Valeura announces Second Quarter 2011 Financial and Operating Results

CALGARY, Aug. 25, 2011 /CNW/ -- 
CALGARY, Aug. 25, 2011 /CNW/ - Valeura Energy Inc. ("Valeura" or the "Corporation") (TSXV: VLE) is pleased to report highlights of its unaudited
 financial and operating results for the three and six month periods
 ended June 30, 2011, and to provide an update on subsequent
 developments. The complete quarterly reporting package for the
 Corporation, including the unaudited financial statements and
 associated management's discussion and analysis, has been filed on
 SEDAR at www.sedar.com and posted on the Corporation's website at www.valeuraenergy.com.


HIGHLIGHTS


Operational


    --  Transformed the Corporation with completion of the acquisition
        of producing assets in Turkey from Thrace Basin Natural Gas
        (Turkiye) Corporation ("TBNG") and Pinnacle Turkey Inc. ("PTI")
        on June 8, 2011 at a final adjusted purchase price of $53.7
        million:
  o Increased proforma petroleum and natural gas sales to 1,874 BOE/d
    (93% natural gas in Turkey) in the second quarter of 2011, assuming
    the TBNG-PTI volumes were booked for the full quarter, which is a
    seven-fold increase from the same period in 2010 at the start-up of
    the Corporation.
  o Increased land holdings in Turkey to approximately 2.6 million
    gross acres (1.0 million net), assuming all farm-in interests are
    earned.
  o Acquired an established shallow gas production and marketing
    business in the Thrace Basin of Turkey, which is currently
    realizing wellhead prices of approximately US$7.00/Mcf and includes
    wells, gathering and sales lines, compression and a diverse
    direct-sales customer base.
  o Increased exposure to a potentially significant tight gas resource
    play in the Thrace Basin below the existing shallow gas production.
    The Corporation now holds interests in approximately 972,000 gross
    acres (481,000 net) of onshore lands in the Thrace Basin, assuming
    all farm-in lands are earned.
    --  Financed the TBNG-PTI acquisition with $81.1 million in
        proceeds (net of share issuance costs) from a subscription
        receipts financing which closed on February 28. Funds were
        released from escrow on June 8 upon closing the acquisition. At
        June 30, 2011, the Corporation had a working capital surplus of
        $37.1 million.
    --  Executed an active shallow gas exploration and development
        program on the onshore TBNG-PTI lands (40% Valeura working
        interest):
  o Completed 12 workovers and recompletions (gross) on existing wells
    in the shallow Danismen and Osmancik formations during the second
    quarter and eight (gross) in July. The aggregate initial production
    rate for these 20 workovers and recompletions (gross) was
    approximately 8,000 Mcf/d (gross) (533 BOE/d net).
  o Spudded eight wells (gross) in the second quarter and three wells
    (gross) in July, of which seven are in various stages of
    completion, one is suspended with plans to deepen, one was drilling
    at the end of July and two were abandoned. Four of these wells were
    drilled into the deeper Mezardere formation. All wells were drilled
    on existing 2D seismic control.
  o Commenced two 3D seismic surveys in late July in the Tekirdag and
    Hayrabolu areas on the TBNG-PTI lands covering an area of 263 km(2)
    and 200 km(2), respectively, at an expected cost of approximately
    US$4.7 million (net). Fully interpreted results are expected in the
    first quarter of 2012. These are the first 3D seismic surveys on
    the TBNG-PTI lands and are designed to build the drillable prospect
    inventory in the shallow gas play and in the deeper tight gas play.
  o Completed single-stage fracs on the Bati Kazanci-3 and
    Bati-Kazanci-4 wells in relatively tight sand intervals in the
    shallow Osmancik formation. These wells had been previously
    suspended after recovering only minor amounts of gas. Bati
    Kazanci-3 achieved an initial flow rate of approximately 100 Mcf/d
    (gross). Bati Kazanci-4 is currently shut-in due to high formation
    water production.
    --  Initiated a "proof-of-concept" modern fracture stimulation
