Cano Petroleum Announces FY 2007 First Quarter Results, Operational Update and Earnings Call.FORT WORTH, Texas Fort Worth is the fifth-largest city in the state of Texas, 18th-largest city in the United States[1], and voted one of "America’s Most Livable Communities. -- Cano Petroleum, Inc. (Amex:CFW CFW Custom Firmware CFW Call Forward CFW Cystic Fibrosis Worldwide CFW Cache Fast Write CFW Citizens for Florida's Waterways CFW Center for Writing (education) CFW Continuous Fillet Weld (engineering) ) today announced its financial results for its fiscal year first quarter ended September 30, 2006. Following are selected financial highlights from the Company's 10-Q: First Quarter Results For the three months ended September 30, 2006, Cano's revenues were $8.7 million, $6.7 million above the same period last year. The company recorded a net loss of $636 thousand or $0.02 per share. The loss included a number of one-time items discussed below. For the three months ended September 30, 2006, Cano's sales were 73 MBbls of oil and 376 MMcf of natural gas, or 136 MBOE MBOE Thousands of Barrels of Oil Equivalent MBOE Milford Board of Education , a 289% increase when compared to the quarter ended September 30, 2005. During the first fiscal quarter, the average prices the Company received for its oil and natural gas were $68.94 per barrel of oil and $8.40 per Mcf of gas, or $63.63 per BOE BOE Based on Experience BOE Board of Education BOE Boletín Oficial del Estado (Spanish) BOE Bank of England BOE Board of Equalization BOE Board of Elections BOE Barrel of Oil Equivalent BOE Bind on Equip . For the same period ending September 30, 2005, oil sales were 28 MBbls at an average price of $60.36 per barrel and natural gas sales were 42 MMcf at an average price of $6.22 per Mcf, or 35 MBOE at an average price of $55.60 per BOE. The increases were primarily related to increased production volumes reflecting the acquisitions of W.O. Operating and Pantwist properties which closed in November 2005 and April 2006, respectively, and cash reimbursements received under our hedging contracts. General and administrative expenses of $3.2 million increased $1.8 million over the same quarter last year. In addition to increased headcount this year, the quarter included additional legal expenses associated with the fire litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called litigation. as well as one-time charges totaling $445 thousand. Depreciation expense of $1 million was $868 thousand higher than last year reflecting the higher production volumes. Interest expense of $1.9 million included a one time charge of $509 thousand associated with retiring $15 million in subordinated debt Subordinated Debt A loan (or security) that ranks below other loans (or securities) with regard to claims on assets or earnings. Also known as "junior security" or "subordinated loan". . Also included in the other income category was an unrealized gain Unrealized Gain A profit that results from holding on to an asset rather than cashing it in and using the funds. Notes: Let's say you own a stock that has doubled, but you haven't sold it yet. This is said to be an unrealized gain. on hedge contracts of $536 thousand. This gain reflects the mark to market valuation of the derivatives in place at September 30 for our floors on oil and natural gas. (See schedule attached). During the quarter the company closed on an $81 million private placement of convertible preferred and common equity. Dividends on the preferred are included in the net loss applicable to common stock. The amount of $268 thousand includes payment-in-kind of $148 thousand. Significant Developments During our first fiscal quarter we announced that we received full funding from private placements of common and convertible preferred securities with gross proceeds of approximately $81 million and net proceeds Net Proceeds The amount received after all costs are deducted from the sale of a piece of property or security. Notes: In the case of an investor selling a security, net proceeds represent the proceeds from the sale minus any trading costs (i.e. commissions). of approximately $76 million. We also announced that we retired approximately $15 million of subordinated debt and paid down approximately $54 million of senior debt with the proceeds. We ended the period with $6.45 million of cash on hand and no outstanding balance under our senior credit facility. Operational Update Desdemona Field Gas sales began in October 2006. We are currently selling approximately 200 Mcfpd gross, 160 Mcfpd net to Cano's interest. This gas is being produced from the Marble Falls formation from 2 existing wellbores that were recently recompleted. A third well that was recently recompleted in the Marble Falls is scheduled to be online in the next 10-15 days. Current gas sales are restricted due to high line pressure. We will be adding compression capacity with the anticipation of additional gas production coming online as we analyze the results of the current new drilling program. Our 10 well Marble Falls/Barnett Shale drilling program has begun. We currently have 2 drilling rigs running in the Desdemona Field. Our first Marble Falls/Barnett Shale well, #E8, reached total depth of 3,450 feet on November 10thand was cased and cemented on November 11th. The well encountered over 125 feet of highly fractured Barnett Shale The Barnett Shale is a geological formation of economic significance. It consists of sedimentary rocks of Mississippian age in the U.S. State of Texas. The formation is estimated to stretch from the city of Dallas to west of the city of Fort Worth and south, covering 5,000 square with over 20% porosity porosity /po·ros·i·ty/ (por-os´it-e) the condition of being porous; a pore. po·ros·i·ty n. 1. The state or property of being porous. 