Mr. Steven Johnson reports
WRANGLER WEST REPORTS 2011 NINE 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 nine
months ended Sept. 30, 2011, with comparative data for the three and
nine months ended Sept. 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.
OPERATIONAL HIGHLIGHTS
Three months Nine months
ended Sept. 30, ended Sept. 30,
2011 2010 2011 2010
Production
Crude oil and NGL (b/d) 146 254 210 284
Natural gas (mcf/d) 4,058 4,120 4,354 3,813
Total (boe/d) 822 941 936 920
Prices
Crude oil and NGL ($/bbl) $86.48 $67.29 $85.61 $70.29
Natural gas ($/mcf) 3.85 3.85 3.92 4.59
Per boe ($)
Petroleum and natural gas revenue 34.34 35.01 37.44 40.74
Review of 2011 nine months
For the nine months ended Sept. 30, 2011, Wrangler West produced 936
barrels of oil equivalent per day, an increase of 2 per cent
compared with the same period one year ago. To date in 2011, field
netbacks were lower by 13 per cent as the price Wrangler West received
for natural gas declined 15 per cent compared with the same period in
2010. For the nine months ended Sept. 30, 2011, crude oil prices
were 22 per cent higher, compared with the same period one year ago.
Operating costs for the three months ended Sept. 30, 2011, were
$11.02 per boe, reflecting the sale of the Grand Forks oil pool at the
end of the second quarter.
Capital expenditures
During the nine months ended Sept. 30, 2011, Wrangler West's total
capital expenditures were $3.2-million with the focus of the company's exploration activities being oil-prone prospects. It has been active
at Crown land sales and continues to expand Wrangler West's land
inventory. In 2011, the company has drilled two oil wells and one
natural gas well.
Credit facility
Subsequent to the 2011 third quarter, Wrangler West amended its credit
facility arrangement and now has in place a credit agreement totalling
$13.4-million, of which $8.4-million is a revolving operating demand
loan and $5.0-million is a non-revolving demand loan dedicated to
acquisitions and development. At Sept. 30, 2011, Wrangler West had
drawn $1.7-million on the credit facility.
Changing business environment
Over the last several years, there has been a change in the business
environment for conventional junior oil and natural gas producers. The
shift from conventional exploration to resource play development is
consuming most of the capital available to this sector because
exploration in tight reservoirs requires massive investment. Junior
conventional exploration companies do not have the critical mass to
participate in these capital-intensive resource plays. From the
historical peak of approximately 20,000 wells drilled annually, the
current forecast is for approximately 12,500 wells in 2012. Almost 70
per cent of the forecasted well count will involve horizontal drilling
which will likely result in a record number of metres drilled. Most
resource play wells require complex completion programs to achieve
production. The rates of return on this invested capital are evolving
but, generally, require the support of higher commodity prices.
The company is seeing a significant supply of conventional oil and natural gas
assets coming to market. Junior producers interested in pursuing these
opportunities will require access to capital to transact. As natural
gas prices improve, conventional exploration has lucrative potential
but it remains critical to manage through the current and prolonged
uncertain business environment.
Outlook
During 2011, Wrangler West's natural gas price has averaged $3.92 per
thousand cubic feet and, in the 2011 third quarter, experienced a modest decrease from
the price received during the 2011 second quarter. These weak prices
persist even as the winter heating season begins and in spite of the
early colder weather cycling through North America's eastern seaboard.
Supply continues to overrun current demand. The opinion of industry
pundits and price forecasters remains bearish for this continent's
natural gas production. For the near term, production of natural gas
without a significant liquids component, or dry gas, remains a
difficult business in terms of attracting capital and garnering
investment. Like most junior oil and natural gas explorers, Wrangler
West believes in the ultimate value of natural gas.
To manage responsibly through this pervasively weak natural gas market,
Wrangler West has limited exploration efforts for natural gas with the
objective of replacing the natural gas reserves it produces and focusing
new exploration activities toward crude oil. It has been active at
land sales and continues to build a range of opportunities. The oil
side of conventional exploration remains extremely competitive as the
entire industry is focused on adding oil production.
In the 2011 third quarter, it cased three newly drilled wells. It is currently tying in a natural gas well which it expects to commence
production during December, 2011. Testing and completing of the
remaining two wells continue. It plans to underspend the approved 2011
capital budget of $8.0-million and expects to allocate future capital to
following up any successful exploration efforts heading into 2012.
STATEMENT OF OPERATIONS AND COMPREHENSIVE LOSS
(in thousands of dollars, except per share amounts)
Three months ended Nine months ended
Sept. 30, Sept. 30,
2011 2010 2011 2010
Revenue
Petroleum and natural gas sales $2,596 $3,029 $9,562 $10,228
Royalties (555) (447) (1,660) (1,768)
------ ------ ------ -------
2,041 2,582 7,902 8,460
------ ------ ------ -------
Expenses
Operating 833 1,065 3,500 3,459
General and administrative 369 254 1,011 813
Share-based payments 82 82 82 222
Depletion and depreciation 1,150 1,522 3,784 4,076
Impairment of property, plant
and equipment - 921 - 921
(Gain) loss on sale of assets (108) 2 932 23
Results from operating activities (285) (1,264) (1,407) (1,054)
------ ------ ------ -------
Finance
Interest and accretion 29 78 193 275
------ ------ ------ -------
(Loss) before income tax (314) (1,342) (1,600) (1,329)
Current income tax benefit - (15) - (15)
Deferred income tax benefit (83) (323) (409) (191)
------ ------ ------ -------
Net (loss) and comprehensive (loss) $ (231) ($1,004) ($1,191) ($1,123)
====== ====== ======
Net (loss) per share
Basic and diluted (0.04) (0.16) (0.18) (0.17)
We seek Safe Harbor.
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