        ("frac") program in late July 2011 in the deeper, undeveloped
        tight gas sands in the Mezardere formation on the TBNG-PTI
        lands:
  o Completed a two-stage frac on the Yazir-2 well in two tight sand
    intervals in the Mezardere formation at depths of approximately
    1,100 metres and 885 metres. The frac appears to have intersected a
    high pressure water zone and only a trace amount of gas was
    produced.
  o Preparatory work is underway on the second well re-entry and frac
    in the Mezardere formation on the Kayi-15 well. The planned frac
    interval has been perforated at a depth of approximately 1,230
    metres. A pre-frac injection test and a swabbing operation to
    confirm producible gas have been completed. It is planned to carry
    out a more directed, limited-entry frac into the five sets of
    perforations in September.
  o The proof-of-concept program is expected to include up to eight
    well re-entries with at least a single-stage frac and up to seven
    new drills and an associated frac. The 2011 program will target
    various tight sand intervals in the Mezardere formation and test a
    range of frac volumes and frac geometries to build a learning curve
    and optimize the expected go-forward program in 2012.
    --  Drilled two gross exploration wells on the Edirne Licence in
        the Thrace Basin in the second quarter of 2011 of which one is
        awaiting completion and one was abandoned. In addition, three
        workovers and recompletions were carried out.
    --  Executed a farm-in agreement on May 4, 2011 with Marhat Marmara
        Boru Hatlari Ins. Muh Taahh.san.Tic.Ltd.sti. ("Marhat") to earn
        a 100% working interest and operatorship of Exploration Licence
        4201. The licence covers an area of 122,000 acres (gross) in
        the Thrace Basin. The working interest is subject to overriding
        royalties of 6.0% to Marhat and 0.6% to an affiliate of
        TransAtlantic Petroleum Ltd. ("TransAtlantic"). Under the
        farm-in terms, Valeura will be required to drill two
        exploration wells into the Mezardere formation.
    --  Executed a farm-in agreement on June 13, 2011 with an affiliate
        of TransAtlantic to earn a 50% working interest in two
        exploration licences 4094 and 4532 in the Thrace Basin. The
        licences cover an area of approximately 242,000 acres (gross).
        Under the farm-in terms, Valeura will be required to fund
        acquisition of 150 km(2) of 3D seismic and two exploration
        wells to a depth of at least 1,500 metres.
    --  Filed an application with the Toronto Stock Exchange ("TSX") on
        July 20, 2011 to graduate to a TSX listing. Subject to the
        TSX's approval of this application, the Corporation plans to
        consolidate its issued and outstanding common shares on a 10:1
        basis at that time.
    --  Valeura is one of five companies that submitted conforming bids
        for an exploration licence on the area previously encompassed
        by Licence 2600, one of the cancelled Rubai Licences near the
        borders with northern Iraq and Syria, as published in Turkey's
        Official Gazette on June 25. The timing of a decision on the
        award of this licence is unknown.
    --  An application by Aladdin Middle East Ltd. ("AME") and Guney
        Yildizi Petrol Uretim Sondaj, Muteahhitlik ve Ticaret A.S.
        ("GYP") to extend the term of the Karakilise Exploration
        Licence 2674 to May 30, 2014 was published in Turkey's Official
        Gazette on June 26. This is a positive development but the
        timing of a final GDPA decision is unknown. If the licence
        extension is granted, it is expected that Valeura will fund the
        deepening of the Altinakar-1 well to the primary exploration
        target in the Bedinan Formation.
    --  Petroleum and natural gas sales in the second quarter of 2011
        averaged 692 BOE/d (net), including 129 BOE/d in Canada, 242
        BOE/d from Valeura's 35% interest in the Edirne Licence for the
        full quarter and 321 BOE/d from Valeura's 40% interest in the
        TBNG-PTI lands for the post-closing period June 9 to 30.



