Arsenal Energy Inc. Announces 2013 Fourth Quarter and Year End
Results
CALGARY, ALBERTA--(Marketwired - Mar 11, 2014) - Arsenal Energy
Inc. (TSX:AEI) (PINKSHEETS:AEYIF) is pleased to release its Q4 and
full year 2013 financial and operating results and its 2013 yearend
reserves.
| SUMMARY OF FINANCIAL AND OPERATIONAL RESULTS |
|
Three Months Ended December 31 |
|
|
|
Year Ended December 31 |
|
| (ooo'S Cdn. $ except per share amounts) |
2013 |
|
2012 |
|
% Change |
|
2013 |
|
2012 |
|
% Change |
|
| FINANCIAL |
|
|
|
|
|
|
|
|
|
|
|
|
| Oil and gas revenue |
24,112 |
|
22,351 |
|
8 |
|
97,811 |
|
82,168 |
|
19 |
|
| Funds from operations |
9,013 |
|
10,000 |
|
(10 |
) |
37,859 |
|
31,119 |
|
22 |
|
|
Per share - basic |
0.56 |
|
0.64 |
|
(12 |
) |
2.38 |
|
1.99 |
|
20 |
|
|
Per share - diluted |
0.56 |
|
0.63 |
|
(12 |
) |
2.36 |
|
1.97 |
|
20 |
|
| Net income (loss) |
(396 |
) |
(896 |
) |
(56 |
) |
(2,714 |
) |
(112 |
) |
2,313 |
|
|
Per share - basic |
(0.02 |
) |
(0.06 |
) |
(57 |
) |
(0.17 |
) |
(0.01 |
) |
2,273 |
|
|
Per share - diluted |
(0.02 |
) |
(0.06 |
) |
(57 |
) |
(0.17 |
) |
(0.01 |
) |
2,273 |
|
| Total debt |
70,422 |
|
68,492 |
|
3 |
|
70,422 |
|
68,492 |
|
3 |
|
| Capital expenditures |
6,645 |
|
10,749 |
|
(38 |
) |
39,743 |
|
42,681 |
|
(7 |
) |
| Property dispositions |
- |
|
- |
|
- |
|
(4,230 |
) |
(1,928 |
) |
119 |
|
| Shares outstanding - end of period (ooo's) |
16,080 |
|
15,595 |
|
3 |
|
16,080 |
|
15,595 |
|
3 |
|
| Net wells drilled |
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil |
0.19 |
|
1.16 |
|
|
|
7.89 |
|
6.14 |
|
|
|
|
Gas |
- |
|
- |
|
|
|
1.10 |
|
- |
|
|
|
|
Dry |
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
| Total net wells drilled |
0.19 |
|
1.16 |
|
|
|
8.99 |
|
6.14 |
|
|
|
| OPERATIONAL |
|
|
|
|
|
|
|
|
|
|
|
|
| Daily production |
|
|
|
|
|
|
|
|
|
|
|
|
| Heavy oil (bbl/d) |
55 |
|
72 |
|
(24 |
) |
65 |
|
112 |
|
(43 |
) |
| Medium oil and NGL's (bbl/d) |
1,371 |
|
1,544 |
|
(11 |
) |
1,389 |
|
1,461 |
|
(5 |
) |
| Light oil and NGLs (bbl/d) |
1,621 |
|
1,405 |
|
15 |
|
1,495 |
|
1,200 |
|
25 |
|
| Natural gas (mcf/d) |
6,012 |
|
5,483 |
|
10 |
|
6,139 |
|
5,697 |
|
8 |
|
| Oil equivalent (boe/d @ 6:1) |
4,048 |
|
3,934 |
|
3 |
|
3,973 |
|
3,723 |
|
7 |
|
| Realized commodity prices ($Cdn.) |
|
|
|
|
|
|
|
|
|
|
|
|
| Heavy oil (bbl) |
71.88 |
|
71.63 |
|
- |
|
73.73 |
|
70.70 |
|
4 |
|
| Medium oil and NGL's (bbl) |
70.32 |
|
70.13 |
|
- |
|
77.60 |
|
74.36 |
|
4 |
|
| Light oil and NGLs (bbl) |
87.30 |
|
81.01 |
|
8 |
|
91.15 |
|
79.09 |
|
15 |
|
| Natural gas (mcf) |
3.38 |
|
2.88 |
|
17 |
|
3.11 |
|
2.28 |
|
36 |
|
| Oil equivalent (boe @ 6:1) |
64.75 |
|
61.76 |
|
5 |
|
67.46 |
|
60.31 |
|
12 |
|
| Operating netback ($ per boe) |
|
|
|
|
|
|
|
|
|
|
|
|
| Revenue |
64.75 |
|
61.76 |
|
5 |
|
67.46 |
|
60.31 |
|
12 |
|
| Royalty |
(14.98 |
) |
(12.26 |
) |
22 |
|
(14.53 |
) |
(12.52 |
) |
16 |
|
| Operating cost |
(19.57 |
) |
(19.05 |
) |
3 |
|
(19.80 |
) |
(20.28 |
) |
(2 |
) |
| Operating netback per boe |
30.20 |
|
30.44 |
|
(1 |
) |
33.13 |
|
27.50 |
|
20 |
|
| General and administrative |
(1.75 |
) |
(2.77 |
) |
(37 |
) |
(2.88 |
) |
(3.03 |
) |
(5 |
) |
| Finance expenses |
(1.86 |
) |
(1.63 |
) |
14 |
|
(1.78 |
) |
(1.67 |
) |
6 |
|
| Realized gains (losses) on risk management
contracts |
(2.66 |
) |
1.75 |
|
(252 |
) |
(2.22 |
) |
0.07 |
|
(3,341 |
) |
| Other (FX and current tax) |
0.27 |
|
(0.16 |
) |
- |
|
(0.14 |
) |
(0.02 |
) |
|
|
| Fund from operations per Boe |
24.20 |
|
27.63 |
|
(12 |
) |
26.11 |
|
22.84 |
|
14 |
|
Financial
Cash flow from
operations in the fourth quarter of 2013 totaled $9.0 million
($0.56 per share basic and diluted) down 10% from the fourth
quarter of 2012. Production, prices and costs were relatively flat
year over year. The change in cash flow is largely due to a
$989,000 hedging loss in Q4 2013 versus a $93,000 hedging gain in
Q4 2012. Annual 2013 cash flow of $37.8 million ($2.38 per share)
was 20% higher than 2012.
