The close: Stay in May
Friday, May 30, 2008
If you sold in May and went away, following one of the oldest investment strategies in the playbook, you missed out on reasonable gains this time.
Canada's benchmark index, the S[amp]amp;P/TSX composite index, rose 5.9 per cent during the month, for an annualized return of more than 70 per cent. More specifically, energy stocks rose 10.9 per cent, information technology stocks (mostly Research In Motion Ltd.) rose 9.4 per cent and materials stocks rose 7.5 per cent.
The S+P 500 did not fare as well, but it still paid to be invested in May. It rose 1.1 per cent in May, for an annualized return of more than 15 per cent. There, information technology led the way, rising 5.6 per cent, materials rose 4.8 per cent and telecom services rose 3.7 per cent.
On Friday, the last day of the month for stock market trading, the S[amp]amp;P/TSX composite index closed at 14,714.73, up 137.56 points or 0.9 per cent, largely because of energy stocks. Despite the fact that crude oil, for once, hugged its starting position, Canadian Natural Resources Ltd. rose 2.2 per cent and Suncor Energy Inc. rose 1.7 per cent.
Toronto-Dominion Bank, among the big banks the least affected by mortgage-related writedowns, rose 2.8 per cent. Bombardier Inc. rose 2 per cent, edging toward a multi-year high of $8. BCE Inc. crossed the $35 threshold, as investors grow more confident that a takeover deal of some sort is still going to happen. And Barrick Gold Corp. rose 3.3 per cent.
The Dow Jones industrial average closed at 12,638.32, down 7.9 points or less than 0.1 per cent. There, American International Group Inc. rose 1.9 per cent and United Technologies Corp. rose 1.2 per cent. Bank of America fell 1.7 per cent and General Motors Corp. fell 1.6 per cent.
The S+P 500 closed at 1400.38, up 2.12 points or 0.2 per cent. Dell Inc. was among the big movers here, rising 5.7 per cent after it reported strong first quarter results on Thursday. As well, Monsanto Co., a leading agriculture company, rose 2.9 per cent.
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© Copyright The Globe and Mail
Phantom Alert For Your GPS In Canada and USA
TP2
Friday, May 30, 2008
If You Stayed In May...You Made $$$$
Alberta's oil sands Next For Ivanhoe Energy
Friedland changes tack with oil sands entrance
NORVAL SCOTT
Thursday, May 29, 2008
CALGARY — The title of “Canada's nickel prince” wasn't enough for Robert Friedland. Now, he's looking to be an oil baron.
Mr. Friedland rose to prominence when his former firm, Diamond Fields Resources, made a huge discovery of nickel at Voisey's Bay in Newfoundland in 1993.
Diamond Fields was ultimately sold to Inco Ltd. for $4.3-billion, a sale that gave Mr. Friedland legendary status among Canada's miners and helped make him a billionaire.
Now, Mr. Friedland, a successful promoter of long-shot mining projects with a knack for attracting investors to remote regions or complex plays, is looking to make a new underground fortune in Alberta's oil sands, the tarry mix of sand and silt that holds huge reserves of crude.
The bituminous nature and deep location of those resources means the oil is hugely expensive and difficult to extract, placing the region off limits to all but the world's largest energy companies.
Ivanhoe Energy Inc., the Calgary-based company of which Mr. Friedland is chief executive, believes it has a solution that has escaped others.
It has developed an upgrading technology that it says improves the quality of the bitumen on site instead of at dedicated plants, dramatically reducing the cost of both producing and transporting oil sands crude and making it more economically feasible for smaller players to get involved.
Now, Ivanhoe plans to put its technology to the test. The junior company, which has a market capitalization of around $650-million, said Thursday that it will buy three oil sands leases from Talisman Energy Inc. for a total of $105-million, including only $30-million in cash up front. Talisman, which has long shunned any opportunity to become an oil sands player and has had the leases on the market for two years, has the option to buy back into the leases as a minority partner.
On one of the leases, Ivanhoe will build a small, technically advanced project – producing between 30,000 and 50,000 barrels a day – that will upgrade crude more cheaply and use far less natural gas or diluent than other projects, the company said. The project is expected to cost somewhere between $1-billion and $2-billion, depending on its size.
“We couldn't be more thrilled. [This deal means] we're in charge of our own destiny,” said Ian Barnett, Ivanhoe executive vice-president of finance. “We can now [build a project] on a much, much smaller scale.”
The oil sands, putting Canada on the map for both their ambitious scale and the controversy surrounding their environmental impact, seem a good fit for Mr. Friedland.
A larger-than-life figure, his big ambitions have attracted a healthy dose of controversy. He once fought a four-year legal battle with U.S. governments over pollution at a Colorado mine site before reaching a settlement in which he did not acknowledge any personal liability and the governments acknowledged no one was solely responsible for the environmental problems.
Mr. Friedland has proved many critics wrong. A copper and gold project in Mongolia looked like an uphill battle until Rio Tinto agreed to buy a 9.95-per-cent stake in the company developing the mine, Ivanhoe Mines Ltd., for $345-million in 2006. Rio Tinto has the option to raise its stake in the project to 47 per cent by investing $2.3-billion (U.S.) in the Friedland company.
Ivanhoe's heavy-oil technology, dubbed HTL, runs bitumen over a circulating bed of very hot sand, upgrading its quality by burning off the heaviest, least useful part of the barrel, leaving lighter crude in its place.
That's a potential step change in the oil sands, where that processing usually takes place in upgraders that cost billions to build. Downscaling that process to smaller projects, without vast expense, fills a gap in the market, said Chris Feltin of Tristone Capital.
“These projects aren't big enough on their own to justify their own upgrader, so this fits a niche opportunity and has big cost advantages,” he said, estimating HTL crude could cost $15 less per barrel to produce than oil extracted with steam-assisted methods.
Beyond Ivanhoe Energy and the oil sands, Mr. Friedland also runs Ivanhoe Mines, a $3.4-billion Toronto Stock Exchange-listed company. He was travelling Thursday and wasn't available for comment.
As befits Mr. Friedland's reputation as a player with a global eye, Ivanhoe Energy has also recently created subsidiaries targeting HTL opportunities in Latin America, China, the Middle East and North Africa as it tries to lever its technology into opportunities in those regions.
Those subsidiaries, which will aim to be self financing, will concentrate on seeking agreements with state-owned companies, said Ed Veith, Ivanhoe executive vice-president of upstream.
With files from reporter David Ebner in Calgary
Buy TLM Today
Thu, May 29, 20081:24 PM New Analyst Reports for CASTILLIAN RESOURCES CORP, ROMARCO MINERALS INC, TALISMAN ENERGY, and FORBES ENERGY SERVICES LTD - Marketwire
Tue, May 20, 20085:12 PM
Wed, Apr 30, 200811:47 AM
5:01 AM Talisman Energy Reports $1.2 Billion in Cash Flow Solid Operational and Financial Results - CCN Matthews 5:00 AM Talisman Energy Reports $1.2 Billion in Cash Flow Solid Operational and Financial Results - Marketwire
Fri, Apr 25, 200810:58 AM
Marketwire
Mon, Apr 14, 20088:02 AM Talisman Energy Inc. Conference Call - CCN Matthews
Tumbling oil sends TSX lower but bank stocks limit losses TheStar.com - Business - Tumbling oil sends TSX lower but bank stocks limit losses
Tumbling oil sends TSX lower but bank stocks limit losses TheStar.com - Business - Tumbling oil sends TSX lower but bank stocks limit losses May 30, 2008
Sliding oil prices sent the Toronto stock market lower yesterday, but losses were moderated by gains in the financial sector even as more big banks released earnings showing much poorer performance than a year earlier.
Toronto's S&P/TSX composite index fell 111.45 points, or 0.76 per cent, to 14,577.17. The TSX Venture Exchange was down 19.65 points to 2,628.6 while the Canadian dollar was ahead 0.08 of a cent (U.S.) to 101.1 cents as Statistics Canada reported that higher commodity prices helped boost the current account surplus to $5.6 billion in the first quarter, up from $3.96 billion a year ago.
N.Y. stocks advance
Lower oil prices also helped send New York markets higher, as did a government report that the economy grew at a faster pace than had been estimated. The Dow Jones industrial average rose 52.19 points to 12,646.22. The Nasdaq composite index gained 21.62 points to 2,508.32 and the S&P 500 index advanced 7.42 points to 1,398.26.
Financials lend support
After a shaky start, the TSX financial sector provided support, rising 1.2 per cent with nearly all banks in the group ahead despite more writedowns connected with U.S. mortgages – with one notable exception.
CIBC fell $1.39 (Canadian) to $69.46 after a second-quarter net loss of $1.11 billion, down from year-ago net income of $807 million. The quarter included a loss of $2.48 billion on writedowns of structured credit.
Royal Bank of Canada said its second-quarter net income came in at $928 million, down by 27 per cent from a year ago, impacted by higher provisions for credit losses in its U.S. banking business. RBC shares were ahead $1.07 to $50.53.
National Bank of Canada added 68 cents to $53.08 as its second-quarter profit fell 29 per cent as it booked $73 million in losses related to asset-backed commercial paper.
Kate Warne, Canadian market specialist at Edward Jones in St. Louis, Mo., says the generally positive showing in the financial sector showed that "people are getting more comfortable that the writedowns are sort of part of the normal business cycle and it's something you don't worry too much about."
Energy stocks slide
The TSX energy sector moved down 2.8 per cent as oil prices dropped $4 (U.S.) as concerns about global energy demand and strength in the dollar countered a government report showing the biggest decline in U.S. stockpiles since 2004.
U.S. crude settled down $4.41 at $126.62 a barrel. Crude prices have risen more than 42 per cent since early December.
"It's not too surprising you're seeing a lot of volatility with the kind of price increase we have seen over the last few weeks," Warne said.
EnCana Corp. lost $2.46 (Canadian) to $88.41 while Suncor Energy moved down $2 to $66.89.
Gold pulls back
Gold pulled back as the U.S. dollar strengthened on the possibility that the U.S. Federal Reserve will have to increase interest rates to deal with inflation fuelled by high energy prices.
The August bullion contract in New York closed down $23.30 (U.S.) to $881.70 and the TSX gold sector retreated 3.7 per cent with Barrick Gold down $1.57 (Canadian) to $38.77 and Kinross Gold Corp. faded 61 cents to $19.45.
The base metals group pulled back 2.4 per cent as Teck Cominco Ltd. dropped $2.20 to $47.41.
TSX decliners beat advancers 922 to 640 with 233 unchanged as 337 million shares traded worth $6.9 billion.
Tin drops most ever
Tin, used in cans and for soldering, fell the most ever on the London Metal Exchange as investors and analysts judged the metal's jump to an all-time high this month was excessive.
Zinc fell to its lowest in more than two years.
"It's just the case of the market getting too far ahead of itself," said Neil Buxton, managing director of GFMS Metals Consulting.
Tin for delivery in three months closed 11 per cent lower at $21,050 (U.S.) a tonne after slumping as much as 13 per cent, or $3,000.
From the Star's wire services
Thursday, May 29, 2008
Ivanhoe Energy to buy Talisman's Athabasca oil interest
Ivanhoe Energy to buy Talisman's Athabasca oil interest
2008-05-29 08:56 ET - News Release
See News Release (C-IE) Ivanhoe Energy Inc
Mr. Robert Friedland of Ivanhoe reports
Ivanhoe Energy Inc. has signed a preliminary agreement with Talisman Energy Canada to acquire all of Talisman's interests in three leases located in the heart of the Athabasca oil sands region in the province of Alberta, Canada. Talisman Energy Canada is an affiliate of Talisman Energy Inc.
The total purchase price is $105-million, of which $30-million is payable at closing. The transaction will see the first commercial application of Ivanhoe Energy's proprietary HTL heavy-oil upgrading technology in a major, integrated heavy-oil project.
Based on the most recent evaluations of the Talisman leases conducted by Sproule Associates Ltd., independent reservoir engineers, two of the three leases are estimated to contain, on a best-estimate basis, approximately 294 million barrels of contingent bitumen resources (with low and high estimates of approximately 216 million and 394 million barrels, respectively), out of approximately 752 million barrels of discovered petroleum initially in place.
The proposed home for Ivanhoe Energy's initial, integrated HTL heavy-oil project will be lease 10, near Fort McMurray. Based on estimates by Sproule of contingent bitumen resources, lease 10 -- the principal block being acquired -- would be capable of producing between 30,000 barrels and 50,000 barrels of oil per day.
Talisman will retain back-in rights of up to 20 per cent in all of the acquired leases for a period of three years. During this period, Talisman will also have the right of first offer to acquire any participation interests in heavy oil projects in Alberta that Ivanhoe wishes to sell, excluding the acquired leases, on mutually agreeable terms. In addition, in order to allow Talisman to effectively monitor the commercial effectiveness of Ivanhoe's HTL technology, Ivanhoe and Talisman will sign an HTL data monitoring agreement.
"We now have achieved our initial objective," said Robert Friedland. "We are anchoring the rollout of our HTL heavy-oil upgrading process with a first-class, high-quality resource asset in the centre of the Athabasca oil sands region. We will now proceed full speed ahead with preparations for an integrated HTL heavy oil project on lease 10, while at the same time progressing discussions relating to additional heavy oil opportunities in Canada and internationally."
Lease 10 to be site for Ivanhoe's first HTL integrated heavy-oil project
Ivanhoe Energy plans to establish its first commercial HTL heavy-oil project on the lease 10 block, the principal lease to be acquired from Talisman.
Lease 10 is a 6,880-acre contiguous block located approximately 10 miles (16 kilometres) northeast of Fort McMurray, immediately south of Suncor's operating Steepbank and Millennium projects. The block also adjoins leases held by ExxonMobil, Laricina Energy and E-T Energy. Talisman has a 100-per-cent working interest in lease 10.
Lease 10 has a relatively high level of delineation (four wells per section). It is believed to be a high-quality reservoir and an excellent candidate for thermal recovery production using the SAGD (steam-assisted gravity drainage) process. The lease 10 reservoir characteristics are believed by Ivanhoe to be similar to those at Petro-Canada's 30,000-barrel-per-day MacKay River project, nearby across the Athabasca River. MacKay River is acknowledged to be one of the most successful and longest-running SAGD projects in the Athabasca oil sands.
Ivanhoe's HTL plant on lease 10 is projected to ultimately be capable of operating at production rates of at least 30,000 barrels per day for approximately 25 years. Ivanhoe intends to integrate established SAGD thermal recovery techniques with its patented HTL upgrading process, producing and marketing a light, synthetic sour crude. Once this acquisition has closed, Ivanhoe will continue the lease 10 delineation program in preparation for the submission of permits for an integrated HTL project. In general, thermal oil sands projects, including SAGD projects, require a period of initial development, including delineation, permitting and field development, which is followed by relatively stable operations for many years. Ivanhoe will provide guidance on expectations regarding development timelines, as appropriate, at a future date. Lease 50 is a second potential HTL site
Lease 50, another lease to be acquired from Talisman, covers a 21,760-gross-acre block located approximately 12 miles (19 kilometres) southeast of Fort McMurray. The block is bordered by Imperial Oil (a subsidiary of ExxonMobil) on three sides and also is adjacent to leases owned by Opti/Nexen and Canadian Natural Resources (CNRL). Talisman has a 75-per-cent working interest in lease 50, which is subject to a right of first refusal in favour of the holder of the remaining 25-per-cent working interest. Although less delineated than lease 10, based on drilling to date, Ivanhoe believes that lease 50 has the potential to host an additional integrated HTL heavy-oil project. The total plant size required to develop and produce the low, best and high estimates of the contingent resources assigned to lease 50 has previously been estimated to be 10,000 barrels of oil per day, 15,000 barrels of oil per day and 25,000 barrels of oil per day, respectively.
Benefits of HTL integration
HTL is a field-located upgrading process that converts heavy oil to a transportable, partially upgraded synthetic crude oil and converts the upgrading byproducts to on-site energy. The process frees the heavy oil producer from the need to purchase diluent for transport, significantly eliminates the need to purchase natural gas to steam the reservoir, and allows the producer to capture the majority of the heavy-oil-light-oil value differential. The net result is enhanced rates of return and reduced earnings volatility. Furthermore, the HTL process is technically and economically scalable down to as low as 10,000 to 30,000 barrels of oil per day, allowing for vertical integration of smaller heavy oil assets in Canada and internationally.
Transaction highlights
A binding preliminary agreement between Ivanhoe Energy and Talisman outlining the key transaction terms was entered into on May 29, 2008. The transaction, expected to close within 45 days, is subject to certain conditions, including completion of definitive transaction documentation and regulatory approval, including approval of the Toronto Stock Exchange.
Purchase details
Ivanhoe will purchase all of Talisman's interests in leases 10, 50 and 6. The total purchase price for the three leases is $105-million, allocated as follows:
$30-million cash, due upon closing;
A $20-million note, with interest at prime plus 2 per cent, to be repaid on or before Dec. 31, 2008;
A $40-million, three-year convertible note, with interest at prime plus 2 per cent with principal convertible at $3.13, which represents a 25-per-cent premium to Ivanhoe Energy's share price based on the volume-adjusted, weighted average closing price for the 10 business days prior to the signing of the preliminary agreement. If the note were fully converted, 12,779,552 common shares of Ivanhoe Energy would be issued to Talisman, representing approximately 4.95 per cent of the issued and outstanding shares of Ivanhoe Energy as of today's date after giving effect to the conversion;
$15-million cash on Ivanhoe Energy receiving requisite government and other approvals to develop the northern border of lease 10, which is subject to a mineral surface lease (MSL) held by Suncor.
Ivanhoe's obligations under the notes and the contingent payment will be secured. Acquisition of lease 50 is subject to the remaining working-interestholder not exercising its right of first refusal in respect of lease 50, in which case the purchase price would be adjusted accordingly. Ivanhoe intends to finance the $30-million initial payment as well as future payments with funds from a combination of strategic investors and/or traditional debt and equity markets, either at the Ivanhoe Energy level or project levels. Talisman will retain back-in rights of up to 20 per cent in all of the acquired leases for a period of three years. During this period, Talisman will also have the right of first offer to acquire any participation interests in heavy oil projects in Alberta that Ivanhoe wishes to sell, excluding the acquired leases, on mutually agreeable terms. In addition, in order to allow Talisman to effectively monitor the commercial effectiveness of Ivanhoe's HTL technology, Ivanhoe and Talisman will sign an HTL data monitoring agreement.
Lease details and resource estimates
Ivanhoe Energy has agreed to acquire the following leases:
A 100-per-cent working interest in lease 10, a 6,880-acre oil sands lease located approximately 10 miles (16 kilometres) northeast of Fort McMurray and immediately south of Suncor's operating Steepbank and Millennium projects;
A 75-per-cent working interest in lease 50, a 21,760-gross-acre oil sands lease located approximately 12 miles (19 kilometres) southeast of Fort McMurray, adjacent to leases owned by Opti/Nexen, Imperial Oil and CNRL;
A 100-per-cent working interest in lease 6, a small, 680-acre block one mile (1.6 kilometres) south of lease 10.
Based on the most recent evaluations conducted by Sproule, lease 10 and lease 50 together are estimated to contain, on a best-estimate basis, approximately 294 million barrels of contingent bitumen resources (with low and high estimates of approximately 216 million and 394 million barrels, respectively). All such resource estimates have been classified as "contingent resources." Lease 6 has not been independently evaluated. The evaluation of lease 10 has an effective date of Aug. 31, 2007, while lease 50 was evaluated as of July 31, 2006. The same reports estimate the discovered petroleum initially in place (which includes the contingent resource volumes) for lease 10 and lease 50, in total, to be approximately 752 million barrels of bitumen on a best-estimate basis. The portion of discovered petroleum initially in place not currently classified as contingent resources does not represent recoverable volumes.
Lease 10 is more delineated than leases 50 and 6. Accordingly, the estimate of recoverable volumes is anticipated to have a higher degree of certainty. Of the total amount of contingent bitumen resources estimated to be contained in all three leases, Sproule has attributed, on a best-estimate basis, approximately 244 million barrels of contingent bitumen resources to lease 10 (with low and high estimates of approximately 188 million and 313 million barrels, respectively), and approximately 50 million barrels of contingent bitumen resources to lease 50 (with low and high estimates of approximately 27 million and 81 million barrels, respectively).
The lease 10 resource target is considered to be of high-quality McMurray sands, with clean and continuous average net pay of approximately 20 metres and no significant top or bottom water or top gas issues. The average porosity is 34 per cent, average bitumen saturation is 79 per cent, and permeabilities are between one and 10 darcies, all of which are considered excellent reservoir characteristics. The high quality of the asset is expected to provide for favourable projected operating costs, including attractive steam-oil ratios (SOR) using SAGD development techniques.
Based on these contingent resource estimates, Ivanhoe's acquisition price of $105-million represents a price of approximately 36 cents per barrel of contingent bitumen resource measured on a best-estimate basis, with a range of approximately 27 cents per barrel on a high-estimate basis to approximately 49 cents per barrel on a low-estimate basis.
Financial adviser
Tristone Capital Inc. is acting as financial adviser to Ivanhoe for this transaction.
The restructuring is planned to enhance Ivanhoe Energy's pursuit of its central mission to develop heavy-oil assets using its HTL technology.
As part of the reorganization, Ivanhoe Energy is establishing a number of geographically focused, self-financing entities. The parent company Ivanhoe Energy will pursue HTL opportunities in the Athabasca oil sands of Western Canada and will hold and manage the core HTL technology. Two new subsidiaries will be established, one for Latin America, and one for the Middle East and North Africa, complementing Sunwing Energy Ltd., Ivanhoe Energy's existing, wholly owned company for China. Dave Martin will lead the subsidiary for Latin America as chairman and chief executive officer, and Leon Daniel will lead the subsidiary for the Middle East and North Africa as chairman and chief executive officer. Ivanhoe Energy initially will own 100 per cent of each of these subsidiaries, although the percentages would be expected to decline as they develop their respective businesses and raise capital independently.
This structure will allow the development and financing of multiple HTL projects around the world, while minimizing dilution of Ivanhoe Energy's existing shareholders. In addition, the alignment with principal energy-producing regions will facilitate financing from region-specific strategic investors, some of which already have been identified, and also will enhance flexibility in accessing global capital markets.
Building an execution team
Over recent months, Ivanhoe has made significant progress in building its execution teams in preparation for this acquisition. The upstream team consists of a number of Calgary-based, experienced heavy oil engineers and geologists hired from firms such as Petro-Canada and Synenco, complemented by a core team of petroleum engineers and geologists located in Ivanhoe's offices in Bakersfield, Calif., a number of which are expected to move to Calgary, Alta., in the summer of 2008. The Houston-based HTL technology team also has been strengthened. Ivanhoe expects to continue filling key positions as it moves into execution mode.
Conference call
Ivanhoe Energy will host a conference call on Tuesday, June 3, 2008, for investors and analysts at 11 a.m. ET (8 a.m. PT) to discuss the acquisition. This conference call replaces the conference call previously scheduled for Monday, June 2, 2008, as announced in Stockwatch March 17, 2008. The conference call may be accessed by dialling 1-866-540-8136 in Canada and the United States, or 1-416-340-8010 in the Toronto area and internationally. A simultaneous webcast of the conference call will be provided. For those unable to participate in the call, it will be archived for later playback by dialling 1-416-695-5800 and entering the pass code 3261239 followed by the number sign. The archived playback will be available until July 4, 2008.
We seek Safe Harbor.
Wednesday, May 28, 2008
High gas prices all summer
High gas prices all summer: NEB
LAUREN KRUGEL
Wednesday, May 28, 2008
CALGARY — The National Energy Board has some discouraging news for Canadians clinging to hope that gasoline prices might cool off this summer.
Gasoline prices will closely track the global price of its raw product, crude oil, which is expected to average $130 (U.S.) a barrel over the next few months — about double what it was at this time last year, said Christian Rankin, an oil market analyst with the federal agency.
A barrel of crude was worth just shy of $131 a barrel on the New York Mercantile Exchange Wednesday.
“Whatever your outlook on the oil markets, I think we can all agree we are all in very, very new territory here,” Mr. Rankin said.
Analysts predict gasoline prices could average between $1.30 (Canadian) and $1.40 a litre this summer.
This week's pump price survey by Calgary consulting firm MJ Ervin said prices across the country are on average close to $1.33.
The situation could get nastier if there are unforeseen refinery problems, which would draw down inventories and push prices up further, Mr. Rankin said.
“Inventories currently look to be at healthy levels, but the refining sector in Canada is quite tight. If we have any regional upsets, that can cause short-term price spikes while inventories and supplies are found,” he said.
But prices could moderate if demand in the United States and Canada subsides, pushing inventories to more steady levels.
Prices of natural gas, which is used for electricity generation and heating, are also going up, the board said.
A million British thermal units of natural gas is expected to be between $11 (U.S.) and $13 over the summer, after bottoming out to less than $6 during the fall.
On the New York Mercantile Exchange Wednesday, prices were close to $12.
“Winter lasted longer and was closer to normal in terms of temperature than previous mild winters. That resulted in a greater drawdown of storage than in previous years,” said Paul Mortensen, the energy board's technical leader of hydrocarbon resources.
The prices are also being pulled up by crude oil prices and by declines in Canadian production.
Another factor is liquefied natural gas, or LNG, which is made by condensing the gas into a liquid state under ultra-cold temperatures.
