Sure Energy announces year end 2009 financial and operating results
CALGARY, March 10 /CNW/ - Sure Energy Inc. ("Sure Energy" or the "Company") today announced its financial and operating results for the year ended December 31, 2009.
The Company's MD&A, Financial Statements and Notes, and AIF can be viewed or downloaded at www.sureenergyinc.com or www.sedar.com.
During 2009, Sure Energy accomplished the following:
- Corporate production increased year over year from 373 BOE/d to over
662 BOE/d
- Peace River Arch natural gas discovery in late 2009 has now increased
production to 950 BOE/d
- Sure Energy's proved plus probable reserves increased 114% from
1.51 MMBOE's in 2008 to 3.25 MMBOE's in 2009
- Finding, development and acquisition costs (proved plus probable) for
2009 came in at $14.99 per BOE (including future development costs)
- Net asset value per share increased substantially to $1.27 per share
(PV 8%, before tax) despite lower natural gas prices
- Sure Energy's Redwater Viking light oil project has emerged as a
significant growth driver for the Company with over 115 locations and
8,741 net acres of undeveloped land
Quarter Ended Year Ended
HIGHLIGHTS December 31, December 31,
2009 2008 2009 2008
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($000 except share
and per share amounts)
Financial
Petroleum and Natural
Gas Revenues 2,193 1,781 6,765 6,909
Funds Flow from
Operations(1) 672 662 1,766 2,740
Per Share, Basic
and Diluted 0.01 0.02 0.04 0.08
Loss (828) (561) (3,760) (1,234)
Per Share, Basic
and Diluted (0.02) (0.01) (0.09) (0.04)
Capital Expenditures 1,631 3,486 11,398 13,654
Total Assets 37,908 37,068
Net Debt(1) (4,537) 2,239
Shareholders' Equity 30,054 31,287
Common Shares Outstanding
Basic 46,873,962 37,659,208
Diluted 50,112,962 40,898,208
Fully Diluted with
Performance Rights 53,617,962 44,678,208
Weighted Average Common
Shares Outstanding
Basic and Diluted 41,168,388 33,802,021
Share Trading
High 0.68 0.66 0.68 1.35
Low 0.37 0.18 0.21 0.18
Close 0.61 0.23 0.61 0.23
Trading Volume 6,926,598 2,957,562 11,545,528 9,959,644
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Quarter Ended Year Ended
December 31, December 31,
HIGHLIGHTS 2009 2008 2009 2008
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Operations
Production
Natural Gas (Mcf/d) 3,614 2,568 3,532 2,044
Oil (bbls/d) 66 15 42 13
NGLs (bbls/d) 39 21 31 19
BOE/d 708 463 662 373
Average Selling Price
Natural Gas ($/Mcf) 4.69 6.85 4.07 8.09
Oil ($/bbl) 73.73 61.52 65.87 100.11
NGLs ($/bbl) 50.98 41.72 44.66 53.03
BOE ($/BOE) 33.66 41.78 28.02 50.57
Operating Netback ($/BOE)(1) 16.61 23.04 12.89 29.28
Funds Flow Netback ($/BOE)(1) 10.33 15.57 7.31 20.06
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(1) Please refer to Management's Discussion and Analysis for a definition
of Non-GAAP measures.
RESERVES
Sure Energy engaged independent petroleum consultants Sproule Associates Limited ("Sproule") to evaluate reserves for all of Sure Energy's properties effective December 31, 2009. The Sproule report has been prepared in accordance with the standards contained in the COGE Handbook and the reserve definitions contained in NI 51-101 by Qualified Reserve Evaluators. Sproule has reviewed and consented to the information contained herein.
All evaluations and future net cash flows are stated prior to any provisions for interest costs or general and administrative costs and after the deduction of estimated future capital expenditures and abandonment costs for wells to which reserves have been assigned. Values of future net revenues do not represent the fair market value of the reserves. Reserves data are based on judgments regarding future events; actual results will vary and the variations may be material. However, any variations should be consistent with the fact that reserves are categorized according to the probability of recovery.
