CALGARY, ALBERTA
Sharon's financial and operating results for the first six
months of the 2008 fiscal year ended September 30, 2007, were lower
than the same reporting period of the prior year, due to reduced
production volumes offset partially by higher gas prices.
Sharon, as operator, is pleased to report that it has contracted
a rig and plans to begin drilling the Wharco-Schilling well during
the next couple of weeks. Also, in January 2008 Sharon plans to
begin drilling the N.W. Speaks well. Both of these wells had been
delayed due to extremely wet conditions caused by record levels of
rainfall in the south-west Texas area.
As a result of greater availability of rigs in the United
States, Sharon believes it is able to operate the bulk of its
future exploration projects. As operator, Sharon can control the
timing and costs involved. A good example of this is the recently
completed Black Owl project which was drilled, completed and placed
on production in 67 days.
Financial
Sharon reported revenue for the six month period ended September
30, 2007, of $1.4 million compared with $1.7 million in the prior
year period and cash flow for the six month period was $520,000
compared with $1.2 million for the same period in 2006. Sharon
reported a loss for the six month period ended September 30, 2007,
of $485,000 or $(0.01) per share versus earnings of $11,000 or nil
per share for the same period in 2006.
Capital spending for the six month period ended September 30,
2007, totaled $3.0 million compared with $2.3 million for the same
period in 2006. Capital spending was financed from cash flow,
capital dispositions and a $9 million equity financing completed in
June 2007.
Sharon exited the second quarter with working capital of $2.5
million versus net debt of $2.6 million at the beginning of the
fiscal year.
Production
Production for the three month period ended September 30, 2007,
declined to average 202 BOEd compared with 312 BOEd for the prior
year. For the six month period production declined to 232 BOEd
compared to 334 BOEd for the prior year period. The Hancock #2 well
located on the Allen Ranch property in Texas was shut-in during the
first and second quarters causing most of the production
decline.
United States
In the first six months of the 2008 fiscal year Sharon's focus
has been on developing the Cheney and Black Owl prospects. Black
Owl came on line in November 2007, while at Cheney the well is
anticipated to be fully tested in early 2008.
Cheney, Colorado County, Texas - Working Interest 14%
On July 10, 2007, drilling reached a total depth of 18,400 feet
after which the well was cased. Based on the Company's log
analysis, the well has encountered 40 feet of gross pay and 30 feet
of potential net gas pay, in the Wilcox #18 zone, which was the
primary target horizon in the well.
Completion operations, which had been hampered by weather and a
change of the operator of the well, are now expected to be carried
out in early 2008 with a fracture stimulation and production test
of the zone.
Black Owl, Wharton County, Texas - Working Interest 24.4%
In the second quarter, Sharon as operator, drilled the Black Owl
#1 well to a depth of 8,775 feet. The well encountered 18 feet of
pay in the Yegua zone and was completed and flow tested at a rate
of 1,300 Mcfd at 5,600 psi.
The well has been connected to a sales pipeline and production
started in November 2007.
West Wharco-Schilling, Wharton County Texas - Working Interest
28.44% (at casing point)
Sharon Energy Ltd. will be the operator for the Duson #1 well.
This prospect has seven potential objectives of which three have
been proven productive by offset operators. Sharon's Duson #1 well,
which is planned to be spud in November 2007, has a proposed depth
of 11,450 feet.
N.W. Speaks, Lavaca County, Texas - Working Interest 35.8%
Sharon will be the operator of the N.W. Speaks Robertson #1
well, located in Lavaca County, Texas. Sharon plans to spud this
well in early 2008.
Canada
During the first six months of the 2008 fiscal year Sharon
participated in drilling and/or re-entering two wells (0.40 net)
resulting in one oil well (0.25 net) and one dry hole (0.15 net).
In the second half of fiscal year, Sharon plans to participate in
the drilling of several wells including a Sawtooth oil test in the
Hays area.
