Mr. Steven Johnson reports
WRANGLER WEST REPORTS 2011 SIX MONTHS OPERATING AND FINANCIAL RESULTS
Wrangler West Energy Corp. has filed on SEDAR the company's unaudited financial statements and related
management's discussion and analysis for the three and six
months ended June 30, 2011, with comparative data for the three and six
months ended June 30, 2010, and the year ended Dec. 31, 2010. Effective Jan. 1, 2011, Wrangler West has prepared interim financial
statements and comparative information according to international
financial reporting standards. Previously, the company prepared
financial statements according to Canadian generally accepted
accounting principles. All documents may be viewed at SEDAR.
HIGHLIGHTS
Three months ended June 30, Six months ended June 30,
2011 2010 2011 2010
Operational highlights
Production
Crude oil and NGL (bbl/d) 238 297 243 299
Natural gas (mcf/d) 4,308 3,337 4,505 3,657
Total (boe/d) 956 853 994 909
Prices
Crude oil and NGL ($/bbl) $92.47 $68.96 $85.34 $71.59
Natural gas ($/mcf) 3.98 4.18 3.95 5.02
Per boe ($)
Petroleum and natural gas revenue $40.96 $40.36 $38.74 $43.76
Royalties (6.95) (8.86) (6.14) (8.03)
Operating expenses (14.26) (15.77) (14.84) (14.56)
Field netback 19.75 15.73 17.76 21.17
General and administrative (3.85) (3.59) (3.57) (3.40)
Interest (0.78) (0.78) (0.70) (0.96)
Funds flow from operations 15.12 11.36 13.49 16.81
Share-based payments -- (1.00) -- (0.85)
Depletion, depreciation and amortization (13.11) (17.11) (14.65) (15.52)
(Loss) on sale of assets (11.98) (0.13) (5.79) (0.13)
Accretion (0.22) (0.23) (0.21) (0.24)
Deferred income tax benefit (expense) 2.58 0.83 1.81 (0.80)
Net (loss) (7.61) (6.28) (5.35) (0.73)
Financial highlights ($ thousands)
Petroleum and natural gas revenue $3,564 $3,133 $6,966 $7,199
Royalties (605) (688) (1,105) (1,321)
Operating expenses (1,240) (1,224) (2,668) (2,394)
General and administrative (335) (279) (642) (559)
Interest (67) (60) (126) (159)
Funds flow from operations 1,317 882 2,425 2,766
Share-based payments -- (78) -- (139)
Depletion, depreciation and amortization (1,141) (1,329) (2,634) (2,554)
(Loss) on sale of assets (1,042) (10) (1,040) (21)
Accretion (20) (18) (37) (39)
Deferred income tax benefit (expense) 225 64 325 (132)
Net (loss) (661) (489) (961) (119)
Funds flow from operations -- basic ($/share) 0.20 0.14 0.38 0.43
Funds flow from operations -- diluted ($/share) 0.20 0.13 0.37 0.42
Net (loss) -- basic and diluted ($/share) (0.10) (0.08) (0.15) (0.02)
Wrangler West converts petroleum and natural gas reserves and volumes to a common unit of
measure on a basis of 6,000 cubic feet of natural gas equals one barrel of oil.
Disclosure using barrels of oil equivalent may be misleading, particularly if used in
isolation. The basis for the boe conversion ratio of 6,000 cubic feet equals one bbl is
an energy equivalency conversion method, primarily applicable at the burner tip. This
conversion rate does not represent a value equivalency at the wellhead. The company
calculates boe per day based on total production for the period divided by the number of
days during the period.
Wrangler West is presenting its
operating and financial results for the second quarter and first six
months of 2011.
Six-month 2011 highlights
- $6.97-million in revenue;
- $2.43-million in funds flow from operations;
- $1.68-million in capital expenditures;
- $4.93-million sale of Grand Forks oil pool.
Review of six months 2011
For the six months ended June 30, 2011, Wrangler West produced 994 barrels of oil equivalent per day, higher by 9 per cent when compared with the same period one
year ago. However, the company's field netback fell significantly as
Wrangler West experienced a 21-per-cent decrease in the natural gas
price received. A 19-per-cent increase in crude oil price somewhat
offset the impact of the lower natural gas price. Operating costs
increased 11 per cent over all, generally in line with the company's growth in
production. Funds flow from operations, at $2.43-million, declined 12
per cent year over year due to lower commodity prices and higher costs.
