June 13, 2011

Corridor Announces First Quarter Results

HALIFAX, NOVA SCOTIA–(Marketwire – June 13, 2011) – Corridor Resources Inc. (“Corridor”)(TSX:CDH) announced today its first quarter financial results.

The following table provides a summary of Corridor’s financial and operating results for the three months ended March 31, 2011, with comparisons to the three months ended March 31, 2010. Corridor’s financial statements and management’s discussion and analysis (“MD&A”) for the first quarter have been filed on SEDAR at www.sedar.com and are available on Corridor’s website at www.corridor.ca.

All amounts referred to in this press release are in Canadian dollars unless otherwise stated.

Selected Financial Information

 

Three months ended March 31

 

thousands of dollars except per share amounts

2011

 

2010(1

)

Revenues

$8,024

 

$9,648

 

Net loss

$(2,178

)

$(396

)

Net loss per share – basic and diluted

$(0.025

)

$(0.005

)

Cash flow from operations(2)

$3,572

 

$4,981

 

Capital expenditures

$705

 

$4,651

 

Total assets

$301,260

 

$309,037

 

(1) As restated under International Financial Reporting Standards (“IFRS”). See “First Time Adoption of IFRS” in Corridor’s MD&A for the three months ended March 31, 2011.

 

(2) Cash flow from operations is a non-IFRS measure. Cash flow from operations represents net earnings adjusted for non-cash items including depletion, depreciation and amortization, deferred income taxes, share-based compensation and other non-cash expenses. See “Non-IFRS Financial Measures” in Corridor’s MD&A for the three months ended March 31, 2011.

 

Highlights

  • During Q1 2011, natural gas production averaged 12.7 mmscfpd net to Corridor (including production from penalty wells) with an average natural gas sales price of $6.75/mscf, resulting in a net loss of $2,178 thousand and basic and diluted net loss per share of $0.025.
  • Natural gas revenues for Q1 2011 decreased to $7,706 thousand from $9,097 thousand for Q1 2010 due to the decrease in natural gas production from 14.9 mmscfpd in Q1 2010 to 12.7 mmscfpd in Q1 2011. The average natural gas sales price was consistent at $6.75/mscf in Q1 2011 compared to $6.77/mscf in Q1 2010. The decrease in production is due to the decreased drilling activities at the McCully Field since 2009 following decreases in natural gas prices. The inlet compressor installed in Q3 2010 is performing as expected and slowing down production declines.
  • Net loss for Q1 2011 increased to $2,178 thousand from $396 thousand for Q1 2010 reflecting mostly the decrease in revenues as well as an increase in share-based compensation expense due to the stock options granted in Q3 2010.
  • Natural gas revenues and production for Q1 2011 were consistent with the budget for the quarter.
  • On May 31, 2011, Apache Canada Ltd. advised Corridor that it had elected not to proceed with the second phase of the farm-out and option program with Corridor in respect of the potential shale gas resource development near Elgin, New Brunswick. Corridor remains confident that the shale gas resource has significant potential and plans to move forward with the drilling of two appraisal wells to commence late this year to confirm the well productivity required to proceed with a pilot phase.

On January 1, 2011, IFRS became the generally accepted accounting principles in Canada for publicly accountable enterprises, including Corridor. The adoption of IFRS required the restatement of amounts, reported by Corridor under the previous Canadian generally accepted accounting principles, for the year ended December 31, 2010. As a result, comparative information in the Company’s MD&A for the three months ended March 31, 2011 has been restated to comply with IFRS. The adoption of IFRS had no impact on Corridor’s cash flows.

Q1 2011 Netback Analysis

 

Three months ended March 31

 

thousands of dollars except $/mscf

2011

 

2010(1)

 

Natural gas revenues

$7,706

 

$9,097

 

Royalty expense

(329

)

(292

)

Transportation expense

(1,691

)

(1,837

)

Production expense

(1,115

)

(1,230

)

Netback

$4,571

 

$5,738

 

 

 

 

 

 

Natural gas production (mmscf)

1,141

 

1,344

 

Natural gas production per day (mmscfpd)

12.7

 

14.9

 

 

 

 

 

 

Natural gas revenues ($/mscf)

$6.75

 

$6.77

 

Royalty expense ($/mscf)

(0.29

)

(0.22

)

Transportation expense ($/mscf)

(1.48

)

(1.37

)

Production expense ($/mscf)

(0.98

)

(0.91

)

Netback ($/mscf)

$4.00

 

$4.27

 

(1) As restated under IFRS. See “First Time Adoption of IFRS” in Corridor’s MD&A for the three months ended March 31, 2011.

