PetroShale Inc. ("PetroShale" or the "Company") (TSX VENTURE:PSH)(OTCQX:PSHIF)
today announces its financial and operating results for the six month period
ended December 31, 2013, as well as its updated reserves as at December 31,
2013. The Company changed its financial year-end from June 30 to December 31 and
as a result, the current reporting period is a six month stub period (July 1,
2013 to December 31, 2013), with the comparative period being the twelve months
ended June 30, 2013. The Company's next reporting period will be the three
months ended March 31, 2014.
PetroShale has filed its audited consolidated financial statements as at and for
the period ended December 31, 2013 and the corresponding Management's Discussion
and Analysis on SEDAR at www.sedar.com, and posted the information on
PetroShale's website at www.petroshaleinc.com. Copies of the materials can also
be obtained upon request without charge by contacting the Company directly.
Highlights:
-- Reported production of 185 boe/d (Company interest, gross of royalty -
147 boe/d net of royalty interest), an increase of 52% over the year
ended June 30, 2013, primarily due to the production generated from the
Company's Stockyard Creek and Antelope/MJ Angus assets, which were
acquired in August and May of 2013, respectively;
-- Reported a strong operating netback of $56.75 (Company interest, gross
of royalties, and excluding the impact of hedging - $71.58 net of
royalty interest), reflecting higher realized pricing and lower
operating expenses;
-- Subsequent to the end of the period, completed two additional
acquisitions in North Dakota, including the North Antelope Project
operated by EOG Resources Inc. ("EOG"), and the acquisition of a 19%
interest in 1,280 total acres of undeveloped land in Williams County,
North Dakota, both of which add to the Company's growing base of
existing or near-term cash flowing assets;
-- Secured a subordinated loan facility with two significant shareholders,
which provides PetroShale access to a $20 million revolving line of
credit; and
-- Increased proved plus probable ("P+P") reserves by 88% to 701.2 Mboe
(561.9 Mboe net of royalty interest) as at December 31, 2013, and after
reflecting acquisitions completed in the first quarter of 2014, P+P
reserves increased further to 2,188 Mboe (1,750 Mboe net of royalty
interest) on a pro forma basis.
Results of Oil and Gas Activities
Six Months Ended Year Ended
For the period ended December 31, 2013 June 30, 2013
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Sales volumes
Oil and natural gas liquids
(Bbl/d) 165 118
Natural gas (Mcf/d) 124 29
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Barrel of oil equivalent
(Boe/d) 185 122
Operating Netbacks ($/Boe)
Revenue $ 89.80 $ 83.02
Royalties (18.61) (18.59)
Realized hedge gain 0.23 -
Operating expenses (9.87) (14.56)
Production taxes (4.57) (2.19)
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Operating netback $ 56.98 $ 47.68
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Operating netback prior to
hedging $ 56.75 $ 47.68
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Funds flow from operations was $264,000 for the six month period ended December
31, 2013 compared to $207,000 for the year ended June 30, 2013. For the six
month period ended December 31, 2013, the Company reported a net loss of $2.7
million ($0.09 per share), compared to a loss of $21.1 million ($0.73 per share)
for the year ended June 30, 2013.
2013 Year-End Reserves:
The reserves data in this press release is based upon evaluations by Netherland,
Sewell & Associates, Inc. ("NSAI") with respect to our assets in the United
States, and by Jim McIntosh Petroleum Engineering Ltd. ("McIntosh") with respect
to our Canadian assets, all with an effective date of December 31, 2013. The
reserves data summarizes PetroShale's crude oil, natural gas liquids and natural
gas reserves and the net present values of future net revenue for these reserves
using forecast prices and costs, not including the impact of any price risk
management activities. The reserves data described herein as pro forma reflect
an evaluation performed by NSAI of our United States assets, including those
arising from the acquisitions completed by the Company subsequent to December
31, 2013, with an effective date of December 31, 2013, aggregated with the
evaluation of our Canadian assets as described above. The Reserve Reports have
been prepared in accordance with the standards contained in the COGE Handbook
and the reserve definitions contained in NI 51-101 and CSA 51-324. No attempt
was made to evaluate possible reserves.
