TRAVERSE CITY, Mich., March 13 /PRNewswire-FirstCall/ -- Aurora Oil
& Gas Corporation (NYSE Alternext US: AOG) today reported a net
loss of $107.4 million for the year ended December 31, 2008,
largely related to one-time non-cash items. William W. Deneau,
Chairman and Chief Executive Officer, commented, "This has been a
challenging year for our business and the economy at large. When we
entered 2008, we anticipated a favorable conclusion to our
strategic alternatives process. Instead, the year presented a
strong headwind of limited capital resources, global credit
challenges, and weakening energy markets. I believe 2009 will
present more of the same. Fortunately, our team has been working to
'batten down the hatches' since the beginning of 2008 and we will
continue working diligently to weather this storm." 2008 Financial
Review Oil and natural gas production revenues totaled $25.2
million on sales of over 3 billion cubic feet of natural gas
equivalent (Bcfe) for the year. This equates to an average of 8.3
million cubic feet of natural gas equivalent (Mmcfe) per day, a
decrease of approximately 5% from the previous year. The weighted
average sales price of $8.28 for the year includes a loss of $3.5
million in realized losses on natural gas hedges. Excluding
one-time non-cash items, expenses totaled $39.3 million, a 35%
increase from 2007. Production and lease operating expenses ("LOE")
increased 19% as a result of increased energy costs, general
maintenance across a larger base of properties, and repairs and
workover charges related to Aurora's 2008 well enhancement program.
General and administrative costs increased by 13% from 2007,
primarily as a result of additional legal and consulting services
related to Aurora's refinancing and various restructuring efforts.
Also, interest expense more than doubled from 2007, due to higher
utilization of debt and higher interest charges from Aurora's
defaulted status. One-time non-cash items were related to an
impairment of goodwill and a ceiling-test write-down of oil and gas
properties. The Company recorded $16 million in goodwill impairment
related to the reverse merger of Cadence Resources Corporation,
completed in 2005, and $3.4 million related to the acquisition of
Bach Services and Manufacturing Company, completed in 2006. These
are determined to be impaired based upon the estimated market value
of the assets acquired in the transactions. A ceiling-test
write-down of oil and natural gas reserves in the amount of $78.5
million was recorded as a result of the application of the "ceiling
test" under the full cost method of accounting. Under full cost
accounting requirements, capitalized costs of oil and natural gas
properties may not exceed an amount equal to the present value,
discounted at 10%, of estimated future net revenues from proved
reserves plus the lower of cost or fair value of unproved
properties. Should capitalized costs exceed this ceiling, an
impairment is recognized. The present value of estimated future net
cash flows is computed by applying year-end prices of oil and
natural gas to estimated future production of proved oil and
natural gas reserves as of year-end less estimated future
expenditures to be incurred in developing and producing the proved
reserves and assuming continuation of existing economic conditions.
The impairment is driven by changes in the Company's base of proved
reserves, as discussed in the "Update on Proved Reserves", below.
Including all items, the net loss totaled $107.4 million or ($1.04)
per basic and diluted share for the year ended December 31, 2008,
as compared to a net loss of $4.4 million or ($0.04) per basic and
diluted share for the same period in 2007. Complete detail on the
financial results can be found in the Company's Form 10-K filed
March 13, 2009. This form can be retrieved from the Securities and
Exchange Commission or via the Company website at
http://www.auroraogc.com/SEC_Filings.htm. Selected annual and
quarterly historical financial data are provided for reference
below. Update on Acreage Aurora's acreage portfolio decreased by
approximately 8.5% during 2008. The change was the result of
several transactions involving the sale or trade of undeveloped
properties. The most significant change was related to the sale of
Aurora's interest in its Oklahoma properties. The sale was
completed in September 2008 and decreased leasehold by
approximately 37,000 net acres, as reflected in the table below.