Arsenal's Q4
production mix was 75% liquids and 25% natural gas. The operating
netback for Q4 2013 of $30.20 per boe was relatively unchanged
compared to the $30.44 per boe received in Q4 2012. In Q4 2013,
slightly higher prices were offset by slightly higher
royalties.
During the fourth
quarter oil price differentials for much of Arsenal's Alberta
production widened out to as much as $40/bbl. In response, Arsenal
cut capital expenditures to $6.6 million from the $16.8 million
that was originally planned. Total debt at year end was $70.4
million.
Operations
Due to the cut in
the capital budget, Q4 2013 production showed only modest growth to
4,048 boe/d versus 3,935 boe/d for Q4 2012. By the end of the
quarter differentials recovered and the Company restarted its
capital program. Current corporate production is approximately
4,500 boe/d with additional volumes behind pipe.
At Princess Alberta,
the Company drilled one successful Mannville formation oil well
late in the fourth quarter and two more subsequent to quarter end.
Over the last 18 months Arsenal has drilled 10 wells on its
Princess Mannville project resulting in 9 oil wells and one service
well. Total all in costs of the 10 well program was approximately
$16 million. Current production from the program is 1,400 boe/d
(85% oil) with additional volumes behind pipe. Production is 25 API
oil with a current price of $98/bbl Cdn. Operating costs are
forecast at $14.80/bbl. Arsenal has assembled 25,603 acres of
undeveloped land in the Princess area and is permitting 9
additional wells for the summer.
In North Dakota,
Arsenal is participating in a 10 (3.1 net) well development
program. Three rigs, one operated and two non-operated, are
currently drilling. It is anticipated that all 10 wells will come
on production by mid-summer. Bakken wells typically produce at an
average first month rate of 630 bbls/d and a first year rate of 265
bbls/d.
Reserves
Deloitte has
evaluated Arsenal's reserves as at December 31, 2013 in accordance
with National Instrument 51-101. Detailed reserve information will
be included in Arsenal's Annual Information Form for the year ended
December 31, 2013 which will be filed on SEDAR at www.sedar.com on
or before March 31, 2014. The summary information that follows has
been derived from that evaluation.
During 2013 Arsenal
targeted capital to the development of its Bakken reserves and to
the exploration of its Mannville project at Princess. The Princess
project is still in the evaluation phase so proven reserves booked
for it at year end were 579 Mboe. Through drilling, reserves in
North Dakota were moved from undeveloped to proven producing. This
resulted in a small depletion in total reserves but an increase in
net asset value from $12.69 per share to $13.03 per share as future
capital requirements were reduced.
Highlights
- Production in 2013 was a record 3,973 BOEPD.
- Year/year proved developed producing reserves increased by
0.7%
- Oil and natural gas liquids at December 31, 2013 constitute 78%
of proved plus probable reserves
- Arsenal's P+P PV10 net asset value is $13.03/share.
- Based on the 2013 production rate, Arsenal has a reserve life
of approximately 10 years on a proved plus probable basis.