LNG makes it possible to ship the commodity around the world via tanker. With demand high in places like Europe and Asia, less LNG has been heading into the North American marketplace.
Last year North America imported 2.6 billion cubic feet of LNG, whereas this summer it's expected to get 1.9 billion, Mr. Mortensen said.
“We do caution that unpredictable events such as extremely hot weather or hurricane activity has the potential to cause prices to move sharply upward for short periods of time,” he said.
There should be more than enough electricity in Canada to meet summer demand, said NEB market analyst Stephane Thivierge.
“However there is always the potential for uncontrolled circumstances to occur that could potentially threaten the supply of generation including extreme weather events and unplanned generation or transmission outages,” he said.
But if natural gas prices peak substantially, it could drive electricity prices up — especially in Alberta and Ontario, which rely on natural-gas fired plants for power.
“These upward pressures will have different effects on different types of consumers,” Mr. Thivierge said.
Residential consumers will see less volatility, because rates are regulated, but industrial consumers could take a hit.
“Since industrial prices are subject to market forces, higher prices could exacerbate the impact of an economic slowdown in some industrial sectors,” he said.
© Copyright The Globe and Mail
Gasoline, oil to remain high, NEB says
Gasoline, oil to remain high, NEB says
DAVID EBNER
Wednesday, May 28, 2008
CALGARY — The National Energy Board expects oil and natural gas prices to remain high throughout the summer.
And gasoline prices are expected to closely correlate the high price of oil, the national energy regular said in Calgary Wednesday in its summer energy outlook.
The NEB outlook suggests predictions of other analysts for record gasoline prices this summer are likely correct.
Consultancy MJ Erwin and Associates has said regular gas could be $1.40 a litre or more. On Tuesday, MJ Ervin reported the average price of regular gasoline in Canada was $1.33, a record.
According to the NEB, the price of oil will likely bounce around $130 (U.S.) a barrel, about the current level, as strong demand and tight supply continue.
Natural gas is expected to average about $12 per thousand cubic feet, also around the current rate, partly because of higher oil prices and lower supply from Canada.
Oil Up And Down
See oil rise. See oil fall.Crude oil traded at $126.22 (U.S.) a barrel early on Wednesday, down $2.63 - hardly a bargain but a steep 7 per cent drop from its peak last week, when it crested $135 for the first time ever.
One theory for the retreat is that demand destruction is at work: that is, with peak driving season upon North America, the concern is that drivers will balk at the high fuel costs and stay at home and watch television instead.Of course, lower crude oil prices is terrible news for the commodity heavy Canadian benchmark index, which was walloped on Tuesday. It usually sends the Canadian dollar into a funk as well.
But for U.S. markets, especially stocks that are energy dependent (auto manufacturers and airlines) or rely on a strong consumer (retail stocks), the lower prices are seen as a welcome relief.Futures for the Dow Jones industrial average rose 26 points, to 12,579, about an hour before markets open for trading, suggesting the index will rise at the start of the day. Futures for the S&P 500 rose 4 points, to 1388.In Europe, the U.K.'s FTSE 100 rose 0.6 per cent and Germany's DAX index rose 1.2 per cent in afternoon trading.
In Asia, Japan's Nikkei 225 fell 1.3 per cent in overnight trading.In Canada, investors will be keeping a close eye on Toronto-Dominion Bank, the third of the big banks to report second quarter earnings. As well, Sears Canada Inc. reports its first quarter for fiscal 2009.Copyright 2001 The Globe and Mail
Tuesday, May 27, 2008
Monday, May 26, 2008
Takeover report spurs Talisman
Takeover report spurs Talisman
JEFFREY JONES
Reuters
May 26, 2008 at 4:41 PM EDT
CALGARY — Talisman Energy Inc. shares jumped more than 6 per cent Monday after a Hong Kong newspaper reported CNOOC Ltd, China's No. 3 oil company, was in talks to buy the Canadian firm or some of its assets.
Talisman, Canada's third largest independent oil explorer, jumped $1.51 to $24.70 on the Toronto Stock Exchange following the report in the South China Morning Post, quoting unnamed sources.
It comes a week after Calgary-based Talisman laid out details of an overhaul aimed at concentrating money and efforts on its highest-return assets around the world, a program that could mean up to $2-billion in asset sales.
A Talisman spokeswoman declined to comment on the CNOOC report.
Talisman Energy
Chief executive officer John Manzoni plans to sell operations in the Netherlands, Trinidad and Denmark that produce up to 40,000 barrels of oil equivalent a day.
Talisman, with a stock market value of more than $24-billion, will focus its efforts on assets in Southeast Asia, the North Sea and on unconventional oil and natural gas in North America, Mr. Manzoni said recently.
“I don't know of anything going on but I can't see any reason why CNOOC would not be interested in Talisman. Everybody should be interested in Talisman,” Raymond James analyst Stephen Calderwood said.
After Talisman released its strategic plan last week, Mr. Calderwood raised his six-to 12-month target price by 12 per cent to between $25 and $28 and kept his “outperform” rating on the stock.
He noted that Talisman's previous CEO, Jim Buckee, was resistant to calls from some investors to break the company into smaller firms along geographic lines, citing the prospect of a tax hit.
However, a breakup could still be possible through a cash bid at a premium to the current price, then a reorganization of the assets over a number of years, he wrote last week.
Some analysts also said it could be possible that CNOOC was in talks to acquire assets Talisman has earmarked for sale.
The goal of the company's reorganization is to rebuild credibility with investors who have been disappointed by a series of missed operational and financial targets.
Mr. Manzoni spent much of last week explaining the strategy to investors in New York, Toronto and Calgary.
A big question mark for any oil acquisition by a Chinese state-controlled company would be the reaction of Ottawa, which recently blocked a foreign takeover of MacDonald, Dettwiler and Associates Ltd.'s space robotic and satellite technology business on national security concerns.
In 2005, CNOOC's bid for another big North American oil company, Unocal, was thwarted when U.S. politicians scuttled the deal.
Talisman's Asian operations, seen as major drivers of the company's plans for steady production increases, are located in Indonesia, Malaysia and Vietnam.
In January, CNOOC and Talisman settled a long-running dispute over ownership of the Tangguh liquefied natural gas project in Indonesia, when the Chinese company sold Talisman a 3.06 per cent interest for $212.5-million.
If Ottawa does clears the way for takeovers and Talisman is still the cheapest big play in the oil patch, then all sorts of rivals will come calling.
Numbers support Talisman takeover, politics don't
Andrew Willis, today at 2:58 PM EDT
When it comes to a Talisman Energy takeover, the numbers make sense, but the politics don't.
Talisman stock is up Monday on a report out of Hong Kong that has the Canadian company in the sights of CNOOC Ltd., China's third largest oil company. Investment bankers who have worked in the past with CNOOC and other state-controlled Chinese companies say the timing is wrong.
All sorts of foreign companies and funds are interested in Canadian resource plays, but are waiting for greater clarity on federal rules.
Ottawa has appointed a panel to study state ownership of foreign acquirers - it's headed by former BCE chairman Lynton (Red) Wilson and includes energy mogul Murray Edwards - and the group isn't scheduled to table its thoughts until June.No company - state-owned or otherwise - wants to fire a takeover bid into an uncertain regulatory environment.
With a market capitalization of $25-billion, any bid for Talisman is going to attract regulatory scrutiny.
There's no sense in Calgary that Talisman is actively being stalked, though the company has certainly been approached in the past. However, the takeover talk isn't going to go away, as valuations support an acquisition. Talisman shares are changing hands at a substantial discount to rivals.Talisman's weak share prices reflects the fact that the company has disappointed investors by missing production forecasts.
Talisman is also seen as behind the times when it comes to strategy, only announcing this year that it is refocusing on unconventional North American natural gas plays.
Peers such as EnCana made this shift years ago.Talisman now has an enterprise value that is just 5 times its debt-adjusted cash flow - a standard industry measure - according to Blackmont Capital analyst Menno Hulshof. The same EV/DACF multiple at Canadian Natural Resources is 7.9 times, while EnCana is at 7.2 times.
On this and just about every other measure, Talisman is cheap.
The challenge facing Talisman management is to complete asset sales - where CNOOC or other state-owned players could be buyers - and turn around the company before the political winds shift.
If Ottawa does clears the way for takeovers and Talisman is still the cheapest big play in the oil patch, then all sorts of rivals will come calling.
Cnooc, PetroChina Eye Talisman Energy, Santos Stakes - Report
Cnooc, PetroChina Eye Talisman Energy, Santos Stakes - Report
20:38 EDT Sunday, May 25, 2008
HONG KONG (Dow Jones)--Cnooc Ltd. (CEO), China's largest listed offshore oil and gas producer by output, held talks with Canada-based Talisman Energy Inc. ( TLM), the South China Morning Post reported Monday, citing unnamed sources.
The talks could lead to Talisman asset sales or a complete takeover of the oil and gas exploration and production company by Cnooc, the report said.
Separately, PetroChina Co. (PTR), China's largest listed oil company by output, is considering taking a stake in Australian oil and gas exploration and production company Santos Ltd. (STO.AU).
PetroChina is also interested in taking a stake in or acquiring the world's fifth-largest oil and gas company, Repsol YPF S.A. (REP), which is considering restarting the sale of its Latin American assets that could be valued at US$10 billion, the paper said, adding that spokesmen at the four companies declined to comment.
Newspaper Web site: http://www.scmp.com/
-By Hong Kong Bureau, Dow Jones Newswires; 852-2802-7002; djnews.hongkong@ dowjones.com (END) Dow Jones Newswires
05-25-08 2038ET
Copyright (c) 2008 Dow Jones & Company, Inc.
Friday, May 23, 2008
Thursday, May 22, 2008
QEC Buy And Sells - Brokerages
T 2008-05-22 10:51:53 4.60 -0.10 36,800 27 Dundee 7 TD Sec K
T 2008-05-22 10:39:32 4.65 -0.05 15,700 27 Dundee 1 Anonymous K T 2008-05-22 10:39:29 4.65 -0.05 15,000 27 Dundee 79 CIBC K
T 2008-05-22 10:34:43 4.70 0.00 50,000 10 FirstEnergy 1 Anonymous K
T 2008-05-22 10:28:02 4.70 0.00 2,600 27 Dundee 27 Dundee K T 2008-05-22 10:28:02 4.70 0.00 13,300 27 Dundee 1 Anonymous K T 2008-05-22 10:27:57 4.70 0.00 2,000 27 Dundee 2 RBC K T 2008-05-22 10:27:49 4.70 0.00 3,100 27 Dundee 2 RBC K T 2008-05-22 10:27:24 4.70 0.00 20,000 27 Dundee 14 ITG K
By popular demand:I was walking by a mental hospital the other day...
13,13,13
the fence was too high to see over,
But I saw a little space between the boards
and I looked through to see what was going on
some Jerk poked me in the eye with a stick
then all I could here was "14... 14... 14..."
Just thought I'd be the one to warn you 1st
Wednesday, May 21, 2008
4.70 is the equity book building price
14:26 EDT Wednesday, May 21, 2008
CALGARY, ALBERTA--(Marketwire - May 21, 2008) - Questerre Energy Corporation ("Questerre" or the "Company") (TSX:QEC) (OSLO:QEC) reported it has priced its previously announced equity offering at $4.70 per Common Share.
The Canadian tranche will consist of 7,500,000 shares and will include an over allotment option of 1,125,000 Common Shares. The over allotment option is exercisable within 30 days from the closing of the issue. The placement is subject to receipt of regulatory approval.
Questerre Energy Corporation is a Calgary-based independent resource company actively engaged in the exploration, development and acquisition of high-impact exploration and development oil and gas projects in Canada.
This news release contains forward-looking information. Implicit in this information are assumptions regarding commodity pricing, production, royalties and expenses, that, although considered reasonable by the Company at the time of preparation, may prove to be incorrect. These forward-looking statements are based on certain assumptions that involve a number of risks and uncertainties and are not guarantees of future performance. Actual results could differ materially as a result of changes in the Company's plans, commodity prices, equipment availability, general economic, market, regulatory and business conditions as well as production, development and operating performance and other risks associated with oil and gas operations. There is no guarantee made by the Company that the actual results achieved will be the same as those forecasted herein.
FOR FURTHER INFORMATION PLEASE CONTACT:Questerre Energy Corporation
Jason D'Silva
VP Finance
(403) 777-1185
(403) 777-1578 (FAX)
Email: info@questerre.com
Website: www.questerre.com
It sold out in 45 minutes!!!!!!!
Claim is that : "This is going higher very soon!"
Questerre Energy Corporation (“Questerre” or the “Company”).
Offering: 7,500,000 Common Shares (the “Shares”).
Issue Size: $35,250,000.
Issue Price: $4.70 per Share.
Drawdown: $4.5825 per Share.
Allocation System Symbol: QEC
Over-Allotment
Option:
Use of Proceeds: The net proceeds of the Shares will be used for the acceleration of the capital program
in Quebec and for general corporate purposes.
Eligibility: The Shares will be eligible under all usual statutes including RRSPs, DPSPs, RESPs,
and RIFs.
Listing: The Shares trade on the Toronto Stock Exchange under the symbol “QEC”.
Form of Offering: Public offering in all provinces of Canada by way of short form prospectus and on
a private placement basis into the United States pursuant to the registration
exemptions provided by Rule 144a and/or Regulation D of the U.S. Securities Act
of 1933.
Form of
Underwriting:
Bought deal, subject to syndication, and an underwriting agreement containing
“disaster out”, “regulatory out”, and “material adverse change out” clauses
running to Closing.
Underwriting Fee: 5%
Closing Date: June 10, 2008
Book Building
About Book Building Book Building is basically a capital issuance process used in Initial Public Offer (IPO) which aids price and demand discovery. It is a process used for marketing a public offer of equity shares of a company. It is a mechanism where, during the period for which the book for the IPO is open, bids are collected from investors at various prices, which are above or equal to the floor price. The process aims at tapping both wholesale and retail investors. The offer/issue price is then determined after the bid closing date based on certain evaluation criteria.
The Process:
The Issuer who is planning an IPO nominates a lead merchant banker as a 'book runner'.
The Issuer specifies the number of securities to be issued and the price band for orders.
The Issuer also appoints syndicate members with whom orders can be placed by the investors.
Investors place their order with a syndicate member who inputs the orders into the 'electronic book'. This process is called 'bidding' and is similar to open auction.
A Book should remain open for a minimum of 5 days.
Bids cannot be entered less than the floor price.
Bids can be revised by the bidder before the issue closes.
On the close of the book building period the 'book runner evaluates the bids on the basis of the evaluation criteria which may include -
Price Aggression
Investor quality
Earliness of bids, etc.
The book runner and the company conclude the final price at which it is willing to issue the stock and allocation of securities.
Generally, the number of shares are fixed, the issue size gets frozen based on the price per share discovered through the book building process.
Allocation of securities is made to the successful bidders.
Book Building is a good concept and represents a capital market which is in the process of maturing.
Initial Public Offerings
Corporates may raise capital in the primary market by way of an initial public offer, rights issue or private placement. An Initial Public Offer (IPO) is the selling of securities to the public in the primary market. This Initial Public Offering can be made through the fixed price method, book building method or a combination of both. In case the issuer chooses to issue securities through the book building route then as per SEBI guidelines, an issuer company can issue securities in the following manner:
100% of the net offer to the public through the book building route.
75% of the net offer to the public through the book building process and 25% through the fixed price portion.
Under the 90% scheme, this percentage would be 90 and 10 respectively.
Questerre to Participate in Major Pilot Project in the Lowlands
Questerre to Participate in Major Pilot Project in the Lowlands
02:15 EDT Wednesday, May 21, 2008
CALGARY, ALBERTA--(Marketwire - May 21, 2008) - Questerre Energy Corporation ("Questerre" or the "Company") (TSX:QEC)(OSLO:QEC) announced that it plans to participate with its partner Talisman Energy Canada ("Talisman") in a major pilot program to assess the commerciality of unconventional gas in the St. Lawrence Lowlands, Quebec.
In addition to the previously announced commitment to drill three vertical test wells, the pilot program will include vertical and several horizontal wells. Questerre expects the program to be carried out in 2008 and 2009 with a budget in excess of $100 million. For its acreage in the play fairway, Questerre will budget, on a net basis, between $25 million and $30 million of which $3 million to $5 million is expected to be spent in 2008 with the balance in 2009. These amounts do not include anticipated spending on the Yamaska licenses.
The pilot project to assess commerciality will focus on the siltstone/shale sequences of both the Utica and Lorraine. Based on recently published data by Talisman, the discovered resource for the Lorraine of 50 Bcf-190 Bcf per section compares favorably to the discovered resource for the Utica of 25 Bcf-160 Bcf per section. The initial three vertical test wells will also test the Trenton Black-River. Further investment in the Trenton Black-River will be contingent on the exploration results achieved.
Michael Binnion, President and Chief Executive Officer of Questerre, commented, "We are delighted with the expanded program to evaluate commerciality of both the Lorraine and Utica formations. Based on work to date we believe the rock properties are very promising for unconventional gas in the Lowlands."
Questerre Energy Corporation is a Calgary-based independent resource company actively engaged in the exploration, development and acquisition of high-impact exploration and development oil and gas projects in Canada.
This news release contains forward-looking information. Implicit in this information are assumptions regarding commodity pricing, production, royalties and expenses, that, although considered reasonable by the Company at the time of preparation, may prove to be incorrect. These forward-looking statements are based on certain assumptions that involve a number of risks and uncertainties and are not guarantees of future performance. Actual results could differ materially as a result of changes in the Company's plans, commodity prices, equipment availability, general economic, market, regulatory and business conditions as well as production, development and operating performance and other risks associated with oil and gas operations. There is no guarantee made by the Company that the actual results achieved will be the same as those forecasted herein.
FOR FURTHER INFORMATION PLEASE CONTACT:Questerre Energy Corporation
Jason D'Silva
VP Finance
(403) 777-1185
(403) 777-1578 (FAX)
Email: info@questerre.com
Website: www.questerre.com
Questerre Announces Equity Offering
Questerre Announces Equity Offering
12:32 EDT Wednesday, May 21, 2008
CALGARY, ALBERTA--(Marketwire - May 21, 2008) - Questerre Energy Corporation ("Questerre" or the "Company") (TSX:QEC) (OSLO:QEC) announced it plans to complete an equity offering.
The offering will consist of up to 15,000,000 Common Shares and will include an over allotment option of 1,125,000 Common Shares. Pricing will be finalized later today. The placement is subject to receipt of all regulatory approval.
The offering will be completed in two tranches one in Norway (the "Norwegian Issue") and one in Canada (the "Canadian Issue").
The Company has appointed Pareto Securities AS and DnB NOR Markets ASA as its financial advisors and syndicate managers for the Norwegian Issue. The Norwegian syndicate will include SEB Enskilda AS. This issue will be carried out through a book building process that will close on or before 0830 CET on May 22, 2008.
The Canadian Issue will be managed by a syndicate of underwriters led by Dundee Securities Corporation and including Desjardin Securities Inc., National Bank Financial Inc., Wellington West Capital Markets Inc, Fraser Mackenzie Limited, Maison Placements Canada Inc, and Canaccord Capital Corporation. The Canadian agents have an overallotment option of 15% on the same terms.
Questerre anticipates the proceeds from this placement will primarily finance its planned exploration and appraisal program in the St. Lawrence Lowlands Quebec and other core areas including Antler and Greater Sierra in 2009.
Questerre Energy Corporation is a Calgary-based independent resource company actively engaged in the exploration, development and acquisition of high-impact exploration and development oil and gas projects in Canada.
This news release contains forward-looking information. Implicit in this information are assumptions regarding commodity pricing, production, royalties and expenses, that, although considered reasonable by the Company at the time of preparation, may prove to be incorrect. These forward-looking statements are based on certain assumptions that involve a number of risks and uncertainties and are not guarantees of future performance. Actual results could differ materially as a result of changes in the Company's plans, commodity prices, equipment availability, general economic, market, regulatory and business conditions as well as production, development and operating performance and other risks associated with oil and gas operations. There is no guarantee made by the Company that the actual results achieved will be the same as those forecasted herein.
FOR FURTHER INFORMATION PLEASE CONTACT:Questerre Energy Corporation `
Jason D'Silva
VP Finance
(403) 777-1185
(403) 777-1578 (FAX)
Email: info@questerre.com
Website: www.questerre.com
Talisman shifts focus to unconventional gas
Talisman shifts focus to unconventional gas
DAVID EBNER
00:00 EDT Wednesday, May 21, 2008
CALGARY -- Talisman Energy Inc. plans to spend $1.3-billion in the next 18 months to evaluate the potential of unconventional natural gas on one million hectares of land it controls in North America.
The spending is part of an overhaul of the company's strategy, a process that started when new chief executive officer John Manzoni took over from long-time leader Jim Buckee last year.
Talisman has spoken about the broad ideas of its shift and late yesterday provided some details ahead of three days of meetings with investors, starting today in New York, moving to Toronto tomorrow and to Calgary on Friday.
Instead of chasing exploration opportunities around the world, Talisman is narrowing its geographic focus. It is also embracing unconventional gas, which Mr. Buckee had dismissed as uninteresting while competitors such as EnCana Corp. successfully pursued it.
Unconventional gas is in fields where the molecules are trapped in tight rock formations that are difficult to access.
With higher spending on unconventional gas, Talisman's budget this year is rising $500-million or 11 per cent to $4.9-billion and will jump a further 18 per cent to $5.8-billion if the work goes well.
"By the end of 2009, we will be able to make informed choices about ongoing levels of investment into our unconventional resource plays," Mr. Manzoni said in a statement.
As Talisman evaluates unconventional gas, it said it aims to increase production by about 6.5 per cent. In 2010, 2011 and 2012, Talisman said it hopes to push the growth to about 7.5 per cent.
Talisman stock has climbed quickly recently after two years of a slow decline. Since March, the shares have soared more than 50 per cent, riding surging oil and gas prices. The Toronto Stock Exchange energy index rose 3.1 per cent to another record close.
The company hopes to raise $2-billion selling assets worth 45,000 barrels a day to further focus the company's holdings. Talisman has been selling assets for several years after criticism from investors that the firm had too many things on the go.
In the first quarter, Talisman's production of oil and gas was 411,000 barrels a day.
TALISMAN (TLM)
Close: $24.90, up 96¢
Friday, May 16, 2008
Questerre and Talisman to Accelerate Work in Quebec
Buy It Today :"First, it means that QEC will be prominiently mentioned at Talisman's presentation next week.Second, that Talisman approved having QEC steal a little of there thunder with this pre-release of info because it is a fairly large part of their shale gas plans. Finally, given that we now know that this 700,000 acre jt venture with Talisman is very important to them we can expect to get schedule for the rampup of production. The profit potential is going to surprise a lot of people."
Source
Questerre and Talisman to Accelerate Work in Quebec
QUESTERRE ENERGY CORP QEC5/16/2008 12:15:03 AMCALGARY, ALBERTA, May 16, 2008 (Marketwire via COMTEX News Network) --
Questerre Energy Corporation ("Questerre" or the "Company") (TSX:QEC) (OSE:QEC) is pleased to announce that Talisman Energy Canada ("Talisman") has elected to drill the remaining three option wells under its farm-in agreement with Questerre and its minority partner in the St. Lawrence Lowlands, Quebec.
The three wells will complete the work program allowing Talisman to earn about a 75% interest in the original 719,000 acre farm-out block. Questerre also retains about a 4 1/4% gross overriding royalty on production from Talisman.
Michael Binnion, President and Chief Executive Officer of Questerre, commented, "We were one of the first companies to recognize the potential of the Quebec Lowlands for unconventional gas and have worked for almost ten years to get to this point. We are thrilled that Talisman, which also saw the potential early on, has decided to accelerate the exploration and appraisal program.
Our joint land lies right in the heart of the Lowlands between the Yamaska growth fault and Logan's Line and runs from Quebec City to south of Lac Saint Pierre. We continue to believe this land position proximate to the market has significant natural gas potential."
The three-well program is expected to commence in the latter half of 2008. The wells will test multiple horizons including the Trenton Black-River and the Utica and Lorraine shale sequences.
Questerre Energy Corporation is a Calgary-based independent resource company actively engaged in the exploration, development and acquisition of high-impact exploration and development oil and gas projects in Canada.
This news release contains forward-looking information. Implicit in this information are assumptions regarding commodity pricing, production, royalties and expenses, that, although considered reasonable by the Company at the time of preparation, may prove to be incorrect.
These forward-looking statements are based on certain assumptions that involve a number of risks and uncertainties and are not guarantees of future performance. Actual results could differ materially as a result of changes in the Company's plans, commodity prices, equipment availability, general economic, market, regulatory and business conditions as well as production, development and operating performance and other risks associated with oil and gas operations. There is no guarantee made by the Company that the actual results achieved will be the same as those forecasted herein.
SOURCE: QUESTERRE ENERGY CORPORATION
Questerre Energy Corporation Jason D'Silva VP Finance (403) 777-1185 (403) 777-1578 (FAX) Email: info@questerre.com Website: http://www.questerre.com/Copyright (C) 2008 Marketwire. All rights reserved.
Roving Talisman casts its eyes homeward
NORVAL SCOTT
00:00 EDT Thursday, May 01, 2008
CALGARY -- Talisman Energy Inc., which for years staked its future on former chief executive officer Jim Buckee's vision of global deep-well exploration, is making a dramatic about-turn: It's embracing Canada's unconventional natural gas resources.