Reserves and future net revenue have been made assuming that development of each property in respect of which the estimate is made will occur, without regard to the likely availability of Sure Energy of funding required for that development.
The following presentation should be read in conjunction with reserves information contained in Sure Energy's Annual Information Form ("AIF"). The AIF presents the Company's reserves according to Canadian Securities Administrators National Instrument 51-101 (NI 51-101") along with the related Forms and per the NI 51-101 Companion Policy.
The Company's total proved plus probable reserves increased by 114% in 2009 to 3.25 MMboe and proved reserves increased by 86% to 1.89 MMboe. These increases were largely the result of reserves attributed to 2009 drilling, additional undeveloped locations being assigned reserves, and to reserves acquired through the purchase of Conifer Exploration Ltd.
Summary Of Oil And Gas Reserves
Forecast Prices and Costs
Light and Medium Oil Gas
(Mbbl) (MMcf)
Gross Net Gross Net
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Proved
Developed producing 99.6 86.0 6,809 5,105
Developed non-producing - - 131 125
Undeveloped 531.0 417.0 34 32
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Total Proved 630.6 502.9 6,974 5,262
Probable 823.1 678.6 2,991 2,213
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Proved plus probable(1) 1,453.7 1,181.5 9,965 7,474
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NGLs 2009 Total Reserves(1)
(Mbbl) MBOE
Gross Net Gross Net
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Proved
Developed producing 81.7 51.0 1,316.1 987.9
Developed non-producing 11.9 9.7 33.8 30.5
Undeveloped - - 536.6 422.3
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Total Proved 93.6 60.8 1,886.5 1,440.7
Probable 37.1 24.8 1,358.8 1,072.1
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Proved plus probable(1) 130.7 85.5 3,245.3 2,512.7
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(1) Columns may not add due to rounding
Summary of Net Present Values of Future Net Revenue
Forecast Prices and Costs ($000s)
Before Income Taxes, Discounted at (% per year)(1)
0% 5% 8% 10% 15% 20%
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Proved
Developed
producing 33,065 24,819 21,823 20,273 17,381 15,361
Developed
non-producing 567 456 404 373 309 260
Undeveloped 17,340 11,787 9,495 8,263 5,920 4,300
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Total Proved 50,972 37,062 31,721 28,909 23,611 19,921
Probable 53,421 31,737 24,929 21,644 15,965 12,367
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Proved plus
probable 104,394 68,799 56,650 50,553 39,576 32,289
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(1) Columns may not add due to rounding
Reserve Life Index
The reserve life index is calculated by dividing gross company reserves as at the effective date of the reports (December 31, 2009) by Sproule's estimate of average production for the following year. The reserve life index represents a measure of the amount of time production could be sustained at the assumed production rates based on the reserves at the applicable point in time.
2009
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Proved Proved plus Probable
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2010 Forecast Production (BOE/d) 799 967
Reserve Life Index (years) 6.5 9.2
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UNDEVELOPED LAND
For the year ended December 31, 2009 Sure Energy's total net undeveloped landholdings were 74,765 net acres as determined by Seaton-Jordan & Associates Ltd. The majority of Sure Energy's undeveloped land is located in the Plains area of Alberta. The Company's land acquisition strategy focuses primarily on acquiring lands to expand existing project areas and prospect inventory.
2009 Developed Undeveloped Total
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Gross Net Gross Net Gross Net
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Alberta 59,276 26,630 117,432 70,975 176,708 95,605
Saskatchewan 160 160 3,870 3,790 4,030 3,950
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59,436 24,790 121,302 74,765 180,738 99,555
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NET ASSET VALUE
The following table represents the net asset value ("NAV") of Sure Energy as at December 31, 2009 based on proved and probable reserves using forecast pricing (PV 8% discounted) as evaluated by Sproule, undeveloped land value as determined by Seaton Jordan & Associates Ltd., seismic value as determined by internal estimates, and internal estimates of value for tax pools.
