Caza Oil & Gas Announces First Quarter Results

HOUSTON, TEXAS--(Marketwire - May 14, 2012) - Caza Oil & Gas, Inc. ("Caza" or the "Company") (CAZ.TO - News)(CAZA.L - News) is pleased to provide its unaudited financial results for the three-month period ended March 31, 2012.

Unaudited First Quarter Financial Results

--  Caza's production increased 18.1% to 28,317 Boe for the three-month

    period ended March 31, 2012, from 23,974 Boe for the comparative period

    in 2011. This represents an average daily production rate increase of 45

    Boe/d to 311 Boe/d, as compared to 266 Boe/d for the comparative period.

    Caza's Q1 2012 production of 28,317 Boe represents an increase of 17.5%

    to 28,317 Boe compared to Q4 2011 (24,105 Boe), due to additional wells

    coming on line. 

--  Caza's revenues from oil and gas sales increased 33.4% to $1,392,729 for

    the three-month period ended March 31, 2012, from $1,043,943 for the

    comparative period in 2011. The increase in revenues was primarily due

    to additional wells being brought on line since the comparative period.

    Despite lower prices, Caza's Q1 2012 revenues of $1,392,729 represent an

    increase of 15.4% to $1,392,729 compared to Q4 2011 ($1,206,649). 

--  The average combined price received by Caza increased 13% to $49.18 per

    Boe during the three-month period ended March 31, 2012, from $43.54 per

    Boe during the comparative period in 2011. The average combined price

    received by Caza in Q1 2012 decreased 1.8% to $49.18 per Boe compared to

    Q4 2011 ($50.06 per Boe). 

--  Caza's oil and natural gas liquids (NGL) production increased 57% to

    11,723 bbls for the three-month period ended March 31, 2012, from 7,467

    bbls for the comparative period in 2011. The Company's oil and NGL

    production has increased to 41% of the Company's combined oil and

    natural gas production in Q1 2012 from 31% in Q1 2011. 

--  Caza had a cash balance of $8,232,701 as of March 31, 2012, as compared

    to $10,204,176 at December 31, 2011. Caza's working capital balance at

    March 31, 2012, was $7,558,545 as compared to $8,845,433 at December 31,

    2011. The decrease in Caza's working capital balance primarily

    represents the investments made to drill the WC 35 State No. 1 well in

    Lea County, New Mexico, and continued operations on the Caza Elkins 3401

    and 3402 wells in Midland County, Texas. 

--  Caza performed an impairment test at March 31, 2012 to assess whether

    the carrying value of its petroleum and natural gas properties exceeds

    fair value. Impairment in the amount of $2,688,506 was recorded as at

    March 31, 2012, primarily due to changes in the estimates of expected

    future natural gas prices used in determining the fair value. This is

    strictly based on the change in estimated future natural gas prices

    since December 31, 2011, and would change in the event such estimates

    are revised upward. 

W. Michael Ford, Chief Executive Officer commented:

"Caza continued its positive operational and financial performance in the first quarter of 2012, increasing both production and revenues. We also continue to increase our oil to natural gas ratio in order to take advantage of the disparity between the high price of oil and low price of natural gas. Management remains committed to delivering shareholder value by increasing production levels, cash flows and proven reserves through all available means."

"As we've recently reported, Caza swapped acreage with Mewbourne Oil Company setting up twelve additional horizontal Bone Spring locations in southeast New Mexico. Mewbourne, as operator, recently commenced drilling the Bradley "29" Fed Com No. 3H horizontal well. This is Caza's first exposure to horizontal Bone Spring drilling. The Company is increasingly enthusiastic about its position in this oil and liquids-rich play."

Copies of the Company's unaudited financial statements for the first quarter ended March 31, 2012, and the accompanying management's discussion and analysis are available on SEDAR at and the Company's website at

About Caza

Caza is engaged in the acquisition, exploration, development and production of hydrocarbons in the following regions of the United States of America through its subsidiary, Caza Petroleum, Inc.: Texas and Louisiana Gulf Coast (on-shore), and the Permian Basin (West Texas and Southeast New Mexico).

