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Dundee Energy Limited Announces Third Quarter 2011 Financial Results

October 19, 2011

TORONTO, ONTARIO--(Marketwire - Oct. 19, 2011) - Dundee Energy Limited (TSX:DEN) (formerly "Eurogas Corporation") ("Dundee Energy" or the "Corporation") today announced its financial results for the three and nine months ended September 30, 2011. The Corporation's unaudited interim consolidated financial statements, along with management's discussion and analysis have been filed on the System for Electronic Document Analysis and Retrieval ("SEDAR") and may be viewed under the Company's profile at or the Corporation's website at

  • Cash flow from operating activities was $11.6 million in the nine months ended September 30, 2011, including $3.3 million generated during the third quarter of this year. This compares with cash outflows of $0.2 million during the nine months ended September 30 of the prior year. In June 2010, the Corporation completed the acquisition of oil and natural gas properties in southern Ontario, significantly affecting operating cash flow in the current period relative to the same period of the prior year.

  • Production volumes for the three months ended September 30, 2011 averaged 10,698 Mcf/d1 of natural gas and 721 bbls/d1 of oil and liquids on a net basis.

  • Revenues earned from the sale of oil and gas during the third quarter of 2011 were $10.4 million and represent an average price of $4.58/Mcf on sales of natural gas and an average price of $89.51/bbl on sales of crude oil.

  • Field netbacks for the three months ended September 30, 2011 were $1.04/Mcf from sales of natural gas and $44.86/bbl from sales of oil and liquids.

  • Capital expenditures during the third quarter of 2011 were $4.1 million.

  • Cash and available credit under the Corporation's credit facilities totalled $25.0 million at September 30, 2011. As at September 30, 2011, the Corporation had drawn $62 million against its credit facilities.

  • Net loss for the three months ended September 30, 2011 was $1.1 million or $0.01 loss per share, and is net of a fair value gain of $1.5 million related to outstanding risk management contracts. On a year-to-date basis, the Corporation incurred a net loss of $2.2 million compared with a net loss of $3.8 million incurred in the same period of the prior year.


Acquisition of Torque Energy Inc. ("Torque Acquisition")

During the quarter ended September 30, 2011, the Corporation completed the acquisition of all of the outstanding common shares of Torque Energy Inc. ("Torque"), a Canadian based oil and natural gas company with exploration, development and production activities. The acquisition of Torque is expected to provide the Corporation with efficiencies of scale by combining Torque's oil and natural gas interests with the Corporation's ongoing operations. Management has estimated that the acquisition of Torque provides the Corporation with proved reserves of 0.5 million barrels of oil with a reserve life index of 16.3 years, as well as 1.1 billion cubic feet of natural gas with a reserve life index of 10.4 years.

The aggregate purchase consideration for the Torque Acquisition was $7.1 million and included a cash payment of $6.0 million and the issuance of 1,346,926 common shares of the Corporation with a value of $1.1 million.

1 Torque's daily production volume is prorated for the period from the date of acquisition on August 4, 2011 to September 30, 2011.

Revenues from Oil and Gas Sales
Quarter ended Quarter ended Quarter ended Quarter ended Quarter ended
30-Sep-11 30-Jun-11 31-Mar-11 31-Dec-10 30-Sep-10
Realized Realized Realized Realized Realized
Revenue Price/unit Revenue Price/unit Revenue Price/unit Revenue Price/unit Revenue Price/unit
Natural gas (Mcf)
DELP $ 4,420 $ 4.59 $ 4,541 $ 4.71 $ 4,290 $ 4.69 $ 4,309 $ 4.50 $ 4,881 $ 5.08
Torque 88 4.17 - - - - - - - -
Oil (bbls)
DELP 5,338 89.82 6,479 105.63 5,211 91.18 5,342 86.82 4,799 76.38
Torque 409 87.08 - - - - - - - -
Liquids (bbls) 129 58.42 185 56.47 68 47.22 117 58.18 72 50.75
Total $ 10,384 n/a $ 11,205 n/a $ 9,569 n/a $ 9,768 n/a $ 9,752 n/a

During the third quarter of 2011, the Corporation realized an average price of $4.58/Mcf, before adjustments resulting from risk management contracts, on sales of natural gas. This represents a positive basis differential from the average NYMEX price of US$4.12/Mcf due in part, to the Corporation's proximity to the Dawn hub, which is located in southwestern Ontario and which is a leading provider of natural gas supply to the greater Toronto market area. Despite the positive basis differential, revenues from natural gas sales continue to be affected by a low North American natural gas price, reflecting excess supply of this commodity.

The Corporation realized an average price of $89.51/bbl on sales of oil during the third quarter of 2011, before adjustments resulting from risk management contracts. Global economic concerns continue to cause significant volatility for crude oil. The Corporation has hedged approximately 81% of its oil production to December 2011 at an average price of $93.79 in order to partially mitigate its exposure to this type of volatility.

Production Volumes

Average Production Volumes per Quarter
30-Sep-11 30-Jun-11 31-Mar-11 31-Dec-10 30-Sep-10
Natural gas (Mcf/d)
DELP 10,469 10,602 10,164 10,417 10,453
Torque 346 - - - -
Oil (bbls/d)
DELP 646 674 635 669 683
Torque 77 - - - -
Liquids (bbls/d) 24 36 16 22 15
Field Level Cash Flows
Field Level Cash Flows per Quarter
30-Sep-11 30-Jun-11 31-Mar-11 31-Dec-10 30-Sep-10
Oil and gas sales $ 10,384 $ 11,205 $ 9,569 $ 9,768 $ 9,752
Royalties (1,627 ) (1,675 ) (1,497 ) (1,467 ) (1,573 )
Production expenditures (4,757 ) (3,054 ) (2,898 ) (2,926 ) (2,793 )
Field level cash flows $ 4,000 $ 6,476 $ 5,174 $ 5,375 $ 5,386

Field level cash flows in the third quarter of 2011 were $4.0 million. As field operations are limited during the winter months, the majority of the Corporation's repair and maintenance and capital expenditures programs are conducted throughout the third and fourth quarters of each year. This seasonality is reflected in lower field level cash flows in the current quarter compared to previous reporting periods.

