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Share Name | Share Symbol | Market | Type |
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Buffalo Resources Com Npv | TSXV:BFR | TSX Venture | Common Stock |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
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0.00 | 0.00% | 0 | - |
Buffalo Resources Corp. ("Buffalo") (TSX VENTURE:BFR) is pleased to announce record cash flow from operations and net earnings for the first quarter ended March 31, 2008. All comparative results for the three months ended February 28, 2007 are those of Choice Resources Corp. HIGHLIGHTS - Cash flow from operations of $8.7 million or $0.13 per share. - Net earnings of $1.9 million or $0.03 per share. - Daily average production of 3,777 boe/d, a 92% increase over 1,959 boe/d for 2007. - Buffalo's oil (predominantly heavy oil) realized a record selling price of $79.86 per bbl for the month of March compared with $35.50 per bbl for the month of December 2007. - No hedging contracts are in place - Buffalo participates fully as oil and gas commodity selling prices rise. - Depletion, depreciation and accretion expense of $16.71 per boe. - Drilled 7 wells at a 100% success rate during the quarter. - Completed an $11 million equity financing in May 2008. FINANCIAL ($000s except shares and per share amounts) ---------------------------------------------------------------------------- March 31, February 28, Three months ended 2008 2007 ---------------------------------------------------------------------------- Revenue 20,626 8,358 Cash flow from operations 8,726 1,825 Basic and diluted per share $ 0.13 $ 0.05 Net earnings (loss) 1,898 (1,021) Basic and diluted per share $ 0.03 ($0.03) Capital expenditures, net 8,763 7,180 March 31, December 31, As at 2008 2007 ---------------------------------------------------------------------------- Total indebtedness, net 63,869 63,628 Shareholders' equity 95,702 94,461 Total assets 210,992 205,272 Common shares outstanding (000s) 65,702 65,702 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- OPERATIONS ---------------------------------------------------------------------------- March 31, February 28, Three months ended 2008 2007 ---------------------------------------------------------------------------- Average daily production Oil and NGLs (bbls/d) 1,966 298 Natural gas (mcf/d) 10,868 9,965 Barrels of oil equivalent (boe/d) 3,777 1,959 Average realized prices Oil and NGLs ($/bbls) 69.90 56.87 Natural gas ($/mcf) 8.10 7.11 Barrels of oil equivalent ($/boe) 60.02 47.41 Field netback ($/boe) 31.12 21.39 Cash flow ($/boe) 25.41 10.29 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Q1 2008 OPERATIONS The amalgamation of The Buffalo Oil Corporation ("Old Buffalo") and Choice Resources Corp. ("Choice") which occurred on August 2, 2007 created a company with sufficient mass to reap the benefits of the recent rise in oil and gas selling prices. For the three months ended March 31, 2008, cash flow from operations was $8.7 million ($0.13 per share), an increase of 381% compared with the previous year. Mainly as a consequence of the amalgamation, average daily production increased 93% from 1,959 barrels of oil equivalent per day ("boe/d") for the three months ended February 28, 2007 to 3,777 boe/d for the three months ended March 31, 2008. Because of Old Buffalo's focus on heavy oil, the gas weighting of the production-mix has decreased from 85% in 2007 to 48% in the current period. World oil prices increased sharply over the period between February 2007 and March 2008. The Company had no hedging in place through the current quarter and was able to participate fully in these price increases. The price of Hardisty Heavy 12 degrees API oil, which approximates the realized price for the majority of Buffalo's oil, averaged $70.05 per barrel for the current period, an increase of 70% over the equivalent price for the 2007 period. Buffalo realized an average oil and NGL selling price of $69.90 per barrel for the quarter. The AECO-C daily spot gas price averaged $7.96 per MMBtu for the three months ended March 31, 2008, up 9% over the average of $7.29 per MMBtu in 2007. Buffalo realized an average gas selling price of $8.10 per Mcf. Revenue for the quarter was $20.6 million or $60.02 per boe. Royalty expense was $4.6 million or 22% of revenue, reflecting a higher proportion of sales revenue being derived from properties which are subject to the payment of gross overriding royalties than in the previous year when the royalty expense ratio was 20%. Operating costs were $5.4 million and decreased 8% from the prior year on a unit basis to $15.40 per boe. This was largely the result of the change in product mix and the construction in late 2007 of a central battery at the Company's Killam property which reduced costs for rental equipment, water handling and workovers. The Company's field netback averaged $31.12 per boe, a 45% increase over 2007. Despite a 93% increase in production, general and administrative expense of $1.2 million was 9% lower than in 2007, reflecting the synergies of the amalgamation. Depletion, depreciation and accretion expense ("DD&A") was $5.7 million for the period. On a unit basis, DD&A was $16.71 per boe compared