontal wells. Both wells have proved productive with only acid squeeze stimulations averaging 46 Bbls/d in the first 6 months of production. A third horizontal well was drilled in the fourth quarter with a multi-stage frac stimulation planned for the first quarter of 2012. Further to the development activities, AvenEx spent $6.3 million on land purchases in 2011 in the continuing effort to enhance the oil portfolio. In total, 7,490 hectares of land were purchased at crown land sales on which the Corporation believes several Slave Point oil resource plays to exist in both the Randell and Cranberry areas. AvenEx, in the first quarter of 2011, also closed a $9.3 million oil asset acquisition in its core Grand Forks area.For the year ending December 31, 2011, the Corporation produced a total of 1,842 MBOE from the asset base. The combined working interest and royalty interest proved plus probable petroleum and natural gas reserve additions from development and acquisition activities ("FD&A") as per the year end independent reserve report was 1,854 MBOE resulting in a 101% production replacement. As a result of the forecast gas pricing as of December 31, 2011, the Corporation had negative revisions of 337 MBOE to the proved plus probable natural gas reserves. Including all capital expenditures, asset acquisitions and changes in future development costs, the Corporation booked $52.4 million in 2011 yielding an FD&A cost of $28.29 per BOE on a working interest proved plus probable basis. Included in the total year capital expenditures are land and seismic acquisitions of $6.8 million which accounted for 14% of the capital spending in 2011. Calculation of the total proved plus probable FD&A costs without land and seismic results in $24.62 per BOE with a recycle ratio of about 1.4 times.Elbow River's fourth quarter results were in line with management expectations and ahead of the comparable quarter in 2011 with Funds from Operations of $5.2 million versus $3.9 million in 2010. The fourth quarter, which is traditionally one of Elbow River's strongest, benefited from strong crude-by-rail shipments, improved growth in heavy fuel oils, short-term strength in ethanol margins and the final receipt of US ethanol credits. Crude oil has become Elbow River's second largest sales commodity and additional tank cars, staff, processes and working capital are being allocated to this product area. With the limited crude oil takeaway capacity in some producing regions and the wide differential between Brent and WTI pricing, crude oil sales by rail was strong. Offsetting the strength in the crude and heavy fuel oil segments was weaker propane sales than the previous two years as North America experienced a much warmer than usual 2011-2012 winter heating season.Elbow River's first quarter is traditionally one of the stronger quarters for Elbow River with seasonal propane and butane sales. For the first quarter of 2012, spot propane sales have been weaker than the prior two years due to mild temperatures, but propane and butane sales have continued to be supported by stronger term sales. Crude-by- rail continues to experience strong demand and should support a solid first quarter of 2012 as Elbow River moves to take advantage of its rail expertise in this product offering.The Corporation continues with an active disposition process of its real estate portfolio in order to focus on its more energy related divisions. In the fourth quarter 2011, two theatre properties sold for gross proceeds of approximately $2.5 million which were used to repay all the Landmark mortgages. Two portfolio properties remain; an industrial property in Ontario and a Western Canadian theatre property. Properties are still expected to be sold in 2012 with funds generated on the sales used to pay off mortgages and the balance redeployed by initially paying down bank debt. The real estate portfolio continues to be 100% leased and performs as expected.AvenEx continues to hold about 328,000 EnerVest Diversified Income Trust units for investment purposes. It is expected that the Corporation will sell the balance of these units over the next few months with the proceeds used to reduce bank debt or fund capital expenditures.First Quarter 2012 UpdateThe Corporation combines the cash flows of a junior oil and gas producer with an energy marketing company to target a dividend payout ratio of approximately 60% of Funds from Operations. As the energy marketing company does not require a reinvestment of capital, funds can be allocated to oil and gas projects or paid out in dividends. Elbow River continues to deliver 2012 results in line with expectations with upside potential in crude-by-rail opportunities. In 2011, AvenEx increased its split of oil and natural gas liquids to natural gas production as a percentage of BOE/D to 46% and it is increasing that percentage further in 2012 as funds are allocated only to oil projects. While oil prices have held relatively firm, natural gas prices in the first quarter of 2012 have declined significantly compared to 2011 with recent daily pricing of sub $1.70 per gigajoule and a forecast 2012 balance of year price of just over $2.00 per gigajoule. Natural gas hedges have sheltered the price impact on about 25% of our natural gas production but the hedges will continue to roll off throughout 2012 beginning in April. Given the low natural gas prices and the pace to date of adding additional oil and natural gas liquid BOEs, the Oil & Gas Division cash flow is now forecast to be more than 20% below 2011 levels. 