TIDMTXP
RNS Number : 7224N
Touchstone Exploration Inc.
11 August 2017
TOUCHSTONE EXPLORATION INC.
ANNOUNCES SECOND QUARTER 2017 RESULTS AND SIX MONTHS TO 30 JUNE
2017 INTERIM RESULTS
Calgary, Alberta - August 11, 2017 - Touchstone Exploration Inc.
("Touchstone" or the "Company") (TSX / LSE: TXP) announces its
financial and operating results for the three months ended June 30,
2017 (the "second quarter"). Selected financial and operational
information is outlined below and should be read in conjunction
with Touchstone's June 30, 2017 unaudited interim consolidated
financial statements and related management's discussion and
analysis, both of which will be available under the Company's
profile on SEDAR (www.sedar.com) and the Company's website
(www.touchstoneexploration.com). Unless otherwise stated, tabular
amounts herein are in thousands of Canadian dollars, and amounts in
text are rounded to thousands of Canadian dollars.
Highlights
-- Completed an admission and listing on the AIM market of the
London Stock Exchange ("AIM") on June 26, 2017. In conjunction with
the admission, the Company successfully placed 20,000,000 new
common shares with United Kingdom investors for gross proceeds of
$2,446,000.
-- Successfully drilled three wells and recompleted five wells in the second quarter of 2017.
-- Achieved second quarter average crude oil sales of 1,334
barrels per day ("bbls/d"), representing an increase of 4% from the
first quarter of 2017.
-- Realized operating netback before realized derivatives of
$21.72 per barrel during the six months ended June 30, 2017,
representing an increase of 134% from $9.27 per barrel recorded in
the equivalent period of 2016.
-- Generated second quarter funds flow from operations of
$438,000 ($0.01 per basic share) compared to $393,000 ($0.01 per
basic share) recorded in the first quarter of 2017.
2017 Second Quarter and Year to Date Financial and Operating
Results Summary
Three months ended Six months ended
June 30, June 30,
2017 2016 2017 2016
-------------- ----------------------------- ----------------------------- ----------------------------- -----------------------------
Operating
Average daily
oil
production
(bbls/d) 1,334 1,322 1,307 1,342
Operating
netback(1)
($/bbl)
Brent
benchmark
price 66.66 58.72 68.79 52.61
Discount (5.40) (8.89) (6.12) (8.45)
-------------- ----------------------------- ----------------------------- ----------------------------- -----------------------------
Realized
sales price 61.26 49.83 62.67 44.16
Royalties (17.84) (13.52) (20.34) (12.54)
Operating
expenses (23.53) (20.10) (20.61) (22.35)
-------------- ----------------------------- ----------------------------- ----------------------------- -----------------------------
Operating
netback
prior
to
derivatives 19.89 16.21 21.72 9.27
Realized
gain on
derivatives - 27.56 - 26.47
-------------- ----------------------------- ----------------------------- ----------------------------- -----------------------------
Operating
netback
after
derivatives 19.89 43.77 21.72 35.74
-------------- ----------------------------- ----------------------------- ----------------------------- -----------------------------
Financial ($000's except share and
per share amounts)
Funds flow
from
operations 438 3,278 831 4,197
Per share -
basic and
diluted(1) 0.01 0.04 0.01 0.05
Net loss (1,848) (2,553) (3,397) (4,997)
Per share -
basic and
diluted (0.02) (0.03) (0.04) (0.06)
-------------- ----------------------------- ----------------------------- ----------------------------- -----------------------------
(1) Refer to
advisory
regarding
non-GAAP
measures.
Capital
expenditures
Exploration 520 476 708 629
Property and
equipment 4,940 (340) 5,486 706
-------------- ----------------------------- ----------------------------- ----------------------------- -----------------------------
Company total 5,460 136 6,194 1,335
-------------- ----------------------------- ----------------------------- ----------------------------- -----------------------------
Total assets
- end of
period 86,570 73,330
Net debt(1) -
end of
period 13,814 4,188
Weighted
average
shares
outstanding
Basic and
diluted 84,236,044 83,125,605 83,689,629 83,106,374
Outstanding
shares - end
of period 103,137,143 83,137,143
(1) Refer to advisory regarding non-GAAP measures.
In the second quarter of 2017, Touchstone commenced its four
well 2017 drilling program. Three wells were drilled in the
quarter, two of which were completed and on production by the end
of June 2017. Touchstone's workover program continued in the
quarter with five wells recompleted, totaling ten well
recompletions in the calendar year of 2017. The Company invested
$5,460,000 in the second quarter of 2017 on exploration and
development expenditures, of which $4,726,000 related to drilling
and well recompletions. As a result, second quarter 2017 production
increased to 1,334 bbls/d, representing an increase of 4% from the
first quarter of 2017 and 1% from the second quarter of 2016. The
two new wells commenced production in mid-June 2017, contributing a
field estimated 3,350 barrels of incremental production in the
second quarter.
Realized second quarter 2017 pricing for crude oil was $61.26
(US$45.51) per barrel versus $49.83 (US$38.59) per barrel received
in the equivalent quarter of 2016. Petroleum revenues increased 24%
from the prior year comparative quarter primarily based on the
significant year over year increase in realized crude oil prices.
Second quarter 2017 royalty expenses represented 29.1% of petroleum
revenues compared to 27.1% in the prior year comparative period.
The increase reflected the sliding scale effect of increased
commodity prices on royalty rates. Second quarter 2017 operating
expenses increased 17% per barrel based on increased workover
activity. General and administrative costs increased 5% from the
prior year second quarter, as less costs were capitalized in the
second quarter of 2017. Second quarter 2017 net finance expenses
increased 16% from the prior year equivalent quarter, as increased
term loan interest expenses were slightly offset by reduced
interest on income taxes and bank loan finance fees.
Funds flow from operations for the three months ended June 30,
2017 was $438,000 ($0.01 per basic share) versus funds flow from
operations of $3,278,000 ($0.04 per basic share) recognized in the
second quarter of 2016. Funds flow from operations decreased in
comparison to the prior year comparative quarter largely due to
$3,316,000 in realized derivative gains that were recorded in 2016.
The Company recorded a net loss of $1,848,000 ($0.02 per basic
share) during the three months ended June 30, 2017, versus a net
loss of $2,553,000 ($0.03 per basic share) recognized in the second
quarter of 2016.
On June 26, 2017, the Company completed an admission and listing
on the AIM market of the London Stock Exchange. In conjunction with
the AIM admission, the Company placed an additional 20,000,000 new
common shares at a price of $0.12, resulting in gross and net
proceeds of $2,446,000 and $777,000, respectively.
