EMBER RESOURCES INC. ANNOUNCES OPERATIONAL UPDATE AND 2009 GUIDANCE
Ember Resources Inc. ("Ember") today announced an operational update, drilling plans and 2009 guidance.
Operational Update
Production for fourth quarter 2008 is estimated at an average 28.7 mmcf/d, a 110% increase over third quarter production of 13.7 mmcf/d and a 300% increase from fourth quarter 2007 production of 7.2 mmcf/d. The significant growth stems from Ember’s acquisition of Cordero Energy Inc. (“Cordero”) on September 5, 2008, as well as Ember’s fall drilling program in core coalbed methane (“CBM”) producing areas.
Drilling during the fourth quarter totaled 17 CBM wells (11.2 net) for a 2008 total of 70 CBM wells (47.2 net). Ember has commenced its first quarter drilling program. A total of 15 CBM wells (8.1 net) are planned together with a five well workover program. In addition, Ember expects to close the acquisition of an 8.5% royalty interest payable on its production from the Acme area during the quarter.
A divestiture program of non-core assets generated $1.75 million in the fourth quarter. An additional $400,000 in divestitures is expected to close in the first quarter of 2009. Production related to these divestitures totals 13 boe/d and includes 31,000 net acres of undeveloped land. Ember continues to market non-core assets which are comprised of 300 boe/d and 100,000 net acres of undeveloped land.
2009 Guidance
Ember is maintaining a conservative approach to capital spending given the global credit crisis and restricted access to credit and equity markets, the worldwide economic downturn, and the resulting uncertainty with respect to future natural gas prices. During such times, Ember has distinct competitive advantages as a CBM producer: low decline, long-life natural gas production; low drilling costs and predictable production adds from new wells; and a low cost structure, including low royalty rates.
Ember’s Board of Directors has approved a 2009 capital budget of $35 million, which is forecasted to yield average production of 28 mmcf/d, essentially flat with fourth quarter 2008. Ember expects to fund its 2009 capital program from available cashflow, with any excess cashflow to be used to pay down bank debt.
Drilling will focus on low risk, low cost Horseshoe Canyon CBM wells at Ember’s Acme, Fenn-Big Valley and Bashaw properties in Alberta. An estimated 60-70 net wells will be drilled with about 80% scheduled for the latter half of the year in order to avoid seasonal rains in the second quarter and limited surface access as a result of agricultural activities.
Capital spending will be reviewed on a regular basis and adjustments will be made should commodity prices continue to deteriorate.
2009 Guidance Summary
Average production (mmcfe/d) 28
Average production (boe/d) 4,665
Capital spending ($000s) 35,000
Net wells drilled 60-70
Average royalty rate 10%
Operating costs ($/boe) 8.00
Transportation costs ($/boe) 1.15
G&A costs ($/boe) 2.50
Interest cost ($/boe) 2.50
Liquidity - Balance Sheet, Credit Lines and Hedging
Ember expects to exit 2008 with bank debt and working capital deficiency of approximately $101 million. Current lines of credit totaling $120 million were recently confirmed by Ember’s banking syndicate. The determination of the Company’s borrowing base and in turn its credit lines is impacted by a number of factors including but not limited to commodity prices, production, reserves and asset dispositions. The next scheduled review is March 31, 2009. The Company is continuing with its strategy of reducing debt with excess cashflows from operations and the disposition of non-core assets. The Company is targeting a $10 million reduction in net debt by the end of 2009.
Ember will use hedging to protect its balance sheet and capital programs. Ember currently has 3.8 mmcf/d hedged from November 1, 2008 to March 31, 2009 at a floor price of $9.45/mcf and a ceiling price of $18.00/mcf. The Company will continue to review opportunities to add additional hedges.
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FORWARD-LOOKING STATEMENTS
This press release may contain forward-looking statements including expectations of future production, cash flow and earnings. These statements are based on current expectations that involve a number of risks and uncertainties, which could cause actual results to differ from those anticipated. These risks include, but are not limited to: the risks associated with the oil and gas industry (e.g., operational risks in development, exploration and production; delays or changes in plans with respect to exploration or development projects or capital expenditures; the uncertainty of reserve estimates; the uncertainty of estimates and projections relating to production, costs and expenses, and health, safety and environmental risks), commodity price and exchange rate fluctuation and uncertainties resulting from potential delays or changes in plans with respect to exploration or development projects or capital expenditures. Additional information on these and other factors that could affect the Company’s operations or financial results are included in the Company’s reports on file with Canadian securities regulatory authorities.
Ember Resources Inc. is a resource company specializing in coal bed methane (CBM) with extensive land and resource holdings in Alberta, Canada. Ember’s shares are traded on the Toronto Stock Exchange under the trading symbol “EBR”.
FOR FURTHER INFORMATION PLEASE CONTACT
Mr. Douglas A. Dafoe
President & C.E.O.
Ember Resources Inc.
Telephone: 403 270-0803
Facsimile: 403 270-2850
Mr. Terry S. Meek
Executive Vice President & C.O.O.
Ember Resources Inc.
Telephone: 403 270-0803
Facsimile: 403 270-2850
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