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Tempest Energy Corp. Announces Record First Quarter Results.

Business Editors

CALGARY, Alberta--(BUSINESS WIRE)--May 12, 2003

Tempest Energy Corp. -0-


FIRST QUARTER REPORT
For the three months ended March 31, 2003
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Corporate Highlights First quarter First quarter
 ended ended %
 March 31, 2003 March 31, 2002 Change
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Operating Results
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Production
 Crude oil and NGLs(bbls/d) 2,241 454 393
 Natural gas (mcf/d) 2,757 584 372
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 Barrels of oil equivalent
 (6:1) (boe/d) 2,701 552 390
Prices
 Crude oil and NGLs($/bbl) 34.18 22.16 54
 Natural gas ($/mcf) 6.66 3.44 94
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 Barrels of oil equivalent
 (6:1) ($/boe) 35.17 21.89 61

Operating Costs ($/boe) 4.88 6.37 (23)

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Financial Results
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Petroleum and natural
 gas sales $ 8,547,891 $ 1,086,541 687

Cash flow from operations 5,238,558 527,882 892
 Per basic share .34 .06 417
 Per diluted share .31 .06 473

Net Income before tax 2,534,515 81,012 3,029

Working capital (deficit) (12,986,162) (11,371,277) 14

Capital expenditures 13,235,383 9,521,777 39

Shareholders' equity 32,954,233 7,055,046 367

Shares outstanding
 Class A 14,965,123 8,107,867 85
 Class B 653,476 653,476 -
 Options 1,889,677 789,467 139

Weighted shares outstanding
 Class A 14,909,588 8,107,867 84
 Class B 653,476 653,476 -
 Options 1,889,677 789,467 139

Basic Shares (weighted) 15,563,064 8,761,343 78
Diluted Shares (weighted) 16,884,422 10,364,587 63



CORPORATE HIGHLIGHTS

-- Record revenue, cash flow, and income before tax of $8.5

million, $5.2 million and $2.5 million, respectively in the

first quarter or $0.55, $0.34, and $0.16 per basic share.

-- First quarter production averaged 2,701 boe per day. Current

production is approximately 3,300 boe per day, weighted

approximately 70 percent to crude oil.

-- Drilled 12 (9.9 net) wells in the first quarter with a 75

percent success rate and an 83 percent working interest.

-- Increased undeveloped land base to 142,902 (111,225 net)

acres.

-- Drilled two significant Granite Wash light oil discoveries at

Red Earth.

-- First natural gas production from Equisetum.

-- First horizontal test well into the fourth oil pool discovery

at Chipman placed on production.

-- Natural gas discovery in the Chipman area, which tested at 2

mmcf per day, expected to be on production in Q3.

MESSAGE TO SHAREHOLDERS

Tempest again set new corporate records for quarterly revenue, cash flow and earnings and in every category eclipsed its Q1 2002 performance as indicated on the page 1 table of this interim report. Growth was accompanied by the Company's lowest cash costs to date of $5.59 per boe. Operating costs for the quarter were $4.88 per boe compared to $6.37 per boe in 2002, reflecting facility development as well as higher production volumes.

Our growth has resulted in a renaming of the core areas. The Chipman area is now referred to as our Central Area; Red Earth, Equisetum and Otter are the cornerstones of our Northern Area.

First quarter growth, which was generated through the drill bit, reflects our continued focus on a disciplined exploration strategy. With this vision for organic growth, we are pushing our core areas outwards. In both areas, we control significant infrastructure, have a dominant land position and will continue to generate exploration opportunities.

The North and Central areas constitute well-established growth regions for Tempest. During the first quarter, we continued efforts to establish a third core area that offers moderate-risk, higher-impact opportunities. We anticipate that this new area will generate exploration drilling in 2004.

Operations

During the first quarter, Tempest participated in drilling 12 (9.9 net) wells with a 75 percent success rate. The total winter drilling program, which commenced in November 2002 and ended with spring break-up in early April, included the drilling of 15 exploration wells and 4 horizontal locations in the Central Area.

Northern Area

Tempest completed a strong winter drilling program, marking the third consecutive winter season with exploration discoveries. In our Northern Area, Tempest tied in three additional Bluesky natural gas wells. Currently, the Company is producing from nine natural gas wells in the Northern Area at a net rate of approximately 4 mmcf per day. This production includes three 100 percent owned wells on farm-in lands at Equisetum that have a current combined net rate of 1.5 mmcf per day.

In our continued efforts to grow and dominate the Northern Area, the Company is preparing to begin building another major pipeline in late fall that will tie in existing natural gas wells at our Otter discovery. The Otter production, which is expected to be onstream in the second quarter 2004, will be processed at Tempest's operated Red Earth natural gas plant.

