Waldron Energy Corporation ("Waldron" or the "Corporation") (TSX:WDN) is pleased
to announce its financial and operational results for the year and three months
ended December 31, 2013. The Corporation's audited year-end financial statements
and Annual Information Form ("AIF") including a statement on reserves data and
other information specified in NI 51-101 are available for review at
www.sedar.com and on the Corporation's website at www.waldronenergy.ca.
2013 Financial Highlights
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Three months ended
December 31, Year ended December 31,
2013 2012 2013 2012
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Financial (000's except for
per share amounts)
Operating netback(1) $ 2,401 $ 3,956 $ 9,664 $ 12,453
Per share basic &
diluted(1)(3) 0.06 0.10 0.24 0.34
Petroleum and natural gas
sales 5,172 6,674 21,805 24,530
Funds from operations(2) 1,169 3,037 5,322 8,191
Per share basic &
diluted(2)(3) 0.03 0.08 0.13 0.22
Net loss (2,425) (8,417) (8,690) (18,339)
Per share basic &
diluted(3) (0.06) (0.21) (0.21) (0.50)
Net proceeds from the
issuance of equity 6,427 - 6,427 3,166
Capital expenditures(4) 2,514 1,274 3,779 12,134
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Net debt(5) 29,104 35,919
Property and equipment 75,528 84,821
Exploration and evaluation
assets 9,538 10,565
Shareholders' equity 46,249 48,574
Number of common shares
outstanding at year end 55,045 40,035
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Notes:
(1) Operating netback is a non-GAAP measure and the Corporation calculates
this measure as revenue, net of any realized gains or losses on
commodity price contracts, less royalties and operating and
transportation expenses.
(2) Funds from operations is a non-GAAP measure and the Corporation
calculates this measure as cash provided from operations before
changes in non-cash working capital, transaction and other costs and
decommissioning expenses.
(3) December 31, 2013 there were 1,983,667 (2012 - 2,733,000) options and
7,182,560 (2012 - 7,182,560) warrants outstanding that were not
included in the calculation of weighted average shares outstanding as
the effect would be anti-dilutive.
(4) Capital expenditures exclude dispositions, share-based compensation
and decommissioning expenditures.
(5) Net debt is a non-GAAP measure and the Corporation calculates this
measure as current assets less current liabilities.
2013 Highlights
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Three months ended Year ended December
December 31, 31,
2013 2012 2013 2012
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Operating
Production
Natural Gas (mcf/d) 7,347 10,715 8,364 10,951
NGL (bbls/d) 305 538 355 511
Light crude oil (bbls/d) 154 160 154 174
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BOE/day 1,684 2,484 1,903 2,510
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Realized Pricing
Natural Gas ($/Mcf) $ 3.72 $ 3.34 $ 3.40 $ 2.50
Natural gas liquids ($/bbl) 54.49 44.02 50.70 50.20
Light crude oil ($/bbl) 79.83 81.86 86.14 80.35
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Average realized price
($/boe) 33.38 29.20 31.39 26.70
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Netback per boe
Sales price $ 33.38 $ 29.20 $ 31.39 $ 26.70
Realized gain (loss) on
commodity contracts (0.59) 0.41 (0.12) 0.27
Royalties (3.59) (2.87) (3.61) (2.48)
Operating expenses (11.60) (7.62) (11.96) (9.08)
Transportation expenses (2.10) (1.82) (1.79) (1.86)
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Operating netback per boe $ 15.50 $ 17.30 $ 13.91 $ 13.55
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Operating netback ($000's) $ 2,401 $ 3,956 $ 9,664 $ 12,453
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Reserves
Mboe - Proved (000's) 4,920 5,078
PV10% Proved Value Before Income Taxes
($000's) $ 55,233 $ 55,863
Mboe - Proved and Probable (000's) 10,418 10,567
PV10% Proved and Probable Value Before
Income Taxes ($000's) $ 86,035 $ 85,123
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Waldron exited 2013 in an improved position despite a volatile and low natural
gas price environment and a limited 2013 capital program. This was accomplished
by executing a disciplined approach throughout 2013 and resulted in:
-- 2013 capital program of $3.8 million compared to operating netback of
$9.7 million and funds from operations of $5.3 million;
-- year-end 2013 reserve volumes and PV10% Before Income Tax Values,
including a December 31, 2013 Proved and Probable value of $86.0
million, which were essentially unchanged from 2012 levels;
-- low 2013 Proved F&D costs of $8 per BOE, including changes in future
development capital and 2013 capital expenditures;
-- the completion of $6.8 million in private placement equity financings in
the fourth quarter 2013; and
-- a reduction in net debt at December 31, 2013 of $6.8 million compared to
December 31, 2012;
Concurrent with a limited 2013 capital program, which included the drilling of
one well in December 2013, Waldron produced on average 1,903 boe per day (27%
oil and liquids) during 2013, a reduction from 2012 production volumes as 2012
production was impacted by flush production from two successful Crystal
Glauconite horizontal wells. The Corporation realized $9.7 million in operating
netback and $5.3 million in funds from operations in 2013.
