Tri-Valley Corporation (NYSE Amex: TIV) today announced its
financial results for the year ended December 31, 2011. Oil and gas
production revenues grew 34% to $2.3 million in 2011 from $1.8
million in the prior year, reflecting increased production at both
the Pleasant Valley and Claflin oil fields and higher oil prices.
Net oil production in 2011 totaled 29,785 barrels compared with
24,559 barrels in 2010, an increase of 21%. Oil prices on average
in 2011 were 10% higher than 2010. Net production costs increased
20% from 2010, largely the result of an increase in production and
steaming activity at Claflin.
“The growth in oil revenues reflects the success of our efforts
during the past year to increase production at Pleasant Valley and
establish new wells at Claflin,” said Maston Cunningham, President
and CEO of Tri-Valley Corporation. “At Pleasant Valley, during 2011
we increased oil production through a more aggressive steam cycle
program and optimized artificial lift methods which reduced
bottlenecks in our production process. Gross production of native
oil at Pleasant Valley increased 33% from 202 to 269 barrels per
day. At Claflin, during 2011 we drilled eight new wells in the
second quarter, but had to shut down our steam generation facility
for modifications required for new safety and emissions permits.
Steam generation resumed in November following modification of our
19.5 MMBTU/hour steam generator and receipt of the new permits.
Through the end of December 2011, six of the eight new wells had
been steamed and we have received good production response. Gross
production at Claflin increased 51% during 2011 and averaged 43
barrels per day in December following resumption of steam injection
in the fourth quarter. Initial steam injection for the remaining
two new wells was completed in early January. In addition to higher
production, our oil revenues also benefitted from higher oil prices
available through our recently signed agreements with Plains
Marketing and ConocoPhillips and market dislocation factors which
caused California heavy crudes to sell at a premium to the West
Texas Intermediate Crude for most of the year. On average, we
realized an improvement in price of approximately $6.95 per barrel
over 2010.”
“We continue to work with the OPUS Special Committee to finalize
the OPUS restructuring agreement for distribution to the OPUS
partners. Due to the complexity of required disclosures and the
emergence of additional legal and tax issues, finalization of the
package could not be completed by year end. Recently, we have
reached an agreement with the Special Committee on a framework for
revised terms that we believe will successfully address these
concerns, as well as settle alleged contract claims against the
Company pursuant to the OPUS partnership agreements at closing. We
currently expect to complete the revised term sheet by April 30,
2012 which will guide finalization of the definitive agreements,
including the Information Statement and Consent Solicitation, which
will be forwarded to the OPUS partners for their consideration and
vote,” Mr. Cunningham continued.
“Turning to our Alaskan minerals operation, McEwen Mining Inc.
(formerly known as US Gold Corporation), our partner in the
exploration and development of the Richardson precious minerals
property, completed its initial sampling and testing on the
property, collecting 1,507 power auger soil samples and
approximately 150 rock samples,” said Mr. Cunningham. “Core
drilling of 2,863 feet in three holes was performed, with 616
samples collected and sent for laboratory analysis. In addition,
airborne magnetic and gamma-ray spectrometry geophysics were
acquired. The field work was suspended in October 2011 due to the
onset of winter. We also conducted field work on our Shorty Creek
property, where a geologic evaluation has confirmed the presence of
a potentially large porphyry copper, gold and molybdenum system. In
August 2011, we conducted a minimum field program to fulfill our
annual labor obligation and analyzed 73 soil and five rock samples
in the Wilbur Creek area. We plan to conduct follow up exploration
work in the summer of 2012 and we continue to seek a strategic
partner for further exploration efforts there.”
Tri-Valley has also made progress recently on several additional
corporate initiatives this year:
- Engaged AJM Deloitte based in Calgary
to evaluate the Claflin and Brea leases located in the Edison
Field.
- Engaged Cannon Engineering Corp. for
front-end engineering design and estimated costs for surface
facilities required for a SAGD pilot at Pleasant Valley.
- On March 30, 2012, the Company entered
into definitive agreements with the trust of G. Thomas Gamble for
the issuance of a senior secured note in the amount of $3,298,310
to replace the three short-term notes made to the Company in 2011.
