Alberta Oilsands earns $4.49-million in 2011Alberta Oilsands earns $4.49-million in 2011
Alberta Oilsands Inc (C:AOS)
Shares Issued 156,617,057
Last Close 4/26/2012
.16
Thursday April 26 2012 - News Release
Mr. Jack Crawford reports
ALBERTA OILSANDS INC. FILES 2011 ANNUAL RESULTS AND UPDATES ACTIVITIES
Alberta Oilsands Inc. has filed with Canadian securities authorities its audited financial statements and its management's discussion and analysis as at and for the year ended Dec. 31, 2011. Copies of the filed documents may be obtained through www.sedar.com on April 27, 2012.
Overview
The Company's efforts during 2011 were focused on a number of areas in the Athabasca oil sands trend. The primary focus was the advancement of the Clearwater Phase I Project. The Company has no debt and a strong cash balance to see the Project through to its regulatory approval with ample flexibility to look at other options to add shareholder value.
Highlights for the fiscal year of 2011 include the following:
Operational: * The 2010-2011 winter exploration activity at Clearwater consisted of 26 core holes, 2 service wells, 6.7 kilometres of 2D and 1.3 square-kilometres of 3D seismic surveys. The objectives of the Clearwater program were to prepare for the execution of Clearwater Phase I development and production activities and to collect the technical data required to prepare an application for the second phase of the development.
* On April 13, 2011, the Energy Resources Conservation Board ("ERCB") issued a first round of Supplemental Information Requests ("SIR") to AOS on the Clearwater Phase I Project Application. AOS submitted the response to the SIR on August 4, 2011.
* On October 6, 2011, the ERCB issued a second SIR pertaining to the Clearwater Phase I Project Application. The response to this SIR was submitted on December 23, 2011.
* GLJ Petroleum Consultants issued a resource evaluation that assigned 373 million barrels (MMbbl) of gross lease contingent resources on a best estimate case to the Clearwater project area with an effective date of December 31, 2011. No reserves were assigned to the Clearwater project area.
* On September 30, 2011, the Company and its joint venture partner closed the sale of its working interest in the Hangingstone property. The Company received net proceeds of approximately $24.7 million.
* In the fourth quarter of 2011, the Company commenced preparations for the drilling of core holes and the shooting of 2D seismic on its Grand Rapids land.
Financial:
* In March 2011, the Company completed a "bought deal" prospectus financing of 20,000,000 Common Shares issued on a "flow-through" basis at a price of
.50 per share for gross proceeds of $10 million. In addition, the Company issued 1,200,000 common share purchase warrants ("Warrants") to the underwriter. Each Warrant entitles the holder to acquire one Common Share at a price of
.50 per share until March 21, 2014.
* On July 15, 2011, the Company completed a prospectus offering of 16,666,600 Common Shares at a price of
.30 per share for gross proceeds of approximately $5.0 million.
* The Company sold the majority of the common shares and warrants of its equity investment in Africa Oil Corp. for net cash proceeds of $5.6 million. The remaining shares were sold in the first quarter of 2012.
Administrative:
* In March and September 2011, the Company granted 3,331,000 and 578,570 stock options ("options"), respectively, pursuant to its stock option plan to employees, directors and long-term consultants with an exercise price of
.40 and
.23 per share. The options vested one-third immediately and one-third on each of the first and second anniversaries of the grant and have a five year life.
* Shabir Premji retired as Executive Chairman as of October 31, 2011. On April 16, 2012, Mr. Premji resigned as a director of the Company.
* The Board of Directors of the Company appointed Mr. Jack Crawford, previously Lead Director of the Company, as Chairman of the Board.
* Mr. Michael Lee, President of the Company was appointed interim CEO.
Subsequent highlights:
* The Company completed its 2012 Grand Rapids field exploration program in February 2012. A total of 41 kilometers of 2D seismic and 8 core holes were completed.
* In March 2012, the ERCB issued a third SIR pertaining to the Clearwater Phase I Project Application. The Company submitted a comprehensive response to this SIR on April 17, 2012. Due to the proximity of the Clearwater Project to the City of Fort McMurray and the Fort McMurray Regional Airport, and the increased scrutiny being afforded oil sand projects in general, AOS now anticipates that the ERCB will hold a public hearing to review the project. No timeline has yet been established for the public hearing but the Company anticipates that this may occur in the fall of 2012. A decision on Clearwater Phase I Project approval would be expected approximately 90 days following the hearing.
* Alberta Environment and Water requested AOS to provide a sample of the formation water from the Wabiska Formation at Clearwater. The Company is evaluating water well drill locations and execution timing to comply with this request.
