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Dundee Energy Limited Announces Second Quarter 2014 Financial Results

TORONTO, ONTARIO -- (Marketwired) -- 07/17/14 -- Dundee Energy Limited ("Dundee Energy" or the "Corporation") (TSX: DEN) today announced its financial results for the three and six months ended June 30, 2014. The Corporation's unaudited condensed interim consolidated financial statements, along with management's discussion and analysis have been filed on the System for Electronic Document Analysis and Retrieval ("SEDAR") and may be viewed under the Corporation's profile at www.sedar.com or the Corporation's website at www.dundee-energy.com.

--  Net loss attributable to owners of the parent during the three months
    ended June 30, 2014 were $0.1 million, compared with a net loss
    attributable to owners of the parent of $0.5 million incurred during the
    same period of the prior year.
--  Production volumes during the second quarter of 2014 averaged 9,085
    Mcf/d of natural gas and 652 bbls/d of oil and liquids, compared with
    production volumes of 8,770 Mcf/d of natural gas and 692 bbls/d of oil
    and liquids during the second quarter of the prior year.
--  Revenues, before royalty interests, earned from oil and natural gas
    sales during the second quarter of 2014 were $11.1 million, a
    substantial increase over the $9.7 million of revenues earned during the
    second quarter of the prior year. The increase in revenues resulted
    primarily from improvements in commodity prices, offset marginally by
    lower production volumes on oil and liquids.
--  Field netbacks during the second quarter of 2014, before realized
    amounts related to risk management contracts, were $2.35/Mcf (three
    months ended June 30, 2013 - $1.64/Mcf) from natural gas and $64.19/bbl
    (three months ended June 30, 2013 - $53.85/bbl) from oil and liquids.
--  Capital expenditures during the second quarter of 2014 were $1.6
--  Cash and available credit under the Corporation's credit facilities
    totalled $10.9 million at June 30, 2014.


During the second quarter of 2014, daily production volumes increased marginally to 2,166 boe/d, compared with an average of 2,154 boe/d in the same period of 2013.

Average daily volume during the three months
 ended June 30,                                          2014           2013
Natural gas (Mcf/d)                                     9,085          8,770
Oil (bbls/d)                                              637            664
Liquids (bbls/d)                                           15             28
Total (boe/d)                                           2,166          2,154

Average daily natural gas production increased by approximately 4% on a period-over-period basis. The increase is a result of the increased volumes from the acquisition of an additional 20% working interest in the southern Ontario assets, which the Corporation completed during the second half of the prior year, partially offset by the natural decline rate of the Corporation's assets. Oil and liquids daily production declined by 6% during the second quarter of 2014, compared with the same period of the prior year, also reflecting natural declines in the underlying assets.

Field Level Cash Flows and Field Netbacks
(in thousands)
For the three months
 ended June 30,                              2014                       2013
                        Natural  Oil and           Natural  Oil and
                            Gas  Liquids    Total      Gas  Liquids    Total
Total sales             $ 4,686  $ 6,365 $ 11,051  $ 3,808  $ 5,914  $ 9,722
Royalties                 (675)    (978)  (1,653)    (575)    (902)  (1,477)
 expenditures           (2,069)  (1,577)  (3,646)  (1,922)  (1,625)  (3,547)
                          1,942    3,810    5,752    1,311    3,387    4,698
Realized risk
 management (loss)
 gain                         -    (119)    (119)    (381)      137    (244)
Field level cash flows  $ 1,942  $ 3,691  $ 5,633    $ 930  $ 3,524  $ 4,454

For the three months
 ended June 30,                              2014                       2013
                        Natural  Oil and           Natural  Oil and
                            Gas  Liquids    Total      Gas  Liquids    Total
                          $/Mcf    $/bbl    $/boe    $/Mcf    $/bbl    $/boe
Total sales              $ 5.67 $ 107.25  $ 56.06   $ 4.77  $ 94.01  $ 49.62
Royalties                (0.82)  (16.48)   (8.39)   (0.72)  (14.34)   (7.54)
 expenditures            (2.50)  (26.58)  (18.50)   (2.41)  (25.82)  (18.10)
                           2.35    64.19    29.17     1.64    53.85    23.98
Realized risk
 management (loss)
 gain                         -   (2.01)   (0.60)   (0.48)     2.18   (1.25)
Field netbacks           $ 2.35  $ 62.18  $ 28.57   $ 1.16  $ 56.03  $ 22.73

Capital Expenditures and the 2014 Work Program

Due to severe winter weather experienced across southern Ontario, the Corporation was limited in completing scheduled capital projects and accordingly, during the first half of 2014, the Corporation incurred $3.0 million of capital expenditures on its oil and gas properties, compared with $5.4 million of capital expenditures incurred during the first half of 2013.

To date, the Corporation has drilled one vertical well and one re-entry horizontal sidetrack well. While initial results are encouraging, further testing and analyses are required to determine flow rates and evaluation of the economic viability of each project. The remaining 2014 work programs will be modified as determined by the results of this test period.

The Corporation anticipates spending $4.2 million on the remainder of its 2014 work program. Approximately $3.3 million will be directed towards exploration and optimization of its oil fields in southern Ontario; a further $0.7 million will be directed towards the Corporation's offshore natural gas assets; and, approximately $0.2 million will be incurred to acquire or maintain mineral rights for both producing and undeveloped properties.

The 2014 onshore capital work program includes a drilling and completion program of two new vertical wells and one existing horizontal well re-entries estimated to cost $2.4 million. Based on reprocessing of previously obtained seismic information, the Corporation is assessing further re-entry and vertical drill locations. In addition, the Corporation has budgeted approximately $0.9 million for the acquisition, processing and evaluation of both 2-D and 3-D seismic as well as other activities to work up additional locations.


