CALGARY , Aug. 13, 2014 /CNW Telbec/ - Exall Energy Corporation ("Exall"
or the "Company") (TSX: EE and TSX: EE.DB) is pleased to announce its
financial and operating results for the three and six months ended June
30, 2014 . Exall's public filings can all be found at www.exall.com or www.sedar.com.
Highlights:
-
A second quarter 2014 production average of 772 boe per day for a 6
month production average of 866 boe per day,
-
Production was negatively affected by the shut in of producing wells due
to AER mandated pressure surveys and water injection well downtime due
to workovers and a metering error. All of the operating wells are back
on production or injection and production is coming back to pre-shut in
levels,
-
A second quarter 2014 field net back of $45.66 per boe for a 6 month
field net back of $46.07 per boe, and
-
A second quarter 2014 cash flow from operations of $757,000 for a 6
month cash flow from operations of $2,716,000 .
SUMMARY OF FINANCIAL RESULTS AND OPERATIONS
|
|
|
Three months ended June 30,
|
Six months ended June 30,
|
In thousands of dollars
|
2014
|
2013
|
%
change
|
2014
|
2013
|
%
change
|
|
|
|
|
|
|
|
Financial ($)
|
|
|
|
|
|
|
Gross revenue
|
6,894
|
9,204
|
(25)
|
15,010
|
18,957
|
(21)
|
Funds from operations
|
757
|
3,458
|
(78)
|
2,716
|
8,416
|
(68)
|
|
Basic per share
|
0.01
|
0.05
|
(80)
|
0.04
|
0.12
|
(67)
|
|
Diluted per share
|
0.00
|
0.02
|
(100)
|
0.02
|
0.05
|
(60)
|
Net income (loss)
|
(882)
|
351
|
(351)
|
(2,049)
|
1,247
|
(264)
|
|
Basic per share
|
(0.01)
|
0.00
|
N/A
|
(0.03)
|
0.01
|
(400)
|
|
Diluted per share
|
(0.01)
|
0.00
|
N/A
|
(0.03)
|
0.00
|
N/A
|
Capital expenditures, net
|
1,561
|
1,162
|
34
|
1,823
|
7,859
|
(77)
|
|
Three months ended June 30,
|
Six months ended June 30,
|
In thousands of dollars
|
2014
|
2013
|
%
change
|
2014
|
2013
|
%
change
|
Operations
|
|
|
|
|
|
|
Daily production
|
|
|
|
|
|
|
|
Crude oil (bbl)
|
709
|
1,084
|
(35)
|
797
|
1,150
|
(31)
|
|
Natural gas liquids (bbl)
|
21
|
20
|
5
|
22
|
20
|
10
|
|
Natural gas (mmcf)
|
253
|
343
|
(26)
|
286
|
368
|
(22)
|
Total daily production (boe @ 6:1)
|
772
|
1,161
|
(34)
|
866
|
1,232
|
(30)
|
Netback per boe (6:1) ($)
|
45.66
|
45.34
|
1
|
46.07
|
49.74
|
(7)
|
Exall's production for the three month period ended June 30, 2014
averaged 772 boe per day, a 34 percent decrease from the same period in
2013. This decrease was primarily the result of well workovers and
turnaround shut in at the Exall battery, as well as the connected oil
and gas handling facilities. Production was also negatively affected by
shut in of producing wells due to AER mandated pressure surveys and
water injection well downtime due to workovers and a metering error.
All of the operating wells are back on production or injection and
production is coming back to pre-shut in levels.
Production for the six month period ended June 30, 2014 averaged 866 boe
per day, a 30 percent decrease from the same quarter in 2013. These
decreases were primarily the result of well cleanout operations
performed during the first quarter of 2014, casing gas compressor
issues resulting from the severe cold weather experienced during the
first quarter of 2014 and the battery maintenance and well build up
reporting requirements for the AER that were performed during the
second quarter of 2014, which resulted in three weeks of lost
production time.
Corporate Developments
Outlook
While Exall continues to seek debt restructuring alternatives, and will
maintain this focus until completed, the Capital Expenditure Program
for 2014 has been deferred to the second half of 2014. Once resumed the
Capital Expenditure Program is slated to continue to explore and
develop the North Waterflood Gilwood channel extension of the Central
Waterflood channel. Successful drilling on the Central Waterflood /
North Waterflood channel extension in the second half of 2014 is
expected to add 320 boepd net (based on an average working interest of
71.5 percent). It is a tribute to the quality of the Gilwood reservoir
that Exall has been able to maintain the level of production it has
today utilizing a modest amount of maintenance capital.
Capital expenditures through the second half 2014 will continue to focus
on the "low-hanging fruit" (LHF) opportunities. Short term focus of
capital will be firstly waterflood implementation and secondly the
lowest-risk, lowest-cost infill wells in the North Waterflood area. Two
water injector conversions are to be implemented through the third
quarter of 2014. Exall plans to drill up to 3 gross development wells
in the third and fourth quarters of 2014 with a further 5 gross
development wells and 1 gross exploration well in 2015, subject to cash
flow from operations. These wells are all high-impact, low risk
locations identified through previous drilling and could have a
significant impact on the Company's production if successful. Continued
drilling success on the North Waterflood channel extension will drive
production growth on an annual basis through 2014 and 2015.