2012 oil and gas capital expenditures will continue to target oil prospects although the Corporation may move to reduce its exposure in some of its newer more capital intensive Slave Point resource plays in order to support its balance sheet strength.April 2012 Dividend DeclarationThe AvenEx Board of Directors reviews the dividend level monthly, based on the Corporation's expected cash flows, forecast commodity prices, and balance sheet strength with a targeted dividend payout ratio of 60% of Funds from Operations. Based on the current outlook for continued very low natural gas prices the Board of Directors has set the April 2012 dividend, payable May 15, 2012, at $0.035 per share. This is a reduction from $0.045 per share for the March 2012 dividend, payable on April 15, 2012. AvenEx remains committed to paying a sustainable monthly dividend.For Canadian resident shareholders the dividend declared is designated as an "eligible dividend" for the purposes of the Income Tax Act (Canada) and any similar provincial legislation.Oil and Natural Gas ReservesIn accordance with National Instrument 51-101 - Standards of Disclosure for Oil and Gas Activities ("NI 51-101"), McDaniel & Associates Consultants Ltd. ("McDaniel") prepared the a report dated March 2, 2012, evaluating the crude oil, natural gas, natural gas liquids and sulphur reserves of the Corporation as at December 31, 2011 (the "McDaniel Report"). The tables below are a summary of the Corporation's oil, NGL and natural gas reserves and the net present value of future net revenue attributable to such reserves as evaluated in the McDaniel Report based on forecast price and cost assumptions. The information set forth below is prepared in accordance with standards contained in the Canadian Oil and Gas Evaluation Handbook ("COGEH") and the reserves definitions contained in NI 51-101 and the COGEH.Reserves Data - Forecast Prices and Costs Summary of Oil and Gas ReservesGross Reserves (1)Net Reserves(2)Light and Medium Crude OilHeavy OilNatural Gas LiquidsNatural GasLight and Medium Crude OilHeavy OilNatural Gas LiquidsNatural GasMbblsMbblsMbblsMmcfMbblsMbblsMbblsMmcfProvedDevelopedProducing3,227.21,152.2166.321,833.52,633.71,071.1113.618,780.0Developed Non-Producing53.705.81,025.839.603.7856.3Undeveloped288.759.41010,071.6244.952.98.68,843.3Total Proved3,569.61,211.5182.132,930.92918.21,124.0125.928,479.7Total Probable1,635.5300.577.715,030.11,288.3274.850.612,178.3Total Provedplus Probable(3)5,205.11,512.1259.747,961.04,206.51,398.9176.540,658.0Notes:Gross reserves include working interest reserves before deduction of royalties but do not include royalty interest reserves. Net reserves include working interest reserves less the deduction of royalties plus royalty interest reserves. Some totals may differ slightly due to rounding. Net Present Value of Future Net Revenue of Oil and Gas Reserves(1)Before Future Income Tax Expenses and Discounted at0%5%10%15%(M$)(M$)(M$)(M$)ProvedDeveloped Producing236,780191,138161,320140,425Developed Non-Producing3,9443,4673,0722,745Undeveloped17,53410,1575,2551,859Total Proved258,257204,762169,647145,029Total Probable138,92385,31758,21042,639Total Proved plus Probable397,180290,079227,857187,667Notes:1. Estimated values do not represent fair market value.Reserves ReconciliationThe following table sets forth a reconciliation of the Corporation's total proved, probable and proved plus probable working interest and royalty interest reserves as at December 31, 2011 against such reserves as at December 31, 2010 based on forecast price and cost assumptions.Total Working Interest and Royalty Interest Oil EquivalentProvedProbableProved PlusReservesReservesProbableMBOEMBOEMBOEOpening Balance December 31, 201010,9194,51715,436Extensions/Infill Drilling374202576Improved Recovery80339842Technical Revisions144(207)(63)Economic Factors(256)(81)(337)Acquisitions42082502Dispositions(2)(1)(3)Production(1,842)0(1,842)Closing Balance December 31, 201110,5614,55115,112Economic factors in the year end 2011 reserves reconciliation are defined as the downward revision to the natural gas reserves as a result of the reduction in the gas price forecast used by McDaniel at December 31, 2011 as compared to December 31, 2010.Properties With No Attributed ReservesThe following table summarizes the gross and