Alberta Oilsands Inc. announces third quarter 2009 results
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Third Quarter 2009 Highlights
- Created an economic relationship with the FMAC on July 8, 2009.
- Announced on July 27, 2009 an increase in the contingent resources
at Clearwater West based on an update by Ryder Scott Company
Canada. The independent resource report, dated June 1, 2009,
provides a "best" estimate of 183 million barrels of contingent
bitumen resources at Clearwater West based on a National
Instrument 51-101 compliant evaluation. See "Disclosure of
Resources" for an explanation of contingent resources.
- Increased production 394% to 321 boepd in the third quarter of
2009 from 65 boepd in the third quarter of 2008.
- Achieved gross revenue of $894,000 in the third quarter compared
with $666,000 in the comparative period in 2008.
- Incurred capital expenditures of $1.65 million in the third
quarter of 2009, compared with $607,000 in the second quarter of
2009 and $952,000 in the third quarter of 2008. Costs incurred in
the third quarter of 2009 were primarily related to the pilot
application for Clearwater West and drilling and abandonment
expenditures related to the Mahaska exploration well.
- Subsequent to September 30, 2009, announced an increase in our
financial flexibility by raising gross proceeds of $10.86 million
through the sale of shares and warrants in a bought-deal financing
and by the arrangement of a $10.0 million senior committed credit
facility. The credit facility is designed to augment working
capital and fund capital expenditures.
Review of Oilsands Operations
Fort McMurray Clearwater West
Alberta Oilsands continues to make noteworthy progress on our Clearwater West in situ oilsands pilot recovery project. In October we announced a revised plan to use stacked well pairs instead of a single layer configuration on the project. This decision is expected to more than double the peak production capacity from the pilot project to 5,000 bpd from 2,000 bpd.
The Clearwater West pilot project lands are located just north of Highway 69, the east-west highway that connects to Highway 63 running from
The revised pilot project plan for Clearwater West is designed to extract the area's bitumen through low pressure steam-assisted gravity drainage (LP SAGD) and expanding solvent (ES) SAGD using stacked SAGD well pairs. The operating parameters from Computer Modeling Group's STARS reservoir simulation suggests an average production rate of more than 4,000 bpd over three years once the project is fully operational, an average operating steam to oil ratio of 2.0 over the project life and a recovery factor ranging from 50% to 55%. If the Clearwater West project receives all the necessary approvals and the pilot project is successful, commercial production is expected to be up to 10,000 bpd once a commercial project is fully operational.
A significant development at Clearwater West in the third quarter of 2009 was the signing of a definitive agreement with the FMAC. The agreement creates an economic relationship between Alberta Oilsands and the FMAC by outlining the rights, obligations and commercial terms of a GORR and warrants Alberta Oilsands is granting the FMAC in return for access to certain airport lands related to the Clearwater West project (so long as the Company's operations do not interfere with the safety or proper operation of the airport), and to work with Alberta Oilsands on planning and logistics of any operation on airport lands. Although we have always had a positive relationship with the FMAC, this agreement entrenches the relationship, allows us to expedite the development of our Clearwater West project and has the potential to provide considerable economic benefits to both parties for years to come.
As part of the formal agreement, Alberta Oilsands granted the FMAC a 2% GORR on the oilsands rights held by AOS in 88-8-W4M: Sections 21 and 22 in the Clearwater West project area, as well as four million warrants to purchase Alberta Oilsands shares at a weighted average price of
It should be noted that assessments of Alberta Oilsands' properties, production and prospects constitute forward-looking statements. Forward-looking statements are based on the opinions and estimates of management at the date the statements are made and are subject to a variety of risks and uncertainties that could cause actual events or results to differ materially from those projected in the forward-looking statements. See "Forward-looking Statements and Information."
Clearwater East
In addition to Clearwater West, Alberta Oilsands offers potential project areas at Clearwater East, south of the Clearwater River, and Clearwater North on the north bank of the river. Although Clearwater West and East are proceeding as separate project areas, based on estimates, Alberta Oilsands believes both areas offer sufficient bitumen resources to support commercial projects. Clearwater West and East are therefore expected to proceed as separate project areas, possibly with shared facilities.
Both Clearwater West and East are in the McMurray formation bitumen sand isopach (thickness) trend mapped by the Alberta Geological Survey. When conditions warrant additional exploration and development, we expect to turn our attention to developing our next project area at Clearwater or Hangingstone East.
Hangingstone East
Alberta Oilsands' potential project area at Hangingstone East consists of 23 sections (14,720 acres) of 100% working interest in oilsands leases. This area is located 45 kilometres southwest of Fort McMurray along Highway 63. In the first quarter of 2008, we entered into a pooling agreement with the Great Divide Oil Sands Partnership, an affiliate of Connacher Oil and Gas Limited ("Connacher"), whereby our 23 sections in this area and Connacher's 15.5 sections in the adjacent Halfway Creek properties were pooled. This resulted in Alberta Oilsands owning a 50% working interest in 38.5 sections of contiguous land in the Hangingstone East/Halfway Creek area and gave us access to significant additional gross contiguous lands. Alberta Oilsands and Connacher have agreed to work jointly on the pooled assets until 2010, after which Connacher has agreed to become the operator and Alberta Oilsands will continue to retain its 50% working interest.