John Manzoni, who took over as CEO in September, said yesterday Talisman will now focus on growth in only a select few areas, one of which is producing gas from tight rock formations in North America.
Under Mr. Buckee, its only previous CEO, the company developed an idiosyncratic reputation for seeking worldwide growth through exploration, instead of tackling the easy-to-find, yet hard-to-develop resources lying in the company's own Alberta backyard.
While Talisman will continue to be a worldwide explorer, Mr. Manzoni's new strategy effectively ditches the company's scattergun approach. His more conservative plan would seek to deliver more reliable, sustainable production over a longer period, adopting the ways of many oil patch majors.
"What has been successful over the last decade may not be so successful going forward," said Mr. Manzoni at the company's annual meeting in Calgary. "In the last year or two our business model has become challenged - we are now at a scale where's it's more difficult to grow at the same pace with the same strategies. We have had to run faster and faster just to stand still."
The annual meeting, which followed the release of the company's first-quarter financial results, was Mr. Manzoni's first public appearance as CEO.
Under Mr. Buckee, who retired last year, Talisman grew from a 1992 spinoff from BP PLC to become one of Canada's largest oil and gas companies, expanding rapidly in regions like the North Sea and - controversially - Sudan. All the while, it avoided unconventional resources like Alberta's oil sands or shale gas, which Mr. Buckee said were uneconomic to develop.
While Talisman had some big finds, it found reliable production growth difficult to come by, while its share price lagged those of rivals like EnCana Corp. and Canadian Natural Resources Ltd. that had made such reserves a focus. Investors began to suggest the firm should be broken up to maximize value.
Under the strategy unveiled yesterday, Talisman will now seek to "lengthen its stride" by demonstrating that it can sustainably grow over the long term, Mr. Manzoni said. The firm will divest assets in non-strategic areas and will no longer look to expand in the North Sea - previously a core growth area. Instead, it will look to develop Southeast Asia and Norway more rapidly, while it may also look to South America and North Africa for future growth.
The firm will also seek to develop shallow but wide unconventional natural gas deposits trapped in shale, sand and silt, an area it hasn't previously targeted. The advantage of that strategy is that Talisman - an established conventional gas producer - already holds a vast North American land base of 2.5 million acres whose unconventional reserves haven't even been evaluated, let alone tapped.
That acreage includes holdings in some of North America's hottest unconventional fields, such as Bakken in Saskatchewan and Montney in British Columbia. Talisman is also the largest landholder in Quebec, whose gas production potential, which could be unlocked with new extraction techniques, has been the subject of fevered speculation in recent months.
"Those are the big names, and we've got them," Mr. Manzoni told reporters after the annual meeting. The company now plans to run pilot projects in those areas to determine the size of reserves before coming up with a more detailed development plan, he said.
While Talisman is now looking at its unconventional resources and will consider making acquisitions, it still has no plans to get into the oil sands, Mr. Manzoni said.
TALISMAN ENERGY (TLM)
Thursday, May 15, 2008
Pescod Talks These Stocks = Accumulation
13:26 EDT Thursday, May 15, 2008
CALGARY, May 15 /CNW/ - Connacher Oil and Gas Limited (CLL-TSX) announced today that it is a participant at the 2008 BNP Paribas Annual Investor Conference in the Bahamas on May 16, 2008. Participating in a panel discussion on oil sands at approximately 9:45 AM MST will be Mr. Richard Kines, Vice President Finance and Chief Financial Officer and Mr. Cameron Todd, Vice President, Refining and Marketing.
Connacher's corporate slide presentation is on the website at www.connacheroil.com. Click on the Investor Information link and go to the May 2008 Presentation.
Connacher Oil and Gas Limited is a Calgary-based Canadian oil and natural gas exploration, development, production and refining company. The company's principal assets are its significant bitumen reserves and resources and its 100 percent interest in approximately 98,000 net acres of oil sands leases at or near its Great Divide oil sands project near Fort McMurray, Alberta. It also owns conventional production and reserves at Marten Creek and Three Hills, Alberta and at Battrum, Saskatchewan.
Connacher owns and operates a 9,500 barrel per day heavy oil refinery in Great Falls, Montana and maintains a valuable 26 percent equity stake in Petrolifera Petroleum Limited (PDP - TSX), a public company active in Argentina, Colombia and Peru in South America.
For further information: Richard A. Gusella, President and Chief Executive Officer, OR Grant D. Ukrainetz, Vice President, Corporate Development, Phone: (403) 538-6201, Fax: (403) 538-6225, inquiries@connacheroil.com, Website: www.connacheroil.com
Today is Sprott day
Today is Sprott day
RTGAM
In Canada, Eric Sprott's investment firm, Sprott Inc. begins trading on the Toronto Stock Exchange after a successful initial public offering valued the company at about $1.5-billion.[amp]nbsp;The stock is seen as a play on commodities, given that Mr. Sprott has invested heavily in a number of Canadian commodity producers.Copyright 2001 The Globe and Mail
Stock index futures suggested a higher start on Thursday morning, with investors digesting a number of economics reports, deals and earnings releases. Futures for the Dow Jones industrial average rose 46 points, to 12,925 about an hour before trading begins. Futures for the broader S[amp]amp;P 500 rose 5 points, to 1412.Reports suggest that Carl Icahn is ready to make a move for Yahoo Inc. by installing his own slate of directors, perhaps as early as today.
Yahoo shares rose 44 cents, to $27.58 (U.S.) in premarket trading.General Electric Co., stung by a disappointing first-quarter miss, has suggested that it will seek a buyer for its appliances business in a deal that could be worth between $5-billion and $8-billion.Investors got another glimpse of U.S. consumer spending early on Thursday when J.C. Penny Co. released first-quarter earnings that fell 50 per cent. The upside, though, is that the retailer issued a more upbeat forecast for the second quarter than analysts had been expecting.
The company's shares rose 4 per cent in premarket activity.Meanwhile, the U.S. Labor Department reported that U.S. employment conditions remain weak, with initial jobless claims rising by 6,000 last week to 371,000.In Asia, Japan's Nikkei 225 rose 0.9 per cent. In Europe, the U.K.'s FTSE 100 rose 0.4 per cent and Germany's DAX index fell 0.1 per cent in afternoon trading - slim gains considering investors were treated to indications of surprisingly strong economic growth. The European economy grew 0.7 per cent in the first quarter over the fourth quarter of 2007, ahead of expectations. Germany, in particular, recorded its strongest growth in 12 years, expanding at a 1.5 per cent clip, quarter over quarter, that was nearly twice what economists had been expecting.
Wednesday, May 14, 2008
Timminco Schedules Conference Call
Timminco Schedules Conference Call to Discuss Operational Review Report by PHOTON Consulting on May 14
TIMMINCO LTD TIM
5/13/2008 1:28:00 PM
Conference call also to be webcast at www.timminco.comTORONTO, ONTARIO, May 13, 2008 (MARKET WIRE via COMTEX News Network) --
Timminco Limited ("Timminco") (TSX: TIM) announced today it will host a conference call on Wednesday, May 14, 2008 at 4:30 pm ET to discuss the highlights of the operational review report completed by a team from PHOTON Consulting on Becancour Silicon Inc, Timminco's solar grade silicon business.
Michael Rogol, Managing Director of PHOTON Consulting will make a presentation and answer questions relating to the solar industry and BSI's position in the industry.
Mr. Rogol is a leading expert on solar energy and focuses on emerging trends in the sector. His recent work includes detailed reports on solar power based on a global review of several hundred solar power companies. Mr. Rogol's research on silicon use in the solar power sector has been included in numerous reports (e.g., Sun Screen, Sun Screen II, Solar Annual 2006, Solar Annual 2007, True Cost of Solar Power), at numerous conferences, (e.g., PHOTON's Solar Silicon Conferences) and in the "Silicon Space" column of PHOTON International magazine. Mr. Rogol's background in the energy sector includes more than a decade of experience working with large energy players while at McKinsey & Co, Cambridge Energy Research Associates, Washington Policy & Analysis and MIT's Laboratory for Energy & Environment. Mr. Rogol holds a BS in Engineering Systems from MIT, an MBA from MIT, a BS in Foreign Service from Georgetown University and was a Henry Luce East Asian Scholar in Korea.
Martin Meyers of PHOTON Consulting, will also participate. Mr. Meyers has nearly 30 years experience in the energy industry, including 18 years with Royal Dutch/Shell and nearly a decade at Cambridge Energy Research Associates (CERA), where he was a Director of Research. His experience includes plant design, operations, technical support and optimization. Martin holds an MBA from Concordia University and a B.A.Sc. (Chemical Engineering) from Queen's University in Kingston, Ontario.
To access the conference call by telephone, dial 416-644-3433 or 1-800-814-4890. Please connect approximately 15 minutes prior to the beginning of the call to ensure participation. The conference call will be archived for replay until Wednesday, May 21, 2008 at midnight. To access the archived conference call, dial 416-640-1917 or 1-877-289-8525 and enter the reservation number 21271874#
A live audio webcast of the conference call will be also available at www.timminco.com. Please connect at least 15 minutes prior to the conference call to ensure adequate time for any software download that may be required to join the webcast. The webcast will be available for replay at www.timminco.com following the live presentation.
ABOUT TiMMINCO
Timminco is a leader in the production and marketing of lightweight metals, specializing in solar grade silicon for the rapidly growing solar photovoltaic energy industry. Using its proprietary technology, Timminco processes metallurgical grade silicon into low cost solar grade silicon for use in the manufacture of solar cells. Timminco also produces silicon metal, specialty ferrosilicon and alloy magnesium for use in a broad range of industrial applications serving the aluminum, chemical, pharmaceutical, electronics and automotive industries.
CAUTIONARY NOTE ON FORWARD-LOOKING IN
Timminco shines through media storm, short selling
Timminco shines through media storm, short selling
2008-05-14 13:32 ET - Street Wire
by Lee M. Webb
Timminco Ltd., a high-flying Toronto Stock Exchange (TSX) solar silicon player that has been a market darling and at least an indirect cash cow for some insiders over the past year or so, appears to be shining through a recent media storm and gloomy forecasts from short sellers and critics who want more light shed on the company.
Heinz Schimmelbusch, Timminco's chairman and chief executive officer, is the principal architect of the company's recent foray into the production of solar-grade silicon, the key component in photovoltaic cells that convert solar energy into electricity, which triggered the stock's meteoric rise on the TSX.
As recently as January of last year, Timminco's stock price was languishing at approximately 30 cents per share in lacklustre trading that frequently saw only a few thousand shares changing hands per session. Those days are gone.
Over the past 12 months, more than 552.5 million Timminco shares with a staggering market value of more than $8.3-billion have changed hands at an average price of $15.06 per share.
On April 16, Timminco notched an all-time high of $28.50 per share, temporarily giving the company a market capitalization of more than $2.96-billion. The stock price has tailed off somewhat, but Timminco is still actively trading well above $20 per share with millions of shares changing hands each day.
Timminco has certainly been a star performer on Canada's premier exchange, but not everyone is caught up in the hoopla over the solar silicon play or enthralled by the money-losing company that has racked up an accumulated deficit of more than $82-million.
Recently, Timminco has experienced some increased pressure from short sellers, including New York-based Manuel P. Asensio. Stockwatch will revisit Mr. Asensio in a future article, but will offer a brief introduction here.
Short sellers are widely despised, perhaps particularly by gullible investors quick to blame them for falling stock prices, and Mr. Asensio arguably has more than his fair share of detractors.
In the 1990s, Mr. Asensio gained notoriety for his abrasive, confrontational and high-profile attacks on his short-selling targets, many of which subsequently collapsed completely.
Perhaps somewhat chastened by his own brush with regulators and a number of lawsuits launched by companies irked by his attention and tactics, Mr. Asensio has adopted a more reserved approach in recent years. However, some of his more vocal critics claim that he is the point man for unscrupulous hedge funds and has a too-cozy relationship with some journalists.
Diatribes against Mr. Asensio often overlook the quality of his research and his rather impressive record in sniffing out overvalued companies. While his record is not perfect, Mr. Asensio certainly knows the game.
Short sellers complain that it is difficult to borrow the Timminco shares to establish a short position, which may not be surprising given that the company's two largest shareholders control almost 70 per cent of its stock.
AMG Advanced Metallurgical Group N.V., which is also headed by Mr. Schimmelbusch, owns approximately 52.56 million Timminco shares representing 50.5 per cent of the outstanding stock. Sprott Asset Management controls approximately 17.7 million shares or 17 per cent of Timminco's stock.
Notwithstanding the difficulty in locating shares to borrow, there was a reported short position of almost 3.1 million shares as of April 30, an increase of approximately 1.9 million shares since April 15.
Interestingly, the jump in the short position to an all-time high of approximately 3.1 million shares between April 15 and April 30 coincides with a spate of largely unflattering news reports about Timminco.
If there is a causal relationship between the increase in the short position and the unusual media coverage, the directionality is an open question.
In any event, recent news reports have raised questions about some of Timminco's key players and, among other things, made at least passing reference to the company's secret proprietary process for producing solar silicon.
The recent unflattering coverage contrasts sharply with the many boosterish puff pieces dating back to early 2007 served up by the same media outlets now taking a poke at Timminco.
Sunny days
Shortly after Timminco entered the bubbling solar silicon market last year, major Canadian newspapers including The Globe and Mail and the National Post began marking its meteoric rise with upbeat reports.
The Financial Post was out of the gate early with an April 10, 2007, report by Peter Koven noting that two announced Timminco solar silicon deals gave the first indication that the company was capable of producing high-grade silicon. Timminco's share price had quadrupled from 65 cents per share to $2.85 per share in the first 10 days of April and was heading much higher.
On May 10, 2007, The Globe and Mail chimed in with reporter Allan Robinson tagging Timminco as a solar energy play because of its development of a low-cost, proprietary purification process to upgrade its chemical-grade silicon for solar applications.
The Globe's Mr. Robinson noted that Clarus Securities analyst Robert Catellier, who had a $6 target for Timminco, thought there could be "potentially explosive earnings growth." At the time, Timminco was changing hands for $3.75 per share and was headed much higher than Mr. Catellier's early target.
The National Post joined the celebration with a June 22, 2007, report by Sonita Horvitch noting that Marquest Investment Counsel partner Gerry Brockelsby was recommending Timminco.
Ms. Horvitch reported in her Buy & Sell column that the company had a proprietary technology to upgrade commodity-grade silicon to the 99.999-per-cent purity level required for use in solar panels. Timminco was then trading at $5 per share and still heading north.
The Globe's Maureen Darrigo followed up two days later with the report of a bullish recommendation from Leeward Capital Management's chief executive officer Brendan Kyne as Timminco was pushing through $5.50 per share and continuing its upward trajectory.
The enthusiasm continued as the Post's Grant Surridge, writing in Trading Post, reported that participants at a solar-energy conference in Germany predicted a looming shortage in the supply of high-quality silicon wafers used in solar cells and the Globe's Mr. Robinson added a July 18, 2007, report that Timminco should benefit from strong demand for silicon.
The upbeat news reports picked up again in the fall with the Globe's Joanna Smith reporting that Timminco had already sold out the full annual production from the silicon facility it had not even finished building yet.
"These guys are winning business left, right and centre," Paradigm Capital Inc. analyst Marvin Wolff reportedly told Ms. Smith on Sept. 7, 2007.
According to Ms. Smith's report, Mr. Wolff had a target of $13 for Timminco and Clarus Securities Inc.'s Carolina Vargas was beating the drum with a $13.50 target. Timminco was trading at $9.15 per share at the time.
Just a few days later, the Globe's Richard Blackwell reported that Paradigm Capital's bullish Mr. Wolff had upped his target to $18 per share, projecting revenue of $880-million by 2010.
By Sept. 21, 2007, Sprott Growth Fund manager Peter Hodson was reportedly telling the Globe's Ms. Darrigo that Timminco "has the potential to be a $50 stock before 2010."
On Sept. 25, 2007, Ms. Darrigo followed up with a report that Leeward Capital's Mr. Kyne was still recommending Timminco. At the time, the stock was changing hands for $11.50 per share.
The bullish reports continued as Timminco broke through $15 per share in early December of last year and the Globe's Angela Barnes reported that Paul Mesburis of Mavrix Sierra Equity Fund thought the stock could go much higher over the next year.
On Dec. 18, 2007, the Globe's Ms. Darrigo chimed in again with a report that Leeward Capital's Mr. Kyne was just as keen as ever on Timminco.
"Timminco is the top supplier of silicon to the solar industry," Mr. Kyne reportedly told Ms. Darrigo. If Mr. Kyne did make that claim, he is wrong.
Before the end of December of last year, Timminco was trading above $18 per share and, with a few bumps along the way, it continued to move upward in the early part of this year.
On March 27, Timminco's stock price surged past $25 per share on the announcement of a deal to supply solar-grade silicon to Germany's Q-Cells AG, the world's largest supplier of solar cells.
The Globe's David Berman remarked on the price jump in a March 28 article, noting that Timminco had climbed more than 3,900 per cent over the past 12 months.
Mr. Berman went on to report that Cormark Securities analyst MacMurray Whale had a "reduce" recommendation on the stock with a target of $19.50, while National Bank Financial analyst Rupert Merer contented himself with a "sector perform" and target price of $24 per share.
Meanwhile, bullish Clarus Securities analyst Mr. Catellier reportedly still had a buy recommendation on the stock with a new target price of $40 per share.
The largely celebratory puff pieces that traced the trajectory of Timminco's rocketing share price while parroting bullish analysts, offered little, if anything, in the way of probing questions about the company's share structure, insiders, associated companies or the secret proprietary technology that effectively renders its solar-grade silicon production a black-box project.
The tone of the media coverage changed abruptly and dramatically in late April.
Storm clouds
Interestingly, the first significant thunderhead to appear on Timminco's previously sunny horizon formed south of the border in an April 21 Barron's article written by Bill Alpert. Like many Canadian companies, Timminco trades in the so-called "grey market" in the U.S., but the volume is minuscule compared with the trading on the TSX.
The title of Mr. Alpert's two-page Barron's article, "Timminco Generates More Heat Than Light," anticipates the tenor of the piece.
Mr. Alpert opened his article by remarking that a recently announced public offering of Toronto-based Sprott Asset Management could make its founder, Eric Sprott, a billionaire. According to Mr. Alpert, Mr. Sprott owed a lot of that "good fortune to his firm's huge stake in a single stock called Timminco," the TSX's star performer for 2007.
"The justification for Timminco's share appreciation is supposed to be its invention of a low-cost way to purify the silicon needed for the booming solar-cell market," Mr. Alpert wrote. "But so far, the evidence for Timminco's breakthrough appears in PowerPoint slides, not financial reports."
Mr. Alpert also took aim at Timminco's largest shareholder, AMG, which is headed by Mr. Schimmelbusch and founded by his private equity firm Safeguard International Fund.
The Barron's writer reported that, in a clever exit strategy designed by Mr. Schimmelbusch, Safeguard shareholders managed to cash in on Timminco without hurting its share price by unloading shares of AMG, which is listed on Amsterdam's Euronext exchange.
Among other things, Mr. Alpert also raised questions about Timminco's touted proprietary technology.
"Timminco clearly has a lot to prove," Mr. Alpert wrote.
On the same day that Mr. Alpert's Barron's article appeared, the Financial Post's Barry Critchley more blandly reported that Timminco had its share of detractors, too.
According to the Post's April 21 article, National Bank Financial left its target at $24 even as Timminco blew through $28 per share and Cormark Securities had a bearish "reduce" recommendation with a $19.50 target.
On April 22, in a triple-bylined article led by Andy Hoffman, the Globe weighed in with its rather belated peek at how Timminco's former majority shareholder Safeguard International had transferred its holdings to Amsterdam-based AMG and then cashed in through that company's initial public offering and subsequent stock sales to the tune of $390-million.
On the same day, the Globe's Ms. Martin reported in the BNN Market Call column that Lawrence Asset Management president Ravi Sood had taken a short position in Timminco.
"It's not a question of whether or not it's overvalued," Mr. Sood reportedly told the Globe. "Is the stock even worth a dollar or two? Our firm is short Timminco."
The Globe's Andrew Willis also had a few words about Timminco on April 22, noting that it was a tricky short because there were simply no shares to borrow. According to Mr. Willis, that was prompting some muttering in hedge fund circles about long-term investors being unwilling to lend their stock and add fuel to the short sellers' fire.
No matter what the reason for the scarcity of stock, Mr. Willis suggested, a few frustrated short sellers will not influence events.
"Preventing borrowing doesn't change fundamentals that dictate the price of Timminco," one trader reportedly remarked. "It just stops the shorts from profiting on any decline."
On April 23, the Globe's Fabrice Taylor piled in with his examination of the Timminco/Safeguard/AMG controversy.
"Maybe Timminco's revolutionary silicon process will work out and make investors filthy rich," Mr. Taylor wrote. "Maybe it won't.
"One thing is for sure though: The people running the show aren't going to wait around to find out, at least not with all their skin in the game.
"Shareholders would be well served to watch what these people are doing."
Mr. Taylor went on to lament that slack disclosure requirements make it difficult to keep up with what insiders are doing.
"Fact is the people who control the company are highly conflicted and have been liquidating their position furiously," Mr. Taylor stated before going on to offer his sketch of Mr. Schimmelbusch's shrewd exit strategy for Safeguard through AMG.
The storm clouds continued to roll in as the Post's Mr. Critchley drew connections between Mr. Schimmelbusch and the former president of Timminco, John Walsh, and now-struggling Alberta company Ceramic Protection Corp.
In April 25 and April 29 articles, Mr. Critchley reported that Mr. Schimmelbusch was the head of Allied Resource when that company sold Alanx Wear Solutions to Ceramic in 2004. Mr. Walsh, a former senior executive at Alanx, became president of Ceramic before moving on for a stint at Timminco.
Ceramic's stock price rocketed above $25 per share and continued to perform fairly well until September of 2006 when Arizona-based ArmorWorks cancelled a supply agreement with the company, provoking a legal battle. The lawsuits have been settled, but Ceramic is now languishing at approximately $2.35 per share.
Mr. Critchley suggested that Timminco shareholders will want to avoid Ceramic's fate.
Over the next few days, both the Globe and the Post published articles about insider transactions by Timminco executives, including the granting of some very lucrative stock options and some rather timely, perhaps even suspiciously so, stock purchases by the company's former president and chief executive officer, Mr. Walsh.
Lost amid the recent thundering about Timminco in the Canadian media is the fact that much of what is causing all the hand-wringing could have been could have been revealed long ago, if, instead of all the hand-clapping over the TSX's solar darling, an editor or even an inquisitive reporter had paused to take an earlier peek beneath the covers.
For example, while Mr. Schimmelbusch did not take out a full-page ad to explain his very crafty exit strategy for Safeguard, disclosures by Timminco regarding the share movement between Safeguard and AMG, coupled with the latter's initial public offering prospectus and subsequent disclosures, trace it all out rather well.
In other words, if any of the market seers at the Globe or the Post had bothered to take a look while their colleagues were regularly pumping out puff pieces about the TSX's soaring solar play, Mr. Schimmelbusch's clever exit strategy could have been revealed a year ago.
Interestingly, while a number of Canadian journalists have some experience with covering black-box projects, perhaps most notably in connection with mining plays, little more than passing mention has been made about Timminco's secret proprietary process for turning metallurgical-grade silicon into much more valuable solar-grade silicon.
Notwithstanding the fact that there has not been much in the way of very pointed questions about its touted technology, Timminco evidently has some concerns about the investing public's confidence in its secret proprietary process.
Just ahead of releasing its first-quarter results and subsequent conference call on May 8, Timminco tried to dispel some of the gloomy effects of the recent stormy media coverage by announcing that it had received an operational review report from an outside consultant.
Photon rays
On May 8, Timminco announced that it had received an operational review report on its solar-grade business at Becancour based on a one-day visit by a Photon Consulting team led by Michael Rogol.
"Timminco commissioned the report to support due diligence efforts for strategic discussions beyond normal supplier-customer relationships that are continuing with potential partners," the company reported.
In a subsequent conference call to discuss the company's first-quarter results, Mr. Schimmelbusch rather more candidly indicated that the operational review was a response to public questions about Timminco's secret proprietary technology.
According to Mr. Schimmelbusch, some of Timminco's critics were now running for cover. It is not clear whether Timminco's leader was serving up a pun relating to short sellers, but there is little doubt that Mr. Schimmelbusch knows the game.
"The Photon Consulting team was given full access to the solar-grade silicon production facility, and to information relating to accounting procedures, research and development efforts, human resource needs, intellectual property and technical processes that the team requested to prepare its report," Timminco reported in its news release.
During the conference call, Mr. Schimmelbusch remarked that Photon had such open access that some of Timminco's employees were even a bit nervous about the disclosures they were making, though they reportedly co-operated fully with Mr. Rogol and his team.
"Operations and processes have potential for massive growth and, possibly, for reshaping the silicon industry," Mr. Rogol gushed in Timminco's upbeat news release.
"The equipment is very impressive, very low cost, beyond polyscale," Mr. Rogol continued. "In interviews, several customers have reported cell efficiencies above 14 per cent and some above 15 per cent utilizing 100-per-cent (unblended) solar-grade silicon from Becancour."
During the May 8 conference call, Timminco would not disclose just how much it paid Mr. Rogol to conduct the one-day walkabout and prepare the operational review report.
