CALGARY, Aug. 6 /PRNewswire-FirstCall/ -- Compton Petroleum
Corporation (TSX - CMT, NYSE - CMZ) reports its financial and
operating results for the three months ended June 30, 2009. The
full text of Management's Discussion and Analysis ("MD A") and the
Corporation's audited consolidated financial statements can be
found on the Corporation's website at
http://www.comptonpetroleum.com/ and at http://www.sedar.com/
Summary of Quarterly Performance - Completion of the annual review
of the credit facility with the borrowing base exceeding the
Corporation's requirements for 2009 - Assembly of the new
management team, who began to work on the go- forward strategy for
the Corporation - Funds flow from operations of $9.6 million, or
$0.08 per diluted share - Adjusted operational earnings for the
quarter was a loss of $15.5 million, largely due to non-cash items
such as unrealized foreign exchange and other gains - Net earnings
of $19.8 million, or $0.16 per diluted share - Average production
was 21,440 boe/d, a decrease of 30% relative to 2008 due to
property dispositions, natural declines and the lack of volume
additions from drilling in the quarter - Capital expenditures of
$15.5 million Natural gas prices remain depressed with some of the
lowest prices being realized since 2002. Though management believes
that the expected longer term trend is for increased commodity
prices through 2010, the current price level has impacted Compton's
financial results. In addition, capital markets appeared to be
showing indications of opening up, with new energy equity issues
increasing 52% in May and June compared to the first four months of
the year. In this environment, Compton remains focused on its
recapitalization and will continue with its defensive strategy of
living within funds flow and investing in projects that meet
internal rate of return hurdles, until a clear signal in the
recovery of commodity prices is evident. Throughout the first half
of 2009, the Corporation strengthened its management team, began
improvements to systems and processes, and initiated strategies to
optimize asset development. Compton's revitalized culture is
committed to delivering on its promises and providing
value-accretive results in all of its activities. These efforts
will be supported by the Corporation's disciplined investment
approach and allow for growth when supported by stronger commodity
prices. Compton is taking a multi-faceted, staged approach to
recapitalization, which is intended to support the needs of all
stakeholders. The objective is to reduce the Corporation's debt
level to achieve a debt to cash flow ratio of less than 2:1 in a
normalized pricing environment of mid-cycle natural gas prices. At
the Corporation's current production rates, the overall debt level
would approximate $400 million. The recapitalization approach
considers various alternatives to reduce the debt level including:
- conversion of debt to equity; - issue of new capital and/or
equity; - sale of a Gross Overriding Royalty on properties; and/or
- mergers or acquisitions. Progress is being achieved on all fronts
with advanced discussions taking place in several areas, including
ongoing discussions with the Corporation's advisor and its note
holders. Financial Review Three Months Ended June 30 Six Months
Ended June 30
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(000s, except per share amounts) 2009 2008 % Change 2009 2008 %
Change
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Total revenue(1) $ 54,124 $ 186,846 (71%) $ 123,023 $ 347,548 (65%)
Funds flow from opera- tions(2) $ 9,572 $ 76,651 (88%) $ 31,613 $
145,973 (78%) Per share - basic(2) $ 0.08 $ 0.59 (86%) $ 0.25 $
1.13 (78%) - diluted (2) $ 0.08 $ 0.58 (86%) $ 0.25 $ 1.10 (77%)
Adjusted operational earnings (1)(2) $ (15,511) $ 24,948 (162%) $
(17,748) $ 44,297 (140%) Net earnings (loss) $ 19,848 $ (8,561)
332% $ 2,480 $ (6,942) 136% Per share - basic $ 0.16 $ (0.07) 329%
$ 0.02 $ (0.05) 140% - diluted $ 0.16 $ (0.07) 329% $ 0.02 $ (0.05)
140% Capital expenditures before acquisitions and divest- ments $
16,651 $ 63,464 (74%) $ 33,034 $ 164,473 (80%) Total bank debt
& term notes $ 853,945 $ 916,951 (7%) Shareholders equity $
838,072 $ 873,293 (4%) Shares outstanding 125,573 130,195 (4%) (1)
Prior periods have been revised to conform to current period
presentation (2) Funds flow from operations and adjusted
operational earnings are non-GAAP measures and are addressed in
detail in the MD&A Revenue decreased by 71% over the second
quarter of 2009 due to significantly lower realized natural gas and
liquids prices and reduced production volumes. Compton recognized
net earnings of $19.8 million for the three months ended June 30,