Touchstone exited the quarter with a cash balance of $9,925,000,
a working capital surplus of $1,186,000 and a $15,000,000 principal
term loan balance. $4,925,000 of the Company's cash balance was
considered available at June 30, 2017, as Touchstone must maintain
a minimum cash reserves balance of $5,000,000 in accordance with
its term loan. In addition, the Company classified $3,186,000 in
cash used to collateralize letters of credit that secured future
work obligations on production and development contracts as
long-term restricted cash. Cash and working capital decreased from
the first quarter of 2017 due to drilling activity in the second
quarter; the Company expects to realize the benefits of increased
production in the second half of 2017.
The fourth well of Touchstone's 2017 drilling program was
drilled subsequent to the end of the second quarter, and all four
wells were completed and on production. The Company will provide an
operational update when all new wells have stabilized with at least
30 days of production data.
Paul Baay, President and Chief Executive Officer of Touchstone,
commented:
"We have had a very positive second quarter, as we completed a
successful admission and listing on AIM and achieved a 134%
year-over-year rise in our year to date operating netback prior to
derivatives. I would like to thank all of our staff for their
continued hard work in ensuring we successfully and safely drilled
three wells and performed five well recompletions during the second
quarter." He went on to say, "The fourth well was successfully
drilled post quarter end with all four wells currently on
production. This drilling program had little effect on second
quarter financial and operating results as incremental production
came on late in June, however, we expect to see the full impact of
these wells during the second half of the year."
For further information, please contact:
Touchstone Exploration Inc. Tel: +1 (403) 750-4487
Paul Baay, President and Chief Executive
Officer
Scott Budau, Chief Financial Officer
James Shipka, Chief Operating Officer
www.touchstoneexploration.com
Shore Capital (Nominated Advisor and Joint Tel: +44 (0) 20 7408
Broker) 4090
Nominated Adviser: Edward Mansfield / Mark
Percy / James Wolfe
Corporate Broking: Jerry Keen
GMP FirstEnergy (Joint Broker) Tel: +44 (0) 207448
0200
Jonathan Wright / Hugh Sanderson
Camarco (Financial PR) Tel: +44 (0) 203 757
4980
Nick Hennis / Jane Glover / Billy Clegg
About Touchstone
Touchstone Exploration Inc. is a Calgary based company engaged
in the business of acquiring interests in petroleum and natural gas
rights, and the exploration, development, production and sale of
petroleum and natural gas. Touchstone is currently active in
onshore properties located in the Republic of Trinidad and Tobago.
The Company's common shares are traded on the Toronto Stock
Exchange and the AIM market of the London Stock Exchange under the
symbol "TXP".
Advisories
Non-GAAP Measures: This announcement contains terms commonly
used in the oil and natural gas industry, such as funds flow from
operations per share, operating netback and net debt. These terms
do not have a standardized meaning under International Financial
Reporting Standards and may not be comparable to similar measures
presented by other companies. The Company calculates funds flow
from operations per share by dividing funds flow from operations by
the weighted average number of common shares outstanding during the
applicable period. Operating netback is presented on a per barrel
basis and is calculated by deducting royalties and operating
expenses from petroleum revenue. The Company discloses operating
netback both prior to realized gains or losses on derivatives and
after the impacts of derivatives are included. Realized gains or
losses represent the portion of risk management contracts that have
settled in cash during the period, and disclosing this impact
provides Management and investors with transparent measures that
reflect how the Company's risk management program can impact
netback metrics. The Company uses operating netback as a key
performance indicator of field results, and considers it to be a
key measure as it demonstrates Touchstone's profitability relative
to current commodity prices. Net debt is calculated by summing the
Company's working capital and non-current undiscounted interest
bearing liabilities. Working capital is defined as current assets
less current liabilities as they appear on the statements of
financial position. The Company uses this information to assess its
true debt and liquidity position and to manage capital and
liquidity risk. Management uses these non-GAAP measures for its own
performance measurement and to provide stakeholders with measures
to compare the Company's operations over time.
Forward-Looking Statements: Certain information provided in this
announcement may constitute forward-looking statements within the
meaning of applicable securities laws. Forward-looking information
in this announcement may include, but is not limited to, statements
regarding expectations related to the future incremental production
to be achieved from the drilling program. 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. Certain
of these risks are set out in more detail in the Company's Annual
Information Form dated March 21, 2017 which has been filed on SEDAR
and can be accessed at www.sedar.com. The forward-looking
statements contained in this announcement are made as of the date
hereof, and except as may be required by applicable securities
laws, the Company assumes no obligation to update publicly or
revise any forward-looking statements made herein or otherwise,
whether as a result of new information, future events or
otherwise.
Interim Consolidated Statements of Financial Position
(Unaudited, thousands of Canadian dollars)
June 30, December
Note 2017 31, 2016
------------------------------------------ ----- ---------- ----------
Assets 7
Current assets
Cash $ 9,925 $ 8,433
Accounts receivable 12 8,176 8,809
Crude oil inventory 146 125
Prepaid expenses 549 368
18,796 17,735
Exploration assets 4 1,985 1,858
Property and equipment 5 61,806 60,358
Restricted cash and cash equivalents 6 3,186 8,461
Other assets 797 873
$ 86,570 $ 89,285
------------------------------------------ ----- ---------- ----------
Liabilities
Current liabilities
Accounts payable and accrued liabilities $ 14,234 $ 13,384
Income taxes payable 3,376 3,505
17,610 16,889
Provisions 362 466
Term loan and associated liabilities 7 14,699 14,496
Decommissioning obligations 8 16,172 16,455
Deferred income taxes 5,166 4,745
------------------------------------------ ----- ---------- ----------
54,009 53,051
------------------------------------------ ----- ---------- ----------
Shareholders' equity
Shareholders' capital 9 170,772 169,995
Contributed surplus 2,262 2,144
Accumulated other comprehensive income 8,060 9,231
Deficit (148,533) (145,136)
------------------------------------------ ----- ---------- ----------
32,561 36,234
------------------------------------------ ----- ---------- ----------
$ 86,570 $ 89,285
------------------------------------------ ----- ---------- ----------
Commitments (note 14)
See accompanying notes to these consolidated financial
statements.