Reserves Highlights:
-- P+P reserves as at December 31, 2013 increased 88% to 701.2 Mboe (561.9
Mboe net of royalty), while total proved reserves increased 57% to 553.0
Mboe (448.5 Mboe net of royalty).
-- 86% of PetroShale's total P+P reserves on a boe basis are light, sweet
oil, and 94% are attributed to the U.S assets located in North Dakota
and Montana.
-- Before tax net present value (discounted at 10%) ("NPV10") of the
Company's P+P reserves totaled $15.0 million, while the NPV10 of total
proved reserves increased to $13.5 million.
-- Following completion of acquisitions in the first quarter of 2014, pro
forma P+P reserves increased further to 2,188 Mboe (1,750 Mboe net of
royalty) with an NPV10 of $44.1 million.
Gross Company Interest Reserves
AGGREGATED CANADA AND UNITED STATES OIL & GAS ASSETS
RESERVES
LIGHT AND
MEDIUM NATURAL GAS
OIL NATURAL GAS LIQUIDS BOE
RESERVES
CATEGORY Gross Net Gross Net Gross Net Gross Net
(Mbbls) (Mbbls) (MMcf) (MMcf) (Mbbls) (Mbbls) (Mboe) (Mboe)
PROVED:
Developed
Producing 305.9 256.4 234.0 193.2 - 0.6 344.9 289.2
Developed Non-
Producing 44.1 33.7 56.4 43.1 - - 53.5 40.9
Undeveloped 128.2 98.2 158.1 121.0 - - 154.6 118.4
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TOTAL PROVED 478.2 388.3 448.5 357.3 - 0.6 553.0 448.5
PROBABLE 123.2 94.3 149.6 114.6 - - 148.1 113.4
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TOTAL PROVED
PLUS PROBABLE 601.4 482.6 598.1 471.9 - 0.6 701.2 561.9
----------------------------------------------------------------------------
Columns may not add due to rounding.
Net Present Value of Future Net Revenue
AGGREGATED CANADA AND UNITED STATES OIL & GAS ASSETS
BEFORE INCOME TAXES DISCOUNTED AT (%/year)
RESERVES CATEGORY 0% 5% 10% 15% 20%
($000s) ($000s) ($000s) ($000s) ($000s)
PROVED:
Developed Producing 18,602.3 12,853.5 9,949.7 8,221.4 7,078.3
Developed Non-
Producing 2,595.4 2,118.8 1,821.7 1,621.1 1,476.7
Undeveloped 4,375.3 2,720.6 1,762.2 1,147.8 727.2
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TOTAL PROVED 25,573.0 17,692.9 13,533.6 10,990.3 9,282.2
PROBABLE 4,119.4 2,437.9 1,485.6 891.0 488.3
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TOTAL PROVED PLUS
PROBABLE 29,692.4 20,130.8 15,019.2 11,881.3 9,770.5
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Columns may not add due to rounding.
Reserves Reconciliation - Aggregate
TOTAL CANADA (MBOE) TOTAL UNITED STATES (MBOE)
Gross Gross
Proved Proved
Gross Gross Plus Gross Gross Plus
Proved Probable Probable Proved Probable Probable
----------------------------------------------------------------------------
June 30, 2013 44.5 - 44.5 306.6 21.7 328.2
Discoveries - - - - - -
Improved
Recovery 3.9 - 3.9 - - -
Technical
Revisions - - - 38.7 (0.5) 38.2
Acquisitions - - - 196.6 127.6 324.2
Dispositions - - - - - -
Economic Factors - - - (1.1) (0.6) (1.7)
Production (2.8) - (2.8) (33.4) - (33.4)
----------------------------------------------------------------------------
December 31,
2013 45.6 - 45.6 507.4 148.2 655.5
TOTAL (MBOE)
Gross
Proved
Gross Gross Plus
Proved Probable Probable
----------------------------------------------------------------------------
June 30, 2013 351.1 21.7 372.8
Discoveries - - -
Improved
Recovery 3.9 - 3.9
Technical
Revisions 38.7 (0.5) 38.2
Acquisitions 196.6 127.6 324.2
Dispositions - - -
Economic Factors (1.1) (0.6) (1.7)
Production (36.2) - (36.2)
----------------------------------------------------------------------------
December 31,
2013 553.0 148.2 701.2
Columns may not add due to rounding.
