High North Resources Ltd. Operations Update and Operating and Financial Results for Third Quarter Ended June 30, 2015

CALGARY, ALBERTA--(Marketwired - Sept. 14, 2015) -

NOT FOR DISTRIBUTION TO U.S. NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES.

High North Resources Ltd. (the "Company" or "High North") (TSX VENTURE:HN) is announcing its financial and operating results for the three and nine months ended June 30, 2015 and providing an operations update. Certain financial and operating information is outlined below. This information should be read in conjunction with the unaudited interim consolidated financial statements and management's discussion and analysis (the "MD&A") for the three and nine months ended June 30, 2015 which are available under High North's profile on SEDAR at www.sedar.com.

THIRD QUARTER HIGHLIGHTS

• Operating expenses on a barrels of oil equivalent ("boe") basis declined by 33% from Q1 December 31, 2014 to Q3 June 30, 2015 and are expected to be reduced even more once a water disposal facility is completed.
• General and administrative expenses decreased 23% from the previous quarter and 47% from the first quarter of fiscal 2015.
• The Company had daily production of 179 barrels per day ("bbls/d") of oil in the third fiscal quarter versus 238 bbls/d in the previous quarter. Three wells which were shut in during the second fiscal quarter remain shut in. One of these wells was converted to a water disposal well, the other two wells are expected to be back on production following the installation of the water disposal facility at which time, the Company expects increased production and reduced operating expenses.
• The Company recognized revenue, net of royalties, of $0.6 million in the third quarter ended June 30, 2015, similar to $0.6 million in the second quarter ended March 31, 2015. 
• The Company incurred total capital expenditures of $355,533 in the three months ended June 30, 2015 on its property and equipment, primarily for the conversion of the well located on 08-02-76-21W5 to a water disposal well.
• The Company had previously incurred $825,000 in delay fees owing to farmors on certain leases. $618,750 of this debt was settled by the issuance of 1.5 million warrants. Each warrant provides the holder the right to purchase one common share of the Company at an exercise price of $0.39 per share. The remaining $206,250 is owed to a non-arm's length farmor and has been reclassified as a long-term liability.

OPERATIONS UPDATE

On August 21, 2015, High North received regulatory approval to install a water disposal facility. The Company anticipates completing this facility prior to the end of 2015 at which time it expects that two of the wells that had previously been shut-in will be put back on production and the sixth well (drilled in December 2014) will be tested for production capability. The Company anticipates that the operation of the water disposal facility and the resulting increase in production will further reduce its operating expenses. 

The Alberta Energy Regulator has granted an extension to allow High North to flare its associated gas production until February 1, 2016. The Company will be required to reapply for further extensions if needed. It is the Company's intention to install a power generation facility to realize gas production revenues and eliminate gas flaring. The Company is currently pursuing the financing and installation of this facility which will allow the gas to be utilized as fuel gas with the excess being marketed to the electrical grid. Once both the water disposal facility and power generation facility have been completed, the Company anticipates that operating costs will be reduced significantly and that it will be able to bring on additional production at minimal cost.

As of June 30, 2015, the Company owns 8,832 hectares of land with potential Montney rights. The Company anticipates that a minimum of four horizontal wells per section targeting Montney oil could be drilled on these prospective lands.

OUTLOOK

To date, the Company has drilled and completed six Montney horizontal oil wells, all of which are deemed successful. Due to low commodity prices and high water transportation and disposal costs the Company elected to shut in three of the previous five producing wells in the second fiscal quarter ended March 31, 2015. The conversion of an existing well to a water disposal well has been completed and an application for a water disposal facility has been approved. Once the facility is installed, operating costs are expected to be significantly reduced and the shut in wells are expected to be put back on production. In addition, the financing and construction of a power generation facility is being pursued whereby the produced gas will be utilized as fuel gas, which is expected to further reduce operating costs, with the excess being marketed to the electrical grid, to create additional revenue.

On July 15, 2015, High North announced the completion of a plan of arrangement (the "Plan of Arrangement") under the Business Corporations Act (British Columbia) with holders (the "Debentureholders") of it 12.00% convertible unsecured subordinated debentures (the "Debentures"). The Debentures were issued on April 4, 2014 and matured on April 4, 2015 and the Company did not have the ability to repay both the principal amount and the accrued and unpaid interest thereon. Pursuant to the Plan of Arrangement $4,011,000 principal amount of Debentures were deemed to be surrendered by Debentureholders and were redeemed by High North in exchange for common shares of the Company and $4,659,000 principal amount of Debentures were amended which amendments, among other things, extended the maturity date of the Debentures to October 4, 2016 and reduced the interest cost to the Company. In addition, interest expense in the amount of $587,453 was settled through the issuance of shares of the Company which resulted in a total reduction of the Company's working capital deficit by $5.2 million. The Company anticipates that the Debentures redeemed by High North will allow for increased cash flow and reduce the Company's debt. 

The Company continues to pursue additional financing and corporate growth opportunities. 

Legal Advisory

Additional information about the Company is available under High North's profile on SEDAR at www.sedar.com.

Barrels of Oil Equivalent ("BOE") Advisory

Certain natural gas volumes have been converted to BOE on the basis of one barrel to six thousand cubic feet. Any figure presented in BOEs may be misleading, particularly if used in isolation. The calculation of BOEs is based on a conversion ratio of six thousand cubic feet of natural gas to one barrel of oil based on an energy equivalency conversion primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. In addition, given that the value ratio based on the current price of crude oil as compared to natural gas is significantly different from the energy equivalency of six to one, utilizing a BOE conversion ratio of six thousand cubic feet: 1 barrel may be misleading as an indication of value.

