Vero Announces 2011 Financial and Operating Results

CALGARY, March 12, 2012 /CNW/ - Vero Energy Inc. ("Vero" or the "Company") (TSX-VRO) today announces its 2011 financial results. Copies of the complete audited financial statements and management's discussion and analysis in respect thereof for the year ended December 31, 2011 will be available, in due course, through www.sedar.com or by visiting Vero's website at www.veroenergy.ca.

Financial and operational highlights for the quarter and year ended December 31, 2011 with comparative data for 2010 are as follows: 

				Three months ended December 31,					Twelve months ended December 31,
Financial ($000's except per share amounts)				2011	2010	% Change			2011	2010	% Change
Production revenue				29,740	27,624	8			126,837	108,874	16
Funds flow from operations				14,877	15,294	(3)			65,853	56,772	16
	Per basic share			0.30	0.33	(9)			1.34	1.28	5
	Per diluted share			0.30	0.33	(9)			1.34	1.28	5
Net earnings (loss)				(79,216)	(3,359)	2,258			(74,919)	2,573	(2,895)
	Per basic share			(1.62)	(0.07)	2,214			(1.53)	0.06	(2.650)
	Per diluted share			(1.62)	(0.07)	2,214			(1.53)	0.06	(2,650)
Capital expenditures (net)				24,726	43,558	(43)			119,550	129,751	8
Net debt				177,201	123,814	43			177,201	123,814	43
Share Capital (000's)
Basic, weighted average				48,992	46,773	5			48,978	44,257	11
Basic, end of period				48,992	48,920	-			48,992	48,920	-
Diluted (treasury method)				48,992	46,773	5			48,978	44,257	11
Fully diluted				52,000	53,196	(2)			52,000	53,196	(2)
Daily Sales Volumes
Natural gas volumes (mcf/d)				40,417	37,704	7			42,073	39,932	5
Light oil (boe/d)				1,089	949	15			1,111	656	69
Liquids (boe/d)				1,094	1,109	(1)			1,115	1,210	(8)
Corporate (boe/d)				8,919	8,341	7			9,238	8,522	8
Average Prices Realized
Natural gas ($/mcf)				3.48	4.08	(15)			3.96	4.39	(10)
Light Oil ($/bbl)				91.86	79.06	16			89.74	75.00	20
Liquids ($/bbl)				75.48	64.30	17			72.88	61.05	19
Corporate ($/boe)				36.24	36.00	1			37.62	35.00	7
Netbacks ($/boe)
Operating				22.16	23.01	(4)			23.57	21.69	9
Funds flow				18.12	19.93	(9)			19.54	18.26	7
Wells drilled
Gross				7	10	(30)			31	31	-
Net				4.7	6.7	(30)			23.6	24.5	(4)

(1)	Funds flow from operations is calculated as funds provided by operating activities from the statement of funds flows, adding change in non-funds working capital and asset retirement expenditures. Funds flow from operations is used to analyze the Company's operating performance and leverage. Funds flow from operations does not have a standardized measure prescribed by IFRS and therefore may not be comparable with the calculations of similar measures for other companies.
(2)	Net debt represents current assets less current liabilities and bank debt (but excludes the potential future liability related to the mark-to-market measurement of hedges). It does not have a standardized meaning prescribed by IFRS and it is therefore unlikely to be comparable to similar measures presented by other companies.
(3)	All barrels of oil equivalent conversions use 6 mcf to 1 barrel of oil.
(4)	Operating netback equals production revenue less royalties, transportation and operating costs calculated on a per boe basis. Funds flow netback uses the operating netback, adds interest and other income and then subtracts interest and general and administrative costs. Operating netback and funds flow from operations netbacks are not standardized measures prescribed by IFRS and therefore may not be comparable with the calculations of similar measures for other companies.

2011 IN REVIEW (all dollar amounts are in 000's except per share, boe, and per boe amounts unless specifically otherwise noted)

Vero is pleased to report to its shareholders that the Company successfully continued with its plans to transition to more oil and liquids weighting throughout 2011. The decision was prudent given the difficult operating environment for natural gas producers particularly in the last half of the year as natural gas prices continued to decline. Ultimately Vero initiated a major transition into oil by starting the process to sell the majority of its natural gas assets.

