PetroFalcon Slips Into Red on Expenses, Lower Output

Oil and gas independent PetroFalcon (TSX: PFC), which operates in Venezuela, reported a net loss of US$6.7mn last year compared to net profits of US$1.0mn in 2005 on lower production and higher expenses from the transition to a new JV structure, the company said in a statement.

Other reasons for the decline are interest expenses and higher stock-based compensation, the company stated.

Production before royalties last year was 323,316boe, down from 328,367boe in 2005. But the average price last year was US$35.72/boe compared to US$34.49/boe in 2005.

"We are committed to Venezuela and look forward to increasing production of oil and natural gas," PetroFalcon's chairman and CEO Juan Francisco Clerico said in the statement.

PetroFalcon owns 40% of the PetroCumarebo JV through its wholly owned subsidiary Vinccler Venezuela with state oil firm PDVSA holding the remaining 60%.

The JV was created under the framework of the 2004 hydrocarbons law, which states PDVSA must have at least 51% in every oil E&P project in Venezuela.

"Despite our financial results, we made significant operational progress in 2006 by finalizing the transition from the former operating service agreements to PetroCumarebo," PetroFalcon's CEO said.

PetroFalcon is expanding its Venezuelan portfolio by purchasing a 30% interest in the offshore natural gas license for the Cardon III block in the Gulf of Venezuela, where US oil major Chevron (NYSE: CVX) is operator and majority partner.

The negotiation has not yet been approved by Venezuelan regulators, PetroFalcon said in the statement.

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