The Company's Marten Mountain oil production attracts a price based on
the average of the daily settlement price of the NYMEX near month Light
Sweet Crude Oil contract as it trades, excluding weekends / holidays,
for the calendar month of production, plus the weighted average of the
Net Energy Index and the NGX index for Light Sweet Crude Oil, plus the
one month prior Enbridge Sweet WADF. The Company's oil price received
averaged approximately $1.98 less than the posted Edmonton Par price at
the wellhead for the first half of 2014. Based on the $1.98
differential, Exall expects that its July 2014 price received was
$99.10 per barrel. This pricing estimate is approximately $13.55 higher
than the posted Western Canadian Select price being received by other
entities during these periods.
Exall's current debt level is approximately $59.0 million which includes
$26.0 million of revolving demand credit held under a facility with an
alternate Canadian lender that bears interest at the lender's base
prime rate plus 3.00 percent, $10.0 million of revolving demand credit
held under a facility with an alternate Canadian lender that bears
interest at the lender's base prime rate plus 3.00 percent, which are
reviewed periodically by the lender. To date, the facility review for
2014 has not been finalized. The balance of the debt is a $23.0 million
Convertible Debenture with a maturity date of March 2017 that pays an
annual interest rate of 7.75 percent.
Exall is a light oil-weighted company with high operating margins.
Starting from a modest production base of light oil and gas, the
Company has historically, excluding the 2013 Reservoir conformance
challenges in the south waterflood, shown itself capable of setting and
achieving ambitious production and cash flow targets (as can be seen in
the chart below reflecting production), production growth that
currently translates to 25.3 percent compounded annually from 2007.
Exall will continue to focus on organic growth through exploitation and
expansion of its existing oil producing properties.
http://files.newswire.ca/357/Outlook.pdf
Overview
Exall's average daily production for the three month period ended June
30, 2014 decreased 34 percent to 772 barrels of oil per day ("boe/d")
from the 1,161 boe/d recorded in the same period of 2013.
http://files.newswire.ca/357/Overview.pdf
Results of Operations
Oil and gas exploration and development expenditures were $1,561 for the
three month period ended June 30, 2014. During the second quarter of
2014 the Company participated in the drilling of 0.0 gross oil wells
(0.00 net) in the Marten Mountain / Mitsue area. During the second
quarter of 2013 the Company participated in the drilling of 0.0 gross
oil wells (0.00 net) in the Marten Mountain / Mitsue area.
As at June 30, 2014 , the Company had 188,960 acres (140,728 acres net)
of undeveloped land in Alberta, Canada .
Exall realized the following netbacks from oil and gas operations:
|
|
|
|
|
|
|
|
|
Three months ended June 30,
|
Six months ended June 30,
|
Netback per boe (6:1) $
|
2014
|
2013
|
% Change
|
|
2014
|
2013
|
% Change
|
|
|
|
|
|
|
|
|
Production revenue
|
98.19
|
87.10
|
13
|
|
95.72
|
85.04
|
13
|
Royalties
|
37.21
|
29.16
|
28
|
|
35.86
|
24.13
|
49
|
Operating expenses
|
15.32
|
12.60
|
22
|
|
13.79
|
11.17
|
23
|
Operating netbacks ($/boe)
|
45.66
|
45.34
|
1
|
|
46.07
|
49.74
|
(7)
|
Realized loss on Financial contracts
|
10.30
|
-
|
100
|
|
7.98
|
-
|
100
|
Abandonment expense
|
0.24
|
-
|
100
|
|
0.11
|
-
|
100
|
Administrative expenses
|
10.37
|
5.02
|
107
|
|
8.31
|
4.67
|
78
|
Interest expenses
|
13.83
|
7.60
|
82
|
|
12.29
|
7.02
|
75
|
Corporate netbacks ($/boe)
|
10.92
|
32.72
|
(67)
|
|
17.38
|
38.05
|
(54)
|
Operating netbacks for the three month period ended June 30, 2014
increased 1 percent to $45.66 per boe compared to the three months
ended June 30, 2013 operating netbacks of $45.34 per boe. This is the
result of 1) the 13 percent increase in commodity prices received for
the three months ended June 30, 2014 as compared to 2013 combined with,
2) the overall royalty expense increase of 28 percent on a second
quarter over second quarter basis as a result of wells having produced
out their allowable production under the NOWPP and reverting from a 5
percent rate to the Alberta maximum Royalty Rate of 40 percent with no
new wells being brought on at the 5 percent NOWPP rate, and 3) the
overall operating expense increase of 22 percent on a second quarter
over second quarter basis.