Approved on behalf of the Board of Directors of Touchstone
Exploration Inc.:
/s/ John D. Wright /s/ Kenneth McKinnon
Director and Chairman of the Board of Directors Director and
Chair of the Audit Committee
Interim Consolidated Statements of Loss and Comprehensive
Loss
(Unaudited, thousands of Canadian dollars, except per share
amounts)
Three months ended June Six months ended
30, June 30,
Note 2017 2016 2017 2016
------------------------------- ----- ---------- ---------- ---------- ----------
Revenues
Petroleum revenue $ 7,436 $ 5,996 $ 14,827 $ 10,783
Royalties (2,166) (1,627) (4,812) (3,062)
------------------------------- ----- ---------- ---------- ---------- ----------
5,270 4,369 10,015 7,721
Loss on financial derivatives 12 - (2,783) - (1,970)
5,270 1,586 10,015 5,751
Expenses
Operating 2,857 2,419 4,877 5,457
General and administrative 1,645 1,571 3,071 3,631
Net finance expenses 10 390 337 1,162 836
Foreign exchange loss 155 35 235 100
Share-based compensation 9 44 33 100 101
Depletion and depreciation 5 1,162 1,154 2,290 2,413
Impairment 4 430 114 516 227
Accretion on decommissioning
obligations 8 39 76 79 154
Accretion on term loan 7 96 - 351 -
6,818 5,739 12,681 12,919
------------------------------- ----- ---------- ---------- ---------- ----------
Net loss before income
taxes (1,548) (4,153) (2,666) (7,168)
Income taxes
Current tax expense 31 48 142 67
Deferred tax expense
(recovery) 269 (1,648) 589 (2,238)
------------------------------- ----- ---------- ---------- ---------- ----------
300 (1,600) 731 (2,171)
------------------------------- ----- ---------- ---------- ---------- ----------
Net loss (1,848) (2,553) (3,397) (4,997)
Foreign currency translation
adjustment (904) (450) (1,171) (4,741)
------------------------------- ----- ---------- ---------- ---------- ----------
Comprehensive loss $ (2,752) $ (3,003) $ (4,568) $ (9,738)
------------------------------- ----- ---------- ---------- ---------- ----------
Net loss per common
share
Basic and diluted 11 $ (0.02) $ (0.03) $ (0.04) $ (0.06)
------------------------------- ----- ---------- ---------- ---------- ----------
See accompanying notes to these consolidated financial
statements.
Interim Consolidated Statements of Changes in Shareholders'
Equity
(Unaudited, thousands of Canadian dollars)
Note Shareholders' Contributed
capital Warrants surplus
---------------------------- ----- -------------- --------- ------------
Balance as at January 1,
2016 $ 169,950 $ 33 $ 1,939
Net loss - - -
Other comprehensive loss - - -
Share-based compensation
expense - - 157
Share-based compensation
capitalized - - 57
Share-based settlements 45 - (42)
Transfer of unexercised
warrants - (33) 33
---------------------------- ----- -------------- --------- ------------
Balance as at December
31, 2016 $ 169,995 $ - $ 2,144
---------------------------- ----- -------------- --------- ------------
Net loss - - -
Other comprehensive loss - - -
Issued pursuant to private
placement 9 777 - -
Share-based compensation
expense 9 - - 100
Share-based compensation
capitalized 5 - - 18
---------------------------- ----- -------------- --------- ------------
Balance as at June 30,
2017 $ 170,772 $ - $ 2,262
---------------------------- ----- -------------- --------- ------------
Note Accumulated
other comprehensive Total Shareholders'
income Deficit Equity
Balance as at January 1,
2016 $ 13,018 $ (132,283) $ 52,657
Net loss - (12,853) (12,853)
Other comprehensive loss (3,787) - (3,787)
Share-based compensation
expense - - 157
Share-based compensation
capitalized - - 57
Share-based settlements - - 3
Transfer of unexercised
warrants - - -
---------------------------- ----- --------------------- -------------- --------------------
Balance as at December
31, 2016 $ 9,231 $ (145,136) $ 36,234
---------------------------- ----- --------------------- -------------- --------------------
Net loss - (3,397) (3,397)
Other comprehensive loss (1,171) - (1,171)
Issued pursuant to private
placement 9 - - 777
Share-based compensation
expense 9 - - 100
Share-based compensation
capitalized 5 - - 18
---------------------------- ----- --------------------- -------------- --------------------
Balance as at June 30,
2017 $ 8,060 $ (148,533) $ 32,561
---------------------------- ----- --------------------- -------------- --------------------
See accompanying notes to these consolidated financial
statements.
Interim Consolidated Statements of Cash Flows
(Unaudited, thousands of Canadian dollars)
Note 2017 2016 2017 2016
-------------------------------- ----- ---------- ---------- ---------- ----------
Cash provided by (used
in):
Operating activities
Net loss for the year $ (1,848) $ (2,553) $ (3,397) $ (4,997)
Items not involving cash
from operations:
Non-cash loss on financial
derivatives - 6,099 - 8,432
Unrealized foreign
exchange loss 325 108 447 314
Share-based compensation 9 44 33 100 101
Depletion and depreciation 5 1,162 1,154 2,290 2,413
Impairment 4 430 114 516 227
Accretion on decommissioning
obligations 8 39 76 79 154
Accretion on term loan 7 96 - 351 -
Other (79) (105) (144) (209)
Deferred income tax
expense (recovery) 269 (1,648) 589 (2,238)
-------------------------------- ----- ---------- ---------- ---------- ----------
Funds flow from operations 438 3,278 831 4,197
Change in non-cash working
capital (1,530) 265 (1,917) 2,158
--------------------------------------- ---------- ---------- ---------- ----------
(1,092) 3,543 (1,086) 6,355
-------------------------------- ----- ---------- ---------- ---------- ----------
Investing activities
Restricted cash and
cash equivalents 6 - - 5,144 -
Exploration asset expenditures 4 (520) (476) (708) (629)
Property and equipment
expenditures (recovery) 5 (4,940) 340 (5,486) (706)
Proceeds from dispositions - - - 900
Change in non-cash working
capital 2,803 118 2,959 (14)
--------------------------------------- ---------- ---------- ---------- ----------
(2,657) (18) 1,909 (449)
-------------------------------- ----- ---------- ---------- ---------- ----------
Financing activities
Repayments of bank
loan - (2,574) - (7,864)
Finance lease receipts 16 4 16 35
Issuance of common
shares 9 777 3 777 3
793 (2,567) 793 (7,826)
-------------------------------- ----- ---------- ---------- ---------- ----------
Change in cash (2,956) 958 1,616 (1,920)
Cash, beginning of
period 13,006 1,826 8,433 4,710
Impact of foreign exchange
in foreign denominated cash
balances (125) (2) (124) (8)
Cash, end of period $ 9,925 $ 2,782 $ 9,925 $ 2,782
-------------------------------- ----- ---------- ---------- ---------- ----------
Supplemental information:
Cash interest paid 296 60 424 152
Cash income taxes paid 143 53 173 67
-------------------------------- ----- ---------- ---------- ---------- ----------
See accompanying notes to these consolidated financial
statements.