There were also certain less-prospective locations on which the
leases were allowed to expire. Following is a summary of the
Company's entire acreage inventory on December 31, 2008 and
December 31, 2007. Acreage by Play/Trend 2008 2007 Gross Net Gross
Net Michigan Antrim Shale 286,390 134,003 310,141 154,643 New
Albany Shale 787,595 449,183 833,365 441,351 Woodford Shale 0 0
37,325 12,785 Other 90,475 68,203 102,352 81,112 Total 1,164,460
651,389 1,283,183 712,215 During 2009, Aurora will continue to
optimize its portfolio of acreage. The Company will focus on
developing its portfolio via partnerships with other operators and
allowing less-prospective acreage positions to expire. This will
allow the Company to focus its resources on the best potential
locations for development. 2008 Drilling Activities Aurora's
capital constraints and slow-down by its operating partners caused
drilling activity to be significantly reduced - from 101 gross
(59.13 net) wells in 2007 to 26 gross (6.12 net) wells in 2008. Of
the wells participated in, 14 (2.80 net) wells were in the Antrim
shale, no wells were in the New Albany shale, and 12 (3.32 net)
wells were drilled in Other project areas. A summary of 2008
drilling activity is provided below: Drilling Activities - FY 2008
Operated Non-Operated Total Gross Net Gross Net Gross Net Producing
0 0.00 1 0.72 1 0.72 Waiting on Hook-Up 0 0.00 16 3.40 16 3.40
Resource Assessment 0 0.00 6 0.97 6 0.97 Dry 0 0.00 3 1.03 3 1.03
Total 0 0.00 26 6.12 26 6.12 The Company's inventory of wells at
the end of 2008 is as follows: Well Status as of December 31, 2008
Antrim Operated Antrim Non-Operated Gross Net Gross Net Producing
177 168.15 390 93.74 Waiting on Hook-Up 0 0.00 24 4.80 Res.
Assessment 1 0.97 9 1.87 Total 178 169.12 423 100.41 Well Status as
of December 31, 2008 New Albany Operated New Albany Non- Operated
Gross Net Gross Net Producing 0 0.00 25 1.25 Waiting on Hook-Up 6
6.00 0 0.00 Res. Assessment 0 0.00 0 0.00 Total 6 6.00 25 1.25 Well
Status as of December 31, 2008 Other Total Gross Net Gross Net
Producing 36 18.35 628 281.49 Waiting on Hook-Up 1 0.10 31 10.90
Res. Assessment 10 4.00 20 6.84 Total 47 22.45 679 299.23 Many
companies in the oil and gas industry have cited pricing issues for
slowdown in development of properties. Though Aurora has other
challenges as well, the case is no different with Aurora and its
operating partners. Without a change in the broader energy markets,
the Company does not expect development in 2009 greater than what
was experienced in 2008. 2008 Production Activities Total company
production during 2008 averaged 8.3 net Mmcfe per day, a 5%
decrease from the previous year. A summary of production for 2008
and 2007 is provided below: Estimated Production by Play/ Trend
(net mcfe) 2008 2007 Total Daily Total Daily Average Average Antrim
Shale 2,789,727 7,622 2,975,715 8,153 New Albany Shale 100,678 275
57,186 157 Other 153,707 420 174,254 477 Total 3,044,112 8,317
3,207,155 8,787 Operated 1,924,947 5,259 2,292,429 6,281
Non-operated 1,119,165 3,058 914,726 2,506 Total 3,044,112 8,317
3,207,155 8,787 During 2008, Aurora attempted to address its
declining operated production. Faced with minimal available
capital, efforts to proactively address production declines were
limited. Beginning October 1, 2008, production sales are subject to
market fluctuations, resulting in property gross margins declining
with falling natural gas prices. This further limits Company
spending on production enhancement efforts. Nonetheless, Aurora
management is working to review various alternatives presented by
its engineering team and consulting experts, which may address the
declining production. Update on Proved Reserves Aurora's year-end
2008 proved reserves decreased 41% from year-end 2007 to 98 Bcfe.
