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Iona Energy Inc. ("Iona" or the "Company") (TSX VENTURE:INA) announces its 2011
third quarter results for the period ended September 30, 2011.
Neill A. Carson, Iona's CEO commented, "Iona is very pleased with the progress
we've made since the beginning of Q3 as we continue to position ourselves for
aggressive development growth in the coming year. During the third quarter,
contracts for critical equipment were finalized and a rig secured for Iona's
first half 2012 drilling program, our management team was bolstered with the
addition of top-notch resources, and Iona actively pursued quality acquisition
targets. We are looking forward to 2012 with great anticipation as we prepare
for an active year of project execution."
Highlights for the Quarter Ended September 30, 2011
Financial
-- Q3 G&A expenditures of CAD$0.9 million a decrease of 62.5% as compared
to Q2 G&A expenditures.
-- Current assets of CAD$47.9 million, including CAD$46 million
unrestricted cash.
-- Net loss of CAD$0.6 million (or CAD$0.004 per share) for the period
Operational
-- Exit Q3 production rate at the Company's Trent and Tyne gas fields was
3.3 million standard cubic feet per day ("MMscfd") net.
-- With partners MPX Resources and Sorgenia, Iona entered into an agreement
with GE Oil & Gas for the construction of two production subsea trees.
-- Continued to assess and pursue accretive acquisition targets. Related
efforts of Q3 culminated in the signing of a Sale and Purchase Agreement
with Fairfield Cedrus Ltd. for the acquisition of a 100% Operated
interest in their Staffa Oil Field.
Corporate
-- Mr. Peter Campbell joined the company as Manager, Commercial
Infrastructure. Peter has more than 30 years experience in the E&P
business and joined Iona from Maersk, where he was Head of New Business
and M&A, responsible for new countries, business development and M&A
worldwide.
-- Mr. Colin Tannock joined the company as Chief of Subsurface. Colin has
30 years experience in the Energy business with Talisman, Statoil, Aran
and joined Iona from TAQA Bratani, where he was most recently the
Geoscience and Exploration Manager.
"With over $47 million in cash and deposits, along with the continued addition
of high caliber team members, we are very well positioned to close on our Staffa
acquisition and execute on our 2012 strategy, and confident that our efforts are
placing Iona on a successful trajectory." commented Brad Gunn, Iona's CFO.
Subsequent to the end of Q3, the Company notes the drilling of the Orlando
appraisal and development well is currently underway.
A reserve report by Gaffney Cline & Associates for the Staffa Field is also
underway.
Further details on the above are provided in the interim consolidated financial
statements and management's discussion and analysis for the three and nine
months ended September 30, 2011, which have been filed with securities
regulatory authorities in Canada. These documents are also available on SEDAR
(www.SEDAR.com) and on the Company's website (www.ionaenergy.com).
Iona is an oil and natural gas acquisition, appraisal, and development
corporation active through its 100% wholly owned United Kingdom subsidiary Iona
Energy Company (UK) Ltd. in the United Kingdom's Continental Shelf ("UKCS"). On
May 27, 2011, Iona and Northern Lights Acquisition Corporation amalgamated to
form Iona Energy Inc. with the Company's shares listing for trading on the TSX
Venture Exchange on June 8, 2011 under the symbol "INA."
Over the last year, the Company has continued its efforts to acquire
strategically aligned assets for its UK portfolio. Iona seeks low-cost, proven
undeveloped acquisition targets that are proximate to infrastructure willing and
able to accept its production, and where sub-sea tiebacks can be utilized.
