Compton Reports First Quarter 2012 Results
Compton Petroleum Corporation (TSX - CMT)
reports its financial and operating results for the first quarter ended March
31, 2012. The full text of Management's Discussion and Analysis
("MD&A") and the Corporation's audited consolidated financial
statements can be found on the Corporation's website at www.comptonpetroleum.com and at www.sedar.com.
Q1 2012 in Review
Summary of Results:
- Cash
flow was $3.8 million or $0.14 per diluted share
- Operating
loss was $18.7 million or $0.71 per diluted share
- Net
loss was $44.3 million or $1.68 per diluted share
- Capital
expenditures were $7.5 million, before acquisitions and divestitures
Highlights:
- Average
daily production of 12,569 boe/d
- Completed
and tied-in six wells and completed an upgrade on one additional well,
adding initial incremental production of 1,250 boe/d
- One
additional well is awaiting tie-in
- Engaged
RBC Capital Markets as financial advisor for the recapitalization of the
Corporation's capital structure
Financial Review
|
|
Three
Months Ended March 31
|
(000s,
except per share amounts)
|
|
|
2012
|
|
2011
|
|
|
|
|
|
|
Revenue
|
|
$
|
24,975
|
$
|
35,649
|
Cash flow (1) (2)
|
|
$
|
3,756
|
$
|
7,626
|
Per share
|
- basic
|
|
$
|
0.14
|
$
|
0.03
|
|
- diluted
|
|
$
|
0.14
|
$
|
0.02
|
Operating earnings (loss) (1) (2)
|
|
$
|
(18,740)
|
$
|
6,544
|
Net earnings (loss)
|
|
$
|
(44,261)
|
$
|
3,460
|
Per share
|
- basic
|
|
$
|
(1.68)
|
$
|
2.63
|
|
- diluted
|
|
$
|
(1.68)
|
$
|
2.17
|
Capital
expenditures before acquisitions and divestments(2)
|
|
$
|
7,505
|
$
|
6,874
|
|
|
|
|
|
|
As at
|
|
|
Mar. 31, 2012
|
|
Dec.
31, 2011
|
Total Facility & MPP financing
|
|
$
|
154,358
|
$
|
143,977
|
Total equity
|
|
$
|
277,763
|
$
|
321,835
|
Shares outstanding
|
|
|
26,359
|
|
26,359
|
(1) Cash flow and
operating loss are non-GAAP measures and are addressed in detail in
the 'Advisories' section
(2) Total shares outstanding changed from 263.6
million to 26.4 million on August 10, 2011 in accordance with the
Recapitalization
Revenue decreased during the first quarter of
2012 compared to 2011 as a result of lower production volumes and lower
realized natural gas prices. Cash flow for 2012 decreased 51% for the same
reasons but was also partially offset by the decline in interest and finance,
administration and operating costs. Compton reported a net loss for the first
quarter of 2012 of $44.3 million versus earnings of $3.5 million in 2011
largely due to an impairment expense in 2012 of $33.2 million related to the
value of development and production assets, which were impacted by low natural
gas prices. Operating loss was $18.7 million in 2012 as compared to
operating earnings of $6.5 million in 2011 primarily due to the impact of lower
natural gas prices and production.
Operations Review
|
|
|
|
Three
Months Ended Mar. 31
|
|
|
|
|
|
2012
|
|
2011
|
% Change
|
Average daily production
|
|
|
|
|
|
|
|
|
|
Natural gas (MMcf/d)
|
|
|
|
|
62
|
|
72
|
(14%)
|
|
Liquids (bbls/d)
|
|
|
|
|
2,183
|
|
2,455
|
(11%)
|
|
Total (boe/d)
|
|
|
|
|
12,569
|
|
14,507
|
(13%)
|
Realized prices
|
|
|
|
|
|
|
|
|
|
Natural gas ($/mcf)
|
|
|
|
$
|
2.44
|
$
|
4.01
|
(39%)
|
|
Liquids ($/bbl)
|
|
|
|
$
|
81.85
|
$
|
69.11
|
18%
|
|
Total ($/boe)
|
|
|
|
$
|
26.17
|
$
|
31.68
|
(17%)
|
Field netback (1) (2)
($/boe)
|
|
|
|
$
|
9.67
|
$
|
16.89
|
(43%)
|
(1) Field netback
is a non-GAAP measures and is addressed in
detail in the MD&A
(2) Prior periods have been revised to conform to
current period presentation
Production for the first quarter of 2012
decreased 13% from 2011 largely due to limited new production additions since
the first quarter of 2011 and natural declines. These reduced production
volumes combined with the significant decrease in natural gas prices limited
internally generated cash flow. Despite this, capital investment, before
acquisitions, divestments and corporate expenses increased by 7% in the first
quarter of 2012 compared to 2011 as the Corporation completed drilling
activities initiated in late 2011.
