Corridor Reports Year-End Financial Results, Reserves for 2008
Corridor Resources Inc. announced today its 2008 year end financial results and reserve evaluations.
- Natural gas revenues for the year ended December 31, 2008 increased to $75,839 thousand from $31,277 thousand for the year ended December 31, 2007 due to an increase in natural gas sales prices in Q3 2008 and Q4 2008 compared to Q3 2007 and Q4 2007 and to an increase in production to 18.5 mmscfpd from 10.2 mmscfpd for the year ended December 31, 2007 reflecting a full year of natural gas production to the Maritimes and Northeast Pipeline (M&NP) in 2008 compared to only six months in 2007.
- Net earnings for the year ended December 31, 2008 increased to $22,151 thousand from $4,049 thousand for the year ended December 31, 2007 due to a full year of natural gas production to the M&NP in 2008 compared to only six months in 2007 and to higher natural gas sales prices in Q3 2008 and Q4 2008 compared to Q3 2007 and Q4 2007.
- In Q4 2008, Corridor reported that it had made a potentially significant oil discovery at its South Branch G-36 well situated three kilometers southeast of the McCully natural gas field in southern New Brunswick. The G-36 oil discovery has been named the Caledonia Field in recognition of the southern bounding basement rocks of the Caledonia highlands. During Q4 2008, a 3-D seismic program was completed in the area surrounding the South Branch G-36 oil- well discovery. The new data will be critically important in mapping the potential extent of the Caledonia Field and in identifying the most favourable locations for drilling follow-up wells to determine the potential size of the oilfield.
- During the year ended December 31, 2008, Corridor drilled nine gross wells (7.5 net wells), one core hole and completed drilling one additional gross well (0.5 net well) which was started in Q4 2007.
- During the 2008 year, Corridor entered into a long term agreement to sell to Repsol Energy Canada Ltd. all of its natural gas produced from the McCully Field and surrounding areas in southern New Brunswick. The agreement becomes effective on April 1, 2009 and provides Corridor with year round access to natural gas markets in Maritimes Canada and the US Northeast and allows it to receive corresponding market prices including those in periods of peak demand.
- During Q4 2008, natural gas production averaged 18.9 mmscfpd net to Corridor (including production from penalty wells) with an average natural gas sales price of $13.01/mscf, resulting in net earnings of $8,380 thousand and basic and diluted net earnings per share of $0.096.
- Natural gas revenues for Q4 2008 increased to $22,667 thousand from $15,586 thousand for Q4 2007 due to the increase in the average natural gas sales price to $13.01/mscf resulting largely from forward sale contracts of 10,000 mmbtupd at an average sales price of $US14.95/mmbtu in effect between November 1, 2008 and March 31, 2009.
2008 Reserve Information
Corridor currently has natural gas reserves in the McCully Field near Sussex, New Brunswick and has recently discovered crude oil reserves in the Caledonia Field near Sussex, New Brunswick.
GLJ Petroleum Consultants Ltd. ("GLJ") has assessed Corridor's reserves in its reports ("the GLJ Reports") dated effective December 31, 2008 and December 31, 2007 which were prepared in accordance with National Instrument 51-101 Standards of Disclosure of Oil and Gas Activities. The following table presents a summary from the GLJ Reports of Corridor's gross natural gas reserves, before the deduction of royalties, using forecast prices and costs.
Based on the 2008 GLJ Report, Corridor's net 2008 proved natural gas reserves reflect increases resulting from the drilling of new wells in the McCully Field and downward technical adjustments to reflect production performance to date from previously drilled wells. GLJ's assessment is based on a 58 well development at the McCully Field constrained by the location of existing wells and the potential risk of encountering over-pressured formation water in future wells. However, no formation water bearing reservoirs have been encountered to date in the northeastern part of the McCully Field where most future wells are expected to be located, potentially increasing reserves if more than 58 wells are ultimately drilled in the McCully Field. Net increases in both the proved plus probable and the proved plus probable plus possible natural gas reserves reflect GLJ's increased appreciation for the ultimate reserve potential of Corridor's interest in the McCully Field.
During the year, Corridor discovered crude oil at the Caledonia Field and further testing is currently underway to determine the significance of this discovery. Based on the information available to date, GLJ has assigned to Corridor total proved crude oil reserves of 86.8 mbbls and total proved plus probable crude oil reserves of 520.5 mbbls.
2008 Revised budget
Corridor has revised its 2009 budget to reflect lower natural gas sales prices and a lower forecasted natural gas production level. Corridor has decreased its estimate of the average natural gas sales price from US$6/mmbtu at Henry Hub to US$4.75/mmbtu at Henry Hub and has changed its estimate of the exchange rate from $0.85 Canadian per US dollar to $0.825 Canadian per US dollar. Corridor has also decreased its previously estimated average production for 2009 from 22 mmscfpd to 21 mmscfpd primarily reflecting the production problems encountered at the N-66 well in the McCully Field. As a result, Corridor's previously estimated cash flow from operations is forecast to decrease by approximately $16 million to $41.5 million. To maintain a strong balance sheet with no outstanding debt, Corridor will decrease its 2009 capital budget from $59.9 million to $47.5 million. The net decrease in the capital budget reflects the following changes:
- Defer the drilling of one McCully development well, for a net reduction of $5 million;
- Defer the drilling and fraccing of the exploration well, located approximately 4 kilometers southeast of the South Branch G-36 oil discovery well, and designed to evaluate the oil and/or natural gas potential of sands in the Hiram Brook formation and the shale gas potential of the Frederick Brook formation, for a net reduction of $4.5 million;
- Defer the joint venture program on Anticosti Island, for a net reduction of $2.3 million; and
- Reduce the number of core holes at Sally's Brook and Salt Springs, for a net reduction of $0.6 million.
Corridor will continue to monitor economic conditions and commodity prices and may adjust its 2009 capital program accordingly.
Corridor is a junior resource company engaged in the exploration for and development and production of petroleum and natural gas onshore in New Brunswick, Prince Edward Island and Quebec and offshore in the Gulf of St. Lawrence. Corridor currently has natural gas reserves in the McCully Field near Sussex, New Brunswick and has recently discovered crude oil reserves in the Caledonia Field near Sussex, New Brunswick. In June 2007, Corridor completed the construction of a field gathering system, a gas plant and a pipeline lateral connecting the McCully Field to markets through the Maritimes & Northeast Pipeline.
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