CALGARY, April 14, 2014 /CNW/ - ArPetrol Ltd. ("ArPetrol" or the "Company") (TSXV: RPT) is pleased to announce its financial and operating results for the three months and year ended December 31, 2013 and to provide an operational update on activities this year to date as well as an outlook for 2014. The consolidated financial statements and management's discussion and analysis, have been filed on SEDAR at www.sedar.com and posted on the Company's website at www.arpetrol.com.
Fourth-Quarter and Fiscal 2013 Summary
Operating and Financial
ArPetrol's working capital position improved significantly during the fourth-quarter of 2013. The Company had a working capital deficit of $750,972 at the end of 2013 compared to a deficit of $4.5 million at the end of the third-quarter of 2013. The majority of this improvement comes from the Company's success in reaching settlement agreements with the outstanding vendors from its 2012 drilling program. Currently, ArPetrol has successfully concluded settlements with all but one of its drilling vendors.
The Company had drawn $1.5 million on its short-term loan at year-end.
Fourth-quarter production averaged 164 barrels of oil equivalent ("boe") per day. This is a decrease of 22 boe/d from the third-quarter of 2013 and a decrease of 88 boe/d from the fourth-quarter of 2012. These decreases are due to well performance issues. The performance issues were resolved before the end of the fourth-quarter of 2013, resulting in estimated average production of 242 boe/d for the first-quarter of 2014.
Fourth-quarter natural gas prices averaged $3.65 per thousand cubic feet ("Mcf"), $0.30 per Mcf lower than the price realized in the third-quarter of 2013 and $0.85 per Mcf higher than the fourth-quarter of 2012. This higher price during 2013 reflects the Company's new gas sales contract signed during the year.
The average price realized for natural gas liquids ("NGL") increased, with fourth-quarter 2013 prices of $82.77 per barrel ("bbl"), $0.98 per bbl higher than in the third-quarter of 2013, and $17.28 per bbl higher than in the same period in 2012. The changes in NGL pricing reflect the changing dynamics in the Argentine markets.
During the fourth-quarter the Company continued to see strong gas processing results with revenues of $2.2 million in the quarter and $6.6 million for the year. This compares to $2.2 million in the third-quarter of 2013 and $4.2 million for 2012. This increase in year-on-year revenues is the result of the new gas processing contract effective July 1, 2013. These strong processing revenues are expected to continue in 2014.
Capital expenditures for the fourth-quarter of 2013 and the year-ended 2013 were $6,886 and $175,310 respectively.
Summary of Results
| |
Three Months Ended Dec 31, |
Year ended Dec 31, |
| |
(Unaudited) |
|
|
| |
2013 |
2012 |
2013 |
2012 |
| Financial |
|
|
|
|
| (Cdn$ except shares outstanding and per boe(1) amounts) |
|
|
|
|
| |
|
|
|
|
| Production sales |
432,047 |
519,332 |
1,995,079 |
1,991,401 |
| Processing revenues |
2,220,761 |
1,101,797 |
6,602,270 |
4,203,390 |
| Funds flow from operations (1) |
(1,316,293) |
(121,470) |
(2,005,538) |
(2,982,279) |
| Cash generated from operating activities |
(2,135,525) |
(1,875,250) |
(3,929,268) |
(9,055,438) |
| Net loss |
(290,350) |
13,071,369 |
3,726,040 |
25,772,561 |
| Capital expenditures |
6,886 |
2,174,298 |
175,310 |
28,875,715 |
| Weighted average shares outstanding (millions) |
|
|
|
|
| - basic and diluted (2) |
572.5 |
572.5 |
572.5 |
572.5 |
| |
|
|
|
|
| Operations |
|
|
|
|
| Production |
|
|
|
|
| Natural gas - Mcf per day |
878 |
1,339 |
1,094 |
1,343 |
| NGL - bbls per day |
18 |
29 |
23 |
24 |
| Total - boe per day (1) |
164 |
252 |
205 |
247 |
| Average sales price |
|
|
|
|
| Natural gas - $ per Mcf |
3.65 |
2.80 |
3.46 |
2.82 |
| NGL - $ per bbl |
82.77 |
65.49 |
73.30 |
68.95 |
| Average operating netback |
|
|
|
|
| Production - $ per boe (1) |
(1.99) |
(1.59) |
0.64 |
0.61 |
| Processing - $ per Mcf processed (1) |
0.18 |
0.04 |
0.12 |
0.06 |
Notes:
(1) See advisories at the end of this news release with respect to non-IFRS measures and boe presentation.
(2) All outstanding warrants, stock options and convertible debentures were excluded in calculating the weighted-average number of dilutive common share outstanding, as they were determined to be anti-dilutive.
