Equal Energy Announces its Results for the Fourth Quarter and Year Ended December 31, 2012

CALGARY , Alberta, March 14, 2013 /CNW/ – Equal Energy Ltd. (“Equal”,”the Company”, “we” or “our”) (EQU) (EQU), an exploration and production oil and gas company is pleased to announce its financial and operating results for the three months and year ended December 31 , 2012.  All dollar amounts are in Canadian dollars unless otherwise indicated and volumes are net of royalties.

Don Klapko, President and Chief Executive Officer commented, “This past year was one of major transition for Equal Energy Ltd.  We took many important and proactive steps to improve the company’s financial position and provide clarity and focus for its future operations.  Our balance sheet is in excellent condition, providing financial flexibility to execute our plans.  We also have responded to our shareholders who sought immediate return from our efforts and we’ve implemented a US$0.20 annual dividend, paid quarterly beginning January 1, 2013 .

Asset sales, including those concluded as part of Equal’s strategic review process launched in May 2012 , totaled $160 million .  Overall the sales were completed at values in excess of our trading multiples at the time and were collectively accretive to the value of Equal.  The asset sales totaled approximately 5.1 million boe of proved reserves on a net revenue interest basis and 6.8 million proved plus probable reserves.  Equal received $31.40 per boe proved and $23.50 per boe on a proved plus probable basis for these sales.  The proceeds of the sales were used primarily for debt reduction.  Net debt, including working capital was reduced from $176 million at December 31, 2011 to $18 million at December 31 , 2012.  Based on our 2013 budgeted cash flow of $33 million , Equal’s net debt to cash flow ratio has been reduced from over 5.3 times to 0.5 times.

The culmination of the strategic review process also resulted in the complete exit of Equal from its Canadian operations.  We are in the process of relocating our head office and transitioning management to Oklahoma City.  The combined interest and general and administrative cost savings total over $7 million as a result of the debt reduction and focus of our operations in Oklahoma.

As a result of the changes made in 2012, Equal has become a US Domestic Issuer and this year’s financial reports reflect the company’s operations, financial results and reserves under U.S. SEC disclosure rules.

Strong Operating Results

• Production averaged 7,186 boe/d during 2012, up 30% compared to 2011, primarily due to the acquisition of Hunton assets in June 2011 offset partially by the sale of Northern Oklahoma assets in September 2012 .
• Funds from operations were down only 12% as the company offset commodity prices that were 29% weaker on a boe basis compared to 2011 with higher production and savings in operating costs, general and administrative costs and interest expense.

Successful Drilling Programs in 2012

• Equal drilled 3 (2.7 net) Twin Cities Central Dolomite Hunton liquids rich natural gas wells.  These wells were brought on stream in the first half of 2012 and are performing well above our historical average and budget type curve for Twin Cities Central Dolomite Hunton wells.
• Significant effort has been put into geological mapping and targeting of the drilling horizon for our Hunton wells, resulting in our most recent wells being some of our best to date.
• Six wells were drilled in Northern Oklahoma early in 2012 and subsequently sold with the Northern Oklahoma sale in late September.
• Two successful Cardium horizontal oil wells were drilled during 2012 and were subsequently sold as part of the strategic review outcome.

Looking Forward
Management and the board of directors continue to take action to transition Equal’s mind and management to reflect its focus in Oklahoma.  Scott Smalling has joined the company as its new Vice President and Chief Financial Officer resident in Oklahoma City.  Additional management positions are expected to be filled in Oklahoma in the coming months.

Three current directors will not be standing for re-election and the director slate for the May Annual Shareholder Meeting will be announced shortly.  The Governance and Nominating Committee of the board of directors is working to re-constitute the board and to bring in expertise and background relevant to the U.S. mid-continent oil and gas business.

We have established a 5 year inventory for one rig drilling continuously and our geological team is working to add future drilling locations.  Plans for 2013 include the drilling of up to 10 horizontal liquids rich natural gas wells in the Twin Cities Central Dolomite area.  Two have been drilled with one on production at this time.  Our priorities are to protect the balance sheet and to maintain our dividend distribution.  Capital spending compared to cash flow will be monitored on an ongoing basis to ensure both objectives are met.

I’d like to thank the Equal employees for their hard work and dedication during 2012.  It was a year of transition and uncertainty which is always challenging.  We’ve had to depart with many of our Canadian staff and friends which was difficult.  We thank these people for their integrity and professionalism during the transition.  I’d also like to thank the board of directors for their hard work and guidance.  In particular, I’d like to thank our shareholders for their support as we changed the face of Equal in 2012.  We believe the actions we’ve taken sets Equal up for success and the company has an exciting future.

