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Shareholders Report 2010
Since our last report, there have been so many things happen in the world of finance, it would not be possible to measure where the Corporation is today without reference to these events.
You may recall that mounting debt, and predatory financing agreements into which we had been forced left the Corporation no choice but to sell off some of it’s production (the Glenrock properties near Casper and the Rawhide property in the Bighorn Basin to relieve it’s debt obligations. While these were sold under an agreement reached when oil prices were still fairly low and just starting to rise, they closed at a time when prices were near historical record highs. While that might seem that the sale left some “money on the table”, one must also recall that immediately afterwards the prices collapsed – and had the sale not already been in place, it is most unlikely that it could have been concluded at all. The balance of 2008 saw prices low enough that operation would not have been sustainable under the previous structure.
Essentially, Dugout Creek in the Powder River Basin remains the principal producing property with potential for further development, while Lite Butte remains as the Corporation’s largest producing asset in the Bighorn Basin, but without increased production options.
With revenue from sale of the Glenrock assets in 2008, WYOIL staff was able to replace 18,000 ft of flow line on the east end of the Dugout oil field. This prevented winter freezes up and drastically reduced the potential flow line leaks that could result in oil spills and potential environmental damage. This was the first step in the first step in shifting field maintenance to restore waterflood and ultimately prepare the field for CO2 injection. It also alleviated the unplanned expenses due to continued winter failure of flow lines.
The next year (2009) started with oil prices far below minimum operating expenses. The Corporation reduced operating expenses to the bare minimum and reduced payroll 20% across the board. The result of the low oil prices was minimum additional work being done in the field and and increase of company debt. The end of the year oil prices were below minimum operating expenses. But, unlike so many companies that got caught up in the rush of financial excesses, WYOIL remained solvent and in operation.
2010 saw enough of an increase in revenue from better oil prices to resume work in the field at a limited pace. Several shut in wells were put back on production. The Corporation is currently well underway to installing a water flood system for re-injection all produced water in the Dugout Oil Field. Because of changes in the standards for quality of discharged water, Dugout’s produced water will no longer meet the new requirements. This injection system over time will increase oil production for the field by restoring reservoir pressure in the Shanon Sands (displacing more oil from the formation towards producing well bores).
You will find WYOIL’s 5 year development plan filed with the United States Bureau of Land Management attached to this report.
Increases in costs of operation have been staggering. In spite of continued, slow growth in crude oil prices, the revenue side is not far away from costs at our current level of production in any given month. To remain stable, WYOIL’s production must increase, and the plan to re-establish waterflood in the Dugout field is what is required to do so. This also leaves that property prepared to go forward with CO2 injection at some time in the future.
Over the next few years, the Corporation must invest a further $1.5 to $2.0 Million USD to get to the end of this project. If oil prices remain strong and continue to increase, some of that may be generated from operating profits. It is more likely that some further investment will be required.
Some of you may recall that when WYOIL was first set up, your directors cautioned that the Corporation could only survive with equity investment. Not by choice, but under duress from financiers we were forced to use debt financing that saw far more of the money raised go to financial interests than was ever available to the Corporation to actually perform work in a timely fashion. From that perspective, it is most unlikely that debt financing options will ever be pursued by your Board of Directors.
That leaves either equity investment or re-investment of revenue (only an option with VERY good oil prices) or some combination of the two. In any case, the Board intends to seek options to provide liquidity to existing shareholders as financial conditions and structure allow.
In a world of incredible turbulence and unrest, it is worth pointing out that by avoiding the temptations of jumping at highly leveraged deals and “voodoo” financing schemes, WYOIL has continued to stay the course and has survived all of these upsets, as well as the onslaught of endless government regulations and requirements. It will continue to survive and operate because it has a wealth of experience and integrity in how its affairs are conducted.
This report was written in the English Language, and only this English version can be considered as the official words of the Corporation.
Patrick M. Dolan,
Chairman of the Board of Directors.