2. in spots and over 75 feet of highly fractured Marble Falls carbonate with over 7% porosity. We anticipate completing this well within the next 10 days. Our second Marble Falls/Barnett Shale, #E2, well is currently drilling at 3,100 feet with anticipated total depth to be reached in the next few days. With 2 rigs under contract, we anticipate completing our initial 10 well program over the next 75 days. We will begin drilling our initial waterflood pattern of up to 4 water injection wells and 7 producers as soon as we complete our 10 well Marble Falls/Barnett Shale program as described above. We anticipate water injection to begin in March/April of 2007. Corsicana Field The drilling of our waterflood pattern has been initiated. We currently have 1 drilling rig and 1 workover rig running in the Corsicana Field. To date we have drilled and cased 7 waterflood pattern wells and are drilling on well number 8. Up to 3 additional wells will be drilled to re-establish a waterflood pattern with water injection commencing in February/March 2007. Open hole logs reveal remaining oil saturations in the 50% to 55% range in the Nacatosh sandstone sandstone, sedimentary rock formed by the cementing together of grains of sand. The usual cementing material in sandstone is calcium carbonate, iron oxides, or silica, and the hardness of sandstone varies according to the character of the cementing material; quartz at a depth of approximately 800 feet. The high remaining oil saturations, combined with the Polymer Pilot response that was conducted in 1983-1984 establish this field as a prime Alkaline-Surfactant-Polymer candidate. Based on the waterflood pattern response and timing, an ASP pilot will be designed to be implemented in the June/July 2007 timeframe. Panhandle panhandle, in geography, a strip of land projecting from the main body of an area and shaped like the handle of a pan, such as the panhandles of West Virginia, Texas, and Alaska. Field - Phase I Waterflood Development Facilities design, permitting and procurement The fancy word for "purchasing." The procurement department within an organization manages all the major purchases. for our planned Phase I waterflood are on budget and on schedule. We are moving in a drilling rig and have 15 workover rigs currently running in the Panhandle Field. The drilling rig is planned to drill 9 replacement wells with the workovers intended to return 20 wells to production in the Phase I waterflood development. The Phase I waterflood patterns are on schedule to be complete with water injection to begin in the March/April 2007 timeframe. Our aggressive workover program in the remainder of the field has increased production over 50 BOEPD BOEPD Barrels of Oil Equivalent Per Day in November. Nowata Field We currently have 2 workover rigs running in the Nowata Field with approximately 6 of 15 scheduled wells having been returned to production to date. ASP Pilot plant design and procurement are on schedule for a March/April 2007 start-up. Davenport Field Davenport Field is a baseball stadium in Charlottesville, Virginia. It is the home field of the University of Virginia Cavaliers college baseball teams. The stadium holds 2,924 fans and opened in 2002. It is named after former UVA executive director, Ted Davenport. We have 2 workover rigs running in the Davenport Field with approximately 8 of a scheduled 24 wells having been returned to production to date. We anticipate having all scheduled wells being returned to production within 90-120 days. Upon completion of all workovers, we anticipate initiating an ASP pilot project in FY 2008 contingent upon Adj. 1. contingent upon - determined by conditions or circumstances that follow; "arms sales contingent on the approval of congress" contingent on, dependant on, dependant upon, dependent on, dependent upon, depending on, contingent successful laboratory studies. Management Comments Jeff Johnson, Cano's Chairman and CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. , stated, "The execution of our capital budget program for FY 2007 remains the focus of our attention. This operational update provides evidence of our significant execution of that budget." Earnings Call The Company will hold an earnings call to discuss fiscal first quarter results and provide an update on its operations on Thursday, November 16, 2006, at 4:15 P.M. Eastern Time (3:15 P.M. Central Time). Interested parties can participate in the call by dialing (800) 573-4842 or (617) 224-4327 (outside the U.S.). The passcode is 66097599. This call is being webcast by Thomson/CCBN and can be accessed at Cano's website at www.canopetro.com. The webcast is also being distributed through the Thomson StreetEvents Network. Individual investors can listen to the call at www.earnings.com, Thomson's individual investor portal, powered by StreetEvents. Institutional investors Institutional Investor A non-bank person or organization that trades securities in large enough share quantities or dollar amounts that they qualify for preferential treatment and lower commissions. can access the call via Thomson StreetEvents (www.streetevents.com), a password-protected event management site. [TABLE OMITTED] See Form 10-Q Form 10-Q See 10-Q. and accompanying notes to these unaudited financials [TABLE OMITTED] [TABLE OMITTED] See Form 10-Q and accompanying notes to these unaudited financial statements. [TABLE OMITTED] See Form 10-Q and accompanying notes to these unaudited financial statements. ABOUT CANO PETROLEUM: Cano Petroleum Inc. is an independent Texas-based energy producer with properties in the mid-continent region of the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. . Led by an experienced management team, Cano's primary focus is on increasing domestic production from proven fields using enhanced recovery methods. Cano trades on the American Stock Exchange American Stock Exchange (AMEX) Stock exchange in the U.S. Originally known as “the Curb,” it began as an outdoor marketplace in New York City c. 1850. It moved indoors to its present location in the Wall Street area in 1921. under the ticker symbol Ticker Symbol An arrangement of characters (usually letters) representing a particular security listed on an exchange or otherwise traded publicly. When a company issues securities to the public marketplace, it selects an available ticker symbol for its securities which investors CFW. Additional information is available at www.canopetro.com. Safe-Harbor Statement -- Except for the historical information contained herein, the matters set forth in this news release are "forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. " within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The company intends that all such statements be subject to the "safe-harbor" provisions of those Acts. Many important risks, factors and conditions may cause the company's actual results to differ materially from those discussed in any such forward-looking statement. These risks include, but are not limited to, estimates or forecasts of reserves, estimates or forecasts of production, future commodity prices, exchange rates, interest rates, geological and political risks, drilling risks, product demand, transportation restrictions, the ability of Cano Petroleum, Inc. to obtain additional capital, and other risks and uncertainties described in the company's filings with the Securities and Exchange Commission. The historical results achieved by the company are not necessarily indicative of its future prospects. The company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. |
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