Entering 2014, Waldron is optimistic as it anticipates capitalizing on its
improved balance sheet and the recent increase and stability in natural gas
prices. To do this, the Corporation will look to exploit its low risk liquids
rich natural gas and light oil inventory of drill locations. Supported by its
hedging program, Waldron will continue to maintain a disciplined approach to
capital spending in 2014.
Operations Update
The Corporation successfully drilled and is now in the process of completing a
liquids-rich Glauconite horizontal well at Crystal 1-33-44-3W5 and expects it to
be on production by the middle of April. This well will follow-up the success
the Corporation has experienced in its other Crystal Glauconite horizontal
wells. Additionally, Waldron's second half of 2014 capital program will include
the drilling of a Falher horizontal well in Ferrybank. If successful, this well
has as many as six immediate follow-up horizontal locations on adjacent 100%
Waldron owned lands.
Q1 2014 production is estimated to be 1,700 - 1,800 boe per day, which was
impacted by a third party facility turnaround that has resulted in the shut-in
of approximately 50 bbl per day of oil. Q1 2014 exit production is expected to
be 1,750 - 1,800 boe, also excluding the temporarily shut-in production.
Waldron is encouraged by its strengthened and increasingly flexible balance
sheet as well as by the increase and stabilization of natural gas prices in the
fourth quarter of 2013 and into 2014. The Corporation expects to provide updated
Q2 2014 financial and production guidance by the middle of April as it continues
to complete the recently drilled well.
2014 Hedging Update
Subsequent to the year ended December 31, 2013, the Corporation entered into the
following commodity price contracts:
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Type of Quantity Contract price
Period Commodity Contract Contracted ($CDN)
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Jan 1, 2014 - Edmonton Par
Dec 31, 2014 Crude Oil Swap 175 bbl/d $90.15/bbl
Jan 1, 2014 -
Dec 31, 2014 Natural gas Swap 2,600 mcf/d AECO $4.15/mcf
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Conversion factor: 1 Mcf = 1.116 GJ
Bank Update
Subsequent to December 31, 2013, the Corporation completed a $6 million secured
subordinated debenture financing that carries an interest rate of 9.5% per
annum. The debenture has a maturity date of February 28, 2015 and at the option
of the borrower may be extended for up to six months subject to a borrowing base
review and full compliance with all financial covenants. The debenture is to be
repaid in full upon maturity. In accordance with the terms of the subordinated
debenture, the Corporation's senior lender revised its borrowing base to $27
million, resulting in combined credit facilities of the Corporation of $33
million. The Corporation estimates March 31, 2014 net debt to be $30 - $30.5
million, including drilling and completion costs associated with the Crystal
1-33-44-3W5 horizontal well.
Private Placement
On January 15, 2014, Waldron closed a private placement for 2,222,223 common
shares of Waldron at $0.45 per share for gross proceeds of $1.0 million.