The senior secured note carries a 14% per year interest rate and
matures on April 30, 2013. The senior secured note was accompanied
by a warrant to purchase 3,000,000 shares of the Company’s common
stock, at an exercise price of $0.19 per share exercisable for a
period of five (5) years from March 30, 2012. As an inducement to
the Gamble trust, the Company agreed to assign, in perpetuity, 2%
of its overriding royalty interests (ORRI) on the Claflin lease and
1% of its ORRIs on other specified leases in and around the Claflin
property, with proceeds to begin after all obligations under the
senior secured note are paid in full.
- On April 3, 2012, the Gamble trust
loaned the Company $1.5 million, also at 14% per year and due on
April 30, 2013, and the proceeds from this loan were used to pay
the $1.5 million settlement with the plaintiffs in the Hansen
lawsuit regarding ownership of mineral rights on the Hansen
property in the Oxnard Field.
“Tri-Valley made good operational progress during 2011 and we
expect to continue our efforts to increase the production,
efficiency and revenues from our oil operations in 2012. We have
also established important milestones for the year that we are
focused on accomplishing to ensure we remain a viable company
positioned for growth and an improved financial performance. On
behalf of the Board, I would like to thank our employees for their
hard work and dedication this past year and our OPUS partners and
TIV shareholders for their patience and support,” concluded Mr.
Cunningham.
2012 Milestones
The Company provided the following milestones for 2012:
- Complete OPUS restructuring agreement
and distribute to OPUS partners for review and vote
- Secure additional working capital and
financing for other corporate expansion initiatives, including SAGD
and additional wells at Claflin
- Begin implementation of SAGD pilot
project at Pleasant Valley to increase oil recovery. Plans call for
two new horizontal wells, one producer and one continuous steam
injector. Completion and testing of the SAGD pilot is not
anticipated until 2013
- Complete next stage of Claflin
Development:
- Drill up to three new horizontal
wells
- Recomplete two vintage wells to produce
the Chanac formation
- Recomplete one idle vintage well for
injection of produced water
- Upgrade surface facilities
- Secure a strategic partner for Shorty
Creek minerals property
- Sell our idle drilling rig that is
stacked in Fallon, Nevada
2011 Financial Highlights
Total revenues for 2011 were $2.6 million compared with $1.9
million in 2010. Oil and gas revenues increased 34% to $2.3 million
compared with $1.8 million the prior year.
Total costs and expenses were $14.3 million compared with $10.5
million in 2010. Oil and gas production costs increased 20%,
largely reflecting the increased production activity at Claflin.
Also included in total costs were $2.4 million in asset write-offs
or impairment charges, including expired leases on unproved oil and
gas properties, equipment and goodwill. The 2011 costs also reflect
the $1.5 million Hansen litigation settlement.
The net loss in 2011 totaled $11.7 million, or $0.19 per share,
compared with a net loss of $8.7 million, or $0.24 per share, in
2010. Weighted average shares outstanding in 2011 were 63.1 million
compared with 36.7 million in 2010, reflecting the sale of common
stock through the Company’s ATM facility with C.K. Cooper &
Company and the private placement financing completed in April 2011
for a total of 21.4 million shares.
Tri-Valley ended the year with $0.6 million in cash on the
balance sheet. Long-term debt totaled $3.5 million. The Company
also announced that its independent public accounting
firm included a going concern qualification in their otherwise
unqualified report on the Company's financial statements for the
fiscal year ended December 31, 2011. The financial statements
are contained in the Company's Annual Report on Form 10-K, filed
with the Securities and Exchange Commission on April
16, 2012.
About Tri-Valley
Tri-Valley Corporation explores for and produces oil and natural
gas in California and has two exploration-stage gold properties in
Alaska. Tri-Valley is incorporated in Delaware and is publicly
traded on the NYSE Amex exchange under the symbol "TIV." Our
Company website, which includes all SEC filings, is
www.tri-valleycorp.com.