On the oil side, Tempest drilled two significant Granite Wash light oil wells. The first was a new pool discovery; the second was a significant extension to an existing pool. Both wells have been onstream for more than 45 days at gross rates of approximately 150 barrels of oil per day each. These latest discoveries are defined on 3-D seismic and the Company is now confirming up to 10 gross development locations. A fourth quarter 2002 Granite Wash discovery drilled on a separate feature is continuing to produce with increased water cuts. The Company is currently evaluating the 3D seismic on this prospect to determine a more optimal drilling location. Our winter drilling activity has confirmed the Northern Area as a major growth region for the Company on our extensive land base.

Tempest has just completed a 31 square kilometre 3D seismic program on nine sections of Tempest operated and controlled lands prospective for Granite Wash light oil. Initial interpretation indicates potential for multiple exploration targets. In addition, several new high-impact light oil area opportunities have been identified and recently secured for future drilling. This region is predominantly a winter-access area; however, a number of exploration and development locations may be accessible in the summer. Tempest is currently confirming these locations and working on next winter's oil and natural gas drilling inventory.

First quarter production from the Northern Area was 294 boe per day, consisting of 44 barrels of oil per day and 1.5 mmcf per day of natural gas, while second quarter production from the area is expected to be approximately 750 boe per day.

Central Area

During the first quarter, the Company drilled its first horizontal test well into its fourth oil pool in Central Alberta. Positive results could lead to as many as five development horizontal wells. Tempest also drilled two horizontal wells into existing pools during the quarter. The Company currently has 18 producing horizontal wells.

In order to continue our oil exploration in the Central Area, the Company recently completed a very significant 28 square kilometre 3D program on Tempest lands. Initial interpretation has identified 3-5 net potential exploratory well locations with drilling scheduled to begin early in the third quarter.

As previously announced, the Central Area is becoming an increasingly important natural gas region for the Company. During the quarter, Tempest drilled its second exploration natural gas discovery well that tested at a rate of 2 mmcf per day. We anticipate having this well tied in and onstream late in the third quarter of 2003. Additionally, Tempest anticipates drilling 15 net natural gas exploration locations in the Central Area over the next two years. The program will commence in the second quarter of 2003.

Tempest had average oil and natural gas production during the first quarter of 2,407 boe per day from the Central Area, consisting of 2,197 barrels of oil per day and 1.2 mmcf per day of natural gas.


2003 Drilling Activity

Exploration Development Total Success W.I.
Gross Net Gross Net Gross Net
 7.0 5.5 5.0 4.4 12.0 9.9 75% 83%



Financial Results

Increased production and strong commodity prices provided Tempest with record first quarter revenue of $8.5 million and cash flow of $5.2 million. Capital expenditures during the first quarter totaled $13.2 million and were primarily allocated to the winter program in the Northern Area. Capital expenditures consisted of $6.5 million for drilling and completions, $2.9 million for land and seismic, and $3.8 million for tangible equipment and facilities. Tempest is forecasting total capital spending of $40 million in 2003.

At the end of March, debt and working capital was $13 million, well within our debt-to-cash flow parameters. Additionally, we are currently negotiating an increase to our bank line that we expect will be in place by mid-year.

Tempest is well on track to meet its 2003 forecast. Our production forecast is set at 3,300 boe per day, with an exit rate of 4,000 boe per day. We have forecast cash flow for the year of $20 million based on a $40 million capital spending program.

Outlook

New light oil and natural gas production from our Northern Area is providing an enhanced production profile and geographical diversification. The Company will be very active throughout the balance of 2003, testing our current exploration inventory and adding to our drillable prospects for 2004. We are continuing to evaluate a large number of strategic acquisitions to find those that are accretive and represent area consolidation.

In order to continue our rapid growth, the Company has added a senior geologist with over 20 years proven oil and gas exploration experience. Tempest now has total staff of 12 full-time employees.

We appreciate the ongoing support of our shareholders and Board of Directors in our exploration efforts.

This disclosure contains certain forward looking statements that involve substantial known and unknown risks and uncertainties, certain of which are beyond Tempest's control, including: the impact of general economic conditions in Canada and the United States, industry conditions, changes in laws and regulations (including the adoption of new environmental laws and regulations) and changes in how they are interpreted and enforced, increased competition, the lack of availability of qualified personnel or management, fluctuations in foreign exchange or interest rates, stock market volatility and market valuations of companies with respect to announced transactions and the final valuations thereof, and obtaining required approvals of regulatory authorities. Tempest's actual results, performance or achievement could differ materially from those expressed in, or implied by, these forward looking statements and, accordingly, no assurances can be given that any of the events anticipated by the forward looking statements will transpire or occur, or if any of them do so, what benefits, including the amount of proceeds, that Tempest will derive therefrom.

The Toronto Stock Exchange has neither approved nor disapproved of the information contained herein.
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