Proved plus Probable
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Present value of reserves (PV 8%) (before tax) 56,650
Undeveloped lands 7,016
Seismic 1,188
Proceeds from in-the-money stock options 350
Working capital deficit (4,537)
Tax pools (no value assigned) -
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60,667
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NAV per share $ 1.27
Number of diluted shares outstanding as of
December 31, 2009(1) 47,772,962
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(1) 2,340,000 options and 1,752,500 vested performance incentive rights
have been excluded from diluted shares outstanding as they are anti-
dilutive.
OPERATIONAL REVIEW
Drilling
For the year ended December 31, 2009, Sure Energy participated in one gross well (1.00 net). An exploration well was drilled in the Peace River Arch. The well commenced production in January 2010.
Sure Energy will be actively drilling in 2010 as described in the Outlook section.
Three Months Ended Year Ended
December 31, December 31,
Capital Program Summary 2009 2008 2009 2008
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($000s)
Land 7 187 444 738
Geological and geophysical 145 150 1,014 785
Drilling 683 1,814 821 2,977
Completions 575 191 616 747
Recompletions and workovers 19 15 632 177
Production equipment
and facilities 460 935 649 2,890
Capitalized exploration G&A 98 154 426 427
Drilling credits (357) - (357) -
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1,630 3,446 4,245 8,741
Asset disposition (149) - (149) (158)
Corporate acquisitions 21 - 7,173 4,993
Asset retirement obligation 129 43 129 73
Other assets - (3) - 5
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1,631 3,486 11,398 13,654
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Acquisition Of Conifer Exploration Ltd.
On August 14, 2009 Sure Energy closed a purchase and sale agreement to acquire all issued and outstanding shares of Conifer Exploration Ltd. ("Conifer") for a total consideration of $8.9 million. Under the terms of the agreement Sure Energy paid $6.0 million in cash and issued 9,214,754 common shares for the issued and outstanding common shares of Conifer. The cash portion of the deal was financed from Sure Energy's existing working capital surplus and bank line. Concurrent with the closing, Sure Energy's credit facility was increased to $11.5 million consisting of a $10 million revolving operating demand loan and a $1.5 million non-revolving acquisition/development demand loan.
Southern Plains (Chinook)
The Company has had success exploring for gas in the Southern Plains of Alberta in the Lloydminster sand. In the Chinook area the Company produced 283 BOE/d in the current quarter of sweet gas from two wells and has another location to drill. Using the knowledge gained at Chinook the Company mapped the producing reservoir regionally and identified two similar prospects, one containing gas and one containing heavy oil. The gas prospect was drilled in January and was successful. This well will be tied in after break-up and is expected to add 40 BOE/d. A follow-up 2D seismic program is planned to optimize the development of the project. The heavy oil prospect is planned to be drilled in March. This well will target a resource of cold flow heavy oil which could significantly impact Sure Energy's reserves and production profile.
Peace River Arch
The Company produced 107 BOE/d from the Peace River Arch area in the current quarter. Production increased to approximately 380 BOE/d on January 1, 2010 when a successful well drilled in December was placed on stream. This well was the only well drilled by Sure Energy in 2009. It was drilled on proprietary 3D seismic data and was successful in the primary targeted zone. The Company will monitor the well's production performance before determining if follow-up locations exist.
Sure Energy has an inventory of five additional locations on the Peace River Arch, two of which are targeting new pools. One of these is a gas prospect and is programmed to be drilled in late 2010.
Plains (Redwater)
The Company owns 8,741 net acres of land on an emerging light oil resource play in the Viking formation. At Redwater the lower Viking sand is easily mappable in a regionally extensive northwest to southeast fairway, and is hydrocarbon bearing throughout. The sandstone is actually a finely laminated sand/shale sequence with relatively good horizontal permeability in the sands but with limited vertical permeability. Vertical wells typically produce at less than 7 BOE/d when stabilized, but exhibit low declines, indicating that they are accessing large reserves. Recent horizontal activity by other oil and gas companies in the area has significantly improved production rates, with some wells coming on at 100 to 275 BOE/d. The higher producing wells are exhibiting post flush rates of 50 to 70 BOE/d.
