News from CNW Group

Eagle Rock Reports Second Quarter 2008 Results

16:12 EDT Friday, August 15, 2008

CALGARY, Aug. 15 /CNW/ - Eagle Rock Exploration ("Eagle Rock" or "the Corporation") (TSXV: ERX) has filed its Unaudited Financial Statements and Management's Discussion and Analysis ("MD&A") for the second quarter ended June 30, 2008 on SEDAR. The documents can be accessed through SEDAR's website at www.sedar.com, or on Eagle Rock's site at www.eaglerockexploration.com.

Selected Quarterly Information

The following table provides a summary of key financial results.

    <<
                                      Three      Three        Six        Six
                                     months     months     months     months
                                      ended      ended      ended      ended
                                    June 30    June 30    June 30    June 30
                                       2008       2007       2008       2007

    $000's except production
     and per share amounts          $ 000's    $ 000's    $ 000's    $ 000's
    -------------------------------------------------------------------------
    Average daily production - boed     403        549        444        556
    Petroleum and natural gas
     revenue before hedging losses    3,929      2,887      7,456      5,539
    Cash flow from operating
     activities (includes working
     capital change)                  2,295      1,229      3,467      2,043
    Funds flow from operations        2,060      1,174      3,736      1,982
    Income (loss) for the period       (613)      (412)      (488)    (1,197)
    Basic and diluted income (loss)
     per share                        (0.01)     (0.01)     (0.01)     (0.03)
    Capital expenditures-excluding
     share based acquisitions         4,560      4,193      6,929      6,501
    Total assets                     35,432     31,966     35,432      6,501
    Net (debt) cash                  (7,290)    (9,222)    (7,290)    (9,222)
    Common shares outstanding
     - basic                         54,001     39,662     54,001     39,662
    Common shares outstanding
     - fully diluted                 59,678     43,339     59,041     43,199
    Weighted average common
     shares outstanding              54,001     39,662     54,001     39,662
    >>

Average daily production decreased due to the sale of Eagle Rock's non-operated Antelope Lake property effective April 1, 2008 for $6.9 million dollars. These funds are being directed to development and production in Eagle Rock's operated areas. Eagle Rock's production remains heavily weighted to oil, comprising 95% of production in Q2 2008 from oil. Current production is in excess of 500 bbls/d and Eagle Rock has recently completed and is currently testing three wells in Saskatchewan and two wells in Alberta which are awaiting pipeline connection.

Funds flow from operations increased by 75 percent to $2,060,000 ($0.04 per basic share) in Q2 2008 from $1,174,000 ($0.03 per basic share) in the same period of 2007. A combination of higher commodity prices and improved operational efficiency contributed to this increase. The operating netback for Q2 2008 more than doubled from Q2 2007 to $80.00 per barrel or $73.00 per barrel after deducting the actual loss incurred on the calendar 2008 hedging collar; $73.00 per barrel represents a 135 percent increase from the Q2 2007.

The net loss for Q2 2008 before income tax recovery was $796,463 which includes the unrealized mark to market loss on hedging contracts of $1,361,800. Without the hedging loss ERX would have earned profit before income taxes of $565,337.

Bank lines of credit have recently been increased to $12.5 million in light of higher production and increased cash flows. Eagle Rock's risk management activities including a contract for a calendar 2009 collar for 100 bbls/d with a floor of US $100/bbl and a ceiling for US $200/bbl also assisted in obtaining higher credit limits.

The capital budget for 2008 has been increased in light of recent operational successes and strengthening cash flows. CAPEX for 2008 will be in the range of $15 to $18 million from the previously announced range of $9 to $12 million. Of this new budget $8 to $11 million will be spent in the second half of the year and will be financed from cash flow and existing bank lines of credit. Eagle Rock's cash flows for 2008 are benefiting from high benchmark oil prices, low differentials on medium gravity oil and improving operating efficiency as production increases.