Sonde Resources Corp. ("Sonde" or the "Company") (TSX: SOQ)(NYSE
Amex: SOQ) announced today the release of its financial and
operating results for the year ended December 31, 2010. The
Management's Discussion and Analysis and financial statements for
the year ended December 31, 2010, can be viewed on the System for
Electronic Document Analysis and Retrieval (SEDAR) at
www.sedar.com, and is included in the Company's Annual Report on
Form 40-F, available on the Securities and Exchange Commission's
Electronic Document Gathering and Retrieval System (EDGAR) at
www.sec.gov. Shareholders have the ability to receive a hard copy
of the Company's complete audited financial statements free of
charge upon request.
In addition, Sonde announced it has filed its statements of
reserves data and other oil and gas information for the year ended
December 31, 2010 (the "Statement of Reserves Data"), as mandated
by National Instrument 51-101 - Standards of Disclosure for Oil and
Gas Activities. The Statement of Reserves Data is included in the
annual information form of Sonde for the year ended December 31,
2010 (the "AIF"). Copies of Sonde's AIF may be obtained on
SEDAR.
Financial and Operating Highlights
In Western Canada, Sonde focused capital activity on its
extensive behind-pipe inventory, deploying $4.3 million to complete
12 re-entries (75% economic success rate) and 19 separate
work-overs (100% economic success rate). At December 31, 2010, the
Company had approximately 700 gross boe per day awaiting
tie-in.
-- On February 14, 2011, the Company entered into a hedge with a financial
institution for 5,000 GJ/day for the period March 1, 2011 to December
31, 2011 at $4.11 CAD/GJ against AECO monthly average index. In exchange
for receiving the fixed price on the February 14 swap agreement, the
Company sold a WTI NYMEX crude oil call option on 250 bbls per day at
US$100 per bbl from March 1, 2011 through to December 31, 2012.
-- Western Canada average daily production for the fourth quarter averaged
3,087 boe/d compared to 2,716 boe/d for the previous quarter. On a full
year basis, average daily production was 2,870 boe/d in 2010 compared to
3,020 boe/d in 2009. The year-over-year decrease in volumes is primarily
due to natural declines combined with minimal capital expenditures in
2010 imposed during the period the Company was under CCAA protection.
-- The Company's proved plus probable reserves were 10,171 MBOE at December
31, 2010 compared to 9,907 MBOE for the previous year. The increase was
due to successful re-entries and work-overs in 2010.
-- Petroleum and natural gas sales increased from $33.6 million in 2009 to
$38.8 million in 2010. The increase is mainly due to increases in
commodity prices and realized gains on an effective gas hedge.
-- The increased loss in 2010 of $(98.0) million compared to the loss of
$(53.3) million in 2009 is primarily due to an oil and gas ceiling test
impairment and the writedown of the Liberty Natural Gas LNG Project (the
"LNG Project"). The ceiling test impairment is due to lower natural gas
pricing in the 2010 versus 2009 independent reserve report.
-- During 2010, the Company incurred $30.9 million in North Africa on costs
related to the drilling and testing of the Zarat-1 North appraisal well.
The Company commenced drilling in November 2010 and completed drilling
and production testing of the appraisal well in January 2011. The
Company has temporarily abandoned the appraisal well in a manner
allowing it to be utilized for future development purposes. The Company
is currently evaluating the commercial development potential of the
feature, as well as discussing unitization options with owners of an
adjacent concession.
The Company is accounting for the following sales as
discontinued operations which are reported on the Company's balance
sheet as Assets and Liabilities of Discontinued Operations. Our
Statements of Operations only reflect our Western Canada, North
Africa and corporate activities.
-- On December 22, 2010, the Company entered into an agreement with Niko
Resources Ltd. ("Niko") to sell its remaining 25% interest in Block 5(c)
and its MG Block exploration and production license for an aggregate
purchase price of US$87.5 million. The purchase price is to be satisfied
via US$75.5 million and the assumption of the Company's performance
guarantee provided for the MG Block of US$12.0 million. On February 8,
2011, as part of the agreement, the Company issued a US$20.0 million
debenture to Niko. The debenture accrues interest at 6.0% per annum and
is secured against the Company's Block 5(c) interests. Upon closing of
the agreement, the US$20.0 million will be applied against the proceeds
of US$75.5 million. If the agreement does not close, the Company will be
required to repay the US$20.0 million plus accrued interest to Niko. The
closing of this agreement will result in the Company to reclaim US$20.0
million held as restricted cash with BG International Limited ("BG")
that was required under the CCAA Plan of Arrangement. The Niko sale
agreement closing is subject to the satisfaction of certain conditions
including approval from the Trinidad and Tobago Ministry of Energy and
Energy Industries. To date, the Company has not received the approval.