The following table is a summary of selected financial and operational information for the three months and year ended December 31, 2012 with comparative 2011 figures.

Non-GAAP Financial Measures

Equal considers funds from operations a key measure for the ability of the Company to repay debt and to fund future growth through capital investment.  Funds from operations, as presented, is not intended to represent cash provided by operating activities nor should it be viewed as an alternative to cash provided by operating activities or other measures of financial performance calculated in accordance with U.S. GAAP.

Management uses cash flow netback to analyze the profitability of its operations.  Cash flow netback, as presented, is not intended to represent an alternative to net income (loss) or other measures of financial performance calculated in accordance with GAAP.

The Company believes that using working capital including long-term debt provides a better measure than using debt as it provides a clearer picture on the Company’s cash requirement.

Annual General and Special Meeting of Shareholders

The 2013 Annual General and Special Meeting of Shareholders of Equal Energy Ltd., will be held in the Strand/Tivoli Room at the Metropolitan Centre, 333 – 4th Avenue S.W., Calgary , Alberta at 10:00 a.m. ( Calgary Time) on Monday, May 13, 2013 .

Equal Energy Ltd.’s 10K, complete consolidated financial statements, accompanying notes and Management’s Discussion and Analysis for the year ended December 31, 2012 will be available on Equal’s website at www.equalenergy.ca, on SEDAR at www.sedar.com and on EDGAR at www.sec.gov/edgar.shtml.

About Equal Energy Ltd.
Equal is an exploration and production oil and gas company.  Equal’s shares and convertible debentures are listed on the Toronto Stock Exchange under the symbols (EQU, EQU.DB.B) and Equal’s shares are listed on the New York Stock Exchange under the symbol (EQU). The oil and gas properties are located in Oklahoma. Equal has compiled a multi-year drilling inventory for its Hunton liquids rich natural gas property in Oklahoma.

Forward-Looking Statements
Certain information in this press release constitutes forward-looking statements under applicable securities law including the timing or uncertainty or amount of payment of future dividends, the amount of the 2013 budgeted cash flow, the reduction of net debt to cash flow, timing of relocation of the head office, the amount of interest and G&A savings, the hiring of additional management positions, the future performance of wells drilled, of plans to drill up to 10 wells in 2013, the timing and number of new board members added and the future outcome of actions taken. Any statements that are contained in this press release that are not statements of historical fact may be deemed to be forward-looking statements. Forward-looking statements are often identified by terms such as “may,” “should,” “anticipate,” “expects,” “seeks” and similar expressions.

Forward-looking statements necessarily involve known and unknown risks, such as risks associated with closing the Royalties sale, repayment of the bank credit facility, the future amount of the bank credit facility, oil and gas production; marketing and transportation; loss of markets; volatility of commodity prices; currency and interest rate fluctuations; imprecision of reserve estimates; environmental risks; competition; incorrect assessment of the value of acquisitions; failure to realize the anticipated benefits of dispositions; inability to access sufficient capital from internal and external sources; changes in legislation, including but not limited to income tax, environmental laws and regulatory matters. Readers are cautioned that the foregoing list of factors is not exhaustive.

Readers are cautioned not to place undue reliance on forward-looking statements as there can be no assurance that the plans, intentions or expectations upon which they are placed will occur. Such information, although considered reasonable by management at the time of preparation, may prove to be incorrect and actual results may differ materially from those anticipated forward-looking statements contained in this press release are expressly qualified by this cautionary statement.

Additional information on these and other factors that could affect Equal’s operations or financial results are included in Equal’s reports on file with Canadian and U.S. securities regulatory authorities and may be accessed through the SEDAR website (www.sedar.com, the SEC’s website www.sec.gov, Equal’s website www.equalenergy.ca) or by contacting Equal. Furthermore, the forward looking statements contained in this news release are made as of the date of this news release, and Equal 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 expressly required by securities law.

Conversion: Natural gas volumes recorded in thousand cubic feet (“mcf”) are converted to barrels of oil equivalent (“boe”) using the ratio of six (6) mcf to one (1) barrel of oil (“bbl”). Boe’s may be misleading, particularly if used in isolation. A boe conversion ratio of 6 mcf: 1bbl is based on an energy equivalent conversion method primarily applicable at the burner tip and does not represent a value equivalent at the wellhead. All dollar values are in Canadian dollars unless otherwise stated.

SOURCE: Equal Energy Ltd.