Ivanhoe Energy 2007 Third Quarter Results and Operations Update
VANCOUVER, Nov. 8 /PRNewswire-FirstCall/ — Ivanhoe Energy Inc. today will file its Quarterly Report on Form 10-Q for the quarter ended September 30, 2007.
Heavy Oil Activities
In the third quarter, Ivanhoe Energy built on the momentum of the first half of 2007 as the company continued to focus on and gear up for full-scale HTL(TM) commercial heavy oil operations.
– Ivanhoe Energy made concrete progress in identifying, prioritizing and analyzing key heavy oil targets, primarily in Canada, that would be excellent candidates for the company’s first commercial HTL facility. Discussions are underway related to key opportunities. – Significant progress was made with AMEC, Ivanhoe Energy’s Tier 1 contractor, in advancing the design and engineering of full-scale HTL facilities. – Ivanhoe Energy released technical data related to the Athabasca bitumen test that was carried out in June, pursuant to a long- standing technical agreement with ConocoPhillips Canada. This, and other test run data, correlated the performance of the Commercial Demonstration Facility (CDF) with earlier runs on the smaller-scale pilot facility and validated the assumptions in Ivanhoe Energy’s economic models. – Integrated HTL/Steam Assisted Gravity Drainage (SAGD) financial models for Athabasca were updated and refined, incorporating newly revised capital costs from AMEC and revised price assumptions and currency exchange rate changes. These updated models show that HTL integration represents robust added value for thermal bitumen projects in Western Canada. – Work was initiated with AMEC in its Canadian and U.K. offices to evaluate the benefits of HTL/SAGD integrated projects. Financial Highlights
Cash flow from operating activities remained positive for the 12th consecutive quarter, generating US$1.8 million. In the third quarter, a $30 million Revolving/Term Credit Facility with an initial borrowing base of $10 million was obtained from Standard Bank Plc for the Dagang project in China.
U.S. Oil and Gas Operations (unaudited; thousands of U.S. dollars except production amounts) —————————- ——————- Three Months Ended Nine Months Ended —————————- ——————- Sept.30 June 30 Sept.30 Sept.30 Sept.30 2007 2007 2006 2007 2006 ——— ——— ——– ——— ——— Financial ——— Revenue $ 1,469 $ 2,522 $ 3,442 $ 6,265 $ 9,567 Depletion and depreciation $ 1,306 $ 1,482 $ 1,445 $ 4,402 $ 3,906 Capital investments $ 645 $ 981 $ 2,929 $ 2,438 $ 4,982 Identifiable assets (at end of period) $ 42,328 $ 40,308 $ 43,296 Operating ——— Net production (after royalties): Barrel of oil equivalent (BOE) 43,374 50,014 57,058 150,233 166,656 BOE/day for the period 471 550 627 550 610 South Midway ————
Ivanhoe Energy has 67 wells in the 1,400-acre South Midway heavy oil field in California, with a working interest of 100%. Production from this field, which makes up the majority of the company’s U.S. production, fell in the second and third quarters of 2007 due to the lack of steam generation at this cyclic steam heavy oil operation for part of the year. A second steam generator was put into service at the start of September and production in September rebounded to an average of 522 barrels of oil per day.
China Oil and Gas Operations (unaudited; thousands of U.S. dollars except production amounts) —————————- ——————- Three Months Ended Nine Months Ended —————————- ——————- Sept.30 June 30 Sept.30 Sept.30 Sept.30 2007 2007 2006 2007 2006 ——— ——— ——— ——— ——— Financial ——— Revenue $ 7,286 $ 6,998 $ 10,376 $ 21,180 $ 26,972 Depletion and depreciation $ 4,537 $ 4,328 $ 5,910 $ 13,591 $ 17,573 Capital investments $ 7,735 $ 6,516 $ 1,630 $ 18,053 $ 6,292 Identifiable assets (at end of period) $ 82,384 $ 72,213 $ 84,036 Operating ——— Net production (after royalties): Barrel of oil equivalent (BOE) 116,184 115,937 152,767 358,437 431,849 BOE/day for the period 1,263 1,274 1,679 1,313 1,582 Dagang ——
The average gross production rate in the third quarter of 2007 at the Dagang project was 1,561 barrels of oil per day from 40 wells, compared to 1,549 barrels per day in the second quarter of 2007. Four of the five new development wells were put on line during the third quarter of 2007 and the fifth well began production in late October.
