TRAVERSE CITY, Mich., Aug. 8, 2006 (PRIMEZONE) -- Aurora Oil & Gas Corporation (AMEX:AOG) today announced operating and financial results for the second quarter of 2006. William W. Deneau, President and CEO of Aurora Oil & Gas Corporation commented, "We are delighted with our progress this year. Our operations staff have been aggressively drilling and adding to our reserve base. We are pleased to announce that we have surpassed our mid-year target of 100 Bcfe in net proven reserves as we continue to pursue our strategy of growth through the drill bit."
Production Results
For the second quarter of 2006, average daily production rose to 7,273 net mcfe per day, a 548% increase over the prior-year period of 1,123 net mcfe per day. This amounted to 661,924 net mcfe, 95% of which is natural gas, creating over $5,524,354 in production revenue for the second quarter of 2006, which includes $792,350 of realized gains from a natural gas hedge for 5,000 mmbtu per day at $8.59. Including the positive impact of the hedge, the production was sold at an average price of $6.92/mcf for natural gas and $69.92/bbl for crude oil.
The Company has been aggressively dedicated to drilling and placing wells into production. For the end of the current quarter, our well status appears as follows:
Antrim Antrim Non- New Albany New Albany
Well Status Operated Operated Operated Non-Operated
as of June
30, 2006 Gross Net Gross Net Gross Net Gross Net
Producing 131 122.59 194 31.46 0 0.00 8 0.35
Waiting on
Hook-Up 25 23.69 34 7.02 4 1.98 12 0.85
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156 146.28 228 38.48 4 1.98 20 1.20
Well Status Other Total
as of June
30, 2006 Gross Net Gross Net
Producing 45 15.19 378 169.59
Waiting on
Hook-Up 11 4.21 86 37.75
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56 19.40 464 207.34
Drilling and Operations Results
By the end of the second quarter, 2006, the Company's leasehold totaled 621,290 net (1,105,739 gross) acres, which represents a 71% increase over December 31, 2005 net acres. During the quarter, the Company added 144,930 net acres, more than twice that of the same quarter in 2005. The Company has seen substantial acreage growth in recent years, as noted in the table below:
12/31/2004 12/31/2005 6/30/2006
Acreage
Balance Gross Net Gross Net Gross Net
Antrim Shale 108,280 55,538 202,854 78,163 271,831 125,993
New Albany
Shale 291,073 220,984 594,022 271,891 784,816 449,460
Other 16,982 2,676 18,588 14,036 49,092 45,837
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416,335 279,198 815,464 364,090 1,105,739 621,290
With the strong acreage position, the Company has been focused on growth through drilling to increase the reserve base and add cash flow through production. For the first six months of 2006, Aurora participated in 72 (33 net) commercial natural gas wells, 31 gross wells as operator. Of the total, 53 (28.25 net) wells were located in the Antrim Shale, with Aurora operating 24 wells. Similarly, 14 (2.60 net) wells were located in the New Albany Shale, with Aurora operating 4 wells.
Update on Proven Reserves
The Company has been working to create value for its shareholders by continuing to build its reserve base. A mid-year reserve report for Aurora's Antrim and New Albany Shale properties was recently completed by Schlumberger Data & Consulting Services, a third-party reserve engineering firm. According to the report, the Company's 2006 drilling and acquisition program has resulted in a 69% increase to its reserve base. The total net proven reserves increased to 108 billion cubic feet of natural gas (Bcf), exceeding the mid-year target of 100 Bcf. Of this new reserve estimate, 103 Bcf is associated with our Antrim Shale properties, which currently represent the bulk of the Company's drilled asset base. The remainder of the reserves are associated with the New Albany Shale (2 Bcf) and other properties (3 Bcfe). This report also estimates that the 108 Bcf net proven reserves associated with all Aurora properties render a PV-10 pre-tax value of approximately $237 million. Of note, the New Albany Shale reserves included in the report represent only non-operated properties.
Update on Antrim and New Albany Shale Activities
Antrim Shale activities have been very positive. The Company is pleased with the drilling activities to date, encountering above-average natural fracturing in two new areas on the North side of the play. Higher water rates are expected to occur in areas of excellent natural fracturing which ultimately result in above-average gas reserves. Once these new wells get through the potentially longer dewatering phase, the increasing natural gas production will contribute to revenue growth. The Company will continue to develop the Antrim Shale as the first piece of its growth strategy. The Company holds approximately 125,993 net acres in the Antrim Shale, the majority of which remain undeveloped at this time.
New Albany Shale activities are still in early stages. Many operators have been active, though on a limited basis. Aurora has had the benefit of participating in many prospects and has a strategy for developing its own New Albany Shale acreage. Aurora has operated 4 resource assessment wells in the New Albany Shale, all of which are waiting for infrastructure prior to production. Three of the wells were vertically drilled, one was horizontal. Production rates from wells in which Aurora has participated are within company expectations. The Schlumberger reserve report has indicated that depending on the drilling method and completion technique used, a horizontal well in the New Albany Shale will typically yield an average of 0.9 to 1.3 Bcf of producible natural gas reserves, based on 320-acre spacing. Overall, Aurora management is encouraged by results which have been available to date and based upon these results, is determined to continue drilling and development efforts.
Financial Highlights
For the second quarter of 2006, Aurora generated revenues of $5,789,628, operating cash flow (defined as cash flow from operating activities before changes in assets and liabilities) of $2,642,563, primarily on production and sale of 661,924 mcfe.
Production expense for the second quarter of 2006 declined to $2.38 per mcfe, totaling $1,573,821, compared to $3.70 per mcfe, totaling $378,200 in the prior-year period. The current quarter result is also a decline from $2.90 per mcfe, reported in the first quarter of 2006. The decrease in the current quarter was primarily a result of pursuing greater cost control over projects and the result of existing facility and infrastructure costs being spread over more production as new development wells come on-line.
Interest expense for the second quarter of 2006 increased to $1,970,019 compared to $189,067 in the same quarter in 2005. This increase is a direct result of the higher utilization of debt to continue the Company's growth through acquiring and developing operating interests in the Antrim and New Albany Shales.
Additional detail on the financial results can be found in the Company's 10-QSB filed August 7, 2006.
About Aurora Oil & Gas Corporation:
Aurora Oil & Gas Corporation is an independent energy company focused on unconventional natural gas exploration, acquisition, development and production with its main operations in the Michigan Antrim Shale and New Albany Shale of Indiana and Kentucky.
Statements regarding the plans for the future growth, development plans and growth through drilling, estimated value of proved reserves and anticipated production volumes are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Although we believe that the forward-looking statements described are based on reasonable assumptions, we can give no assurance that they will prove accurate. Important factors that could cause our actual results to differ materially from those included in the forward-looking statements include the timing and extent of changes in commodity prices for oil and gas, drilling and operating risks, the availability of drilling rigs, changes in laws or government regulations, unforeseen engineering and mechanical or technological difficulties in drilling the wells, operating hazards, weather-related delays, the loss of existing credit facilities, availability of capital, and other risks more fully described in our filings with the Securities and Exchange Commission. All forward-looking statements contained in this release, including any forecasts and estimates, are based on management's outlook only as of the date of this release and we undertake no obligation to update or revise these forward-looking statements, whether as a result of subsequent developments or otherwise.