CALGARY, Feb. 21, 2018 /CNW/ - Gear Energy Ltd.
("Gear" or the "Company") (TSX:GXE) is pleased to provide the
following fourth quarter operating update to shareholders. Gear's
Interim Financial Statements and related Management's Discussion
and Analysis ("MD&A") for the period ended December 31, 2017 are available for review on
Gear's website at www.gearenergy.com and on www.sedar.com.
Financial
Summary
|
|
|
|
|
|
Three months
ended
|
Twelve months
ended
|
(Cdn$ thousands,
except per share,
share and per boe amounts)
|
|
Dec 31,
2017
|
Dec 31,
2016
|
Sep 30,
2017
|
Dec 31,
2017
|
Dec 31,
2016
|
FINANCIAL
|
|
|
|
|
|
|
Cash flow from
operations (1)
|
|
14,613
|
9,407
|
9,960
|
43,550
|
28,591
|
|
Per weighted average
basic share
|
|
0.07
|
0.05
|
0.05
|
0.23
|
0.21
|
|
Per weighted average
diluted share
|
|
0.07
|
0.05
|
0.05
|
0.21
|
0.21
|
Cash flow from
operating activities
|
|
9,964
|
6,888
|
9,197
|
36,768
|
25,306
|
Net income
(loss)
|
|
6,947
|
(12,191)
|
(2,705)
|
10,229
|
(23,686)
|
|
Per weighted average
basic share
|
|
0.04
|
(0.07)
|
(0.01)
|
0.05
|
(0.18)
|
|
Per weighted average
diluted share
|
|
0.03
|
(0.07)
|
(0.01)
|
0.05
|
(0.18)
|
Capital
expenditures
|
|
12,307
|
6,067
|
10,513
|
47,765
|
14,368
|
Net acquisitions
(2)
|
|
14
|
(74)
|
1,635
|
1,709
|
57,612
|
Net debt outstanding
(1)
|
|
43,269
|
36,967
|
44,568
|
43,269
|
36,967
|
Weighted average
shares, basic (thousands)
|
|
194,968
|
191,134
|
193,158
|
193,477
|
133,172
|
Weighted average
shares, diluted (thousands)
|
|
211,310
|
191,134
|
193,158
|
210,029
|
133,172
|
Shares outstanding,
end of period (thousands)
|
|
194,968
|
192,568
|
194,968
|
194,968
|
192,568
|
|
|
|
|
|
|
|
OPERATING
|
|
|
|
|
|
|
Production
|
|
|
|
|
|
|
|
Heavy Oil
(bbl/d)
|
|
4,760
|
3,997
|
4,054
|
4,112
|
4,099
|
|
Light and Medium Oil
(bbl/d)
|
|
1,161
|
989
|
1,290
|
1,237
|
428
|
|
Natural gas liquids
(bbl/d)
|
|
242
|
308
|
279
|
265
|
114
|
|
Natural gas
(mcf/d)
|
|
5,566
|
5,456
|
5,415
|
5,379
|
3,064
|
|
Total
(boe/d)
|
|
7,090
|
6,203
|
6,525
|
6,511
|
5,152
|
Average
prices
|
|
|
|
|
|
|
|
Heavy oil
($/bbl)
|
|
49.18
|
41.21
|
44.00
|
45.49
|
34.74
|
|
Light and Medium oil
($/bbl)
|
|
64.71
|
57.98
|
53.12
|
59.40
|
55.30
|
|
Natural gas liquids
($/bbl)
|
|
27.79
|
24.16
|
27.28
|
26.80
|
22.89
|
|
Natural gas
($/mcf)
|
|
1.90
|
3.07
|
1.52
|
2.32
|
2.50
|
Netback
($/boe)
|
|
|
|
|
|
|
|
Commodity and other
sales
|
|
46.06
|
39.70
|
40.41
|
43.15
|
34.15
|
|
Royalties
|
|
(4.15)
|
(3.76)
|
(4.50)
|
(4.40)
|
(3.19)
|
|
Operating
costs
|
|
(16.03)
|
(16.25)
|
(16.57)
|
(16.66)
|
(15.46)
|
|
Operating netback
(1)
|
|
25.88
|
19.69
|
19.34
|
22.09
|
15.50
|
|
Realized risk
management (losses) gains
|
|
(0.73)
|
0.24
|
0.11
|
(0.64)
|
4.67
|
|
General and
administrative
|
|
(1.92)
|
(2.59)
|
(2.06)
|
(2.25)
|
(2.85)
|
|
Interest
|
|
(0.83)
|
(0.85)
|
(0.81)
|
(0.84)
|
(1.17)
|
|
Other
|
|
-
|
-
|
-
|
(0.04)
|
(1.04)
|
|
Corporate netback
(1)
|
|
22.40
|
16.49
|
16.58
|
18.32
|
15.11
|
|
|
|
|
|
|
|
TRADING
STATISTICS
($ based on intra-day
trading)
|
|
|
|
|
|
|
High
|
|
1.00
|
1.18
|
0.86
|
1.26
|
1.18
|
Low
|
|
0.70
|
0.68
|
0.65
|
0.60
|
0.25
|
Close
|
|
0.85
|
1.18
|
0.82
|
0.85
|
1.18
|
Average daily volume
(thousands)
|
|
468
|
647
|
326
|
400
|
389
|
|
|
|
|
|
|
|
(1)
|
Cash flow from
operations, net debt, operating netback and corporate netback are
non-GAAP measures and additional information with respect to these
measures can be found under the heading "Non-GAAP Measures"
in Gear's MD&A.