Zitong ——
Testing operations on the Xu 4 formation at the 4,045-meter (13,270-foot) second exploratory well, Yixin # 1, on the Zitong natural gas exploration block were concluded during the third quarter of 2007. The Xu 4 zone tested sub-economic rates of natural gas and has been temporarily suspended and isolated. A 14-meter section of the upper Xu 5 Triassic zone is expected to be perforated and tested in the fourth quarter.
After completion of the testing of the Yixin #1 well, Ivanhoe Energy will evaluate the results and make an election, along with our partner Mitsubishi Gas Chemical Company Inc., whether to enter into the next three-year exploration phase. Ivanhoe Energy has received approval to extend the Phase 1 exploration program to December 31, 2007, to allow for an evaluation period following the final testing of the well. Ivanhoe Energy has a 90% working interest in this project and is the operator.
Consolidated Financial Highlights (unaudited; thousands of U.S. dollars except per share and production amounts) —————————- ——————- Three Months Ended Nine Months Ended —————————- ——————- Sept.30 June 30 Sept.30 Sept.30 Sept.30 2007 2007 2006 2007 2006 ——— ——— ——— ——— ——— Financial ——— Net loss $ (7,232) $ (6,579) $ (4,388) $(20,358) $(14,169) Net loss per share – basic and diluted $ (0.03) $ (0.03) $ (0.02) $ (0.08) $ (0.06) Cash flow from operating activities $ 1,766 $ 199 $ 5,353 $ 4,566 $ 11,055 Revenue $ 8,823 $ 9,589 $ 14,015 $ 27,669 $ 36,963 Depletion and depreciation $ 6,044 $ 6,024 $ 7,772 $ 18,960 $ 24,808 Capital investments $ 9,100 $ 8,123 $ 5,019 $ 22,557 $ 13,622 Total assets (at end of period) $243,214 $235,761 $264,242 Cash and cash equivalents (at end of period) $ 14,779 $ 11,076 $ 19,535 Operating ——— Net production (after royalties): Barrel of oil equivalent (BOE) 159,558 165,951 209,825 508,670 598,505 BOE/day for the period 1,734 1,824 2,306 1,863 2,192 Summary of Third Quarter ————————
Cash flow from operating activities remained positive for the 12th consecutive quarter, generating US$1.8 million. Ivanhoe Energy’s existing production in the U.S. and China continued to meet the goal of funding the business and technology development expenses associated with the planned deployment of the HTL technology. Oil prices were higher in the third quarter; however, revenue fell from the second quarter due to an increased loss on derivative instruments that were put in place as part of the company’s banking facilities.
Liquidity and Capital Resources
On September 30, 2007, Ivanhoe Energy’s cash position was US$14.8 million. In the third quarter of 2007 the company obtained a $30 million Revolving/Term Credit Facility with an initial borrowing base of $10 million from Standard Bank Plc for the Dagang project in China. An initial draw of $6.3 million (net of financing costs) was made in September 2007. The facility is scheduled to expire in September 2010. In the third quarter, the company also made a draw of $3 million on its existing $15 million Senior Secured Revolving/Term Credit Facility.
Capital investments of US$9.1 million for the third quarter of 2007 were $1.0 million higher than the second quarter, primarily as a result of increased development activities in China.