Employing this strategy facilitates the Company's pursuit of profitable oil and
gas production through the effective management of finding and development
costs, initial capital expenditure, and lower long-term per barrel operating
expenditure and tariffs. To date in 2011, the Company closed the following
transactions:
Orlando - A proven undeveloped oil discovery
In December 2010, the Company signed a Sale and Purchase Agreement with
Wintershall (E&P) Limited ("Wintershall") to acquire their entire 35% equity
interest in UKCS License P1606, Block 3/3b (An oil discovery referred to as
"Orlando" located in the North Viking Graben area of the UK North Sea) with the
transaction closing on March 14, 2011. The consideration payable to Wintershall
for the Orlando acquisition is USD$3,150,000 and the Company will fund the
respective commitment well to the extent of 42.5% (approximately USD$11,050,000)
to earn their 35% equity interest. The Orlando drilling program is operated by
MPX North Sea Limited (with a 30% working interest) with Iona and Sorgenia E&P
(UK) Ltd. as partners (each with a 35% working interest).
The Company engaged Gaffney, Cline & Associates Ltd. ("GCA"), an independent
reserve auditor of oil and gas resources, to provide a reserve audit and
production estimate on the Orlando asset (the "GCA Reserve Report"). The GCA
Reserves Report estimates proven reserves net to Iona of 2.4 MMbbls ("1P"),
proven plus probable reserves of 3.6 MMbbls ("2P"), and proven plus probable
plus possible reserves of 5.4 MMbbls ("3P"). Drilling activities on Orlando are
currently underway. Production processing is planned for CNRL International's
Ninian platform, where a per-barrel tariff has been negotiated at USD $5.50/bbl.
The Company spudded the Orlando appraisal well, 3/3b-13, on November 2, 2011.
The semi-submersible drilling rig Awilco WilHunter is anticipated to be on
location for approximately 45 days, drilling a deviated well which will be
suspended for a future re-entry and conversion to a producing well once the
Orlando development commences. The total depth is anticipated to be 14,245 feet
or approximately 12,000 feet vertically. The well is targeting a producing Brent
horizon that flowed at 2,800 barrels of oil per day in the discovery well
3/3b-11.
Trent & Tyne gas production
In November 2010, the Company signed a Letter of Intent with Perenco UK Limited
("Perenco") regarding Iona's acquisition of a 20% working interest in two
producing UK Southern North Sea gas fields, the Trent Field (Block 43/24 -
License P685) and the Tyne Field (Block 44/18 - License P609) (herein referred
to as "Trent & Tyne") with the transaction closing on May 31, 2011. Pursuant to
the agreement, Iona committed to fund up to GBPGBP 21,200,000 for the drilling
of a production well on the Tyne Field. The planned work program is comprised of
a re-entry into the existing T5 well and sidetrack to an up-dip location (the
"T5 Sidetrack Well"). The Company's financial exposure will be cost-capped such
that, in the event the T5 Sidetrack Well exceeds the GBPGBP 21,200,000, any
additional costs related to the well will be borne 100% by Perenco.
Additionally, with respect to an area known as Tyne North West, Iona will have
the option to increase its working interest in Trent & Tyne by a further 17.5%
(37.5% in total), by committing to fund the drilling of a second well with
Perenco as Operator. Again, this drilling program is cost-capped to Iona at
GBPGBP 24,650,000, such that any cost overrun beyond this amount will be borne
100% by Perenco.
As with Orlando, the Company contracted GCA to assess Trent & Tyne's reserve
base and production profile. GCA's Reserve Report estimates 1P reserves of
6.1Bcf, 2P reserves of 12.6 Bcf, and 3P reserves of 16.2 Bcf, net to Iona.
Furthermore, with the successful completion of Tyne North West, a 2C contingent
resource, GCA projects 19.6Bcf will be added to the Company's net recoverable
reserves.
The Trent & Tyne agreement with Perenco is dated effective September 1, 2010,
therefore Iona will receive production revenue and pay its share of production
related costs associated with approximately 4MMscfd of net gas production as a
result of its 20% working interest. The Company anticipates drilling the "T5
Sidetrack Well" during the second quarter of 2012, thereby increasing Iona's net
Trent & Tyne production to 8MMscfd (20% WI), and furthering this to 14.2MMscfd
(37.5% WI) with their commitment to drill Tyne North West. A successful
completion of Tyne North West, which the Company hopes to drill and tie back by
the third quarter of 2012, has the potential to increase production by an
incremental 11MMscfd.
