Arsenal Energy Inc. Announces 2014 First Quarter Results and Increased Quarterly Dividend
06 Mai 2014 - 10:10PM
Marketwired Canada
Arsenal Energy Inc. ("Arsenal") (TSX:AEI)(PINKSHEETS:AEYIF) is pleased to
release its 2014 Q1 financial and operational results.
Cash flow for the first quarter increased 55% from 2013 Q1 to $11.1 million. On
a per share basis, cash flow increased to $0.69 per share, a 50% increase from
2013 Q1. The Board of Directors has declared an increase in the quarterly
dividend to $.065 per common share. This 8% increase is consistent with the
Arsenal dividend policy of paying out approximately 10% of trailing quarterly
cash flow. The dividend is payable on May 30, 2014 to shareholders of record at
the close of business on May 16, 2014. The ex-dividend date is May 14, 2014.
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Three Months Ended March 31
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(ooo'S Cdn. $ except per share amounts) 2014 2013 % Change
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FINANCIAL
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Oil and gas revenue 27,606 21,117 31
Funds from operations 11,053 7,139 55
Per share - basic 0.69 0.46 50
Per share - diluted 0.69 0.45 52
Net income (loss) 1,028 (4,648) -
Per share - basic 0.06 (0.30) -
Per share - diluted 0.06 (0.30) -
Total debt 74,294 70,641 5
Capital expenditures 12,189 11,578 5
Property acquisitions 152 - -
Shares outstanding - end of period (ooo's) 16,090 15,694 3
Net wells drilled
Oil 4.61 2.83 63
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OPERATIONAL
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Daily production
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Heavy oil (bbl/d) 46 63 (26)
Medium oil and NGL's (bbl/d) 1,635 1,425 15
Light oil and NGLs (bbl/d) 1,298 1,292 -
Natural gas (mcf/d) 6,776 6,153 10
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Oil equivalent (boe/d @ 6:1) 4,108 3,806 8
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Realized commodity prices ($Cdn.)
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Heavy oil (bbl) 71.70 58.07 23
Medium oil and NGL's (bbl) 86.09 69.63 24
Light oil and NGLs (bbl) 96.60 88.31 9
Natural gas (mcf) 5.51 2.86 92
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Oil equivalent (boe @ 6:1) 74.66 61.65 21
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Netback ($ per boe)
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Revenue 74.66 61.65 21
Royalty (14.66) (13.35) 10
Operating cost (21.29) (22.10) (4)
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Operating netback per boe 38.71 26.20 48
General and administrative (2.67) (3.19) (16)
Finance expenses (1.79) (2.08) (14)
Realized losses on risk management contracts (4.18) (0.06) -
Other (FX and current tax) (0.17) (0.02) 673
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Fund from operations per Boe 29.89 20.84 43
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Financial
Funds from operations for Q1 2014 totaled $11.1 million or $0.69 per share
versus $7.1 million or $0.46 per share for Q1 2013. The increase in cash flow is
attributable to increased production volumes and higher prices. The average
price received increased by $13.01 per Boe compared to the same period in 2013.
Royalties increased by $1.31 per Boe and operating costs decreased by $0.81 per
Boe. The operating margin for Q1 2014 of $38.71 per Boe was 48% higher than the
$26.20 per Boe in Q1 2013. Funds from operations were $29.89 per Boe versus
$20.84 per Boe in Q1 2013. The funds from operations netback in Q1 2014 included
a realized loss on commodity contracts of $4.18 per Boe. Arsenal recorded net
income of $1.0 million in Q1 2014 compared to a loss of $4.6 million in Q1 2013.
Operations
At Princess, Alberta, just prior to year end 2013 Arsenal placed a new Lower
Mannville channel oil well (65% working interest) on production. That well has
averaged 560 boe/d (44% oil) over 110 producing days. During the first quarter,
two additional Lower Mannville channel wells (100% working interest) were
drilled and completed at Princess. The first well has averaged 280 boe/d (97%
oil) over 40 days of production. The second has averaged 585 boe/d (95% oil)
over 48 days of production. The results of all three wells are significantly
better than anticipated. Current production from Princess is 1,100 boe/d (85%
oil) but is limited by processing facilities and transportation. Total well
production capacity is estimated at 1,600 boe/d. Arsenal has initiated a
debottlenecking program to accommodate the restricted volumes as well as
potential volumes from new drills. Arsenal has assembled 25,600 acres of
undeveloped land in the Princess area and is permitting 4 additional 100%
working interest drills for Q2 2014 and 4 additional 100% working interest
drills for Q4 2014. The Company has an inventory of approximately 20 drilling
locations at Princess. Although the last three drill results are encouraging,
shareholders are cautioned that future results may trend towards more modest
"type" wells with IP30s of 140 boe/d, reserves of 81,000 bbls/well and 82% rates
of return.
During Q1 2014 Arsenal participated in new drill operations on 9 (2.61 net)
Bakken/ThreeForks horizontal wells in North Dakota. One well (0.15 net) was
fracked and placed on production in April, six wells (2.24 net) were drilled and
cased and are awaiting completion, and two wells (0.22 net) are currently
drilling. It is anticipated that all wells will be completed and placed on
production by the end of the third quarter. Bakken wells typically produce at an
average rate of 630 boe/d for the first month and 260 boe/d for the first year.