The company has scheduled another conference call for May 14 to discuss the conclusions of boosterish Mr. Rogol's apparently stellar report. An executive summary of the report will be made available prior to the call.
Meanwhile, perhaps basking in the anticipated rays of Photon's report, Timminco continues to be a busy trader on the TSX. With more than 5.27 million shares valued at $127-million changing hands, Timminco gained $1.60 to close at $24.60 on May 13.
Comments regarding this article may be sent to lwebb@stockwatch.com.
Tuesday, May 13, 2008
Tim Houses Wow What A Day
Timminco Schedules Conference Call to Discuss Operational Review Report by PHOTON Consulting on May 14
TIMMINCO LTD TIM
5/13/2008 1:28:00 PM
Timminco Limited ("Timminco") (TSX: TIM) announced today it will host a conference call on Wednesday, May 14, 2008 at 4:30 pm ET to discuss the highlights of the operational review report completed by a team from PHOTON on Becancour Silicon Inc, Timminco's solar grade silicon business.
Michael Rogol, Managing Director of PHOTON Consulting will make a presentation and answer questions relating to the solar industry and BSI's position in the industry.
Mr. Rogol is a leading expert on solar energy and focuses on emerging trends in the sector. His recent work includes detailed reports on solar power based on a global review of several hundred solar power companies. Mr. Rogol's research on silicon use in the solar power sector has been included in numerous reports (e.g., Sun Screen, Sun Screen II, Solar Annual 2006, Solar Annual 2007, True Cost of Solar Power), at numerous conferences, (e.g., PHOTON's Solar Silicon Conferences) and in the "Silicon Space" column of PHOTON International magazine. Mr. Rogol's background in the energy sector includes more than a decade of experience working with large energy players while at McKinsey & Co, Cambridge Energy Research Associates, Washington Policy & Analysis and MIT's Laboratory for Energy & Environment. Mr. Rogol holds a BS in Engineering Systems from MIT, an MBA from MIT, a BS in Foreign Service from Georgetown University and was a Henry Luce East Asian Scholar in Korea.
Martin Meyers of PHOTON Consulting, will also participate. Mr. Meyers has nearly 30 years experience in the energy industry, including 18 years with Royal Dutch/Shell and nearly a decade at Cambridge Energy Research Associates (CERA), where he was a Director of Research. His experience includes plant design, operations, technical support and optimization. Martin holds an MBA from Concordia University and a B.A.Sc. (Chemical Engineering) from Queen's University in Kingston, Ontario.
To access the conference call by telephone, dial 416-644-3433 or 1-800-814-4890. Please connect approximately 15 minutes prior to the beginning of the call to ensure participation. The conference call will be archived for replay until Wednesday, May 21, 2008 at midnight. To access the archived conference call, dial 416-640-1917 or 1-877-289-8525 and enter the reservation number 21271874#
A live audio webcast of the conference call will be also available at www.timminco.com. Please connect at least 15 minutes prior to the conference call to ensure adequate time for any software download that may be required to join the webcast. The webcast will be available for replay at www.timminco.com following the live presentation.
ABOUT TIMMINCO
Timminco is a leader in the production and marketing of lightweight metals, specializing in solar grade silicon for the rapidly growing solar photovoltaic energy industry. Using its proprietary technology, Timminco processes metallurgical grade silicon into low cost solar grade silicon for use in the manufacture of solar cells. Timminco also produces silicon metal, specialty ferrosilicon and alloy magnesium for use in a broad range of industrial applications serving the aluminum, chemical, pharmaceutical, electronics and automotive industries.
Monday, May 12, 2008
Saturday, May 10, 2008
Friday, May 9, 2008
Tim-t Fights Back
Globe says Timminco fires back at critics
2008-05-09 08:03 ET - In the News
The Globe and Mail reports in its Friday edition that Timminco, which has faced skepticism about the viability of its ability to produce solar-grade silicon, hit back at critics Thursday. The Globe's Andy Hoffman writes Tmminco announced a contract upgrade and a report it commissioned suggesting its method has the potential to transform the solar industry.
The Toronto company's shares rose Thursday and are up sharply over the past week. Pittsburgh's Solar Power Industries (SPI) will buy another 3,000 tonnes of solar grade silicon from Timminco a year from 2010 to 2015. The initial deal, announced March 15, 2007, to supply 4,000 tonnes of silicon over five years, was Timminco's first contract announcement. At the time, SPI was not identified as the buyer.
Timminco claims it has developed a "breakthrough" process to upgrade metallurgical silicon for use in solar cells at much lower costs than competitors. Critics and short sellers have questioned whether Timminco can produce large amounts of solar-grade silicon, when rivals such as Elkem AS are spending more than twice as much to produce less material. Timminco says it commissioned a report by Photon Consulting to review its manufacturing.
Independent study confirms technology: Timminco
Independent study confirms technology: Timminco
ANDY HOFFMAN
Thursday, May 08, 2008
Timminco Ltd., which has faced questions about the viability of its process to produce solar-grade silicon, says an independent report it commissioned found its method has the potential to transform the silicon industry.
Germany's Photon Consulting was given access to Timminco's solar grade silicon production facility in Becancour, Que., during a one-day visit in early May.
In a news release, Timminco said Photon officials were given full access to the plant and information relating to accounting procedures, research and development efforts, intellectual property and technical processes to prepare the report.
“Operations and processes have potential for massive growth and, possibly, for reshaping the silicon industry,” Michael Rogol, Photon's managing director said in a statement.
“The equipment is very impressive, very low-costs, beyond poly-scale,” he said.
Skeptics and critics have said that Timminco has provided little evidence that its so-called “breakthrough” technology can produce large amounts of solar-grade silicon at the company's ambitious cost estimates which are lower than rival solar-silicon makers.
Timminco's shares, which were the top performer on the Toronto Stock Exchange last year, have been on a roller coaster in recent weeks as concerns have been raised about the company.
Toronto-based Timminco is scheduled to release its first-quarter financial report Thursday. The company has a conference call scheduled for later in the afternoon.
A summary of the Photon report will be released next week, Timminco said. It has another conference call scheduled for May 15.
The company's shares were halted before the announcement. Once they resumed trading, they were up 97 cents to $24.67 on the TSX.
© Copyright The Globe and Mail
Timminco Reports First Quarter 2008 Results
Timminco Reports First Quarter 2008 Results
16:30 EDT Thursday, May 08, 2008
TORONTO, ONTARIO--(Marketwire - May 8, 2008) - Timminco Limited ("Timminco") (TSX:TIM) today announced its financial results for the first quarter ended March 31, 2008.
Highlights of the First Quarter
- Sales of $47.6 million, representing a growth of 11.2% from $42.8 million in the first quarter of 2007.
- Net loss of $0.6 million compared to a net loss of $3.1 million in the first quarter of 2007.
- Completed the commissioning of a solar grade silicon production facility with nominal annual production output of 3,600 metric tons.
- Announced the expansion of solar grade silicon nominal capacity to 14,400 metric tons of annual output based on market demand and customer acceptance of product.
- Shipped 100 metric tons of solar grade silicon at an average selling price in excess of $60 per kilogram.
- Signed an agreement to supply solar grade silicon to Q-Cells AG, the world's largest manufacturer of solar cells.
Highlights Subsequent to Quarter End
- Appointed John Fenger to assume leadership of the Magnesium Group.
- Received a EUR 5 million deposit under a long term contract from a major customer for delivery of solar grade silicon.
- Received positive report by PHOTON Consulting on operational review of solar grade silicon business in Becancour.
- Signed second agreement to supply solar grade silicon to Solar Power Industries, Inc.
Overview
"Following the completion of the commissioning of our 3,600 metric ton solar grade silicon facility in the first quarter, the ramp up of production is progressing in line with our expectations, with output and shipments to our customers steadily increasing each month," said Dr. Heinz Schimmelbusch, Chairman of the Board and Chief Executive Officer of Timminco. "During the first quarter, we met our internal shipment target of 100 metric tons of solar grade silicon, all of which was tested by an independent laboratory and met the specifications set by our customers. Moreover, feedback from our customers has been positive. With production output for our existing facility sold out through 2008, we expect the continued ramp up in production to have an increasing positive impact in our financial results with each successive quarter. We will report on the progress of our ramp up when we report our second quarter results. While we anticipate that the cost of our solar grade silicon production will fluctuate as we make refinements to our facilities, we are comfortable with current levels and continue to expect to achieve an average variable cost in the range of $10 to $15 per kilogram at long-term nominal production levels."
Timminco has two reporting segments: the Silicon Group, which includes silicon metal and solar grade silicon products, and the Magnesium Group, which includes magnesium extruded and fabricated products. Timminco also has a minority investment in Fundo Wheels AS, an aluminum wheels business based in Norway.
Results for the First Quarter
Sales for the first quarter of 2008 were $47.6 million, an increase of 11.2% from $42.8 million the first quarter of 2007. The increase is attributable to growth in the sales volume of Timminco's solar grade silicon and regular grade silicon metal.
The net loss was $0.6 million or $0.01 per share, compared with a net loss of $3.1 million, or $0.04 per share, in the first quarter of 2007.
Cash and short-term investments as at March 31, 2008 were $11.3 million compared to $34.6 million at the end of 2007. During the quarter, $6.2 million was invested in working capital to support the 31% increase in sales volumes over the fourth quarter of 2007, $16.5 million was spent on capital expenditures relating primarily to the solar grade silicon facilities and $1.9 million was invested in Fundo Wheels to support the turnaround of that business.
Silicon Group
Sales of the Silicon Group were $34.7 million in the first quarter of 2008, an increase of 45.2% from $23.9 million of first quarter of 2007. The increase in sales was due to the growth in sales of solar grade silicon and an increase in sales volume of regular grade silicon metal.
Gross profit for the first quarter of 2008 was $4.2 million or 12.2% of sales compared with the gross margin of $1.7 million or 6.9% of sales in the first quarter of 2007. The growth was primarily due to the increase in sales of solar grade silicon. During the quarter $2.1 million of start up costs were incurred and expensed as cost of sales.
Amortization of capital assets in the first quarter of 2008 was $1.3 million compared with $0.6 million in the first quarter of 2007. The increase was attributable to the new solar grade silicon facility now in use.
Magnesium Group
Sales of the Magnesium Group were $12.8 million in the first quarter of 2008, representing a decrease of 31.9% from the $18.8 million generated in the first quarter of 2007. The decrease is a result of unusually high sales volumes in the first quarter of 2007, unfavourable foreign exchange rate moves and increased competition.
Gross profit for the first quarter was $1.2 million or 9.6% of sales. This compares to $1.1 million or 5.6% of sales in the first quarter of 2007. Although overhead expenses were decreased by $0.8 million, these were offset by higher costs for magnesium feedstock and increased competition in principal markets.Financial Highlights
in thousands of Canadian dollars,
except for loss per common share
-------------------
Three Months Ended
(unaudited)
-------------------
March 31, March 31,
2008 2007
-------------------
Sales $47, 557 $42,786
Gross profit 5,701 3,047
Gross profit percentage 12.0% 7.1%
Net loss (556) (3,119)
Loss per common share, basic and
diluted (0.01) (0.04)
Working capital (excluding
available cash items) 33,029 12,594
Total assets 185,674 102,647
Cash and marketable securities 11,338 201
Bank debt 11 23,115
Total long term liabilities 25,057 22,838
Weighted average number of
common shares outstanding, basic
and diluted 103,999 75,133
Timminco will file its consolidated financial statements for the quarter ended March 31, 2008, and related management's discussion and analysis (MD&A) with securities regulatory authorities within the applicable timelines. Such financial statements, MD&A and related documents will be available through SEDAR at www.sedar.com as well as through Timminco's website at www.timminco.com.
About Timminco
Timminco is a leader in the production and marketing of lightweight materials, specializing in solar grade silicon for high growth solar photovoltaic energy industry. Using its proprietary technology, Timminco processes metallurgical grade silicon into low cost solar grade silicon for use in the manufacture of solar cells. Timminco also produces silicon metal and specialty ferrosilicon and alloy magnesium for use in a broad range of industrial applications serving the aluminum, chemical, pharmaceutical, electronics and automotive industries.
Timminco Announces Second Solar Grade Silicon Supply Agreement With Solar Power Industries, Inc.
Timminco Announces Second Solar Grade Silicon Supply Agreement With Solar Power Industries, Inc.
15:08 EDT Thursday, May 08, 2008
TORONTO, ONTARIO--(Marketwire - May 8, 2008) - Timminco Limited ("Timminco") (TSX:TIM) today announced that its wholly-owned subsidiary, Becancour Silicon Inc. ("BSI"), has signed a second agreement to supply solar grade silicon to Solar Power Industries, Inc. based in Belle Vernon near Pittsburgh, Pennsylvania. ("SPI"). SPI was BSI's first long-term solar grade silicon customer, having entered into its initial supply agreement with BSI in March 2007. SPI was BSI's largest customer in 2007.
The initial supply agreement anticipated shipments of solar grade silicon in excess of 4,000 metric tons over its initial period of 5 years. Under this second supply agreement, SPI has committed to purchase an additional 3,000 metric tons per year from 2010 to 2015.
"We are very happy to have SPI as a strategic partner in the development of our solar silicon business and this second contract with SPI further corroborates the value proposition we bring to our customers." said Mr. Rene Boisvert, President and CEO of BSI. "SPI has had extensive experience with our solar grade silicon, having shipped their products using our material for over one year."
ABOUT TIMMINCO
Timminco is a leader in the production and marketing of lightweight metals, specializing in solar grade silicon for the rapidly growing solar photovoltaic energy industry. Using its proprietary technology, Timminco processes metallurgical grade silicon into low cost solar grade silicon for use in the manufacture of solar cells. Timminco also produces silicon metal, magnesium extrusions and other specialty metals for use in a broad range of industrial applications serving the aluminum, chemical, pharmaceutical, electronics and automotive industries.
CAUTIONARY NOTE ON FORWARD-LOOKING INFORMATION
This news release contains "forward-looking information", as such term is defined in applicable Canadian securities legislation, concerning Timminco's future financial or operating performance and other statements that express management's expectations or estimates of future developments, circumstances or results. Generally, forward-looking information can be identified by the use of forward-looking terminology such as "expects", "believes", "anticipates", "budget", "scheduled", "estimates", "forecasts", "intends", "plans" and variations of such words and phrases, or by statements that certain actions, events or results "may", "will", "could", "would" or "might" "be taken", "occur" or "be achieved". In this news release, such information includes statements regarding agreements and commitments to supply solar grade silicon. Forward-looking information is based on a number of assumptions and estimates that, while considered reasonable by management based on the business and markets in which Timminco operates, are inherently subject to significant operational, economic and competitive uncertainties and contingencies. Timminco cautions that forward-looking information involves known and unknown risks, uncertainties and other factors that may cause Timminco's actual results, performance or achievements to be materially different from those expressed or implied by such information, including, but not limited to, limited history with the solar grade silicon business; expansion of the solar grade silicon business generally; production capacity expansion at the Becancour facilities; protection of intellectual property rights; increasing and maintaining the purity of solar grade silicon; long-term contracts for supplying solar grade silicon; selling prices for solar grade silicon; price volatility for silicon metal; pricing and availability of raw materials for the silicon businesses; dependence upon power supply for silicon metal production; the cost of solar grade silicon production; price volatility for magnesium metal; magnesium supply chain interruptions; dependence upon key customers of magnesium extruded products; manufacturing cost reduction initiatives; financing requirements for capital expenditures; limitations under existing credit facilities; foreign currency exchange; dependence upon key executives and employees; customer concentration; completion and integration of potential acquisitions, partnerships or joint ventures; risks with foreign operations and suppliers; environmental, health and safety laws and liabilities; equipment failures; transportation disruptions; conflicts of interest; intellectual property infringement claims; new regulatory requirements; labour disputes; and changes in tax laws. These factors are discussed in greater detail in Timminco's Annual Information Form for the year ended December 31, 2007, which is available via the SEDAR website at www.sedar.com. Although Timminco has attempted to identify important factors that could cause actual results, performance or achievements to differ materially from those contained in forward-looking information, there can be other factors that cause results, performance or achievements not to be as anticipated, estimated or intended. There can be no assurance that such information will prove to be accurate or that management's expectations or estimates of future developments, circumstances or results will materialize. Accordingly, readers should not place undue reliance on forward-looking information. The forward-looking information in this news release is made as of the date of this news release and Timminco disclaims any intention or obligation to update or revise such information, except as required by applicable law.
Sedar Filer Profile #00000838
FOR FURTHER INFORMATION PLEASE CONTACT:Timminco Limited
Robert J. Dietrich
Executive Vice President - Finance and CFO
(416) 364-5171
(416) 364-3451 (FAX)
Email: rdietrich@timminco.com
or Becancour Silicon Inc.
Rene Boisvert
President and CEO
(819) 294-6000
(819) 294-9001 (FAX)
Email: rboisvert@silbec.com
Contract upgrade, report boost Timminco shares
Contract upgrade, report boost Timminco shares
ANDY HOFFMAN
00:00 EDT Friday, May 09, 2008
Timminco Ltd., which has faced skepticism about the viability of its process to produce solar-grade silicon, hit back at critics yesterday, announcing a contract upgrade and a report it had commissioned suggesting its method has the potential to transform the solar industry.
The Toronto-based company's shares rose nearly 5 per cent yesterday and have jumped 21 per cent in the past week. The stock had previously been battered by mounting concerns it may not be able to deliver solar-grade silicon to customers at cost projections and also on reports of timely option grants and stock buying by company insiders.
Timminco yesterday said Pittsburgh's Solar Power Industries Inc. (SPI) has committed to purchase an additional 3,000 tonnes of solar grade silicon from Timminco a year from 2010 to 2015. The initial deal, announced March 15, 2007, to supply 4,000 tonnes of silicon over five years, was Timminco's first contract announcement. At the time, SPI was not identified as the buyer.
That first contract was the early catalyst sending Timminco shares rocketing higher in 2007, from 40 cents to nearly $22 at the end of the year.
Timminco claims it has developed a "breakthrough" process to upgrade metallurgical silicon for use in solar cells at much lower costs than competitors.
Critics and short sellers have questioned whether Timminco can economically produce large amounts of solar-grade silicon, when rivals such as Elkem AS are spending more than twice as much to produce less material.
Yesterday, Timminco said it had commissioned a report by Photon Consulting to review its process. "Operations and process have potential for massive growth and, possibly, for reshaping the silicon industry," Photon's managing director Michael Rogol said in a statement.
Mr. Rogol and other Photon officials were given a one-day tour of Timminco facilities in Bécancour, Que., in early May. "The equipment is very impressive, very low-cost," Mr. Rogol added. Officials from Photon and Mr. Rogol's firm Rogol Energy Consulting declined further comment.
David Dunnison, the head of business development at Mississauga's 6N Silicon Inc., which is also developing a process to upgrade metallurgical silicon for use in solar cells, said Mr. Rogol is the solar industry's top analyst and is both highly respected and exceedingly bullish on the sector's growth potential.
However, "when it comes to technology and process specifics, no offence, he probably wouldn't be my first choice. He tells you what is going on the market. He doesn't talk technology," Mr. Dunnison said.
On a conference call, Timminco CEO Heinz Schimmelbusch said the company chose Photon to audit its process instead of an established engineering firm in order to safeguard the company's proprietary process.
"We felt that the integrity and the reputation of Photon would shield us against the outflow of competitive information while giving us a comfortable statement here," Mr. Schimmelbusch said.
Timminco also yesterday reported a first-quarter loss of $556,000 or 1 cent per share compared to a $3.1-million loss or 4 cents last year. Revenue was $47.6-million, up 11 per cent from last year.
© Copyright The Globe and Mail
Thursday, May 8, 2008
Petrolifera Petroleum reports Q1 2008
Petrolifera Petroleum reports Q1 2008 results and schedules conference call May 9, 2008, 9:00 A.M. MT
15:19 EDT Thursday, May 08, 2008
CALGARY, May 8 /CNW/ - Petrolifera Petroleum Limited (TSX: PDP) reports steady growth during the first quarter of 2008 with sales up 12 percent and cash flow per share up 14 percent over the fourth quarter of 2007. During the period Petrolifera drilled 16 new wells in Argentina, substantially completed its Puesto Morales Norte production facilities and activated its pressure maintenance program. Since year end, a significant followup well at Rinconada has been drilled, resulting in a Sierras Blancas discovery which, after a frac treatment, flowed light gravity crude oil at approximately 800 bbl/d and is presently producing at a rate of approximately 460 bbl/d through a 10 millimetre choke. Also, the company will shortly be testing several indicated hydrocarbon-bearing zones in its PME x-1002 well. The first well on this block is a Loma Montosa natural gas discovery.
The company anticipates commencing drilling in Colombia during the third quarter 2008. Subsequent thereto and over the ensuing 18 month period, the company plans a continuous program comprised of drilling high impact wells in both Colombia and Peru.
Against a backdrop of regulated energy prices in Argentina and regulatory delays anticipated in Peru to secure approval of the company's drilling Environmental Impact Assessment ("EIA"), Petrolfiera has decided to reduce its capital budget for 2008 to $102 million compared to a previously-announced level of $140 million. This primarily reflects the probable deferral of the startup of drilling in Peru until 2009.
These Q1 2008 results will be subject to a Conference Call event at 9:00 A.M MT, May 9, 2008. To listen to or participate in the live conference call please dial either (416) 644-3424 or (800) 587-1893. A replay of the event will be available from May 9, 2008 at 11:00 a.m. MT until May 16, 2008 at 11:59 p.m. MT. To listen to the replay please dial either (416) 640-1917 or 877-289-8525 and enter the passcode 21270831 followed by the pound sign.
<<
HIGHLIGHTS
- Sales and cash flow growth restored
- Profitability retained despite provision for ABCP impairment
- ABCP headed towards resolution
- Facilities completed, operational at Puesto Morales Norte, Argentina
- Focus moving to plans for Colombian and Peruvian drilling
- High impact Colombian and Peruvian wells anticipated throughout
second half of 2008, all of 2009
Summary Results
Three months ended
-------------------------------------------------------------------------
March 31, December 31, March 31,
2008 2007 2007
-------------------------------------------------------------------------
FINANCIAL ($000 except per
share amounts)
Total revenue 27,167 27,266 47,122
Cash flow from operations before
working capital changes(1) 11,902 10,707 24,615
Per share, basic(1) 0.24 0.21 0.56
Per share, diluted(1) 0.23 0.21 0.49
Net earnings for the period 1,738 4,863 15,069
Per share, basic 0.04 0.10 0.34
Per share, diluted 0.03 0.09 0.30
Capital expenditures 31,056 57,608 7,514
Working capital including bank debt (51,546) (31,779) 58,811
Bank debt 53,039 29,612 -
Shareholders' equity 127,225 120,303 98,124
Total assets 231,278 204,227 137,840
OPERATING
Daily sales volumes
Crude oil - bbl/d 6,726 6,565 11,333
Natural gas - mcf/d 7,044 2,860 1,858
Barrels of oil equivalent -
boe/d(2) 7,900 7,042 11,643
Average selling prices
Oil - $/bbl 41.99 44.36 45.43
Natural gas - $/mcf 2.20 1.76 1.53
Barrels of oil equivalent - $/boe(2) 37.72 42.07 44.47
COMMON SHARES OUTSTANDING (000s)
Weighted average
Basic 50,212 50,123 43,800
Diluted 51,562 51,689 50,635
End of period
Issued 50,353 50,127 44,029
Fully diluted 51,572 51,670 53,280
-------------------------------------------------------------------------
(1) Cash flow from operations before working capital changes ("cash
flow") and cash flow per share do not have standardized meanings
prescribed by Canadian generally accepted accounting principles
("GAAP") and therefore may not be comparable to similar measures used
by other companies. Cash flow includes all cash flow from operating
activities and is calculated before changes in non-cash working
capital. The most comparable measure calculated in accordance with
GAAP would be net earnings. Cash flow is reconciled with net earnings
on the Consolidated Statements of Cash Flows and in the accompanying
Management's Discussion & Analysis. Management uses these non-GAAP
measurements for its own performance measures and to provide its
shareholders and investors with a measurement of the company's
efficiency and its ability to fund a portion of its future growth
expenditures.
(2) All references to barrels of oil equivalent (boe) are calculated on
the basis of 6 mcf : 1bbl. Boes may be misleading, particularly if
used in isolation. This conversion is based on an energy equivalency
conversion method primarily applicable at the burner tip and does
not represent a value equivalency at the wellhead.
>>
LETTER TO SHAREHOLDERS
Your company achieved its objective of steady growth during the first quarter of 2008. Our sales of both crude oil and natural gas increased over the fourth quarter of 2007. On an equivalent basis, sales rose 12 percent to reach 7,900 boe/d, with much of the increase deriving from increased natural gas sales with the completion of the company's high pressure gas line from Puesto Morales Norte to Medanito. Significantly, natural gas prices rose 25 percent to accompany the 146 percent improvement in natural gas sales volumes, on a successive or quarter over quarter basis. This improvement in crude oil and natural gas sales is almost entirely attributable to new drilling, which more than offset normal declines. This occurred while we completed most of our permanent facilities at Puesto Morales Norte. We were unable to achieve the record results of a year ago, when we experienced flush production from our new discovery wells at Puesto Morales Norte and registered the company's record set of quarterly results.