Reserves
The Company has obtained an independent audit of the natural gas and natural gas liquid reserves attributable to ArPetrol's interest in the Faro Virgenes concession as prepared by Gaffney, Cline & Associates Inc. effective December 31, 2013 (the "GCA Report").
The GCA Report presented a 4% increase in proved plus probable natural gas reserves (gross after losses due to shrinkage and consumption) from 42,210 million cubic feet ("MMcf") as of December 31, 2012 to 43,860 MMcf as of December 31, 2013. This increase was a product of adjustment to these losses, which more than compensated for gas volumes produced and sold in 2013. The GCA Report further presented a 9% decrease to the net present value of future net revenue of proved plus probable reserves (before deducting income tax; discounted at 10%) from US$123 million as of December 31, 2012 to US$112 million as of December 31, 2013. This decrease in value matched against an increase in reserves is primarily the result of optimistic assumptions regarding plant revenues. In the 2012 report prepared by Gaffney, Cline & Associates Inc. plant revenue assumptions were based on the status of negotiations at the time of the report. These assumptions were higher than the actual contract prices achieved by ArPetrol in late 2013. The 2013 GCA Report incorporates these revised contracted volumes and prices in the forecast of future value.
The GCA Report was prepared using assumptions and methodology guidelines consistent with the Canadian Oil and Gas Evaluation Handbook and in accordance with National Instrument 51-101, Standards of Disclosure for Oil and Gas Activities. The Company's natural gas and NGL reserves are located in the Province of Santa Cruz in Argentina.
Oil and Gas Reserves Based on Forecast Prices and Costs
| |
|
Natural Gas |
|
Natural Gas Liquids |
| Reserves |
|
Gross(1)
(MMcf)(2) |
|
Net(1)
(MMcf) |
|
Gross(1)
(Mbbl)(2) |
|
Net(1)
(Mbbl) |
| Proved Developed Producing(3)(6) |
|
1,624 |
|
1,381 |
|
28 |
|
24 |
| Proved Developed Non-Producing(3)(7) |
|
- |
|
- |
|
- |
|
- |
| Proved Undeveloped(3)(8) |
|
25,739 |
|
21,881 |
|
411 |
|
349 |
| Total Proved(3) |
|
27,363 |
|
23,262 |
|
439 |
|
373 |
| Total Probable(4) |
|
16,497 |
|
14,024 |
|
262 |
|
223 |
| Total Proved Plus Probable(3)(4) |
|
43,860 |
|
37,286 |
|
701 |
|
596 |
| Total Possible(5) |
|
15,158 |
|
12,886 |
|
240 |
|
204 |
| Total Proved Plus Probable Plus Possible(3)(4)(5) |
|
59,018 |
|
50,172 |
|
941 |
|
800 |
Net Present Values of Future Net Revenue Based on Forecast Prices and Costs
| Reserves |
|
Before Deducting Income Tax
Discounted at 10%
(US$MM) |
|
After Deducting Income Tax
Discounted at 10%
(US$MM) |
| Proved Developed Producing(3)(6) |
|
16 |
|
16 |
| Proved Developed Non-Producing(3)(7) |
|
- |
|
- |
| Proved Undeveloped(3)(8) |
|
35 |
|
21 |
| Total Proved(3) |
|
51 |
|
37 |
| Total Probable(4) |
|
61 |
|
40 |
| Total Proved Plus Probable(3)(4) |
|
112 |
|
77 |
| Total Possible(5) |
|
51 |
|
33 |
| Total Proved Plus Probable Plus Possible(3)(4)(5) |
|
163 |
|
110 |
| Notes: |
| (1) |
"Gross Reserves" are ArPetrol's working interest (operating or non-operating) share before deduction of royalties and without including any royalty interests of ArPetrol. "Net Reserves" are ArPetrol's working interest (operating or non-operating) share after deduction of royalty obligations plus ArPetrol's royalty interests in reserves. |
| (2) |
"MMcf" means million cubic feet and "Mbbl" means thousand barrels. |
| (3) |
"Proved" reserves are those reserves that can be estimated with a high degree of certainty to be recoverable. It is likely that the actual remaining quantities recovered will exceed the estimated proved reserves. |
| (4) |
"Probable" reserves are those additional reserves that are less certain to be recovered than proved reserves. It is equally likely that the actual remaining quantities recovered will be greater or less than the sum of the estimated proved plus probable reserves. |
| (5) |
"Possible" reserves are those additional reserves that are less certain to be recovered than probable reserves. There is a 10% probability that the quantities actually recovered will equal or exceed the sum of the estimated proved plus probable plus possible reserves. |
| (6) |
"Developed Producing" reserves are those reserves that are expected to be recovered from completion intervals open at the time of the estimate. These reserves may be currently producing or, if shut in, they must have previously been on production, and the date of resumption of production must be known with reasonable certainty. |
| (7) |
"Developed Non-Producing" reserves are those reserves that either have not been on production, or have previously been on production but are shut in and the date of resumption of production is unknown. |
| (8) |
"Undeveloped" reserves are those reserves expected to be recovered from known accumulations where a significant expenditure (for example, when compared to the cost of drilling a well) is required to render them capable of production. They must fully meet the requirements of the reserves classification (proved, probable, possible) to which they are assigned. |
| (9) |
The reserve estimates provided herein are estimates only and there is no guarantee that the estimated reserves will be recovered. |
| (10) |
Actual natural gas and NGL reserves may be greater than or less than the estimates provided herein. |
| (11) |
The future net revenue estimates provided herein do not represent fair market value. |
| (12) |
The pricing assumptions used in the GCA report with respect to net present values of future net revenue (forecast) are based on ArPetrol's future scenario of gas and NGL. The forecast gas prices start with US$2.50/MMBtu equivalent to US$2.775/Mcf according to an existing contract, increasing to US$4.00/MMBtu in 2014, escalated at 5% per year thereafter. Future capital costs were derived from development program forecasts prepared by ArPetrol for the field. Recent historical operating expense data were utilized as the basis for operating cost projections. Capital and operating expenses were indexed at 4% per year since 2013 to account for inflation. |
All values in this news release are in Canadian dollars unless otherwise indicated.