Vero delivered an 8% increase in average production levels, for the year ended 2011, achieving 9,238 boe/d over 8,522 boe/d in 2010. Funds flow from operations was 16% higher at $65.9 million or $1.34 per share (weighted average and diluted) compared to the $56.8 million ($1.29 per share) in 2010. Vero realized a net loss of $74.9 million in 2011 or $1.53 per basic and diluted share. The loss was principally attributable to impairments taken on the oil and gas assets as well as goodwill at the end of the year. Further loss was driven by write-downs associated primarily with the fair value of the natural gas assets sold.

Vero's exploration and development capital spending in 2011 was $124,939, which was flat with the capital spent in 2010. The Company drilled 31 gross (23.6 net) wells versus 31 gross (24.5 net) wells drilled in 2010. Vero's net debt stood at $177,201 at December 31, 2011. In the year the Company sold a portion of its non-core assets for proceeds of $5.4 million.

By concentrating drilling efforts on our expanding Cardium land base, the Company grew oil production by 69% during the year. In shifting the focus to the more profitable oil and liquids production throughout the year, we were able to increase the percentage of revenues coming from liquids by 10% as the average contribution from liquids production was 52% throughout 2011.

Vero increased its borrowing base with its syndicate of banks to $170 million from $140 million in April of 2011. Even in the face of lower gas price decks, this borrowing base was maintained in its mid-year review as a result of Vero's strong drilling successes.

The Company embarked on an initiative to sell the majority of its natural gas production. Discussions for the sale of the gas assets occurred during the fourth quarter of 2011 which culminated in a binding purchase and sale agreement that was executed on January 2, 2012. Gross proceeds from the sale, prior to adjustments, were $209 million. Upon the closing of the sale on January 31, 2012 Vero repaid all of its existing bank indebtedness.

2012 OUTLOOK

The future looks very bright for Vero as the sale of the natural gas assets has put the Company in a great position financially and strategically. The decision continues to look solid as natural gas prices have further declined into 2012 and look to be under severe pressure for some time with high natural gas storage levels and high production levels in North America. Vero is strongly capitalized and has successfully restructured its business into a high growth, pure-play Cardium light oil producer. The Company is now focused on a commodity and a play that looks to command solid commodity prices generating solid returns for some time. This is recognized in the future prices for the next few years where prices are well over $100 per barrel for West Texas Intermediate oil. The management team has plenty of technical experience in the play and area having drilled over 44 horizontal wells to date in the Cardium formation.

With the restructuring of the business complete and a very strong capital structure, the Company has put a plan in place that will have maximum flexibility to execute its business plan. Vero received an initial borrowing base of $45 million, and current forecasts for 2012 are to spend $62.5 million on its exploration and development program. This includes the planned drilling of 28-30 wells (16-17 net) all of which will target horizontal Cardium light oil prospects. Vero currently forecasts that production should average 2,300 - 2,500 boe/d with 67% light oil and liquids production during 2012. The Company will prudently manage its capital throughout the year and anticipates a net debt to cash flow ratio at the end of the year of approximately 0.5 times, based on the fourth quarter's projected cash flow. To protect Vero's cash flow position and secure the execution of its capital plan, the Company has entered into hedges such that approximately 44% of its forecast 2012 production has a floor of just over $88/bbl Canadian.

In Summary, Vero has been successful in shifting its focus to oil production. The result is a company with strong capitalization, and a high growth, light oil producer.  The Company will have low cost structures and high corporate netbacks generating strong cash flow and capital to be redirected into the large multi-year drilling inventory allowing for solid production and reserve growth. Vero will continue to prudently manage the asset base to ensure maximum flexibility from a financial and business strategy standpoint. The team is focused and ready to grow the Company quickly and efficiently similarly to what occurred in its early years in the prior iteration of Vero. The Company would like to thank its long term shareholders and new shareholders for their support and looks forward to providing a first quarter operations update early in April.

FINANCIAL STATEMENTS

Below is selected financial statement information for the year ended December 31, 2011 with comparative data for December 31, 2010. For full disclosure of our audited financials statements with notes and the Management, Discussion and Analysis, please visit our website or SEDAR.