Staffa - Redevelopment of a proven field
Subsequent to the quarter ending, the Company signed a Sale and Purchase
Agreement with Fairfield Cedrus Ltd., for a 100% interest in U.K. block 3/8d
containing the Staffa oil field. The transaction is subject to approval of the
U.K's Department of Energy and Climate Change (DECC).
Under the terms of the agreement, Iona shall reimburse Fairfield in cash for
pre-development expenditures related to the Staffa oil field including, but not
limited to, cash deposits on subsea wellheads, production trees and associated
equipment, a pipeline route survey, an advanced field development plan (FDP),
predevelopment engineering studies, and reservoir optimization modelling and
engineering. These expenditures have been determined at GBPGBP 5,372,358. In
addition, upon FDP approval by DECC, Iona shall make a cash payment of
USD$5,000,000 to Fairfield and pay a net price of USD$2.50 per barrel of
production commencing upon first oil from Staffa.
The Staffa oil field is located in block 3/8d in the U.K. North Sea and lies
approximately 14 kilometres southeast of the producing Ninian Central platform.
The Staffa field also lies due south of the Orlando oil discovery within block
3/3b in which a 35% working interest is held by Iona. The Staffa field is a
three-way fault closed structure approximately four km long by two km wide and
has a 489-foot (true vertical thickness) oil column in the Upper Brent sandstone
reservoirs. The Staffa field produced at rates of between 10,000 and 5,800
barrels of oil per day (bopd) between the years 1992 and 1994 and ceased
production when the Brent crude oil price was approximately $13 to $15 per
barrel.
West Wick - Oil Discovery
On April 15th, 2011, Iona Energy Company (UK) Limited entered into an option
agreement with Venture North Sea Oil Limited ("Venture") for the right by Iona
Energy Company (UK) Limited to purchase a 58.73016% working interest in an oil
discovery contained in UK Block 13/21a. Pursuant to the original agreement, Iona
Energy Company (UK) Limited paid a non-refundable deposit of US$3,150,000 to
Venture and had until October 31st, 2011 to give notice of its intent to deliver
additional monetary consideration to Venture in order to complete the purchase.
On October 31st, 2011, Iona requested and was granted an extension until
December 31st, 2011 to give notice of its intent to close. If Iona Energy
Company (UK) Limited delivers notice to Venture by December 31st, 2011, the
transaction remains subject to other conditions precedent, including the payment
of the full purchase price and approval of DECC to the transaction. If Iona
Energy Company (UK) Limited does not deliver the notice by December 31st, 2011,
the agreement will terminate without further obligation to either party in
accordance with its terms.
The Company is currently reviewing its portfolio of assets, both in terms of
managing its forward risks and as a means of realizing value to fund ongoing
appraisal and development. The review may result in farm-outs, project financing
or divestitures of certain assets.
General and Administrative
General and administrative costs for the first three and nine month periods
ended September 30, 2011 has increased compared to the comparative periods of
2010 as a result of professional costs with respect to increased operations, the
Company's public listing on the TSX Venture Exchange, financing, option grants
and a one-time charge related to the NLAC acquisition. Costs will continue to
increase as the Company continues to staff up its operations.
Exploration and Evaluation
During the three and nine month periods ended September 30, 2011, $11,375,168
and $18,399,767, respectively of exploration and evaluation assets were
capitalized. Details of the Company's properties (Orlando and Trent & Tyne) have
previously been discussed under the heading Development of Business. The costs
incurred in the current quarter relate to the commencement of construction of
two production subsea trees, one for the Orlando project and one for potential
use on the Orlando field or other development candidates and preliminary costs
for the drilling of the Orlando appraisal well in 3/3b with the well being spud
on November 2nd. A semi-submersible drilling rig is anticipated to be on
location for approximately 45 days, drilling a deviated well which will be
suspended for a future re-entry and conversion to a producing well once the
Orlando development commences. The total depth is anticipated to be 14,245 feet
or approximately 12,000 feet vertically with an estimated net cost of
$11,427,900 (US$11,000,000) to Iona. The well is targeting a producing Brent
horizon that flowed at 2,800 barrels of oil per day in the discovery well
3/3b-11.
