Note: All figures are quoted in U.S. dollars unless
otherwise noted.
CALGARY, March 17, 2014 /PRNewswire/ - Ivanhoe Energy Inc.
(TSX: IE; NASDAQ: IVAN) reported today its financial results and
operating highlights for 2013.
Government processes, market conditions, and
capital constraints resulted in a challenging year for Ivanhoe
Energy. Despite these headwinds, the Company advanced its
patented and proprietary Heavy-to-Light (HTL®) upgrading
technology, paving the way for full commercialization.
Additionally, the Company gained clarity from the Ecuadorian
Government on the requirements to achieve approval of the
consortium contract for Block 20.
Looking ahead the Company will right-size the
organization, establish key partnerships, create greater financial
strength and commercialize HTL.
Year End Financial Summary
Ivanhoe Energy filed its year-end financial
report on Form 10-K with the U.S. Securities and Exchange
Commission and its MD&A and audited annual financial statements
with the Canadian Securities Administrators for the year ended
December 31, 2013.
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|
|
|
|
(US$000s,
except per share amounts) |
Three
months
ended Dec. 31, |
Year
ended
Dec. 31, |
2013 |
2012 |
2013 |
2012 |
|
|
|
|
|
Net loss from continuing operations |
(108,184) |
(12,820) |
(143,754) |
(64,018) |
Net loss per share, from continuing
operations* |
(0.94) |
(0.11) |
(1.25) |
(0.56) |
|
|
|
|
|
Net cash used in operating activities |
(5,383) |
(12,895) |
(36,432) |
(27,060) |
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|
|
|
|
Capital expenditures |
(857) |
(4,073) |
(16,927) |
(47,444) |
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|
|
|
|
Cash and cash equivalents (end of period) |
23,556 |
62,819 |
23,556 |
62,819 |
Restricted cash |
500 |
20,500 |
500 |
20,500 |
* Basic and diluted
The Company posted a net loss from continuing
operations of $143.8 million, which
represents an increase of $79.8
million compared to 2012. This increase is mainly
attributable to $101.1 million in
non-cash impairment charges, $6.9
million higher general and administrative expenses and
$1.2 million in other net
charges. The increase in net loss from continuing operations
was partially offset by $11.9 million
in deferred income tax recoveries, $7.6
million lower exploitation and evaluation expenses,
$3.7 million in net foreign currency
gains and $2.0 million lower finance
expenses.
Non-cash Impairment Charges
Ivanhoe's 2013
results from operations were materially affected by a non-cash
impairment charge of $101.1 million
relating to the HTL partial upgrading process. Pursuant to
International Financial Reporting Standards (IFRS) accounting
standards, an impairment in the recorded book value of HTL was
required as a result of the Company's current market capitalization
and risk adjusted forecasted future cash flows. The Company abides
by IFRS accounting standards; however, this impairment charge does
not represent the Company's assessment of HTL's commercial value
(See HTL details below). Under IFRS, the impairment charge can be
reversed in the future once facts and circumstances relating to the
charge improve.
Capital Expenditures
The Company's capital investments amounted to
$16.9 million in 2013, which is
$30.7 million less than the
expenditures in 2012. In 2013, capital expenditures included
$8.4 million for environmental work,
road work and drilling the IP-14b appraisal well in Ecuador; $7.5
million in Canada for a
winter data acquisition program that provided project planning
information and supported an addendum submitted to the Alberta Energy Regulator in the third quarter;
and, property, plant and equipment capital expenditures of
$1.0 million for office, computer and
leasehold improvements.
Net Cash Used in Operating Activities
Net cash used in operating activities in 2013
was $36.4 million, an increase of
$9.4 million from $27.0 million in 2012. The increase is primarily
due to $6.9 million in increased cash
G&A expenses, which are explained below. The remaining
$2.5 million variance includes taxes,
closing costs and previous years' results related to the
discontinued operations in China.
General and Administrative
Expenses
The Company incurred G&A expenses of
$38.1 million in 2013, an increase of
$7.0 million compared to costs of
$31.1 million in 2012. The increase
is primarily due to specific, non-recurring activities including
increased legal fees, severance and retention costs and the excess
of short-term incentive compensation over a 2012 accrual.
Liquidity and Capital Resources
At December 31,
2013, Ivanhoe Energy had approximately $23.6 million in cash and cash equivalents.
Ivanhoe anticipates existing
financial resources will fund activities until mid-third quarter;
however, additional funding will be required to maintain the
Company's business activities as currently constituted. The
proposed consortium contract for Block 20 will bolster the
Company's current liquidity position once approved by the
Government of Ecuador. If
required, the Company is considering all private and public forms
of capital.
Heavy-to-Light (HTL)
HTL is ready to be deployed at a commercial
scale. As announced in 2013:
- An industry leading and recognized international energy
consulting firm validated that HTL Synthetic Crude Oil (SCO) should
be valued on or close to par with Brent pricing.
- Leading consultants to the energy and chemical industries, The
Kline Group, completed an evaluation which compares HTL to more
than 10 other upgrading technologies under development today.
In this comparison, The Kline Group concluded that HTL is the
leading partial upgrading technology due to five significant
advantages including its advanced stage of development, low
capex/opex and high yields of high quality synthetic crude
oil.