During the quarter, our water supply, treatment and waterflood facilities were substantially completed and we expect to see some measurable impact of the waterflood later in 2008 as it ramps up towards full effectiveness in mid-2009, after more injectors are drilled and injection rates are escalated. This should provide a more stable, manageable and predictable production profile for Puesto Morales Norte in upcoming years.
Our progress at Puesto Morales was achieved despite serious dislocations in the Argentinean economy during the latter half of 2007 and into 2008. These dislocations included shortages of natural gas and equipment, along with emerging inflationary pressures, especially from labor. Also, the industry continues to be adversely affected by Argentina's regulated pricing policy, which is limiting cash flow from current production, traditionally the source of reinvestment capital. Price regulation is prevalent for both crude oil and natural gas and, as a consequence, there is growing evidence of a slowdown of new investment throughout the Argentinean oil and natural gas industry. Our experience is that capital will always move to opportunities in jurisdictions which afford a more attractive market-driven return on investment. This activity slowdown is unfortunately already evident in Argentina and is likely to continue unless changes are made near-term.
Against this backdrop, Petrolifera has maintained a respectable reinvestment rate, with capital expenditures continuing to be made at levels considerably in excess of cash flow, in order to maintain its asset base in Argentina while meeting all commitments. This dislocation clearly cannot persist. We believe an indicated near term response from the policy makers in respect of fairer and more appropriate energy pricing is now overdue; further delays will only exacerbate existing and looming issues of energy supply shortfalls and lead to a further reduction in investment, which would only accelerate the deterioration.
During the first quarter 2008, Petrolifera's capital expenditures totaled $31.1 million. These investments were made in Argentina, Peru and Colombia. In Argentina, outlays of $23 million were invested in the drilling of 16 wells (which resulted in eight oil wells, one natural gas well (undergoing a long-term test), one abandoned well, two water injector wells and four wells awaiting completion or drilling at the end of the period) and to complete our Puesto Morales Norte facilities. Initial drilling on Puesto Morales Este yielded dissapointing but commercial results and the PME x-1002 well has been cased for testing after drilling and logging; testing is warranted but expectations for the well are guarded. Drilling of these wells completes our negotiated commitment on this block. The balance of the capital program was largely incurred in Peru for the company's 2D seismic program on Ucayali Block 107.
This level of total capital expenditure again exceeded cash flow. In Argentina, our investments were more than double our corporate cash flow. As a result, the company's indebtedness increased by about $23 million to approximately $53 million, which while higher than we would prefer is clearly at a level well within the company's financial capacity, especially when evaluated in relation to its anticipated annualized cash flow and credit capacity. Nevertheless, this rising indebtedness has been forced upon the company as it carries out its chosen level of capital expenditures while we await the resolution of the status of our investment in Asset Backed Commercial Paper ("ABCP"). Our ABCP investments, which total approximately $38 million, have regrettably been frozen since August of last year. We have participated to the extent possible in the process of trying to resolve and unwind this impasse, which has effectively sterilized these investments. You may recall they were sold to us by our banker as cash-equivalent, highly-rated and liquid paper. Your company made a provision for impairment of the value of this investment in each of the last two quarters and charged this against its earnings. A similar non-cash charge has been provided for in this quarter, which again reduced net income for the first quarter 2008.
On April 25, 2008 a vote to determine if the Plan of Arrangement proposed by the Pan-Canadian Investors Committee for third-Party Structured ABCP ("the Committee") was accepted by the majority of investors holding ABCP. A fairness hearing will now be held and thereafter the full impact of the resolution may be more appropriately measurable, although liquidity and the timing thereof remains uncertain. Resolution of this difficult and unfortunate situation has been protracted, seemingly insensitive to the interests of corporate holders of ABCP, such as Petrolifera and the situation is unprecedented in the annals of the Canadian money market.
Despite the lack of current liquidity afforded by our ABCP holdings, we continue to have access to considerable unutilized credit to supplement our internally generated funds so we can continue to conduct our desired programs, but we are monitoring our financial condition constantly with balance sheet strength foremost in our minds and with our insistence to only financing development activity with debt. We are hopeful some resolution will permit us to significantly reduce our current level of indebtedness and restore our balance sheet to its rightful strength.
During the remainder of 2008, we expect a developmental multi-well drilling program will continue in Argentina on our Puesto Morales Norte, Este and Rinconada blocks. We also anticipate exploratory drilling will be initiated on each of our Vaca Mahuida and Gobernador Ayala II blocks, following the completion, processing and interpretation of our ongoing 3D seismic programs.
In Colombia, we have identified three drillable prospects with interesting and meaningful potential on our Sierra Nevada I Block and with rig availability to be finalized, anticipate commencement of drilling in the late summer of 2008.
In Peru, our seismic program on Block 107 has been progressing favorably and we recently decided to shoot an expanded program to follow up leads developed by our primary activity in the region. We continue to plan for drilling in Peru for as early a date as will be facilitated by the government's approval of our drilling Environmental Impact Assessment ("EIA") and selection of a suitable rig for an adequate period to facilitate the prospect of a multi-well program, especially if early success is achieved. We also await approval of our seismic EIA for Maranon Block 106, where drilling will not occur until 2009.
Your company is confident of its future. We have already experienced higher productivity and sales since the end of the reporting period, with daily sales levels approaching 10,000 boe/d on occasion. Once our waterflood begins to impact on adjacent well productivity, further gains can be anticipated without the level of pressure decline on overall well productivity through the production process. This will be reinforced with the drilling of additional injector wells during the year, accompanied by a higher injection rate to replace voidage which has occurred during production.
Later in the year, shareholders will be exposed to high potential drilling in Colombia and subsequently in Peru. In the process of preparing for very high cost drilling in new countries, we have strengthened our staff and assigned new responsibilities to our senior managers in Argentina, as expertise is accessed for our Colombian project. Even with our healthy level of cash generation and the level of unused credit available to the company, we may also give consideration to the introduction of some form of risk management through farmout or other form of joint venture activity, or capital strengthening alternatives, as a result of the unfortunate and unnecessary effect which the status of our ABCP investment has placed on what previously had been a debt free balance sheet. Against this backdrop, we have decided to scale back our planned 2008 capital program to $102 million from a previously announced level of $140 million. While this may have a modest impact on anticipated production levels in Argentina during the balance of the year, the reduction primarily reflects deferral of Peruvian drilling until early 2009. We believe this is prudent awaiting resolution of the ABCP situation and in light of prevailing regulatory limitations on realizations in Argentina in a credit-conscious environment.
We appreciate the continued support of all our shareholders. Now that our Argentinean facilities construction program is virtually complete, we can again focus on new exploration opportunities and continued growth, at a measured pace and with a more controllable cost structure than that which usually results from reliance on and access to third party facilities.
FORWARD-LOOKING INFORMATION:
This press release contains forward-looking information, including but not limited to future exploration and development plans, future drilling plans and the anticipated timing associated therewith, anticipated capital expenditures and sources of funding in respect thereof, anticipated production growth from planned capital programs, current production and the recently activated waterflood, and potential recovery of investments in ABCP. Forward-looking information is not based on historical facts but rather on Management expectations regarding the company's future growth, results of operations, production, future capital and other expenditures (including the amount, nature and sources of finding thereof), competitive advantages, plans for and results of drilling activity, environmental matters, business prospects and opportunities. Such forward-looking information reflects Management's current beliefs and assumptions and is based on information currently available to Management. Forward-looking information involves significant known and unknown risks and uncertainties. A number of factors could cause actual results to differ materially from the results discussed in the forward-looking information including, but not limited to, risks associated with the oil and gas industry (e.g. operational risks in development, exploration and production delays or changes in plans with respect to exploration or development projects or capital expenditures; the uncertainty of reserve estimates; the uncertainty of estimates and projections in relation to production, costs and expenses and health, safety and environmental risks), the risk of commodity price and foreign exchange rate fluctuations, the uncertainty associated with negotiating with foreign governments and risk associated with international activity. Additional risks and uncertainties are described in the company's Annual Information Form which is filed on SEDAR at www.sedar.com.
Forecast capital expenditures are based on Petrolifera's current budgets and development plans which are subject to change based on commodity prices, market conditions, drilling success and potential timing delays. Petrolifera's capital budget has been prepared based upon anticipated costs for equipment and services which are subject to fluctuation based upon market conditions and availability. Additionally, forecast capital expenditures do not include capital required to pursue future acquisitions. Anticipated production growth has been estimated based on the proposed drilling program with a success rate based upon historical drilling success and an evaluation of the company's waterflood program. Indicated flow rates from production testing are not necessarily indicative of sustainable production rates for such wells.
Recovery of the company's investment in ABCP is dependent on the value of the underlying assets held by the applicable trusts, the restoration of liquidity in this market and approval of the proposed restructuring proposal. There can be no assurance as to the timing or extent of recovery of this investment.
Due to the risks, uncertainties and assumptions inherent in forward-looking information, prospective investors in the company's securities should not place undue reliance on this forward-looking information. Forward-looking information contained in this press release is made as of the date hereof and is subject to change. The company assumes no obligation to revise or update forward-looking information to reflect new circumstances, except as required by law.
For further information
Richard A Gusella
Executive Chairman
Petrolifera Petroleum Limited
Phone: (403) 538-6201, Fax: (403) 538-6225
inquiries@petrolifera.ca, www.petrolifera.ca
MANAGEMENT'S DISCUSSION AND ANALYSIS ("MD&A")
The following is dated as of May 8, 2008 and should be read in conjunction with the unaudited consolidated financial statements of Petrolifera Petroleum Limited ("Petrolifera" or the "company") for the three months ended March 31, 2008 as contained in this interim report and the MD&A and audited financial statements for the years ended December 31, 2007 and 2006 as contained in the company's 2007 Annual Report. Additional information relating to Petrolifera, including its Annual Information Form for the year ended December 31, 2007, is on SEDAR at www.sedar.com. The consolidated financial statements have been prepared in accordance with Canadian generally accepted accounting principles ("GAAP") and are presented in Canadian dollars. This MD&A provides management's view of the financial condition of the company and the results of its operations for the reporting periods indicated.
This interim report, including the MD&A and letter to shareholders, contains forward-looking information, including but not limited to future exploration and development plans and the anticipated timing associated therewith, anticipated capital expenditures and sources of funding in respect thereof, anticipated production growth from planned capital programs, current production and the recently activated waterflood, anticipated reductions in operating costs and potential recovery of investments in asset backed commercial paper ("ABCP"). This information is based on current expectations that involve a number of risks and uncertainties, which could cause actual results to differ materially from those anticipated. These risks include, but are not limited to risks associated with the oil and gas industry (e.g. operational risks in development, exploration and production delays or changes in plans with respect to exploration or development projects or capital expenditures; the uncertainty of reserve estimates; the uncertainty of estimates and projections in relation to production, costs and expenses and health, safety and environmental risks), the risk of commodity price and foreign exchange rate fluctuations, the uncertainty associated with negotiating with foreign governments and risk associated with international activity. Additional risks and uncertainties are described in the company's Annual Information Form which is filed on SEDAR at www.sedar.com.
Forecast capital expenditures are based on Petrolifera's current budgets and development plans which are subject to change based on commodity prices, market conditions, drilling success and potential timing delays. Petrolifera's capital budget has been prepared based upon anticipated costs for equipment and services which are subject to fluctuation based upon market conditions, availability and potential changes or delays in capital expenditures. Additionally, forecast capital expenditures do not include capital required to pursue future acquisitions. Anticipated production growth has been estimated based on (i) the proposed drilling program with a success rate based upon historical drilling success and an evaluation of the particular wells to be drilled and has been risked, (ii) current production and anticipated decline rates and (iii) the projected impact of the company's waterflood program. Recovery of the company's investment in ABCP is dependent on the value of the underlying assets held by the applicable trusts and the restoration of liquidity in this market. There can be no assurance as to the timing or extent of recovery of this investment. Due to the risks, uncertainties and assumptions inherent in forward-looking information, prospective investors in the company's securities should not place undue reliance on this forward-looking information. Readers should review the risk factors set forth in the company's Annual Information Form, available at www.sedar.com, for a detailed description of the risks and uncertainties facing the company. Forward-looking information contained in this interim report is made as of May 8, 2008 and is subject to change. The company assumes no obligation to revise or update forward-looking information to reflect new circumstances, except as required by law. Throughout the MD&A, per barrel of oil equivalent ("boe") amounts have been calculated using a conversion rate of six thousand cubic feet of natural gas to one barrel of crude oil (6:1). The conversion is based on an energy equivalency conversion method primarily applicable to the burner tip and does not represent a value equivalency at the wellhead. Boes and may be misleading, particularly if used in isolation.
<<
FINANCIAL AND OPERATING REVIEW
SALES VOLUMES, PRICING AND REVENUE
-------------------------------------------------------------------------
March 31, December 31, March 31,
Three months ended 2008 2007 2007
-------------------------------------------------------------------------
Daily sales volumes
Oil - bbl/d 6,726 6,565 11,333
Natural gas - mcf/d 7,044 2,860 1,858
Total - boe/d 7,900 7,042 11,643
Average selling prices
Crude oil - per bbl $41.99 $44.36 $45.43
Natural gas - per mcf 2.20 1.76 1.53
Revenue per boe $37.72 $42.07 $44.47
Petroleum and natural gas sales ($000) $27,114 $27,257 $46,598
Interest and other income ($000) 53 9 524
-------------------------------------------------------------------------
Total revenue ($000s) $27,167 $27,266 $47,122
-------------------------------------------------------------------------
>>
Petroleum and natural gas sales for the three months ended March 31, 2008 were $27.1 million (three months ended March 31, 2007 - $46.6 million) on sales of 6,726 bbl/d (2007 - 11,333 bbl/day) of crude oil and 7.0 mmcf/d (2007 - 1.9 mmcf/d) of natural gas. The decrease in revenue resulted from lower crude oil pricing and lower crude oil production and sales volumes. These short-falls arose due to delays in the implementation of the company's reservoir pressure maintainance program (water flood), natural production declines and the incursion of water at one of the company's key wells, PMN-1013, offset by improved natural gas sales and prices. All production was from the company's Argentinean properties.
Crude oil sales decreased 41 percent from the first quarter of 2007. In the three months ended March 31, 2008 sales of crude oil represented 85 percent of the company's sales volumes; in the three months ended March 31, 2007 crude oil sales represented 97 percent of the sales volumes. Argentinean crude oil selling prices reflect world prices for the respective quality of oil, adjusted for the impact of Argentinean export taxes on domestic sales prices. The company does not receive world crude oil pricing for its crude oil produced in Argentina, due to export taxes that establish a limit on the realized crude oil price that a company can receive at approximately US$42.00 per barrel. Compared to last year, the realized crude oil price decreased eight percent to average $41.99 per barrel in the three months ended March 31, 2008, mainly due to the implementation of the resultant limit on oil prices that can be received. Natural gas prices increased 44 percent to average $2.20 per mcf in 2008, reflecting the company's new natural gas sales contract and some relaxation of regulated Argentinean natural gas prices, which are still substantially below prices prevailing in North American markets. All of Petrolifera's production is sold in domestic Argentinean markets. Natural gas prices have been improving and are expected to continue improving in the future due to market conditions and new policy initiatives aimed at market deregulation. Petroleum and natural gas revenues for the three months ended March 31, 2008 were essentially flat compared to the fourth quarter of 2007. Crude oil sales were up two percent, natural gas sales were up 146 percent and sales on a boe basis were up 12 percent compared to the fourth quarter of 2007.
Interest and other income of $0.1 million in the three months ended March 31, 2008 and $0.5 million for three months ended March 31, 2007 related to interest earned on short-term cash deposits. The company has an investment of $37.7 million face value in non-bank asset backed commercial paper ("ABCP") on which no interest income has been accrued since August 2007, due to the lack of liquidity for these investments. There are also fair value concerns for these investments and they have been classified as a long term investment on the balance sheet. See "Long-Term Investments" for additional details including estimates of valuation.
ROYALTIES
Royalties represent charges against production or revenue by governments and landowners. Included in royalties are revenue taxes levied by provincial jurisdictions. Royalties in the first three months of 2008 were $3.4 million ($4.71 per boe), or 13 percent of oil and gas revenue compared to $5.9 million ($5.59 per boe) or 13 percent in the first quarter of 2007.
<<
OPERATING COSTS AND NETBACKS
Company Netbacks(1)
-------------------------------------------------------------------------
Three months
ended March 31, 2008 December 31, 2007 March 31, 2007
-------------------------------------------------------------------------
Total Per boe Total Per boe Total Per boe
-------------------------------------------------------------------------
($000, except
per unit
amounts)
-------------------------------------------------------------------------
Average daily
sales (boe/d) 7,900 7,042 11,643
-------------------------------------------------------------------------
Petroleum and
natural gas
sales $27,114 $37.72 $27,257 $42.07 $46,598 $44.47
Interest and
other income 53 0.07 9 0.01 524 0.50
Royalties (3,384) (4.71) (3,730) (5.76) (5,855) (5.59)
-------------------------------------------------------------------------
Net revenue 23,783 33.08 23,536 36.32 41,267 39.38
Operating
costs (5,925) (8.24) (5,312) (8.20) (4,612) (4.40)
-------------------------------------------------------------------------
Corporate
netback $17,858 $24.84 $18,224 $28.12 $36,655 $34.98
-------------------------------------------------------------------------
(1) Calculated by dividing related revenue and costs by total boe sold,
resulting in an overall company netback. Netbacks do not have a
standardized meaning prescribed by GAAP and therefore may not be
comparable to similar measures used by other companies. Nevertheless,
Petrolifera's management uses netbacks as a performance measurement
of operating efficiency and the prevailing royalty regime. A high
ratio of netback to selling price is a positive indicator.
>>
Petrolifera's corporate netbacks decreased 29 percent over those recorded in the the first quarter of 2007. This primarily reflects the decreased price received for crude oil, a higher proportion of natural gas in the sales volumes which has a lower sales price and higher unit operating costs.
Operating costs in the first quarter of 2008 increased 28 percent in total and 87 percent on a per unit basis from 2007. The increases are mainly attributable to a significant increase in the number of wells, a significant increase in the number of wells on pump or that require servicing on a more frequent basis, inflationary pressures and start-up costs related to new field facilities. Petrolifera anticipates unit operating costs will be more stable after the new field facilities are optimally utilized which is expected to occur during the remainder of 2008 and throughout 2009.
Operating costs increased 12 percent in total and were essentially flat on a per unit basis compared to the fourth quarter of 2007.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative ("G&A") expenses were $2.1 million ($2.87/boe) in the first three months of 2008 (first quarter 2007 - $1.4 million - $1.36/boe), reflecting costs incurred in Canada, Argentina, Colombia and Peru. These costs primarily consist of management and administrative salaries, legal and professional fees, insurance, travel and other administrative expenses. The increase from 2007 is attributable to increased staffing levels to handle the expanded nature of the company's operations and increased public company costs. Non-cash stock-based compensation costs of $2.4 million were recorded in the first three months of 2008 (2007 - $2.9 million), reflecting the calculated value of the stock options granted and vesting during the period and options previously granted that vested during the period.
FOREIGN EXCHANGE
The impact of fluctuations in the Argentinean peso and the US dollar relative to the Canadian dollar arising from settling foreign-denominated transactions and from translating foreign denominated financial statements and operating results of its integrated foreign operations resulted in a foreign exchange loss of $0.1 million in the first three months of 2008 (first quarter 2007 - $0.1 million loss). The company's main exposure to foreign currency risk relates to the pricing of crude oil sales, costs and capital expenditures which are denominated in US dollars and Argentinean pesos.
FAIR VALUE IMPAIRMENT - ABCP
In recognition of the loss of liquidity in the company's ABCP investment, provision has been made in the financial statements for a charge for a non-cash fair value impairment charge of $1.5 million. The cumulative effect of the current quarter and previous impairments represents approximately 20 percent of the face value of the investment at the time of the loss of liquidity in the Canadian commercial paper market. The basis for this charge is explained under "Long-Term Investments." It is not known when or whether these amounts can or will be recovered.
DEPLETION, DEPRECIATION AND ACCRETION ("DD&A")
DD&A is calculated using the unit-of-production method based on total estimated proved reserves. DD&A in the first three months of 2008 was $4.7 million (first quarter 2007 - $5.4 million) or $6.49 per boe (first quarter 2007 - $5.15 per boe). DD&A is lower in total compared to the first quarter of 2007 due to the lower sales volume but is higher on a per unit basis because of the significant amount invested in 2007, especially on facilities. DD&A includes a charge of $0.1 million (2007 - $0.04 million) to accrete the company's estimated asset retirement obligation. These charges will continue to be necessary in future to accrete the currently booked discounted liability of $6.3 million over the estimated remaining economic life of the company's oil and gas properties. Capital costs of $8.6 million related to unevaluated properties in Argentina and for major development projects and other assets in the pre-production stage principally related to the Colombian and Peruvian assets, have been excluded from depletable costs (2007 - $6.4 million).
CEILING TEST
Oil and gas companies are required to compare the recoverable value of their oil and gas assets to their recorded carrying value at the end of each reporting period. Excess carrying values over fair value are to be written off against earnings. No write-down was required in 2008 or 2007.
TAXES
The current income tax provision of $2.7 million for the first three months of 2008 (first quarter 2007 - $10.2 million) primarily relates to income taxes in Argentina. Additionally, a future income tax provision of $1.3 million (2007 - $1.1 million) was recorded to recognize changes in tax pool balances. The increase in the effective tax rate to 70 percent in the first quarter of 2008 compared to 43 percent in 2007 is primarily due to the impairment recorded on ABCP. Taxes other than income taxes of $0.5 million (2007 - $0.4 million) represent taxes charged on all banking transactions in Argentina.
<<
NET EARNINGS AND SHARES OUTSTANDING
-------------------------------------------------------------------------
Three months
ended March 31, 2008 December 31, 2007 March 31, 2007
-------------------------------------------------------------------------
Total Per boe Total Per boe Total Per boe
-------------------------------------------------------------------------
($000, except
per unit
amounts)
-------------------------------------------------------------------------
Netback $17,858 $24.84 $18,224 $28.12 $36,655 $34.98
-------------------------------------------------------------------------
General &
adminis-
trative (2,062) (2,87) (1,647) (2.54) (1,421) (1.35)
-------------------------------------------------------------------------
Stock-based
compensation (2,398) (3.34) (1,414) (2.18) (2,921) (2.79)
-------------------------------------------------------------------------
Finance
charges (920) (1.28) (381) (0.59) (23) (0.02)
-------------------------------------------------------------------------
Foreign
exchange
(loss) gain (90) (0.13) 3,956 6.11 (133) (0.13)
-------------------------------------------------------------------------
Fair value
impairment
- ABCP (1,490) (2.07) (3,382) (5.22) - -
-------------------------------------------------------------------------
Taxes other
than income
taxes (506) (0.70) (832) (1.28) (438) (0.42)
-------------------------------------------------------------------------
Depletion,
depreciation
and accretion (4,669) (6.49) (4,471) (6.90) (5,396) (5.15)
-------------------------------------------------------------------------
Income tax
provision (3,985) (5.54) (5,191) (8.01) (11,254) (10.74)
-------------------------------------------------------------------------
Net earnings
for the
period $1,738 $2.42 $4,862 $7.51 $15,069 $14.38
-------------------------------------------------------------------------
>>
In the first quarter of 2008 the company reported earnings of $1.7 million (first quarter 2007 - $15.1 million), which equates to $0.04 (2007 - $0.34) per basic and $0.03 (2007 - $0.30) per weighted average diluted share outstanding.
In the first quarter of 2008, the weighted average number of common shares outstanding was 50.2 million (first quarter 2007 - 43.8 million). In the first quarter of 2008, 1.4 million additional shares (2007 - 6.8 million) were included in the diluted earnings per share calculations related to the potentially dilutive effect of options and warrants calculated under the treasury method.
As at the close of business on May 7, 2008, the company had the following securities issued and outstanding:
<<
- 50,353,010 common shares;
- 160,000 warrants; and
- 3,622,067 stock options
Details of the exercise rights and terms of the warrants and options are
noted in the Consolidated Financial Statements, included in this Interim
Report.
CAPITAL RESOURCES, CAPITAL EXPENDITURES AND LIQUIDITY
Cash flow from operations before working capital changes ("cash flow"),
cash flow per share and cash flow per boe do not have standardized meanings
prescribed by GAAP and therefore may not be comparable to similar measures
used by other companies. Cash flow includes all cash flow from operating
activities and is calculated before changes in non-cash working capital. The
most comparable measure calculated in accordance with GAAP would be net
earnings. Cash flow is reconciled with net earnings on the Consolidated
Statement of Cash Flows and below. Cash flow per share is calculated by
dividing cash flow by the weighted average shares outstanding; cash flow per
boe is calculated by dividing cash flow by the quantum of crude oil and
natural gas (expressed in boe) sold in the period. Management uses these
non-GAAP measurements for its own performance measures and to provide its
shareholders and investors with a measurement of the company's efficiency and
its ability to fund a portion of its future growth expenditures.