|
(2)
|
Net acquisitions
exclude non-cash items for decommissioning liability and deferred
taxes and is net of post-closing adjustments.
|
QUARTERLY HIGHLIGHTS
- Achieved record high sales production for the fourth quarter
averaging 7,090 boe per day. This was a nine per cent increase
compared to the prior quarter and a 14 per cent increase compared
to the prior year fourth quarter. Estimated field production was
even higher at 7,380 boe per day for the fourth quarter. As a
result of takeaway bottlenecks experienced in the fourth quarter,
Gear built its heavy oil inventory by approximately 27,000 barrels
to exit with approximately 189,000 barrels in storage. As oil
egress improves through the remainder of 2018, Gear will look to
reduce inventories to regular operating levels.
- Realized quarterly cash flow from operations of $14.6 million, a 46 per cent increase from the
third quarter cash flow of $10.0
million and the highest quarterly cash flow in 10
consecutive quarters. The significant increase was primarily due to
higher production as a result of Gear's active and successful
summer drilling program and an increase in realized pricing.
- Realized operating netback of $25.88 per boe and a corporate netback of
$22.40 per boe, an increase of 34 per
cent and 35 per cent, respectively, from the third quarter,
principally as a result of increased prices and lower costs.
- Drilled 7 gross (7 net) wells during the quarter with 100 per
cent success including; three multi-lateral unlined heavy oil wells
in Wildmere, two fracture stimulated medium oil wells in
Killam, one horizontal heavy oil
well in Paradise Hill, and one
multi-lateral unlined heavy oil well in Hoosier. Based on preliminary results,
aggregate production for the new wells is meeting expectations.
Total development capital expenditures during the fourth quarter
totaled $12.3 million.
- Reduced outstanding net debt through the fourth quarter to exit
2017 with net debt of $43.3 million
and a strong fourth quarter net debt to annualized cash flow from
operations ratio of 0.7 times.
ANNUAL HIGHLIGHTS
- Realized record annual sales production of 6,511 boe per day
for calendar 2017, a 26 per cent increase over the 5,152 boe per
day in 2016. This accomplishment was primarily the result of the
successful annual drilling program as well as including a full year
of production from the acquisition of Striker Exploration Corp.
("Striker") completed in July 2016.
Estimated field production for 2017 was 6,648 boe per day.
- Achieved annual cash flow from operations of $43.6 million in 2017, a 52 per cent increase
over the $28.6 million recorded in
2016.
- Successfully drilled 33 out of 34 gross wells (32.8 out of 33.8
net) including 15 Paradise Hill heavy oil wells, 11 Wildmere heavy
oil wells, three Hoosier heavy oil
wells, two Killam medium oil
wells, and three Wilson Creek
light oil wells. The one unsuccessful well experienced an
underground blowout prior to reaching the target reservoir and was
abandoned after being safely and effectively contained. All
associated expenditures were insured.
- Decreased annual general & administrative and interest
expense per boe by 21 per cent and 28 per cent, respectively,
compared to 2016. These savings were a result of increasing
production and lowering average debt levels. Operating costs
increased year over year by eight percent largely as a result of
increased gas processing fees associated with the Striker
acquisition completed in July
2016.
- Increased Gear's credit facility from $50 million to $55
million and maintained a strong 2017 annual net debt to cash
flow from operations ratio of 1.0 times.
2018 OUTLOOK
- Commodity prices into early 2018 have continued their trend of
volatility with WTI ranging from a high of almost US$67 per barrel to a low below US$58 per barrel. Additionally, Canadian heavy
oil differentials have widened, albeit briefly to as much as
US$30 per barrel. The theme through
the last few months has been focused on transportation challenges
for Canadian oil with the market presently looking to crude-by-rail
to relieve the current bottlenecks. The recent forward curve
prices, after hedging, are indicating a potential $4 per boe reduction in forecasted revenue
relative to the pricing Gear used when building the initial 2018
capital budget.