At Niton, two Rock Creek
horizontal wells were completed and tied-in during the first quarter of 2012:
one well is producing 180 boe/d including 49 bbls/d of
liquids while the other is waiting facility upgrade. In addition, a
Notikewin well and a Wilrich well were completed in the Niton area. The Wilrich
well is currently producing approximately 315 boe/d including 30 bbls/d of liquids, while the Notikewin well is producing
approximately 260 boe/d including 32 bbls/d of liquids. The Corporation holds a
100% working interest in all of these wells.
In the Southern Plains, further
development of the Ellerslie, Mannville and Big Valley Formations continued
into 2012. These plays provide significant upside potential for the
Corporation. Late in 2011, the Corporation drilled two vertical oil wells in
Southern Plains: one in the Basal Quartz and a second in the Ellerslie
Formation (both 100% working interest). The Basal Quartz well was put on
production in early April with initial production rates of 1.0 mmcf/d of gas
and 110 bbl/d of oil. The Ellerslie well has been put on production and is
currently producing 1.2 mmcf/d of gas and 36 bbls/d of oil. A second 100% W.I.
Ellerslie evaluation well is awaiting completion, which is expected in the
second quarter.
During this period of low natural gas prices,
Compton will manage its capital expenditure program within current cash flow in
accordance with Management's prudent financial approach. The program remains
flexible should commodity price levels increase or additional funds become
available.
Outlook
North American natural gas prices are at
historic lows and industry analysts predict that gas prices will remain
depressed throughout 2012, and potentially beyond. The current depressed
natural gas market has resulted from supply levels that have outpaced consumer
demand. As natural gas comprises approximately 84% of Compton's
production, the Corporation has been significantly impacted by the natural gas
price outlook.
Compton's Management has re-focused the
Corporation's strategy to act prudently in light of the prevailing natural gas
price environment and will limit activity to operate within existing cash flow.
Compton is currently generating positive cash flow from operations that has
been allocated to its planned maintenance capital expenditure program.
Recognizing the potential impact of reduced
natural gas prices on its liquidity, Compton engaged RBC Capital Markets as a
financial advisor in March 2012 to recapitalize the Corporation's capital structure
through the sale of assets and/or raising equity financing. Compton is also
considering opportunities to leverage its substantial tax pool base. The
Board's objectives are to strengthen the balance sheet sufficiently to
establish a sustainable operating base in the current commodity price
environment and to create a platform that can take advantage of growth
opportunities in future.
Compton's full year guidance is as follows:
Year-end average
production
|
|
|
10,800 - 11,200 boe/d
|
2012 cash flow from operations(1)
|
|
|
$6.0 - $10.0 million
|
2012 capital expenditures
|
|
|
$14.0 - $16.0 million
|
(1) Based on $1.75/GJ AECO and $100/bbl
Edmonton Par
Approximately half of the 2012 capital
expenditures have been incurred to date, including completion and tie in of
wells drilled in 2011. The balance of the estimated 2012 capital
expenditures will be incurred in the remainder of the year, focused on maintenance
activities and future opportunities where superior returns are forecast. As
funds become available, Compton plans to selectively invest in its liquids rich
natural gas and oil opportunities and its emerging oil plays in the Bakken/Big
Valley, Ellerslie and Glauconite Formations in the Southern Plains area.
Compton's assets provide significant upside
potential through their multiple zone development opportunities, contiguous
land blocks and impact of horizontal multi-stage fracture technology.
Management continues to review strategies designed to maximize shareholder
value, considering the current natural gas environment and cash flow
limitations. In the context of the current price environment, Compton
will focus on maintaining the value of its asset base and identifying and
executing on selected opportunities for future growth.
Additional Information
Compton has filed its audited Consolidated
Financial Statements for the three months ended March 31, 2012 and related
Management's Discussion and Analysis with Canadian securities regulatory
authorities. Copies of these documents may be obtained via www.sedar.com or the Corporation's website, www.comptonpetroleum.com. To order printed copies of the filed documents free of charge, email
the Corporation at investorinfo@comptonpetroleum.com.