Note Regarding Forward-Looking Statements
All statements contained in this press release that refer to
future events or other non-historical matters are forward-looking
statements. We have attempted to identify forward-looking
statements by terminology including “anticipates,” “believes,”
“can,” “continue,” “could,” “estimates,” “expects,” “hope,”
“intends,” “may,” “plans,” “potential,” or “predicts,” or the
negative of these terms or other comparable terminology. Although
we do not make forward-looking statements unless we believe we have
a reasonable basis for doing so, we cannot guarantee their
accuracy. These statements are only predictions based on
management’s expectations as of the date of this press release, and
involve known and unknown risks, uncertainties and other factors,
including: our ability to obtain additional funding; the outcome of
an ongoing investigation by the staff of the SEC; fluctuations in
oil and natural gas prices; imprecise estimates of oil reserves;
drilling hazards such as equipment failures, fires, explosions,
blow-outs, and pipe failure; shortages or delays in the delivery of
drilling rigs and other equipment; problems in delivery to market;
adverse weather conditions; compliance with governmental and
regulatory requirements; geographical concentration of oil and gas
reserves in the State of California; changes in, or inability to
enter into or maintain, strategic and joint venture partnerships;
pending and threatened lawsuits against us; potential rescission
rights stemming from our potential violation of Section 5 of the
Securities Act of 1933; our ability to consummate the OPUS
restructuring transaction; the continued listing of our common
stock on the NYSE Amex; and such other risks and factors that are
discussed in our filings with the Securities and Exchange
Commission from time to time, including under “Part I, Item 1A.
Risk Factors” and “Part II, Item 7. Management’s Discussion and
Analysis of Financial Condition and Results of Operations,”
contained in Tri-Valley’s Annual Report on Form 10-K for the year
ended December 31, 2011. Except as required by law, Tri-Valley
undertakes no obligation to update or revise publicly any of the
forward-looking statements after the date of this press release to
conform such statements to actual results or to reflect events or
circumstances occurring after the date of this press release.
Notice to OPUS Partners and Additional Information about the
Restructuring Transaction
This press release is neither an offer to purchase nor a
solicitation of an offer to sell any securities. The equity
interests of the new joint venture company to be issued in
connection with the OPUS restructuring transaction will not be
registered under the Securities Act of 1933, as amended, and may
not be offered or sold in the United States absent registration or
an applicable exemption from registration requirements. No
securities of the new joint venture company will be issued or sold
in any state in which such offer, solicitation or sale would be
unlawful absent registration or qualification under the securities
laws of such state.
In connection with the potential restructuring transaction,
Tri-Valley Corporation, as the managing partner of OPUS, will
prepare and distribute an Information Statement and Consent
Solicitation to all OPUS partners. OPUS partners are urged to read
carefully the Information Statement and Consent Solicitation, and
the other relevant materials, when they become available before
making any voting or investment decision with respect to the
proposed restructuring transaction, because they will contain
important information about the transaction and the parties to the
transaction. Tri-Valley Corporation and its respective directors,
executive officers, and employees are expected to participate in
the solicitation of consents to the proposed restructuring
transaction from OPUS partners. OPUS partners may obtain more
detailed information regarding the names, affiliations and
interests of certain of Tri-Valley’s executive officers, directors
and/or other employees in the solicitation by reading the
Information Statement and Consent Solicitation, and other relevant
materials, when they become available and are distributed to the
OPUS partners.
When available, Tri-Valley Corporation will distribute the
Information Statement and Consent Solicitation, and other relevant
materials, to all OPUS partners of record. OPUS partners may obtain
free copies of the Information Statement and Consent Solicitation,
when available, by contacting Tri-Valley Corporation at 4927
Calloway Drive, Bakersfield, California 93312, or at (661)
864-0500.
TRI-VALLEY CORPORATION
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2011 AND 2010
2011 2010 ASSETS Current
Assets Cash $ 584,415 $ 581,148 Accounts receivable 1,864,936
4,492,448 Prepaid and other 1,048,133
615,778 3,497,484 5,689,374
Oil and gas properties (successful efforts
basis), other property and equipment, net)
8,393,499 6,719,353 Long-term receivables 6,339,144 1,830,317 Other
long-term assets 419,128 762,448
$ 18,649,255 $ 15,001,492
LIABILITIES AND STOCKHOLDERS’ EQUITY Current
Liabilities Accounts payable and accrued expenses $ 8,608,525 $
8,052,388 Settlement of claim 1,500,000 - Debt 76,041 134,322 Asset
retirement obligations – current portion 22,881
- 10,207,447 8,186,710 Asset
retirement obligations 525,985 206,183 Long-term debt
3,522,746 455,246
14,256,178 8,848,139
Commitments and Contingencies - -
Stockholders'
Equity
Series A preferred stock - 10.00%
cumulative; $0.001 par value; $10.00 liquidation value; 20,000,000
shares authorized; 438,500 shares outstanding
439 439
Common stock, $0.001 par value;
100,000,000 shares authorized; 67,615,407 and 44,750,964 shares
issued at December 31, 2011 and 2010, respectively.