Notes to the Interim Consolidated Financial Statements
(unaudited)
As at June 30, 2017 and for the three and six months ended June
30, 2017 and 2016
1. Reporting Entity
Touchstone Exploration Inc. (the "Company") is incorporated
under the laws of Alberta, Canada with its head office located in
Calgary, Alberta. The Company is an oil and gas exploration and
production company active in the Republic of Trinidad and Tobago
("Trinidad").
The principal address of the Company is located at 4100, 350
7(th) Avenue SW, Calgary, Alberta, T2P 3N9. The Company's common
shares are listed on the Toronto Stock Exchange ("TSX") and on the
AIM market of the London Stock Exchange ("AIM") under the symbol
"TXP".
2. Basis of Preparation and Statement of Compliance
These unaudited interim consolidated financial statements (the
"financial statements") have been prepared in accordance with
International Accounting Standard ("IAS") 34 Interim Financial
Reporting, using accounting policies consistent with International
Financial Reporting Standards ("IFRS") as issued by the
International Accounting Standards Board ("IASB"). These financial
statements are condensed as they do not include all the information
required by IFRS for annual financial statements and should be read
in conjunction with the Company's audited consolidated financial
statements for the year ended December 31, 2016. Unless otherwise
stated, amounts presented in these financial statements are rounded
to thousands of Canadian dollars and tabular amounts are stated in
thousands of Canadian dollars.
These financial statements have been prepared on a historical
cost basis, except as detailed in the accounting policies disclosed
in Note 3 "Summary of Significant Accounting Policies" of the
Company's audited consolidated financial statements for the year
ended December 31, 2016. All accounting policies and methods of
computation followed in the preparation of these financial
statements are consistent with those of the previous financial
year, except as noted in Note 3 "Accounting Policies". There have
been no significant changes to the use of estimates or judgments
since December 31, 2016.
At December 31, 2016, the audited consolidated financial
statements included the accounts of the Company and its wholly
owned subsidiaries, including Archon Technologies Ltd. Effective
January 1, 2017, Archon Technologies Ltd. amalgamated with
Touchstone Exploration Inc. All intercompany transactions have been
eliminated upon consolidation between the Company and its
subsidiaries in these financial statements.
These financial statements were authorized for issue by the
Board of Directors on August 10, 2017.
3. Accounting Policies
(a) Segment reporting
Effective January 1, 2017, the Company's operations were viewed
as a single operating segment by the chief operating decision
makers of the Company for the purpose of resource allocation and
assessing operational performance. Accordingly, certain
reclassification adjustments have been made to the comparative
period to conform to the current presentation.
(b) Accounting standards adopted
There were no new or amended accounting standards or
interpretations adopted by the Company during the six months ended
June 30, 2017.
-
(c) Standards issued but not yet adopted
In April 2016, the IASB issued its final amendments to IFRS 15
Revenue from Contracts with Customers, which replaces IAS 18
Revenue, IAS 11 Construction Contracts, and related
interpretations. IFRS 15 provides a single, principles-based
five-step model to be applied to all contracts with customers. The
standard requires an entity to recognize revenue to reflect the
transfer of goods and services for the amount it expects to receive
when control is transferred to the purchaser. Disclosure
requirements have also been expanded. The standard is required to
be adopted either retrospectively or using a modified retrospective
approach for annual periods beginning on or after January 1, 2018,
with earlier adoption permitted. IFRS 15 is expected to be applied
by the Company on January 1, 2018. The Company is currently in the
process of reviewing its underlying crude oil contracts to
determine the impact, if any, that the adoption of IFRS 15 will
have on its financial statements, as well as the impact that
adoption of the standard will have on disclosure.
In July 2014, the IASB completed the final elements of IFRS 9
Financial Instruments. The standard supersedes earlier versions of
IFRS 9 and completes the IASB's project to replace IAS 39 Financial
Instruments: Recognition and Measurement. IFRS 9 introduces a
single approach to determine whether a financial asset is measured
at amortized cost or fair value and replaces the multiple rules
within IAS 39. For financial liabilities, IFRS 9 retains most of
the requirements of IAS 39. The Company does not anticipate any
material changes in the carrying values of the Company's financial
instruments because of the adoption of IFRS 9. The standard will
come into effect for annual periods beginning on or after January
1, 2018, with earlier adoption permitted. IFRS 9 is expected be
applied on a retrospective basis by the Company on January 1,
2018.
In January 2016, the IASB issued IFRS 16 Leases, which replaces
IAS 17 Leases. For lessees applying IFRS 16, a single recognition
and measurement model for leases would apply, with required
recognition of assets and liabilities for most leases. The standard
will come into effect for annual periods beginning on or after
January 1, 2019, with earlier adoption permitted if the entity is
also applying IFRS 15 Revenue from Contracts with Customers. The
standard is required to be adopted either retrospectively or using
a modified retrospective approach. IFRS 16 is expected to be
applied by the Company on January 1, 2019, and the Company is
currently evaluating the impact of the standard on its financial
statements.
4. Exploration Assets
Exploration assets consist of the Company's projects in the
exploration and evaluation stage which are pending determination of
technical and commercial feasibility. The following table is a
continuity schedule of the Company's exploration assets.
Trinidad Corporate Total
----------------------------- ------------------------- ------------------------- ------------------------
Balance, January 1, 2016 $ 1,163 $ 491 $ 1,654
Additions 4,041 35 4,076
Dispositions - (60) (60)
Impairment (4,574) (466) (5,040)
Transfer from held for sale 1,413 - 1,413
Effect of change in foreign
exchange rates (185) - (185)
----------------------------- ------------------------- ------------------------- ------------------------
Balance, December 31, 2016 $ 1,858 $ - $ 1,858
Additions 669 39 708
Impairment (477) (39) (516)
Effect of change in foreign
exchange rates (65) - (65)
Balance, June 30, 2017 $ 1,985 $ - $ 1,985
----------------------------- ------------------------- ------------------------- ------------------------
During the three and six months ended June 30, 2017, $11,000 and
$31,000 (2016 - $123,000 and $134,000) of general and
administrative expenses were capitalized to exploration assets,
respectively.
