Enhanced Oil Resources Inc. Reports $10.1 Million in Revenues; $0.5 Million Cash Flow Used in Operating Activities and a Net Loss of $11.4 Million for 2011
Conference Call to Shareholders Scheduled for Wednesday May 9, 2012
HOUSTON, May 4, 2012 /PRNewswire/ - Enhanced Oil Resources Inc. (TSX-V: EOR) today announces its audited financial results for the year ending December 31, 2011.
Results of operations for the year ended December 31, 2011, included crude oil and natural gas sales revenues of $10.1 million, and a net comprehensive loss of $11.4 million, compared to revenues of $10.0 million and a net comprehensive loss of $47.4 million for the year ended December 31, 2010. Loss per fully diluted share was $0.07 per share and $0.32 per share on weighted average shares outstanding of 160.02 million shares and 149.43 million shares for the years ended December 31, 2011 and 2010, respectively. Loss per fully diluted share for the three months ended December 31, 2011 and 2010 was $0.2 per share and $0.32 per share, respectively. The Company recognized an impairment of $11.0 million ($0.07 per fully diluted share) related to certain assets held for sale in connection with the St. Johns field, which were sold to Kinder Morgan CO2 Company, and which was closed after the balance sheet date. In connection with the sale, the Company also recognized an income tax benefit of $2.8 million. Cash used in operations of $0.5 million compared to $3.2 million of cash provided by operations in 2010. The decrease in operating cash flows was principally related to declines in net revenue at the Crossroads, and Milnesand fields of $0.8 million and $1.0 million, an increase in abandonment expenditures principally at the Milnesand field of $0.5 million and working capital consumed of $0.7 million.
Oil production for 2011 totaled 144,435 gross oil equivalent barrels ("Boe"), a decrease of 13% over the 166,210 gross Boe produced in 2010. Improving oil prices contributed to the Company's increased revenue, with the Company's oil production averaging $93.35 per barrel for 2011 as compared to $75.76 per barrel for 2010. Our lifting costs decreased to $20.17 per Boe for 2011 as compared to $23.03 per Boe for 2010, primarily related to reductions in water handling expenses at Crossroads field. Workover costs increased at both Milnesand and Chaveroo fields primarily as a result of increased regulatory requirements. For the fourth quarter of 2011, the Company reported a net loss of $2.7 million, including an impairment of $2.9 million, ($0.02 per share) compared to a net loss of $47.2 million ($0.32 per share) for the fourth quarter of 2010, principally comprised of an impairment recognized in the fourth quarter 2010 of the St. Johns He/CO2 field.
In 2011, the Company's oil production averaged 396 BOPD compared to an average of 455 BOPD in 2010. Production costs for 2011 increased significantly over 2010 to $5.4 million as compared to $4.1 million, due to increases associated with workover costs in the Chaveroo and Milnesand fields, principally related to responses to regulatory activity in these two fields and a general increase in service costs.
At December 31, 2011, we had cash on hand of $0.3 million and working capital of $24.6 million, including assets held for sale, compared to $4.8 million in working capital reported for December 31, 2010.
Our general and administrative costs decreased $0.5 million to $2.7 million for the year 2011 as compared to $3.2 million in 2010, principally associated with reduced administrative personnel costs in 2011 compared to 2010, including reductions in related travel and other related general and administrative expenses.
Sale of St Johns
At December 31, 2011, the pending sale of the St. Johns assets to Kinder Morgan was treated as an impairment indicator and, accordingly, the expected loss on disposition of assets was recognized in 2011. On January 31, 2012, the Company completed the transaction with a closing of the Purchase and Sale Agreement with Kinder Morgan CO2 Company, L.P., a wholly owned subsidiary of Kinder Morgan Energy Partners, L.P. for all of the Company's rights, title and interest in the St Johns dome and certain related assets, located in Apache County, Arizona and Catron County, New Mexico. In addition, upon closing, Kinder Morgan agreed to amend the CO2 gas sale and purchase agreement with the Company, originally announced on April 20, 2010, modifying the dates of pipeline connection and the date of first deliveries and eliminating the termination fee for and delaying the date for a cancellation of the take or pay obligation. Adjusted proceeds of $29.8 million were received at closing for the assets including a $4.5 million escrow deposit, which is further subject to certain post-closing adjustments and conditions for contingencies, should such materialize. The proceeds from sale of the St Johns assets will enable an acceleration of the Company's infill oil development and exploitation program within the 27,000 acres of the San Andres leases in two oil fields in New Mexico.
With the proceeds from the sale of assets to Kinder Morgan in January 2012, the Company realized proceeds of $29.5 million, including $4.5 million held in escrow pending certain contingent post-closing obligations, if any. Following the transaction, the Company repaid borrowings outstanding on its bank Credit facility of $1.9, million and reduced its accounts payable and accrued liabilities by approximately $3.8 million. Our capital budget for 2012 is $8.5 million, including drilling and completion activities at the Milnesand field of $3.5 million to commence in June, $2.3 million of compliance expenditures related to the Milnesand and Chaveroo fields and the remainder involved in geological and geophysical exploration, well workovers, reactivations and the replacement and upgrading of production facilities and equipment.
A conference call presentation to Shareholders has been scheduled for Wednesday May 9th, 2012 at 11 a.m. Eastern Standard Time. The presentation will discuss current activities as well as outline the Company's business plan and objectives for the remainder of the fiscal and calendar year.
Investors wishing to join the presentation from the USA or Canada can do so by calling 1-855-353-9183. If outside the USA or Canada, please call 403-532-5601. Once connected, please enter code 52351#.
About Enhanced Oil Resources Inc.
Enhanced Oil Resources Inc. is an early-stage company, with a principal goal of increasing crude oil and natural gas production through enhanced oil recovery ("EOR") and infill drilling projects it is initiating in the Permian Basin on oil fields acquired by the Company in 2007 and 2008 for that purpose.
Certain statements contained herein are "forward-looking statements" and "forward-looking information" under applicable securities laws, including statements regarding beliefs, plans, expectations or intentions regarding the future relating to Enhanced Oil Resources Inc.'s operations, business prospects, expansion plans and strategies.
Forward-looking information typically contains statements with words such as "intends", "anticipate", "estimate", "expect", "potential", "could", "plan" or similar words suggesting future outcomes. Readers are cautioned not to place undue reliance on forward-looking statements because it is possible that expectations, predictions, forecasts, projections and other forms of forward-looking information will not be achieved. Forward-looking statements are based on the opinion and estimates of management at the date the statements are made, and are based on a number of assumptions and subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ materially from those projected in the forward-looking statements. Although Enhanced Oil Resources believes that the expectations reflected in such forward-looking statements are reasonable, Enhanced Oil Resources can give no assurance that such expectations will prove to be correct. Assumptions upon which such forward-looking statements are based include that the Company will be able to carry out its proposed activity for 2012, that there will be accelerated development of our oil reserves, that production increases from our oilfields will be added, that our infill program will commence as expected and that our Crossroads 3-D seismic program will commence as expected. Readers should refer to Enhanced Oil Resources' current filings, which are available at www.sedar.com, for a detailed discussion of these factors, risks and uncertainties. The forward-looking statements or information contained in this news release are made as of the date hereof and Enhanced Oil Resources undertakes no obligation to update publicly or revise any forward-looking statements or information, whether as a result of new information, future events or otherwise, unless so required by applicable laws or regulatory policies.
ON BEHALF OF THE BOARD OF DIRECTORS
Barry D Lasker, CEO
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