Edge Resources Inc. Announces Record Quarterly and Half Year Results

CALGARY, ALBERTA–(Marketwired – Nov. 18, 2013) – Edge Resources Inc. (TSX VENTURE:EDE)(AIM:EDG) (“Edge” or the “Company”) is pleased to report it has once again achieved record operating and financial results, with further improvement upon the record results announced for the quarter ended June 30, 2013 (“Q1 2013”).

As expected, following the record results reported in Q1 2013, the Company, for the quarter ended September 30, 2013 (“Q2 2013”), showed record improvements in revenue, operating costs, general & administration costs, cash flow and netbacks.

As previously reported, all of the Company’s three core assets continue to be cash flow positive; however, the Company is pursuing higher profitability and growth from oil-based prospects, such as Eye Hill, while its natural gas properties are allowed to decline naturally. The Company also disposed of a small, non-core natural gas producing asset in exchange for a highly-prospective, strategic asset in heart of Eye Hill East.

Detailed operating and financial results are presented in Edge’s unaudited quarterly financial statements and related Management Discussion & Analysis (“MD&A”), which can be accessed on the Company’s website (www.edgeres.com) and on SEDAR (www.sedar.com). The unaudited second quarter results for the three month period ended September 30, 2013 (“Q2 2013”) and unaudited half yearly results for the six month period ended September 30, 2013 (“H1 2013”) are highlighted and summarized below.

Highlights for the three and six month periods, ending September 30, 2013:

• Continued demonstration of a disciplined business plan; when comparing Q2 2012 to Q2 2013, Oil and Natural Gas Sales increased to $2,566,000 from $2,061,000, General and Administrative Costs decreased to $466,000 from $716,000, Operating Costs (oil) decreased to $19.47/bbl from $45.74/bbl and Netback (oil) increased to $51.20/bbl from $8.15/bbl;
• Meticulous focus on cash generation has resulted in a dramatic improvement, with net cash generated from operations of $850,000 in H1 2013 compared to a loss of $447,000 in H1 2012.
• Demonstrated production capability of Eye Hill East assets with a six month, restricted-rate production test yielding continually increasing – but purposely limited – flow rates of up to 151 bopd, averaging 128 bopd in the month ending September 30, 2013.
• Maintained a controlled focus on oil with average quarterly oil production showing an increase to 283 bopd from 248 bopd, while natural gas production declined due to natural declines and asset dispositions; and,
• Disposed of non-core, natural gas producing property in exchange for a highly prospective, strategic property in the heart of the Company’s key growth asset, Eye Hill East in Saskatchewan.

Brad Nichol, President & CEO of Edge, commented, “We have enjoyed another excellent, record quarter. Unquestionably, the entire industry was buoyed by a year-on-year improvement in oil pricing; however, in the face of an improving top line number, we simultaneously reduced our G&A, Operating and Transportation costs, which resulted in a huge increase in the cash we were able to generate from our operations.” Nichol added, “Edge’s industry-leading profit-to-investment ratio, also known as the recycle ratio, at 3.5x versus the industry average of 1.5x, allows us to generate significantly more cash from our properties than other operators. This has been demonstrated by our production results in Eye Hill. Our ability to generate cash at these levels is an outstanding quality in today’s industry, which should allow Edge to continue grow and utilize internally-generated cash flow.”

To view the Company’s full Q2 2013 and H1 2013 statements, please go to the company website www.edgeres.com or to www.sedar.com.

For more information, visit the company website: www.edgeres.com.

About Edge Resources Inc.

Edge Resources is focused on developing a balanced portfolio of oil and natural gas assets from properties in Alberta and Saskatchewan, Canada. Management has consistently focused on:

1. Shallow, vertical, conventional programs with reduced capital, operational and geological risks
2. Very high or 100% working interests and fully operated assets
3. Pools and horizons with exceptionally high reserves in place

The management team’s very high drilling success rate is based on the safe, efficient deployment of capital and a proven ability to efficiently execute in shallow formations, which gives Edge Resources a sustainable, low- cost, competitive advantage.

