Tuscany Energy Updates on First Quarter
Tuscany Energy has made significant progress towards its objective of building a rapidly growing junior resource company.
During 2009 Tuscany accomplished the following:
- Drilled and completed the second horizontal Dina oil well at Evesham, Saskatchewan, identifying 363,000 Bbls of proved and probable oil reserves under less than 25% of Tuscany's prospective lands, with possibly 30 additional locations.
- Raised $521,000 through the issue of 8.7 million treasury shares by way of a rights offering.
- Completed the acquisition of Goldmark Minerals Ltd. through the issue of 12.1 million shares. This transaction added approximately $1.4 million of working capital to Tuscany.
- Subsequent to the year end, Tuscany completed the construction of a water disposal system which significantly reduced the operating cost in the area.
Tuscany completed 2009 in sound financial condition and with proved and probable reserves of 741 MBOE, 85% of which was oil and NGL. The net present value of its reserves at December 31, 2009 was over $17 million at a 10% discount rate, 64% of which were proved reserves (Net present value may not represent the fair value of the assets).
At December 31, 2009 Tuscany had total net debt of $2.7 million and anticipates a significant increase in production and cash flow for 2010.
Exploration and Development
During 2010, Tuscany will focus on developing an inventory of oil prospects in Alberta and Saskatchewan. The Company's first goal is to develop a production and cash flow base from its Dina oil property at Evesham. Tuscany plans to commence the development drilling of infill horizontal wells at Evesham, after spring break-up, as conditions permit.
In addition to its development operations, Tuscany has agreed to operate jointly with two related companies, Diaz Resources and Sharon Energy, to identify and develop oil properties along similar trends in Alberta and Saskatchewan.
In order to maximize the amount of investment dollars available for reinvestment in exploration and development, Tuscany has agreed to share overhead expenditures with the two companies, in effect, to manage the company within a joint venture group with common goals.
During the first nine months of 2009, Tuscany's capital expenditure program was curtailed due to the need to preserve capital. Hence the Company's production levels declined significantly. In the fourth quarter, Tuscany completed a rights offering financing and the merger with Goldmark which together, resulted in approximately $2 million of new working capital for Tuscany. This allowed the Company to increase its capital expenditure program which resulted in positive production growth in Q1 2010.
Tuscany's revenue for 2009 declined to $1.7 million from $4.2 million in 2008. The Company reported a loss of $263,000 compared with earnings of $244,000 a year earlier and a cash flow deficiency of $144,000 compared with cash flow of $1.7 million in 2008.
New oil production, from Evesham, steadily improved oil prices and reduced overhead costs should reverse these losses in 2010 and provide growth for the Company.
Tuscany is very focused on growth through oil exploration and development. With a sound reserve base developed over the past year, Tuscany believes it can achieve significant growth over the next year. Oil prices should remain high as world economies are beginning to show signs of recovery.