CALGARY, ALBERTA -- (Marketwired) -- 05/30/13 -- Forent Energy Ltd. (TSX VENTURE: FEN) ("Forent" or the "Company") is pleased to announce that it has filed its unaudited condensed Interim Financial Statements and Management's Discussion & Analysis, for the period ending March 31, 2013, 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.
Overview of the First Quarter of 2013
During the first quarter of 2013, Forent undertook significant positive changes for the Company in regards to the closing of the sale of its Mervin property, changes in senior management and a $1.5 million private placement.
On February 1, 2013, the Company closed the sale of all its interests in its Mervin, Saskatchewan property for $5.5 million plus customary adjustments, resulting in a gain of $2.9 million over the carrying amount of the property and related liabilities, net of deferred taxes. The disposition of the property allowed Forent to realize a value that was comparable to the fair market value of the asset prior to the impairment in September of 2012 and in excess of the independently assigned proved plus probable value as of December 31, 2011. The proceeds of the sale have been allocated to ongoing capital requirements.
On February 22, 2013 Forent appointed Richard Wade as the new President and Chief Executive Officer to lead the Company into its next phase of growth. This change came as a result of the resignation of Thomas Lester the former interim President, CEO and CFO. Mr. Wade is a registered Professional Engineer in Alberta & Saskatchewan and brings to Forent a broad range of experience in drilling, completions, reserve evaluations and production operations. He also has a strong background in asset acquisitions and divestitures. Mr. Wade will be a key asset to the Company as Forent moves to acquire a base level of cash flow while exploiting both the Montgomery and Alton assets.
In March of 2013, Timothy Laska, P.Geol, joined Forent as Vice-President of Geology. Mr. Laska is a registered Professional Geologist with over 25 years of exploration and development experience across the Western Canada Sedimentary Basin. He has worked with Mr. Wade previously at Elk Point Resources, Western Gas Canada and Lario Oil and Gas. Mr. Laska has also previously worked with Forent's Vice-President of Exploration, Ian Shook, at PanCanadian Petroleum during a very successful exploration and development growth phase in PanCanadian's Drumheller district. The addition of Mr. Laska adds a key element to Forent's management team.
As a result of the production and cash flow impairment of the Mervin asset, Forent opened the year with a $1.2 million working capital deficiency, not including long-term assets and liabilities held for sale. In order to ensure adequate short term working capital and due to uncertainty regarding the ability and potential timing to close the Mervin sale, Forent initiated a financing transaction in earlier 2013 and completed the non-brokered financing of $1,500,000 on February 20, 2013.
Forent reached a significant milestone in 2012 with the drilling of two exploration wells for Gays River reefs on the Alton Block. Forent Alton #1 and Forent South Branch #1 were both drilled through the zones of interest to basement. These wells provided confirmation regarding the presence of hydrocarbons in the system and reef development at depth. They also reduced the Company's three year $6.3 million exploration agreement commitment to $1.8 million, as at March 31, 2013. Under the current terms of the Alton Block exploration agreement, the balance of the work commitment is required to be spent by April 8, 2014.
Forent is actively looking for a joint venture partner to assist with capital expenditures and share risk and upside potential on the Alton Block. In addition to 8 geophysical anomalies targeting Gays River reef locations, Forent sees large potential for gas reserves in the Horton shale on the northern portion of the Alton bock. Data obtained from operators offsets Forent acreage; indicate significant shale gas potential on these lands. During 2013, Forent will continue geological evaluation of the Horton Shale potential while seeking a joint venture partner to evaluate both Gays River reef and Horton Shale potential.
During the second quarter of 2012, at Montgomery, Forent entered into a joint venture partnership with BlackShale Resources Inc. ("BlackShale"), a wholly owned subsidiary of Houston based Kerogen Energy Holdings LLC. BlackShale is a private company specializing in identifying and exploiting unconventional oil and gas opportunities in Canada. After an extensive assessment of the regional light oil resource opportunities in Western Canada, BlackShale identified Forent's Montgomery lands for one of its initial projects and committed to drill up to two exploration wells on a pay 100% of cost to earn 70% working interest basis. BlackShale will earn a 70% interest on 4 sections of land per well drilled.