2009, as compared to a net loss of $8.6 million during the second
quarter of 2008. The gain is largely attributable to unrealized
foreign exchange gains recognized on the US dollar denominated
senior notes, which more than offset the impact of lower commodity
prices and production volumes. For the year-to-date, Compton
realized net earnings of $2.5 million for 2009, as compared to a
net loss of $6.9 million for 2008 due to unrealized foreign
exchange gains over 2009 and a future income tax recovery
recognized in the first quarter of 2009. Capital spending, before
acquisitions, divestments and corporate expenses decreased by 85%
in 2009 compared to the comparable period in 2008 due to decreased
and delayed activity during 2009. The Corporation commenced
drilling one well in the second quarter of 2009 as compared to 34
in 2008. The decline in commodity prices has adversely impacted
economic returns on many of our drilling projects. Until such time
as natural gas prices improve and/or reductions in service costs
allow Compton to achieve its internal rate of return objectives,
the majority of the Corporation's field activities will focus on
optimizing production from existing wells. Operations Review Three
Months Ended June 30 Six Months Ended June 30
------------------------------------------------------ % % 2009
2008 Change 2009 2008 Change
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Average daily production Natural gas (mmcf/d) 108 149 (28%) 113 160
(29%) Liquids (bbls/d) 3,428 5,643 (39%) 3,540 5,326 (34%)
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Total (boe/d) 21,440 30,556 (30%) 22,312 31,915 (30%)
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Realized prices Natural gas ($/mcf) $ 3.80 $ 9.42 (60%) $ 4.51 $
8.39 (46%) Liquids ($/bbl) 49.93 110.37 (55%) 43.99 103.13 (57%)
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Total ($/boe) $ 27.74 $ 67.18 (59%) $ 30.46 $ 60.12 (49%)
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Field netback(1) ($/boe) $ 18.05 $ 37.62 (52%) $ 19.49 $ 32.03
(39%)
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(1) Field netback is a non-GAAP measures and is addressed elsewhere
in detail in the MD&A As anticipated, second quarter production
volumes were lower compared to the corresponding period in 2008
primarily due to asset sales in 2008 and natural declines. In
addition, volumes were affected by the impact of turnarounds and
minimal new production additions due to Compton's defensive
strategy limiting its capital expenditures. Activities during the
quarter continued to focus on the Niton area, targeting the Rock
Creek formation. Compton commenced drilling a Niton horizontal well
(100% working interest) during the second quarter. The well was rig
released and is in the process of being completed in the third
quarter. Well cost is expected to be approximately 10% less than
previous horizontal wells drilled in the area due to the
Corporation's focus on cost reduction and lower industry rates.
Compton is in the process of monitoring the Niton horizontal well
drilled in the first quarter to determine a six month production
rate. The well had an initial production rate (9.5 MMcf/d) that was
higher than previous wells drilled in the area and is currently
flowing at 1.7 MMcf/d. Typically, these wells experience a decline
in the first two months of approximately 70%, from which rates
stabilize after six months. This will provide additional data in
evaluating the economics and design of future wells in the area.
Compton focused on several initiatives with its new teams during
the second quarter to identify opportunities to add value. During
the quarter the Corporation: - Launched an operating expense
benchmarking study to better understand operating costs and
identify cost savings opportunities, which is expected to be
completed by the end of October; - Continued the optimization study
initiated in the first quarter by thoroughly reviewing properties
and wellbores to identify workover and recompletion opportunities.
Implementation is expected to commence during the second half of
the year; and - Prepared preliminary work to launch an updated
multi-year strategic plan, which is expected to be completed by
year-end. In establishing Compton's 2009 capital expenditure level,
management's objective is to limit spending to within funds flow
generated from operations, which is consistent with the
Corporation's defensive operating strategy. The majority of the
year's expenditures were expected in the first half of the year. As
capital plans are assessed for the balance of the year, management
will consider additional activities as funds become available.