Letter to shareholders:
Throughout calendar 2013, we enhanced PetroShale's strategic position, which
included changing the Company's year end to December 31. As a result of this
change, this report provides our results and discusses our achievements for the
six month period from July 1, 2013 to December 31, 2013.
As part of our ongoing strategy to acquire and consolidate working interests in
the prolific Williston Basin in North Dakota, we completed several acquisitions
that we anticipate will contribute to growth in production, reserves and cash
flows. In August, 2013, we partnered with Slawson Exploration Inc. ("Slawson"),
one of the largest private operators in the Williston Basin, to acquire certain
assets within the Stockyard Creek field (situated in southern Williams County,
North Dakota). These assets included 106 net leased acres giving the Company a
5.5% interest in a 17 well drilling program over three 640 acre sections. The
Stockyard Creek assets are operated by Slawson, and to date include the
successful drilling and completion of five wells, including four new wells that
came on production in February 2014.
Subsequent to the end of 2013, two additional acquisitions were completed. The
first was the acquisition of the North Antelope Project in McKenzie County,
North Dakota, operated by EOG, a large and experienced operator in shale oil
plays, including the Bakken. The Antelope Project provides PetroShale with an
18.75% working interest in a proposed drilling unit, which has been spaced for
the drilling of 8 wells. Based on current capital plans, we expect results from
those wells should have a positive impact on PetroShale's production and cash
flows later in 2014. The second acquisition we completed after year end 2013 was
the purchase of 245 net held-by-production acres, giving the Company an
approximate 19% working interest in a 1,280 acre drilling unit in Williams
County, North Dakota.
As a result of our activities to date, PetroShale's production has grown to
approximately 240 boe/d currently. Following the acquisitions completed in the
first quarter of 2014, our pro forma P+P reserves increased to approximately
2,188 Mboe (1,750 Mboe net of royalty), with a NPV10 of $44.1 million.
In addition to growing the Company's asset base, we also took steps in the
latter half of 2013 to strengthen our Board and management team. PetroShale's
management team and Board have extensive experience in managing and governing
high-growth oil and natural gas entities. We look forward to a focused expansion
of our operations in the Williston Basin.
We appreciate your continued support of PetroShale, and look forward to updating
you on our progress and achievements in our next financial report, for the first
quarter ended March 31, 2014.
M. Bruce Chernoff, Executive Chairman and CEO
About PetroShale
PetroShale is a growing oil company engaged in the acquisition and consolidation
of interests in the Williston Basin in North Dakota and Montana. The strategy
focuses on acquiring leases in the most prolific and proven areas of the
Williston Basin.
Neither the TSX Venture Exchange nor its Regulation Services Provider (as that
term is defined in the policies of the TSX Venture Exchange) accepts
responsibility for the adequacy or accuracy of this release.
Note Regarding Forward-Looking Statements and Other Advisories
It should not be assumed that the discounted future revenue estimated by NSAI
represent the fair market value of the reserves. Company interest means, in
relation to the Company's interest in production and reserves, the Company's
working interest (operating and non-operating) before the deduction of royalties
payable and including such entity's royalty interest in production and reserves.
Where volumes of reserves and production have been presented, they have been
presented as company working interest, gross of royalties. All operating
netbacks referenced in this press release are Company working interest. Relative
price deck used by NSAI and McIntosh in their reserves evaluations has been
disclosed within our Annual Information Form, which will be available on our
SEDAR profile. All dollar figures included herein are presented in Canadian
dollars, unless otherwise noted.
Within this press release, references are made to terms commonly used in the oil
and natural gas industry. The term "netback" or "operating netback" in this
press release is not a recognized measure under generally accepted accounting
principles in Canada. PetroShale uses "netback" as a key performance indicator
and it is used by the Company to evaluate the operating performance of its
petroleum and natural gas assets and is determined by deducting royalties and
production and operating expenses from petroleum and natural gas revenue.
