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Gold/Mining/Energy : Canadian Oil & Gas Companies

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To: Richard Saunders who wrote (230)	9/13/1996 3:37:00 AM
From: Kerm Yerman	of 24935

Richard/Richland Petroleum II The kicking butt portions I 've extracted from the 1995 annual report. PRESIDENTS MESSAGE To better manage our activities in Saskatchewan in the future, we will be implimenting a number of changes to our exploration approach. The changes include delinerating new pools thru vertical drilling prior to extensive horizonal drilling. We have also introduced improvements to our reservoir engineering techniques and modeling in order to better assess longer term term reservoir performance. These changes in approach will extend the time frame required to realize full asset value but they will help achieve two objectives: to ensure that the limits of the reservoir are well understood and that pool developement is completed at the optimal capital expenditure level, reducing finding and onstream costs. Richlands high participation rates (68% 1995) are indicative of our willingness to bear the risk in order to maintain controls in the areas in which we are active. Richland will continue to generate prospects internally and retain operatorship whenever possible. The undeveloped land base nearly doubled in 1995 with an average working interest of 88%. The investment reflects our commitment to exploration as the key strategy to our long term growth. $30 million has been budgeted for capital expenditures, funded from cash flow and our line of credit. By removing our long term debt position in 1995, we have stayed well within corporate objective of 1.5X forward annualized cash flow. Our current budget will allow us to end 1996 at a conservative debt level. The drilling program for 1996 is more varied and has the opportunity to add long-life reserves and near term cash flow. Richland will consider acquisitions to establish a new core area. We have detailed criteria and will be watchful for upside potential with the capability of complimenting our exploration program. We have made personnel changes in our operations and exploration groups and, combined with the seismic and land investments made in 1995, this will result in an active exploration program in the second half of 1996. Growth in production is expected to be in excess of 30% to 4100 bbl's/d. This will allow for cash flow in excess of $16.3 million. We expect price of crude oil to be same as 1995. Approximately 50% of our budgeted production has been hedged at $24.88Cdn. OTHER NOTEWORTHY COMMENTARY Wells drilled in 1995 accelerated production without necessarily adding new reserves. Our approach in 1996 will be adjusted to take advantage of longer production profiles to augment detailed reservoir engineering ensuring maximum recovery at the most efficient cost. Based upon average WTI price of $18.00 and average exchange rate of $0.73, revenues are expected to exceed $33 million in 1996. The company has hedged over 2100 bbl's/d at an average price of $18.06US and an average exchange rate of $0.7258 which allowed the company to plan 1996 activity with confidence. Richland has invested over $8 million into facilities over past two years and operating cost objective is $3.70 bbl for 1996. Richland has budgeted $30 million in expenditures for 1996; $12.5 mil is targeted for exploration and $9.5 mil for developement projects. The remaining portion is allocated to acquisitions. In 1995, the company ended the year without any outstanding debt and an unused credit line of $20 million. Of the $30 mil in planned expenditures, $13mil is anticipated to be new debt. The company plans up to 12 exploration prospects for 1996. End Part II

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