Outlook As Compton faces the challenge presented by low natural gas
prices, the Corporation is taking a prudent approach to financial
management by establishing appropriate return on investment
requirements, reducing its internal cost structure, managing its
capital structure to suitable levels, and re-evaluating its
depletion strategy to optimize asset value. In addition, Compton
increased its risk management activities by expanding its natural
gas price hedging position to reduce cash flow volatility as
natural gas prices are not expected to recover until late 2009 or
the first half of 2010. Approximately 60% of the Corporation's
production is hedged for 2009 and beyond at prices between AECO
$4.50 per giga joule and $7.18 per giga joule, safeguarding a
portion of revenue. Management is progressing with its various
recapitalization options. During the third quarter of 2009, the
Corporation expects to address its leverage concerns, realigning
capital structure and reducing overall financial risk. When this
process is complete, Compton expects to emerge as a stronger
company, poised to capitalize on its assets and growth in
production and cash flow. Over the first half of 2009, Compton
continued to make progress in controllable areas such as reduced
operating, G A and drilling costs. Due to negative movement in
foreign exchange and natural gas prices, downward pressure is being
experienced on the Corporation's cash flow; as a result, cash flow
may range between $50 and $60 million for 2009. Compton's asset
base provides solid growth potential through a large focused land
position and significant impact from horizontal multi-stage
fracture wells in the Niton and Hooker/High River properties. With
a continued focus on lowering well cost, management believes that
these horizontal wells may represent the best opportunity for
return on investment. Once the capital restructuring is complete,
the strength of the team as it implements a multi-year strategic
plan will position the Corporation to deliver long-term value to
its shareholders. Additional Information Compton has filed its
audited Consolidated Financial Statements for the three months
ended June 30, 2009 and related Management's Discussion and
Analysis with Canadian securities regulatory authorities. Copies of
these documents may be obtained via http://www.sedar.com/ or the
Corporation's website, http://www.comptonpetroleum.com/. To order
printed copies of the filed documents free of charge, email the
Corporation at . 2009 Second Quarter Conference Call Compton will
host a conference call and web cast on Thursday, August 6, 2009 at
8:00 a.m. MST (10:00 a.m. EST) to discuss the Corporation's 2009
second quarter financial and operating results. To participate in
the conference call, please contact the Conference Operator ten
minutes prior to the call at 1-888-231-8191 or 1-647-427-7450. To
participate in the web cast, please visit:
http://www.comptonpetroleum.com/. The web cast will be archived two
hours after the presentation at the website listed above. For a
replay of this call, please dial: 1-888-562-2819 or 1-402-220-7737
and enter access code 22903567 until August 13, 2009. Advisories
Non-GAAP Financial Measures Included in the news release are
references to terms used in the oil and gas industry such as funds
flow from operations, funds flow per share, adjusted operational
earnings, adjusted EBITDA, field netback, debt and capitalization.
These terms are not defined by GAAP in Canada and consequently are
referred to as non-GAAP measures. Non-GAAP measures do not have any
standardized meaning and therefore reported amounts may not be
comparable to similarly titled measures reported by other
companies. Funds flow from operations should not be considered an
alternative to, or more meaningful than, cash provided by
operating, investing and financing activities or net earnings as
determined in accordance with Canadian GAAP, as an indicator of the
Corporation's performance or liquidity. Funds flow from operations
is used by Compton to evaluate operating results and the
Corporation's ability to generate cash to fund capital expenditures
and repay debt. Adjusted operational earnings (loss) is used by the
Corporation to facilitate comparability of earnings between
periods. Adjusted operational earnings (loss) represents net
earnings excluding certain items that are largely non-operational
in nature, primarily of a non-cash nature or one-time non-recurring
items, and should not be considered an alternative to, or more
meaningful than, net earnings as determined in accordance with
Canadian GAAP. Adjusted EBITDA is a non-GAAP measure defined as net
earnings, before interest and finance charges, income taxes,
depletion and depreciation, accretion of asset retirement
obligations, and foreign exchange and other gains and losses. Field
netback equals the total petroleum and natural gas sales, including
realized gains and losses on commodity hedge contracts, less
royalties and operating and transportation expenses, calculated on
a $/boe basis. Funds flow netback equals field netback including
general and administrative costs and interest costs. Field netback
and funds flow netback are non-GAAP measures that management uses
to analyze operating performance. Debt is comprised of floating
rate bank debt and fixed rate senior term notes. Capitalization is
defined as bank debt plus shareholder's equity. Use of Boe
Equivalents The oil and natural gas industry commonly expresses
production volumes and reserves on a barrel of oil equivalent
("boe") basis whereby natural gas volumes are converted at the
ratio of six thousand cubic feet to one barrel of oil. The
intention is to sum oil and natural gas measurement units into one
basis for improved measurement of results and comparisons with
other industry participants. We use the 6:1 boe measure which is
the approximate energy equivalency of the two commodities at the
burner tip. However, boes do not represent a value equivalency at
the well head and therefore may be a misleading measure if used in
isolation. Forward-Looking Statements Certain information regarding
the Corporation contained herein constitutes forward-looking
information and statements and financial outlooks (collectively,
"forward-looking statements") under the meaning of applicable
securities laws, including Canadian Securities Administrators'
National Instrument 51-102 Continuous Disclosure Obligations and
the United States Private Securities Litigation Reform Act of 1995.