net acres of unproved properties in which the Corporation has an interest. The Corporation does not have any properties that are unproductive at this time.The following table sets out the Corporation's undeveloped land holdings as at December 31, 2011:Undeveloped AcresGrossNetAlberta204,351112,944British Columbia121,21767,986Saskatchewan24,1109,645Total349,679190,575The Corporation estimates the value of this land at approximately $30.1 million based on third party evaluations by effective December 31, 2011.2010 Drilling ActivityThe following table summarizes the Corporation's drilling results for the year ended December 31, 2011.2011GrossNetOil269.4Natural Gas10.2Coal bed methane00Dry & Abandoned10.2Total289.7Finding and Development CostsThe following table summarizes the finding and development ("F&D") and the finding, development and acquisition ("FD&A") costs of AvenEx for 2011 and the three year average from 2009 to 2011:2011Three Year AverageTotalTotalProvedProvedTotalplusTotalplusProvedProbableProvedProbableFinding and DevelopmentExplore and Develop (M$)33,16133,16172,84272,842Change in Future Capital (M$)7693,23316,31118,998Total (M$)33,93036,39489,15391,840Reserve Additions (MBOE)1,3201,3555,1395,515F&D Excluding Future Capital ($/BOE)25.1224.4714.1713.21F&D Including Future Capital ($/BOE)25.7026.8617.3516.65Finding, Development and AcquisitionExplore and Develop (M$)49,20949,209200,228200,228Change in Future Capital (M$)7693,23325,28834,643Total (M$)49,97852,442225,516234,871Reserve Additions (MBOE)1,7391,8548,92011,368FD&A Excluding Future Capital($/BOE)28.3026.5422.4517.61FD&A Including Future Capital ($/BOE)28.8428.2925.2820.66AvenEx calculates the FD&A costs inclusive of all exploration and development expenditures including land and seismic. Under NI 51 - 101, the methodology to be used to calculate FD&A costs includes incorporating changes in future development capital ("FDC") required to bring the proved undeveloped and probable reserves to production. For continuity, AvenEx has presented herein FD&A costs calculated both excluding and including FDC. Changes in forecast FDC occur annually as a result of development activities, acquisition and disposition activities and capital cost estimates that reflect the independent evaluator's best estimate of what it will cost to bring the proved undeveloped and probably reserves on production.As a result of various land and seismic acquisitions in 2011, AvenEx has included the expenditure of $6.8 million in the FD&A analysis which equates to 14% of the total expenditures during the year. Calculation of the total proved plus probable FD&A costs without the land and seismic results in $24.62 per BOE.For further information regarding the Corporation's reserves, please refer to its Annual Information Form for December 31, 2011 which will be posted on the Corporation's profile at www.sedar.com.REVIEW OF FINANCIAL RESULTSNet loss for the quarter ended December 31, 2011 was $30.1 million, higher than the net loss of $26.9 million for the quarter ended December 31, 2010 as the Corporation recognized a $23.9 million impairment on its natural gas weighted cash-generating units ("CGUs") reflecting a decline in forecasted natural gas prices. The net loss for the year ended December 31, 2011 of $2.7 million was reduced from a net loss of $21.7 million in 2010 as a result of an unrealized gain on financial instruments in Elbow River of $6.0 million in 2011 versus an unrealized loss on financial instruments of $21.9 million in 2010. Offsetting this unrealized gain was a $6.9 million higher impairment on the natural gas weighted CGUs in 2011 versus 2010.Funds from Operations were $14.3 million for the quarter ended December 31, 2011, up from Funds from Operations for the quarter ended December 31, 2010 of $13.1 million as a result of the acquisition of Great Plains Exploration Inc. ("Great Plains") in the fourth quarter of 2010 and increased crude-by-rail sales in Elbow River. Funds from Operations for the year ended December 31, 2011 were $53.0 million versus $44.5 million in 2010 reflecting the inclusion of the Great Plains acquisition for a full year and increased 2011 crude-by-rail sales in Elbow River.AvenEx declared dividends of $7.2 million ($0.135 per share) for the quarter ended December 31, 2011 which is up from the $5.7 million ($0.12 per share) distributed for the quarter ended December 31, 2010, as the fourth quarter of 2010 included only two dividend payments of $0.06 each versus three dividend payments in the fourth quarter of 2011 of $0.045 each. In conjunction with the conversion from a trust to a corporation, monthly dividends were lowered reflecting the tax effected nature of the dividend and the normal December 2010 dividend was delayed until January 7, 2011. The fourth quarter payout ratio was 51% of Funds from Operations compared to 43% at December 31, 2010. The 2011 dividend payout ratio of 59% was