Average production of 4,108 boe/d during the first quarter was up 8% when
compared to the first quarter of 2013. The increase is attributed to the new
Mannville wells at Princess. Operating costs at $21.29/boe and royalties at 20%
were relatively stable compared to Q1 2013. Arsenal's Q1 2014 production mix was
32% light oil, 41% medium and heavy oil, and 27% natural gas.
Outlook
Due to the results of the three Princess drills, Arsenal is raising its estimate
of average production for the year to 4,400 boe/d. Based on the higher
production and higher prices, cash flow guidance for 2014 is increased to $50
million. Capital expenditures for 2014 are currently estimated at $44 million.
Debt at year end is projected at $71 million or 1.4 X 2014 estimated cash flow.
Full financial details are contained in the financial statements and MD&A filed
on SEDAR and on the Company's website at: www.arsenalenergy.com
Advisory
Certain information regarding Arsenal Energy Inc. (the "Company") contained in
this press release, including statements regarding management's assessment of
future plans and operations, the timing of drilling, tie-in and commencement of
production of new wells, productive capacity and economics of new wells and
alternatives for increasing liquidity, may constitute forward-looking statements
under applicable securities laws. The forward-looking statements are based on
certain key expectations and assumptions made by the Company, including
expectations and assumptions concerning the success of optimization and
efficiency improvement projects, the availability of capital, the success of
future drilling and development activities, the performance of existing wells,
the performance of new wells, prevailing commodity prices, the availability of
labor and services, the geological nature of the formations targeted by the
Company and the success of completion and recompletion activities. Although the
Company believes that the expectations and assumptions on which the
forward-looking statements are based are reasonable, undue reliance should not
be placed on the forward-looking statements because the Company 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. Actual results could differ materially from those
currently anticipated due to a number of factors and risks. These include, but
are not limited to, risks associated with the oil and gas in0dustry in general
(e.g., operational risks in development, exploration and production; delays or
changes in plans with respect to exploration or development projects or capital
expenditures; the uncertainty of reserve estimates; the uncertainty of estimates
and projections relating to production, costs and expenses, and health, safety
and environmental risks), commodity price and exchange rate fluctuations,
changes in the regulatory regime applicable to the Company and uncertainties
resulting from potential delays or changes in plans with respect to exploration
or development projects or capital expenditures. Certain of these risks are set
out in more detail in the Company's Annual Information Form will be filed on
SEDAR and can be accessed at www.sedar.com on filing. The forward-looking
statements contained in this presentation are made as of the date hereof and the
Company undertakes no obligation 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.
This press release contains financial terms that are not considered measures
under International Financial Reporting Standards ("IFRS"), which are considered
to be generally accepted accounting principles ("GAAP"), such as cash flow,
funds from operations, net debt and operating netback. These measures are
commonly utilized in the oil and gas industry and are considered informative for
management and stakeholders. Specifically, cash flow and funds from operations
reflects cash generated from operating activities before changes in non-cash
working capital, decommissioning liabilities settled, exploration and evaluation
expenses and transaction costs. Management considers cash flow and funds from
operations important as it helps evaluate performance and demonstrates the
ability to generate sufficient cash to fund future growth opportunities and
repay debt. Net debt includes bank debt outstanding plus or minus working
capital and is used to evaluate the Company's financial leverage. Profitability
relative to commodity prices per unit of production is demonstrated by an
operating netback. Operating netback reflects revenues less royalties and
operating and transportation expenses divided by production for the period. Cash
flow, funds from operations, net debt and operating netbacks may not be
comparable to those reported by other companies nor should they be viewed as an
alternative to cash flow from operating activities or other measures of
financial performance calculated in accordance with IFRS.
Natural gas volumes have been converted to barrels of oil equivalent ("boe").
Six thousand cubic feet ("mcf") of natural gas is equal to one barrel based on
an energy equivalency conversion method primarily applicable at the burner tip
and does not represent a value equivalency at the wellhead. Boes may be
misleading, especially if used in isolation.
There is no assurance that future dividends will be declared or the timing or
amount of any future dividend. The payments of dividends or distributions in the
future are within the discretion of the Corporation's Board of Directors and are
dependent on numerous factors including the Corporation's cash flow, capital
expenditure budgets, earning, financial conditions, the satisfaction of the
applicable solvency test in the Corporation's governing statue (the Business
Corporation Act (Alberta)), and such other factors as the Board of Directors may
consider appropriate from time to time. The Corporation's ability to continue to
pay dividends in the future is also subject to many other factors including
falling commodity prices, repatriation restrictions, disruptions or reductions
in production or collection of receivables following sales of production.
Dividend payments to shareholders will be subject to applicable statutory
deductions and tax withholdings prescribed by the applicable law. There is also
no assurance that future drawdowns of the secured term loan facility will be
available to the Corporation when requested or at all.
To receive company news releases via e-mail, please advise ir@arsenalenergy.com
and specify "Arsenal Press Releases" in the subject line.
FOR FURTHER INFORMATION PLEASE CONTACT:
Arsenal Energy Inc.
Tony van Winkoop
President and Chief Executive Officer
(403) 262-4854
Arsenal Energy Inc.
J. Paul Lawrence
Vice President, Finance and CFO
(403) 262-4854
(403) 265-6877 (FAX)
ir@arsenalenergy.com
www.arsenalenergy.com