67,615 44,751
Less: common stock in treasury, at cost;
none and 161,847 shares at December 31, 2011 and 2010,
respectively.
- (38,370 ) Capital in excess of par value 72,657,724 63,112,372
Additional paid in capital – warrants 1,397,428 1,350,678
Additional paid in capital - stock options 3,073,360 2,806,945
Accumulated deficit (72,803,489 )
(61,123,462 ) 4,393,077
6,153,353 $ 18,649,255 $
15,001,492
TRI-VALLEY CORPORATION
CONSOLIDATED STATEMENTS OF
OPERATIONS
YEARS ENDED DECEMBER 31,
2011 2010 Revenues Oil
and gas $ 2,347,368 $ 1,756,570 Interest income and other
267,939 98,890
2,615,307 1,855,460
Costs and Expenses Oil and gas production 1,814,405
1,507,434 Mining exploration 90,711 371,975 General and
administrative 6,841,752 6,884,334 Write off and impairment loss
2,393,779 140,242 Loss on settlement of claim 1,500,000 -
Depreciation, depletion and amortization 683,530 570,020
Stock-based compensation 418,477 1,846,253 Exploration expense
362,402 - Interest 234,613 324,241 Gain on sale of assets (44,335 )
(3,014,244 ) Bad debt - 44,391 Loss on derivative instruments
- 1,846,611
14,295,334 10,521,257
Net loss $ (11,680,027 ) $
(8,665,797 ) Cumulative, undeclared preferred stock
dividends (523,045 ) (88,750
)
Net loss allocated to common shareholders
(12,203,072 ) (8,754,547
) Basic and diluted loss per common share
$
(0.19
)
$
(0.24
)
Weighted average number of common shares outstanding
63,134,690
36,659,198
TRI-VALLEY CORPORATION
CONSOLIDATED STATEMENTS OF CASH
FLOWS
YEARS ENDED DECEMBER 31,
2011 2010 Operating
Activities Net loss $ (11,680,027 ) $ (8,665,797 )
Adjustments to reconcile net loss to net cash from operating
activities: Write off and impairment loss 2,393,779 140,242
Depreciation, depletion and amortization 683,530 570,020
Stock-based compensation 418,477 1,846,253 Dry hole expense 123,653
- Loss on derivative instruments - 1,846,611 Gain on sale of assets
(44,335 ) (3,014,244 ) Bad debt - 44,391 Other 23,736 -
Changes
in non-cash working capital items: (Increase) decrease in
accounts receivable (2,730,877 ) 673,489 Increase in prepaid and
other (432,355 ) (752,809 ) Increase in accounts payable and
accrued expenses and current portion of asset retirement
obligations 750,322 602,764 Increase in settlement of claim
1,500,000 -
Net cash used in
operating activities (8,994,097 )
(6,709,080 ) Investing
Activities Capital expenditures (5,097,221 ) (1,992,831 )
Proceeds from sale of assets 318,894 4,369,311 Changes in non-cash
working capital related to investing activities and other long-term
assets 1,290,600 562,500
Net cash provided by (used in) investing activities
(3,487,727 ) 2,938,980
Financing Activities Net proceeds from the
issuance of common stock and warrants 9,475,872 5,328,687 Principal
payments on debt (140,781 ) (1,245,565 ) Proceeds from issuance of
debt 3,150,000 - Purchase of treasury stock - (25,000 ) Proceeds
from exercise of stock options -
2,200
Net cash provided by financing activities
12,485,091
4,060,322 Net increase in cash 3,267 290,222
Cash at the beginning of the year 581,148
290,926
Cash at the end of the year
$ 584,415 $
581,148 Supplemental Schedule of Non-Cash
Transactions Issuance of preferred stock for: Debt
$
- $ 850,000 Partnership interests
-
3,535,000
$
- $ 4,385,000
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