approximately equal to the long term targets of 60%. Without the additional dividend declared on January 7, 2011, the dividend payout ratio would have been 55%.On December 31, 2010, Avenir Diversified Income Trust (the "Trust") effectively completed its conversion to a dividend paying corporation from an income trust pursuant to a plan of arrangement (the "Arrangement") under Section 193 of the Business Corporations Act (Alberta). Pursuant to the Arrangement, holders ("unitholders") of trust units ("trust units") of the Trust received one common share ("common shares") of AvenEx for each trust unit. In addition, holders of exchangeable shares of AvenEx received common shares of AvenEx for each exchangeable shares. As a result of the Arrangement, on December 31, 2010 AvenEx had approximately 52.8 million common shares issued and outstanding.The common shares of AvenEx trade on the Toronto Stock Exchange (the "TSX") under the trading symbol "AVF". Previous historical references to "unitholders", "distributions", "trust units" and "per unit' have now been replaced by "shareholders", "dividends", "common shares" and "per share", respectively, where applicable. Despite the change in legal structure from a trust to a dividend paying corporation, AvenEx's business activities and business strategy remain unchanged and all officers and directors remain the same.AvenEx Energy Corp.CONSOLIDATED BALANCE SHEETSAs atDecember 31,December 31,January 1,201120102010(in thousands of dollars)$$$ASSETSCurrentCash-1,0282,183Marketable securities4,1827,59519,842Accounts receivable130,73964,65856,310Prepaid expenses3,0383,5148,626Inventory29,73525,59113,687Risk management assets9,4894,95022,825Current assets177,183107,336123,473Assets held for sale - Real Estate10,51712,533-187,700119,869123,473Exploration and evaluation35,50032,61314,586Property, plant and equipment202,914204,731147,498Investment property--33,529Intangibles and other assets11,42812,8369,094Goodwill28,60328,60323,424Deferred income taxes25,13524,49220,102491,280423,144371,706LIABILITIES AND SHAREHOLDERS' EQUITYCurrentBank indebtedness102,60858,38012,351Accounts payable and accrued liabilities120,17073,52167,194Dividend payable2,406-2,527Deferred revenue--215Risk management liabilities3,0235,461404Current portion of mortgages--4,063Current liabilities228,207137,36286,754Liabilities of assets held for sale - Real Estate3,2585,862-231,465143,22486,754Mortgages--21,391Decommissioning liabilities31,63022,19816,885Deferred income taxes--8,099Liability for share-based compensation--4,279263,095165,422137,408Commitments and contingenciesShareholders' equityShare capital254,500250,337-Unitholders' capital--421,270Contributed surplus7,5456,144-Deficit(34,032)-(187,550)Accumulated other comprehensive income1721,241578228,185257,722234,298491,280423,144371,706AvenEx Energy Corp.CONSOLIDATED STATEMENTS OF OPERATIONS ANDCOMPREHENSIVE LOSSFor the year ended December 31,20112010(in thousands of dollars)$$REVENUEOil and gas revenue95,36069,282Royalties(16,502)(9,472)Unrealized gain (loss) on financial instruments967(1,299)Total oil and gas revenue79,82558,511Elbow River revenue922,615588,843Unrealized gain (loss) on financial instruments6,010(21,884)Total Elbow River revenue928,625566,959Gain (loss) on sale of marketable securities4421,599Interest and other revenue6561,078Total revenue1,009,548628,147EXPENSESOil and gas operating30,92923,132Oil and gas transportation costs2,4921,754Elbow River operating896,455567,418General and administrative18,49116,278Share-based compensation2,8594,603Bad debt recovery(2,005)(748)Finance costs4,5963,318Capital taxes362347Exploration and evaluation expense3,7282,242Depletion, depreciation and amortization30,67123,173Impairment23,87116,987Acquisition costs of Great Plains-4,1591,012,449662,663Income (loss) from continuing operations before income tax(2,901)(34,516)Income taxes:Current income tax expense(1,398)-Deferred income tax recovery48313,078(915)13,078Net loss from continuing operations(3,816)(21,438)Net income (loss) from discontinued operations - Real Estate1,072(255)Net loss for the year(2,744)(21,693)Other comprehensive (loss) income:Change in fair value of marketable securities, net of tax(1,069)663Other comprehensive (loss) income(1,069)663Comprehensive loss for the year(3,813)(21,030)Net loss from continuing operations per shareBasic and diluted(0.07)(0.49)Net income (loss) from discontinued operations per shareBasic and diluted0.02(0.00)Net loss per shareBasic and diluted(0.05)(0.49)AvenEx Energy Corp.CONSOLIDATED STATEMENTS OF CHANGES IN EQUITYFor the year ended December 31,20112010(in thousands of dollars)Number$Number$Share capitalBalance, beginning of year52,783,690250,337--Issued to trust unitholders--51,652,333481,232Exchanged for exchangeable shares--1,131,3577,116Elimination of deficit---(238,011)Exercise of options691,8564,163--Balance, end of year53,475,546254,50052,783,690250,337Unitholders' capitalBalance, beginning