Diaz Announces Year End Results, Reserves Evaluations and the Cancellation of the Previously Announced Financing
31 März 2011 - 3:00PM
Marketwired Canada
Diaz Resources Ltd. (TSX:DZR) announces that is has filed its 2010 MD&A,
Financial Statements, and Annual Information Form ("AIF") on SEDAR.
Diaz has now completed its second year with its principal focus on heavy oil
exploration and development following the suspension of the focus on developing
natural gas reserves, early in 2009.
The primary reasons for the change in focus to heavy oil are:
-- The rapid rebound in oil prices in 2009, partly aided by OPEC oil
production curtailments,
-- Increasing use of oil by far eastern economies, especially China,
-- The variable uses and easy transportation of oil, making it the
principal fuel of choice, and
-- The availability of inexpensive leases in Alberta and Saskatchewan, on
repeatable exploration prospects, in close proximity to Lloydminster.
Diaz discontinued its natural gas exploration efforts in early 2009 due to
the Company's realization that:
-- Natural gas prices would steadily decrease,
-- North American gas prices are isolated from world pricing, and in a time
of surplus are extremely low,
-- Extensive horizontal shale gas development through out North America
will keep gas in surplus for the foreseeable future, and finally
-- Major companies entering the North American shale gas play will continue
the over supply situation for a lengthy period.
As a result of the foregoing, Diaz commenced developing its Lloydminster heavy
oil pool and acquired potentially productive leases on an additional 13
prospects. To date, Diaz has interests in 10 producing wells on 4 separate
properties, and has the potential to drill over 50 development wells in the next
2 years provided financing can be obtained. Diaz plans to continue development
drilling at its Lloydminster heavy oil pool while continuing to build an
inventory of acreage, of heavy oil prospects in Alberta and Saskatchewan.
Exploration and Development
Below is a map of the current active exploration and development areas for the
Company:
To view the Exploration and Develpment map, please visit the following link:
http://media3.marketwire.com/docs/3314dzr_map.pdf
In addition to its Lloydminster property, since the beginning of 2009, Diaz has
acquired oil and gas leases on five prospects in Alberta (5,750 gross acres,
3,793 net acres) and eight prospects in Saskatchewan (20,563 gross acres, 11,522
net acres) for a total inventory of eleven heavy oil prospects and three
medium/light oil projects. The primary pay zones are Lloydminster in Alberta and
the Dina, Shaunavon and Birdbear zones in Saskatchewan.
Financial
For 2010, revenue decreased to $6.5 million compared with $7.0 million for the
prior year period. Cash flow from operations for the period decreased to $1.7
million or $0.02 per share compared with $1.9 million or $0.03 per share for the
prior year period. Diaz reported a loss for the year of $4.2 million or ($0.05)
per share versus a loss of $14.4 million or ($0.21) per share in the prior year
period. The Company took an impairment write down of $11.4 million during the
prior year as a result of a sharp reduction in estimated future gas prices.
Net capital expenditures for 2010 totalled $4.0 million compared with nil in the
prior year as prior year capital expenditures of $4.4 million were offset by
disposals of $4.4 million. Capital expenditures during 2010 were financed by two
equity financings, cash flow from operations, working capital, and an increase
in net debt.
Production
The Company's total production for 2010 decreased 20% to average 505 BOEd
compared with the prior year average of 642 BOEd.
Reserves and Reserves Values
The independent engineering evaluation of Diaz's properties assigned proved
reserves, before royalties, of 1.2 million BOE and total reserves, before
royalties, of 3.3 million BOE at December 31, 2010. These reserve estimates
result in a before tax present value of estimated future net revenues,
discounted at 10%, of $38 million.