VERO ENERGY INC. Balance Sheet (in thousands of Canadian dollars)
			December 31, 2011	December 31, 2010	January 1, 2010
ASSETS
CURRENT
	Accounts receivable		14,729	27,458	29,541
	Prepaid expenses and deposits		1,035	3,241	4,566
	Loans receivable		-	-	2,289
	Assets held for sale		216,897	-	-
			232,661	30,699	36,396
Derivative contracts			5	-	-
Property, plant and equipment			131,882	352,007	272,343
Exploration and evaluation assets			14,492	19,495	15,302
Goodwill			5,633	19,913	19,913
			384,673	422,114	343,954
LIABILITIES
CURRENT
	Accounts payable and accrued liabilities		35,762	60,349	49,574
	Derivative contracts		539	1,422	1,132
	Bank debt		158,715	94,164	77,719
	Deferred liability		-	5,062	-
	Liabilities associated with assets held for sale		18,660	-	-
			213,676	160,997	128,425
Derivative contracts			-	-	113
Decommissioning liabilities			2,100	9,346	7,960
Deferred income taxes			6,086	18,013	13,422
			221,862	188,356	149,920
SHAREHOLDERS' EQUITY
	Share capital		216,678	216,174	180,617
	Contributed surplus		14,672	11,204	9,610
	Retained earnings (deficit)		(68,539)	6,380	3,807
			162,811	233,758	194,034
			384,673	422,114	343,954

VERO ENERGY INC. Statement of  Comprehensive Income (Loss)  (in thousands of Canadian dollars, except per share data)
															2011				2010
REVENUE
	Petroleum and natural gas sales														126,837				108,874
	Royalties														(14,359)				(11,568)
															112,478				97,306
EXPENSES
	Operating														28,233				24,950
	Transportation														4,778				4,892
	(Gains) losses on derivative contracts														262				(624)
	General and administrative														6,282				6,171
	Share based compensation														2,913				3,171
	Loss on disposal of assets														1,622				476
	Exploration and evaluation														5,552				2,727
	Depletion and depreciation														52,839				44,094
	Property, plant and equipment impairment loss														80,820				-
	Goodwill impairment loss														14,280				-
	Finance income														(90)				(197)
	Finance expenses														6,882				5,842
															204,373				91,502
EARNINGS (LOSS) BEFORE TAXES															(91,895)				5,804
TAXES Deferred income tax expense (recovery)															(16,976)				3,231
NET EARNINGS (LOSS) AND COMPREHENSIVE INCOME (LOSS)															(74,919)				2,573
NET  EARNINGS (LOSS) PER SHARE
	Basic														(1.53)				0.06
	Diluted														(1.53)				0.06

The accompanying notes are an integral part of these financial statements

VERO ENERGY INC. Statement of Cash Flows (in thousands of Canadian dollars)
																	2011				2010
CASH FLOWS RELATED TO THE
	FOLLOWING ACTIVITIES:
OPERATING
	Net earnings (loss)																(74,919)				2,573
	Adjustments for:
		Unrealized (gain) loss on derivative contracts															(888)				177
		Share based compensation															3,126				3,171
		Depletion and depreciation															52,839				44,094
		Accretion of decommissioning liabilities															397				323
		Exploration and evaluation expense															5,552				2,727
		Loss on disposal of assets															1,622				476
		Property, plant and equipment impairment															80,820				-
		Goodwill impairment															14,280				-
		Deferred income tax expense (recovery)															(16,976)				3,231
																	65,853				56,772
	Decommissioning costs incurred																(37)				(341)
	Changes in non-cash working capital																14,685				5,651
																	80,501				62,082
FINANCING
	Increase in bank debt																64,551				16,445
	Repayment of loans to officers/directors																-				2,289
	Proceeds from stock option exercises																348				4,857
	Proceeds from issuance of common shares, net of share issue costs																-				32,660
																	64,899				56,251
INVESTING
	Additions to petroleum and natural gas properties																(123,655)				(117,310)
	Additions to exploration and evaluation assets																(1,284)				(7,135)
	Purchase of petroleum and natural gas producing assets																(40)				(7,988)
	Additions to administrative assets																(69)				(27)
	Proceeds on sale of petroleum and natural gas assets																5,498				3,609
	Changes in non-cash working capital																(25,850)				10,518
																	(145,400)				(118,333)
NET DECREASE IN CASH AND    CASH EQUIVALENTS																	-				-
CASH AND CASH EQUIVALENTS,   BEGINNING OF PERIOD																	-				-
CASH AND CASH EQUIVALENTS,   END OF PERIOD																	-				-

Vero Energy Inc. is a Calgary based oil and natural gas exploration and development company. Vero's common shares trade on The Toronto Stock Exchange under the symbol "VRO". Please see the latest corporate presentation on the Vero Energy Inc. website at www.veroenergy.ca.