In December of 2012 the first earning well, BlackShale Montgomery 01-16-012-29W4/00, was drilled and cased to the base of the Mannville formation at 3,227 meters. Although the well is still being evaluated, indications to date are that it will achieve its intended objectives. Extensive core was cut and a full suite of conventional and specialized petrophysical logs were run over the entire well bore in order to analyze both the unconventional and conventional hydrocarbon potential. During the first quarter of 2013, the Second White Specs formation was perforated and stimulated in order to obtain rock mechanical properties, pressure and flow data. Subsequent to the stimulation, the well was flowed for a partial clean up, shut-in for an extended reservoir pressure build up and remains in this state today. Tight reservoirs typically require extended shut-in periods to fully build up to initial reservoir conditions in order to adequately analyze the data and calculate the stimulated permeability. Additional evaluations of the well, core and log data will occur over the next several months.
On February 1, 2013, the Company closed the sale of all of its interests in the Mervin, Saskatchewan property for proceeds of $5.5 million, resulting in a gain of $2.9 million over the carrying amount of the assets and liabilities related to the property, net of deferred taxes. The disposition of this property allowed Forent to realize a value comparable to the fair market value of the asset prior to the impairment and in excess of the independently assigned proved plus probable value as of December 31, 2011.
Outlook for 2013
Forent has made significant progress in evaluating both asset and corporate merger opportunities during the first quarter of 2013. Several assets were evaluated however only a few were of sufficient quality to warrant an offer. While unsuccessful in securing any of these asset packages, Forents offers were competitive but other circumstances prevented closing of the deals. During the first quarter, Forent also evaluated a number of companies as potential merger candidates. Focus was directed towards companies with quality assets and strong balance sheets. We will continue to evaluate and submit proposals to replace the production loss from the sale of the Mervin property and restore operating cash flow. The cash flow generated from new operations will provide a foundation of steady operating funds and reserve base while Forent continues to advance our core projects in Montgomery, Alberta and Alton, Nova Scotia.
While the first well in the Montgomery block was intended as a regional test well, Forent anticipates that a longer term production test will occur after the reservoir recorders are removed and the pressure build up has been analyzed. We anticipate the reservoir recorders will be pulled from the wellbore in early June 2013 and the data will be analyzed to evaluate the effectiveness of the stimulation. This will provide valuable input for development of a production model and assist in the planning of future wells. In Montgomery, we will continue to work closely with our joint venture partner's technical team on analyzing the results of the 01-16-12-29W4 well and evaluate future drilling locations. We will continue to communicate with the landowners in the area and remain a good neighbor and joint venture partner.
In Nova Scotia it is anticipated the Alton # 1 standing wellbore will be abandoned in the second quarter of 2013 in order to ensure the capital expended on the well is fully qualified as flow through expenditures. The wellbore will be left in a state that future re-entry will be easily accommodated should further testing be warranted. Forent is actively seeking a joint venture partner to accelerate the drilling of the balance of the Gays River Reef structures identified and assist in further quantification of the shale gas potential of the area.
Shares of Forent trade on the TSX Venture Exchange under the symbol "FEN".
This release includes certain statements that may be deemed "forward-looking statements". All statements in this release, other than statements of historical facts, that address future production, reserve potential, exploration drilling, exploitation activities and events or developments that the Company expects are forward-looking statements. Although the Company believes the expectations expressed in such forward looking statements are based on reasonable assumptions, such statements are not guarantees of future performance and actual results or developments may differ materially from those in the forward-looking statements. Factors that could cause actual results to differ materially from those in forward looking statements include market prices, exploitation and exploration successes, continued availability of capital and financing, and general economic, market or business conditions. Investors are cautioned that any such statements are not guarantees of future performance and those actual results or developments may differ materially from those projected in the forward-looking statements. For more information on the Company, Investors should review the Company's registered filings which are available at www.sedar.com.
This news release shall not constitute an offer to sell or the solicitation of any offer to buy, nor shall there be any sale of these securities in any jurisdiction in which such offer, solicitation or sale would be unlawful. The securities offered have not been and will not be registered under the U.S. Securities Act of 1933, as amended, and may not be offered or sold in the United States absent registration or applicable exemption from the registration requirements of the U.S. Securities Act and applicable state securities laws.
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.
Forent Energy Ltd.
President & CEO
(403) 262-9444 #211
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