Reconciliation of net earnings to cash flow from operations before
working capital changes:
-------------------------------------------------------------------------
Three months ended March 31, December 31, March 31,
2008 2007 2007
-------------------------------------------------------------------------
($000)
-------------------------------------------------------------------------
Net earnings for the period $1,738 $4,862 $15,069
-------------------------------------------------------------------------
Add (deduct)
-------------------------------------------------------------------------
Stock-based compensation 2,398 1,414 2,921
-------------------------------------------------------------------------
Depletion, depreciation, and accretion 4,669 4,471 5,396
-------------------------------------------------------------------------
Future income tax provision 1,325 534 1,096
-------------------------------------------------------------------------
Amortization of deferred finance
charges 192 - -
-------------------------------------------------------------------------
Foreign exchange loss (gain) 90 (3,956) 133
-------------------------------------------------------------------------
Fair value impairment - ABCP 1,490 3,382 -
-------------------------------------------------------------------------
Cash flow from operations before
working capital changes $11,902 $10,707 $24,615
-------------------------------------------------------------------------
Cash flow from operations in the first quarter of 2008 was $11.9 million
(first quarter 2007 - $24.6 million) or $0.24 per basic share and $0.23 per
diluted share, (2007 - $0.56 per basic share and $0.49 per weighted average
diluted share).
Capital Expenditures
-------------------------------------------------------------------------
Three months ended March 31, December 31, March 31,
2008 2007 2007
-------------------------------------------------------------------------
($000)
-------------------------------------------------------------------------
Argentina $23,240 $50,077 $6,850
Colombia 225 241 -
Peru 7,591 7,290 630
Corporate - - 34
-------------------------------------------------------------------------
Total capital expenditures $31,056 $57,608 $7,514
-------------------------------------------------------------------------
>>
Capital expenditures in the first quarter of 2008 totaled $31.1 million (first quarter 2007 - $7.5 million). In Argentina the company drilled or initiated drilling of 16 wholly-owned wells at Puesto Morales/Rinconada, resulting in eight oil producers, two water injectors, one gas discovery, two wells waiting on completion, one well drilling, one preparing to drill on the company's Rinconada Block and one dry hole.
Capital spending exceeded cash flow, resulting in an increase in bank debt. Nevertheless, Petrolifera remained in a healthy financial position at March 31, 2008 with anticipated stable cash flow during the balance of 2008 and unused available credit.
The company's 2008 capital program includes expenditures to satisfy work commitments related to its landholdings. The company anticipates that it has sufficient cash flow and availability of credit to fund these planned capital expenditures and the current working capital deficit. Funds are being moved among Argentina, Barbados, Colombia and Peru as required.
The company's only financial instruments are cash and cash equivalents, accounts receivable, accounts payable, debt and income taxes payable; it maintains no off-balance sheet financial instruments.
CREDIT FACILITIES
On September 5th, 2007, the company entered into a US$100 million reserve-based revolving credit facility, with a borrowing base of US$60 million. The initial facility term is for three years, bears interest at LIBOR plus a margin, is secured by a pledge of the shares of Petrolifera's subsidiaries and has a provision for a borrowing base adjustment every six months, with the next adjustment being calculated as at June 30, 2008. Drawings under this facility are made for a term of less than one year and are therefore classified as current liabilities. Deferred financing costs of $2.0 million related to this facility are being amortized over the remaining term of the facility. The company is anticipating an increase to the borrowing base of this facility during the second quarter of 2008 based on the 2007 year-end reserve report submitted to the bank.
In December 2007 the company established an $18 million line of credit with a Canadian chartered bank. This facility bears interest at a floating rate and is solely secured by the ABCP notes.
As of March 31, 2008, the reserve based facility had US$35.0 million outstanding and the line of credit facility had $17.1 million outstanding. Interest expense on the debt facilities for the three months ended March 31, 2008 was $0.7 million.
LONG-TERM INVESTMENTS
Due to the immediate success of the Argentinean drilling program in late 2005 and subsequent thereto, significant cash balances from its initial public offering were retained in Petrolifera's bank accounts. These funds were largely kept in Canada for capital preservation and security. In mid-2006 the company commenced a program to invest its surplus funds in high quality, highly rated, liquid commercial paper with a primary emphasis on security of capital. Investments were made in R-1 High rated ABCP, as rated by Dominion Bond Rating Service, sold to us by the money market facilities of a Canadian chartered bank with whom we held bank accounts. These investments were made in more than one issuing entity, were made for various time periods and were acquired to earn a reasonable return in relation to prevailing market conditions. On maturity, proceeds including earned interest were generally reinvested on a regular basis. In August 2007 the Canadian third-party ABCP market experienced severe liquidity problems. This has caused the conduits that issued the notes to default on the redemption of the notes. As a result, holders could not receive their cash plus interest at maturity.
On September 6, 2007 a panel of banks, asset providers, and major investors formed the Pan-Canadian Investors Committee for Third-Party Structured Asset-Backed Commercial Paper ("Pan-Canadian Committee") to oversee a proposed restructuring process. The proposed restructuring called for the ABCP to be converted into longer term floating rate notes which more closely match the maturities of the underlying assets. On March 17, 2008 the Pan-Canadian Committee made the restructuring proposal by filing a Companies' Creditors' Arrangement Act ("CCAA") restructuring proposal whereby the company's notes will be exchanged for several classes of notes with maturities that better match the maturities of the underlying assets. Subsequent to the quarter end the CCAA restructuring proposal was voted on and approved by note holders.
Quoted market values of the ABCP are not available due to the market disruption that is currently paralyzing the ABCP market. Management has therefore estimated the fair value of the owned ABCP based on a probabilistic recovery of principal and interest taking into account all available information. Under this valuation method, several different outcomes of the recovery of the principal and interest are estimated considering the information available as at March 31, 2008. A weighted average recovery is then calculated. This weighted average recovery is used to determine the discounted cash flows that are expected from these investments. The recovery factors used for were as follows:
<<
------------------------------------------------------------------------
Capital Interest Term
Capital Interest Weighted Weighted
Class Recovery Recovery Average Average
of Note Range Range Recovery Recovery
-------------------------------------------------------------------------
A-1 0-95% 0-90% 91% 84% 5-8 years
-------------------------------------------------------------------------
A-2 0-90% 0-90% 86% 81% 8 years
-------------------------------------------------------------------------
B 0-75% 0-75% 71% 70% 8 years
-------------------------------------------------------------------------
C 0-50% 0-50% 48% 48% 8 years
-------------------------------------------------------------------------
IA Tracking 0-75% 0-75% 62% 56% 8 years
-------------------------------------------------------------------------
>>
Based on the above approach the fair value of the investment in ABCP is estimated to be $29.9 million which implies an impairment of $1.5 million for the quarter ended March 31, 2008 or approximately four percent of the carrying value of the ABCP. This impairment brings the total impairment of the ABCP recorded to date to approximately 20 percent of the original cost of the ABCP. As at March 31, 2008, included in long-term investments were ABCP with a face value of $37.7 million. These investments are classified as Held for Trading and are carried at fair value which is assessed each reporting date. The theoretical fair value of the company's ABCP could range from $22.4 million to $34.3 million using the valuation methodology described above with alternative reasonably possible assumptions. The company anticipates that it presently has sufficient cash resources and available credit to satisfy obligations as they come due. Assuming the ABCP problems are restructured during 2008 and normal liquidation for cash occurs, the company would be able to substantially reduce its net indebtedness incurred from lack of access to these amounts. The outcome of the restructuring process, actual timing and amount ultimately recoverable from these notes may differ materially from this estimate which would impact the company's earnings.
LEGAL PROCEEDINGS
Petrolifera is a party to an arbitration proceeding initiated by the former contract operator of the Puesto Morales/ Rinconada block. The former operator is seeking financial compensation, including damages for wrongful dismissal. Petrolifera is of the opinion that the claim is without merit and has filed a counterclaim against the former operator. Potential damages, if any, against the company are not quantifiable at this time, but in any event are not anticipated to be material to the company.
RELATED PARTY TRANSACTIONS AND SIGNIFICANT TRANSACTIONS
Under the terms of a Management Services Agreement with Connacher Oil and Gas Limited ("Connacher") (extended on a month-to-month basis since its original term, which expired in May 2007), Connacher provides services to assist in the administration of the company. The fee for these services is $15,000 per month. From time to time Connacher also pays bills on behalf of Petrolifera, for which it is reimbursed at cost. Connacher is also guarantor for Petrolifera in Peru and operator of record on behalf of Petrolifera in Colombia for which Connacher is indemnified by Petrolifera. This extension is anticipated to be replaced by a new agreement on substantially the same terms.
SIGNIFICANT ACCOUNTING POLICIES AND APPLICATION OF CRITICAL ACCOUNTING
ESTIMATES
Certain accounting policies require that management make appropriate decisions with respect to the formulation of estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. Changes in these judgments and estimates may have a material impact on the company's financial results and condition. The following discusses such accounting policies and is included in the MD&A to aid the reader in assessing the significant accounting policies and practices of the company and the likelihood of materially different results being reported. Management reviews its estimates regularly. The emergence of new information and changed circumstances may result in changes to estimates which could be material and the company might realize different results from the application of new accounting standards promulgated, from time to time, by various rule-making bodies.
The following assessment of significant accounting polices is not meant to be exhaustive.
Oil and Gas Reserves
Under Canadian Securities Regulators' "National Instrument 51-101-Standards of Disclosure for Oil and Gas Activities" ("NI 51-101") proved reserves are those reserves that can be estimated with a high degree of certainty to be recoverable. In accordance with this definition, the level of certainty should result in at least a 90 percent probability that the quantities actually recovered will equal or exceed the estimated reserves. In the case of probable reserves, which are less certain to be recovered than proved reserves, NI 51-101 states that it must be equally likely that the actual remaining quantities recovered will be greater or less than the sum of the estimated proved plus probable reserves. Possible reserves are those reserves less certain to be recovered than probable reserves. There is at least a 10 percent probability that the quantities actually recovered will exceed the sum of proved plus probable plus possible reserves.
The company's oil and gas reserve estimates are made by independent reservoir engineers using all available geological and reservoir data as well as historical production data. Estimates are reviewed and revised as appropriate. Revisions occur as a result of changes in prices, costs, fiscal regimes, reservoir performance or a change in the company's plans. The reserve estimates are also used in determining the company's borrowing base for its credit facilities and may impact the same upon revision or changes to the reserve estimates. The effect of changes in proved oil and gas reserves on the financial results and position of the company is described under the heading "Full Cost Accounting for Oil and Gas Activities".
Full Cost Accounting for Oil and Gas Activities
The company uses the full cost method of accounting for exploration and development activities. In accordance with this method of accounting, all costs associated with exploration and development are capitalized whether successful or not. The aggregate of net capitalized costs and estimated future development costs is amortized using the unit-of-production method based on estimated proved oil and gas reserves.
IMPACT OF NEW AND PROPOSED ACCOUNTING PRONOUNCEMENTS
Effective January 1, 2008, the company adopted CICA Handbook sections 1535, 3031, 3862 and 3863 relating to Capital Disclosures, Inventories, Financial Instruments - Disclosures and Financial Instruments - Presentation, respectively.
Under section 1535, the company is required to disclose its objectives, policies and processes for managing capital, and in addition, whether the entity has complied with any externally imposed capital requirements. Note 5 contains further disclosures with respect to this standard.
Under section 3031, the measurement of cost and cost formulas for inventories have been revised, along with additional disclosure requirements. The adoption of this section has had no impact on the company's consolidated financial statements, as inventories were already being measured in a manner permitted under the new standard.
Under section 3862, the company is required to disclose the significance of financial instruments to an entity's financial statements, the risks associated with the financial instruments, and how those risks are managed. Note 5 contains further disclosures with respect to this standard.
Under section 3863, further guidance is provided on the classification of financial instruments as liabilities vs. equity, and when netting of financial assets and financial liabilities is appropriate.
As of January 1, 2009, the company will be required to adopt CICA Handbook section 3064, Goodwill and Intangible Assets, replacing section 3062, Goodwill and Other Intangible Assets and section 3450, Research and Development Costs. Various changes have been made to other sections of the CICA Handbook for consistency purposes. It establishes standards for the recognition, measurement, presentation and disclosure of goodwill subsequent to its initial recognition and of intangible assets by profit-oriented enterprises. Standards concerning goodwill are unchanged from the standards included in the previous section 3062. The company is currently evaluating the impact of the adoption of this new section.
Over the next three years the CICA will adopt its new strategic plan for the direction of accounting standards in Canada, which was ratified in January 2006. As part of the plan, Canadian GAAP for public companies will converge with International Financial Reporting Standards ("IFRS"), with an expected effective date of January 1, 2011. The company continues to monitor and assess the impact of the convergence of Canadian GAAP with IFRS.
COMMITMENTS, CONTINGENCIES, GUARANTEES, CONTRACTUAL OBLIGATIONS
AND OFF BALANCE SHEET ARRANGEMENTS
In 2005 Petrolifera acquired two significant oil and gas exploration licenses in Peru. The licenses have a total US$41.8 million financial commitment to complete negotiated work programs on the two licenses over seven years. The company has the right to withdraw from the licenses at the end of each period associated with the term of the licenses. The first license term for Block 106 ended in 2007 and the company has met its commitment and is currently in the second license term with a commitment to invest a minimum of US$1.6 million in this term. These expenditures are budgeted to be fully discharged in 2008. In Block 107, the company is in the first term of the license and expects to complete all the required work commitments for the term during 2008. The company has issued letters of credit in the total amount of US$2.3 million to secure the capital expenditure requirements associated with the two exploration licenses in Peru.
In 2007 the Company was granted three concessions in Colombia with a total work commitment of US$5.7 million over a two year period. These work commitments are budgeted to be completed during 2008. The company has issued letters of credit in the total amount of US$0.6 million in support of these work commitments. In Argentina the company has total work commitments of US$54.0 million over the next three years related to the Vaca Mahuida, Puesto Guevara and Gobernador Ayala II blocks.
Additionally, the company has various guarantees and indemnifications in place in the ordinary course of business, none of which are expected to have a significant impact on the company's financial statements or operations.
The company's annual commitments under service contracts for drilling, leases for office premises, various operating costs, software license agreements and other equipment are as follows:
<<
-------------------------------------------------------------------------
Contractual Remainder Subsequent
Obligations 2008 2009-2011 2012-2013 to 2013 Total
-------------------------------------------------------------------------
($000)
Service
contracts
and other $8,613 $11,601 $- $- $20,214
-------------------------------------------------------------------------
Total $8,613 $11,601 $- $- $20,214
-------------------------------------------------------------------------
>>
The company has no off balance sheet financing arrangements.
DISCLOSURE CONTROLS AND PROCEDURES
Disclosure controls and procedures have been designed to ensure that information required to be disclosed by the company is accumulated, recorded, processed, summarized and reported to the company's management as appropriate to allow timely decisions regarding required disclosure. The company's Executive Chairman, President and Chief Financial Officer have concluded, based on their evaluation as of the end of the period covered by this MD&A, that the company's disclosure controls and procedures as of the end of such period are effective to provide reasonable assurance that material information related to the company, including its consolidated subsidiaries, is communicated to them as appropriate to allow timely decisions regarding required disclosure.
INTERNAL CONTROL OVER FINANCIAL REPORTING
Management of the company is responsible for designing adequate internal controls over the company's financial reporting to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with Canadian GAAP. There have been no changes in the company's system of internal controls over financial reporting that would materially affect, or is reasonably likely to materially affect, the company's internal controls over financial reporting. It should be noted that while the company's Executive Chairman, President and Chief Financial Officer believe that the company's disclosure controls and procedures provide a reasonable level of assurance that they are effective and that the internal controls over financial reporting are adequately designed, they do not expect that the financial disclosure controls and procedures or internal control over financial reporting will prevent all errors and fraud. In reaching a reasonable level of assurance, management necessarily is required to apply its judgement in evaluating the cost-benefit relationship of possible controls and procedures. A control system, no matter how well conceived or operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.
BUSINESS RISKS
Petrolifera is exposed to certain risks and uncertainties inherent in the oil and gas business. Furthermore, being a smaller independent company, it is exposed to financing and other risks which may impair its ability to realize on its assets or to capitalize on opportunities which might become available to it. Additionally, Petrolifera operates in various foreign jurisdictions and is exposed to other risks including currency fluctuations, political risk, price controls and varying forms of fiscal regimes or changes thereto which may impair Petrolifera's ability to conduct profitable operations.
The risks arising in the oil and gas industry include price fluctuations for both crude oil and natural gas over which the company has limited control; risks arising from exploration and development activities; production risks associated with the depletion of reservoirs and the ability to market production. Additional risks include environmental and safety concerns.
The success of the company's capital programs as embodied in its productivity and reserve base could also impact its prospective liquidity and pace of future activities. Control of finding, development, operating and overhead costs per boe is an important criterion in determining company growth, success and access to new capital sources.
To date, the company has utilized debt and equity financing and has had a bias towards conservatively financing its operations under normal industry conditions to offset the inherent risks of domestic and international oil and gas exploration, development and production activities. From time to time, the company may have to access capital markets for new equity to supplement internally generated cash flow and bank borrowings to finance its growth plans. Periodically, these markets may not be receptive to offerings of new equity from treasury, whether by way of private placement or public offerings. This may be further complicated by the limited market liquidity for shares of smaller companies, restricting access to some institutional investors.
Periodic fluctuations in energy prices may also affect lending policies of the company's banker for new borrowings. This in turn could limit growth prospects over the short run or may even require the company to dedicate cash flow, dispose of properties or raise new equity to reduce bank borrowings under circumstances of declining energy prices or disappointing drilling results.
While hedging activities may have opportunity costs when realized prices exceed hedged pricing, such transactions are not meant to be speculative and are considered within the broader framework of financial stability and flexibility. Management continuously reviews the need to utilize such financing techniques.
The company attempts to mitigate its business and operational risk exposures by maintaining comprehensive insurance coverage on its assets and operations, by employing or contracting competent technicians and professionals, by instituting and maintaining operational health, safety and environmental standards and procedures and by maintaining a prudent approach to exploration and development activities. The company also addresses and regularly reports on the impact of risks to its shareholders, writing down the carrying values of assets that may not be recoverable.
OUTLOOK
In light of late 2007 fiscal regime changes in Argentina which results in a relatively low selling price for crude oil, Petrolifera has adopted a measured approach for its anticipated capital expenditure program to more appropriately align available funds to the level of capital expenditures. Accordingly, this will have an impact on projected production and sales volumes. Capital spending in Argentina will continue to protect the significant asset base in the country at the same time the company is accelerating the Colombian capital expenditure program given the fiscal regime where participation in world prices and potentially significantly higher operating netbacks are available. Due to delays in approval time for drilling environmental impact assessments ("EIA") as a result of significantly increased activity levels in Peru, the first well on Block 107 will now be drilled in 2009. Nevertheless, in the next 18 months, shareholders will be exposed to the drilling of high-impact wells continuously.
Forecast operating cash flow from growing production and available credit is anticipated to be sufficient to finance Petrolifera's expected 2008 capital spending program, which has been reallocated and revised downwards from earlier estimates to $102 million. This is primarily due to a slower pace of development drilling in Argentina during 2008; a deferral of Peruvian drilling due to delays in securing a drilling EIA; and an allocation of more capital to Colombia drilling.
Petrolifera does not provide formal guidance although it discloses planned capital budgets. The company's revised reallocated budget now totals $102 million or $38 million less than the initial budget of $140 million. Petrolifera's capital program expenditures are largely discretionary, except for a total of approximately US$27 million for which the company is obligated between the years 2008 and 2010, pursuant to certain work obligations in Argentina, Peru and Colombia which may entail seismic reprocessing, seismic acquisition and drilling obligations. Some of these obligations will be discharged within the 2008 capital budget.
<<
QUARTERLY RESULTS
-----------------------------------------------------
2006
-----------------------------------------------------
Three months ended
-----------------------------------------------------
June 30 Sept 30 Dec 31
-----------------------------------------------------
Financial results
($000 except per share
amounts) - unaudited
-----------------------------------------------------
Total revenue 18,821 33,157 45,153
-----------------------------------------------------
Cash flow from
operations before
working capital
changes(1) 9,470 18,384 18,495
-----------------------------------------------------
Basic, per share(1) 0.25 0.46 0.42
-----------------------------------------------------
Diluted, per share(1) 0.19 0.38 0.35
-----------------------------------------------------
Earnings (loss) for the
period (7,685) 15,683 12,401
-----------------------------------------------------
Basic, per share (0.21) 0.39 0.28
-----------------------------------------------------
Diluted, per share (0.16) 0.32 0.24
-----------------------------------------------------
Capital expenditures 2,310 9,738 22,031
-----------------------------------------------------
Cash on hand 25,941 36,206 51,008
-----------------------------------------------------
Working capital surplus
(deficiency) 28,913 41,361 40,456
-----------------------------------------------------
Indebtedness - - -
-----------------------------------------------------
Shareholders' equity 40,844 61,440 78,074
-----------------------------------------------------
Total assets 52,760 81,226 118,517
-----------------------------------------------------
-----------------------------------------------------
Operating results
-----------------------------------------------------
Sales volumes
-----------------------------------------------------
Crude oil - bbl/d 4,006 7,202 10,716
-----------------------------------------------------
Natural gas - mcf/d 1,181 1,259 1,101
-----------------------------------------------------
Equivalent - boe/d(2) 4,203 7,412 10,900
-----------------------------------------------------
Pricing
-----------------------------------------------------
Crude oil - $/bbl 50.71 49.49 45.20
-----------------------------------------------------
Natural gas - $/mcf 1.33 1.44 1.50
-----------------------------------------------------
Selected highlights
- $/boe(2)
-----------------------------------------------------
Weighted average
selling price per boe 48.71 48.33 44.59
-----------------------------------------------------
Interest and other
income 0.50 0.30 0.44
-----------------------------------------------------
Royalties 7.20 6.73 6.37
-----------------------------------------------------
Operating costs 4.42 5.21 4.02
-----------------------------------------------------
Netback(3) 37.59 36.69 34.64
-----------------------------------------------------
-----------------------------------------------------
Common share
information (000)
-----------------------------------------------------
Shares outstanding at
end of period 37,855 42,817 43,612
-----------------------------------------------------
Fully diluted 52,172 52,671 52,704
-----------------------------------------------------
Weighted average shares
outstanding for the
period
-----------------------------------------------------
Basic 37,399 40,442 43,418
-----------------------------------------------------
Diluted 48,777 48,594 51,002
-----------------------------------------------------
Volume traded during
quarter (000) 8,697 16,732 18,086
-----------------------------------------------------
Common share price ($)
-----------------------------------------------------
High 12.60 21.95 25.24
-----------------------------------------------------
Low 8.15 10.92 14.71
-----------------------------------------------------
Close (end of period) 11.00 20.90 17.65
-----------------------------------------------------
-------------------------------------------------------------------------
2007 2008
Three months ended
-------------------------------------------------------------------------
Mar 31 June 30 Sept 30 Dec 31 Mar 31
-------------------------------------------------------------------------
Financial results
($000 except per share
amounts) - unaudited
-------------------------------------------------------------------------
Total revenue 47,122 28,105 31,730 27,266 27,167
-------------------------------------------------------------------------
Cash flow from
operations before
working capital
changes(1) 24,615 14,504 18,619 10,707 11,902
-------------------------------------------------------------------------
Basic, per share(1) 0.56 0.3 0.37 0.21 0.24
-------------------------------------------------------------------------
Diluted, per share(1) 0.49 0.28 0.36 0.21 0.23
-------------------------------------------------------------------------
Earnings (loss) for the
period 15,069 4,450 4,919 4,863 1,738
-------------------------------------------------------------------------
Basic, per share 0.34 0.09 0.10 0.10 0.04
-------------------------------------------------------------------------
Diluted, per share 0.30 0.09 0.10 0.09 0.03
-------------------------------------------------------------------------
Capital expenditures 7,514 19,842 26,061 57,608 31,056
-------------------------------------------------------------------------
Cash on hand 59,155 66,535 11,368 13,052 11
-------------------------------------------------------------------------
Working capital surplus
(deficiency) 58,811 69,690 22,742 (31,779) (51,546)
-------------------------------------------------------------------------
Indebtedness - - - 29,612 53,039
-------------------------------------------------------------------------
Shareholders' equity 98,124 120,236 121,727 120,303 127,225
-------------------------------------------------------------------------
Total assets 137,840 139,054 144,016 204,227 231,278
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Operating results
-------------------------------------------------------------------------
Sales volumes
-------------------------------------------------------------------------
Crude oil - bbl/d 11,333 6,644 7,195 6,565 6,726
-------------------------------------------------------------------------
Natural gas - mcf/d 1,858 1,726 2,169 2,860 7,044
-------------------------------------------------------------------------
Equivalent - boe/d(2) 11,643 6,932 7,557 7,042 7,900
-------------------------------------------------------------------------
Pricing
-------------------------------------------------------------------------
Crude oil - $/bbl 45.43 45.17 46.99 44.36 41.99
-------------------------------------------------------------------------
Natural gas - $/mcf 1.53 1.42 1.41 1.76 2.20
-------------------------------------------------------------------------
Selected highlights
- $/boe(2)
-------------------------------------------------------------------------
Weighted average
selling price per boe 44.47 43.65 45.65 42.07 37.72
-------------------------------------------------------------------------
Interest and other
income 0.50 0.90 0.49 0.01 0.07
-------------------------------------------------------------------------
Royalties 5.59 6.19 5.77 5.76 4.71
-------------------------------------------------------------------------
Operating costs 4.40 5.56 6.96 8.20 8.24
-------------------------------------------------------------------------
Netback(3) 34.98 32.80 32.91 28.12 24.84
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Common share
information (000)
-------------------------------------------------------------------------
Shares outstanding at
end of period 44,029 50,084 50,119 50,127 50,353
-------------------------------------------------------------------------
Fully diluted 53,280 53,382 51,803 51,670 54,105
-------------------------------------------------------------------------
Weighted average shares
outstanding for the
period
-------------------------------------------------------------------------
Basic 43,800 47,816 50,107 50,123 50,212
-------------------------------------------------------------------------
Diluted 50,635 51,303 51,800 51,689 51,562
-------------------------------------------------------------------------
Volume traded during
quarter (000) 7,202 6,211 10,921 12,223 7,721
-------------------------------------------------------------------------
Common share price ($)
-------------------------------------------------------------------------
High 20.20 19.29 22.35 17.10 11.96
-------------------------------------------------------------------------
Low 16.05 16.60 13.18 9.14 6.61
-------------------------------------------------------------------------
Close (end of period) 19.14 17.04 15.20 9.87 9.10
-------------------------------------------------------------------------
(1) Cash flow from operations before working capital changes ("cash
flow") and cash flow per share do not have standardized meanings
prescribed by Canadian generally accepted accounting principles
("GAAP") and therefore may not be comparable to similar measures used
by other companies. Cash flow from operations before working capital
changes includes all cash flow from operating activities and is
calculated before changes in non-cash working capital. The most
comparable measure calculated in accordance with GAAP would be net
earnings. Cash flow from operations before working capital changes is
reconciled with net earnings on the Consolidated Statement of Cash
Flows and in the accompanying Management's Discussion & Analysis.