Of the 98 Bcfe, approximately 56% is considered proved developed,
of which 17% is behind pipe or waiting on hook-up. The remaining
27% of total proved reserves is considered proved undeveloped. With
respect to proved reserves by property location, 71.1 Bcf is in the
Antrim shale, 26 Bcf is in the New Albany shale, and 1 Bcfe is held
in Other project areas. A summary of the proved reserves
reconciliation is provided below: Reconciliation of Reserves Proved
Reserves (Bcfe) Proved Reserves as of December 31, 2007 166.6
Revisions of previous estimates -68.3 Extensions and discoveries
2.8 Production -3.0 Proved Reserves as of December 31, 2008 98.1
The significant revision in previous estimates was driven by the
use of production data from the Company's Antrim shale projects to
estimate reserves. Aurora's Antrim shale reserves have historically
been determined by our third-party reserve engineers using type
curves derived from a combination of reservoir simulation and
nearby production performance from more mature Antrim shale units
operated by others. Now that sufficient historical data is
available to develop decline curves for Aurora's wells, the
engineers have based their projections of future production volumes
on actual historical data from our own wells instead of
representative data from other wells in the Antrim play. This not
only affected the proved developed producing reserves, but also the
type curves used for proved undeveloped reserves. Additional
impacts to the reserve base were the result of capital constraints,
regulatory concerns on some of Aurora's northernmost properties,
and lower market prices for oil and natural gas. After integrating
these impacts and using price levels required by the SEC (an
average natural gas price of $6.07 per mcf, as compared to $7.18
per mcf in 2007), Aurora's pre-tax PV-10 decreased 64%, from $190
million in 2007 to $68.6 million in 2008. If the benefit of
Aurora's pipeline ownership were included in the SEC evaluation,
the PV-10 would improve by $9.2 million for a total pre-tax PV-10
value of $77.8 million. Management Comments Mr. William W. Deneau
commented further on Aurora's activities and prospects: "Currently,
we are focused on meeting the obligations of our forbearance
agreement as well as working with our lenders to develop a
collaborative solution to our situation. Given the challenging
economic times, we cannot predict when our situation will be
resolved. However, we will continue to adapt to our changing
environment by quickly making the necessary changes to our business
to enhance operational efficiency and drive down controllable
costs. With diligence, time, and improvement in the markets in
which we work, we expect to not only survive, but thrive in what we
still believe to be the most important industry in the world."
Selected Financial Data The following table sets forth Aurora's
quarterly unaudited statement of operations for the quarter ended
December 31, 2008 and September 30, 2008, respectively. You should
review this information together with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the
audited consolidated financial statements and related notes
included in Aurora's Form 10-K for the year ending December 31,
2008. Three Months Ended December 31, September 30, 2008 2008
Statement of operations data Revenues Oil and natural gas sales
$4,306,161 $7,657,965 Pipeline transportation and marketing 176,815
215,540 Field service and sales 1,057,145 1,280,206 Interest and
other income 427,197 205,983 Total revenue 5,967,318 9,359,694
Expenses Production taxes 219,939 376,381 Production and lease
operating expenses 2,131,907 2,557,330 Pipeline and processing
operating expenses 147,641 179,977 Field services expense 884,999
977,235 General and administrative expenses 2,506,467 2,770,028 Oil
and natural gas depletion and amortization 2,597,539 874,426 Other
assets depreciation and amortization 342,859 265,040 Interest
expense 3,952,227 2,023,411 Ceiling write-down of oil and gas
properties 78,457,801 - Goodwill impairment 3,399,918 15,973,346
Taxes, other 93,912 29,005 Total expenses 94,735,209 26,026,179
Loss before minority interest (88,767,891) (16,666,485) Minority
interest in income of subsidiaries (17,605) (28,385) Net loss
$(88,785,496) $(16,694,870) Net loss per common share - basic and
diluted $(0.86) $(0.16) Selected Historical Financial Data The
following tables set forth our December 31, 2008, 2007, and 2006,
year-end selected financial data as of and for each of the periods
indicated. The data as of and for the years ended December 31,
2008, 2007, and 2006, is derived from our audited consolidated
financial statements for the periods indicated. You should review
this information together with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and
audited consolidated financial statements and related notes
included in our Form 10-K for the year ending December 31, 2008.