2012 First Quarter Conference Call
Compton will host a conference call and web
cast on Friday, May 11, 2012 at 9:00 a.m. MST (11:00 a.m. EST) to discuss the
Corporation's first quarter financial, operating and reserves results. The
format of the call will be as a question and answer session for analysts and
investors after a brief summary of results and strategy. To participate
in the conference call, please contact the Conference Operator ten minutes
prior to the call at 1-888-231-8191 or 1-647-427-7450. To participate in the
web cast, please visit: www.comptonpetroleum.com. The web cast will be
archived two hours after the presentation at the website listed above. For a
replay of this call, please dial: 1-855-859-2056 or 1-416-849-0833 and enter
access code 75795755# until May 18, 2012.
About Compton Petroleum Corporation
Compton Petroleum Corporation is a public corporation
actively engaged in the exploration, development and production of natural gas,
natural gas liquids, and crude oil in western Canada. The majority of our
operations are located in the Deep Basin fairway of the Western Canada
Sedimentary Basin, providing multi-zone potential for future development and
exploration opportunity.
With approximately 84% natural gas, our
strategy has shifted to developing our high-return, liquids-rich natural gas
area at Niton and balancing our portfolio through emerging crude oil
opportunities to offset continued low natural gas prices. Compton maximizes
value by concentrating on properties that generate strong returns on capital
investment, such as the Rock Creek Formation at Niton, and developing new
horizons such as the Wilrich and Notikewin. Compton 's
emerging oil plays target the Bakken/Big Valley, Ellerslie and Glauconite
Formations in the Southern Plains area as well as future exploratory potential
through the joint venture on its Montana Bakken/Big Valley lands. The
successful development of these areas is expected to provide growth in oil
production and reserves, further augmenting our large natural gas reserves that
can be capitalized on when natural gas markets recover.
Through further improving operating efficiencies,
maximizing returns on capital invested and focusing on higher return assets,
Compton will create value by providing appropriate investment returns for
shareholders. Compton's shares are listed on the Toronto Stock Exchange under
the symbol CMT.
Advisories
Non-GAAP Financial Measures
Included in this document are references to
terms used in the oil and gas industry such as, cash flow, operating earnings
(loss), free cash flow, cash flow per share, adjusted EBITDA, field netback,
funds flow netback, debt and capitalization. Non-GAAP measures do not have any
standardized meaning and therefore reported amounts may not be comparable to
similarly titled measures reported by other companies. These measures have been
described and presented in this document in order to provide shareholders and
potential investors with additional information regarding the Company's
liquidity and its ability to generate funds to finance its operations.
Cash flow should not be considered an
alternative to, or more meaningful than, cash provided by operating, investing
and financing activities or net earnings as determined in accordance with
Canadian GAAP, as an indicator of the Corporation's performance or liquidity.
Cash flow is used by Compton to evaluate operating results and the
Corporation's ability to generate cash to fund capital expenditures and repay
debt.
Operating earnings (loss) is used by the
Corporation to facilitate comparability of earnings between periods. Operating
earnings (loss) represents net earnings excluding certain items that are
largely non-operational in nature, primarily of a non-cash nature or one-time
non-recurring items, and should not be considered an alternative to, or
more meaningful than, net earnings as determined in accordance with Canadian
GAAP.
Adjusted EBITDA is a non-GAAP measure defined
as net earnings, before interest and finance charges, income taxes, depletion
and depreciation, accretion of asset retirement obligations, and foreign
exchange and other gains and losses.
Field netback equals the total petroleum and
natural gas sales, including realized gains and losses on commodity hedge
contracts, less royalties and operating and transportation expenses, calculated
on a $/boe basis. Funds flow netback equals field netback including general and
administrative costs and interest costs. Field netback and funds flow netback
are non-GAAP measures that management uses to analyze operating
performance.
Free cash flow is a non-GAAP measure that
Compton defines as cash flow in excess of capital investment, excluding net
acquisitions and divestitures, and is used by Management to determine the funds
available for other investing activities, and/or other financing activities.
Debt is comprised of floating rate bank debt
and fixed rate senior term notes. Capitalization is defined as bank debt plus
shareholder's equity.
Use of Boe Equivalents
The oil and natural gas industry commonly
expresses production volumes and reserves on a barrel of oil equivalent
("boe") basis whereby natural gas volumes are converted at the ratio
of six thousand cubic feet to one barrel of oil. The intention is to sum
oil and natural gas measurement units into one basis for improved measurement
of results and comparisons with other industry participants. We use the
6:1 boe measure which is the approximate energy equivalency of the two
commodities at the burner tip. However, boes do not represent a value
equivalency at the well head and therefore may be a misleading measure if used
in isolation.