("Trinidad Sale")
-- On February 22, 2011, the Company completed the sale of Liberty Natural
Gas LLC which owns a 100% working interest in the LNG Project to an
entity related to West Face Capital Inc. The Company received US$1.0
million for reimbursable costs between January 1, 2011 and the date of
closing. The Company is entitled to receive deferred cash consideration
of US$12.5 million payable upon Liberty Natural Gas LLC's first
successful gas delivery. ("Liberty Sale")
Business Overview and Future Strategy
The Company is focused on the maximization of long-term
sustainable value to its shareholders by:
-- Developing the Western Canada asset base to increase average daily
production along with replacement of producing reserves on an economic
and cost effective basis by exploitation, full-cycle exploration and
strategic acquisition.
-- The Company is currently evaluating its entire acreage position in
anticipation of an aggressive, multi-year drilling program. Subject to
the completion of the Trinidad Sale, we anticipate 2011 Western Canada
capital expenditures to be approximately $34 million with near-term
focus on the Drumheller and Kaybob core areas.
-- Evaluating the commercial development potential of the feature
associated with the Zarat-1 North appraisal well in North Africa, as
well as discussing unitization options with owners of an adjacent
concession as a result of drilling the appraisal well, and evaluating
the recoverable reserve scenarios, development options and cost
estimates for the field's development.
Speaking today, Mr. Schanck, Sonde's President and Chief
Executive Officer, said, "The Company continues to monitor the
Trinidad government approval progress as well as the political
situation in North Africa while focusing on near term growth in
Western Canada. Even with these two international setbacks from our
plans, we will continue to monitor our cash position and intend to
aggressively pursue our growth strategy and development of our
assets as funds and circumstances permit."
4th Quarter Financial and Operational Review
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Three months ended December Twelve months ended December
31 31
($ thousands
except share,
per share and
operating % %
amounts) 2010 2009 change 2010 2009 change
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Financial
Petroleum and
natural gas
sales, net of
transportation 10,488 9,812 7 38,773 33,649 15
Cash flow from
(used for)
operations(1) (591) 3,672 (116) 4,009 645 522
Cash flow per
share - basic
(1) $0.00 $0.05 (100) ($0.01) ($0.08) 88
Net loss (71,263) (63,903) 12 (98,000) (53,321) 84
Net loss per
share - basic ($1.17) ($1.62) (28) ($1.60) ($1.51) 84
Capital
expenditures 56,730 19,360 193 85,525 104,597 (18)
Working capital
surplus
(deficit) 34,432 (9,345) (468) 34,432 (9,345) (468)
Shares
outstanding at
period end 62,301,446 39,411,500 58 62,301,446 39,411,500 58
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Operating
Natural gas
(mcf/d) 14,140 14,428 (2) 13,324 14,569 (9)
Crude oil and
natural gas
liquids
(bbl/d) 730 653 12 648 592 9
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Total
production
(boe/d) 3,087 3,058 1 2,870 3,020 (5)
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Natural gas
($/mcf) $4.65 $4.82 (4) $4.69 $4.09 15
Crude oil and
natural gas
liquids
($/bbl) $66.16 $56.73 17 $67.55 $55.09 23
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Total ($/boe) $36.93 $34.87 6 $37.03 $30.52 21
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(1) Non-GAAP measure
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Three months Twelve months
ended December 31 ended December 31
% %
2010 2009 change 2010 2009 change
----------------------------------------------------------------------------
Gross undeveloped land
(acres)
Western Canada 255,647 226,119 13 255,647 226,119 13
Offshore Trinidad
and Tobago 80,041 80,090 (1) 80,041 80,090 (1)
Offshore Nova Scotia - 27,790 (100) - 27,790 (100)
Offshore North
Africa 768,000 768,000 -- 768,000 768,000 --
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Wells drilled in
Western Canada
Gross -- 13.0 (100) -- 13.0 (100)
Net -- 11.4 (100) -- 11.4 (100)
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The Company also announced that the auditors' report received
from its independent public accounting firm on its audited
financial statements for the fiscal year ended December 31, 2010
included in its Annual Report on Form 40-F filed with the
Securities and Exchange Commission on March 25, 2011, contained a
going concern explanatory note. This uncertainty results from
whether the Company will be able to close the sale of its Trinidad
and Tobago assets in the near term. This announcement is required
by Section 610(b) of the NYSE AMEX Company Guide, which requires a
listed company that receives an audit opinion that contains a going
concern qualification to make a public announcement of such.