However, Wrangler West experienced a 19-per-cent improvement in funds
flow for second quarter 2011, compared with first quarter 2011.
Capital expenditures
Wrangler West invested $1.68-million in capital expenditures during the
first six months of 2011. The company's capital was directed toward
the development of oil-prone exploration and development
opportunities. The capital invested during the six months was
primarily allocated to the acquisition of land and seismic to define
new and existing prospects. The company expects to continue to build an
inventory of quality, seismically defined drilling prospects throughout
2011 and, on completion of this exploratory work, intends to commence
drilling and testing its plays to confirm their commercial viability.
At June 30, Wrangler West's 2011 capital expenditures budget of $8.0-million was approximately 20 per cent deployed. An extremely wet summer
following a prolonged spring breakup has prevented Wrangler West from
undertaking its usual summer drilling program. Standing water on the company's drill-ready prospects will push much of Wrangler West's exploration
activity into the last half of 2011.
Commodity prices
For 2011, Wrangler West's natural gas price has averaged almost $4
per thousand cubic feet. During the first six months of 2011, natural gas prices
continued to disappoint producers and their shareholders. Natural gas
injection into storage is above the five-year average, and consumption
is lagging supply. The current AECO spot natural gas price is hovering
under $3.50 per thousand cubic feet. The company expects weak prices will continue until the
arrival of the 2011-2012 winter heating season. Fundamentally, there
is little margin for producers in $4 per thousand cubic feet natural gas.
The U.S. industrial market and a more stable economy are critical to a healthier natural gas market. An improvement in the
economic outlook south of the 49th parallel would likely foreshadow a
rather quick recovery in the North American natural gas price. Efforts
to establish new infrastructure to ship natural gas outside of North
America, if successful, should open up new markets for natural gas.
The timing to accomplish this potentially positive initiative to create
additional demand for natural gas is yet to be defined.
Crude oil price continues to be reasonably strong despite the recent
weakness resulting from the U.S. debt ceiling negotiations and
the pending European bank restructuring. During this period of global
uncertainty, oil prices have retreated.
In volatile markets, even a junior producer must factor world events
into day-to-day management of producing assets. During second
quarter 2011, a period of strong oil prices, Wrangler West solicited bids to
maximize the value of the Grand Forks oil property, which culminated in
the sale of this asset for $4.9-million. On completion of the sale,
the proceeds were applied to bank indebtedness, which leaves the company
with a significantly stronger balance sheet. Over the next few months,
the company will focus on drilling its prospects with the intention of replacing
the production sold at Grand Forks.
Outlook for 2011
Wrangler West is working daily to build a solid inventory of drillable
oil-prone targets to fuel future growth. However, as global economies
restructure, managing and building a small conventional producer in
this unpredictable business climate are challenging. The company has a
strong balance sheet and the positive cash flow to act on
opportunities. It has a significant portion of capital remaining in
the 2011 budget of $8.0-million. During the last half of 2011, the company expects to deploy capital to exploration prospects that meet Wrangler
West's risk/reward criteria.
STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(stated in thousands of dollars, except per share amounts)
Three months ended Six months ended
June 30, June 30,
2011 2010 2011 2010
Revenue
Petroleum and natural gas sales $ 3,564 $ 3,133 $ 6,966 $ 7,199
Royalties (605) (688) (1,105) (1,321)
Total revenue 2,959 2,445 5,861 5,878
Expenses
Operating 1,240 1,224 2,668 2,394
General and administrative 335 279 642 559
Share-based payments -- 78 -- 139
Depletion, depreciation and amortization 1,141 1,329 2,634 2,554
Loss on sale of assets 1,042 10 1,040 21
Results from operating activities (799) (475) (1,123) 211
Finance
Interest and accretion 87 78 163 198
Earnings (loss) before income tax (886) (553) (1,286) 13
Deferred income tax expense (benefit) (225) (64) (325) 132
Net (loss) and comprehensive (loss) $ (661) $ (489) $ (961) $ (119)
Net (loss) per share,
basic and diluted $ (0.10) $(0.08) $(0.15) $(0.02)
We seek Safe Harbor.
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