Financial  


    --  Funds flow from operations in the second quarter of 2011 was
        negative ($1,622,240) compared to negative ($885,673) in the
        second quarter of 2010, reflecting higher G&A expenses related
        to the growth in business activities, partially offset by
        higher petroleum and natural gas sales related to the Edirne
        and TBNG-PTI asset acquisitions.
    --  Capital expenditures in the second quarter of 2011 were
        $55,650,606 compared to $449,670 in the second quarter of 2010
        reflecting the closing of the TBNG-PTI asset acquisition in
        Turkey.
    --  As at June 30, 2011, the Corporation had a positive working
        capital surplus of $37.1 million, including cash and cash
        equivalents of $32.5 million. This compares to a working
        capital surplus of $27.4 million as at June 30, 2010.



RESULTS SUMMARY 



                                                           

(Three and six  Three Months  Three Months   Six Months    Six Months
month periods       Ended         Ended         Ended         Ended
unaudited)      June 30, 2011 June 30, 2010 June 30, 2011 June 30, 2010

                                                                       

Financial ($
except share
and per share
amounts)                                                               

                                                                       

Petroleum and
natural gas
revenues (net)      2,707,193       892,878     3,269,325     1,754,225

Funds flow from
operations (
(1))              (1,622,240)     (885,673)   (3,546,565)   (1,233,190)

Net loss          (4,359,006)   (3,194,474)   (8,621,015)   (4,901,585)

Capital
expenditures       55,650,606       449,670    59,848,568       843,847

Net working
capital surplus                                37,101,075    27,436,979

Common shares
outstanding                                                            

  Basic           464,061,475   198,327,621             -             -
  Diluted         645,859,765   235,880,121             -             -

Share trading                                                          

  High                   0.48          0.90             -             -
  Low                    0.25          0.37             -             -
  Close                  0.25          0.41             -             -

                                                                       

Operations                                                             

                                                                       

Production                                                             

  Crude oil &
  NGLs (bbl/d)             57            97            55            87

  Natural Gas
  (Mcf/d)               3,810           994         2,219           980

  BOE/d (@ 6:1)
  ( (2))                  692           263           425           251

Average
reference
prices                                                                 

  Edmonton
  light 
  (Cdn$/bbl)
  AECO-5A Daily
  Spot
  (Cdn$/Mcf)
  BOTAS
  reference -
  Turkey               103.07         75.13         95.11         77.59
  (Cdn$/Mcf) (           3.87          3.89          3.82          4.41
  (3))                   8.18          8.79          8.22          8.93

Average
realized prices                                                        

  Crude oil
  (Cdn$/bbl)
  Natural gas
  liquids
  (Cdn$/bbl)
  Natural gas -
  Turkey
  (Cdn$/Mcf)            82.20         66.44         76.35         68.46
  Natural gas -         48.97         45.84         51.50         45.52
  consolidated           7.05             -          7.05             -
  (Cdn$/Mcf)             6.68          3.83          6.36          4.32

                                                                       

Average
operating
netback
(Cdn$ per BOE @
6:1) ((1) (2) )         24.82         12.01         22.03         14.60





Notes:



(1)      The above table includes non-IFRS measures, which may not be
         comparable to other companies. Funds flow from operations is
         calculated as net loss for the period adjusted for non-cash
         items in the statement of cash flows. Operating netback is
         calculated as petroleum and natural gas sales less royalties,
         production expenses and transportation costs. See MD&A for
         further discussion.

(2)      BOEs may be misleading, particularly if used in isolation. A
         BOE conversion ratio of 6.0 Mcf:1.0 bbl is based on an energy
         equivalency conversion method primarily applicable at the
         burner tip and does not represent a value equivalency at the
         well head.

(3)      Boru Hatlari ile Petrol Tasima Anonim Sirketi ("BOTAS") owns
         and operates the national crude oil pipeline grid and the
         national natural gas pipeline grid in Turkey. BOTAS regularly
         posts prices and its Industrial Interruptible Tariff benchmark
         is shown herein as a reference price. See the 2010 Annual
         Information Form for further discussion.





OUTLOOK


Operations


The Corporation's primary focus at this time is to "bed-down" the assets
 acquired in the TBNG-PTI transaction which is the largest of five
 transactions executed in Turkey since September 2010 and the
 Corporation's largest source of cash flow.