Conference Call
Ivanhoe Energy will host a conference call today, November 8, 2007, for investors and analysts at 4:30 p.m. EST (1:30 p.m. PST) to discuss 2007 third quarter results and provide an update on operations. The conference call may be accessed by dialing toll-free 1-866-540-8136 in Canada and the United States, or 1-416-340-8010 in the Toronto area and internationally. A simultaneous webcast of the conference call will be provided through http://www.ivanhoeenergy.com/. If you are unable to participate in the call it will be archived for later playback by dialing 1-416-695-5800 and entering the pass code 3237896 followed by the number sign, or via http://www.ivanhoeenergy.com/. The archived playback will be available until December 10, 2007.
This news release summarizes our 2007 third quarter results of operations and financial condition and should be read in conjunction with our Quarterly Report on Form 10-Q for the quarter ended September 30, 2007, which contains condensed financial statements and Management’s Discussion and Analysis of Financial Condition and Results of Operations. The Form 10-Q is expected to be filed today and copies may be obtained from the Ivanhoe Energy website at http://www.ivanhoeenergy.com/, on EDGAR at http://www.sec.gov/ or SEDAR at http://www.sedar.com/.
Ivanhoe Energy is an independent international heavy oil development and production company focused on pursuing long-term growth in its reserves and production using advanced technologies, including its proprietary heavy oil upgrading process (HTL(TM)). Core operations are in the United States and China, with business development opportunities worldwide. Ivanhoe Energy trades on the NASDAQ Capital Market with the ticker symbol IVAN and on the Toronto Stock Exchange with the symbol IE.
FORWARD-LOOKING STATEMENTS: This document includes forward-looking statements, including forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include, but are not limited to, statements concerning the potential benefits and costs of Ivanhoe Energy’s heavy oil upgrading technology, the potential for, and timing of, commercialization and future application of the heavy oil upgrading technology, statements relating to the continued advancement of Ivanhoe Energy’s projects, the potential for successful exploration and development drilling, statements related to anticipated capital expenditures and other statements which are not historical facts. When used in this document, the words such as “could,”"plan,”"estimate,”"expect,”"intend,”"may,”"potential,”"should,” and similar expressions relating to matters that are not historical facts are forward-looking statements. Although Ivanhoe Energy believes that its expectations reflected in these forward-looking statements are reasonable, such statements involve risks and uncertainties and no assurance can be given that actual results will be consistent with these forward-looking statements. Important factors that could cause actual results to differ from these forward-looking statements include the potential that the company’s projects will experience technological and mechanical problems, new product development will not proceed as planned, the HTL technology to upgrade bitumen and heavy oil may not be commercially viable, market acceptance of the HTL technology may not be as anticipated, Ivanhoe Energy’s lack of history in developing commercial HTL opportunities, geological conditions in reservoirs may not result in commercial levels of oil and gas production, the availability of drilling rigs and other support services, the risk associated with doing business in foreign countries, environmental risks, changes in product prices, the ability to generate cash flow and raise capital as and when required, competition and other risks disclosed in Ivanhoe Energy’s Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission on EDGAR and the Canadian Securities Commissions on SEDAR.
RESERVES DATA AND OTHER OIL AND GAS INFORMATION: Ivanhoe Energy’s disclosure of reserves data and other oil and gas information is made in reliance on an exemption granted to Ivanhoe Energy by Canadian securities regulatory authorities, which permits Ivanhoe Energy to provide disclosure in accordance with U.S. disclosure requirements.
The information provided by Ivanhoe Energy may differ from the corresponding information prepared in accordance with Canadian disclosure standards under National Instrument 51-101 (NI 51-101). Further information about the differences between the U.S. requirements and the NI 51-101 requirements is set forth under the heading “Reserves, Production and Related Information” in Ivanhoe Energy’s Annual Report on Form 10-K.
CONTACT: Cindy Burnett, (604) 331-9830; Website: http://www.ivanhoeenergy.com/
Ivanhoe Energy Inc.
CONTACT: Cindy Burnett, (604) 331-9830; Website: http://www.ivanhoeenergy.com/