of year--42,110,678421,270Exercise of options--978,5265,586Issued upon acquisition of Great Plains--8,563,12954,376Exchanged for common shares--(51,652,333)(481,232)Balance, end of year----Contributed surplusBalance, beginning of year6,144-Exercise of options(1,645)-Cash settlement of options(242)-Share based compensation capitalized429-Share based compensation expensed2,859-Reclassification from liability-6,144Balance, end of year7,5456,144Retained earnings (deficit)Balance, beginning of year-(187,550)Net income (loss)(2,744)(21,693)Distributions-(28,768)Dividends(31,288)-Transfer into share capital-238,011Balance, end of year(34,032)-Accumulated other comprehensive incomeBalance, beginning of year1,241578Change in fair value of marketable securities, net of tax(1,069)663Balance, end of year1721,241AvenEx Energy Corp.CONSOLIDATED STATEMENTS OF CASH FLOWSFor the year ended December 31,20112010(in thousands of dollars)$$OPERATING ACTIVITIESNet loss from continuing operations(3,816)(21,438)Add (deduct) non-cash items:Share-based compensation2,8594,603Non-cash general and administrative1,007629Exploration and evaluation expense3,7282,242Depletion, depreciation and amortization30,67123,173Impairment23,87116,987Accretion of decommissioning liabilities1,7771,277Unrealized loss (gain) on financial instruments(6,977)23,183Unrealized foreign exchange(277)804Transaction costs-4,159Deferred income tax recovery(483)(13,078)Funds from continuing operations52,36042,541Funds from discontinued operations - Real Estate6391,93752,99944,478Asset retirement expenditures during period(1,352)(671)Net change in non-cash working capital(14,303)(18,628)Cash provided (used in) by operating activities37,34425,179FINANCING ACTIVITIESIssue of shares, net of issue costs2,3792,877Cash settlement of options(242)(314)Dividends(31,085)(28,768)Increase in bank indebtedness44,22846,080Real estate repayment of mortgages(2,493)(614)Net change in non-cash working capital(2,609)(2,527)Cash provided by (used in) financing activities10,17816,734INVESTING ACTIVITIESOil and gas property acquisitions(9,284)(57)Oil and gas property disposals2612,809Oil and gas evaluation and exploration(6,791)(631)Oil and gas development expenditures(33,202)(28,412)Acquisition of Great Plains Exploration-(30,621)Purchase of other assets(486)(351)Purchase of financial services royalty-(5,035)Real estate dispositions2,3973,801Real estate development expenditures(33)-Net change in non-cash working capital(1,472)15,505Cash provided by (used in) investing activities(48,610)(42,992)Decrease in cash and cash equivalents during the year(1,088)(1,079)Cash and cash equivalents, beginning of year1,0282,148Change in cash within assets held for sale60(41)Cash and cash equivalents, end of year-1,028Supplemental information:Cash taxes paid429104Cash interest paid2,9771,887An electronic copy of this press release may be obtained on AvenEx's SEDAR profile at www.sedar.com.AvenEx Energy Corp. was created to provide stable, sustainable dividends to shareholders while providing modest growth. AvenEx is focused on energy with two distinct business units, namely Oil & Gas development and production and LPG marketing and logistics.AvenEx trades on the TSX under the symbol AVF. This press release shall not constitute an offer to sell or the solicitation of an offer to buy the securities in any jurisdiction. The securities offered have not been and will not be registered under the United States Securities Act of 1933, as amended (the "U.S. Securities Act") or any state securities laws and may not be offered or sold in the United States except in certain transactions exempt from the registration requirements of the U.S. Securities Act and applicable state securities laws.Forward Looking StatementsCertain statements contained herein including, without limitation, financial and business prospects and financial outlook, the effect of government announcements, proposals and legislation, plans in its Oil and Gas Division regarding hedging, wells to be drilled, expected or anticipated production rates, timing of expected production increases, the weighting of production between different commodities, expected commodity prices, exchange rates, production expenses, transportation costs and other costs and expenses, maintenance of productive capacity and capital expenditures; plans in the Elbow River Marketing Limited Partnership ("Elbow River") business regarding plans for its ongoing Liquefied Petroleum Gas ("LPG") business and activities around the exit from marketing its bio-diesel product; plans in the Real Estate Division for the timing and completion of selling assets, repayment of mortgages on the assets and the nature of capital expenditures; and the timing and method of financing these businesses, may be forward looking statements. Words such as "may", "will", "should", "could", "anticipate", "believe", "expect", "intend", "plan", "potential", "continue", "targeted" and