In accordance with AIM Rules - Guidance Note for Mining, Oil and Gas Companies, the information contained in this announcement has been reviewed and approved by Anthony B. Sam, Vice President Operations of Caza who is a Petroleum Engineer and a member of The Society of Petroleum Engineers.


Boe may be misleading, particularly if used in isolation. A boe conversion of six thousand cubic feet: 1 barrel is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the well head.

Caza Oil & Gas, Inc.                                                        

Condensed Consolidated Statement of Financial Position                      



                                               March 31,       December 31, 

(In United States dollars)                          2012               2011 





  Cash and cash equivalents             $      8,232,701   $     10,204,176 

  Accounts receivable                          2,309,099          3,680,998 

  Prepaid and other                              226,486            312,704 


                                              10,768,286         14,197,878 

Exploration and evaluation assets                                           

 (Note 2)                                      5,079,536          4,941,256 

Petroleum and natural gas properties                                        

 and equipment (Note 3)                       26,713,657         29,419,741 



                                        $     42,561,479   $     48,558,875 






  Accounts payable and accrued                                              

   liabilities                          $      3,209,742   $      5,352,445 


Decommissioning liabilities (Note 4)             843,912          1,052,091 


                                               4,053,654          6,404,536 

Shareholders' Equity                                                        

  Share capital                               75,064,216         75,064,216 

  Share based compensation reserve             9,476,251          9,430,656 

  Deficit                                    (45,928,153)       (42,747,681)


Equity attributable to owners of the                                        

 Company                                      38,612,314         41,747,191 


Non-controlling interests                       (104,489)           407,148 



Total equity                                  38,507,825         42,154,339 



                                        $     42,561,479   $     48,558,875 



See accompanying notes to the condensed consolidated financial statements   



Caza Oil & Gas, Inc.                                                        

Condensed Consolidated Statements of Net Loss and Comprehensive Loss        



For the three month periods ended                                           

 March 31,                                                                  

(in United States dollars)                          2012               2011 




  Petroleum and natural gas             $      1,392,729   $      1,043,943 

  Interest income                                    299              8,692 


                                               1,393,028          1,052,635 




  Production                                     420,759            166,295 

  General and administrative                   1,365,879          1,092,911 

  Depletion and depreciation                     781,864            819,113 

  Financing costs - unwinding of the                                        

   discount                                        4,133              6,597 

  Other expense (income)                        (176,004)           (54,185)

  Development and production                                                

   impairment (Note 3)                         2,688,506                  - 

  Exploration and evaluation                                                

   impairment                                          -          2,696,808 


                                               5,085,137          4,727,539 



Net loss and comprehensive loss for                                         

 the period                                   (3,692,109)        (3,674,904)




Attributable to:                                                            

  Owners of the Company                       (3,180,472)        (3,164,519)

  Non-controlling interests                     (511,637)          (510,385)


                                        $      (3,692,10)  $     (3,674,904)



Net loss per share                                                          

  - basic and diluted                              (0.02)             (0.02)



Weighted average shares outstanding                                         

  - basic and diluted (1)                    164,743,667        164,319,000 



(1) The options and warrants have been excluded from the diluted loss per   

share computation as they are anti-dilutive                                 


See accompanying notes to the condensed consolidated financial statements   



Caza Oil & Gas, Inc.                                                        

Condensed Consolidated Statement of Cash Flows                              


For the three month periods ended March 31,                                 

(in United States dollars)                                2012         2011 



  Net loss for the period                           (3,692,109)  (3,674,904)


  Adjustments for items not affecting cash:                                 

