May 14, 2012

Corridor Announces First Quarter Results

HALIFAX, NOVA SCOTIA–(Marketwire – May 14, 2012) – (TSX:CDH): Corridor Resources Inc. (“Corridor”) 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, 2012, with comparisons to the three months ended March 31, 2011. 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

2012

2011

Revenues

$4,156

$8,024

Net loss

$(1,654

)

$(2,178

)

Net loss per share – basic and diluted

$(0.019

)

$(0.025

)

Cash flow from operations(1)

$1,290

$3,572

Capital expenditures

$787

$705

Total assets

$200,885

$301,260

(1) 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, 2012.

Highlights

  • During Q1 2012, natural gas production averaged 9.9 mmscfpd net to Corridor (including production from penalty wells) with an average natural gas sales price of $4.16/mscf.
  • Cash flow from operations was $1,290 thousand in Q1 2012 compared to $3,572 thousand in Q1 2011. The decrease in cash flow from operations is due to the lower natural gas revenues partially offset by lower transportation expenses. Corridor had cash and cash equivalents as at March 31, 2012 of $7,769 thousand, working capital of $10,055 thousand and no outstanding debt.
  • Natural gas revenues for Q1 2012 decreased to $3,764 thousand from $7,706 thousand for Q1 2011 due to the decrease in the average natural gas sales price to $4.16/mscf in Q1 2012 from $6.75/mscf in Q1 2011 and the decrease in natural gas production to 9.9 mmscfpd in Q1 2012 from 12.7 mmscfpd in Q1 2011.

Q1 2012 Netback Analysis

Three months ended March 31

thousands of dollars except $/mscf

2012

2011

Natural gas revenues

$3,764

$7,706

Royalty expense

(8

)

(329

)

Transportation expense

(1,096

)

(1,691

)

Production expense

(795

)

(1,115

)

Netback

$1,865

$4,571

Natural gas production (mmscf)

904

1,141

Natural gas production per day (mmscfpd)

9.9

12.7

Natural gas revenues ($/mscf)

$4.16

$6.75

Royalty expense ($/mscf)

(0.01

)

(0.29

)

Transportation expense ($/mscf)

(1.21

)

(1.48

)

Production expense ($/mscf)

(0.88

)

(0.98

)

Netback ($/mscf)

$2.06

$4.00

Natural gas sales decreased to $3,764 thousand in Q1 2012 from $7,706 thousand in Q1 2011 due to the decrease in the average natural gas sales price to $4.16/mscf in Q1 2012 from $6.75/mscf in Q1 2011 and the decrease in the average daily natural gas production to 9.9 mmscfpd in Q1 2012 from 12.7 mmscfpd in Q1 2011. The decrease in production is due to the Company’s decision to decrease drilling activities at the McCully Field since 2009 following decreases in natural gas prices.

The decrease in the royalty expense per mscf for Q1 2012 to $0.01/mscf from $0.29/mscf for Q1 2011 is due to the significant decrease in the natural gas revenues, due to low natural gas prices in Q1 2012, while the deductions allowable in the royalty calculation did not decrease significantly.

Transportation expense decreased to $1,096 thousand for Q1 2012 from $1,691 thousand for Q1 2011 due to the transportation agreement in effect from April 1, 2011 to April 1, 2012 to purchase 12,000 mmbtu per day of transportation on the Canadian side of the M&NP at a cost significantly lower than firm tolls. Transportation expense also decreased due to the decrease in natural gas production and a stronger Canadian dollar as compared to the U.S. dollar.

Production expense per mscf in Q1 2012 decreased to $0.88/mscf from $0.98/mscf in Q1 2011 due to the decrease in work-over activities in Q1 2012 and in utilities expenses due to the modifications made to Corridor’s compressor in Q2 2011, which were successful in reducing energy costs subsequent to that date.

2012 Outlook

Corridor has reduced the forecasted 2012 cash flow from operations from $3,000 thousand to $1,500 thousand to reflect the decrease in the estimated natural gas prices. Corridor has reduced its estimated average natural gas sales price for 2012 from $4.30/mscf to $3.55/mscf (US$2.55/mmbtu at Henry Hub, a premium at Dracut of US$0.72/mmbtu and an estimate of the exchange rate at $0.98 U.S. per Canadian dollar). Corridor has maintained its estimated average net daily gas production for 2012 of 9 mmscfpd which is based on a shut-in of approximately 2 mmscfpd of natural gas production during the summer months due to expected low natural gas prices during this period.

Corridor has increased its capital budget by $0.5 million to include the planned testing this summer of the Green Road B-41 shale gas well near Elgin, New Brunswick. Based on available working capital of $9.5 million at December 31, 2011 and Corridor’s current capital budget of approximately $1.5 million, Corridor is forecasting a net positive working capital of approximately $9.5 million at December 31, 2012 with no outstanding debt. However, the board of directors may approve additional capital expenditures in 2012 relating to one or more of Corridor’s prospects.

Corridor is an Eastern Canadian junior resource 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; natural gas production, natural gas prices and cash flow from operations in 2012; debt and net positive working capital as at December 31, 2012; the 2012 capital budget; and testing activities and timing of such testing.

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 anticipated financial performance, 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, the impact of increasing competition, the ability to obtain financing on acceptable terms, and the ability to add production and reserves through development and exploration activities. Although management considers these assumptions to be reasonable based on information currently available to it, they may prove to be incorrect. By their very nature, forward-looking statements involve inherent risks and uncertainties, both general and specific, and risks that forward-looking statements will not be achieved. These factors may be found under the heading “Risk Factors” in Corridor’s Annual Information Form for the year ended December 31, 2011.

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.