Outlook
Since July of 2013 the Company has made significant improvements in its revenue generation and in its balance sheet. The new gas processing contracts have provided ArPetrol with a significant increase in processing revenue and cash flow during the last half of 2013 and this is expected to continue during 2014. The Company has also improved its balance sheet by concluding settlement agreements with all but one vendor from the 2012 drilling program.
The Company's 2014 outlook includes estimated production of 200 to 240 boe/d, estimated processing volumes of 70 to 80 MMcf/d and estimated capital expenditures for maintenance and improvements of $0.8 million to $1.2 million. In 2014, the Company is forecast to be self-funding through projected cash flows, covering its capital expenditures and, barring any unforeseen circumstances, the repayment of its short-term loan by the year-end. In addition ArPetrol will continue to look at growth opportunities when they become available.
Management Changes
Dr. Ian Moffat will be resigning as VP Exploration effective May 1, 2014. The Company would like to extend its sincere appreciation to Ian for his significant contribution to the Company over the past three years and wish him the very best in his next endeavor.
The Company is pleased to announce that Jason James has joined its Board of Directors effective April 8, 2014. Mr. James is a Chartered Accountant and has over 16 years of corporate finance, accounting and business development experience in the oil and gas industry including the midstream sector.
About ArPetrol Ltd.
ArPetrol is a Calgary-based publicly traded company engaged in oil and natural gas exploration, development and production and third-party natural gas processing in Argentina, where it owns and operates a gas processing facility with capacity of 85 MMcf per day. The Company's common shares are listed on the TSXV under the symbol "RPT".
Forward-Looking Information
This news release contains certain forward‐looking information relating, but not limited, to the Company's reserves and related future net revenue, projected cash flows and achieving positive cash flow in 2014, processing revenue and cash flow, estimated production volumes, processing volumes and capital expenditures, the repayment of the Company's short term loan and the timing thereof, the pursuit of growth opportunities, the pending completion of final documentation and negotiation of settlements arrangements with certain creditors, the Company's ability to continue to operate as a going concern and the availability of future financing. Forward-looking information typically contains statements with words such as "anticipate", "believe", ""forecast", expect", "plan", "intend", "estimate", "propose", "project", or similar words suggesting future outcomes. The Company cautions readers and prospective investors in the Company's securities not to place undue reliance on forward‐looking information as, by its nature, it is based on current expectations regarding future events that involve a number of assumptions, inherent risks and uncertainties, which could cause actual results to differ materially from those anticipated by the Company. Forward-looking information is based on management's current expectations and assumptions regarding, among other things, the ability to sustain consistent processing and production volumes, future production and processing revenue, future economic conditions, future currency and exchange rates, the ability to repatriate funds from Argentina, future pricing, continued political stability in the areas in which the Company is operating, the reduction of G&A and expenses, and the Company's continued ability to obtain and retain qualified management and staff and equipment in a timely and cost-efficient manner. A number of factors could cause actual results to differ materially from those anticipated by the Company, including but not limited to risks associated with the oil and natural gas industry (e.g., operational risks; the ability to retain staff and equipment; and health, safety and environmental risks), weather delays and natural disasters, union activities, change in government policies, currency fluctuations and controls, a change in the manner and rates at which the Company is exchanging its currency, the risk of disruptions at the gas plant, increased maintenance costs or other expenditures at the gas plant, interruptions to production and processing revenue, production declines, changes in commodity prices and revenues, increased costs, unavailability of funding, and other risks associated with international activity and Argentina. ArPetrol operates outside of Canada and as such, is subject to a number of political risks over which it has no control. The forward-looking information included herein is expressly qualified in its entirety by this cautionary statement. The forward-looking information included herein is made as of the date hereof and the Company assumes no obligation to update or revise any forward‐looking information to reflect new events or circumstances, except as required by law.