Combined with the private placements completed during the fourth quarter of
2013, the Corporation has raised a total of $7.8 million in gross proceeds at
$0.45 per share since November 2013.
2013 Reserves Summary
Waldron is pleased to announce that its December 31, 2013 total proved and total
proved plus probable reserves values and volumes were largely unchanged from its
prior year reserve report. The PV10% value of total proved reserves at December
31, 2013 was $55.2 million compared to $55.9 million at December 31, 2012. The
PV10% value of proved plus probable reserves at December 31, 2013 increased by
$0.9 million to $86.0 million compared to December 31, 2012. On a volumes basis,
December 31, 2013 total proved volumes and proved plus probable volumes of 4.9
MMboe and 10.4 MMboe (32% liquids), respectively, are virtually unchanged from
December 31, 2012 reserve volumes of 5.1 MMboe and 10.6 MMboe (26% liquids),
respectively. On a total proved basis, the Corporation's one year F&D costs were
approximately $8 per BOE, including changes in future development capital and
$3.8 million in 2013 capital expenditures.
Waldron is also pleased to provide the following summary results from its annual
independent reserve evaluation completed by GLJ Petroleum Consultants ("GLJ")
for all of the Corporation's properties effective December 31, 2013 (the "GLJ
Report"). These estimates were prepared in accordance with National Instrument
51-101 Standards of Disclosure for Oil and Gas Activities ("NI 51-101") and the
full reserves information is included in the Corporation's AIF, which will be
available under the Corporation's profile on SEDAR at www.sedar.com.
The following tables summarize the Corporation's gross and net interests in
proved and probable reserves at December 31, 2013 as assessed in the GLJ Report
prepared in accordance with NI 51-101 using the GLJ January 1, 2014 forecast
prices and cost assumptions.
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RESERVES SUMMARY (1)
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TOTAL OIL EQUIVALENT
OIL & NGLS NATURAL GAS(2) (3)
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RESERVES Gross Net Gross Net Gross Net
CATEGORY (Mbbl) (Mbbl) (Mmcf) (Mmcf) (Mboe) (Mboe)
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Proved
Producing 1,036 805 13,000 11,504 3,203 2,723
Developed Non-
Producing 246 200 2,805 2,463 714 610
Undeveloped 360 276 3,864 3,401 1,004 843
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TOTAL PROVED 1,643 1,281 19,668 17,368 4,920 4,176
PROBABLE 1,641 1,268 23,141 19,932 5,498 4,589
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TOTAL PROVED
PLUS PROBABLE 3,283 2,548 42,810 37,300 10,418 8,765
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Notes:
(1) Numbers in this table are subject to rounding.
(2) Natural gas volumes include solution gas volumes associated with the
Corporation's light and medium crude oil reserves.
(3) Natural gas is converted to barrels of oil equivalent ("boe") at a
ratio of six thousand standard cubic feet to one barrel of oil.
Net Present Values of Future Net Revenue
The following table summarizes Waldron's share of the net present value of
future net revenue attributable to its reserves before taxes but prior to the
provision for interest and general and administrative expenses:
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NET PRESENT VALUES OF FUTURE NET
REVENUE(1)(2)(3)(4)(5)
BEFORE INCOME TAXES DISCOUNTED AT (%/year)
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0% 5% 10% 15%
RESERVES CATEGORY (M$) (M$) (M$) (M$)
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Proved
Producing 63,936 49,617 41,123 35,446
Developed Non-Producing 15,323 12,051 10,023 8,625
Undeveloped 10,614 6,622 4,087 2,389
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TOTAL PROVED 89,873 68,289 55,233 46,461
PROBABLE 86,167 50,106 30,802 19,421
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TOTAL PROVED PLUS PROBABLE 178,040 118,396 86,035 65,882
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Notes:
(1) Gross reserves are the Corporation's total interest share before the
deduction of royalties and without including any royalty interest of
the Corporation.
(2) Utilizes GLJ escalated price forecasts as of January 1, 2014.