Review of Oil Sands Operations
Clearwater
AOS continued to take steps on the path to production at its oil sands project at Clearwater. The initial Clearwater Phase I Project Application was filed on January 15, 2010 with the ERCB. In December 2010, AOS filed an application update with the ERCB for a Solvent Assisted Low Pressure Steam Assisted Gravity Drainage ("SLP-SAGD") project at Clearwater with a design production capacity of 4,350 bbl/d of bitumen through six horizontal SLP-SAGD well pairs. The 2011 winter exploration program included 26 core holes as well as 2D and 3D seismic programs. The coring further delineated existing Clearwater lands as well as two of the new sections purchased in November 2010. The Clearwater Project area is now delineated by a total of 25 core holes over 2 sections resulting in an average density of 12.5 wells per section. The seismic programs acquired 6.7 kilometres of 2D and 1.3 square kilometres of 3D data. The Company engaged GLJ Petroleum Consultants to prepare a resource report on the entire Clearwater Project area based on delineation that included the results of the winter drilling program and an effective date of December 31, 2011. Gross lease contingent resources of 373 MMbbl were assigned on a best estimate basis. The contingencies which currently prevent the classification of the contingent resources as reserves are the pending successful piloting of the SLP-SAGD technology, further delineation drilling, facility design, regulatory approvals and firm development plans. The contingent resources have been assessed using the same fiscal conditions applicable in the assessment of reserves and, as such, these volumes are defined as economically recoverable. For the year ended December 31, 2010, the Company had engaged Ryder Scott Company Canada, Petroleum Consultants to prepare a resource report for Clearwater. Ryder Scott Company Canada, Petroleum Consultants assigned 12.0 million barrels of gross lease probable reserves and 32.7 million barrels of possible reserves to Clearwater Phase I. The change from probable reserves to contingent resource assignment at Clearwater resulted from the change in resource evaluators that AOS used in 2011 and their respective reserves and resource assignment policies. Both evaluators provided NI 51-101 compliant evaluations in accordance to the guidelines of the Canadian Oil & Gas Evaluation Handbook ("COGEH").
On April 13, 2011, the ERCB issued a SIR comprising 36 questions to AOS on the Clearwater Phase I Project Application. AOS submitted the responses to the SIR on August 4, 2011. On October 6, 2011 the ERCB issued a second SIR with 7 questions. The Company submitted responses to these questions on December 23, 2011.
AOS is working with the Provincial Government and the Regional Municipality of Wood Buffalo ("RMWB") to highlight the benefits of the Clearwater Project and to assess the potential impact of the proposed Lower Athabasca Regional Plan ("LARP") which includes the Fort McMurray Urban Development Sub- Region ("UDSR"). On August 2, 2011, Alberta Sustainable Resource Development ("ASRD") cancelled all surface lease applications in a large area surrounding the City of Fort McMurray, which included the majority of the Clearwater Project area. On August 29, 2011, a memorandum of understanding was signed between the Provincial Government and the RMWB which committed the province to transfer land to the RMWB in a timely manner for the continued growth of Fort McMurray. Details of the UDSR have yet to be released but could have a material impact on the Clearwater Project. Development of Phase I is subject to both regulatory approval and obtaining project financing.
Hangingstone
The Company and its 50% joint venture partner completed the sale of their 100% working interest in the Hangingstone East/Halfway Creek area on September 30, 2011. The Company received net proceeds of $24.7 million. Proceeds of the sale will help fund the Company's working capital which will be used for both its core focus area, the Clearwater Phase I Project and commencement of an exploration program at Grand Rapids.
Grand Rapids
The Company has a 100% working interest in 18 sections in the Grand Rapids prospect area. During the 2011/2012 winter drilling season, the Company drilled 8 core holes and acquired 41 kilometres of 2D seismic. The expenditures for the program are estimated to be approximately $7.0 million and are anticipated to satisfy the remaining balance of flow-through expenditure commitments. Preliminary indications from open hole logs and core inspections confirm the presence of bitumen in these leases. Estimation of the size of the bitumen deposit is ongoing. Geological mapping, further laboratory analysis work and the incorporation of the interpreted seismic data will occur over the course of the next few months. Indications are sufficiently encouraging to warrant further exploration activity on the property, subject to allocation of capital funding.
Algar Lake
The Company has a 100% working interest in 51 sections in the Algar Lake prospect area. These sections are on the two leases acquired in 2007 and have a 15 year term. The three 1950's vintage vertical wells drilled on the lease indicate potential for significant in situ bitumen volumes. There is also potential for heavy oil "cold-flow" (or non-thermally-assisted) production, which if viable and approved would considerably reduce the capital requirement and facility complexity to achieve production. The Company intends to drill core holes or acquire seismic so that the bitumen potential in the area may be further examined.
Conventional Operations
AOS produced an average of 47 boe/d in the fourth quarter of 2011, comprised of 108 mcf/d of natural gas from Ladyfern and 22 boe/d of oil from Leduc with the balance from minor properties. This compares to 118 boe/d in the fourth quarter of 2010 and 82 boe/d in the third quarter of 2011. Major contribution to production loss was due to the decline at the Ladyfern gas well and one of the Leduc oil wells. The average production for the 2011 year was 78 boe/d comprised of 244 mcf/d of natural gas and 37 bbls/d of oil and natural gas liquids. This compares to the 2010 year of 152 boe/d which was comprised of 603 mcf/d of natural gas and 62 bbls/d of oil and natural gas liquids. The Company has not added any conventional production since the Ladyfern well went on production in April 2009. The cash flow from AOS' conventional operations will continue to be used to offset the Company's funding needs. AOS continues seeking opportunities to rationalize its conventional portfolio to maximize value from these assets and to focus its efforts in the oil sands.