With respect to the shallow gas business in the Thrace Basin, work is
 focused on replenishing the inventory of well recompletions and
 workovers on existing wells through an intense effort to look at all
 producing and suspended wells. These opportunities have the lowest cost
 and promise the quickest payout. To build the inventory of drillable
 prospects (both exploration and development) and to improve the
 drilling success rate, a large 3D seismic program is underway in two
 high potential areas on the TBNG-PTI lands where significant operations
 are already in place. The fully interpreted results are not expected
 until the first quarter of 2012. In the meantime, the Corporation is
 focussed on high-grading the 2011 drilling inventory on the existing 2D
 seismic and deferring some earlier planned drilling until the 3D
 seismic interpretation is available.


Unlocking the potential in the deeper tight gas play in the Thrace Basin
 is a major priority for the Corporation. A deliberate program has been
 kicked-off to build a comprehensive knowledge base through acquisition
 of new seismic, more sophisticated well logging, more extensive core
 analysis work, new geological and geophysical studies and a series of
 "proof-of-concept" field experiments with various frac designs and
 target tight sand intervals in the Mezardere formation.


Accordingly, the Corporation's work program and budget for 2011 has
 three main objectives:


    --  Sustaining the shallow gas business in the Thrace Basin;
    --  Proving-up the potential of the tight gas play in the Thrace
        Basin;
    --  Fulfilling exploration-focused work programs on high potential
        farm-in acreage in the Thrace Basin (gas targets) and in the
        Anatolian Basin (oil targets).



The Corporation has modified its outlook for capital expenditures in
 2011 to approximately $20 million compared to earlier guidance of $30
 to 35 million based on the results of partner budget meetings in Turkey
 in late June. This change relates primarily to deferral of some
 discretionary exploration expenditures. The revised budget outlook
 excludes any capital invested on the TBNG-PTI and Edirne lands prior to
 the closing date of these acquisitions, which amounts were reflected in
 purchase price adjustments. The budgeted funds are essentially all
 directed to Turkey and include estimates of: $11.7 million for up to 19
 drill wells (gross), of which six are shallow gas wells and seven are
 deeper Mezardere tests (drill and frac) on the TBNG-PTI lands; $2.6
 million for up to 50 workovers and eight fracs (gross) on existing
 wells in the Thrace Basin; and, $5.7 million for up to 463 km(2) of 3D seismic and 100 km of 2D seismic in the Thrace Basin.


The Corporation has essentially completed Phase I of the AME-GYP farm-in
 and is in discussion with AME-GYP on next steps, including possible
 deepening of the Altinakar-1 well to test the Bedinan formation,
 contingent on the GDPA granting an extension to the term of Licence
 2674. Under terms of the farm-in, Valeura must invest a minimum of
 US$8.8 million in Phase I to earn a 25% working interest in two
 exploration licences at Karakilise and a production lease at Kahta. The
 scope of the ultimate investment and earning under the AME-GYP farm-in
 is under review for further discussion with AME-GYP.


Business Development


The Corporation is pursuing other farm-in and acquisition opportunities
 in Turkey.  These have the potential to further expand the
 Corporation's acreage position, particularly in the Thrace Basin.


The Corporation is also pursuing other opportunities in the region,
 particularly oil-weighted opportunities, to complement its position in
 Turkey.


NEW WEBSITE LAUNCHED


The Corporation has created launched a new website and has updated its
 August 2011 corporate presentation, both of which can be accessed on
 the Corporation's website at www.valeuraenergy.com.


ABOUT THE CORPORATION


Valeura Energy Inc. is a Canada-based public company currently engaged
 in the exploration, development and production of petroleum and natural
 gas in Turkey and Western Canada.


CAUTION REGARDING ENGINEERING TERMS


When used herein, the term "BOE" means barrels of oil equivalent on the basis of one BOE being equal to
 one barrel of oil or NGLs, or 6,000 cubic feet of natural gas. BOEs may
 be misleading, particularly if used in isolation. A BOE conversion
 ratio of 6.0 Mcf: 1.0 bbl is based on an energy equivalency conversion
 method primarily applicable at the burner tip and does not represent a
 value equivalency at the well head.