with $15.84 per boe in 2007. This increase derives from the asset values applied in the amalgamation of the two companies. The increase in production volumes combined with higher commodity selling prices produced net income of $1.9 million or $0.03 per share for the current quarter in contrast to the loss of $1.0 million or $0.03 per share in 2007. EXPLORATION AND DEVELOPMENT During the three months ended March 31, 2008 Buffalo incurred $8.8 million in capital expenditures net of the proceeds from the sale of non-core properties totalling $2.8 million. This included a 10 square mile 3D seismic shoot in the Peace River Arch as part of Buffalo's plan to increase its focus on this area. Buffalo drilled seven wells including three wells at Frog Lake, three wells at Killam and one well at Whitecourt. In addition, three wells which had been drilled at Frog Lake in 2007 were completed, equipped and placed on production. A 2007 discovery well at Expanse, in which Buffalo has a 100% working interest, was tied-in during March 2008 and is currently producing gas at a rate of 500 Mcf/d. In March Buffalo spudded a Mississippian horizontal well at Pincher Creek, Alberta which finished drilling in late May. The well was drilled to a vertical depth of 3,742 metres and then horizontally for 671 metres. Natural gas from the Mississippian formation was encountered throughout the under-balanced horizontal drilling operations. The well is expected to be completed, stimulated and tied-in for production testing by late June. OUTLOOK In the second quarter of 2008 world oil selling prices have surpassed the record levels established in the first quarter. Buffalo's oil and gas selling prices remain unhedged and the Company is continuing to enjoy the associated increases in revenue. Initial indications are that the Company will experience strong cash flow and earnings in the second quarter 2008. Buffalo is currently preparing to drill seven wells at Frog Lake in the early summer. A holding application has been made to increase the density of wells at Frog Lake which will add a further 160 locations for drilling in the fall of 2008 and future years. Two wells are planned for summer drilling in the Peace River Arch, one at Cecil and a follow up well at Expanse. Buffalo is proceeding with documentation of its proposed drilling joint venture pursuant to which the other joint venture partners will invest between $10 million and $20 million to participate with Buffalo in drilling oil and gas wells on Company owned lands on normal industry farmout terms. On May 9, 2008, Buffalo completed an $11 million private placement of units, each unit consisting of one Buffalo common share and one warrant to acquire a common share. The net proceeds will be used to reduce debt and to fund the 2008 capital expenditure program. Buffalo is an emerging Canadian junior oil and gas company engaged in the exploration, development and production of oil and gas reserves in the provinces of Alberta and Saskatchewan. Buffalo's interim financial statements and Management's Discussion and Analysis for the three months ended March 31, 2008 are available on SEDAR (www.sedar.com) and on Buffalo's website at www.buffaloresources.com. Certain information set forth in this press release contains forward looking statements. Readers are cautioned that the assumptions used in the preparation of such information, although considered reasonable at the time of preparation, may prove to be imprecise and, as such, reliance should not be placed on forward-looking statements. Buffalo's actual results, performance or achievements could differ materially from those expressed in, or implied by, these forward-looking statements and accordingly, no assurance can be given that any of the events anticipated by the forward-looking statements will transpire or occur, or if any of them do so, what benefits Buffalo will derive therefrom. Buffalo disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Barrels of oil equivalent (Boe's) may be misleading, particularly if used in isolation. A boe conversion ratio of 6 Mcf of gas = 1 Bbl of oil is based upon an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. The terms "cash flow from operations" and "field netback" are non-GAAP financial measures that do not have any standardized meaning prescribed by Canadian Generally Accepted Accounting Principles ("GAAP") and are therefore unlikely to be comparable to similar measures presented by other issuers. Both "cash flow from operations" and "field netback" provide useful information to investors and management since they are an indicator of the Corporation's profitability and ability to fund future capital expenditures which drives growth. Cash flow from operations is calculated as earnings (loss) before charges for depletion, depreciation and accretion, stock-based compensation and future income taxes and after deducting asset retirement expenditures. The inclusion of changes in non-cash operating working capital results in cash flow from operating activities. Field netback represents the profit margin from the sale of oil, natural gas and natural gas liquids and is calculated as revenues less royalties and operating expenses.
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