International Operations
The sale and assignment of AOS' Kenyan assets to Africa Oil Corp. in August 2010 was for consideration of 2.5 million Africa Oil common shares and 1.5 million Africa Oil warrants, each of which was exercisable into one common share of Africa Oil at a price of $1.50 per share. By the end of December 2011, the Company had sold virtually all of the 2.5 million Africa Oil common shares and exercised the 1.5 million warrants and sold the resulting shares. Net proceeds of approximately $5.6 million were realized from the sale. The remaining shares were sold in the first quarter of 2012 for net proceeds of $5,066. The Company has no further international operations interests.
Financial and Operating Summary Statement of Operations and Deficit
-***-------------------------------------------------------------------------- Years ended December 31 2011 2010 2009(1)-------------------------------------------------------------------------Statement of Operations and DeficitPetroleum and natural gas sales ($) 1,613,649 2,453,182 2,979,929Petroleum and natural gas sales per boe ($) 56.82 44.15 35.05Daily sales volumes (boe 6:1) 78 152 233Net income (loss) for the year ($) 4,494,959 (3,909,297) (3,660,479)Net income (loss) per share * basic and diluted ($) 0.03 (0.04) (0.04)
(1) The annual results for 2009 have not been adjusted and reflect the results in accordance with previous Canadian GAAP.
Outlook
AOS's growth strategy is to develop its oil sands assets through a combination of capital transactions, joint-ventures, debt and other financial partnerships. The Company believes that this strategy will expedite conversion of its bitumen resources to production and cash flow. Management believes that the fundamentals for oil sands will remain strong over the foreseeable future, recognizing there could also be periods of correction. Energy demand continues to grow globally and the entry of several Asian national companies into Alberta's oil sands industry indicates the growing importance of this resource in the world energy supply equation. Events in the Middle East and South America and demand from Asia's growing economies accentuate the need for an alternative supply source from a stable region of the world, especially as the United States, which is the largest market for Canadian oil supply, reconsiders its strategic energy partners. The anticipated intensive level of industry activity in the oil sands creates challenges for all industry competitors in securing qualified personnel, supplies and services over the next few years. Activity in the oil sands sector was strong in the 2010-2011 winter season and has continued into the 2011-2012 season. Concurrent with increased demand for services and qualified personnel there will likely be increases in labour and material costs. Management is cognizant of this and has considered strategies to adapt.
AOS expects to continue with technical and consultation work on Clearwater Phase I in anticipation of ERCB approval. This includes finalizing the interpretation of the 2011 winter exploration program in order to confirm Phase I well placements. These results will also be used to plan the expansion of the project in Clearwater Phase II. Management believes that there is a likelihood that the Clearwater Phase I Project Application will be referred to a public ERCB hearing, prior to a decision on the project approval. The Company is preparing to advocate its position if a hearing takes place. Management estimates that a public hearing will defer the project approval decision to late 2012 or the beginning of 2013.
The sale of the Hangingstone property has been completed and the Company received net cash proceeds of approximately $24.7 million.
Exploration of AOS' Grand Rapids oil sands leases has commenced by drilling 8 core holes and shooting 41 km of 2D seismic. Preliminary indications from open hole logs and core inspections confirm the presence of bitumen in these leases. Estimation of the size of the bitumen deposit is ongoing. Geological mapping, further laboratory analysis work and the incorporation of the interpreted seismic data will occur over the course of the next few months. Indications are sufficiently encouraging to warrant further exploration activity on the property, subject to allocation of capital funding. The area surrounding Grand Rapids has experienced more activity and recent core holes on offsetting lands have assisted in generating the Grand Rapids exploration plan. A further successful delineation program at Grand Rapids may support an oil sands project proposal in the future.
The objective of an Algar Lake exploration plan would be to confirm available resource volumes and evaluate further bitumen development potential.
Over the next year, management will focus on the following: guide the Clearwater Phase I Project Application through a hearing (if required) and to approval, assess and mitigate any impact of the planned UDSR on the Clearwater project, secure sufficient development funding for Clearwater Phase I, secure the personnel and contracts to execute and construct the Clearwater Phase I Project, evaluate the results of the 2012 exploration program, and consider a further planned exploration program at Grand Rapids, explore options for an exploration program at Algar Lake, and rationalize the conventional oil and natural gas assets. In addition, the Company's strong cash balance allows it the flexibility to continue to evaluate a number of options to add shareholder value.
We seek Safe Harbor.
© 2012 Canjex Publishing Ltd.