- Arsenal's P+P FD&A was $25.72 per boe in 2013.
| Summary of Oil and Natural Gas Reserves as at December
31, 2013 |
|
Oil and NGL's |
Natural Gas |
Oil Equivalent |
|
Gross (1) |
Net (2) |
Gross (1) |
Net (2) |
Gross (1) |
Net (2) |
| Reserve Category |
(Mbbl) |
(Mbbl) |
(MMcf) |
|
(Mboe) |
(Mboe) |
| Proved |
|
|
|
|
|
|
|
Developed producing |
4,140.4 |
3,424.8 |
7,941.8 |
6,851.5 |
5,464.0 |
4,566.8 |
|
Developed nonproducing |
291.7 |
252.3 |
1,558.0 |
1,359.3 |
551.4 |
260.4 |
|
Undeveloped |
2,622.1 |
2,153.5 |
1,047.0 |
863.0 |
2,796.7 |
3,034.8 |
| Total Proved |
7,054.2 |
5,830.6 |
10,546.8 |
9,073.8 |
8,812.1 |
7,862.0 |
|
Probable additional |
4,164.3 |
3,423.7 |
8,626.8 |
7,668.2 |
5,603.1 |
4,343.8 |
| Total Proved + Probable |
11,218.5 |
9,254.3 |
19,173.6 |
16,742.0 |
14,415.2 |
12,205.8 |
|
Possible |
2,945.6 |
2,395.0 |
651.7 |
522.9 |
3,053.2 |
2,482.2 |
| Total Proved +Probable + Possible |
14,164.1 |
11,649.3 |
19,825.3 |
17,264.9 |
17,468.4 |
14,688.0 |
| (1) "Gross" reserves means Arsenal's interest before
deduction of royalties |
| (2) "Net" reserves means Arsenal's interest after
deduction of royalties |
|
|
| Summary of Net Present Value of Future Net Revenue as
of December 31, 2013 |
| ($ Millions) |
|
Value Before Income Tax (1) |
|
Discounted at |
| Reserve Category |
0% |
5% |
10% |
| Proved |
|
|
|
|
Developed producing |
156.4 |
133.3 |
117.5 |
|
Developed nonproducing |
14.9 |
12.0 |
10.1 |
|
Undeveloped |
76.2 |
44.6 |
25.3 |
| Total Proved |
247.5 |
189.9 |
152.9 |
|
Probable additional |
227.7 |
152.7 |
112.3 |
| Total Proved + Probable |
475.2 |
342.6 |
265.2 |
|
Possible |
204.0 |
126.6 |
90.4 |
| Total Proved + Probable + Possible |
679.2 |
469.2 |
355.6 |
| (1)
AJM forecast prices at December 31, 2013 |
|
| 2013 Reserve Reconcilliation |
|
|
December 31 2013 |
Acquired / Sold |
|
Production |
|
Adds / Revisions |
December 31 2013 |
| TP
(Mboe) |
9,691 |
(26 |
) |
(1,450 |
) |
597 |
8,812 |
| TP
value (MM$) |
134.8 |
(0.2 |
) |
(48.0 |
) |
66.3 |
152.9 |
|
P+P (Mboe) |
14,899 |
(38 |
) |
(1,450 |
) |
1,004 |
14,415 |
|
P+P value (MM$) |
245.9 |
(0.2 |
) |
(48.0 |
) |
67.5 |
265.2 |
Outlook
First quarter
production is expected to average 4,200 boe/d. It is anticipated
that production will increase again in the second quarter due to
the strong drilling results from Princess in Q1. Through the second
and third quarters, 3.1 net Bakken wells are expected to come on
stream.
Oil prices, gas
prices, oil price differentials, and the exchange rate have all
moved positively during the first quarter. Forecast operating
margins for the first quarter are 25% higher than Q4 2013, and
based on forward strip pricing, forecast operating margins for 2014
are 21% higher than 2013. Arsenal expects 2014 funds from
operations to total approximately $45.0 million.
To receive company
news releases via e-mail, please advise ir@arsenalenergy.com and
specify "Arsenal Press Releases" in the subject line.
Information
Regarding Disclosure on Oil and Gas Reserves and Operational
Information
Arsenal's oil
and gas reserves statement for the year ended December 31, 2013,
which will include complete disclosure of our oil and gas reserves
and other oil and gas information in accordance with NI 51-101,
will be contained within our Annual Information Form which will be
available on our SEDAR profile at www.sedar.com on or
before March 31, 2014. The recovery and reserve estimates contained
herein are estimates only and there is no guarantee that the
estimated reserves will be recovered. In relation to the disclosure
of estimates for individual properties, such estimates may not
reflect the same confidence level as estimated reserves and future
net revenue for all properties, due to the effects of aggregation.
The Company's belief that it will establish additional reserves
over time with conversion of probable undeveloped reserves into
proved reserves is a forward-looking statement and is based on
certain assumptions and is subject to certain risks, as discussed
below under the heading "Advisory".
It should not be
assumed that the future net revenues estimated by Deloitte
represent the fair market value of the reserves.
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.
Arsenal Energy Inc.Tony van WinkoopPresident and Chief Executive
Officer(403) 262-4854(403)-265-6877Arsenal Energy Inc.J. Paul
LawrenceVice President, Finance and CFO(403)
262-4854(403)-265-6877Arsenal Energy Inc.1900, 639 - 5th Avenue
S.W.Calgary, Alberta, T2P
0M9ir@arsenalenergy.comwww.arsenalenergy.com