CALGARY, ALBERTA--(Marketwire - May 1, 2012) - Forent Energy Ltd. ("Forent" or the "Company") (TSX VENTURE:FEN) is pleased to announce that it has filed its audited Financial Statements and Management's Discussion & Analysis for the period ending December 31, 2011, with applicable securities regulatory authorities in Canada. Copies of these documents can be accessed under the Company's profile on the SEDAR website at www.sedar.com and on the Company's website www.forentenergy.com.
In addition Forent's board of directors has accepted the 2011 year end reserves report, prepared by Sproule Associates Ltd. ("Sproule") and the Company has today filed its Form 51-101F1 - Statement of Reserves Data and Other Oil and Gas Information; Form 51-101F2 - Report on Reserves Data by Independent Qualified Reserves Evaluator; and Form 51-101F3 - Report of Management and Directors on Oil and Gas Disclosure with applicable securities regulators in Canada under National Instrument 51-101, Standards of Disclosure for Oil and Gas Activities. Such filings can also be accessed electronically from the SEDAR website at www.sedar.com.
Overview of 2011
The Company had a very active year in Nova Scotia in preparation for the drilling of several exploration wells on the Alton Block in early 2012. Our goal was to drill the wells in the fourth quarter of 2011 but due to the extensive regulatory process in Nova Scotia the wells were delayed to the first half of 2012. The Company completed tie-in of its water disposal well in Saskatchewan in order to enhance net operating income, as well as, long term viability of the Mervin property. Crude oil and natural gas liquids prices remained high, allowing the Company to largely maintain netbacks. However, production declines occurred at most of Forent's properties and the Company was forced to shut in the Blackfoot well in the fourth quarter as a result of high operating costs and very low production. In June we sold our 35% interest in two non-core Thompson Lake wells for proceeds of $750,000 (loss on disposal of $296,587 due to the carrying value in excess of the realized selling price) and used the funds for the salt water disposal project at Mervin. The Company was able to conduct two non-brokered equity placements in 2011, raising a total of $4.7 million in new equity that was allocated to exploration activities on its Alton Block in Nova Scotia. The Company appointed Mr. Robert S. Crosbie to its board of directors to provide stronger representation from Atlantic Canada, given the significance of its Nova Scotia exploration efforts.
Building on the excellent results of the 900 km(2) Alton aerial gravity gradiometry survey that was completed in late 2010, the Company allocated the majority of its financial and human resources to the exploration of the Alton Block in 2011.
Early in the first quarter Forent established the foundation for a very successful and proactive ongoing communication strategy in Nova Scotia. This was extremely important as it allowed the Company to complete its 2011 work program without running into many of the roadblocks that hampered other oil and gas companies operating in the Maritimes during 2011. During the balance of the year the Company continued to dedicate resources to ensure all stakeholders understood its objectives for the Alton Block. As part of this process the Company established a community liaison committee comprised of individuals from the local community, including members of the First Nations. The community liaison committee serves as a forum for the community to build understanding, make suggestions and identify concerns about the Company's Nova Scotia operations and met several times during the year. Forent representatives met with members of the public in both April and October at open houses in Stewiacke, NS, to review the Company's plans for the 2D seismic acquisition program and the drilling of our exploration wells.
Onshore petroleum exploration in Nova Scotia is an industry that's in its infancy in comparison to the western Canadian sedimentary basin. Forent has taken an approach that is focused on ensuring all stakeholders are informed and educated as to the exploration process that the Company is pursuing. Specifically, the Company has indicated that it is drilling for crude oil into the reef structures it has identified and will not need to hydraulically fracture any of the proposed wells.
The Company initiated the permitting for a 65 km 2D seismic acquisition program early in the second quarter and completed the seismic survey in June, interpreting the data over the summer and submitted applications to the government of Nova Scotia for three wells in September, for which it received approval on November 17, 2011. In order to minimize mobilization costs, Forent partnered with another exploration company for the movement of a drilling rig from Quebec to Nova Scotia. As this other company received approval for the drilling of its well prior to our approvals, it utilized the rig first, with the result that Forent did not spud its first well until February 14, 2012.
The well encountered the flank of a Gays River reef, a shaley dolomite, lying on a Meguma basement high, as was anticipated from the Company's seismic and gravity gradiometry interpretation. Several significant natural gas kicks were detected during the well drilling and live oil was found in the mud tank, indicating an active petroleum system and suggesting that there are natural gas liquids or light oil associated with the natural gas. The logs indicated minimal porosity and permeability near the well bore and the company does not anticipate production from this well, however, future wells drilled into the same reef may be productive. The well has been cased and left in a condition that it may be easily re-entered for further evaluation. The well was drilled within the financial and time parameters established prior to spud and the company was encouraged by the results.