A second phase 10-hole coring program is being contemplated for the Hangingstone East project.
Review of Conventional Operations
Although we remain focused on Alberta's oilsands, we also have relevant conventional assets to support our oilsands development. Our conventional assets provide modest cash flow to help defray administrative costs and provide a vehicle for the fulfillment of our exploration requirements related to the issuance of flow-through shares.
Our Ladyfern Slave Point discovery well (
Production in the third quarter from our Leduc property and other legacy conventional properties averaged 53 bpd, which, combined with Ladyfern, resulted in average production of 321 boepd in the third quarter.
Financial and Operating Summary
Financial
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Three months ended September 30
2009 2008 2007
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Statement of Operations and Deficit
Petroleum and natural gas
sales ($) 894,316 666,302 507,374
Petroleum & natural gas sales
per boe ($) 30.25 110.77 74.92
Daily sales volumes (boe 6:1) 321 65 74
Net loss for the period ($) (486,157) (799,495) (1,688,739)
Net loss per share
- basic and diluted ($) (0.01) (0.01) (0.03)
Statement of Cash Flows
Funds (used in) from
operations ($)(1) 98,124 (282,302) (231,667)
Cash flow (used in) from
operations ($) 399,091 (270,430) (462,248)
Capital expenditures ($) 1,651,024 952,090 7,658,343
Weighted average number of shares
- basic and diluted 79,651,375 65,728,136 53,163,269
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Nine months ended September 30
2009 2008 2007
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Statement of Operations and Deficit
Petroleum and natural gas
sales ($) 2,153,857 1,665,971 2,505,385
Petroleum & natural gas sales
per boe ($) 33.35 103.29 65.78
Daily sales volumes (boe 6:1) 237 59 140
Net loss for the period ($) (2,624,539) (2,749,176) (1,751,857)
Net loss per share
- basic and diluted ($) (0.03) (0.04) (0.04)
Statement of Cash Flows
Funds (used in) from
operations ($)(1) (1,046,434) (1,180,891) (330,152)
Cash flow (used in) from
operations ($) (1,048,824) (860,338) (73,221)
Capital expenditures ($) 9,522,113 10,633,470 15,540,349
Total assets ($) 50,216,792 55,043,725 33,753,021
Total liabilities ($) 7,079,537 5,656,611 2,639,696
Shareholders' equity ($) 43,137,255 49,387,114 31,113,325
Weighted average number of shares
- basic and diluted 79,651,375 65,009,300 41,595,961
(1) Alberta Oilsands' method of calculating funds from operations may
differ from that of other corporations and, accordingly, may not be
comparable to measures used by other corporations. Alberta Oilsands
calculates funds from operations by taking cash flow from operating
activities as determined under GAAP before the change in non-cash
working capital related to operating activities and abandonment
expenditures incurred.
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Three months ended Nine months ended
September 30 September 30
2009 2008 2009 2008
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Production
Oil and NGL (bbls/day) 71 59 71 52
Natural gas (mcf/day) 1,504 40 996 43
boe/day (6:1) 321 65 237 59
2009 2008 2009 2008
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Commodity Prices
Oil and NGL ($/bbl) 65.41 116.86 60.43 109.95
Natural gas ($/mcf) 3.40 9.64 3.64 9.14
boe ($/boe) 30.25 110.77 33.35 103.29
Revenues
Oil and NGL ($) 424,388 630,397 1,164,824 1,558,973
Natural gas ($) 469,928 35,905 989,033 106,998
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Total ($) 894,316 666,302 2,153,857 1,665,971
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2009 2008 2009 2008
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Royalties ($) 66,569 101,739 175,116 233,787
% of revenues 7 15 8 14
$/boe 2.25 16.91 2.71 14.49
Operating and
transportation
expenses ($) 266,121 169,980 1,150,718 627,120
$/boe 9.00 28.26 17.82 38.88
Netbacks 2009 2008 2009 2008
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Revenue ($/boe) 30.25 110.77 33.35 103.29
Royalties ($/boe) 2.25 16.91 2.71 14.50
Operating expenses
($/boe) 9.00 28.26 17.82 38.88
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Field netbacks ($/boe) 19.00 65.60 12.82 49.91
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Outlook
Alberta Oilsands' recent
We expect to spend approximately
The submission of our Clearwater West pilot project application will mark the beginning of a critical growth phase for Alberta Oilsands. If our application meets all the regulatory requirements, we expect to receive project approval within one year of submitting our application.
Strong commercial partnerships, effective hedges and cash flow from conventional production will all contribute to our short-term viability. We must now select the industry and financial partners who will work with us to develop our sizeable resources and ultimately share in our long-term success.