Debentures Change of Terms
Diaz has now completed all required documentation related to the previously
announced change in terms to the $7.085 million aggregate principal amount of
8.75% convertible unsecured subordinated debentures ("Debentures"). The amended
terms of the Debentures are: (i) increase the interest payable on the Debentures
from 8.75% per annum to 10.5% per annum effective January 17, 2011; (ii) reduce
the conversion price of the Debentures from $0.90 per share to $0.33 per share,
such that 3,000 common shares of the Corporation shall be issuable for each
$1,000 principal amount of Debentures converted; and (iii) extend the maturity
date of the Debentures from March 27, 2012 to March 27, 2014.
Private Placement
The previously announced $3.0 million best efforts private placement was
unsuccessful due to poor market conditions. Diaz is now considering several
financing alternatives to provide the necessary funds for its heavy oil drilling
program to begin as planned this spring.
Business Outlook
Diaz expects oil prices to remain at high levels as industrial activity in North
America slowly recovers.
Due to current high natural gas storage levels and significant volumes of gas
being developed on North American shale gas projects there is still considerable
uncertainty as to when natural gas prices will improve. To mitigate the
uncertainty in natural gas prices, Diaz has put in place fixed gas price
contracts for approximately half of the Company's anticipated 2011 gas
production, at prices between $4.00 per Mcf and $4.46 per Mcf.
The Company will continue to focus on its Lloydminster heavy oil development
program and if successful, Diaz should exit 2011 with a significant increase in
its oil production relative to current levels.
SUMMARY OF OIL AND GAS RESERVES
AND NET PRESENT VALUES OF FUTURE NET REVENUE
AS OF DECEMBER 31, 2010
FORECAST PRICES AND COSTS
RESERVES
------------------------------------------
LIGHT AND
COMPANY TOTAL MEDIUM OIL HEAVY OIL NATURAL GAS
----------------------------------
Gross Net Gross Net Gross Net
RESERVES CATEGORY (MBbl) (MBbl) (MBbl) (MBbl) (MMcf) (MMcf)
----------------------------------------------------------------------------
PROVED
Developed Producing 30 25 79 77 2,487 2,223
Developed Non-producing 10 9 47 45 415 364
Undeveloped - - 160 142 - 1,798
----------------------------------------------------------------------------
TOTAL PROVED 40 34 286 264 4,886 4,385
PROBABLE 28 22 667 560 8,414 6,788
----------------------------------------------------------------------------
TOTAL PROVED PLUS PROBABLE 68 56 953 824 13,300 11,173
----------------------------------------------------------------------------
RESERVES RESERVES RESERVES
------------------------------------------
NATURAL GAS
COMPANY TOTAL LIQUIDS TOTAL TOTAL
----------------------------------
Gross Net Gross Net
RESERVES CATEGORY (MBbl) (MBbl) (MBOE) (MBOE)
----------------------------------------------------------------------------
PROVED
Developed Producing 9 6 533 479
Developed Non-producing 1 1 127 116
Undeveloped 13 9 504 451
----------------------------------------------------------------------------
TOTAL PROVED 23 16 1,164 1,046
PROBABLE 15 10 2,111 1,723
----------------------------------------------------------------------------
TOTAL PROVED PLUS PROBABLE 38 26 3,275 2,769
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NET PRESENT VALUES OF FUTURE NET REVENUE
----------------------------------------------------------------------------
COMPANY TOTAL BEFORE INCOME TAXES AFTER INCOME TAXES DISCOUNTED
DISCOUNTED AT (% per year) AT (% per year)
----------------
RESERVES 0 5 10 12 15 0 5 10 12 15
CATEGORY (MM$) (MM$) (MM$) (MM$) (MM$) (MM$) (MM$) (MM$) (MM$) (MM$)
----------------------------------------------------------------------------
PROVED
Developed
Producing 9.3 8.1 7.3 6.9 6.5 9.3 8.1 7.2 6.9 6.5
Developed
Non-producing 3.2 2.7 2.3 2.2 2.1 3.2 2.7 2.3 2.2 2.0
Undeveloped 10.6 7.3 5.1 4.6 3.8 10.6 7.2 5.2 4.5 3.8
----------------------------------------------------------------------------
TOTAL PROVED 23.1 18.1 14.7 13.7 12.4 23.1 18.0 14.7 13.6 12.3
PROBABLE 50.7 33.6 23.3 20.3 16.6 50.7 30.1 21.0 18.4 15.1
----------------------------------------------------------------------------
TOTAL PROVED
PLUS PROBABLE 73.8 51.7 38.0 34.0 29.0 73.8 48.1 35.7 32.0 27.4
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Further information regarding financial and operating results may be obtained at
www.sedar.com, where the Company's MD&A and financial statements have been
filed.