During the three and six months ended June 30, 2017, the Company
incurred $391,000 and $477,000 (2016 - $114,000 and $227,000) in
accrued lease expenses and letter of credit holding costs relating
to its East Brighton property, respectively. These costs were
impaired given the property's estimated recoverable amount was
$nil. An additional $39,000 in corporate exploration property lease
expenses were incurred and impaired during the three and six months
ended June 30, 2017 (2016 - $nil and $nil, respectively).
5. Property and Equipment
Trinidad Corporate Total
----------------------------- ------------------------- ------------------------- -----------------------
Cost:
Balance, January 1, 2015 $ 167,202 $ 7,221 $ 174,423
Additions 4,656 138 4,794
Dispositions - (5,011) (5,011)
Effect of change in foreign
exchange rates (12,241) - (12,241)
Balance, December 31, 2016 $ 159,617 $ 2,348 $ 161,965
Additions 5,592 108 5,700
Effect of change in foreign
exchange rates (5,195) - (5,195)
Balance, June 30, 2017 $ 160,014 $ 2,456 $ 162,470
----------------------------- ------------------------- ------------------------- -----------------------
Accumulated depletion, depreciation
and impairments:
Balance, January 1, 2015 $ 102,064 $ 1,720 $ 103,784
Depletion and depreciation 4,852 190 5,042
Impairments 47 - 47
Dispositions - (144) (144)
Decommissioning obligation
change in estimate 349 - 349
Effect of change in foreign
exchange rates (7,471) - (7,471)
Balance, December 31, 2016 $ 99,841 $ 1,766 $ 101,607
Depletion and depreciation 2,195 95 2,290
Effect of change in foreign
exchange rates (3,233) - (3,233)
Balance, June 30, 2017 $ 98,803 $ 1,861 $ 100,664
----------------------------- ------------------------- ------------------------- -----------------------
Net book values:
Balance, December 31, 2016 $ 59,776 $ 582 $ 60,358
Balance, June 30, 2017 61,211 595 61,806
----------------------------- ------------------------- ------------------------- -----------------------
As at June 30, 2017, $63,293,000 in future development costs
were included in Trinidad production asset cost bases for depletion
calculation purposes (December 31, 2016 - $70,870,000). During the
three and six months ended June 30, 2017, $207,000 and $403,000 in
general and administrative expenses were capitalized to property
and equipment, respectively (2016 - $194,000 and $515,000). During
the three and six months ended June 30, 2017, $9,000 and $18,000 in
share-based compensation expenses were capitalized to property and
equipment, respectively (2016 - $16,000 and $36,000).
Lease operatorship agreements
The Company's Lease Operating Agreements ("LOAs") in respect of
its four core properties (Coora 1, Coora 2, WD-4 and WD-8) with the
Petroleum Company of Trinidad and Tobago Limited ("Petrotrin"),
initially expire on December 31, 2020, with the Company holding a
five-year renewal option upon reaching agreement regarding the
proposed work program and financial obligations. The practice in
Trinidad is for extensions to be issued in most cases on terms
substantially similar to those in effect at the time. Presently,
the Company is subject to annual minimum production levels and
five-year minimum work commitments from 2016 through 2020 (see note
14).
In 2016, the Company did not meet the annual minimum production
levels and the minimum work obligations specified in the Coora 1,
Coora 2 and WD-8 LOAs or the minimum work obligations specified in
the WD-4 LOA. Although the LOAs provide that the minimum production
levels are to be achieved on a best endeavors basis, the LOAs also
describe the failure to achieve the minimum production levels or
the failure to complete the work obligations as potentially
constituting a material breach of the LOAs. As a result of this
inconsistency, the Company sought legal advice regarding the effect
of not meeting the production levels and not completing the work
obligations.
On May 17, 2017, the Company received additional correspondence
from Petrotrin approving the Company's development plans for the
Coora 1 and WD-4 properties and requesting the Company to provide a
definite timeline under which the work obligations for the Coora 2
and WD-8 licences will be met. At the date of these financial
statements, the Company has fulfilled its work commitments on the
Coora 1 and WD-4 properties for 2016 and 2017. The Company will
respond to the Coora-2 and WD-8 request after the results of the
initial four well program have stabilized, and the impact of
continued low commodity pricing and available capital resources are
evaluated.
Based on correspondence and quarterly lease operatorship reviews
to date, Petrotrin has not taken the position that there is any
breach of the LOAs. It is not anticipated that a default notice
will be issued; however, in any event, the Company is only required
to begin to rectify the breach within seven days from the date of
receipt of such notice. The Company has been advised by its legal
counsel that the risk of the loss of the LOAs for an allegation of
noncompliance is extremely remote. No assurance can be given that,
if future breaches of these obligations occur, they will not result
in a material adverse impact to the Company's cash flows. As at
June 30, 2017, the Company was in compliance with all other
obligations specified in the LOAs.
Exploration and production licences
The Company's Fyzabad and Palo Seco exploration and production
agreements with the Trinidad and Tobago Minister of Energy and
Energy Industries ("MEEI") contain no major work obligations or
covenants but expired on August 19, 2013. The Company is currently
negotiating licence renewals and has permission from the MEEI to
operate in the interim period. The Company has no indication that
the two licences will not be renewed. During the three and six
months ended June 30, 2017, production volumes produced under
expired MEEI production licences represented 4.6% and 5.0% of total
production, respectively (2016 - 5.2% and 5.4%).
Private lease agreements
The Company is operating under a number of Trinidad private
lease agreements which have expired and are currently being
renewed. Based on legal opinions received, the Company is
continuing to recognize revenue on the producing properties because
the Company is the operator, is paying all associated royalties and
taxes, and no title to the revenue has been disputed. The Company
currently has no indication that any of the producing expired
leases will not be renewed. During the three and six months ended
June 30, 2017, production volumes produced under expired Trinidad
private lease agreements represented 3.2% and 3.0% of total
production, respectively (2016 - 2.2% and 2.3%).
6. Restricted cash and cash equivalents
The Company has United States dollar ("US$") denominated cash
collateralized letters of credit that secure long-term work
obligations on its production and exploration concessions. A
reconciliation of the long-term restricted cash and cash
equivalents balance is set forth below:
Restricted Restricted
cash and cash and
cash equivalents cash equivalents
(US$) ($)
----------------------------- ------------------------- ------------------------
Balance, January 1, 2016 $ - $ -
Additions 6,299 8,457
Interest 2 3
Effect of change in foreign
exchange rates - 1
Balance, December 31, 2016 $ 6,301 $ 8,461
Letter of credit reduction (3,858) (5,144)
Interest 11 15
Effect of change in foreign
exchange rates - (146)
------------------------------ ------------------------- ------------------------
Balance, June 30, 2017 $ 2,454 $ 3,186
------------------------------ ------------------------- ------------------------
On March 14, 2017, the Company received formal approval from the
MEEI to reduce the letter of credit related to the East Brighton
exploration property from US$6,000,000 to US$2,150,000. The funds
were released to the Company on March 30, 2017.