Management uses these non-GAAP measurements for its own performance
measures and to provide its shareholders and investors with a
measurement of the company's efficiency and its ability to fund a
portion of its future growth expenditures.
(2) All references to barrels of oil equivalence (boe) are calculated on
the basis of 6 mcf : 1 bbl. Boe may be misleading particularly if
used in isolation. This conversion is based on an energy equivalency
conversion method primarily applicable at the burner tip and does not
represent a value equivalent at the wellhead.
(3) Netback is a non-GAAP measure used by management as a measure of
operating efficiency and profitability. It is calculated as petroleum
and natural gas revenue and other income less royalties and operating
costs.
CONSOLIDATED BALANCE SHEETS
Petrolifera Petroleum Limited
(Unaudited)
-------------------------------------------------------------------------
March 31, December 31,
2008 2007
-------------------------------------------------------------------------
($000)
ASSETS
Current
Cash and cash equivalents $11 $13,052
Accounts receivable 38,288 27,512
Prepaid expenses 544 468
Inventories (Note 3) 1,244 854
-------------------------------------------------------------------------
40,087 41,886
Long-term investments (Note 4) 31,967 33,378
Deferred financing costs (Note 6) 1,968 2,089
Property and equipment 157,256 126,874
-------------------------------------------------------------------------
$231,278 $204,227
-------------------------------------------------------------------------
-------------------------------------------------------------------------
LIABILITIES
Current
Accounts payable and accrued liabilities $32,770 $37,963
Income taxes payable 5,817 6,090
Bank debt (Note 6) 53,039 29,612
Due to a related company 7 -
-------------------------------------------------------------------------
91,633 73,665
Asset retirement obligations (Note 7) 6,252 5,639
Future income taxes 6,168 4,620
-------------------------------------------------------------------------
104,053 83,924
-------------------------------------------------------------------------
SHAREHOLDERS' EQUITY
Share capital, warrants and contributed
surplus (Note 8) 67,108 64,544
Accumulated other comprehensive loss (8,054) (10,674)
Retained earnings 68,171 66,433
-------------------------------------------------------------------------
127,225 120,303
-------------------------------------------------------------------------
$231,278 $204,227
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Commitments, contingencies and guarantees (Note 11)
CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
Petrolifera Petroleum Limited
Three months ended March 31
(Unaudited)
-------------------------------------------------------------------------
2008 2007
-------------------------------------------------------------------------
($000)
Revenue
Petroleum and natural gas sales $27,114 $46,598
Interest and other income 53 524
-------------------------------------------------------------------------
27,167 47,122
Royalties (3,384) (5,855)
-------------------------------------------------------------------------
Net revenue 23,783 41,267
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Expenses
Operating 5,925 4,612
General and administrative 2,062 1,421
Stock-based compensation 2,398 2,921
Finance charges 920 23
Foreign exchange loss 90 133
Fair value impairment - ABCP (Note 4) 1,490 -
Taxes other than income taxes 506 438
Depletion, depreciation and accretion 4,669 5,396
-------------------------------------------------------------------------
18,060 14,944
-------------------------------------------------------------------------
Earnings before income taxes 5,723 26,323
Current income tax provision 2,660 10,158
Future income tax provision 1,325 1,096
-------------------------------------------------------------------------
3,985 11,254
-------------------------------------------------------------------------
NET EARNINGS 1,738 15,069
RETAINED EARNINGS, BEGINNING OF PERIOD 66,433 37,132
-------------------------------------------------------------------------
RETAINED EARNINGS, END OF PERIOD $68,171 $52,201
-------------------------------------------------------------------------
-------------------------------------------------------------------------
NET EARNINGS PER SHARE (Note 10)
Basic $0.04 $0.34
Diluted $0.03 $0.30
-------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Petrolifera Petroleum Limited
Three months ended March 31
(Unaudited)
-------------------------------------------------------------------------
2008 2007
-------------------------------------------------------------------------
($000)
-------------------------------------------------------------------------
Net earnings $1,738 $15,069
Foreign currency translation adjustment 2,620 (956)
-------------------------------------------------------------------------
Comprehensive income $4,358 $14,113
-------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF ACCUMULATED
OTHER COMPREHENSIVE INCOME (LOSS)
Petrolifera Petroleum Limited
Three months ended March 31
(Unaudited)
-------------------------------------------------------------------------
2008 2007
-------------------------------------------------------------------------
($000)
-------------------------------------------------------------------------
Balance, beginning of period $(10,674) $1,667
Foreign currency translation adjustment 2,620 (956)
-------------------------------------------------------------------------
Balance, end of period $(8,054) $711
-------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
Petrolifera Petroleum Limited
Three months ended March 31
-------------------------------------------------------------------------
(Unaudited) 2008 2007
-------------------------------------------------------------------------
($000)
Cash provided by (used in) the following activities:
Operating
Net earnings $1,738 $15,069
Items not involving cash:
Depletion, depreciation and accretion 4,669 5,396
Stock-based compensation 2,398 2,921
Amortization of deferred charges 192 -
Fair value impairment - ABCP 1,490 -
Foreign exchange loss 90 133
Future income tax provision 1,325 1,096
-------------------------------------------------------------------------
Cash flow from operations before working
capital changes 11,902 24,615
Changes in non-cash working capital (Note 10(b)) (12,040) (9,928)
-------------------------------------------------------------------------
(138) 14,687
-------------------------------------------------------------------------
Financing
Proceeds from bank debt 23,427 -
Issue of common shares, net of share
issue costs (Note 8) 165 434
-------------------------------------------------------------------------
23,592 434
Investing
Development of oil and gas properties (31,056) (7,514)
Changes in non-cash working capital (Note 10(b)) (4,660) 2,302
-------------------------------------------------------------------------
(35,716) (5,212)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (12,262) 9,909
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 13,052 51,008
Impact of foreign exchange on foreign currency
denominated cash balances (779) (1,762)
-------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $11 $59,155
-------------------------------------------------------------------------
-------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS IS COMPOSED OF:
Cash in banks $11 $16,012
Term deposits - 43,143
-------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS $11 $59,155
-------------------------------------------------------------------------
-------------------------------------------------------------------------
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Supplementary information - Note 10
-------------------------------------------------------------------------
-------------------------------------------------------------------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Petrolifera Petroleum Limited
Period ended March 31, 2008
1. FINANCIAL STATEMENT PRESENTATION AND ACCOUNTING POLICIES
The interim Consolidated Financial Statements include the accounts of
Petrolifera and its subsidiaries (collectively, "Petrolifera" or the
"company"), and are presented in accordance with Canadian generally
accepted accounting principles. Through subsidiaries and foreign
branches, Petrolifera is engaged in petroleum and natural gas
exploration, development and production activities in South America.
The interim Consolidated Financial Statements have been prepared
following the same accounting policies and methods of computation as the
annual audited Consolidated Financial Statements for the year ended
December 31, 2007 except as provided below. The disclosures provided
below do not conform in all respects to those included with the annual
audited Consolidated Financial Statements. The interim Consolidated
Financial Statements should be read in conjunction with the annual
audited Consolidated Financial Statements and the notes thereto.
Financial instruments
Financial instruments are recognized initially at fair value on the
balance sheet, and include cash and cash equivalents, accounts
receivable, long-term investments, accounts payable and accrued
liabilities, amount due to a related company and bank debt. The company
has classified all of its financial instruments as held for trading, with
the exception of the bank debt, which is classified as other liabilities.
Held for trading instruments are measured at fair value, while other
liabilities are measured at amortized cost. The company has not entered
into any financial derivative contracts, does not enter into these
contracts for speculative purposes, and has not recorded any assets or
liabilities as a result of embedded derivatives.
The carrying value of held for trading instruments is equal to their fair
value. The fair value of the bank debt approximates the carrying value as
the debt has a floating market interest rate.
2. NEW ACCOUNTING STANDARDS
Effective January 1, 2008, the company adopted CICA Handbook sections
1535, 3031, 3862 and 3863 relating to Capital Disclosures, Inventories,
Financial Instruments - Disclosures and Financial Instruments -
Presentation, respectively.
Under section 1535, the company is required to disclose its objectives,
policies and processes for managing capital, and in addition, whether the
entity has complied with any externally imposed capital requirements.
Note 5 contains further disclosures with respect to this standard.
Under section 3031, the measurement of cost and cost formulas for
inventories have been revised, along with additional disclosure
requirements. The adoption of this section has had no impact on the
company's consolidated financial statements, as inventories were already
being measured in a manner permitted under the new standard.
Under section 3862, the company is required to disclose the significance
of financial instruments to an entity's financial statements, the risks
associated with the financial instruments, and how those risks are
managed. Note 5 contains further disclosures with respect to this
standard.
Under section 3863, further guidance is provided on the classification of
financial instruments as liabilities or equity, and when netting of
financial assets and financial liabilities is appropriate.
As of January 1, 2009, the company will be required to adopt
CICA Handbook section 3064, Goodwill and Intangible Assets, replacing
section 3062, Goodwill and Other Intangible Assets and section 3450,
Research and Development Costs. Various changes have been made to other
sections of the CICA Handbook for consistency purposes. This section
establishes standards for the recognition, measurement, presentation and
disclosure of goodwill subsequent to its initial recognition and of
intangible assets by profit-oriented enterprises. Standards concerning
goodwill are unchanged from the standards included in the previous
section 3062. The company is currently evaluating the impact of the
adoption of this new section.
Over the next three years the CICA will adopt its new strategic plan for
the direction of accounting standards in Canada, which was ratified in
January 2006. As part of the plan, Canadian GAAP for public companies
will converge with International Financial Reporting Standards ("IFRS"),
with an expected effective date of January 1, 2011. The company continues
to monitor and assess the impact of the convergence of Canadian GAAP with
IFRS.
3. INVENTORIES
The company maintains inventory as a consequence of the sales process for
its products, whereby crude oil which has been produced is not delivered
to customers for periods of up to several days, during which time it must
be stored.
-------------------------------------------------------------------------
March 31, December 31,
2008 2007
-------------------------------------------------------------------------
($000)
-------------------------------------------------------------------------
Crude oil and natural gas liquids $1,244 $854
-------------------------------------------------------------------------
At March 31, 2008 and December 31, 2007, inventory is composed of crude
oil and natural gas liquids held in storage at the company's facilities
and in transportation pipelines. Crude oil and natural gas liquids are
carried at the lower of cost (on a weighted average cost basis) and net
realizable value.
4. LONG-TERM INVESTMENTS
Due to the immediate success of the Argentinean drilling program in late
2005 and subsequent thereto significant cash balances from its initial
public offering were retained in Petrolifera's bank accounts. These funds
were largely kept in Canada for capital preservation and security. In
mid-2006 the company commenced a program to invest its surplus funds in
high quality, highly rated, liquid commercial paper with a primary
emphasis on security of capital. Investments were made in R-1 High rated
ABCP, as rated by Dominion Bond Rating Service, sold to us by the money
market facilities of a Canadian chartered bank with whom we held bank
accounts. These investments were made in more than one issuing entity,
were made for various time periods and were acquired to earn a reasonable
return in relation to prevailing market conditions. On maturity, proceeds
including earned interest were generally reinvested on a regular basis.
In August 2007 the Canadian third-party ABCP market experienced severe
liquidity problems. This has caused the conduits that issued the notes to
default on the redemption of the notes. As a result, holders could not
receive their cash plus interest at maturity.
On September 6, 2007 a panel of banks, asset providers, and major
investors formed the Pan-Canadian Investors Committee for Third-Party
Structured Asset-Backed Commercial Paper ("Pan-Canadian Committee") to
oversee a proposed restructuring process. The proposed restructuring
called for the ABCP to be converted into longer term floating rate notes
which more closely match the maturities of the underlying assets. On
March 17, 2008 the Pan-Canadian Committee made the restructuring proposal
by filing a Companies' Creditors' Arrangement Act ("CCAA") restructuring
proposal whereby the company's notes will be exchanged for several
classes of notes with maturities that better match the maturities of the
underlying assets. Subsequent to the quarter end the CCAA restructuring
proposal was voted on and approved by note holders.
Quoted market values of the ABCP are not available due to the market
disruption that is currently paralyzing the ABCP market. Management has
therefore estimated the fair value of the owned ABCP based on a
probabilistic recovery of principal and interest taking into account all
available information. Under this valuation method, several different
outcomes of the recovery of the principal and interest are estimated
considering the information available as at March 31, 2008. A weighted
average recovery is then calculated. This weighted average recovery is
used to determine the discounted cash flows that are expected from these
investments. The recovery factors used for were as follows:
-------------------------------------------------------------------------
Capital Interest
Capital Interest Weighted Weighted
Recovery Recovery Average Average
Class of Note Range Range Recovery Recovery Term
-------------------------------------------------------------------------
A-1 0-95% 0-90% 91% 84% 5-8 years
-------------------------------------------------------------------------
A-2 0-90% 0-90% 86% 81% 8 years
-------------------------------------------------------------------------
B 0-75% 0-75% 71% 70% 8 years
-------------------------------------------------------------------------
C 0-50% 0-50% 48% 48% 8 years
-------------------------------------------------------------------------
IA Tracking 0-75% 0-75% 62% 56% 8 years
-------------------------------------------------------------------------
Based on the above approach the fair value of the investment in ABCP is
estimated to be $29.9 million which implies an impairment of $1.5 million
for the quarter ended March 31, 2008 or approximately four percent of the
carrying value of the ABCP. This impairment brings the total impairment
of the ABCP recorded to date to approximately 20 percent of the original
cost of the ABCP. As at March 31, 2008, included in long-term investments
were ABCP with a face value of $37.7 million. These investments are
classified as Held for Trading and are carried at fair value which is
assessed each reporting date. The theoretical fair value of the company's
ABCP could range from $22.4 million to $34.3 million using the valuation
methodology described above with alternative reasonably possible
assumptions. The company anticipates that it presently has sufficient
cash resources and available credit to satisfy obligations as they come
due. Assuming the ABCP problems are restructured during 2008 and normal
liquidation for cash occurs, the company would be able to substantially
reduce its net indebtedness incurred from lack of access to these
amounts. The outcome of the restructuring process, actual timing and
amount ultimately recoverable from these notes may differ materially from
this estimate which would impact the company's earnings in future
periods.
5. FINANCIAL RISK MANAGEMENT
Summary
The company is exposed to various risks that arise from its business
environment and the financial instruments it holds. The Audit Committee
of the Board of Directors reviews the adequacy of the risk management
framework in relation to these risks. The following outlines the
company's risk exposures, quantifies these risks, and explains how these
risks and its capital structure are managed.
Capital Management
The company's objective is to maintain a strong capital position in order
to execute on its business plans and maximize value to shareholders. The
company defines its capital as shareholders' equity and bank debt.
Changes to the relative weighting of the capital structure is driven by
our business plans, changes in economic conditions and risks inherent in
the global oil and gas industry. There have been no material changes to
the company's processes and objectives related to capital management
compared to prior periods. Methods to adjust our capital structure could
include any or all of the following activities:
- Repurchase shares pursuant to a normal course issuer bid;
- Issue new shares through a public offering or private placement;
- Raise fixed or floating rate debt;
- Refinance existing debt facilities to change amounts or terms
The company periodically reviews certain quantitative measures of its
capital structure, in order to understand its position relative to
industry peers. These measures include calculations such as return on
equity, return on capital employed and the debt to equity ratio. The
company does not set certain limits or ranges with respect to these
quantitative measures.
The company is subject to external restrictions on its reserves-based,
revolving debt facility. The facility has an overall limit of
US$100 million and the current available limit is US$60 million, which is
subject to semi-annual review. Debt outstanding cannot exceed two times
the 12 month trailing EBITDA. EBITDA is defined as net earnings prior to
deduction of interest, income taxes, depletion, depreciation and
accretion expense and other non-cash expenses. As at March 31, 2008,
total debt outstanding under this facility was $36 million and two times
EBITDA was $140.9 million, for a ratio of 0.3:1, which is well below the
imposed limit.
Credit Risk
The Company is exposed to credit risk in relation to its cash and cash
equivalents, long-term investments and accounts receivable. Cash and cash
equivalents are held with highly rated international banks and therefore
the company considers these assets to have negligible credit risk. Refer
to Note 4 for further discussion regarding the credit risk of long-term
investments.
The company's accounts receivable are primarily with joint venture
partners, oil and gas marketers and local government agencies. The
company conducts a small minority of its business through joint ventures,
so its overall exposure to credit risk from joint venture partners is
considered to be low. The company's production base is entirely located
in Argentina, and is heavily weighted to oil. It sells its oil production
to a well-established, investment grade, state-owned oil company, and its
gas production to a reputable local gas marketing company. Receivables
with local governments pertain to input taxes paid on certain
expenditures. The company has not experienced any collection problems
with its counterparties and does not currently have any overdue amounts.
The carrying amounts of cash and cash equivalents and accounts receivable
represents the company's maximum credit exposure. The company does not
have an allowance for doubtful accounts, and did not write off any
receivables in the quarter ended March 31, 2008.
Liquidity Risk
The company manages its risk of not meeting its financial obligations
through management of its capital structure, annual budgeting of its
revenues, expenditures and cash flows, cash flow forecasting, and
maintaining unused credit facilities where practicable.
Accounts payable and income taxes payable, as disclosed on the
Consolidated Balance Sheet, fall due within the next reporting period.
The revolving debt facility has a current available limit of
US$60 million.
This facility expires on September 5th, 2010. The company also holds an
$18 million line of credit, of which $1 million is undrawn at March 31,
2008, that is secured solely by the company's long-term investments.
This line of credit is due on demand. The company believes it has
adequate cash flows and unused credit facilities to discharge its
financial obligations.
Market Risk
Changes in commodity prices, interest rates and foreign currency exchange
rates can expose the company to fluctuations in its net earnings and in
the fair value of its financial assets and liabilities.
Commodity Price Risk
Price fluctuations for both crude oil and natural gas are a risk to the
company over which the company has little influence. Due to pricing
controls present in Argentina, the company's selling price for oil is
limited to approximately US$42.00 per barrel when the world posted price
(WTI) for crude oil is in excess of US$60.90 per barrel. Natural gas
prices are controlled by the Argentine government and local demand with
historic prices at low levels compared to world prices. Recent natural
gas prices have shown improvement due to increasing demand.
Interest Rate Risk
Floating rate bank debt exposes the company to fluctuations in cash flows
and net earnings due to changes in market interest rates. Based on the
current debt balance, a one percent increase (decrease) in the underlying
market rates would have decreased (increased) after tax earnings by
approximately $0.1 million for the quarter. The company may enter into
derivative interest swap contracts to manage this risk, but has not done
so to date.
Foreign Currency Exchange Rate Risk
Substantially all of the company's operations are conducted in foreign
jurisdictions, so the company is exposed to foreign currency exchange
rate risk on most of its activities. Oil and natural gas sales contracts
are denominated in US Dollars and paid in Argentine Pesos. Operating and
capital expenditures are incurred in US Dollars (USD) and Argentine Pesos
(ARS), and to a lesser extent in Peruvian Nuevos Soles (PEN) and
Colombian Pesos (COP). The revolving credit facility is denominated in US
Dollars, which partially limits the company's exposure in terms of cash
outflows (interest expense) being inversely correlated to cash inflows
(oil and gas revenues). The company may enter into derivative forward
exchange rate contracts to manage this risk, but has not done so to date.
The table below shows the company's exposure to foreign currencies on the
balance sheet for its financial instruments:
-------------------------------------------------------------------------
($000) Per CAD USD ARS PEN COP
Balance $ -------------------------------------
Sheet CAD $ equivalent amounts
-------------------------------------------------------------------------
Cash and cash
equivalents 11 (29) 393 (461) 6 102
-------------------------------------------------------------------------
Accounts
receivable 38,288 176 17,105 17,569 3,395 43
-------------------------------------------------------------------------
Accounts
payable and
accrued
liabilities (32,770) (357) (8,296) (24,040) (7) (70)
-------------------------------------------------------------------------
Income taxes
payable (5,817) (308) 180 (5,689)
-------------------------------------------------------------------------
Bank debt (53,039) (17,063) (35,976)
-------------------------------------------------------------------------
Balance sheet
exposure (53,327) (17,581) (26,594) (12,621) 3,394 75
-------------------------------------------------------------------------
The company estimates a three percent change in the Canadian Dollar
against the above foreign currencies could be reasonably possible over a
three month period. A three percent strengthening in the Canadian Dollar
would result in a change to after tax net earnings and other
comprehensive income as follows (an equal but opposite impact to net
earnings and other comprehensive income would result if the Canadian
Dollar weakened by three percent):
-------------------------------------------------------------------------
($000) USD ARS PEN COP
--------------------------
CAD $ equivalent amounts
-------------------------------------------------------------------------
Increase (decrease) in after tax earnings 226 - (69) (2)
-------------------------------------------------------------------------
Increase (decrease) in other comprehensive
income 820 - - -
-------------------------------------------------------------------------
6. CREDIT FACILITIES
On September 5th, 2007, the company entered into a US$100 million
reserve-based revolving credit facility, with a borrowing base of
US$60 million. The initial facility term is for three years, bears
interest at LIBOR plus a margin, is secured by a pledge of the shares of
Petrolifera's subsidiaries and has a provision for a borrowing base
adjustment every six months, with the next adjustment being calculated as
at June 30, 2008. Drawings under this facility are made for a term of
less than one year and are therefore classified as current liabilities.
Deferred financing costs of $2.0 million related to this facility are
being amortized over the remaining term of the facility.
In December 2007 the company established an $18 million line of credit
with a Canadian chartered bank. This facility bears interest at a
floating rate and is solely secured by the ABCP notes.
As of March 31, 2008, the reserve based facility had US$35.0 million
outstanding and the line of credit facility had $17.1 million
outstanding. Interest expense on the facilities for the three months
ended March 31, 2008 was $0.7 million.
7. ASSET RETIREMENT OBLIGATIONS
At March 31, 2008 the estimated total undiscounted amount required to
settle the asset retirement obligations was $11.9 million
(December 31, 2007 - $11.3 million). These obligations are expected to be
settled over the useful lives of the underlying assets, which currently
extend up to 20 years into the future. This amount has been discounted
using a credit-adjusted risk-free interest rate of six percent and an
annual inflation rate of two percent. Changes to asset retirement
obligations were as follows:
------------------------------------------------------------------------
Three months ended Year ended
March 31, December 31,
2008 2007
-------------------------------------------------------------------------
($000)
-------------------------------------------------------------------------
Asset retirement obligations, beginning of period $5,639 $2,347
Liabilities incurred 527 2,678
Changes in estimates - 490
Accretion expense 86 124
-------------------------------------------------------------------------
Asset retirement obligations, end of period $6,252 $5,639
-------------------------------------------------------------------------
8. SHARE CAPITAL, WARRANTS AND CONTRIBUTED SURPLUS
Authorized
The authorized share capital is comprised of an unlimited number of
common shares.
Issued:
-------------------------------------------------------------------------
Number Amount
of Shares ($000)
-------------------------------------------------------------------------
Share capital and warrants:
Balance, share capital and warrants,
December 31, 2007 50,126,510 $54,356
Issued upon exercise of options 226,500 165
Assigned fair value of options exercised - 39
-------------------------------------------------------------------------
Balance, share capital and warrants,
March 31, 2008 50,353,010 $54,560
-------------------------------------------------------------------------
Contributed surplus:
-------------------------------------------------------------------------
Balance, contributed surplus, December 31, 2007 $10,188
Assigned fair value of options exercised (39)
Assigned fair value of stock options vesting 2,398
-------------------------------------------------------------------------
Balance, contributed surplus, March 31, 2008 $12,547
-------------------------------------------------------------------------
Total share capital, warrants and contributed
surplus:
December 31, 2007 $64,544
March 31, 2008 $67,108
-------------------------------------------------------------------------
(a) Common Share Purchase Warrants
As at March 31, 2008, there were 160,000 Common Share Purchase Warrants
outstanding to acquire 160,000 common shares at $0.40 per share until
October 17, 2008.
