In the third quarter, production from the Issaran oilfield in Egypt averaged 5,595 boe/d with an additional 121 boe/d contributed from production in Canada. During the third quarter, the Corporation drilled nine wells in Egypt resulting in nine oil wells. One new well will be utilized for steam injection as the first of seven new steam injection wells to be drilled in 2006.
Net Income for the nine months ended September 30, 2006 was $4.6 million, as compared to $0.9 million for the comparable 2005 period. Net Income for the 2006 nine month period was reduced by a $9.7 million write-down taken in the third quarter. At September 30, 2006, the Corporation recorded this write-down due to valuation impairments associated with Canadian petroleum and natural gas assets, primarily related to costs originally incurred during 2001 to 2004 resulting from the Corporation's abandoned Prince Edward Island oil and gas exploration programs.
Working capital at the end of the third quarter was $19.1 million, of which $8.1 million was cash and short-term cash investments. At September 30, 2006, long-term debt drawn under the new US$25 million loan facility from the International Finance Corporation was $16.8 million (US$15 million).
The Safed Koh joint venture partners held a technical committee meeting on November 6 and the operator advised that the Salsabil pipeline is 70% complete and production will start with minimal processing facilities in late January 2007 until completion of the main gas processing plant in March. There has not yet been any decision rendered on the enhanced gas price currently under review by the Attorney General's office. Additionally, the operator advises that the next development well is now expected to be drilled in mid-March 2007 due to delays in the drill rig manufacturing.
Based in Calgary, Alberta, Canada, Rally Energy is an oil and gas exploration, development and production company. The Corporation's primary area of operations is in Egypt, where it has a 100% operating interest in the Issaran Oilfield, a significant heavy oil development opportunity with strong growth potential. In Pakistan, the Corporation holds a 30% interest in the Safed Koh Block, where it is participating in the development of a large natural gas/condensate discovery.
HIGHLIGHTS Quarter ended September 30 -------------------------- 2006 2005 Change ---- ---- ------ Production (boe/d) 5,716 2,613 +119% Average Price ($/boe) 48.89 44.51 +10% Revenue ($ million) 25.7 10.7 +140% Cash Flow ($ million) 13.1 4.4 +198% Capital Expenditures ($ million) 16.8 5.0 +234%
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