West Energy Ltd. (TSX: "WTL") provides a summary of the corporate results for the Third Quarter ended September 30, 2008.
West surpassed its production and financial goals during the third quarter ended September 30, 2008, while building its inventory of capital projects.
For the quarter ended September 30, 2008, the Company recorded strong revenue, cashflow and net income results. Production averaged 5,735 Boe per day for the three month period ended September 30, 2008 compared to 2,943 Boe per day for the same period in 2007. Prices averaged $106.49/Boe in the third quarter of 2008 compared to $66.78 per Boe in the same quarter of 2007. As a result of higher production and higher prices, revenue for the quarter ended September 30, 2008 was $56.2 million compared to $18.1 million in the third quarter of 2007. The operating costs per barrel of production in the third quarter averaged $7.96 compared to $10.40 for the same period in 2007.
Cashflow from operating activities for the third quarter of 2008 was $38.9 million ($0.49 per share) compared to $8.4 million ($0.11 per share) for the same period in 2007. Net income for the three month period ended September 30, 2008 was $4.5 million ($0.06 per share) compared to a net loss of $3.2 million ($0.04 per share) for the comparable period in 2007. At September 30, 2008 the Company had working capital of $60.1 million including $65.1 million of cash on hand compared to a working capital deficit of $4.2 million at September 30, 2007. This is in addition to the Asset Backed Commercial Paper recognized as a non-current asset in the Company's balance sheet.
During the quarter, West reached an agreement with its bank such that West may borrow up to $22.5 million which is 75% of the original face value of its ABCP holdings of $30.0 million in addition to its existing corporate credit facilities. West retains the option to sell its ABCP holdings should a liquid and stable market be reestablished in the future. This agreement is contingent upon the conversion of the existing ABCP holdings to new financial instruments under the Pan-Canadian Committee's plan approved in April, 2008. The conversion process is expected to occur in late November, 2008.
Operations
Third quarter operations of the Company are highlighted as follows:
- Commenced production at the Crossfire 9-1-50-6W5 Nisku oil well (W.I. 67.5%) at the end of August. With current gross production of 2,400 Boe per day (88% light oil) this well is one of the most prolific conventional oil wells in western Canada. The well is currently producing approximately 22 percent of the Company's total production.
- Geological information from 9-1 has confirmed the trapping of commercial Nisku oil in the area. Consultation and the licensing process for three new Nisku locations were commenced during the quarter.
- At Two Rivers, British Columbia, West spent $3.5 million to acquire 14 sections of prospective Montney lands. The first of three potential zones in the 15-31-82-14W6 well (W.I. 100%) was successfully completed and is currently on a long term production test. A follow-up drilling location is being licensed.
- Drilled one well at 13-30-81-21W6 (BPO W.I. 100%) at Monias British Columbia and commenced completion programs on three prospective zones.
- A Montney horizontal well was spud at Monias 13-05-82-21W6 (W.I. 100%) late in the quarter with results expected in early 2009.
- In Alberta, West perforated the Montney zone at Economy Creek 12-27- 68-2W6 (W.I. 50%). The Montney zone in 12-27 was recently put on a long term production test. Additional up-hole zones will be completed in the well at the conclusion of the Montney production test.
- An oil discovery (BPO W.I. 100%) was drilled and completed during the quarter. Further drilling to delineate the extent of this new pool is being planned.
Corporate production for the period October 1 to November 7 has averaged 7,116 BOEPD, over 80% light oil, condensate and natural gas liquids reflecting the impact of the Crossfire 9-1 well. West forecasts that Crossfire 9-1 well will require an EOR scheme in 2009 to maintain the reservoir pressure and current production rate. The public consultation and licensing process associated with the injection well is on-going.
While recent dramatic events in the financial markets and declining commodities pricing have put tremendous downward pressure on public energy company share prices including West's, the Company is fortunate to have a strong balance sheet and production base to weather the storm and plans to take full advantage of opportunities that may arise. -- www.cnxmarketlink.com
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