Summary of Quarterly Results
Three
Three Three Three months
months ended months months ended
September ended ended December
($ thousands, except 30, June 30, March 31, 31,
per share amounts) 2011 2011 2011 2010
----------------------------------------------------------------------------
Net earnings (loss) (607) (2,694) (725) (22)
Net and comprehensive
income (loss) 1,892 (4,028) (842) -
Net capital
expenditures
(recovery) 11,992 2,854 3,648 -
Working capital surplus
(deficiency) 45,709 56,063 17,372 1,211
Total assets 69,450 66,320 68,652 2,978
Three Three Three
months ended months months
September ended ended
($ thousands, except per share 30, June 30, March 31,
amounts) 2010 2010 2010
----------------------------------------------------------------------------
Net earnings (loss) (106) (216) (18)
Net and comprehensive income (loss) - - -
Net capital expenditures (recovery) 12 - 8
Working capital surplus (deficiency) 1,439 (18) (224)
Total assets 3,066 1,559 1,636
The increase in operations commencing in the first three quarters of 2011 is due
to the completion of the $69 million financing in March, which allowed the
Company to complete the Orlando and Trent & Tyne acquisitions and expand
operations.
The increase in capital expenditures in the current quarter is primarily related
to the preparation of the drilling of the Orlando well.
The decrease in the loss for the three month period ended September 30, 2011
compared to June 30, 2011 is primarily due to $1,015,670 of stock option expense
and a one-time charge of $525,341 related to the NLAC transaction incurred in
the 2nd quarter.
To view the Company's complete interim consolidated financial statements and
management's discussion and analysis for the three and nine months ended
September 30, 2011 or for further information about Iona Energy Inc. please go
to the Company's website www.ionaenergy.com or SEDAR (www.SEDAR.com).
Forward-looking statements
Some of the statements in this announcement are forward-looking. Forward-looking
statements include statements regarding the intent, belief and current
expectations of Iona Energy Inc. or its officers with respect to various
matters. When used in this announcement, the words "expects," "believes,"
"anticipate," "plans," "may," "will," "should", "scheduled", "targeted",
"estimated" and similar expressions, and the negatives thereof, whether used in
connection with the estimated drilling times of the Orlando well, estimated
production levels and future activity or otherwise, are intended to identify
forward-looking statements. Such statements are not promises or guarantees, and
are subject to risks and uncertainties that could cause actual outcome to differ
materially from those suggested by any such statements. These forward-looking
statements speak only as of the date of this announcement. Iona Energy Inc.
expressly disclaims any obligation or undertaking to release publicly any
updates or revisions to any forward-looking statement contained herein to
reflect any change in its expectations with regard thereto or any change in
events, conditions or circumstances on which any forward-looking statement is
based except as required by applicable securities laws.
Note: "Boe" means barrel of oil equivalent on the basis of 6 mcf of natural gas
to 1 bbl of oil. Boes may be misleading, particularly if used in isolation. A
boe conversion ratio of 6 mcf: 1 bbl is based on an energy equivalency
conversion method primarily applicable at the burner tip and does not represent
a value equivalency at the wellhead. As used in this press release, possible
reserves are those additional reserves that are less certain to be recovered
than probable reserves. There is a 10% probability that the quantities actually
recovered will equal or exceed the sum of proved plus probable plus possible
reserves.
Additionally, this news release uses certain abbreviations as follows:
Oil and Natural Gas Liquids Natural Gas
----------------------------------------------------------------------------
bbls barrels scf standard cubic foot
MMbbls millions of barrels MMscf million standard cubic feet
boepd barrels of oil equivalent per day Bscf billion standard cubic feet
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