This release includes certain statements that may be deemed “forward-looking statements”. All statements in this release, other than statements of historical facts, that address future production, reserve potential, exploration drilling, exploitation activities and events or developments that the Company expects are forward-looking statements. Although the Company believes the expectations expressed in such forward looking statements are based on reasonable assumptions, such statements are not guarantees of future performance and actual results or developments may differ materially from those in the forward-looking statements. Factors that could cause actual results to differ materially from those in forward looking statements include market prices, exploitation and exploration successes, continued availability of capital and financing, and general economic, market or business conditions. Investors are cautioned that any such statements are not guarantees of future performance and those actual results or developments may differ materially from those projected in the forward-looking statements. For more information on the Company, Investors should review the Company’s registered filings which are available at www.sedar.com.

This news release shall not constitute an offer to sell or the solicitation of any offer to buy, nor shall there be any sale of these securities in any jurisdiction in which such offer, solicitation or sale would be unlawful. The securities offered have not been and will not be registered under the U.S. Securities Act of 1933, as amended, and may not be offered or sold in the United States absent registration or applicable exemption from the registration requirements of the U.S. Securities Act and applicable state securities laws.

Trading in the securities of Edge Resources Inc. should be considered highly speculative. 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.

1. Going Concern
   These financial statements have been prepared on a going concern basis which presumes that the Company will be able to discharge its obligations and realize its assets in the normal course of business. The Company had a loss and comprehensive loss of $245,668 for the six month period ended September 30, 2013. As at September 30, 2013, the Company had a working capital deficiency of $7.8 million that includes $7.5 million in bank debt (excluding derivative assets/liabilities and flow-through share premium). The Company had unused credit lines of $4.5 million related to its revolving credit facility and $6.5 million related to its development/acquisition facility at September 30, 2013. At September 30, 2013, the Company was compliant with its lender’s covenants. Subsequent to September 30, 2013, a review of the Company’s banking facilities was completed, resulting in a reduction of the revolving credit facility borrowing limit to $8 million and the cancellation of the development/acquisition facility, and a new review date of January 1, 2014. As of November 15, 2013, the Company is in compliance with the lender’s covenants.

   On August 29, 2013, the Company was successful in restructuring the loans payable (note 7). The due dates for the loans payable plus accrued interest were extended to January 31, 2017, resulting in a significant improvement in the working capital deficit and will allow more financial flexibility for the Company in the near term. Also, as per note 18, the Company raised an additional $3.3 million in equity resulting in an even stronger financial position subsequent to quarter end. Despite the above noted reduction in the Company’s banking facilities, management believes with the amendments and the extension of the due dates for the loans payable, positive cash flows generated from operating activities during the quarter prior to changes in non-cash items, the continued implementation of operating cost reduction initiatives to enhance future cash flows, equity raised subsequent to quarter end, and expected increased cash flows from its planned capital program, that the Company will generate sufficient funds to meet its foreseeable obligations in the normal course of operations. Management has been and continues to be active in seeking alternative sources of funding to help accelerate its planned capital expenditure program, and to ultimately reduce its total debt. The Company cannot provide any assurance that sufficient cash flows will be generated from operating activities and/or potential equity issuances will be available on acceptable terms, if at all, to reduce its working capital deficiency and to carry out an accelerated capital expenditure program.

   The above-noted factors describe matters and conditions that indicate the existence of a material uncertainty that may cast significant doubt about the Company’s ability to continue as a going concern. The Company’s ability to continue as a going concern is dependent upon its ability to attain profitable operations, generate sufficient funds to continue its exploration and development activities, to repay its debts as they come due, and continue to obtain sufficient capital from investors or other sources of financing to meet its current and future obligations.

   Management considers the Company is a going concern and has prepared the condensed interim financial statements on a going concern basis.