Capital Expenditures

Capital expenditures in the third quarter of 2011 totalled $4.1 million. As part of its offshore work program, the Corporation drilled three gas wells. Two wells were drilled, completed and connected to the pipeline grid and are expected to result in a gross production of 500 Mcf/d. The third well was shut-in, pending further evaluation. The Corporation also initiated its onshore drilling program late in the third quarter of 2011 and drilled two wells in the Rochester field, targeting oil volumes previously unrecoverable from existing producers.

The Corporation anticipates drilling and completion costs during the fourth quarter of $2.8 million. In addition, during the fourth quarter, the Corporation expects to acquire a large 3-dimensional seismic program over producing and non- producing lands for approximately $1.2 million. The acquisition of this data is required for the design and planning of the Corporation's drilling program for 2012.

Price Risk Management

The Corporation has entered into fixed price derivative contracts for the purpose of protecting its oil and natural gas revenue from the volatility of oil and natural gas prices and the volatility in Canadian to US foreign exchange rates. At September 30, 2011, the Corporation had locked in pricing for 550 bbls/d of oil production at a weighted average rate of Cdn$93.79/bbl through to December 2011 and 6.5 million btu/day of natural gas from October 1, 2011 to February 28, 2012 at a fixed price of Cdn$4.66/MMbtu. As previously noted, these risk management contracts hedge approximately 81% of the Corporation's oil production and 62% of its natural gas production during the periods covered by the hedges.


The construction of the Castor Project, which is now over 80% complete, is progressing as scheduled and is currently on budget. The 13-well drilling program is essentially complete, as is the installation of the onshore pipeline, which is currently undergoing testing. Installation of the subsea pipeline, which will connect the offshore processing platform to the onshore pipeline, is progressing and is expected to be completed early in the fourth quarter of this year. The responsibility for the construction of the interconnecting pipeline between the onshore facilities and Spain's national natural gas network has been undertaken by Escal and is expected to be completed before the end of 2011 or early in 2012.

The topsides for the offshore processing platform, which were constructed in the United States, are completed. They will be transported to southern Spain where the process platform will be assembled, towed to the offshore site and connected to the drilling platform.


The Corporation believes that important measures of operating performance include certain measures that are not defined under IFRS and as such, may not be comparable to similar measures used by other companies. While these measures are non-IFRS, they are common benchmarks in the oil and natural gas industry, and are used by the Corporation as supplementary measures to net earnings and assist management in the estimation of future cash flow.

  • "Field Level Cash Flows" are calculated as revenues from oil and gas sales, less royalties and production expenditures.
  • "Field Netbacks" refers to field level cash flows expressed on a measurement unit or barrel of oil equivalent basis.


Dundee Energy Limited (formerly "Eurogas Corporation") is a Canadian-based company whose common shares currently trade on the Toronto Stock Exchange under the symbol "DEN" (formerly "EUG"). The Corporation is focused on creating long-term value for its shareholders through the development and acquisition of high-impact energy projects. Dundee Energy holds interests, both directly and indirectly, in the largest accumulation of producing oil and gas assets in Ontario, in the development of an offshore underground natural gas storage facility in Spain and, through a preferred share investment, in certain exploration and evaluation programs for oil and natural gas offshore of Tunisia. Prior to February 4, 2011, the Corporation's common shares were trading on the TSX Venture Exchange.


Certain information set forth in these documents, including management's assessment of each of the Corporation's future plans and operations, contains forward-looking statements. Forward-looking statements are statements that are predictive in nature, depend upon or refer to future events or conditions or include words such as "expects", "anticipates", "intends", "plans", "believes", "estimates" or similar expressions. By their nature, forward-looking statements are subject to numerous risks and uncertainties, some of which are beyond the Corporation's control, including: exploration, development and production risks; uncertainty of reserve estimates; reliance on operators, management and key personnel; cyclical nature of the business; economic dependence on a small number of customers; additional funding that may be required to execute on exploration and development work; the ability to obtain, sustain or renew licenses and permits; risks inherent to operating and investing in foreign countries; availability of drilling equipment and access; industry competition; environmental concerns; climate change regulations; volatility of commodity prices; hedging activities; no history of earnings; potential defects in title to properties; potential conflicts of interest; changes in taxation legislation; insurance, health, safety and litigation risk; labour costs and labour relations; geo- political risks; risks relating to management of growth; aboriginal claims; volatility of the Corporation's share price; royalty rates and incentives; regulatory risks relating to oil and natural gas exploration; marketability and price of oil and natural gas; failure to realize anticipated benefits of acquisitions and dispositions; information system risk; and other risk factors discussed or referred to in the section entitled "Business Risks" in the Corporation's Management's Discussion and Analysis as at and for the year ended December 31, 2010. Readers are cautioned that the assumptions used in the preparation of such information, although considered reasonable at the time of preparation, may prove to be imprecise and, as such, undue reliance should not be placed on forward-looking statements. The Corporation's actual results, performance or achievement could differ materially from those expressed in, or implied by, these forward-looking statements and, accordingly, no assurance can be given that any of the events anticipated by the forward-looking statements will transpire or occur, or if any of them do so, what benefits the Corporation will derive from them. The Corporation disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

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