looks like mediocre results and no meaningful mention of what is going on in sask.******************************************* Redstar loses $26.5-million in 2006 2007-04-02 21:26 ET - News Release Mr. Lawrence Walter reports REDSTAR OIL & GAS INC. ANNOUNCES FINANCIAL AND OPERATING RESULTS FOR THE YEAR ENDED DECEMBER 31, 2006 Redstar Oil & Gas Inc. is releasing its financial and operating results for the year ended Dec. 31, 2006. Highlights from the fourth quarter and year ended Dec. 31, 2006, include: During the year, the company drilled 20 (16.4 net) wells with a success rate of 60 per cent which added approximately 8,394 million cubic feet of natural gas (1,399,000 barrels of oil equivalent) of proved plus probable reserves. Average production for 2006 increased by 141 per cent to 996 barrels of oil equivalent per day from 412 boe/d in 2005. Redstar's current production is estimated at 1,350 boe per day with an additional 275 boe per day constrained due to third party pipeline bottlenecks and an additional 250 boe per day behind pipe that the company expects to follow up with further drilling, completion and tie-in activities next winter. In December, Redstar entered into a $20-million joint venture on its farm-in lands in the greater Sierra area with a private oil and gas company pursuant to which the partner has committed to finance $20-million of drilling, completion and tie-in activities for a 50-per-cent working interest on all future drilling activities in the greater Sierra area. This joint venture allows Redstar to complete its 2007 capital programs at no capital cost to the company. The company and its partner expect to drill approximately 15 exploration or development wells in northeastern British Columbia in 2007 of which nine have been drilled to date. The company is eager to drill its first summer well which is targeting the Keg River formation and is situated in a reef complex located between two pools that have produced between 29 billion cubic feet and 48 billion cubic feet of gross production. The net interest in the well is 30 per cent and will be drilled at no capital cost to Redstar. The company completed six separate sales of portions of its 3-D seismic data to independent oil and gas producers operating in the Cutbank Ridge area netting Redstar approximately $11.2-million of which $5.6-million was sold in the fourth quarter. Proceeds from the sales were used to reduce debt and working capital deficiencies. Redstar expects to complete additional 2007 seismic sales. During the fourth quarter of 2006, Redstar graduated from the TSX Venture Exchange to the Toronto Stock Exchange. OPERATING AND FINANCIAL SUMMARY (thousands of dollars) Three Three Twelve Seven months months months months ended ended ended ended Dec. 31, Dec. 31, Dec. 31, Dec. 31, 2006 2005 2006 2005 Petroleum and natural gas sales, net of royalties 2,021 2,684 9,409 4,099 Net income (loss) (26,593) (569) (29,534) (925) Per share Basic (0.74) (0.02) (0.83) (0.044) Diluted (0.74) (0.02) (0.83) (0.044) Funds flow from operations (non-GAAP) 416 1,523 2,633 2,207 Per share Basic 0.01 0.05 0.07 0.10 Diluted 0.01 0.05 0.07 0.10 Average daily production (boe/d) 914 589 996 412 Average natural gas pricing ($/mcf) 6.11 11.13 6.08 10.35 Average pricing ($/boe) 36.65 68.67 36.64 64.01 Redstar began 2006 with a successful first quarter drilling program in the greater Sierra area of northeast British Columbia, increasing production by 59 per cent from approximately 700 boe per day to approximately 1,100 boe/d at year-end 2006 and increasing reserves year over year by 135 per cent, from 1,104 million barrels of oil equivalent (proven plus probable) to 2,592 Mboe (proven plus probable). Redstar's sales of $11.2-million in seismic data throughout 2006 enabled the company to exit 2006 with a net debt level of $7.0-million which is approximately 1.4 times forecasted 2007 cash flow. Potential future seismic sales are expected, with the proceeds to be used to either increase activity levels and/or further reduce the company's debt. The net loss for the year ended Dec. 31, 2006, of $29.5-million was primarily the result of an impairment provision of $36.5-million due to the following factors: the company elected to take an impairment charge on its greater Sierra seismic databases in the amount of $26.7-million by writing down the seismic to its estimated future sales value; lower than estimated natural gas prices; higher operating costs; and a negative revision on Redstar's a-56-b Pine Point well where high decline rates reduced probable reserves by approximately 2,596 million cubic feet. Throughout 2006, Redstar focused on lowering its operating costs, and was successful in decreasing transportation and processing costs, which make up the majority of its operating costs, by approximately 14 per cent. The company will continue to work on reducing its processing fees, transportation costs and administration costs in order to strengthen 2007 netbacks. In the fourth quarter of 2006, the company completed three operations which resulted in two successful recompletions and one dry hole. One of the recompletions was a behind-pipe well from the first quarter 2006 program in the greater Sierra area which flow tested at a stable rate of approximately 1,000 thousand cubic feet per day with a drawdown of less than 6 per cent. This well conservatively represents 250 boe/d of behind-pipe production. The second completion resulted in another successful well that flow tested at a stable rate of approximately 2,225 thousand cubic feet per day with a drawdown of less than 2 per cent. This well has been tied in and is on production at a restricted rate due to third party capacity issues. Currently, Redstar has approximately 275 boe per day of constrained production due to pipeline bottlenecks in the greater Sierra area as a result of high line pressure and constrained third party compression capacity. The operators are investigating installing either field booster compression and/or additional plant compression to reduce these bottlenecks. Including Redstar's 2007 winter drilling program, current production is estimated at 1,350 boe per day with up to an additional 250 boe per day behind pipe. The company's 2006 joint venture arrangement provided Redstar with $20-million of capital ($10-million net) to continue with its 2007 drilling program and portfolio development in a weakened equity market at no capital cost to the company. In the first quarter of 2007 Redstar drilled nine of the 16 wells planned for its 2007 drill program. Of the first nine wells drilled in the greater Sierra area, four have been tied in and are on production, two are planned be tied in next winter, and three were dry and abandoned. Redstar continues to inventory prospects and has identified over 20 shallow locations and five deep high-reward locations in northeastern British Columbia. In addition, the company has over 30 locations in southwest Saskatchewan. Outlook The last year was a difficult one for the oil and gas industry. Service and operating costs were extremely high and commodity price volatility made for a challenging environment to operate and forecast in. So far in 2007 the company has seen a decline in the cost of many of its services due primarily to reduced industry activity levels leading to increased competition in the service sector. The outlook for natural gas prices is favourable as gas inventory levels are back in line with historical averages and curtailed drilling activities have led to a reduction in pipeline receipts. As a result, the company feels that the margins for natural gas producers in the industry should improve. Redstar remains positive on the future development of its existing opportunities in 2007. Redstar's current financial flexibility, combined with additional sales proceeds from its seismic databases, will allow it to continue with the development of its shallow and deeper prospects in northeastern British Columbia and explore on its large undeveloped acreage in Saskatchewan. Redstar's major industry partner has plans to drill several deeper wells this summer in areas where Redstar has identified significant shallow gas potential. Favourable well log results from its partner's wells could result in two new development areas for Redstar in the fall of 2007 and winter of 2008. With a budgeted capital program of $25-million, Redstar is forecasting production to average 1,300 to 1,400 boe per day in 2007 and 2007 exit production levels of 1,500 to 1,700 boe per day. We seek Safe Harbor. tchewan. Comments?