CAUTION REGARDING FORWARD-LOOKING INFORMATION


This news release contains certain forward‐looking statements including,
 but not limited to: the extent and timing of the frac program on the
 TBNG-PTI lands; the approval of the GDPA for the extension of the term
 on Licence 2674; the resumption of drilling to a deeper target in the
 Altinakar-1 well on Licence 2674; the extent of Valeura investment and
 earning under the AME-GYP farm-in; anticipated work programs and
 operational plans and the timing associated therewith; and, the
 Corporation's plans to graduate to a TSX listing and consolidate its
 common shares on a 10:1 basis. Forward‐looking information typically
 contains statements with words such as "anticipate", "estimate",
 "expect", "potential", "could", "would" or similar words suggesting
 future outcomes. The Corporation cautions readers and prospective
 investors in the Corporation's securities to not place undue reliance
 on forward‐looking information, as by its nature, it is based on
 current expectations regarding future events that involve a number of
 assumptions, inherent risks and uncertainties, which could cause actual
 results to differ materially from those anticipated by the Corporation.


Forward looking information is based on management's current
 expectations and assumptions regarding, among other things:  continued
 political stability of the areas in which the Corporation is
 anticipating completing transactions; continued operations of and
 approvals forthcoming from the GDPA in a manner consistent with past
 conduct; results of future seismic programs; future drilling activity;
 future capital and other expenditures (including the amount, nature and
 sources of funding thereof); future economic conditions; future
 currency and exchange rates; the Corporation's continued ability to
 obtain and retain qualified staff and equipment in a timely and cost
 efficient manner; and, the receipt of all necessary third party and
 regulatory approvals for transactions and the plans of the Corporation.
 In addition, budgets are based upon the Corporation's current
 acquisition plans, work programs proposed by partners and associated
 exploration plans and anticipated costs, both of which are subject to
 change based on, among other things, the actual results of
 acquisitions, drilling activity, unexpected delays and changes in
 market conditions. Although the Corporation believes the expectations
 and assumptions reflected in such forward‐looking information are
 reasonable, they may prove to be incorrect.


Forward‐looking information involves significant known and unknown risks
 and uncertainties. Exploration, appraisal, and development of oil and
 natural gas reserves are speculative activities and involve a
 significant degree of risk. A number of factors could cause actual
 results to differ materially from those anticipated by the Corporation
 including, but not limited to, risks associated with the oil and gas
 industry (e.g. operational risks in exploration; inherent uncertainties
 in interpreting geological data; changes in plans with respect to
 exploration or capital expenditures; the uncertainty of estimates and
 projections in relation to reserves, production, costs and expenses;
 and health, safety, and environmental risks), the risk of commodity
 price and foreign exchange rate fluctuations, the uncertainty
 associated with negotiating with third parties in countries other than
 Canada, the uncertainty regarding competitive bidding rounds (including
 the application made in respect of Licence 2600 in Turkey) and timing
 of results, the risk of partners having different views on work
 programs and potential disputes among partners, the uncertainty
 regarding government and other approvals and the risk associated with
 international activity. The forward‐looking information included in
 this news release is expressly qualified in its entirety by this
 cautionary statement. The forward‐looking information included herein
 is made as of the date hereof and Valeura assumes no obligation to
 update or revise any forward‐looking information to reflect new events
 or circumstances, except as required by law.


Additional information relating to Valeura is also available on SEDAR at
 www.sedar.com


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 news
 release. 


 


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p Jim McFarland, President and CEObr/ Valeura Energy Inc.br/ [phone]br/ a href="mailto:[e-mail]"[e-mail]/a /p p align="justify" Steve Bjornson, CFObr/ Valeura Energy Inc.br/ [phone]br/ a href="mailto:[e-mail]"[e-mail]/a /p p align="justify" a href="http://www.valeuraenergy.com"www.valeuraenergy.com/a /p 

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