- Ivanhoe successfully upgraded
heavy crude oil from Ecopetrol S.A. (7.2 °API), demonstrating the
flexibility and robustness of the process to convert diverse heavy
crude feedstocks into high value, marketable and pipeline-ready
SCO.
- Ivanhoe conducted several
tests at the Feedstock Test Facility in San Antonio, Texas that demonstrated the
stability of the SCO product for pipelining and refining.
- Refinery hydrotreater pilot plant studies demonstrated that HTL
SCO produces specification products including naphtha, diesel and
jet.
- Ivanhoe and SBM Offshore
formed a global strategic alliance, combining their respective
expertise to create Floating, Production, Upgrading, Storage and
Offloading vessels (FPUSO's). The two parties are
co-marketing the process globally.
- Ivanhoe is in ongoing
discussions with several companies in Canada, Mexico and Colombia.
- Ivanhoe continues to
strengthen its intellectual property portfolio, filing several new
patent applications in 2013.
Ivanhoe's
extensive activity over the past year demonstrates the Company's
focus to achieve HTL technology commercialization. Once
commercialized, HTL will assist in the evolution or paradigm shift
currently underway in the oil and gas industry involving the
migration of hydrocarbon upgrading and refining process intensities
closer to the production source. By removing carbon closer to
the production source historical transportation constraints and
refinery infrastructure bottlenecks will be mitigated.
Corporate Matters
In 2013, Ivanhoe successfully maintained operations
with zero safety and environmental lost time incidents. Given
the importance of this achievement, employees were recognized for
realizing this corporate objective. However, the Leadership
Team was evaluated on a number of other factors, none of which were
achieved. As a result, no cash bonuses were paid to the
Leadership Team for 2013 performance.
The NASDAQ stock exchange recently informed
Ivanhoe Energy that the Company has qualified for an additional 180
calendar day extension until September 2,
2014 before it must comply with all listing
requirements. If necessary, the Company will effect a reverse
stock split to cure the deficiency.
Project Highlights
Tamarack - Canada
As disclosed previously, Ivanhoe has suspended activity on its current
Tamarack oil sands project until there is greater regulatory
certainty as to a path to approval. Until then, Ivanhoe will limit Tamarack spending to only
essential items.
Block 20 - Ecuador
The Company continues to pursue Ecuadorian
Government approval for the proposed joint financial participation
agreement with a large international oil company. If
approved, this new consortium contract would supplant Ivanhoe's existing contract. The Company
is in active discussions with the Government and the proposed
consortium partner on future Block 20 development.
Nyalga - Mongolia
In 2013 the Company completed a 106 kilometer
2-D seismic program. Independent consultants created a prospects
report that combines this new seismic data and results from 2012
drilling. The report recommends three potential drill sites to be
evaluated. The Company was granted a two-year extension to
the initial five-year term of the exploration license, set to
expire July 19, 2013. The
Production Sharing Contract (PSC) term now ends on July 19, 2015. This provides additional time to
find a partner or buyer. The PSC permits an additional two year
extension from July 2015.
Ivanhoe Energy is an independent international
heavy oil exploration and development company focused on pursuing
long-term growth in its reserves and production using advanced
technologies, including its proprietary heavy oil upgrading process
(HTL®). Core operations are in Canada, United
States, and Ecuador, with
business development opportunities worldwide. Ivanhoe Energy trades
on the Toronto Stock Exchange with the ticker symbol IE and on the
NASDAQ Capital Market with the ticker symbol IVAN. For more
information about Ivanhoe Energy Inc. please visit
www.ivanhoeenergy.com.
FORWARD-LOOKING STATEMENTS: This document
includes forward-looking statements, including forward-looking
statements within the meaning of the Private Securities Litigation
Reform Act of 1995. Forward-looking statements include, but
are not limited to the potential for commercialization and future
application of the heavy oil upgrading technology and other
technologies, statements relating to the continued advancement of
Ivanhoe Energy's projects, statements relating to the timing and
amount of proceeds of agreed upon and contemplated disposition
transactions, statements relating to anticipated capital
expenditures, statements relating to the timing and success
of regulatory review applications, and other statements which are
not historical facts. When used in this document, the words such as
"could," "plan," "estimate," "expect," "intend," "may,"
"potential," "should," and similar expressions relating to matters
that are not historical facts are forward-looking statements.
Although Ivanhoe Energy believes that its expectations reflected in
these forward-looking statements are reasonable, such statements
involve risks and uncertainties and no assurance can be given that
actual results will be consistent with these forward-looking
statements. Important factors that could cause actual results
to differ from these forward-looking statements include the
potential that the Company's projects will experience technological
and mechanical problems, new product development will not proceed
as planned, the HTL® technology to upgrade bitumen and
heavy oil may not be commercially viable, geological conditions in
reservoirs may not result in commercial levels of oil and gas
production, the availability of drilling rigs and other support
services, uncertainties about the estimates of reserves, the risk
associated with doing business in foreign countries, environmental
risks, changes in product prices, our ability to raise capital as
and when required, our ability to complete agreed upon and planned
asset dispositions, competition and other risks disclosed in
Ivanhoe Energy's 2013 Annual Report on Form 10-K filed with the
U.S. Securities and Exchange Commission on EDGAR and the Canadian
Securities Commissions on SEDAR.
SOURCE Ivanhoe Energy Inc.