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