Grey Wolf Exploration has reported summary financial and operating results for the quarter ended September 30, 2008.
For the three months ended September 30, 2008, The Company recorded net income of $3.0 million ($0.07 per share) compared to a net loss of $441 thousand ($0.01 per share) in the same period of 2007. The increase in net income was due to higher commodity prices, gain on financial instruments and lower stock compensation expense and partially offset by higher DD&A expense.
For the nine months ended September 30, 2008, the Company recorded net income of $1.9 million compared to a net loss of $131 thousand in the same period last year. The increase in net income for the nine month period was mainly due to an increase in commodity prices , offset by a $2.2 million loss on commodity derivative contracts (2007 - nil).
For the third quarter of 2008, funds flow from operations of $4.9 million ($0.12 per share) increased by 42% from $3.5 million ($0.10 per share) received last year. For the first nine months of 2008, funds flow from operations increased 48% to $16.9 million from $11.4 million in the same period in 2007. The increase in funds flow from operations for the three and nine month periods was primarily due to the increase in commodity prices.
The Company's third quarter production revenue from crude oil, natural gas liquids and natural gas sales increased 24% to $11.3 million from $9.1 million for the same period in 2007. Total production during the third quarter of 2008 averaged 2,029 boe per day, a decrease of 14% from the 2,352 boe per day recorded in the same period of 2007.
The upturn in commodity prices was the main contributing factor for the increase in gross revenues for the third quarter of 2008 despite a 14% decrease in production volumes. The decrease in production was primarily from Knopcik and Harmattan areas due to the effect of normal decline rates. Grey Wolf's current production is approximately 2,300 boe/d.
For the nine months ended September 30, 2008, production revenues rose 35% to $35.4 million from $26.3 million in the prior year. The increase was primarily attributed to the rise in commodity prices. The Company's production averaged 2,038 boe per day a slight decrease from 2,071 boe per day recorded last year.
Operating netbacks increased 48% to $32.09 per boe for the third quarter of 2008 from $21.63 per boe last year. The increase was the result of higher commodity prices, partially offset by the production commodity derivative loss and increase in royalty expenses. Operating netbacks of $36.64 per boe increased by 39% from $26.42 per boe recorded in the first nine months of 2007.
Grey Wolf's first horizontal well (100% working interest "W.I.") completed in the Lower Doig (phosphate member) at Pouce Coupe has been on production for 75 days and continues to produce at 4.7 MMcf/d with strong flowing pressures.
Our second Pouce Coupe horizontal (50% W.I.) in the Lower Doig was completed with a seven stage frac of 60 tonnes each and flowed on clean up at 3.4 MMcf/d with strong flowing pressures. The well is expected to be on production before the end of November.
In addition, a vertical well (50% W.I.) is currently being completed as a dual producer and is expected to be on production by mid December.
We expect to spud a vertical well (50% W.I.) to test multiple zones down through the Doig/Montney on a lease scheduled to expire early in 2009.
Additionally, Grey Wolf announced that based on a recent semi-annual review of the borrowing base and facility amount associated with its operating credit facility with a Canadian chartered bank, the bank has reaffirmed the $55 million operating line of credit through to the next scheduled facility review in April 2009.
"We are pleased with this third party confirmation of Grey Wolf's success during 2008. Indications are that our borrowing capacity is actually higher, however, we intend to live within our current line, and still grow during these turbulent times," commented Bob Watson, Chairman and Chief Executive Officer of the Corporation.
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