Yoho Resources Inc. filed the interim unaudited consolidated financial statements for the nine months ended June 30, 2010 and related Management's Discussion and Analysis on www.sedar.com.

Highlights

  • Production for the three months ended June 30, 2010 was 2,270 boe per day, consistent with the 2,200 boe per day for the three months ended March 31, 2010. The increase in natural gas production due to drilling success was offset by production shut-in due to facility turnarounds in the current quarter.
  • On June 30, 2010, the Company closed its acquisition of Canoil Inc. for a total acquisition cost of approximately $21.3 million, funded through the issuance of 6.9 million common shares and $6.0 million cash. Included in the acquisition was approximately $1.7 million of cash and positive working capital. Production and operations from the Canoil acquisition will be included in Yoho's results commencing with the fourth quarter of fiscal 2010.
  • Net exploration and development expenditures for the first nine months of fiscal 2010 were $13.1 million with 13 (7.1 net) gas wells drilled.
  • Generated funds from operations for Q3 2010 of $3.1 million ($0.12 per share diluted).
  • Maintained a flexible balance sheet with total net debt of $17.2 million at June 30, 2010 with a bank credit facility of $32 million.

Financial

In the quarter ended June 30, 2010 Yoho generated funds from operations of $3.1 million, with a realized natural gas wellhead price of $4.15 per mcf. On a per share basis, funds from operations for the quarter were $0.12 basic and diluted. With the continued volatility in commodity prices, the activity levels for the balance of fiscal 2010 will be closely monitored to match capital expenditures with expected cash flow.

Canoil Inc. Acquisition

On May 26, 2010, the Company entered into an agreement pursuant to which it made an offer to acquire all of the issued and outstanding common shares of Canoil Inc. ("Canoil") on the basis of 0.3536 of a common share of Yoho or $0.85 cash (to a maximum of $6 million) for each common share of Canoil or a combination thereof.

On June 30, 2010, the Company closed its acquisition of Canoil for a total acquisition cost of approximately $21.3 million, funded through the payment of $6.0 million cash and the issuance of 6.9 million common shares, calculated based on an adjusted volume weighted average trading price of the shares around the date of the announcement of $2.20 per share. As part of the acquisition, Yoho received approximately $1.7 million of cash and positive working capital. Production and operations from the Canoil acquisition will be included in Yoho's results commencing with the fourth quarter of fiscal 2010. A total of 27,000 net acres of undeveloped land was also acquired.

Operations

Yoho has drilled five (2.9 net) wells from break-up to date and operations are currently ongoing on one additional well.

At Kaybob, the Company operated the drilling of four wells, two of which were horizontal wells and two of which were vertical. The first vertical well at Kaybob was drilled, cased, and completed in the Gething formation and is currently being tied in. Initial stabilized production rates are expected to be approximately 125 boe per day of natural gas and liquids net to Yoho. Yoho's working interest in this well is 94%.

The second vertical well at Kaybob was drilled, cased, and completed successfully in both the Notikewin and Viking formations. Yoho holds a 37.5% working interest in this well which is also currently being tied in, with initial gross production rates expected to be 250 boe per day of natural gas and liquids (94 boe per day net).

Yoho drilled a short leg horizontal well, which was completed with a three stage frac treatment targeting natural gas and liquids from the Cardium formation. Although initial results have not established economic flow rates, the well demonstrates good pressures and further completion work is underway. Yoho's working interest in this well is 45%.

The second horizontal well drilled at Kaybob was at a 60% working interest and targeted natural gas and liquids in the Notikewin formation. The well was drilled with an 800 metre horizontal section and was completed with a nine stage sand frac. Initial production test rates from the well were 4.0 Mmcf per day at flowing pressures of 4,250 kpa with associated liquids production. This well is also currently being tied in with expected initial gross production of 500 boe per day (300 boe per day net to Yoho).

At McLeod, Yoho operated the drilling of a 50% working interest vertical well targeting natural gas and liquids from the Ostracod formation. The well was cased with very positive log indications and completion operations are currently underway. Upon success, a horizontal well is planned in fiscal 2011.

Also at Kaybob, Yoho is currently participating in the drilling and completion of a 5,100 metre horizontal Duvernay shale test. The operator of the well expects to complete the drilling and testing of this well in September 2010. Yoho currently holds a one-third working interest in 28 sections of Duvernay rights at Kaybob immediately offsetting lands where industry spent $336.7 million to acquire 125,440 acres of land at an average price of $2,685 per acre at the July 7, 2010 Alberta Crown land sale.

With the successful results from recent drilling, Yoho expects to exit the 2010 fiscal year with production between 2,900 and 3,000 boe per day.

Outlook

Yoho has several drilling projects that will be carried out over the remainder of the calendar year.

At Sweeney in North West Alberta, Yoho plans to drill up to three short leg horizontal wells in the recently acquired Sweeny Baldonnal oil pool at a 40% working interest.

Yoho is also preparing to drill a 2,100 metre horizontal Halfway oil test in the Peace River Arch area of North West Alberta at a 100% working interest. The horizontal technology in this project is designed to access better parts of very heterogeneous reservoir quality within the Halfway formation. Vertical wells in this area have had cumulative production volumes ranging from 10,000 to 200,000 barrels of oil per well (as per recent public data), illustrating the high degree of variability within the Halfway in this area.

In North East British Columbia, the Company will re-enter a standing well bore and drill horizontally from this well into the Montney formation and will complete the well with a multistage fracture treatment. Yoho's working interest in this project is 100%.

Yoho is currently preparing for the 2010-2011 winter drilling program which includes a variety of different projects, including a horizontal well targeting an over-pressured Jean Marie formation at Mike, British Columbia. This well location is offset by two vertical Jean Marie gas producers drilled by Yoho. Production from one of the vertical wells has been monitored for three years, which has produced 500 Mmcf of gas to date and has an extremely low production decline. Yoho has assembled 22,000 (18,700 net) acres of land surrounding the existing vertical wellbores. The Company's working interest in this project is approximately 85%.