In addition, at June 30, 2017 the Company had a security
agreement with Export Development Canada in connection with a
performance security guarantee that supports a US$3,313,000 letter
of credit provided to the MEEI related to work commitments on its
Ortoire exploration property. The letter of credit expired on
August 6, 2017 and will be replaced with a parent company
guarantee.
7. Term Loan and Associated Liabilities
On November 23, 2016, the Company completed an arrangement for a
$15,000,000, five-year term loan from a Canadian investment fund.
The term loan replaced the Company's former bank loan, which was
discharged.
The term loan matures on November 23, 2021 with no mandatory
repayment of principal required until January 1, 2019. The Company
is required to repay $810,000 per quarter commencing on January 1,
2019 through October 1, 2021, and the then outstanding principal
balance is repayable on the maturity date. The term loan bears a
fixed interest rate of 8% per annum, compounded and payable
quarterly in arrears from January 1, 2017. In connection with the
term loan, the Company also granted the lender a 1% gross
overriding royalty on petroleum sales from current Company land
holdings in Trinidad, which are payable until November 23, 2021
regardless of any repayment or prepayment of the term loan. The
Company may prepay any principal portion of the term loan after May
23, 2018 and has the option to negotiate a buyout of the future
royalty obligations if the term loan balance is prepaid in full.
The term loan and the Company's obligations in respect of the
royalty are principally secured by fixed and floating security
interests over all present and after acquired assets of the Company
and its subsidiaries.
The term loan was initially measured at fair value, net of all
transaction fees, using a discount rate of 12%. The term loan
balance less transaction costs is unwound using the effective
interest rate method to the principal value at maturity with a
corresponding non-cash accretion charge to earnings. The royalty
obligation was initially measured at fair value, using the
estimated royalty payable at the inception of the loan discounted
by 15%. The royalty liability is reduced by future amounts paid to
the lender. Once the liability is reduced to $nil, any subsequent
amounts paid are recorded as finance expenses in the period
incurred.
The following is a continuity schedule of the term loan and
associated liabilities balance from inception to June 30, 2017:
Term loan Royalty Total
liability liability
---------------------------- ------------------------- ------------------------- ------------------------
Balance, November 23, 2016 $ 13,132 $ 1,247 $ 14,379
Accretion 164 - 164
Payments - (47) (47)
Balance, December 31, 2016 $ 13,296 $ 1,200 $ 14,496
Accretion 351 - 351
Payments - (148) (148)
---------------------------- ------------------------- ------------------------- ------------------------
Balance, June 30, 2017 $ 13,647 $ 1,052 $ 14,699
---------------------------- ------------------------- ------------------------- ------------------------
The term loan arrangement contains industry standard
representations and warranties, positive and negative covenants and
events of default. The financial covenants and the Company's
estimated position as at June 30, 2017 was as follows:
Covenant Covenant Estimated
threshold position
at June
30, 2017(1)
----------------------------------------- -------------- -------------
Cash balance > $5,000,000 $9,925,000
Net funded debt to equity ratio(2) < 0.5 times 0.2 times
EBITDA(3) for the three fiscal quarters
ending June 30, 2017 > $1,875,000 $2,976,000
(1) Estimated position subject to final approval.
(2) Net funded debt is defined as interest-bearing debt less
cash reserves. Equity is defined as book value of shareholders'
equity less accumulated other comprehensive income (loss).
(3) EBITDA is defined as net earnings before interest, income
taxes and non-cash items.
8. Decommissioning Obligations
The Company's decommissioning obligations relate to future site
restoration and abandonment costs including the costs of production
equipment removal and land reclamation based on current
environmental regulations. The total decommissioning obligation is
estimated by Management based on the Company's net ownership
interest in all wells and facilities, estimated costs to reclaim
and abandon these wells and facilities, and the estimated timing of
the costs to be incurred in future periods.
Pursuant to Trinidad production licences, the Company is
obligated to remit funds into an abandonment fund based on
production. The abandonment fund obligations are determined based
on cumulative crude oil sales and recognized as a current liability
and a reduction of the long-term decommissioning obligation.
Payments to the fund are recorded as a long-term asset included in
property equipment. The Company and the relevant Trinidad
government entity must agree on the budget and site to reclaim
prior to using the abandonment fund.
As at June 30, 2017, the Company remitted $738,000 of
abandonment fund payments, and $266,000 in short-term fund
obligations were included in accounts payable and accrued
liabilities (December 31, 2016 - $697,000 and $328,000,
respectively). As at June 30, 2017, the Company estimated the total
undiscounted cash flows required to settle its decommissioning
obligations to be approximately $20,159,000 (December 31, 2016 -
$20,664,0000). June 30, 2017 decommissioning liabilities were
discounted using a weighted average risk-free rate of 5.8% and
calculated using an inflation rate of 4.8% (December 31, 2016 -
5.8% and 4.8%, respectively).
The majority of these obligations are anticipated to be incurred
in twenty-five years and are expected to be funded from the
abandonment fund and the Company's internal resources available at
the time of settlement. The following table summarizes the
Company's decommissioning obligation provision:
Balance, January 1, 2016 $ 16,987
Dispositions (4,028)
Liabilities incurred 1
Accretion expense 378
Change in estimates 4,367
Effect of change in foreign
exchange rates (922)
Balance, December 31, 2016 $ 16,783
Liabilities incurred 129
Accretion expense 79
Change in estimates (11)
Effect of change in foreign
exchange rates (542)
Balance, June 30, 2017 $ 16,438
------------------------------------ ------------------------
Non-current 16,172
Current (included in accounts
payable) 266
Total decommissioning obligation $ 16,438
------------------------------------ ------------------------
9. Shareholders' Capital
(a) Issued and outstanding common shares
Number of
shares Amount
----------------------------- ---------------- -----------------------
Balance, January 1, 2016 83,087,143 $ 169,950
Exercise of incentive share
options 50,000 45
Balance, December 31, 2016 83,137,143 $ 169,995
Issued pursuant to private
placement 20,000,000 777
------------------------------- ---------------- -----------------------
Balance, June 30, 2017 103,137,143 $ 170,772
------------------------------- ---------------- -----------------------
The Company has authorized an unlimited number of voting common
shares without nominal or par value.