Technical and economic audits of the Castor Project, which were required for the inclusion of the project to the Spanish gas system, were initiated in July 2013 and completed and delivered to the Spanish authorities in January 2014. These audits concluded that the Castor Project is technically fit to store and deliver gas, that it has an appropriate process design and configuration, and that it has sufficient safety engineering for operation. Injection of cushion gas to the reservoir was initiated in June 2013. However, in mid September 2013, micro-seismic activity was detected in the area surrounding the Castor Project, following which the Spanish authorities implemented a suspension until an independent assessment of the source of the seismic activity was completed. Independent assessments were subsequently completed, putting forth that the seismicity observed appears to be related to a secondary fault present in the area. These findings were made available for review by the Spanish authorities.

Escal continues to ensure the proper care and maintenance of the facilities, having funded operating and maintenance costs. However, and notwithstanding the results of the technical and economic audits, as well as the results of the independent assessments as to the source of seismic activity, the Spanish authorities have not revoked their mandated suspension. Therefore Escal considered various options available in respect of the Castor Project, including the possibility of exercising their right under the underground gas storage concession to relinquish the concession to the Spanish authorities (the "Relinquishment Option"). Under the terms of the Spanish regulations, exercise of the Relinquishment Option would result in the ownership of the facilities associated with the Castor Project reverting to the Spanish authorities in exchange for a compensatory amount to Escal, as stipulated in such regulations. The exercise of the Relinquishment Option is subject to the prior approval of the European Investment Bank (the "EIB") as the issuer of a standby letter of credit provided as a form of subordinated credit enhancement instrument in relation to the EUR1.4 billion secured limited recourse amortizing bonds (the "Euro Bonds") issued in respect of the Castor Project. On June 25, 2014, Escal advised the EIB of their interest in exercising the Relinquishment Option, in order to obtain the EIB's consent to the exercise of the Relinquishment Option, if exercised.

Conditional on obtaining the necessary approvals for the exercise of the Relinquishment Option, Escal may formally advise the Spanish authorities of its relinquishment of the underground storage concession, at which time the appropriate compensatory amount and terms of payment will be determined, compliant with the underlying regulations. The disbursement of any compensation amount that may be received upon exercise of the Relinquishment Option must first satisfy the financial terms of the Euro Bond, as outlined in the offering document supporting their issuance.


The Corporation believes that important measures of operating performance include certain measures that are not defined under International Financial Reporting Standards ("IFRS") and as such, may not be comparable to similar measures used by other companies. While these measures are non-IFRS, they are common benchmarks in the oil and natural gas industry, and are used by the Corporation in assessing its operating results, including net earnings and cash flows.

--  "Field Level Cash Flows" are calculated as revenues from oil and gas
    sales, less royalties and production expenditures, adjusted for realized
    gains or losses on risk management contracts.
--  "Field Netbacks" refers to field level cash flows expressed on a
    measurement unit or barrel of oil equivalent basis.


Dundee Energy Limited is a Canadian-based oil and natural gas company with a mandate to create long-term value for its shareholders through the exploration, development, production and marketing of oil and natural gas, and through other high impact energy projects. Dundee Energy holds interests, both directly and indirectly, in the largest accumulation of producing oil and gas assets in Ontario, in the development of an offshore underground natural gas storage facility in Spain and, through a preferred share investment, in certain exploration and evaluation programs for oil and natural gas offshore Tunisia. The Corporation's common shares trade on the Toronto Stock Exchange under the symbol "DEN".


Certain information set forth in these documents, including management's assessment of each of the Corporation's future plans and operations, contains forward-looking statements. Forward-looking statements are statements that are predictive in nature, depend upon or refer to future events or conditions or include words such as "expects", "anticipates", "intends", "plans", "believes", "estimates" or similar expressions. By their nature, forward-looking statements are subject to numerous risks and uncertainties, some of which are beyond the Corporation's control, including: exploration, development and production risks; uncertainty of reserve estimates; reliance on operators, management and key personnel; cyclical nature of the business; economic dependence on a small number of customers; additional funding that may be required to execute on exploration and development work; the ability to obtain, sustain or renew licenses and permits; risks inherent to operating and investing in foreign countries; availability of drilling equipment and access; industry competition; environmental concerns; climate change regulations; volatility of commodity prices; hedging activities; potential defects in title to properties; potential conflicts of interest; changes in taxation legislation; insurance, health, safety and litigation risk; labour costs and labour relations; geo-political risks; risks relating to management of growth; aboriginal claims; volatility of the Corporation's share price; royalty rates and incentives; regulatory risks relating to oil and natural gas exploration; marketability and price of oil and natural gas; failure to realize anticipated benefits of acquisitions and dispositions; information system risk; and other risk factors discussed or referred to in the section entitled "Risk Factors" in the Corporation's Annual Information Form for the year ended December 31, 2013.

Readers are cautioned that the assumptions used in the preparation of such information, although considered reasonable at the time of preparation, may prove to be imprecise and, as such, undue reliance should not be placed on forward-looking statements. The Corporation's actual results, performance or achievement could differ materially from those expressed in, or implied by, these forward-looking statements and, accordingly, no assurance can be given that any of the events anticipated by the forward-looking statements will transpire or occur, or if any of them do so, what benefits the Corporation will derive from them. The Corporation disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

Dundee Energy Limited
c/o Dundee Corporation
21st Floor,
1 Adelaide Street East
Toronto, ON M5C 2V9

Jaffar Khan, President & CEO
Telephone: (403) 264-4985
Telefax: (403) 262-8299
Website: www.dundee-energy.com

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