    Depletion and depreciation                         781,864      819,113 

    Unwinding of the discount                            4,133        6,597 

    Share-based compensation                            45,595       35,324 

    Development and production impairment (Note 3)   2,688,506            - 

    Exploration and evaluation impairment                    -    2,696,808 

    Other expense (income)                            (176,004)           - 

    Abandonment activities                                   -      (69,388)

    Interest income                                       (299)      (8,692)

    Changes in non-cash working capital (Note 7a)      240,093      405,477 


    Cash flows (used in) from operating activities    (108,221)     210,335 




  Interest received                                        299        8,692 


  Cash flow from financing activities                      299        8,692 





  Exploration and evaluation expenditures           (1,167,108)  (1,717,231)

  Development and production expenditures             (798,650)    (850,092)

  Purchase of office furniture and equipment            (1,944)      (3,800)

  Joint interest billings partner reimbursements     1,028,828            - 

  Changes in non-cash working capital (Note 7a)       (924,679)    (704,515)


  Cash flows used in investing activities           (1,863,553)  (3,275,638)




DECREASE IN CASH AND CASH EQUIVALENTS               (1,971,475)  (3,056,611)





CASH AND CASH EQUIVALENTS, END OF THE PERIOD         8,232,701   30,829,289 




Supplementary information (Note 7)                                          

See accompanying notes to the condensed consolidated financial statement    



Caza Oil & Gas, Inc.                                                        

Condensed Consolidated Statement of Changes in Equity                       



For the three months periods ended March 31,                                

(in United States dollars)                             2012            2011 



Share Capital                                                               

  Balance, Beginning of the Period               75,064,216      75,013,680 



  Balance, End of the Period                     75,064,216      75,013,680 



Share based compensation reserve                                            

  Balance, Beginning of the Period                9,430,656       9,363,598 


  Share-based compensation                           45,595          35,324 



  Balance, End of the Period                      9,476,251       9,398,922 





  Balance, Beginning of the Period              (42,747,681)    (16,385,876)


  Net loss allocated to the owners of the                                   

   Company                                       (3,180,472)     (3,164,519)



  Balance, End of the Period                    (45,928,153)    (19,550,395)




Non-Controlling Interests                                                   

  Balance, Beginning of the Period                  407,148      (2,677,625)


  Net loss allocated to non-controlling                                     

   interests                                       (511,637)       (510,385)



  Balance, End of the Period                       (104,489)     (3,188,010)



Total Shareholders' Equity                       38,507,825      61,674,197 



See accompanying notes to the condensed consolidated financial statements   


1. Basis of Presentation

Caza Oil & Gas, Inc. ("Caza" or the "Company") was incorporated under the laws of British Columbia on June 9, 2006 for the purposes of acquiring shares of Caza Petroleum, Inc. ("Caza Petroleum"). The Company and its subsidiaries are engaged in the exploration for and the development, production and acquisition of, petroleum and natural gas reserves. The Company's common shares are listed for trading on the TSX (symbol "CAZ") and AIM stock exchanges (symbol "CAZA"). The corporate headquarters of the Company is located at 10077 Grogan's Mill Road, Suite 200, The Woodlands, Texas 77380 and the registered office of the Company is located at Suite 1700, Park Place, 666 Burrard Street Vancouver, British Columbia, V6C 2X8.

Caza's functional and presentational currency is the United States ("U.S.") dollar as the majority of its transactions are denominated in the currency.

The condensed consolidated financial statements (the "Financial Statements") were prepared in accordance with IAS 34 - Interim Financial Reporting using accounting policies consistent with International Financial Reporting Standards ("IFRS").

These Financial Statements should be read in conjunction with the Company's audited annual consolidated financial statements as at and for the year ended December 31, 2011, which outline the Company's significant accounting policies in Note 2 thereto, as well as the Company's critical accounting judgements and key sources of estimation uncertainty, which have been applied consistently in these Financial Statements. The note disclosure requirements of annual consolidated financial statements provide additional disclosures to that required for interim unaudited condensed consolidated financial statements.