Non-IFRS Measures
This news release includes references to financial measures commonly used in the oil and natural gas industry. The terms "operating netback" (production and processing revenue less royalties, turnover taxes and operating expenses) and "funds flow from operations" (cash generated from operating activities before changes in non-cash working capital, and translation adjustment on operating items) do not have any standardized meaning under International Financial Reporting Standards ("IFRS") and may not be comparable with similar measures presented by other companies. Funds flow from operations should not be considered an alternative to, or more meaningful than, cash generated from operating activities, net income (loss) or other measures determined in accordance with IFRS, as an indicator of the Company's performance.
See the management's discussion and analysis for the year ended December 31, 2013, filed on SEDAR at www.sedar.com and on the Company's website, for further discussion, including a reconciliation of funds flow from operations to cash generated from operating activities which is the most directly comparable measure calculated in accordance with IFRS. There is no IFRS measure that is reasonably comparable to operating netbacks and a detailed calculation of such netbacks is presented in the "Results of Operations" section.
Reserves and Oil and Gas Advisories
BOE Presentation. Production information is commonly reported in units of barrels of oil equivalent. For purposes of computing such units, natural gas is converted to equivalent barrels of oil using a conversion factor of six thousand cubic feet to one barrel. This conversion ratio of 6:1 represents energy equivalency, which is primarily applicable at the burner tip, and does not represent a value equivalency at the wellhead. Such disclosure of boe may be misleading, particularly if used in isolation.
Price Deck Assumptions
| |
|
|
|
Natural Gas |
|
NGL |
|
|
| Year |
|
|
|
(US$/MMBtu) |
|
(US$/bbl) |
|
|
| 2014 |
|
|
|
3.64 |
|
80.00 |
|
|
| 2015 |
|
|
|
4.00 |
|
83.20 |
|
|
| 2016 |
|
|
|
4.20 |
|
86.53 |
|
|
| 2017 |
|
|
|
4.41 |
|
89.99 |
|
|
| 2018 |
|
|
|
4.63 |
|
93.59 |
|
|
| 2019 |
|
|
|
4.86 |
|
97.33 |
|
|
| 2020 |
|
|
|
5.11 |
|
101.23 |
|
|
| 2021 |
|
|
|
5.36 |
|
105.27 |
|
|
| 2022 |
|
|
|
5.63 |
|
109.49 |
|
|
| 2023 |
|
|
|
5.91 |
|
113.86 |
|
|
| 2024 |
|
|
|
6.21 |
|
118.42 |
|
|
| 2025 |
|
|
|
6.52 |
|
123.16 |
|
|
| 2026 |
|
|
|
6.84 |
|
128.08 |
|
|
There are numerous uncertainties inherent in estimating quantities of reserves and related future net revenue. The reserves and related future net revenue set forth above are estimates only. In general, estimates of economically recoverable natural gas and NGL reserves and the related future net revenue are based upon a number of variable factors and assumptions, such as historical production from the properties, production rates, ultimate reserve recovery, timing and amount of capital expenditures, the scope and timing of the development program, expected pricing and gas processing revenue, marketability of oil and natural gas, royalty rates, the assumed effects of regulation by governmental agencies and future operating costs, all of which may vary materially. For these reasons, estimates of the economically recoverable natural gas and NGL reserves attributable to any particular group of properties, classification of such reserves based on risk of recovery and estimates of future net revenues associated with reserves prepared by different engineers, or by the same engineers at different times, may vary. The Company's actual production, revenues, taxes and development and operating expenditures with respect to its reserves will vary from estimates thereof and such variations could be material. Additional information regarding ArPetrol's reserves data and the risks and the level of uncertainty associated therewith can be found in the Company's statement of reserves data and other oil and gas information for the year ended December 31, 2012 which is available on SEDAR at www.sedar.com.
The reserve data provided in this news release presents only a portion of the disclosure required under National Instrument 51-101, Standards of Disclosure for Oil and Gas Activities. All of the required information will be contained in the Company's statement of reserves data and other oil and gas information for the year ended December 31, 2013 which will be available on SEDAR at www.sedar.com prior to the end of April 2014.
Additional information relating to the Company is also available on SEDAR at www.sedar.com.
Neither the TSXV nor its Regulation Services Provider (as defined in the policies of the TSXV) accepts responsibility for the adequacy or accuracy of this release.
SOURCE ArPetrol Ltd.
For further information:
Ian Habke, President and Chief Financial Officer
i.habke@arpetrol.com
ArPetrol Ltd.
Main Phone: 403-263-6738