This press release shall not constitute an offer to sell or a solicitation of an offer to buy the securities in any jurisdiction.  The common shares of Vero will not be and have not been registered under the United States Securities Act of 1933, as amended, and may not be offered or sold in the United States, or to a U.S. person, absent registration or applicable exemption therefrom.

READER ADVISORY

Forward Looking Statements:  Certain information regarding the Company in this news release including management's assessment of future plans and operations, production estimates including forecast 2012 average rates and commodity mix, initial production rates, drilling inventory and wells to be drilled, timing of drilling and tie-in of wells, productive capacity and product mix of new and existing wells, funds flow and net debt expectations, ability to execute on our 2012 capital expenditure plans and the timing thereof, future oil and natural gas prices, future liquidity and financial capacity, future results from operations and operating metrics, and prospectivity of our Cardium inventory may constitute forward-looking statements under applicable securities laws and necessarily involve risks including, without limitation, 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, incorrect assessment of land values, environmental risks, competition from other producers, inability to retain drilling rigs and other services, the timing and length of plant turnarounds and the impact of such turnarounds and the timing thereof, delays resulting from or inability to obtain required regulatory approvals and ability to access sufficient capital from internal and external sources.  Forward looking statements or information is 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.  As a consequence, the Company's actual results, performance or achievements could differ materially from those expressed in, or implied by, these forward-looking statements and, accordingly no assurance can be given that any events anticipated by the forward-looking statements will transpire or occur, or, if any of them do so, what benefits the Company will derive therefrom.  In addition to other factors and assumptions which may be identified in this document and other documents filed by the Company, assumptions have been made regarding, among other things: the impact of increasing competition; the general stability of the economic and political environment in which the Company operates; the ability of the Company to obtain qualified staff, equipment and services in a timely and cost efficient manner; drilling results; the ability of the operator of the projects which the Company has an interest in to operate the field in a safe, efficient and effective manner; the Company's ability 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 or exploration; the timing and costs of pipeline, storage and facility construction and expansion; the ability of the Company 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 the Company operates; and the Company's ability to successfully market its oil and natural gas products. 

Readers are cautioned that the foregoing list of factors is not exhaustive.  Additional information on these and other factors that could effect the Company's operations and financial results are included in reports on file with Canadian securities regulatory authorities and may be accessed through the SEDAR website (www.sedar.com, and the Company's website www.veroenergy.ca). Furthermore, the forward-looking statements contained in this news release are made as at the date of this news release and the Company does not undertake any obligation to update publicly or to revise any of the included forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by applicable securities laws.

BOE Disclosure:  Disclosure provided herein in respect of barrels of oil equivalent (BOE) 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. Given that the value ratio based on the current price of crude oil as compared to natural gas is significantly different than the energy equivalency of 6:1, utilizing a 6:1 conversion basis may be misleading as an indication of value

Non-GAAP terms: This press release contains the terms "funds flow from operations" and "netbacks" which are not terms recognized under IFRS Generally Accepted Accounting Principles ("GAAP"). The Company uses these measures to help evaluate its performance as well as to evaluate acquisitions. The Company considers funds flow from operations a key measure as it demonstrates the Company's ability to generate funds necessary to repay debt and to fund future growth through capital investment. Funds generated from operations should not be considered as an alternative to, or more meaningful than, funds flow from operating activities as determined in accordance with International Financial Reporting Standards as an indicator of Vero's performance. Vero's determination of funds flow from operations may not be comparable to that reported by other companies. The reconciliation between net income and funds flow from operations can be found in the statement of funds flows in the financial statements. Vero also presents funds generated from operations per share whereby per share amounts are calculated using weighted average shares (basic and diluted) outstanding consistent with the calculation of net earnings per share, which per share amounts are calculated under GAAP. The Company considers netbacks as a key measure as it demonstrates its profitability relative to current commodity prices. Operating netbacks are calculated by taking total revenues (including hedging gains and losses) and subtracting royalties, operating expenses and transportations costs on a per boe basis. Funds flow netbacks are calculated by taking the operating netback, adding interest and other income and then subtracting interest costs, and general and administrative costs on a per boe basis. 

Doug Bartole, President & CEO, at [phone]
Gerry Gilewicz, Vice-President Finance & CFO, at [phone]
Scott Koyich, Investor Relations, [phone]
Internet:  www.veroenergy.ca