(b) Stock Options
For the three months ended March 31, 2008 and 2007 the company had stock
options outstanding to acquire common shares as follows:
------------------------------------------------------------------------
2008 2007
-------------------------------------------------------------------------
Weighted Weighted
Average Average
Number of Exercise Number of Exercise
Shares Price Shares Price
-------------------------------------------------------------------------
Outstanding, beginning
of period 3,228,867 $8.71 2,896,667 $4.86
Granted 619,700 9.94 576,000 19.20
Exercised (226,500) 0.73 (412,000) 1.02
-------------------------------------------------------------------------
Outstanding, end of
period 3,622,067 9.42 3,060,667 8.07
-------------------------------------------------------------------------
Exercisable, end of
period 2,620,999 $7.90 1,411,666 $7.84
-------------------------------------------------------------------------
All options have been granted for a period of five years. Options granted
under the plan are generally fully exercisable after three years and
expire five years after the date granted. The table below summarizes
unexercised stock options:
-------------------------------------------------------------------------
Weighted
Average
Remaining
Contractual
Life at
Number March 31,
Range of Exercise Prices Outstanding 2008
-------------------------------------------------------------------------
$0.50 - $2.00 1,182,667 2.4
$8.55 - $20.95 2,439,400 3.8
-------------------------------------------------------------------------
Total 3,622,067 3.2
-------------------------------------------------------------------------
Vested at March 31, 2008 2,620,999
-------------------------------------------------------------------------
In the first three months of 2008 a compensatory non-cash expense of
$2.4 million (2007 - $2.9 million) was recorded, reflecting the fair
value of stock options amortized over the vesting period.
The fair value of each option granted in 2008 is estimated on the date of
grant using the Black-Scholes option-pricing model with assumptions for
grants as follows:
-------------------------------------------------------------------------
Risk free Expected Expected
interest rate life Volatility
-------------------------------------------------------------------------
2008 2.86% 4 years 88.8%
2007 4.14%-4.73% 4 years 70.3%-75.9%
-------------------------------------------------------------------------
The weighted average fair value at the date of grant of all options
granted in 2008 was $6.43 per option (2007 - $10.38 per option)
9. SEGMENTED INFORMATION
The Company has corporate offices in Canada and Barbados (combined to
comprise the corporate segment), petroleum and natural gas operations in
Argentina and exploration activities in Peru and Colombia. Financial
information pertaining to these operating segments is presented below.
Corporate Argentina Peru Colombia Total
-------------------------------------------------------------------------
($000)
-------------------------------------------------------------------------
Three months
ended March
31, 2008
Revenue, gross $48 $27,119 $- $- $27,167
Net earnings
(loss) (5,457) 7,144 63 (12) 1,738
Property and
equipment 302 133,109 23,025 820 157,256
Capital
expenditures - 23,240 7,591 225 31,056
Total assets $34,310 $169,375 $26,595 $998 $231,278
-------------------------------------------------------------------------
Three months
ended March
31, 2007
Revenue, gross $281 $46,841 $- $- $47,122
Net earnings
(loss) (3,931) 19,055 (55) - 15,069
Property and
equipment 301 36,661 3,150 - 40,112
Capital
expenditures 34 6,850 630 - 7,514
Total assets $27,337 $107,060 $3,443 $- $137,840
-------------------------------------------------------------------------
10. SUPPLEMENTARY INFORMATION
(a) Per share amounts
The following table summarizes the common shares used in the per share
calculations:
-------------------------------------------------------------------------
Three months ended March 31 2008 2007
-------------------------------------------------------------------------
Weighted average common shares outstanding 50,212,120 43,800,217
Dilutive effect of all stock options and all
stock purchase warrants 1,349,398 6,834,948
-------------------------------------------------------------------------
Weighted average common shares outstanding
- diluted 51,561,518 50,635,165
-------------------------------------------------------------------------
(b) Net change in non-cash working capital
-------------------------------------------------------------------------
Three months ended March 31 2008 2007
-------------------------------------------------------------------------
($000)
-------------------------------------------------------------------------
Accounts receivable (10,775) (9,338)
Prepaid expenses (76) (35)
Accounts payable and accrued liabilities (5,193) (7,680)
Inventories (390) 33
Income taxes payable (273) 9,503
Due from (to) a related company 7 (109)
-------------------------------------------------------------------------
Total (16,700) (7,626)
-------------------------------------------------------------------------
Operating (12,040) (9,928)
Investing (4,660) 2,302
-------------------------------------------------------------------------
(16,700) (7,626)
-------------------------------------------------------------------------
(c) Supplementary cash flow information
-------------------------------------------------------------------------
Three months ended March 31 2008 2007
-------------------------------------------------------------------------
($000)
-------------------------------------------------------------------------
Interest paid 571 -
Income taxes paid 2,570 409
-------------------------------------------------------------------------
11. COMMITMENTS, CONTINGENCIES AND GUARANTEES
Work Commitments
In 2005 Petrolifera acquired two significant oil and gas exploration
licenses in Peru. The licenses have a total US$41.8 million financial
commitment to complete negotiated work programs on the two licenses over
seven years. The company has the right to withdraw from the licenses at
the end of each period associated with the term of the licenses. The
first license term for Block 106 ended in 2007 and the company has met
its commitment and is currently in the second license term with a
commitment to invest a minimum of US$1.6 million in this next term. In
Block 107, the company is in the first term of the license and expects to
complete all the required work commitments for the term during 2008. The
company has issued letters of credit in the total amount of
US$2.3 million to secure the capital expenditure requirements associated
with the two exploration licenses in Peru.
In 2007 the Company was granted three concessions in Colombia with a
total work commitment of US$5.7 million over a two year period. The
company has issued letters of credit in the total amount of
US$0.6 million in support of these work commitments. In Argentina the
company has total work commitments of US$54.0 million over the next three
years related to the Vaca Mahuida, Puesto Guevara and Gobernador Ayala II
blocks.
Contractual Commitments
The company's annual commitments under service contracts for drilling,
leases for office premises, various operating costs, software license
agreements and other equipment are as follows:
-------------------------------------------------------------------------
Contractual Obligations 2008 2009-2011 Subsequent
to 2012 Total
-------------------------------------------------------------------------
Service contracts and other $8,613 $11,601 $- $20,214
-------------------------------------------------------------------------
Petrolifera is a party to an arbitration proceeding initiated by the
former contract operator of the Puesto Morales/Rinconada block. The
former operator is seeking financial compensation including damages for
wrongful dismissal. Petrolifera is of the opinion that the claim is
without merit and has filed a counterclaim against the former operator.
Potential damages, if any, against the company are not quantifiable at
this time, but in any event are not anticipated to be material to the
company.
Additionally, the company has various guarantees and indemnifications in
place in the ordinary course of business, none of which are expected to
have a significant impact on the company's financial statements or
operations.
>>
For further information: Richard A Gusella, Executive Chairman, Petrolifera Petroleum Limited, Phone: (403) 538-6201, Fax: (403) 538-6225, inquiries@petrolifera.ca, www.petrolifera.ca
Bullish signs seen in markets' about-face
Bullish signs seen in markets' about-face
DAVID PARKINSON
From Wednesday's Globe and Mail
May 7, 2008 at 8:26 AM EDT
The upturn in equity markets is fast evolving from a temporary bounce into a full-fledged baby bull, some technical analysts believe.
North American stocks, now seven weeks into a rebound from their March lows, are sending off increasingly bullish technical signals that imply the gains are more than merely a short-term recovery in a bear market. In fact, some technical analysts suggested this week that the Canadian market is already back in bull mode, while the U.S. market is on the verge.
"The strong performance of the past four weeks ... provided further evidence that a new bull market is indeed developing," Ron Meisels, head of Montreal-based technical analysis firm Phases & Cycles Inc., said in a research report.
"Over the past couple of weeks, we have become increasingly intrigued with the possibility that ... the broad indexes could actually break out and run substantially higher," Ray Hanson, technical analyst at RBC Dominion Securities, said in a note to clients.
While the S&P 500's move back above 1,400 last week was seen by some observers as a bullish psychological signal, analysts say a more telling indicator of a burgeoning technical bull market has been the about-face of major stock indexes relative to their key moving averages.
After trading below the closely watched 50- and 200-day moving averages since the end of last year, Toronto's S&P/TSX composite index has traded above both averages for the past month. In the U.S. market, the S&P 500 index has been above its 50-day moving average since mid-April, and yesterday's gain (it closed up 10.77 points at 1,418.26) put it within spitting distance of its 200-day moving average of 1,431.
Mr. Meisels also noted that the markets have established "a clear pattern of higher highs and higher lows," and that they have shown a propensity to shake off negative news - both of which are bullish signs.
The TSX is up 13 per cent and the S&P 500 is up 11 per cent from their respective March lows. Analysts suggested we might see a brief consolidation before the North American markets take a run at the last big hurdle to solidifying a bona fide bull trend: the S&P 500's 200-day average, a major point of technical resistance.
"Short-term data is getting overbought for the S&P and [Nasdaq], and it's likely we'll see more tug-of-war near the 200-day moving averages over the next couple of weeks," RBC's Mr. Hanson said.
"We expect that after a brief consolidation, the next surge should confront this resistance and put the indexes firmly above it," Mr. Meisels said.
Canadians sitting on $45 billion
TheStar.com - Business - Canadians sitting on $45 billion
Keeping more money than usual in cash has already cost investors $9 billion since Jan. 21
May 08, 2008 James DawBUSINESS COLUMNIST
Canadian investors are showing a record level of caution in the face of turbulent stock markets.
Economist Benjamin Tal of CIBC World Markets Inc. calculates we are sitting on an extra $45 billion of safe money.
It's languishing in money market mutual funds, brokerage accounts, savings and chequing accounts and government securities, barely earning enough to keep ahead of rising prices.
"The overall liquidity position held by Canadian households is now rising at a year-over-year rate of 15 per cent – the fastest rate in more than six years," Tal writes in a report released yesterday.
"When measured in both nominal and real terms, the current value of personal liquid assets is at a record high (with about $45 billion or 10 per cent more than what) would have been consistent with a risk aversion level seen at the eve of the current financial crisis."
If the entire excess sum were suddenly redeployed to earn capital gains from Canadian stocks, it would not be enough to change markedly the direction of Canada's leading stock index, valued at about $1.7 trillion.
Nor will the sidelining of this amount of money ruin retirement or pension plans, assuming the money is spread thinly across the whole spectrum of retail investors.
Yet Tal worries ordinary investors will repeat errors of the past, hold excess cash too long after markets have started to recover and sacrifice a higher return over several years. Already the timidity of investors has cost them a potential $9 billion.
The extra cash, if it had been put into the S&P/TSX composite index before Jan. 21, would have grown nearly 20 per cent. The recovery of the Toronto market since then has left it as the only major market in the world to post positive results for 2008, a modest 4.2 per cent as of yesterday.
That sort of gain could be quickly reduced, or lost altogether, of course.
The risk of stock prices falling with the United States near or in a recession may explain why investors have set money aside.
They haven't poured it into stocks, bonds or mutual funds, or even real estate, as investors did during the scary times of 2001 and 2002.
Donald Drummond, chief economist at TD Bank Financial Group, says that, "when there are downturns in the market, people do tend to exit fairly quickly and they do stay out and, on balance, miss the bottom.
"That's a bit of human nature, isn't it?
"But sitting here at the beginning of May, who is to say that is wrong, and that we are necessarily at the bottom? I think there is a lot of grief to come, and for an extended period of time in the U.S., and I find it hard to believe that won't spill over into Canada."
But Tal says he is taking a longer-term perspective, and not making a prediction on the direction of the market, when he cautions against keeping more money than usual earning short-term interest rates.
Based on historical stock-market returns, the difference could be 35 per cent over five years, he estimated quickly during an interview.
"We are bullish on the stock market, (because of the relative health of the Canadian economy and outlook for commodity prices) but that is something that is secondary and not part of this analysis," he insists. "We know from history that cash has underperformed the stock market in general.
"Basically, what we are saying is, if you sit on $45 billion extra cash, down the road you are basically sacrificing return, without getting into the timing of the market, whether or not the market has already rebounded or whether or not we have another small correction."
The securities industry does, however, have a vested interest in seeing investors assume more risk and shift money from low-cost mutual funds to higher-cost equity and bond funds.
An extra 1 percentage point of management and distribution fees on $45 billion translates into $450 million over a year if the investor earns zero return, and more if his or her investments grow in value.
Both Tal and Drummond say the extra funds held in low-return, readily cashable investments are not an indication Canadians have stepped up savings.
With home prices rising and employers still hiring, consumers are continuing to buy, although sales of homes have been falling.
"In 2001, real estate was like comfort food. You sell your (equity) mutual funds and go to money market, or you go into real estate. Today, you are not doing that," Tal says.
"Today, the real estate market is perceived, maybe rightly so, to be at the peak, and therefore more money is coming into cash. That is why the cash position is larger than in 1987 or in 2001."
Wednesday, May 7, 2008
Petrolifera to webcast corporate presentation at its annual meeting
Petrolifera to webcast corporate presentation at its annual meeting of shareholderscnwCALGARY, May 7 /CNW/ - Petrolifera Petroleum Limited (PDP - TSX) announces that it will be webcasting the Corporate Presentation which is scheduled at its Annual
Meeting of Shareholders being held on Thursday, May 8, 2008 at the Devonian Room at The Calgary Petroleum Club in Calgary. The Corporation's presentation will be made by Mr. R. A. Gusella, Executive Chairman and Mr. Gary Wine, President and Chief Operating Officer. The presentation will be webcast by CNW Group and will commence at approximately 3:15 PM MDT on Thursday, May 8, 2008.
To listen and view the presentation please follow the link to the webcast on Petrolifera's website at www.petrolifera.ca or
on CNW at http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID=2256100.
Why oil prices are at a record high
TheStar.com - Business - Why oil prices are at a record high
May 06, 2008 Reuters
U.S. crude oil hit an all-time high of $122 a barrel Tuesday.
Robust demand for crude and a weak dollar have fuelled the rally from a dip below $50 at the start of 2007.
Adjusted for inflation, oil is now above the $101.70 peak hit in April 1980, according to the International Energy Agency, a year after the Iranian revolution.
DOLLAR WEAKNESS
The fall in the value of the dollar against other major currencies has helped drive buying across commodities as investors view dollar assets as relatively cheap.
It has also reduced the purchasing power of OPEC's revenues and increased the purchasing power of some non-dollar consumers.
OPEC oil ministers have noted that although prices are rising to record nominal levels, inflation and the dollar have softened the impact.
Some analysts say investors have been using oil as a hedge against the weaker dollar.
FUNDS
Since the Federal Reserve cut U.S. interest rates in mid-August last year and central banks pumped billions of dollars into financial markets to ease a credit crunch, oil and gold have risen.
Investment flows from pension and hedge funds into commodities including oil have boomed, as has speculative trading. At the same time, the credit crunch has brought some other markets, such as the U.S. asset-backed commercial paper market, to a virtual standstill.
Some of that money has found its way into energy and commodities, analysts say.
DEMAND
While previous price spikes have been triggered by supply disruptions, demand from top consumers the United States and China is a main driver of the current rally.
Global demand growth has slowed after a surge in 2004 but is still rising and higher prices have so far had a limited effect on economic growth.
Analysts say the world is coping with high nominal prices because, adjusted for exchange rates and inflation, they have been until now lower than during previous price spikes and some economies have become less energy intensive.
OPEC SUPPLY RESTRAINT
The Organization of the Petroleum Exporting Countries, source of more than a third of the world's oil, started to reduce oil output in late 2006 to stem a fall in prices.
Fewer OPEC barrels entering the market helped propel the rally and consumer nations led by the International Energy Agency have urged OPEC to pump more oil.
At its meetings since December, OPEC has agreed to leave output unchanged, saying there is enough crude in the market. It next meets formally Sept. 9.
Few in the group believe there is much it can do to tame a market it says defies logic.
NIGERIA
Supply of crude from Nigeria, the world's eighth-largest oil exporter, has been cut since February 2006 because of militant attacks on the country's oil industry.
Oil companies and trading sources have detailed 564,000 bpd of shut Nigerian production due to militant attacks and sabotage.
IRAN
Oil consumers are concerned about supply disruption from Iran, the world's fourth-biggest exporter, which is locked in a dispute with the West over its nuclear programme.
Western governments suspect Iran is using its civilian nuclear programme as a cover to develop nuclear weapons. Iran denies this, saying it wants nuclear power to make electricity.
IRAQ
Iraq is struggling to get its oil industry back on its feet after decades of wars, sanctions and underinvestment.
Exports of Kirkuk crude from the country's north are stabilizing as the system recovers from technical problems that had mostly idled the pipeline since the U.S.-led invasion of Iraq in March 2003.
REFINERY BOTTLENECKS
Refiners in the United States, the world's top gas guzzler, struggled with unexpected outages which have drained inventories.
Tuesday, May 6, 2008
Price Of Oil :Same old obsession
Same old obsession
Tuesday, May 06, 2008
Scratch out the old record for crude oil and replace it with this one: $122.36 (U.S.) a barrel. Yes, oil has returned with a vengeance from its recent slump, rising nearly 9 per cent in the past four trading days, and $2.39 a barrel on Tuesday alone.
You can blame it on perceived supply disruptions in Nigeria or the weaker U.S. dollar or the fact that Goldman Sachs has predicted oil prices could jump to a high of $200 a barrel within the next six to 24 months – but either way, oil is back on the minds of investors.
That, of course, is good news for a big chunk of the S[amp]amp;P/TSX composite index. It rose 77 points, or 0.5 per cent, to 14,351 at midday on Tuesday, led by commodity producers. Energy stocks were up 2.2 per cent and materials stocks were up 1.7 per cent. In particular, Canadian Oil Sands Trust shot up 5.2 per cent.
The Dow Jones industrial average fell 23 points, or 0.2 per cent, to 12,947, weighed down in part by concerns over the impact runaway energy costs are going to have on the already-fragile U.S. consumer. Home Depot Inc. fell 1.7 per cent and Wal-Mart Stores Inc. fell 1.4 per cent.
The broader S[amp]amp;P 500 fell 2 points, to 1405. Curiously, two bad-news stocks were among the biggest winners. Yahoo Inc. jumped 6.6 per cent a day after takeover talks with Microsoft Corp. fell through, sending its stock hurtling downward. Is there still hope for a deal?
As well, Fannie Mae shrugged off earlier losses after it reported dismal results in the first quarter and announced plans to raise capital. Its stock rose 5.1 per cent.
© Copyright The Globe and Mail
Oil hits record $121 on supply woes
TheStar.com - Business - Oil hits record $121 on supply woes
CP PHOTO
A pumpjack sits surrounded by canola flowers near Carstairs, Alta., in this July 2004 file photo.
May 06, 2008 GILLIAN WONGThe Associated Press
SINGAPORE–Oil futures rose to an all-time high near $121 a barrel Tuesday in Asia, fueled by worries about threats to supply and a weakening of the U.S. dollar.
The surge in oil prices was also fueled by hopes that the U.S. economy will be spared a sharp downturn after the release of data Monday showing an unexpected expansion in the U.S. service sector in April, analysts said.
Light, sweet crude for June delivery rose to a record $120.93 a barrel in electronic trading on the New York Mercantile Exchange on Tuesday. The contract later retreated to $120.24 a barrel, up 27 cents from Monday's close.
Crude futures settled on Monday at $119.97 a barrel, up $3.65 from Friday's close.
"The bulls are in control of the market," said Victor Shum, an energy analyst with Purvin & Gertz in Singapore. "The economic report out of the U.S. yesterday on the service sector seems to suggest the economic slowdown may not be as deep as initially thought.''
"The sentiment is that the oil pricing is likely going to stay quite strong, with a lot of volatility," Shum said.
The dollar weakened against the euro on Monday, attracting investors to oil and other commodities viewed as hedges against inflation. Also, a falling dollar makes oil less expensive to investors overseas. A series of U.S. Federal Reserve rate cuts starting last year weakened the dollar considerably against foreign currencies, and analysts blame the dollar's protracted decline for oil's sharp rise this spring.
Supply outages or potential threats to supply emerged in Iran and Nigeria over the weekend and from Iraq on Monday; events in all three nations have caused prices to spike many times in recent months.
In Iraq, Kurdish rebels warned they could launch suicide attacks against American interests to punish the U.S. for sharing intelligence with Turkey after Turkey bombed rebel bases in Iraq on Friday. In Nigeria, a Royal Dutch Shell PLC spokesman said attackers hit an oil facility belonging to Shell's joint venture in southern Nigeria and that some oil production has been shut down.
And Iran's Supreme Leader Ayatollah Ali Khamenei said his country will not bend to international pressure and give up its nuclear program.
Energy investors grow concerned any time conflict breaks out or is threatened in the oil-rich Middle East. Years of unrest in Nigeria have cut off nearly a quarter of the major U.S. supplier's oil output.
Amid the occasional threats to crude supplies, global demand for oil continues to grow. While demand for oil and gasoline has been soft in the U.S., the Chinese and Indian economies are growing by double digits, boosting global demand for oil.
In other Nymex trading, heating oil futures rose 0.75 cent to $3.314 a gallon (3.8 liters) while gasoline prices added 1.21 cents to $3.065 a gallon. Natural gas futures gained 0.8 cent to $11.186 per 1,000 cubic feet.
Brent crude futures rose 72 cents to $118.71 a barrel on the ICE Futures exchange in London.
Monday, May 5, 2008
Timminco ex-CEO trading reviewed
Timminco ex-CEO trading reviewed
ANDY HOFFMAN
00:00 EDT Saturday, May 03, 2008
The former chief executive officer of Timminco Ltd. bought 152,000 company shares in the weeks before the company revealed it had developed a "breakthrough" technology to produce solar grade silicon.
The acquisitions by John Walsh included a purchase just 15 days before the first contract with a solar cell maker was announced.
Trading by Mr. Walsh, who left Timminco and its board of directors last month, has been made the subject of "certain reviews and inquiries," the company disclosed this week in a regulatory filing.
Timminco officials declined to discuss the nature of the reviews and inquiries or who was making them.
The contract with an unnamed solar cell maker was announced on March 15, 2007. It was the initial catalyst for an astounding run-up in Timminco shares, which rose from 40 cents each before the solar-grade silicon capability was revealed to $21.95 by the end of 2007. The stock recently traded above $28 after Timminco said it won a supply contract with Q-Cells AG, the world's largest solar cell producer.
Trading records filed with regulators show Mr. Walsh, who was named Timminco's president and CEO in December, 2006, bought the 152,000 shares in three separate transactions between Feb. 7 and Feb. 28, 2007 for $58,250. Based on yesterday's closing price, those shares are now worth more than $3-million.
On Feb. 7, Mr. Walsh paid 35 cents each for 43,000 shares. On Feb. 21, he bought 101,000 shares at 40 cents a piece, the records show. A week later, Mr. Walsh bought 8,000 shares at 35 cents each. Fifteen days later, Timminco announced it could produce solar grade silicon and the stock began its ascent towards becoming the top performing equity on the Toronto Stock Exchange in 2007.
Mr. Walsh's trading records with the Ontario Securities Commission were amended. He originally said he had purchased 98,000 shares on March, 5, 2007. On April 24, he filed an amended statement saying the March 5 share purchase had, in fact, taken place on Feb. 28, and was for only 8,000 shares not 98,000.
Timminco officials, including vice-chairman Arthur Spector and chief financial officer Robert Dietrich declined comment. Officials at the Ontario Securities Commission would not answer questions about Timminco. Attempts to reach Mr. Walsh, who is believed to reside in Delaware, were unsuccessful.
In a regulatory filing, Timminco said that during 2007, it "reimbursed approximately $16,000 to Mr. Walsh, pursuant to an agreement of the corporation to indemnify Mr. Walsh in connection with certain reviews and inquiries related to trading of the common shares of the corporation held by him in April 2007."
The trading records show that Mr. Walsh bought another 200,000 shares for 89 cents each on April 3, 2007. The next day, on April 4, Timminco announced it had won its second solar silicon contract.
Prior to joining Timminco, Mr. Walsh was the chief executive officer of Alanx Wear Solutions Inc., a Delaware headquartered maker of bullet-proof clothing and protective wear. Alanx was sold to Calgary's Ceramic Protection Corp. in 2004. Alanx was controlled by Allied Resource Corp., whose chairman, Heinz Schimmelbusch is also the chairman of Timminco. Mr. Schimmelbusch assumed the CEO duties at Timminco in August, 2007. Mr. Walsh was reassigned to head Timminco's magnesium business. Mr. Walsh left Timminco and its board last month to "pursue other opportunities," the company said.
At the end of January, 2007, a month and a half before the solar silicon deal was announced, Timminco executives including Mr. Schimmelbusch were awarded more than one million Timminco stock options priced at 40 cents each.
In an interview this week, Mr. Dietrich said Timminco had followed all timely disclosure rules and that "there was no certainty until the first customer signed the contract that there would be a contract."
Timminco (TIM)
Close: $19.88, up 39¢
Sunday, May 4, 2008
I was walking by the mental hospital the other day
13,13,13
the fence was too high to see over,
But I saw a little space between the boards
and I looked through to see what was going on
some Jerk poked me in the eye with a stick
then all I could here was "14... 14... 14..."
Just thought I'd be the one to warn you 1st
Your IP Address Below
123 Chat
Ashley Madison
Google Secrets
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