(b) Private placement
On June 26, 2017, the Company completed an admission and listing
on the AIM market of the London Stock Exchange. In conjunction with
the AIM admission, the Company placed an additional 20,000,000
common shares at a price of 7.25 pence sterling ($0.1221) for gross
proceeds of GBP1,450,000 ($2,446,000). Following the private
placement, the Company had 103,137,143 common shares
outstanding.
Total fees incurred from the private placement were $1,669,000,
which included brokerage commissions and legal, accounting and
corporate finance advisory fees. Net proceeds of the private
placement were $777,000.
All common shares issued by the Company pursuant to the offering
are freely transferable outside of Canada, however these common
shares are subject to a four-month restricted hold period in Canada
which will prevent such common shares from being resold in Canada,
through a Canadian exchange or otherwise, during the restricted
period without an exemption from the Canadian prospectus
requirement. The restriction period expires on October 27,
2017.
(c) Share options and incentive share options
The Company has a share option plan pursuant to which options to
purchase common shares of the Company may be granted by the Board
of Directors to directors, officers, employees and consultants of
the Company. The exercise price of each option may not be less than
the closing price of the common shares prior to the date of grant.
Compensation expense is recognized as the options vest. Unless
otherwise determined by the Board of Directors, vesting typically
occurs one third on each of the next three anniversaries of the
date of the grant as recipients render continuous service to the
Company, and the share options typically expire five years from the
date of the grant. The maximum number of common shares issuable on
the exercise of outstanding share options and incentive share
options at any time is limited to 10% of the issued and outstanding
common shares.
Number of Weighted average
share options exercise price
-------------------------------- ------------------ ----------------------
Outstanding, January 1, 2016 5,308,445 $ 0.75
Granted 1,578,800 0.23
Forfeited (1,245,205) 0.72
---------------------------------- ------------------ ----------------------
Outstanding, December 31, 2016 5,642,040 $ 0.61
Granted 1,466,300 0.14
Forfeited (125,001) 0.46
Outstanding, June 30, 2017 6,983,339 $ 0.51
Exercisable, June 30, 2017 4,052,644 0.73
---------------------------------- ------------------ ----------------------
During the three and six months ended June 30, 2017, the Company
granted 447,500 and 1,466,300 share options to directors and
employees, respectively (2016 - nil and 1,558,800). The weighted
average fair value of options granted during the three and six
months ended June 30, 2017 was $0.09 and $0.08 per option as
estimated on the date of each grant using the Black-Scholes option
pricing model (2016 - nil and $0.13 per option).
The Company has an incentive share option plan which provides
for the grant of incentive share options to purchase common shares
of the Company at a $0.05 exercise price. A maximum of two million
incentive shares have been approved for issuance under this plan.
Unless otherwise determined by the Board of Directors, vesting
typically occurs one third on each of the next three anniversaries
of the date of the grant, and the incentive share options typically
expire five years from the date of the grant.
Number of Weighted average
incentive exercise price
share options
------------------------------------ ------------------- ----------------------
Outstanding, January 1, 2016 298,125 $ 0.06
Exercised (50,000) 0.05
Forfeited (120,625) 0.06
Outstanding, December 31, 2016 and
June 30, 2017 127,500 $ 0.06
Exercisable, June 30, 2017 127,500 0.06
-------------------------------------- ------------------- ----------------------
During the three and six months ended June 30, 2017, the Company
recorded share-based compensation expenses of $44,000 and $100,000
(2016 - $33,000 and $101,000) in the consolidated statement of
earnings, respectively, as a result of the vesting of outstanding
options and additional share options granted in 2017.
10. Net Finance Expenses
Three months ended June Six months ended June
30, 30,
2017 2016 2017 2016
-------------- ------------------------ ------------------------ ------------------------ ------------------------
Interest
income $ (17) $ (30) $ (34) $ (61)
Interest
expense on
bank loan - 25 - 120
Interest
expense on
term loan 299 - 595 -
Interest
expense on
taxes 108 263 601 616
Finance fees
and other - 79 - 161
Net finance
expenses $ 390 $ 337 $ 1,162 $ 836
-------------- ------------------------ ------------------------ ------------------------ ------------------------
11. Loss per Common Share
Three months ended June Six months ended June
30, 30,
2017 2016 2017 2016
------------------- ------------- ------------- ------------- -------------
Net loss $ (1,848) $ (2,553) $ (3,397) $ (4,997)
------------------- ------------- ------------- ------------- -------------
Weighted number of average common shares
outstanding:
Basic and diluted 84,236,044 83,125,605 83,689,629 83,106,374
Basic and diluted
loss per share $ (0.02) $ (0.03) $ (0.04) $ (0.06)
------------------- ------------- ------------- ------------- -------------
There was no dilutive impact to the weighted average number of
common shares for the three and six months ended June 30, 2017 and
2016, as all share options, incentive share options and warrants
were excluded from the weighted average dilutive share calculation
because their effect would be anti-dilutive.
12. Risk Management
(a) Credit risk
Credit risk arises from the potential that the Company may incur
a loss if a counterparty to a financial instrument fails to meet
its obligation in accordance with agreed terms. The Company's
Trinidad crude oil production is sold, as determined by market
based prices adjusted for quality differentials, to Petrotrin.
Typically, the Company's maximum credit exposure to Petrotrin is
revenue for one month's petroleum sales, of which $2,801,000 was
included in accounts receivable as at June 30, 2017 (December 31,
2016 - $1,880,000). The aging of accounts receivable as at June 30,
2017 and December 31, 2016 was as follows:
June 30, December 31,
2016
2017
------------------------------- ---- --------------------- ---------------------
Not past due $ 4,318 $ 3,373
Past due greater than 90 days 3,858 5,436
------------------------------------- --------------------- ---------------------
Total accounts receivable $ 8,176 $ 8,809
------------------------------------- --------------------- ---------------------
No provision was made for past due receivables as the Company
assessed that there were no impaired receivables. The Company
believes that the accounts receivable balances that are past due
are still collectible, as the majority are due from Trinidad
government agencies. The Company's carrying values of accounts
receivable balances represents the Company's maximum credit
exposure.
(b) Liquidity risk
Liquidity risk is the risk that the Company will not be able to
meet its financial obligations as they become due. Liquidity risk
also includes the risk of not being able to liquidate assets in a
timely manner at a reasonable price. The Company's approach to
managing liquidity is to ensure that it will have sufficient
liquidity to meet liabilities when due, under both normal and
unusual conditions without incurring unacceptable losses or
jeopardizing the Company's business objectives. The Company manages
this risk by preparing cash flow forecasts to assess whether
additional funds are required. The Company's liquidity is dependent
on the Company's expected business growth and changes in the
business environment.
