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DATE: October 15, 1999 ECORD FINANCIAL RESULTS -CASH FLOW PER SHARE DOUBLES In the third quarter of 1999, the Company increased cash flow by 104 percent over the third quarter of 1998 from $6.4 million to $13.0 million. Funds generated from operations per fully diluted share were a record $0.51 in the third quarter of 1999 compared to $0.26 during the same period in 1998. This represents an increase of 96 percent over the third quarter of 1998. Earnings for the third quarter of 1999 were a record $2.7 million ($0.11 per share) as compared to earnings of $84,000 ($0.004 per share) in the third quarter of 1998. This represents an increase in earnings per fully diluted share of more than 2,500 percent over the third quarter of 1998. These record financial results were achieved in the third quarter as a result of excellent ongoing drilling results from Startech's expanded drilling program, improved world oil prices and continued low operating, and general and administrative expenses. Third quarter 1999 corporate average prices were C$27.83 per barrel of crude oil and C$2.33 per mcf for natural gas, compared to C$18.20 per barrel of crude oil and C$2.01 per mcf for natural gas in the third quarter of 1998. Startech's ongoing hedging program had an opportunity cost of $0.71 per BOE in the third quarter of 1999. The Company continues to use hedging as a tool for managing cash flow for re-investment. Operating expenses in the third quarter of this year were $4.71 per BOE compared to $5.14 per BOE for the same period a year ago. General and administrative expenses in the third quarter of 1999 were $0.65 per BOE as compared to $0.91 per BOE in the same period a year ago. Bank debt as at September 30, 1999 was $88.0 million, with a working capital deficiency of $3.4 million, resulting in total debt of $91.4 million at quarter end. OPERATIONS -SUCCESSFUL DRILLING CONTINUES During the third quarter of 1999 Startech's daily production averaged 10,425 BOED compared to 8,886 BOED in the third quarter of 1998. This represents an increase in daily production of 17 percent over the third quarter of 1998. In the third quarter of 1999 Startech drilled 29 net wells of which 4 were cased for oil production, 21 were cased for gas production, 1 is a service injector, and 3 were dry and abandoned. This represents an 90 percent success rate for the Company's 1999 third quarter drilling program. Startech achieved excellent drilling results in the third quarter with respect to light oil drilling at Lougheed, Alida and Wilmar in SE Saskatchewan, and for medium gravity crude oil and natural gas drilling at Grassy Lake and Retlaw in SE Alberta. At Lougheed, third quarter drilling resulted in a significant new extension to the existing pool. The successful stepout horizontal, currently producing over 450 bopd, has proved up a number of incremental horizontal locations. Two of these new locations will be drilled in the 4th quarter of 1999. At Retlaw, the Company was successful in extending the existing Sunburst oil pool with the drilling of a new 100 percent working interest stepout location. This prolific well has proved up several followup locations which will be part of Startech's year 2000 drilling program. At Wilmar in SE Saskatchewan Startech participated in the drilling of a successful horizontal well during the 3rd quarter that has proved up the undrained nature of this prolific reservoir. There are 2 further locations to be drilled in the 4th quarter, and a minimum of 3 follow-up locations planned for the year 2000. The Company also initiated the first phase of its 125 well, low risk, natural gas in-fill program on the Company's 100 percent owned Brooks property in southeast Alberta. In the third quarter of this year 21 wells were drilled into this multi-zone, high netback natural gas property adding more than 3.5 mmcf/d of long life production by mid-September. The second phase drilling of an additional 50 wells at Brooks will provide an additional 7 - 8 mmcf/d by year end. Startech will now enter 2000 producing approximately 18 mmcf/d of long life gas at Brooks - triple the pre-development production rate. Based on the excellent results Startech has achieved from its drilling program, current production is now more than 1,000 BOED higher than the Company's third quarter average daily production. This will have a continued positive impact on fourth quarter production, cash flow and cash flow per share. The Company is now producing more than 9,000 bpd of oil and liquids, and 25 mmcf/d of gas. Startech has already exceeded its projected year end natural gas production rate of 24 mmcf/d, and expects the fourth quarter 50 well Brooks program to add an additional 7 - 8 mmcf/d. Continued drilling will occur in the fourth quarter of 1999 with the drilling of over 65 net wells in SE Alberta at Retlaw, Grassy Lake, Bow Island and Brooks for crude oil and natural gas, and in SE Saskatchewan at Lougheed, Wilmar and Parkman for light oil. To date in the fourth quarter, successful oil wells have been drilled at Retlaw, Wilmar and Parkman adding over 450 bopd net to Startech. With the continued strength in commodity prices, Startech is stepping up pre-investment in high quality exploration projects. Startech has initiated 3-D seismic programs in each of the Company's 3 project areas on "impact plays" that have been identified as key to the Company's continued growth. Startech continues to await a regulatory decision with respect to its Whiskey Creek Mississippian Foothills natural gas location. The Company is also proceeding to a regulatory hearing (ie. through the operator) on Startech's first West Peace River Arch exploratory location (50 percent Startech). Pending successful resolution of outstanding regulatory matters these exciting, high impact locations will be drilled as soon as rigs become available. OUTLOOK Upward Revision to 1999 Production Exit Rate Startech continues to achieve excellent success from its drilling program. As a result, Startech will now exit 1999 with production of more than 12,000 BOED (25 percent gas). Based upon the Company's successful program to date, and continued strong commodity prices for both oil and gas, Startech once again expects to achieve record production, cash flow, and earnings in the fourth quarter of 1999. For further information concerning Startech Energy Inc., please contact Mr. Paul Colborne, President and CEO at (403) 231-2300 or visit our website at startechenergy.com. Became intriqued by this company when looking at their exploration into the Montana side of the disturbed belt. They're exploring in Teton Co., Montana, on land directly south of the K2/MEXP/Blackfeet project. Became more intriqued after I reviewed their drilling record and debt profile. IMO share price is not currently reflecting sutstained higher oil prices. I will inquire about hedging. Any thoughts? | ||||||||||||
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