Synenco Energy Inc. has released its interim financial results and operating highlights for the second quarter and six-month period ended June 30, 2007.
Synenco Energy reported a net loss for the six-month period ended June 30, 2007 of $0.9 million ($0.02 per share) compared with a net income of $2.9 million ($0.06 per share) for the same period in 2006. The change in net result is mainly attributable to comparatively higher office and corporate costs in 2007 as a result of activity growth, and restructuring costs incurred in the second quarter of 2007 resulting from the reprioritization of Northern Lights development activities announced on May 1, 2007.
Synenco Energy reported a second quarter net loss of $0.5 million ($0.01 per share) compared with a net income of $2.7 million ($0.05 per share) for the same period in 2006. The net loss is mainly attributable to restructuring costs incurred in the second quarter of 2007.
Most costs incurred relate to the Northern Lights Partnership (NLP) project development activities and are capitalized. As a development stage entity, Synenco Energy expects it will mainly report net losses until project development activities are complete and operations commence.
Synenco Energy also reported consolidated capital expenditures of $35.3 million for the second quarter of 2007. With 60-percent ownership of the Northern Lights Partnership, Synenco's share of these expenditures amounted to $21.9 million. Capital expenditures in the quarter mainly comprised engineering activities, technology and piloting-related costs, personnel costs and work related to the upstream regulatory application.
Corporate Developments
On May 1, Synenco Energy announced its intention to review options to maximize shareholder value. This announcement came at the same time as Synenco released revised guidance for the Northern Lights upgrader (with a capital cost estimate of $6.3 billion). The plan to assess strategic options has a range of possible outcomes including: restructuring the downstream business to capture economies of scale by including other partners, alternative downstream commercial ventures, and other corporate-level options that enhance shareholder value. Until the strategic options review is complete, work on the Northern Lights Sturgeon County upgrader has been put on hold. Development work in support of the Northern Lights upstream (mining and extraction) project was reprioritized to initiatives that reduce execution and operational risks.
In conjunction with initiating the announced options review, Synenco Energy also updated other previously disclosed guidance. The company revised its 2007 cash expenditure estimate to approximately $100 million, versus the previously announced $235 million. Synenco Energy also retracted a previously announced first oil target of mid-2011.
On May 10, Synenco Energy announced the results of its annual shareholders' meeting, where the proposed slate of ten directors were elected to the Board, including eight independent directors. Shareholders also approved the adoption of an amended and restated Stock Option Plan and authorized the transfer of the Corporation's 60-percent interest in the Northern Lights Partnership to a wholly owned subsidiary of the Corporation.
On May 30, Synenco Energy announced that, as a result of the reprioritized Northern Lights development plan, 46 positions were eliminated.
Also on May 30, Synenco Energy released its first independent estimate of coal resources on the NLP coal lease application area. There are approximately 62,950 kilotonnes of Indicated coal resources and an additional 78,658 kilotonnes of Inferred coal resources within the lease application area.
As further described in the second quarter Management's Discussion and Analysis, Contingent Resources of 1.08 billion barrels were disclosed, relating to the portion of Northern Lights Discovered Resources that have now been subjected to an engineering and economic evaluation by Norwest Corporation, an independent geological engineering firm.