similar expressions may be 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, risks associated with oil and gas exploration: development, exploitation, production, marketing and transportation, loss of markets, volatility of commodity prices, currency fluctuations, imprecision of reserve estimates, environmental risks, competition from other producers and the inability to retain drilling rigs and other services; risks associated with its Elbow River business including, but not limited to, counterparty risk in default, operational risks, hedging, access to credit, competitor risk, seasonality and impact of the global recession on overall economic activity; and risks associated with the Real Estate Division including, but not limited to the impact the overall economy has on valuations, future delinquencies, access to mortgages and impact on interest rates; as well as the risks associated with AvenEx's incorrect assessment of the value of acquisitions, failure to realize the anticipated benefits of acquisitions, delays resulting from or inability to obtain required regulatory approvals and ability to access sufficient capital from internal and external sources and the risk factors outlined under "Risk Factors" and elsewhere herein. The recovery and reserve estimates of AvenEx's reserves provided herein are estimates only and there is no guarantee that the estimated reserves will be recovered. As a consequence, actual results may differ materially from those anticipated in the forward-looking statements.Forward-looking statements or information are based on a number of factors and assumptions which have been used to develop such statements and information but which may prove to be incorrect. Although AvenEx 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 AvenEx can give no assurance that such expectations will prove to be correct. In addition to other factors and assumptions which may be identified in this document, assumptions have been made regarding, among other things: the impact of increasing competition; the general stability of the economic and political environment in which AvenEx operates; the timely receipt of any required regulatory approvals; the ability of AvenEx to obtain qualified staff, equipment and services in a timely and cost efficient manner; Divisional results; the ability of operators to operate the field in a safe, efficient and effective manner; the ability of AvenEx 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 of exploration; the timing and costs of pipeline, storage and facility construction and expansion and the ability of AvenEx to secure adequate product transportation; future oil and natural gas prices; currency, exchange and interest rates; the regulatory framework regarding royalties, taxes and environmental matters in the jurisdictions in which AvenEx operates; and the ability of AvenEx to successfully market its products, fluctuations in foreign exchange or interest rates and stock market volatility, credit risk and the ability to realize on collateral in the event of default, failure of counter parties to perform on contracts, fluctuation in the value of real property, failure to produce income or revenue from real estate, failure of tenants to meet lease obligations, increase in property taxes and mortgage, maintenance, insurance, operating costs and decreases in occupancy and rental rates, and fixed costs in relation to variable revenue streams. Readers are cautioned that the foregoing list of factors is not exhausted.Forward looking statements and other information contained herein concerning the Oil and Gas Division, Elbow River's business, the Real Estate Division and AvenEx's general expectations concerning these industries are based on estimates prepared by each Division's management and from 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 these industries which AvenEx believes to be reasonable. However, this data is inherently imprecise, although generally indicative of relative market positions, market shares and performance characteristics. While AvenEx is not aware of any misstatements regarding any industry data presented herein, these industries involve risks and uncertainties and are subject to change based on various factors.These forward looking statements are made as of the date hereof and AvenEx assumes no obligation to update or review them to reflect new events or circumstances except as required by applicable securities laws.FOR FURTHER INFORMATION PLEASE CONTACT: William GallacherAvenEx Energy Corp.President & CEO(403) 237-9949(403) 237-0903 (FAX)ORGary H. DundasAvenEx Energy Corp.Vice-President, Finance and CFO(403) 237-9949(403) 237-0903 (FAX)ORSuite 300, 808 - 1st Street S.W.AvenEx Energy Corp.Calgary, Alberta T2P 1M9www.avenexenergy.comThe TSX Exchange has not reviewed and does not accept responsibility for the adequacy or accuracy of this release.