DIAZ RESOURCES LTD.
#1800, 633 Sixth Avenue SW Calgary, AB T2P 2Y5 Canada Tel: (403) 269-9889 Fax: (403) 269-9890The following is for immediate release August 27, 2012
DIAZ ANNOUNCES Q2 2012 FINANCIAL RESULTS Diaz Resources Ltd. (TSXV: DZR) wishes to announce that it has filed on SEDAR its Interim
Financial Statements and MD&A for the six months ended June
30, 2012.
Diaz is pleased to report that for the six months ended June
30, 2012, it increased production, revenues and cash flow
from operations, compared with the same period in the prior
year. The Company's average first half production increased
to 427 BOEd from 405 BOEd while revenues increased to $3.2
million from $2.5 million and cash flow from operations
increased to $570,000 compared with $151,000 in the prior
year.
The Company's Q2 2012 revenues were derived 91% from oil
production as compared with 54% in Q2 2011. This resulted
from quarterly oil production increasing to 250 bopd from 104
bopd in the prior year combined with natural gas production
declining to 825 mcfd from 1,772 mcfd in the prior year.
During the quarter approximately 50% of Diaz's natural gas
production was shut- in due to uneconomic natural gas prices.
In Q1 2012 Diaz completed a three well drilling program at
Macklin, Saskatchewan and placed the wells on production at
the end of the quarter. The wells produced at an average
combined rate of 225 bopd (101 bopd net to Diaz) during Q2
2012 and have subsequently declined to 105 bopd (47 bopd net
to Diaz). The Company now has increased its number of
horizontal heavy oil wells to 17 wells in total, with 6 wells
at Macklin and 11 wells at Lloydminster, Alberta.
During Q2 2012 Diaz commenced a program to increase the water
handling facilities and disposal capacity at Macklin by
installing a pipeline to transport increased volumes of water
between its main oil battery and an existing water disposal
well.
The Company plans to significantly increase the total fluid
production from producing wells at
Macklin which we believe will increase oil production at the
field.
The Company's Q2 2012 revenues increased to $1.5 million from
$1.1 million and cash flow from operations increased to
$208,000 compared with negative $169,000 in Q2 2011. The
Company had a net loss for the quarter of $749,000 compared
with a net loss of $1.2 million in Q2 2011. Net loss for the
six month period was $1.7 million compared with $1.2 million
for the same period in the prior year.
Diaz incurred $371,000 of capital expenditures during the
quarter compared with $693,000 for Q2 2011. For the sixth
month period, capital spending was $2.2 million compared with
$1.5 million for the same period in the prior year. Capital
expenditures for the three and six month periods ended June
30, 2012, were financed from cash flow from operations,
working capital and an increase in the Company's bank
debt.
At June 30, 2012, Diaz had net current debt of $3.5 million
compared with net current debt of
$1.7 million at the beginning of the year.
The management of Diaz is optimistic that higher total fluid
production at Macklin, made possible by the increased water
handling facility which commenced in August this year, will
result in an increase in the Company's production and
cashflow. In addition, oil prices have recently improved
which will give the Company's financial results an added
boost.
However, the overall productivity of the Company's heavy oil
wells, while acceptable, have been substantially lower than
anticipated when Diaz decided to proceed with its $8.0
million secured convertible debenture issue, completed in
June 2011. As a result, the combination of higher interest
costs of the debenture and low gas prices has put the Company
in a position of having limited capital for further
development of the heavy oil properties. Consequently, Diaz
is considering alternatives available to it to ensure that
the Company's asset base can be maintained and developed
over time to maximize value, including reorganization of its
capital structure, possible asset sales or other
transactions.
Diaz expects oil prices to remain above $90 per barrel
through the balance of 2012, as demand for oil continues to
be strong and distribution bottlenecks at Cushing, Oklahoma,
are now beginning to be alleviated with the reversal of the
Seaway Pipeline. The Seaway Pipeline reversal allows oil to
be delivered from Cushing to the US Gulf Coast.
Using current heavy oil discounts, WTI prices in excess of
$90 should result in the Company realizing average prices for
its heavy oil production greater than $60 per barrel for the
remainder of the year. At this price the Company believes
continued development of Diaz's heavy oil projects have
positive economics.
Longer term growth will result from development of new
production and reserves from Diaz's
heavy oil prospect inventory acquired over the past three
years.
Diaz is an oil and gas exploration and production company based in Calgary, Alberta. Diaz's current
focus is on heavy oil exploration and development in Alberta and Saskatchewan.
FOR FURTHER INFORMATION, PLEASE CONTACT:
Robert W. Lamond, Chairman - or - Donald K. Clark, Chief Operating Officer
DIAZ RESOURCES LTD. Telephone: (403) 269-9889
Fax: (403) 269-9890
Website: www.diazresources.com
Email: info@diazresources.com
TSX: DZR
NEITHER 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 RELEASE.
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