Dias has also filed its Annual Information Form which includes the Company's
reserves data and other oil and gas information for the year ended December 31,
2010, as mandated by National Instrument 51-101 Standards of Disclosure for Oil
and Gas Activities of the Canadian Securities Administrators. Copies of Diaz's
AIF may be obtained at www.sedar.com.
Summary of Operations
(Thousands, except shares and per share
amounts) Years Ended December 31
------------------------------
2010 2009
----------------------------------------------------------------------------
Financial
Revenue (net of royalty expense) $ 6,508 $ 6,973
Cash flow from operations (i) 1,684 1,881
per share, diluted 0.02 0.03
Loss for the period (4,228) (14,355)
per share, diluted (0.05) (0.21)
Capital additions 4,334 4,415
Dispositions 346 4,407
----------------------------------------------------------------------------
Net capital additions 3,988 8
Net current debt 6,402 5,844
Convertible debentures(ii) 6,682 6,377
Total assets 34,029 36,657
Total shares outstanding at period end 90,883,252 76,576,752
Operations
Production
Gas (MMcfd) 2.3 3.3
Oil (Bopd) 128 97
BOEd (6 Mcf = 1 Bbl) 505 642
Product Prices
Gas ($/Mcf) $ 4.80 $ 4.72
Oil ($/Bbl) $ 61.83 $ 54.51
----------------------------------------------------------------------------
Reserves (proved plus probable, future costs
and prices)
Gas (Bcf) 13.3 16.7
Oil (MBbl) 1,059.0 1,058.0
BOE (Millions) 3.3 3.8
Net present value of future net revenue,
before tax discounted at 10% $ 38.0 $ 52.4
----------------------------------------------------------------------------
Undeveloped land holdings (net acres)
Canada 53,583 54,409
United States 494 446
Total net acreage 54,077 54,855
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(i) Non-GAAP measure. Please see the reconciliation of "cash flow from
operations" to "cash flow from operating activities" found in the MD&A
for the year ended December 31, 2010.
(ii) Convertible debentures have a face value of $7.1 million and mature on
March 27, 2014. See Note 8, "Convertible Debentures", in the notes to
the financial statements for the year ended December 31, 2010.
(iii) Net present value of future net revenue may not represent fair market
value of reserves.
Diaz is an oil and gas exploration and production company based in Calgary,
Alberta. Diaz's current focus is on oil development and exploration in Alberta
and Saskatchewan.
ADVISORY: This press release contains forward looking statements. Although Diaz
believes that the expectations reflected in these forward looking statements are
reasonable, undue reliance should not be placed on them because Diaz can give no
assurance that they will prove to be correct. Since forward looking statements
address future events and conditions, by their very nature they involve inherent
risks and uncertainties.
The forward looking statements contained in this press release are made as of
the date hereof and Diaz undertakes no obligations to update publicly or revise
any forward looking statements or information, whether as a result of new
information, future events or otherwise, unless so required by applicable
securities laws.
Where amounts are expressed on a barrel of oil equivalent (boe) basis, natural
gas volumes have been converted to barrels of oil at six thousand cubic feet
(mcf) per barrel (bbl). Boe figures may be misleading, particularly if used in
isolation. A boe conversion of six thousand cubic feet per barrel is based on an
energy equivalency conversion method primarily applicable at the burner tip and
does not represent a value equivalency at the wellhead. References to oil in
this discussion include crude oil and natural gas liquids (NGLs).
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