In the southern part of the trend Sure Energy owns 2,181 gross acres of land, most of which was acquired through the purchase of Conifer. The Company has four producing horizontal wells in the area (2.4 net wells) which came on production between 25 and 76 BOE/d. The Company is currently drilling two additional horizontal development wells from an inventory of at least 33 gross (18.4 net) wells in the immediate area.
In the northern extension of the trend the Company has 6,560 acres of Lower Viking rights in the prospective oil fairway (8.75 sections). The northern end of the trend is less drilled and therefore less proven, but older vertical wells drilled in the immediate area to Sure Energy's land produce similar to those to the south. Recent horizontal wells by other oil and gas companies in the area appear to be exhibiting similar initial production rates to wells to the south, most being in the 60 to 275 BOE/d range. Sure Energy's land is all 100% owned and the Company plans to drill one horizontal on the northern block in 2010 to investigate the area's production potential. Sure Energy would have a minimum of 80 development locations (drilling at 3 wells per quarter) should the area develop similar to the southern area.
Currently companies are using a variety of horizontal well technologies including multi-leg laterals, "packers-plus", multi-frac "monobores", and dual laterals. Sure Energy is monitoring the activity and results in the area to determine the best method to develop its resource. The play has compelling economics at current capital expenditures and will improve significantly as capital costs decrease with new technologies.
SE Saskatchewan
The Company owns 1,725 acres of land on a prospective light oil fairway at Queensdale in southeast Saskatchewan. After shooting 13 square kilometres of proprietary 3D seismic the Company has delineated two prospects on its land; one new pool and one pool extension. The exploration prospect was drilled in January and was dry and abandoned. The pool extension will be evaluated in June with a horizontal well and could lead to four follow-up wells. This light oil project could materially add to Sure Energy's production.
Tweedie
The Company currently produces 150 BOE/d of sweet gas from shallow Cretaceous reservoirs in the Tweedie area, just northeast of Edmonton. The production is from approximately 35 wells and declines at low rates. Sure Energy has an inventory of 17 locations at Tweedie, all defined by both geology and 2D seismic, but only intends to drill a maximum of 2 to 3 wells in the area per year, to maintain production levels.
West Central
Sure Energy produces 110 BOE/d of low decline, liquids rich gas in West Central Alberta. The Company owns 12,160 net acres of undeveloped land in the area and has an inventory of three drillable prospects.
Production
Production for the period by major property is as follows:
Three Months Ended Year Ended
December 31, 2009 December 31, 2009
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Gas Oil NGLs Total Gas Oil NGLs Total
Mcf/d Bbls/d Bbls/d BOE/d Mcf/d Bbls/d Bbls/d BOE/d
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Peace
River 511 7 16 107 546 9 16 116
Plains 29 54 - 58 32 30 - 35
Southern
Plains 1,661 - 6 283 1,746 - 8 299
Tweedie 868 - - 145 999 - - 166
West
Central 545 5 17 115 209 3 7 46
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Total 3,614 66 39 708 3,532 42 31 662
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Outlook
Sure Energy has a solid asset base of oil and natural gas reserves and production to build on, while at the same time providing its shareholders with an extensive inventory of over 160 prospects to grow from.
The proved plus probable reserve base has grown to over 3.25 million BOE's with approximately 50% oil and liquids weighting, while production has increased to 950 BOE/d.
Redwater has emerged through the acquisition of Conifer and consolidation of the area to be the significant growth driver with over 115 light oil locations on 8,741 acres of undeveloped land.
The Company continues to remain in a strong financial position and has approved a $10 million capital budget to be financed with cash flow and our balance sheet. Prospects to be drilled in 2010 include wells at Sedalia (gas), Hatton (heavy oil), Peace River Arch (gas), and Queensdale, Sask. (oil) along with a minimum of five light oil horizontal wells at Redwater.
In addition to this, the market is now starting to recognize the true value and growth potential of our business.
