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Business Update: The Company exited the quarter at 937 Boe/d. This drop from the first two months of the quarter was mainly due to required downtime within the Berwyn field for minor workovers. Average oil production for the quarter was 109 Boe/d as compared to 208 Boe/d in the first quarter of 2008. During the same period average gas production increased from 3,286 Mcf/d at March 31, 2008 to 5,280 Mcf/d at March 31, 2009 (from 548 Boe/d to 880 Boe/d, an increase of 332 Boe/d). The overall increase in gas production can be attributed to primarily to Boundary Lake and Berwyn areas. Funds from operations for the three months ended March 31, 2009 totaled $506,550 or $0.03 per share, compared to $1,910,453 or $0.14 per share for the same period in 2008. Although production increased, the drop in energy prices resulted in a reduction in cash flow from operations. Net loss for the three month period ended March 31, 2009 was $1,105,313 or $0.07 per share compared to an income of $489,464 or $0.04 per share, for the same period in 2008. The loss in the quarter was a result of a decrease in energy prices, an increase in production volumes resulting in an increase in operating costs, an increase in depreciation, depletion and accretion charges and an increase in general administration costs. General and administrative ("G&A") expenses increased 64% in the first quarter of this year to $747,128 from $455,196 in the same period in 2008. However, G&A before capitalization decreased by 13%, or by $5.65 per Boe. In Q3 2008 the Company decided to take a conservative approach by not capitalizing any of the G&A expenses. The Company continues to monitor and control these expenses. ISR has budgeted approximately $7 million in capital expenditures for balance of 2009 and expects to rely on internally generated cash flows and available lines of credit to fund its capital program. The Company had established and has available an operating line of credit of $10 million. However, capital expenditures will be reviewed in light of current energy prices, the surplus of natural gas inventories in North America and general economic conditions.
Outlook The Company will continue to review its capital expenditure program in light of the current economic climate. Since the present portfolio is approximately 80% gas, the Company will focus on opportunities that increase the oil component because we feel that the present outlook for near term oil prices is more favorable than natural gas prices.
Domestic
International The international properties in Pakistan and Ecuador will receive appropriate attention so that the Company can best benefit from those significant investments.
Pakistan The Sukkur Joint Venture ("SJV") is comprised of MGCL, the operator, with a 50% working interest ("WI"), Petroleum Exploration Limited, a Pakistani exploration and production company with a 35% WI and the Company, as mentioned above, with a 15% WI. The SJV is committed to drilling 3 wells within the Sukkur Block. Drilling, completion, and stimulation of the first well, Koonj Well #1A, proved to be a success. The well was tested at gross rates of 15MMCFD and is expected to have commercial sales in the latter half of 2009. The second well, Bodla Bahar, drilled in late 2008, proved to be a commercial failure. Spudding of Indus 1-B, which seems to have significant potential based on seismic, has been pushed back for 18 months while the partners conduct a post-mortem on the failure of Bodla Bahar.
Ecuador Eugene Hretzay, CEO, added: "We presently trade at approximately 1 times 2008 YE cash flow before non-recurring items, which is historically cheap, and have a NAV/share value of $2.72 at 2008 YE. We have no debt and our balance sheet allows us to make opportunistic acquisitions during this period of drilling inactivity and depressed commodity prices to immediately capitalize on the upswing in commodity prices. One component of our strategy is to rebalance our portfolio with a greater allocation to oil. We presently have approximately 80% of our reserve allocation in natural gas. Since I believe that oil prices will recover more quickly than natural gas because oil is subject to world demand of countries like China and India, while natural gas is a North American market, which is currently experiencing a supply glut and anemic demand due to the recession of the U.S. economy, such a reallocation makes strategic sense." For further information, please contact:
Eugene Hretzay Reader Advisories Forward-Looking Statements: This news release contains certain forward-looking statements, including management's assessment of future plans and operations, and capital expenditures and the timing thereof, that involve substantial known and unknown risks and uncertainties, certain of which are beyond the Company's control. Such risks and uncertainties include, without limitation, risks associated with oil and gas exploration, development, exploitation, production, marketing and transportation, loss of markets, volatility of commodity prices, currency fluctuations, imprecision of reserve estimates, environmental risks, competition from other producers, inability to retain drilling rigs and other services, delays resulting from or inability to obtain required regulatory approvals and ability to access sufficient capital from internal and external sources, the impact of general economic conditions in Canada, the United States and overseas, industry conditions, changes in laws and regulations (including the adoption of new environmental laws and regulations) and changes in how they are interpreted and enforced, increased competition, the lack of availability of qualified personnel or management, fluctuations in foreign exchange or interest rates, stock market volatility and market valuations of companies with respect to announced transactions and the final valuations thereof, and obtaining required approvals of regulatory authorities. The Company's actual results, performance or achievements could differ materially from those expressed in, or implied by, these forward-looking statements and, accordingly, no assurances 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, including the amount of proceeds, that the Company will derive there from. Readers are cautioned that the foregoing list of factors is not exhaustive. Additional information on these and other factors that could affect the Company's operations and financial results are included in reports on file with Canadian securities regulatory authorities and may be accessed through the SEDAR website (www.sedar.com). All subsequent forward-looking statements, whether written or oral, attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by these cautionary statements. Furthermore, the forward-looking statements contained in this news release are made as at the date of this news release and the Company does not undertake any obligation to update publicly or to revise any of the included forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by applicable securities laws. BOE may be misleading, particularly if used in isolation. A BOE conversion of 6 Mcf: 1 bbl is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. The Toronto Stock Exchange has not reviewed and does not accept responsibility for the adequacy or accuracy of this news release. This news release is not for dissemination in the United States or to U.S. persons.
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