 

Natural gas revenues decreased to $7,706 thousand in Q1 2011 from $9,097 thousand in Q1 2010 due to the decrease in the average daily natural gas production to 12.7 mmscfpd in Q1 2011 from 14.9 mmscfpd in Q1 2010. The decrease in production is due to the decreased drilling activities at the McCully Field since 2009 following decreases in natural gas prices.

Transportation expense decreased to $1,691 thousand for Q1 2011 from $1,837 thousand for Q1 2010 due to the decrease in natural gas production and a stronger Canadian dollar as compared to the U.S. dollar. This decrease in transportation expense was partially offset by the increase in the cost of Canadian transportation due to the expiry on October 31, 2010 of Corridor’s agreement, in effect since December 1, 2009, for transportation on the M&NP, at a cost lower than firm tolls.

The increase in the production expense per mscf for Q1 2011 to $0.98/mscf from $0.91/mscf for Q1 2010 is due to the decrease in the natural gas production from 14.9 mmscfpd in Q1 2010 to 12.7 mmscfpd in Q1 2011, this was partially offset by decreases in production expenses in Q1 2011.

2011 Outlook

Corridor intends to revise its 2011 capital budget to include the planned expenditures to drill two appraisal wells to evaluate the Frederick Brook shale in the Elgin area in New Brunswick when these plans have been completed. Corridor’s current 2011 capital budget of $8 million is based on available working capital of $4 million at December 31, 2010, $2.7 million received on the exercise of 632,000 stock options and forecasted 2011 cash flow from operations of $7.8 million. As a result, Corridor currently estimates a net positive working capital position at December 31, 2011 of $6.5 million.

Corridor’s June 2011 investor presentation, available on Corridor’s website at www.corridor.ca, provides an update on the Company’s three prospects in the Elgin area of New Brunswick, on Anticosti Island and on the Old Harry Prospect in the Gulf of St. Lawrence.

Corridor is an Eastern Canadian company engaged in the exploration for and development and production of petroleum and natural gas onshore in New Brunswick, Prince Edward Island and Québec and offshore in the Gulf of St. Lawrence. Corridor currently has natural gas reserves and production in the McCully Field near Sussex, New Brunswick and discovered crude oil reserves in the Caledonia Field near Sussex, New Brunswick in 2008. In addition, Corridor has contingent resources and discovered resources of shale gas in Elgin, New Brunswick.

Forward Looking Statements

This press release contains certain forward-looking statements and forward-looking information (collectively referred to herein as “forward-looking statements”) within the meaning of Canadian securities laws. All statements other than statements of historical fact are forward-looking statements. Forward-looking information typically contains statements with words such as “anticipate”, “believe”, “plan”, “continuous”, “estimate”, “expect”, “may”, “will”, “project”, “should”, or similar words suggesting future outcomes. In particular, this press release contains forward-looking statements pertaining to: business plans and strategies; the characteristics and potential of the Frederick Brook shale; plans to drill two vertical appraisal wells in the Elgin area late in 2011; plans to demonstrate commercial viability, including a pilot phase; identification of Corridor’s three prospects; the quantity of discovered resources of natural gas; the capital budget for 2011; and cash flow from operations in 2011. Statements relating to “resources” are forward-looking statements, as they involve the implied assessment, based on certain estimates and assumptions that the reserves and resources described exist in the quantities predicted or estimated and can profitably be produced in the future.

Undue reliance should not be placed on forward-looking statements, which are inherently uncertain, are based on estimates and assumptions, and are subject to known and unknown risks and uncertainties (both general and specific) that contribute to the possibility that the future events or circumstances contemplated by the forward-looking statements will not occur. There can be no assurance that the plans, intentions or expectations upon which forward-looking statements are based will in fact be realized. Actual results will differ, and the difference may be material and adverse to Corridor and its shareholders.

Forward-looking statements are based on Corridor’s current beliefs as well as assumptions made by, and information currently available to, Corridor concerning the characteristics of the Frederick Brook shale, business prospects, strategies, regulatory developments, future natural gas commodity prices, future natural gas production levels, the ability to obtain equipment in a timely manner to carry out development activities, the ability to market natural gas successfully to current and new customers. Although management considers these assumptions to be reasonable based on information currently available to it, they may prove to be incorrect.

Unknown risks and uncertainties include, but are not limited to risks associated with oil and gas exploration, financial risks, substantial capital requirements, bank financing, government regulation, environmental, prices, risks may not be insurable and reserves and resources estimates. Further information regarding these factors and additional factors may be found under the heading “Risk Factors” in Corridor’s Annual Information Form for the year ended December 31, 2010.

The forward-looking statements contained in this press release are made as of the date hereof and Corridor does not undertake any obligation to update publicly or to revise any of the included forward-looking statements, except as required by applicable law. The forward-looking statements contained herein are expressly qualified by this cautionary statement.