Business Outlook
Sharon anticipates that North America natural gas prices will
continue to recover which should result in an improvement in the
Company's financials. The weakening US dollar during the first half
of the fiscal year had a negative $297,000 affect on Sharon's
consolidated earnings which are denominated in U.S. currency
resulting from the settling of Canadian denominated debt. However,
if currency valuations maintain their current levels Sharon
anticipates that this trend will reverse in the second half of the
fiscal year as Canadian net assets and revenues are consolidated
into Sharon's statements at increasingly favourable exchange
rates.
Highlights for the second half of fiscal year 2008 will include
production additions in both Canada and the U.S. and the drilling
of several exploration oil and gas wells in Canada and three gas
wells in the U.S.
Six Months Ended
(Thousands, except per share amounts) September 30,
-------------------------------
(U.S. Dollars, unaudited) 2007 2006
----------------------------------------------------------------------------
Financial
Total revenue $ 1,369 $ 1,720
Cash flow from operations $ 520 $ 1,154
per share, basic and diluted $ 0.01 $ 0.02
Earnings (loss) for the period $ (485) $ 11
per share, basic and diluted $ (0.01) $ -
Property, plant and equipment
Capital additions $ 3,030 $ 2,308
Dispositions $ (119) $ (23)
Working capital/(net debt) $ 2,541 $ (2,806)
Total assets $ 18,277 $ 13,216
Total shares outstanding, at period end 75,419 51,419
Operations
Production
Gas (MMcfd) 1.3 1.8
Oil (Bopd) 23 34
BOEd (6Mcf = 1Bbl) 232 334
Product Prices
Gas ($/Mcf) $ 6.66 $ 6.01
Oil ($/Bbl) $ 62.05 $ 63.31
----------------------------------------------------------------------------
BOE Presentation - the term barrels of oil equivalent (BOE) may
be misleading, particularly if used in isolation. A BOE conversion
ratio of 6 Mcf: 1Bbl is based on an energy equivalency conversion
method primarily applicable at the burner tip and does not
represent a value equivalency at the wellhead. All BOE conversions
in this report are derived by converting gas to oil in the ratio of
six Mcf of gas to one Bbl of oil.
Financial Reporting - all numbers are reported in U.S.
dollars.
Sharon is an oil and gas exploration and production company
based in Calgary, Alberta. Sharon's current focus is on shallow gas
developments in southern Alberta, natural gas exploration in
central and southern Alberta and deep gas exploration in Texas.
ADVISORY: Certain information regarding the Company in this News
Release including management's assessment of future plans and
operations, the use of proceeds from the offering and the
anticipated closing date of the offering, may constitute
forward-looking statements under applicable securities laws and
necessarily involve risks including, without limitation, risks
associated with oil and gas exploration, development, exploitation,
production, marketing and transportation, loss of markets,
volatility of commodity prices, currency fluctuations, imprecision
of reserve estimates, environmental risks, competition from other
producers, inability to retain drilling rigs and other services,
capital expenditure costs, including drilling, completion and
facilities costs, unexpected decline rates in wells, wells not
performing as expected, incorrect assessment of the value of
acquisitions, failure to realize the anticipated benefits of
acquisitions, delays resulting from or inability to obtain required
regulatory approvals and ability to access sufficient capital from
internal and external sources. As a consequence, actual results may
differ materially from those anticipated in the forward-looking
statements. Readers are cautioned that the foregoing list of
factors is not exhausted. Additional information on these and other
factors that could effect the Company's operations and financial
results are included in reports on file with Canadian securities
regulatory authorities and may be accessed through the SEDAR
website (www.sedar.com) and at the Company's website
(www.sharonenergy.com). Furthermore, the forward-looking statements
contained in this news release are made as at the date of this news
release and the Company does not undertake any obligation to update
publicly or to revise any of the included forward-looking
statements, whether as a result of new information, future events
or otherwise, except as may be required by applicable securities
laws.
The TSX Venture Exchange does not accept responsibility for the
adequacy or accuracy of this release.
Contacts: Sharon Energy Ltd. H.C. (Kip) Ferguson, III President
(713) 789-5395 (713) 789-8454 (FAX) Sharon Energy Ltd. Robert W.
Lamond Chairman (403) 269-9889 (403) 269-9890 (FAX) Website:
www.sharonenergy.com
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