The Company relinquished its interest in the Beech Hill Block in the second half of the year. As a junior company, management was concerned about diluting its exploration resources and decided not to make any additional spending commitments for another three years of exploration on the Beech Hill Block.
The 23 section 3D seismic acquisition program that was completed in late December 2010 has yielded very promising results, identifying at least 12 drilling locations, each with significant exploration and development potential. These locations include multi-zone, three-way structural closures of significant areal extent. However, the Company has been challenged to find a partner to participate in the drilling program as exploration projects are have fallen out of favour for many smaller companies as resource plays are currently easier to finance. While larger companies are still interested in exploration projects, most have their own internally generated projects and often look for significantly larger opportunities.
During the second quarter Forent undertook a native grass study as part of its program of engaging the local surface land owners in order to help to ensure that any access concerns are identified and addressed prior to drilling and operations are conducted in a safe, effective and acceptable manner, with limited impact to the environment.
During February of 2011 the Company witnessed a significant production decline, which was reversed early in the second quarter, although water volumes increased significantly. This resulted in the Company experiencing a considerable increase in water handling costs throughout most of the year and necessitated the need for internal water disposal facilities. The Company completed the conversion of one of the seven well bores that it re-entered in 2010 to a saltwater disposal ("SWD") well early in the first quarter of the year. However, as a result of regulatory approval and delays experienced in accessing the land for the tank farm, that needed to be built at the SWD facility, the wells were not tied into the SWD well until late in the year. The completion of the project has allowed the Company to save approximately $50,000 per month in operating costs and Mervin is currently generating close to $40,000 per month in third party salt water disposal revenue. During 2011 Forent produced more than 50,000 bbls of oil from the Mervin property and the production is expected to remain fairly stable.
Outlook for 2012
Due to the seasonal road restrictions in effect in Nova Scotia, the Company stored the drilling rig near the Alton #1 location and was able to move it to the second drilling location (South Branch #1), about 17 km to the east of Alton #1 and in late April in order to continue its exploration program. We are optimistic that our efforts over the past five years will bear fruit in 2012 and that Forent will become the first company in Nova Scotia to produce oil on shore. Depending on the results of the South Branch #1 well the Company may raise funds for the development of the property. If we are successful, we believe that there will be significant long term value additions for Forent's shareholders.
We continue to market the Montgomery, Alberta exploration opportunity and are currently in discussions with several parties in an effort to complete a multiple well farm-out before the end of the year. The Company has interests in 29 contiguous sections with an average working interest of approximately 85% at Montgomery. We believe that interest may grow this year in excellent exploration opportunities such as Montgomery where we have identified more than a dozen drilling locations, including multi-zone, three-way structural closures of significant areal extent, as well as, a number of Second White Specs prospects, that appear similar to a very successful nearby Second White Specs well.
In Mervin, the Company will continue its optimization of the asset to effect further cost savings and will look to maintain and if possible augment its income from the processing of third party water. There is considerable activity in the area that could result in additional volumes of water being delivered and processed at our facility. The Company intends to review the potential to drill additional wells at Mervin and will assess other nearby low risk heavy oil opportunities, as internally generated cash flow dictates. Although Mervin production declined in the fourth quarter of 2011 as compared to 2010, we believe that a significant portion of this production loss can be restored in the second quarter of 2012. In addition, we have recently started shipping a portion of our production to the US Gulf Coast via rail car in order to take advantage of the premium price being offered and hope to expand this program later in the year.
The Common shares of Forent are listed for trading on the TSX Venture Exchange under the symbol FEN.
Except for statements of historical fact, this news release contains certain "forward-looking information" within the meaning of applicable securities law. Forward-looking information is frequently characterized by words such as "plan", "expect", "project", "intend", "believe", "anticipate", "estimate" and other similar words, or statements that certain events or conditions "may" or "will" occur. Forward-looking statements such as the estimates of reserves, the references to Forent's exploration program and drilling program and capital expenditures relating to, and timing of, such programs are based on the opinions and estimates at the date the statements are made, and are subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ materially from those anticipated in the forward-looking statements. There are uncertainties inherent in forward-looking information, including factors beyond Forent's control, and no assurance can be given that the programs will be completed on time, on budget or at all. In addition, there are numerous uncertainties inherent in estimating reserves, including many factors beyond Forent's control, and no assurance can be given that the indicated level of reserves or the recovery thereof will be realized. Forent undertakes no obligation to update forward-looking information if circumstances or management's estimates or opinions should change except as required by law. The reader is cautioned not to place undue reliance on forward-looking statements. Additional information identifying risks and uncertainties that could affect financial results is contained in Forent's filings with Canadian securities regulators, which filings are available at www.sedar.com.
The TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this press release.