Circle Energy year end report plus more details on Brazeau well and lawsuit between Scorpion Energy and Circle Energy
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Canadian Quotes from Telenium
CEN. (ASE)
Attention Business/Financial Editors:
Circle Energy Announces Year-End Results
CALGARY, May 20 /CNW/ - Circle Energy Inc. reports that production
revenue for the year ended December 31, 1998 was $1,326,621(1997-nil)
resulting in net earnings from operations of $447,875. This dramatic
improvement over 1997 is wholly attributable to the commissioning of a Brazeau
River Shunda gas well in June 1998 in which Circle has a 41.5% working
interest and is operator. The consolidated net loss for the year was $177,559
compared to net loss of $507,461 in 1997. The current year's loss is
primarily a function of the absorption of pre-production G & A costs and the
write-off of certain U.S. assets. Funds provided by operations for the year
were $386,351 with $514,242 contributed in the second half of the year.
Daily production (net to Circle) from the Brazeau well averaged 2.6 mmcf
per day of gas and 58.7 bbls of associated liquids for total production of 319
BOE per day. This well is capable of gross gas production in excess of 10
mmcf per day, however, production has been limited due to processing and
transportation restrictions in the area. The Company is currently negotiating
a solution to these restrictions. Gas prices for the year averaged $2.21 per
mcf and average liquid price was $16.81 per bbl.
The Company added proved reserves of 4.53 bcf of gas and 147,000 bbls of
NGLs and probable reserves of 1.0 bcf in the Brazeau area with the
commissioning of the 13-15-48-12 W5M well and the drilling of the 16-16-48-12
W5M well.
Expenses for the year were $1,183,948 compared with $435,350 in 1997, an
increase of $748,598. This increase is primarily associated with the Brazeau
production with $347,920 in operating costs and $308,429 in depletion expense.
$31,400 of interest expense was incurred relating to an advance from a Company
officer and utilization of our bank credit facility.
The Company wrote off $248,481 of capital assets in the United States.
$170,480 related to a well drilled and abandoned in Sealy, Texas with the
balance related to land expiries in New Mexico.
During 1998 the Company raised $1,270,600 in gross proceeds from two
flow-through share private placements. Of these proceeds the full amount was
expended and renounced as qualifying expenditures for the 1998 tax year. The
Company raised a further $655,308 of capital through the disposition of a
non-core property in Northern Alberta and partner equalizations related to
wells drilled during the year. In addition, an officer of the Company
advanced the Company $300,000 of which $230,000 remains outstanding at
December 31, 1998. The Company had a further $388,000 available through a
revolving credit facility negotiated in 1998.
Capital expenditures for the year were $4,119,293 (1997-$1,717,051). The
Company invested $3,601,498 of this amount in Canada with the completion and
tie-in of the Brazeau River 13-15- 48-12 W5M Shunda gas well; drilling of four
wells in Alberta (1 successful gas at Brazeau River 16-16-48-12 W5M, 2 dry
holes at Waskatenau and Greencourt, 1 suspended well at Morinville); and
undertaking various seismic programs and land acquisitions related to the
development of our current drilling prospects. $517,795 was invested in
United States acquiring land in New Mexico and drilling a well (dry) in Sealy,
Texas.
As previously disclosed, the Company is party to a legal dispute over its
entitlement, under an Area of Mutual Interest Agreement (''AMI'') to an
additional 16.95% working interest ownership in two sections of land in the
Brazeau River area of Alberta. Management of the Company believes their claim
to entitlement to this interest is meritorious.
Related to the foregoing dispute, the Company initiated legal action by
filing an Affidavit with the Court in December 1998 applying for an
expeditious interpretation of the AMI and a declaration of the rights of the
Company. Subsequent to filing a second Affidavit with the Court in January
1999, the Company was served with a Statement of Claim by the Respondent to
the Affidavit. The plaintiffs have asserted that the Company is not entitled
to the additional 16.95% working interest ownership in the properties; that
the Company is in penalty with respect to its initial 39.55% working interest
ownership in a successful natural gas well on the properties; and, is seeking
$3,971,426 in damages and a further $150,000 in punitive damages. The
plaintiff has asserted that the amount applicable to the penalty on the 39.55%
interest would be approximately $1,700,000 which would be deductible from the
Company's interest in net production revenue from the well.
The Company asserts that it is entitled to the additional 16.95%
interest; is contesting the plaintiff's claim that the Company is in penalty;
and has filed a Statement of Defense and Counterclaim seeking $2,000,000 in
damages and $500,000 in punitive damages. Although the legal proceedings are
in the early stages, management of the Company is of the view that the
plaintiffs claim lacks merit.
Circle Energy Inc. holds oil and gas leases in Central Alberta,
Saskatchewan, New Mexico and Texas. The Company's shares trade on The Alberta
Stock Exchange under the symbol CEN.
The Alberta Stock Exchange has neither approved nor disapproved the
information contained herein.
%SEDAR: 00001150E
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For further information: Bill Baker, President & Chief Executive
Officer, (403) 777-1925; Geoffrey Bennett, Chief Financial Officer, (403)
777-1929
CIRCLE ENERGY INC. has 27 releases in this database.
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