ADVISORIES
Forward-looking Information
Certain statements contained in this release constitute forward-looking information. These statements relate to future events or Sure Energy's future performance. The use of any of the words "could", "expect", "believe", "will", "projected", "estimated" and similar expressions and statements relating to matters that are not historical facts are intended to identify forward-looking information and are based on Sure Energy's current belief or assumptions as to the outcome and timing of such future events. Actual future results may differ materially. In particular, Sure Energy's stated exploration and development intentions for its principal oil and natural gas properties, land acquisition strategy and statements under "Outlook" contain forward looking information. Sure Energy's Annual Information Form and other documents filed with securities regulatory authorities (accessible through the SEDAR website www.sedar.com) describe the risks, material assumptions and other factors that could influence actual results and which are incorporated herein by reference. Sure disclaims any intention or obligation to publicly update or revise any forward-looking information, whether as a result of new information, future events or otherwise, except as may be expressly required by applicable securities laws.
Use of BOEs
In this press release the calculation of barrels of oil equivalent (BOE) is calculated at a conversion rate of 6,000 cubic feet (Mcf) of natural gas for one barrel (bbl) of oil based on an energy equivalency conversion method. BOEs may be misleading particularly if used in isolation. A BOE conversion ratio of 6 Mcf: 1 bbl is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.
SURE ENERGY INC.
BALANCE SHEETS
As at December 31 2009 2008
($000's)
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Assets
Current assets
Cash and cash equivalents $ - $ 6,043
Accounts receivable 1,829 870
Prepaid expenses 457 241
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2,286 7,154
Property, plant and equipment 35,622 29,914
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37,908 37,068
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Liabilities and Shareholders' Equity
Current liabilities
Accounts payable and accrued liabilities 3,777 4,915
Bank debt 3,046 -
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6,823 4,915
Asset retirement obligations 1,031 866
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7,854 5,781
Shareholders' equity
Share capital 35,732 33,718
Contributed surplus 3,152 2,639
Deficit (8,830) (5,070)
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30,054 31,287
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$ 37,908 $ 37,068
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SURE ENERGY INC.
STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS AND DEFICIT
Year Ended Year Ended
December 31, December 31,
($000's, except per share amounts) 2009 2008
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Revenue
Petroleum and natural gas revenues $ 6,765 $ 6,909
Royalties (940) (1,283)
Interest income 15 78
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5,840 5,704
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Expenses
Operating 2,363 1,433
Transportation 348 192
General and administration 1,330 1,339
Interest on bank debt 33 -
Stock compensation 513 625
Depletion, depreciation and accretion 5,763 3,349
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10,350 6,938
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Loss before future income tax recovery (4,510) (1,234)
Future income tax recovery 750 -
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Loss and comprehensive loss (3,760) (1,234)
Deficit, beginning of year (5,070) (3,836)
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Deficit, end of year (8,830) (5,070)
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Loss per common share
Basic and diluted $ (0.09) $ (0.04)
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SURE ENERGY INC.
STATEMENTS OF CASH FLOWS
Year Ended Year Ended
December 31, December 31,
($000's) 2009 2008
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Cash provided by (used in):
Operating
Loss $ (3,760) $ (1,234)
Items not affecting cash:
Depletion, depreciation and accretion 5,763 3,349
Stock compensation 513 625
Future income tax recovery (750) -
Abandonment expenditures (132) (53)
Changes in non-cash working capital 24 (532)
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1,658 2,155
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Investing
Drilling and development of petroleum
and natural gas properties (4,245) (8,741)
Corporate acquisitions, net of cash acquired (4,513) (2,055)
Disposition of petroleum and
natural gas properties 149 158
Other asset purchases - (5)
Changes in non-cash working capital (2,138) 3,251
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(10,747) (7,392)
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Financing
Increase in bank debt 3,046 -
Issue of common shares for cash, net of
share issue costs - 7,837
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3,046 7,837
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Net change in cash and cash equivalents (6,043) 2,600
Cash and cash equivalents, beginning of year 6,043 3,443
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Cash and cash equivalents, end of year $ - $ 6,043
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Sure Energy is a public company traded on the Toronto Stock Exchange under the symbol SHR.
%SEDAR: 00024118E
For further information: Mr. Jeff Boyce, President and CEO or Mr. Lance Wirth, Vice President Finance and CFO, Phone: (403) 410-3100, Email: [email protected]
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