Operating netbacks for the six month period ended June 30, 2014
decreased 7 percent to $46.07 per boe compared to the six months ended
June 30, 2013 operating netbacks of $49.74 per boe. This is the result
of 1) the 13 percent increase in commodity prices received for the six
months ended June 30, 2014 as compared to 2013 combined with, 2) the
overall royalty expense increase of 49 percent on a second quarter over
second quarter basis as a result of wells having produced out their
allowable production under the NOWPP and reverting from a 5 percent
rate to the Alberta maximum Royalty Rate of 40 percent with no new
wells being brought on at the 5 percent NOWPP rate, and 3) the overall
operating expense increase of 23 percent on a second quarter over
second quarter basis.
Corporate netbacks for the three month period ended June 30, 2014
decreased 67 percent to $10.92 per boe compared to the three months
ended June 30, 2013 corporate netbacks of $32.72 per boe. This is the
result of 1) the operating netback increase of 1 percent on a second
quarter over second quarter basis, 2) the realized loss on financial
contracts from the Canadian $99.05 WTI Hedge of $723 as the average WTI
price in Canadian Dollars was $112.34 /bbl versus the swap price of
$99.05 /bbl, 3) the 107 percent increase in administrative expenses, on
a per boe basis, as a result of the 14,050 percent increase in bank
fees, and 4) the overall interest expense increase of 82 percent on a
second quarter over second quarter basis, directly attributable to the
increased interest rate being charged by the Company's lender on its
revolving loan.
Corporate netbacks for the six month period ended June 30, 2014
decreased 54 percent to $17.38 per boe compared to the six months ended
June 30, 2013 corporate netbacks of $38.05 per boe. This is the result
of 1) the operating netback decrease of 7 percent on a second quarter
over second quarter basis, 2) the realized loss on financial contracts
from the Canadian $99.05 WTI Hedge of $1,251 as the average WTI price
in Canadian Dollars was $110.62 /bbl versus the swap price of
$99.05 /bbl, 3) the 78 percent increase in administrative expenses, on a
per boe basis, as a result of the 7,000 percent increase in bank fees,
and 4) the overall interest expense increase of 75 percent on a year to
date basis, directly attributable to the increased interest rate being
charge by the Company's lender on its revolving loan.
Net income, as a result, for the second quarter of 2014 was negative
$882,000 or a loss of $0.01 per share compared to a net income for the
second quarter of 2013 of $351,000 or $0.00 per share. For the six
month period ended June 30, 2014 , net income was negative $2,049,000 or
a loss of $0.03 per share compared to a net income for the six month
period ended June 30, 2013 of $1,247,000 or $0.01 per share.
Subsequent Events
Effective July 30, 2014 Exall signed an Amended Purchase and Sale
Agreement with a private corporation for the sale of approximately 18%
of Exall's working interest in the Mitsue property in Alberta , located
from Townships 71 to 75 within Ranges 3 to 6 West of the 5th Meridian. The transaction terms had been previously disclosed on May
15, 2014 . The purchase price for the working interest disposition is
$14,000,000 CDN and is targeted to close on August 29, 2014 with an
effective date of July 1, 2014 . Proceeds from the working interest
disposition will be used to retire existing revolving debt with the
Company's Canadian lender. Exall will retain an average working
interest in Mitsue, Alberta of 67.72%, with a range of 54.12 to 100% as
well as retaining operatorship.
About Exall
Exall is a junior oil and gas company active in its business of oil and
gas exploration, development and production from its properties in
Alberta . Exall Energy is currently developing the new Mitsue area
"Marten Mountain" discovery in north-central Alberta .
Exall Energy currently has 66,634,854 common shares outstanding. The
Company's common shares are listed on the Toronto Stock Exchange under
the trading symbol EE. The Company's convertible debentures are listed
on the Toronto Stock Exchange under the trading symbol EE.DB.
Reader Advisory
This news release contains forward-looking statements, which are subject
to certain risks, uncertainties and assumptions, including those
relating to results of operations and financial condition, capital
spending, financing sources, commodity prices and costs of production.
By their nature, forward-looking statements are subject to numerous
risks and uncertainties that could significantly affect anticipated
results in the future and, accordingly, actual results may differ
materially from those predicted. A number of factors could cause actual
results to differ materially from the results discussed in such
statements, and there is no assurance that actual results will be
consistent with them. Such factors include fluctuating commodity
prices, capital spending and costs of production, and other factors
described in the Company's most recent Annual Information Form under
the heading "Risk Factors" which has been filed electronically by means
of the System for Electronic Document Analysis and Retrieval ("SEDAR")
located at www.sedar.com. Such forward-looking statements are made as at the date of this news
release, and the Company assumes no obligation to update or revise
them, either publicly or otherwise, to reflect new events, information
or circumstances, except as may be required under applicable securities
law.
For the purposes of calculating unit costs, natural gas has been
converted to a barrel of oil equivalent (boe) using 6,000 cubic feet
equal to one barrel (6:1), unless otherwise stated. The boe conversion
ratio of 6 mcf: 1 bbl is based on an energy equivalency conversion
method and does not represent a value equivalency; therefore boe may be
misleading if used in isolation. This conversion conforms to the
Canadian Securities Regulators' National Instrument 51-101 - Standards
of Disclosure for Oil and Gas Activities.
SOURCE EXALL ENERGY CORPORATION