REDSTAR2008-03-19 23:57 ET - News Release
Mr. Lawrence Walter reports
REDSTAR OIL & GAS INC. ANNOUNCES FINANCIAL AND OPERATING RESULTS FOR THE YEAR ENDED DECEMBER 31, 2007
Redstar Oil & Gas Inc. is releasing its financial and operating results for the year ended Dec. 31, 2007. Highlights from the fourth quarter and year ended Dec. 31, 2007, include:
* Redstar has maintained a strong balance sheet with a working capital surplus of $4.5-million and is undrawn on its $10-million credit facility.
* Redstar's average natural gas production volumes in 2007 were 6.5 million cubic feet per day (1,078 barrels of oil equivalent (boe) per day), an 8-per-cent increase as compared with fiscal 2006. Production volumes were 12 per cent higher in the fourth quarter as compared with the comparative quarter in 2006.
* Redstar's funds flow from operations in 2007 increased by 93 per cent as compared with 2006. An 8-per-cent increase in production volumes combined with a 23-per-cent decrease in operating, transportation and general administrative costs accounted for the increase in funds flow from operations.
* In May, 2007, Redstar improved its balance sheet by completing the sale of the proprietary rights of its Cutbank Ridge 3-D seismic data for proceeds of $9.6-million. Redstar continues to maintain a licensed copy of the Cutbank Ridge 3-D seismic data.
* In 2007, Redstar replaced 99 per cent of its produced reserves at a finding and development cost of $6.97 per boe.
* The highly publicized shale gas play emerging in northeastern British Columbia should have a positive impact on the value of Redstar's extensive, proprietary 3-D seismic database.
* In October, 2007, Redstar further strengthened its balance sheet when the company and its JV partner began to discuss amending the original terms of the Dec. 22, 2006, agreement. When an amending agreement was mutually agreed to and consummated, Redstar and the partner divided the remaining financing commitment, less a $600,000 holdback for future costs in the Sierra area, resulting in proceeds of approximately $3.18-million to Redstar, subject to customary final closing adjustments. Pursuant to the agreement, Redstar must offer to the partner 100 per cent of the participation to drill any deep prospects in the Sierra area, as determined by the area of mutual interest (AMI) estimated to be over five million acres, and will receive a 5-per-cent gross overriding royalty on any deep projects within the AMI that the partner enters into or commences within a two-year window. In addition, Redstar's shallow rights are uninhibited by the agreement within the AMI, and thus, the company has the right to drill its own shallow gas wells within the AMI. Redstar also has a completion point election to back in for 25 per cent of any shallow well that the partner drills during the AMI period.
* As reported in Stockwatch on March 7, 2008, Redstar entered into a preacquisition agreement with Great Plains Exploration Inc., pursuant to which Great Plains and Redstar will proceed with a business combination whereby Great Plains will acquire all of the Redstar shares in consideration for the issuance of 0.9 Great Plains share for each Redstar share held. Total consideration offered by Great Plains is expected to be 32.2 million Great Plains shares, effectively representing 83 cents per Redstar share based on a five-day weighted average price per share of 92 cents for Great Plains, being a 21-per-cent premium on the five-day weighted average price of Redstar on the Toronto Stock Exchange.