(3) Natural gas volumes include solution gas volumes associated with the
Corporation's light and medium crude oil reserves.
(4) Natural gas is converted to barrels of oil equivalent ("boe") at a
ratio of six thousand standard cubic feet to one barrel of oil.
(5) Numbers in this table are subject to rounding.
Net Asset Value
The following table summarizes the Corporation's net asset value at December 31,
2013, excluding the value of undeveloped lands and certain seismic data:
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Net Asset Value December 31, 2013
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(000's)
Proved plus Probable NI 51-101 discounted at 10% $ 86,035
Net Debt (29,104)
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Net Asset Value $ 56,931
Basic Common Shares Outstanding at December 31, 2013 55,045
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Net Asset Value - Basic (per share)(1) $ 1.03
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Notes:
(1) Net Asset Value numbers are at December 31, 2013 and do not
incorporate changes in dilutives post December 31, 2013.
Adoption of Advance Notice By-Law
The Corporation also announces board approval of an amendment to its by-laws to
include advance notice provisions (the "By-Law Amendment"), the purpose of which
is to require that advance notice be provided to the Corporation in
circumstances in which nominations of persons for election to the board of
directors of the Corporation are made by shareholders other than pursuant to the
requisition of a meeting or a shareholder proposal in accordance with the
Business Corporations Act (Alberta).
The By-Law Amendment fixes a deadline by which shareholders must provide notice
to the Corporation of nominations for election to the board, and sets out the
information that a shareholder must include in the notice for it to be valid.
The By-Law Amendment is in effect on the date hereof. In accordance with the
Business Corporations Act (Alberta), the amendment will be submitted to the
shareholders for confirmation at the Meeting.
The By-Law Amendment, containing the full details of the advance notice
provisions, is available under the Corporation's profile on SEDAR at
www.sedar.com.
Adoption of Shareholder Rights Plan
Effective March 31, 2014 the Corporation adopted a shareholder rights plan (the
"Rights Plan"). The Rights Plan has been accepted for filing by the Toronto
Stock Exchange, subject to certain conditions, including ratification by the
Corporation's shareholders. The Corporation intends to seek approval of the
Rights Plan from its shareholders at its annual general meeting on May 21, 2014
(the "Meeting"). If the shareholders do not ratify the Rights Plan at the
Meeting, the Rights Plan will be immediately rescinded.
The Rights Plan is intended to ensure that the Corporation's board of directors
and shareholders have adequate time to consider and evaluate any unsolicited
take-over bid, and to identify, solicit, develop, and negotiate any alternatives
that would maximize shareholder value. This will encourage fair treatment of all
of the Corporation's shareholders in connection with any unsolicited take-over
bid.
The Rights Plan, including full details of the operation of the Rights Plan, is
available under the Corporation's profile on SEDAR at www.sedar.com.
Investor Information
Waldron is a Calgary, Alberta based corporation engaged in the exploration,
development and production of petroleum and natural gas. The Corporation's
common shares are currently listed on the Toronto Stock Exchange under the
trading symbol "WDN." Additional information regarding Waldron is available
under the Corporation's profile at www.sedar.com or at the Corporation's
website, www.waldronenergy.ca.
Forward Looking and Cautionary Statements
This news release contains forward-looking statements relating to the
Corporation's plans and other aspects of the Corporation's anticipated future
operations, strategies, financial and operating results and business
opportunities. These forward-looking statements may include opinions,
assumptions, estimates, management's assessment of value, reserves, future plans
and operations.