Readers are cautioned; however, that this measure should not be construed as an
alternative to net earnings or cash flow from operating activities determined in
accordance with generally accepted accounting principles in Canada as an
indication of our performance. "Funds flow from operations" is calculated based
on cash flow from operating activities before the change in non-cash working
capital and settlement of decommissioning obligations. PetroShale believes the
timing of collection, payment or incurrence of these items involves a high
degree of discretion and as such may not be useful for evaluating PetroShale's
operating performance. Management utilizes funds flow from operations as a key
measure to assess the ability of the Company to finance operating activities and
capital expenditures. Funds flow from operations should not be construed as an
alternative to net earnings or cash flow from operating activities determined in
accordance with GAAP as an indication of PetroShale's performance. A
reconciliation of funds flow from operations to cash flow from operating
activities is provided in the MD&A.
This press release contains forward-looking statements and forward-looking
information (collectively "forward-looking information") within the meaning of
applicable securities laws relating to aspects of management focus, objectives,
strategies and business opportunities. Forward-looking information typically
uses words such as "anticipate", "believe", "project", "expect", "goal", "plan",
"intend" or similar words suggesting future outcomes, statements that actions,
events or conditions "may", "would", "could" or "will" be taken or occur in the
future. Statements relating to "reserves" are also deemed to be forward-looking
statements, as they involve the implied assessment, based on certain estimates
and assumptions, that the reserves and resources described exist in the
quantities predicted or estimated and that the reserves or resources can be
profitably produced in the future. The forward-looking information is based on
certain key expectations and assumptions made by the Company's management,
including expectations and assumptions concerning prevailing commodity prices,
exchange rates, interest rates, applicable royalty rates and tax laws; future
production rates and estimates of operating costs; performance of existing and
future wells; reserve and resource volumes; anticipated timing and results of
capital expenditures; the success obtained in drilling new wells; the
sufficiency of budgeted capital expenditures in carrying out planned activities;
the timing, location and extent of future drilling operations; the state of the
economy and the exploration and production business; results of operations;
performance; business prospects and opportunities; the availability and cost of
financing, labor and services; the impact of increasing competition; ability to
market oil and natural gas successfully; the Company's ability to access
capital, ad obtaining the necessary regulatory approvals.
Although the Company believes that the expectations and assumptions on which
such forward-looking information is based are reasonable, undue reliance should
not be placed on the forward-looking information because the Company can give no
assurance that they will prove to be correct. Since forward-looking information
addresses future events and conditions, by its very nature they involve inherent
risks and uncertainties. The Company's actual results, performance or
achievement could differ materially from those expressed in, or implied by, the
forward-looking information and, accordingly, no assurance can be given that any
of the events anticipated by the forward-looking information will transpire or
occur, or if any of them do so, what benefits that the Company will derive
therefrom. Management has included the above summary of assumptions and risks
related to forward-looking information provided in this press release in order
to provide security holders with a more complete perspective on the Company's
future operations and such information may not be appropriate for other
purposes.
Readers are cautioned that the foregoing lists of factors are not exhaustive.
Additional information on these and other factors that could affect our
operations or financial results are included in reports on file with applicable
securities regulatory authorities and may be accessed through the SEDAR website
(www.sedar.com). These forward-looking statements are made as of the date of
this press release and the Company disclaims any intent or obligation to update
publicly any forward-looking information, whether as a result of new
information, future events or results or otherwise, other than as required by
applicable securities laws.
Where amounts are expressed on a barrel of oil equivalent ("boe") basis, natural
gas volumes have been converted to boe using a ratio of 6,000 cubic feet of
natural gas to one barrel of oil (6 Mcf: 1 Bbl). This boe conversion ratio 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 the
value ratio based on the current price of crude oil as compared to natural gas
is significantly different from the energy equivalency of 6 Mcf: 1 Bbl,
utilizing a conversion ratio at 6 Mcf: 1 Bbl may be misleading as an indication
of value.
FOR FURTHER INFORMATION PLEASE CONTACT:
PetroShale Inc.
Attention: Executive Chairman and CEO
+1.303.297.1407
Info@PetroShaleInc.com
www.petroshaleinc.com
5 Quarters Investor Relations, Inc.
Cindy Gray
403.828.0146
cgray@5qir.com
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