These Financial Statements were approved for issuance by the Board of Directors on May 10, 2012.

2. Exploration and evaluation assets


                                                    March 31,  December 31, 

                                                         2012          2011 


Balance, beginning of the period                  $ 4,941,256   $ 7,371,582 

Additions to exploration and evaluation assets      1,167,108     9,271,394 

Transfers to property, plant and equipment                  -    (5,361,725)

Joint interest billings partner reimbursements     (1,028,828)            - 

Exploration and evaluation impairment                       -    (6,339,995)


Balance, end of the period                        $ 5,079,536   $ 4,941,256 



During the year ended December 31, 2011, the Company expensed $6,339,995 of exploration and evaluation costs of which $2,594,801 related to the Marian Baker et al, No 1 drilled during the three months ended March 31, 2011 that did not encounter hydrocarbons as well as an impairment to the valuation of the Las Animas prospect in the amount of $1,146,226. The balance of the costs expensed related to other leasehold and prospect expenditures that have expired or no longer provide value for the Company.

3. Petroleum and natural gas properties and equipment


                                   Development &                            

                                      Production     Corporate              

                                          Assets        Assets         Total



Balance, December 31, 2011        $   45,223,073  $    826,882  $ 46,049,955

  Additions                              762,342         1,944       764,286


  Balance, March 31, 2012         $   45,985,415  $    828,826  $ 46,814,241




                                   Development &                            

                                      Production     Corporate              

                                          Assets        Assets         Total


Accumulated Depletion and                                                   



Balance, December 31, 2011        $   15,943,179  $    687,035  $ 16,630,214

Depletion and depreciation               744,979        36,885       781,864

Impairment                             2,688,506             -     2,688,506


Balance, March 31, 2012           $   19,376,664  $    723,920  $ 20,100,584




Carrying amounts                                                            

At December 31, 2011              $   29,279,894  $    139,847  $ 29,419,741

At March 31, 2012                 $   26,608,751  $    104,906  $ 26,713,657



Future development costs of proved undeveloped reserves of $30,722,900 were included in the depletion calculation at March 31, 2012 and December 31, 2011. The Company performed an impairment test at March 31, 2012 to assess whether the carrying value of its petroleum and natural gas properties exceeds fair value. An impairment in the amount of $2,688,506 was required to be recorded as at March 31, 2012 primarily due to changes in the estimates of expected future natural gas prices used in determining the fair value. The March 31, 2012 impairment was recognized using a 16% discount rate (December 31, 2011 - 16%).

4. Decommissioning Liabilities

The following table presents the reconciliation of the beginning and ending aggregate carrying amount of the obligation associated with the retirement of oil and gas properties:

                                                                 Year ended 

                                          March 31, 2011  December 31, 2011 


Decommissioning liabilities, beginning                                      

 of the period                           $     1,052,091   $        807,754 

Obligations incurred                              30,121            131,318 

Revision in estimated cash flows and                                        

 discount rate                                         -            171,100 

Obligations settled                             (242,433)           (79,898)

Unwinding of the discount                          4,133             21,817 


Decommissioning liabilities, end of the                                     

 period                                  $       843,912   $      1,052,091 


The undiscounted amount of cash flows, required over the estimated reserve life of the underlying assets, to settle the obligation, adjusted for inflation, is estimated at $1,206,116 (December 31, 2011 - $1,533,283). The obligation was calculated using a risk free discount rate of 2.5 percent and an inflation rate of 3 percent. It is expected that this obligation will be funded from general Company resources at the time the costs are incurred with the majority of costs expected to occur between 2012 and 2030.

5. Related Party Transactions

The aggregate amount of expenditures made to related parties:

Singular Oil & Gas Sands, LLC ("Singular") is a related party as it is a company under common control with Zoneplan Limited, which is a significant shareholder of Caza.