Interim Filings
The Company will file its MD&A and interim consolidated financial statements and notes thereto as at and for the three and nine months ended
BOE Presentation - Production information is commonly reported in units of barrel of oil equivalent ("boe"). For purposes of computing such units, natural gas is converted to equivalent barrels of oil using a conversion factor of six thousand cubic feet to one barrel of oil. This conversion ratio of 6:1 is based on an energy equivalent wellhead value for the individual products. Such disclosure of boes may be misleading, particularly if used in isolation. Readers should be aware that historical results are not necessarily indicative of future performance.
Disclosure of Resources - "Resources" are quantities of petroleum that are estimated to exist originally in naturally occurring accumulations, including the quantity of petroleum that is estimated, as of a given date, to be contained in known accumulations, prior to production, plus those estimated quantities in accumulations yet to be discovered.
"Contingent resources" are defined as those quantities of petroleum estimated, on a given date, to be potentially recoverable from known accumulations using established technology or technology under development, but which are not currently considered to be commercially recoverable due to one or more contingencies. Contingencies may include factors such as economic, legal, environmental, political and regulatory matters or a lack of markets. It is also appropriate to classify as "contingent resources" the estimated discovered recoverable quantities.
There is no certainty that it will be commercially viable for the Company to produce any portion of the bitumen resources detailed in this news release. The estimated future net revenues and values contained in this news release do not necessarily represent the market value of such resources. The high level of uncertainty associated with the Company's possible recovery of any of these resources is the result of various risks and uncertainties including: current uncertainties around the specific scope and timing of the development of the Company's Fort-McMurray properties; the ability of the Company to finance any potential oil sands projects at its Fort-McMurray properties; proposed reliance on technologies that have not yet been demonstrated to be commercially applicable in oil sands applications; lack of regulatory approvals; the uncertainty regarding marketing plans for production from the subject areas; and improved estimation of project costs. There are a number of inherent risks and contingencies associated with such development, including commodity price fluctuations, project costs and those other risks and contingencies discussed in more detail in the sections entitled "Forward-looking Statements and Information" in this news release.
Resources, undiscovered resources and contingent resources do not constitute, and should not be confused with, reserves.
Forward-looking Statements and Information - Certain information regarding the Company set forth in this news release, including management's assessment of the Company's future plans, operations, properties, production and prospects contains forward looking information and statements that involve substantial known and unknown risks and uncertainties. In some cases, forward looking information and statements can be identified by terminology such as "may", "will", "should", "intends", "expects", "projects", "plans", "anticipates", "targets", "believes", "potential", "estimates", "continues", "designed", "objective", "maintain", "schedule" and similar expressions or statements that certain events or conditions "may" or "will" occur. In particular, this news release contains forward-looking statements and information with respect to: (i) possible in-situ development (including the timing of such development) on the Company's oilsands properties, including in respect of pilot projects and further development in respect of its Clearwater East and Clearwater West project areas located in its Fort-McMurray properties and the joint development of its Hangingstone East project area with its pooling partner in the area; (ii) expectations regarding future developments costs and the ability to fund such costs; (iii) future values that may be attributable to the Company's oil and gas properties; (iv) the ability of the current working capital levels of the Company to maintain future capital expenditures; (v) the Company's projected capital budget; (vi) successful results from the Company's core drilling program; (vii) crude oil, natural gas and bitumen production levels; (viii) the continued economic viability of the Company's projects; (ix) a regulatory regime that will be conducive to the Company completing its projects (including in respect of environmental regulation and royalty rates); and * projections of market prices and the demand for the commodities the Company produces or intends to produce. Such forward-looking statements and information are based on the opinions, assumptions and estimates of management at the date the statements are made, and are subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ materially from those projected in the forward-looking statements and information. These factors include the inherent risks involved in the exploration and development of oilsands properties, the uncertainties involved in interpreting drilling results and other geological data, fluctuating oil prices, the possibility of project cost overruns or unanticipated costs and expenses, uncertainties relating to the availability and costs of financing needed in the future and other factors including unforeseen delays. As an oilsands-focused enterprise, the Company faces risks, including those associated with exploration, development, approvals and the ability to access sufficient capital from external sources. Anticipated exploration and development plans relating to the Company's properties are subject to change. For a detailed description of the risks and uncertainties facing the Company and its business and affairs, readers should refer to the Company's interim financial statements and management discussion and analysis for the three and nine months
Statements relating to "resources" are deemed to be forward looking statements, as they involve the implied assessment, based on certain estimates and assumptions, that the described resources exist in the quantities predicted or estimated, and can be profitably produced in the future. See "Disclosure of Resources" in this news release.
The TSX Venture Exchange has not reviewed and does not accept responsibility for the adequacy and accuracy of this release.
Not for dissemination in the
Alberta Oilsands is a technically driven high growth energy company focused on the development and conversion of the Company's oilsands resources to reserves and the creation of long term sustainable value by increasing production and cash flow on relevant conventional oil and natural gas assets.
For further information: Alberta Oilsands Inc., Suite 2800, 350 - 7th Avenue S.W., Calgary, Alberta, T2P 3N9, Shabir Premji, Executive Chairman, T: (403) 232-3341, F: (403) 263-6702, [email protected]; or Chad Dust, Executive Vice-President, T: (403) 538-3191, [email protected]; Company website: www.aboilsands.ca
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