Sonde Resources Corp. is a Calgary, Alberta, Canada based
diversified global energy company engaged in the exploration and
production of oil and natural gas and in the development of a
liquefied natural gas project. Its operations are located in
Western Canada, offshore Trinidad and Tobago, and North Africa. See
Sonde's website at www.sonderesources.com to review further detail
on Sonde's operations.
Non-GAAP Measures - This document contains terms such as cash
flow from operations and cash flow per share, which are non-GAAP
financial measures that do not have any standardized meaning
prescribed by GAAP and are, therefore, unlikely to be comparable to
similar measures presented by other issuers. Management believes
cash flow from operations and cash flow per share are relevant
indicators of the Company's financial performance, ability to fund
future capital expenditures and repay debt. Cash flow from
operations and cash flow per share should not be considered an
alternative to or more meaningful than cash flow from operating
activities, as determined in accordance with GAAP, as an indicator
of the Company's performance. These measures have been described
and presented in this document in order to provide shareholders and
potential investors with additional information regarding the
Company's liquidity and its ability generate funds to finance its
operations.
Boe Presentation - Production information is commonly reported
in units of barrel of oil equivalent ("boe"). For purposes of
computing such units, natural gas is converted to equivalent
barrels of oil using a conversion factor of six thousand cubic feet
to one barrel of oil. This conversion ratio of 6:1 is based on an
energy equivalent conversion method primarily applicable at the
burner tip and does not represent a value equivalency at the
wellhead. Such disclosure of boes may be misleading, particularly
if used in isolation. Readers should be aware that historical
results are not necessarily indicative of future performance.
This news release contains "forward-looking information" (within
the meaning of applicable Canadian securities laws) and "forward
-looking statements" (within the meaning of the U.S. Private
Securities Litigation Reform Act of 1995). Such statements or
information are identified with words such as "anticipate",
"believe", "expect", "plan", "intend", "estimate", "propose",
"project" or similar words suggesting future outcomes or statements
regarding an outlook. Such statements include, among others, those
concerning our anticipated operational plans including our
development and drilling program in Western Canada, exploration and
evaluation plans in North Africa, anticipated completion of the
Trinidad Sale, future entitlement to payments pursuant to the
Liberty Sale, the potential growth opportunities and strategy of
the Company, future capital expenditures, our expected financial
performance, and the expectation of successful future results.
Such forward-looking information or statements are based on a
number of risks, uncertainties and assumptions which may cause
actual results or other expectations to differ materially from
those anticipated and which may prove to be incorrect. Assumptions
have been made regarding, among other things, operating conditions,
availability of capital, and capital and other expenditures. Actual
results could differ materially due to a number of factors,
including, without limitation, risks affecting the completion of
the Trinidad Sale, risks affecting the Company's ability to execute
projects and market oil and natural gas, risks inherent in
operating in foreign jurisdictions including recent political
turmoil in Tunisia and Libya, the ability to attract key personnel,
and the inability to raise additional capital. Additional important
assumptions and risks are set out in detail in the Company's Annual
Information Form, available on SEDAR at www.sedar.com, and included
in the Company's Annual Report on Form 40-F on file with the
Securities and Exchange Commission.
Although the Company believes that the expectations reflected in
the forward-looking information or statements are reasonable,
prospective investors in the Company's securities should not place
undue reliance on forward-looking statements because the Company
can provide no assurance that such expectations will prove to be
correct. Forward-looking information and statements contained in
this news release is as of the date of this news release and the
Company assumes no obligation to update or revise this
forward-looking information except as required by law.
Contacts: Sonde Resources Corp. Suite 3200, 500 - 4th Avenue
S.W. Calgary, Alberta, Canada T2P 2V6 Investor Relations (403)
216-2374 (FAX) Phone: (403) 294-1411 www.sonderesources.com