Statement of Operations Data 2008 2007 2006 Revenues: Oil and
natural gas sales $25,201,777 $26,723,818 $21,591,811 Pipeline
transportation and marketing 710,250 578,020 489,473 Field service
and sales 3,051,419 390,401 125,611 Interest and other 877,488
549,149 220,592 Total revenues 29,840,934 28,491,388 22,427,487
Expenses: Production taxes 1,338,397 1,123,070 877,319 Production
and lease operating expense 9,995,981 8,424,096 5,966,341 Pipeline
and processing operating expense 593,059 482,647 265,795 Field
services expense 2,439,939 321,753 90,913 General and
administrative expense 9,075,903 8,029,122 7,531,718 Oil and
natural gas depletion and amortization 5,380,106 3,769,104
2,681,290 Other assets depreciation and amortization 1,193,993
2,396,026 2,083,191 Interest expense 9,201,343 4,582,021 4,573,785
Ceiling write-down of oil and gas properties 78,457,801 - -
Goodwill impairment 19,373,264 - - Loss on debt extinguishment -
3,448,520 - Taxes, other 77,671 19,021 250,884 Total expenses
137,127,457 32,595,380 24,321,236 Loss before minority interest
(107,286,523) (4,353,992) (1,893,749) Minority interest in (income)
loss of subsidiaries (78,139) (67,841) (50,898) Net loss
$(107,364,662)$(4,421,833)$(1,944,647) Net loss per common
share-basic and diluted $ (1.04)$ (0.04) $ (0.02) Weighted average
common shares outstanding - basic and diluted 103,062,697
101,633,162 82,288,243 Cash Flow Data Cash provided by (used in)
operating activities $4,098,818 $10,079,049 $5,467,910 Cash used by
investing activities (10,701,427)(61,100,489)(89,606,098) Cash
provided by financing activities 14,182,069 51,711,722 73,892,946
As of December 31, Balance Sheet Data 2008 2007 Cash and cash
equivalents $ 10,005,138 $ 2,425,678 Other current assets 5,411,250
8,901,774 Oil and natural gas properties, net (using full cost
accounting) 116,426,381 209,818,344 Other property and equipment,
net 14,451,523 10,365,599 Other assets 13,906,789 23,160,273 Total
assets $160,201,081 $254,671,668 Current liabilities $127,312,547 $
8,580,990 Long-term debt, net of current maturities 5,265,459
113,835,028 Minority interest in nets assets of subsidiaries
467,937 112,661 Shareholders' equity 27,155,138 132,142,989 Total
liabilities and shareholders' equity $160,201,081 $254,671,668
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 primary operations in the Antrim Shale of
Michigan and the New Albany Shale of Indiana and Kentucky.
Cautionary Note on Forward-Looking Statements Statements regarding
future events, occurrences, circumstances, activities, performance,
outcomes, beliefs and results, including future revenues,
renegotiation of existing credit facilities, the procurement of new
credit facilities, the continued forbearance and future relations
with our existing lenders, anticipated capital availability,
anticipated capital expenditures, estimated reserve values,
anticipated partnerships with other operators, activities intended
to address declining production, expected improvement in the
domestic or global economies, anticipated improvement in energy
prices, drilling results, and plans for future growth through
drilling and production 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. Join our email
distribution list:
http://www.b2i.us/irpass.asp?BzID=1419&to=ea&s=0 Contact:
Aurora Oil & Gas Corporation Jeffrey W. Deneau, Investor
Relations (231) 941-0073 http://www.auroraogc.com/ DATASOURCE:
Aurora Oil & Gas Corporation CONTACT: Jeffrey W. Deneau,
Investor Relations, Aurora Oil & Gas Corporation,
+1-231-941-0073 Web Site: http://www.auroraogc.com/
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