2. Basis of preparation
   These condensed interim financial statements are unaudited and have been prepared in accordance with International Accounting Standard (“IAS”) 34, “Interim Financial Reporting” using accounting policies consistent with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”). Certain information and disclosures normally included in the annual financial statements prepared in accordance with IFRS have been condensed or omitted.

   The condensed interim financial statements should be read in conjunction with the Company’s audited annual financial statements as at and for the year ended March 31, 2013 and the notes thereto.

4. Bank debt
   As at September 30, 2013, the Company had lending facilities with a Canadian chartered bank, consisting of a $12.0 million revolving demand credit facility, and a $6.5 million demand development/acquisition facility, of which $7.5 million ($7.0 million under bankers’ acceptances and $0.5 million under prime-based lending) and $Nil were drawn, respectively. The revolving facility is a borrowing base facility that is determined based on, among other things, the Company’s current reserve report, results of operations, current and forecasted commodity prices and the current economic environment. The revolving credit facility contains standard commercial covenants for facilities of this nature. The Company also has available a risk management facility which allows the Company to conduct certain financial risk management options. The interest rates on the facilities are bank prime plus 0.75% per annum and bank prime plus 1.25% per annum, respectively. Bankers’ acceptances are subject to a 2% acceptance fee plus an applicable market interest rate. The facilities are secured by a $50.0 million demand debenture and a general security agreement covering all assets of the Company. The revolving credit facility provides that advances may be made by way of direct advances, bankers’ acceptances, or standby letters of credit/guarantee. Advances on the development/acquisition facility are subject to bank approval; however they are generally limited to the lesser of the estimated development/acquisition cost and the bank’s internal valuation of associated reserves. Repayments for the revolving facility are interest only, and repayments for the development/acquisition line are determined by the bank based on their evaluation of the specific circumstances, both subject to the bank’s right of demand.

   The only financial covenant on the revolving facility is a requirement for the Company to maintain a current ratio (as defined in the credit agreement and further described in note 17) of not less than 1.0:1.0, and such ratio is to be tested at the end of each fiscal quarter. The Company was in compliance with this financial covenant as at September 30, 2013. A condition of the risk management facility is the Company must not hedge greater than 50% of its oil and natural gas production.

   Subsequent to September 30, 2013, a review of the Company’s banking facilities was completed, resulting in a reduction of the revolving demand credit facility borrowing limit to $8 million and the cancellation of the development/acquisition facility, and a new review date of January 1, 2014. In addition, the interest rate on the revolving demand credit facility changed to prime plus 3.0%, the acceptance fee on banker’s acceptances changed to 4.25% and the production limitations on the risk management facility were clarified such that the Company may only hedge 50% of estimated forward production on a commodity by commodity basis. All other aspects of the lending facilities remain the same. As of November 15, 2013, the Company is in compliance with the lender’s covenants.

5. Loans payable
   As at September 30, 2013, the Company has a loan payable with a principal amount of $8 million, which bears interest at 10% per annum, is secured against the assets of the Company as a second charge to the Company’s lending facility (note 6), and is due January 31, 2017. Any interest and principal repayments for this loan is subject to the bank’s prior approval. The loan payable is due to a company that is also a shareholder of the Company, and repayable early at any time without penalty.

   On August 29, 2013, the terms of the loan payable were amended, such that the previous principal amounts owing of $7,000,000 (due January 2014) and $1,000,000 (due January 2013), were consolidated into a total balance owing of $8,000,000 bearing simple interest at 10% per annum, with a due date of January 31, 2017. Under the terms of the new agreement, accrued interest is also due and payable January 31, 2017. The due date for interest owing on the previous loan amount was also extended to January 31, 2017. There were no fees associated with the amendment.

   The following table summarizes changes in the loans payable:

6. Availability of the Financial Statements and MD&A
   Copies of all the Company’s Financial Statements and MD&A’s will be available on the Company’s website (www.edgeres.com) and on SEDAR (www.sedar.com).