To manage its capital structure in a period of low commodity
prices, the Company may further reduce its fixed cost structure,
adjust capital spending, issue new equity or seek additional
sources of debt financing. The Company will continue to manage its
expenditures to reflect current financial resources in the interest
of sustaining long-term viability.
Undiscounted cash outflows relating to financial liabilities as
at June 30, 2017 were as follows:
Undiscounted Less than 1 - 3 years 4 - 5 years
amount 1 year
--------------- -------------------- ------------------------- ------------------------- -------------------------
Accounts
payable
and accrued
liabilities $ 14,234 $ 14,234 $ - $ -
Income taxes
payable 3,376 3,376 - -
Term loan 15,000 - 4,050 10,950
Total
financial
liabilities $ 32,610 $ 17,610 $ 4,050 $ 10,950
--------------- -------------------- ------------------------- ------------------------- -------------------------
(c) Commodity price risk
The Company is exposed to commodity price movements as part of
its operations, particularly in relation to prices received for its
oil production. Commodity prices for oil are impacted by the world
and continental/regional economy and other events that dictate the
levels of supply and demand. Consequently, these changes could also
affect the value of the Company's properties, the level of spending
for exploration and development and the ability to meet obligations
as they come due.
The Company had no commodity risk management contracts in place
as at or during the six months ended June 30, 2017. During the
three and six months ended June 30, 2016, the Company recorded net
losses of $2,783,000 and $1,970,000 related to commodity risk
management contracts, respectively. The Company's commodity price
contracts were liquidated on June 2, 2016.
To manage commodity price risk, the Company has reduced its
operating and administrative cost structure. The Company may reduce
capital expenditures, issue new equity or seek additional sources
of debt should forward commodity pricing materially decrease. The
Company will continue to monitor forward commodity prices and may
enter into commodity based risk management contracts in the future
to reduce the volatility of petroleum revenues and protect future
development capital programs.
(d) Foreign currency risk
Foreign exchange risk arises from changes in foreign exchange
rates that may affect the fair value or future cash flows of the
Company's financial assets or liabilities. As the Company primarily
operates in Trinidad, fluctuations in the exchange rate between the
Canadian dollar and the Trinidad and Tobago dollar can have a
significant effect on reported results. The Company's foreign
exchange gain or losses primarily include unrealized gains or
losses on the translation of the Company's US$ denominated working
capital balances in Canada and Trinidad. The Company's foreign
currency policy is to monitor foreign currency risk exposure in its
areas of operations and mitigate that risk where possible by
matching foreign currency denominated expenses with revenues
denominated in foreign currencies. The Company attempts to limit
its exposure to foreign currency through collecting and paying
foreign currency denominated balances in a timely fashion. The
Company had no contracts in place to manage foreign currency risk
as at or during the six months ended June 30, 2017.
13. Capital Management
The basis for the Company's capital structure is dependent on
the Company's expected business growth and any changes in the
business and commodity price environment. Stewardship of the
Company's capital structure is managed through its financial and
operating forecast process. The forecast of the Company's future
cash flows is based on estimates of production, crude oil prices,
royalty expenses, operating expenses, general and administrative
expenses, capital expenditures and other investing and financing
activities. The forecast is regularly updated based on changes in
commodity prices, production expectations and other factors that in
the Company's view would impact cash flow.
The Company's objective is to maintain net debt to annualized
funds flow from operations at or below a level of 3.0 to 1. While
the Company may exceed this ratio from time to time, efforts are
made after a period of variation to bring the measure back in line.
Net debt is a non-IFRS measure calculated as working capital less
long-term portions of undiscounted interest bearing financial
liabilities. Working capital is calculated as current assets less
current liabilities as they appear on the consolidated statements
of financial position. Net debt is used by management as a key
measure to assess the Company's liquidity.
The Company also monitors its capital management through the net
debt to net debt plus equity ratio. The Company's strategy is to
utilize more equity than debt, thereby targeting net debt to net
debt plus shareholders' equity at a ratio of less than 0.4 to
1.
Target June 30, December 31,
measure 2016
2017
-------------------------------- ------------- --------------------- ---------------------
Working capital surplus $ (1,186) $ (846)
Undiscounted term loan balance 15,000 15,000
Net debt $ 13,814 $ 14,154
Shareholders' equity 32,561 36,234
----------------------------------------------- --------------------- ---------------------
Net debt plus equity $ 46,375 $ 50,388
----------------------------------------------- --------------------- ---------------------
Rolling four quarter funds flow from
operations(1) $ 2,751 $ 6,117
----------------------------------------------- --------------------- ---------------------
Net debt to funds flow from
operations < 3.0 times 5.0 2.3
-------------------------------- ------------- --------------------- ---------------------
Net debt to net debt plus
equity < 0.4 times 0.3 0.3
-------------------------------- ------------- --------------------- ---------------------
(1) Calculated as funds flow from operations from July 1, 2016
to June 30, 2017.
14. Commitments
The Company has minimum work obligations under various operating
agreements with Petrotrin, exploration commitments under
exploration licence and production agreements with the MEEI and
various lease commitments for office space and equipment. As at
June 30, 2017, the Company's estimated contractual capital
requirements over the next four years and thereafter were as
follows:
2017 2018 2019 2020 Thereafter
-------------------- ----------------- ----------------- ----------------- ----------------- --------------------
Operating
agreements $ 1,400 $ 7,120 $ 599 $ 377 $ 182
Exploration
agreements 360 6,466 7,280 823 -
Office leases 134 424 304 289 269
Equipment leases 187 354 338 290 3
-------------------- ----------------- ----------------- ----------------- ----------------- --------------------
Total minimum
payments $ 2,081 $ 14,364 $ 8,521 $ 1,779 $ 454
-------------------- ----------------- ----------------- ----------------- ----------------- --------------------
Under the terms of its operating agreements, the Company must
fulfill minimum work obligations on an annual basis over the
specific licence term. In total, the Company is obligated to drill
12 wells and perform 18 heavy workovers prior to the end of 2021.
As of June 30, 2017, three wells and 11 workovers have been
completed with respect to these obligations. The Company failed to
drill four wells that were required in 2016, two of which were
drilled during the three months ended June 30, 2017 (see note
5).
Under the terms of its exploration licences, the Company must
drill five wells prior to the end of December 31, 2020, none of
which have been completed as of June 30, 2017.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR LFFVLTRIILID
(END) Dow Jones Newswires
August 11, 2017 02:00 ET (06:00 GMT)
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