Reader Advisory Regarding Forward-looking Statements and Information

This press release contains "forward-looking statements" or "forward-looking information" (collectively referred to herein as "forward-looking statements") within the meaning of applicable securities legislation. Such forward-looking statements include, without limitation, forecasts, estimates, expectations and objectives for future operations that are subject to a number of assumptions, risks and uncertainties, many of which are beyond the control of the Company. Forward-looking statements are statements that are not historical facts and are generally, but not always, identified by the words "expects", "plans", "anticipates", "believes", "intends", "estimates", "projects", "potential" and similar expressions, or that events or conditions "will", "would", "may", "could" or "should" occur or be achieved. This press release contains forward-looking statements, pertaining to, among other things, the following: additional capital funding; the Company's ability to obtain such funding and the use thereof; the Company's pursuit of alternative financing arrangements; the Company's ability to continue as a going concern; the issuance of warrants to certain farmors and the exercise of warrants by and the issuance of shares to such farmors; the settlement of debt owed to the non-arm's length farmor; the existence of reserves; oil production rates and recovery from drilling operations; commercial viability of drilled wells; additional drilling locations; storage and transportation of oil and costs thereof; the timing, method, cost and recovery from drilling operations; infrastructure development and the timing and effects thereof; facilities construction, equipment installation and the corresponding costs, timing, location and effects thereof;
the decision to pursue the installation of cogeneration facilities; the results from the sixth Montney well and the anticipated timing of the same to be put on production; the completion of the water disposal facility and the timing thereof; the timing and ability of two of the shut in wells to come back on production and the impact on production thereof; the ability of the water disposal facility to reduce operating costs; the timing and approach of the Company's next phase of capital expenditures; regulatory approvals and the Company's ability to obtain applicable permits; the intention of the Company to install a power generation facility and the ability thereof to realize gas production revenues and eliminate gas flaring; future operation, general and administrative expenditures and the anticipated impact of the reduction thereof; the anticipated reduction of operating expenses and the impact of reduction thereof; potential Montney land rights; performance and financial results; capital expenditures; the Company's ability to realize its assets and discharge its liabilities; financial statements and MD&A adjustments; the Company's expected debt levels and cash flows; the Company's working capital deficiency and capital requirements; the impact of the redemption of the Debentures on the Company's cash flow; the effects of risks and uncertainties, including those listed under the section "Risks & Uncertainties" in the MD&A on the Company and its business prospects; estimates and assumptions made in accordance with IFRS requirements; the effects of the foregoing on shareholder value; and the Company's ability to generate shareholder value.

Forward-looking statements are necessarily based upon a number of estimates and assumptions that, while considered reasonable by the Company as of the date of such statements, are inherently subject to significant business, economic and competitive uncertainties and contingencies. The estimates and assumptions of the Company contained in this press release, which may prove to be incorrect, include, but are not limited to: the general continuance of current or, where applicable, assumed industry conditions and the lack of any significant disruptions affecting operations, whether due to labour disruptions, supply disruptions, power disruptions, damage to equipment, adverse weather conditions or otherwise; the ability of the Company to obtain necessary permits; acquisition of lands; the Company's status as a going concern; costs and availability of equipment, labour, natural gas, fuel, oil, electricity, water and other key supplies; the accuracy of production data; the continuance of existing and, in certain circumstances, proposed tax and royalty regimes; the continuance of laws and regulations relating to environmental matters; the Company's ability to retain key employees and executives; assumptions relating to the costs of future wells; the accuracy of estimates of reserves volumes; the availability and timing of additional financing to fund the Company's capital and operating requirements as needed; and certain commodity price and other cost assumptions.

Statements regarding future production, capital expenditures and development plans are subject to all of the risks and uncertainties normally incident to the exploration for and development and production of oil and gas that may cause actual results or events to differ materially from those anticipated in such forward-looking statements. These risks include, but are not limited to: inflation or lack of availability of goods and services; changes in commodity prices; global and domestic changes to supply and demand levels of oil and gas; increased competition for exploration and development of oil and gas assets; unanticipated operating results or production declines; third party pipeline issues; environmental risks; drilling risks; financial markets; economic conditions; volatility in the debt and equity markets; regulatory changes; changes in tax or environmental laws or royalty rates; and certain other known and unknown risks detailed from time to time in High North's public disclosure documents, copies of which are available on High North's profile on SEDAR at www.sedar.com.

Although High North believes that the material factors, expectations and assumptions expressed in such forward-looking statements are reasonable based on information available to it on the date such statements were made, no assurances can be given as to future results, levels of activity and achievements and such statements are not guarantees of future performance. High North's actual results may differ materially from those expressed or implied in forward-looking statements and readers should not place undue importance or reliance on the forward-looking statements. Statements including forward-looking statements are made as of the date they are given and, except as required by applicable securities laws, High North disclaims any intention or obligation to publically update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

NON-IFRS MEASURES

This press release includes references to certain financial measures, as described below, which do not have standardized meanings prescribed by IFRS, however, as these measures are commonly used in the oil and gas industry, the Company believes that their inclusion is useful to investors and they are measures that the Company uses to evaluate its performance. Investors are cautioned that these non-IFRS measures should not be construed as an alternative to the measures calculated in accordance with IFRS as, given their non-standardized meanings; they are unlikely to be comparable to similar measures presented by other issuers. The term "funds from (used in) operations", defined as the cash flow from operating activities, before the change in non-cash working capital and abandonment expenditures, should not be considered an alternative to, or more meaningful than, cash flow from operating activities or net income (loss) as determined in accordance with IFRS, as an indicator of performance. The Company's determination of funds from (used in) operations may not be comparable to that reported by other companies.

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.