Q3 results...Winstar releases Q3 2010 Financial and Operational Results
CALGARY, Nov. 11, 2010 (Canada NewsWire via COMTEX News Network) --
Winstar Resources Ltd. ("Winstar" or the "Company") is pleased to announce its financial and operating results for the three and nine month periods ended September 30, 2010 (all dollar values are expressed in Canadian dollars unless otherwise stated).
Q3 2010 financial and operating results as compared to Q3 2009 The financial and operating results for Q3 2010, as compared to continuing operations reported during Q3 2009, show a marked improvement reflecting stronger commodity prices and increased production.
-- Production was up 12% to 1,998 boepd as compared with 1,790
boepd during Q3 2009.
-- Field operating netback in Tunisia was $58.59 per boe; a 23%
increase as compared to Q3 2009.
-- Funds from continuing operations were $8.5 million (
.24 per
share); 28% higher than the $6.7 million reported in Q3 2009.
Production during Q3 2010 was positively affected by:
-- the commencement of production from Chouech Essaida Triassic
Development well 11 (CS#11) which produced an average of 550
bpd during the quarter;
-- positive results from workovers at CS#1 and CS#7, within the
Chouech Essaida Triassic Oil Field which increased production
by 661 bpd.
-- the increases in oil production were partially offset by a 75%
reduction in gas sales from Chouech Essaida relative to Q3 2009
due to third party transportation restrictions. Gas sales have
increased again at the end of October 2010 to approximately 700
mcfd (115 boepd) but there remains no assurance that current
sales volumes will remain stable. During October 2010, Winstar
averaged approximately 2,050 to 2,100 boepd of production.
Funds from continuing operations during Q3 2010 were $8.5 million, which are a significant improvement relative to Q3 2009 of $6.6 million. Due to the timing of tanker sales during the quarter, the Company was unable to sell 100% of Q3 production and crude oil inventory increased by 10,100 bbls, resulting in a September 30, 2010 inventory balance of 33,100 bbls. At current market prices of approximately US $80, the 33,100 bbls of inventory represent approximately $2.4 million of incremental funds from operations after deducting approximately $360,000 in operating expenses booked as cost of crude inventory. The Company is currently planning tanker sales during Q4 to ensure that the existing crude inventory is sold prior to December 31, 2010.
Operational and Financial Highlights - from continuing operations
Three Months Nine Months
Ended September 30 Ended September 30
Financial 2010 2009 % Change 2010 2009 % Change
Oil and gas sales 13,985 11,222 25 35,344 25,175 40
Net royalty (1,744) (1,263) 38 (4,164) (2,609) 60
Operating expense 2,206 1,909 16 6,387 6,023 6
General and
administrative
expense
(excludes non-cash
stock based
compensation) (1,421) (1,633) (13) (4,211) (4,026) 5
Current income tax - (328) - - (1,025) -
Funds from operations 8,535 6,689 28 20,289 12,857 58
Net income (loss) 779 694 - 754 (174) -
Capital expenditures 7,004 1,131 519 23,320 13,807 69
Total production 1,998 1,790 12 1,741 1,452 20
(boepd)
Total sales (boepd) 1,888 1,790 5 1,648 1,713 (4)
Oil (bopd) 1,747 1,432 22 1,467 1,199 22
Average price ($ 81.84 73.29 12 80.65 65.31 23
per bbl)
Gas (mcfd) 1,888 1,790 5 1,648 1,713 (4)
Average price ($ 10.68 7.92 35 10.28 7.32 40
per mcf)
Operating expense ($ 12.70 11.59 10 14.20 16.11 (12)
per boe)
Operations Update Chouech Essaida Triassic Development Well 13 (CS#13) The Company completed the drilling of CS#13 to a total depth of 2,485 meters. The well, which spud on September 28, 2010, and was rig released on October 31, 2010, ahead of projected time and under budgeted costs. The 33 day drilling operation was the best performance by the Company to date, to this depth, and represents a significant improvement in the Company's drilling operations. The open-hole logs, obtained during the final week of October 2010 provided conflicting results with the information obtained during drilling, which indicated the Triassic sands had good oil and gas shows.
Following perforation of three prospective zones and installation of completion equipment, the Company commenced testing of the well on November 3, 2010. Testing of the first two zones resulted in relatively low production rates of water and uneconomic traces of oil. The Company is currently testing the final zone which will be followed by a final test to flow all three zones commingled using coil tubing and nitrogen. If upon completion of the testing program there is still no prospect of economic production, the Company will review the possibility of re-completing as a water disposal well.
Chouech Essaida Silurian Exploration Well 1 (CS Sil#1) Following the completion of operations at CS#13, the drilling rig moved to the CS Sil#1 location and spud in early November. The well is targeted to drill 4,400 meters to test the Silurian Acacus formation and is anticipated to take 60 days to drill and complete with a budgeted cost of US $12.0 million. Due to the multi-level formation of the Silurian Acacus formation, testing could take up to 30 days and is budgeted to cost an additional US $3.0 million depending on the hydrocarbon phase encountered and could be lower in the well if it is predominantly oil. If successful, the Company expects that test results from the well will be available during the first quarter of 2011.
Outlook The Company has the contractual option to use the same drilling rig to drill one additional well immediately after CS Sil#1. The option can be exercised up to 30 days prior to rig release of the CS Sil#1 well, which is expected to be in late December 2010. The Company has not yet determined whether it will exercise this option as it is the Company's mandate that the ongoing capital program will be funded primarily through existing working capital and ongoing funds from operations.
BOE
References herein to boe mean barrels of oil equivalent derived by converting gas to oil in the ratio of 6,000 cubic feet (mcf) of gas to one barrel (bbl) of oil. Boe may be misleading, particularly if used in isolation. A boe conversion ratio of 6 mcf: 1 bbl is based upon an energy conversion method primarily applicable at the burner tip and does not necessarily represent a value equivalency at the wellhead.
Non-GAAP Measures Funds from operations are a non-GAAP measure, defined by the Company as cash flow from operating activities excluding