Singular participates in the drilling of the Matthys McMillan Gas Unit #2 and the O B Ranch #1 and 2 wells located in Wharton County, Texas. Under the terms of that agreement, Singular paid 14.01% of the drilling costs through completion to earn a 10.23% net revenue interest on the Matthys McMillan Gas Unit #2 well and paid 12.5% of the drilling costs to earn a 6.94% net revenue interest on the O B Ranch #1 well. Under the terms of the agreement of the O B Ranch #2 Singular paid 9.375% of the drilling costs to earn approximately 6.8% net revenue interest. This participation was in the normal course of Caza's business and on the same terms and conditions to those of other joint interest partners. Singular owes the Company $536,425 in joint interest partner receivables as at March 31, 2012 (December 31, 2011 - $492,240).

All related party transactions are in the normal course of operations and have been measured at the agreed to exchange amounts, which is the amount of consideration established and agreed to by the related parties and which is comparable to those negotiated with third parties.

6. Commitments and Contingencies

As of March 31, 2012, the Company is committed under operating leases for its offices and corporate apartment in the following aggregate minimum lease payments which are shown below:

2012    $ 180,727

2013    $  95,090

2014    $  81,200

7. Supplementary Information

(a) net change in non-cash working capital

                                                  March 31,       March 31, 

                                                       2012            2011 


Provided by (used in)                                                       


Accounts receivable                               1,371,899         301,261 

Prepaid and other                                    86,218          36,335 

Accounts payable and accrued liabilities         (2,142,703)       (636,634)


                                                   (684,586)       (299,038)



Summary of changes                                                          

Operating                                           240,093         405,477 

Investing                                          (924,679)       (704,515)


                                                   (684,586)       (299,038)


(b) supplementary cash flow information

                                            March 31, 2012    March 31, 2011


Interest paid                             $              -  $              -

Interest received                                      299             8,692

(c) cash and cash equivalents

                                                    March 31,   December 31,

                                                         2012           2011


Cash on deposit                              $      1,500,753  $     272,699

Money market instruments                            6,731,948      9,931,477


Cash and cash equivalents                    $      8,232,701  $  10,204,176




The money market instruments bear interest at a rate of 0.022% as at March  

31, 2012                                                                    

(December 31, 2011 - 0.033%).                                               

8. Financial Instruments

Credit Risk

Credit risk arises when a failure by counter parties to discharge their obligations could reduce the amount of future cash inflows from financial assets on hand at the consolidated statement of financial position date. A majority of the Company's financial assets at the consolidated statement of financial position date arise from natural gas liquids and natural gas sales and the Company's accounts receivable that are with these customers and joint interest participants in the oil and natural gas industry. Industry standard dictates that commodity sales are settled on the 25th day of the month following the month of production. The Company's natural gas and condensate production is sold to large marketing companies. Typically, the Company's maximum credit exposure to customers is revenue from two months of sales. During the period ended March 31, 2012, the Company sold 78.39% (March 31, 2011 - 72.35%) of its natural gas and condensates to a single purchaser. These sales were conducted on transaction terms that are typical for the sale of natural gas and condensates in the United States. In addition, when joint operations are conducted on behalf of a joint interest partner relating to capital expenditures, costs of such operations are paid for in advance to the Company by way of a cash call to the partner of the operation being conducted.

Caza management assesses quarterly whether there should be any impairment of the financial assets of the Company. At March 31, 2012, the Company had overdue accounts receivable from certain joint interest partners of $86,807 which were outstanding for greater than 60 days and $72,748 that were outstanding for greater than 90 days. At March 31, 2012, the Company's two largest joint interest partners represented approximately 26% and 8% of the Company's receivable balance (March 31, 2011 12% and 9% respectively). The maximum exposure to credit risk is represented by the carrying amount on the consolidated statement of financial position of cash and cash equivalents, accounts receivable and deposits.

The Toronto Stock Exchange has neither approved nor disapproved the information contained herein.