Forward-looking statements include estimates, plans, expectations,
opinions, forecasts, projections, guidance, or other statements
that are not statements of fact, including statements regarding (i)
cash flow and capital and operating expenditures, (ii) exploration,
drilling, completion, and production matters, (iii) results of
operations, (iv) financial position, and (v) other risks and
uncertainties described from time to time in the reports and
filings made by Compton with securities regulatory authorities.
Although Compton believes that the assumptions underlying, and
expectations reflected in, such forward-looking statements are
reasonable, it can give no assurance that such assumptions and
expectations will prove to have been correct. There are many
factors that could cause forward-looking statements not to be
correct, including risks and uncertainties inherent in the
Corporation's business. These risks include, but are not limited
to: crude oil and natural gas price volatility, exchange rate
fluctuations, availability of services and supplies, operating
hazards, access difficulties and mechanical failures, weather
related issues, uncertainties in the estimates of reserves and in
projection of future rates of production and timing of development
expenditures, general economic conditions, and the actions or
inactions of third-party operators, and other risks and
uncertainties described from time to time in the reports and
filings made with securities regulatory authorities by Compton.
Statements relating to "reserves" and "resources" are deemed to be
forward-looking statements, as they involve the implied assessment,
based on estimates and assumptions, that the reserves and resources
described exist in the quantities predicted or estimated, and can
be profitably produced in the future. The forward-looking
statements contained herein are made as of the date of this news
release solely for the purpose of generally disclosing Compton's
views of its financial and operational results as of June 30, 2009,
and prospective activities. Compton may, as considered necessary in
the circumstances, update or revise the forward-looking statements,
whether as a result of new information, future events, or
otherwise, but Compton does not undertake to update this
information at any particular time, except as required by law.
Compton cautions readers that the forward-looking statements may
not be appropriate for purposes other than their intended purposes
and that undue reliance should not be placed on any forward-looking
statement. The Corporation's forward-looking statements are
expressly qualified in their entirety by this cautionary statement.
About Compton Petroleum Corporation Compton Petroleum Corporation
is a public company actively engaged in the exploration,
development and production of natural gas, natural gas liquids, and
crude oil in western Canada. Our strategy is focused on creating
value for shareholders by providing appropriate investment returns
through the effective development and optimization of assets. The
Corporation's operations are located in the deep basin fairway of
the Western Canada Sedimentary Basin. In this large geographical
region, we pursue three deep basin natural gas plays: the Basal
Quartz sands at Hooker in southern Alberta, the Gething/Rock Creek
sands at Niton and Caroline in central Alberta, and the shallower
Plains Belly River sand play in southern Alberta. In addition, we
have an exploratory play at Callum/Cowley in the Foothills area of
southern Alberta. Natural gas represents approximately 86% of
reserves and production. Compton's shares are listed on the Toronto
Stock Exchange under the symbol CMT and on the New York Stock
Exchange under the symbol CMZ. DATASOURCE: Compton Petroleum
Corporation CONTACT: Susan J. Soprovich, Director, Investor
Relations, Ph: (403) 668-6732, Fax: (403) 237-9410, Email: ,
Website: http://www.comptonpetroleum.com/
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