Forward-looking statements typically use words such as "will," "anticipate,"
"believe," "estimate," "expect," "intend," "may," "project," "should," "plan,"
and similar expressions suggesting future outcomes, and include statements that
actions, events or conditions "may," "would," "could," or "will" be taken or
occur in the future. Specifically, this press release contains forward-looking
statements relating to the results and timing of operations; anticipated cash
flow and debt reduction; whether or not recent industry results are favorable;
whether or not additional reserves are recognized; whether or not the
Corporation achieves guidance; the character and nature of the Corporation's
asset base; whether or not the asset base is prospective; number of horizontal
drilling locations and opportunities and number of follow-up opportunities; and
the Corporation's shareholders' rights plan and advance notice by-la, and the
approval thereof by shareholders of the Corporation. The forward-looking
statements are based on various assumptions including expectations regarding the
success of current or future drill wells; the outlook for petroleum and natural
gas prices; estimated amounts and timing of capital expenditures; estimates of
future production; assumptions concerning the timing of regulatory approvals;
the state of the economy and the exploration and production business; results of
operations; business prospects and opportunities; future exchange and interest
rates; assumptions with regards to hedging activities; the Corporation's ability
to obtain equipment in a timely manner to carry out development activities; and
the ability of the Corporation to access capital and credit. While the
Corporation considers these assumptions to be reasonable based on information
currently available to it, they may prove to be incorrect.
Forward-looking statements are subject to a wide range of assumptions, known and
unknown risks and uncertainties and other factors that contribute to the
possibility that the predicted outcome will not occur, including, without
limitation: risks associated with oil and gas exploration, development,
exploitation, production, marketing and transportation; loss of markets;
volatility of commodities prices; currency fluctuations; imprecision of reserves
estimates; environmental risks; competition from other producers; inability to
retain drilling rigs and other services; general economic conditions; delays
resulting from or inability to obtain required regulatory approvals; and ability
to access sufficient capital from internal and external sources. Readers are
cautioned that the foregoing list of factors is not exhaustive.
Although Waldron believes that the expectations represented by such
forward-looking statements are reasonable, there can be no assurance that such
expectations will be realized. As a consequence, actual results may differ
materially from those anticipated in the forward-looking statements and you
should not rely unduly on forward-looking statements. The forward-looking
statements contained in this news release are made as of the date of this news
release. Except as required by applicable law, Waldron does not undertake any
obligation to publicly update or revise any forward-looking statements.
Note Regarding Non-GAAP Measures
Funds from operations, operating netback and net debt are not recognized
measures under IFRS as issued by the International Accounting Standards Board
("IASB"). Management believes that in addition to cash flow from operations and
net earnings, funds from operations and operating netback are useful
supplemental measures as they demonstrate the Corporation's ability to generate
the cash necessary to fund future growth through capital investment or repay
debt if incurred in future periods. The Company uses net debt (bank debt plus
negative working capital or less positive working capital, both excluding bank
debt) as an alternative measure of outstanding debt and is used as a measure to
assess the Company's financial position. Investors are cautioned, however, that
these measures should not be construed as an alternative to cash flow from
operating activities or net earnings determined in accordance with IFRS as an
indication of the Corporation's performance or financial position. The
Corporation's method of calculating these measures may differ from other
entities and, accordingly, they may not be comparable to measures used by other
entities. For these purposes, the Corporation defines funds from operations as
cash flow from operations before changes in non-cash operating working capital,
transaction and other costs and decommissioning expenditures and defines
operating netback as revenue, net of any realized gains or losses on commodity
price contracts, less royalties, operating and transportation expenses. Net debt
is defined as current assets less current liabilities.
Note Regarding BOEs
The term barrel of oil equivalent ("boe") may be misleading, particularly if
used in isolation. A conversion ratio for gas of 6 mcf:1 boe is based on an
energy equivalency conversion method primarily applicable at the burner tip and
does not represent a value equivalency at the wellhead. Given that the value
ratio based on the current price of crude oil as compared to natural gas is
significantly different from the energy equivalency conversion ratio of 6:1,
utilizing a conversion on a 6:1 basis is misleading as an indication of value.
FOR FURTHER INFORMATION PLEASE CONTACT:
Ernie Sapieha
President & CEO
esapieha@waldronenergy.ca
Jeff Kearl
VP Finance & CFO
jkearl@waldronenergy.ca
Murray Stodalka
Chief Operating Officer
mstodalka@waldronenergy.ca
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