- Fortunately, additional oil takeaway capacity appears to be
coming into the market with greater pipeline capacity (through
re-configurations) and incremental rail services. At this time,
Gear is still planning to largely execute its 2018 program as
outlined in its December 14, 2017
budget press release. However, Gear has deferred some of its
planned Q1 heavy oil drilling locations into the summer due to the
takeaway capacity constraints previously highlighted. Gear is also
looking to potentially substitute and accelerate some of its light
oil drilling locations in place of heavy oil drilling locations in
the first half of the year. As always, the team will remain nimble
and adjust capital accordingly to balance growth opportunities with
the maintenance of a strong balance sheet.
GEAR ENERGY
LTD.
|
BALANCE SHEETS
(unaudited)
|
As at December
31
|
|
(Cdn$
thousands)
|
|
2017
|
|
2016
|
ASSETS
|
|
|
|
|
Current
assets
|
|
|
|
|
|
Accounts
receivable
|
$
|
13,240
|
$
|
9,526
|
|
Prepaid
expenses
|
|
2,862
|
|
2,774
|
|
Inventory
|
|
7,297
|
|
5,723
|
|
|
|
23,399
|
|
18,023
|
|
|
|
|
|
|
Deferred income tax
asset
|
|
26,531
|
|
20,589
|
Property, plant and
equipment
|
|
256,961
|
|
242,837
|
Total
assets
|
$
|
306,891
|
$
|
281,449
|
|
|
|
|
|
|
LIABILITIES
|
|
|
|
|
Current
liabilities
|
|
|
|
|
|
Accounts payable and
accrued liabilities
|
$
|
11,625
|
$
|
9,827
|
|
Risk management
contracts
|
|
5,295
|
|
7,305
|
|
Flow-through share
liability
|
|
-
|
|
135
|
|
|
|
16,920
|
|
17,267
|
|
|
|
|
|
|
Debt
|
|
41,345
|
|
31,163
|
Convertible
debentures
|
|
12,155
|
|
11,973
|
Decommissioning
liability
|
|
80,541
|
|
78,814
|
Total
liabilities
|
|
150,961
|
|
139,217
|
|
|
|
|
|
|
SHAREHOLDERS'
EQUITY
|
|
|
|
|
|
Share
capital
|
|
311,240
|
|
308,900
|
|
Warrants
|
|
129
|
|
335
|
|
Equity component of
convertible debentures
|
|
2,592
|
|
2,649
|
|
Contributed
surplus
|
|
15,178
|
|
13,786
|
|
Deficit
|
|
(173,209)
|
|
(183,438)
|
Total shareholders'
equity
|
|
155,930
|
|
142,232
|
Total liabilities and
shareholders' equity
|
$
|
306,891
|
$
|
281,449
|
GEAR ENERGY
LTD.
|
|
|
|
|
|
|
|
|
|
|
|
|
STATEMENTS OF
CHANGES IN SHAREHOLDERS' EQUITY (unaudited)
|
|
For the years
ended December 31
|
|
(Cdn$
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share
Capital
|
|
Warrants
|
|
Equity
Component of
Convertible
Debentures
|
|
Contributed
Surplus
|
|
Deficit
|
|
Total
Equity
|
Balance at
December 31, 2015
|
$
|
241,535
|
$
|
-
|
$
|
-
|
$
|
12,377
|
$
|
(159,752)
|
$
|
94,160
|
Issued on offering of
common shares
|
|
20,125
|
|
-
|
|
-
|
|
-
|
|
-
|
|
20,125
|
Issued as
consideration on corporate acquisition
|
|
46,506
|
|
335
|
|
-
|
|
-
|
|
-
|
|
46,841
|
Issued on
flow-through share offering
|
|
859
|
|
-
|
|
-
|
|
-
|
|
-
|
|
859
|
Share issue costs,
net of deferred tax of $357
|
|
(979)
|
|
-
|
|
-
|
|
-
|
|
-
|
|
(979)
|
Approval of
conversion feature
|
|
-
|
|
-
|
|
2,800
|
|
-
|
|
-
|
|
2,800
|
Issued on conversion
of convertible
|
|
|
|
|
|
|
|
|
|
|
|
|
|
debentures
|
|
854
|
|
-
|
|
(151)
|
|
-
|
|
-
|
|
703
|
Share-based
compensation
|
|
-
|
|
-
|
|
-
|
|
1,409
|
|
-
|
|
1,409
|
Net loss for the
year
|
|
-
|
|
-
|
|
-
|
|
-
|
|
(23,686)
|
|
(23,686)
|
Balance at
December 31, 2016
|
$
|
308,900
|
$
|
335
|
$
|
2,649
|
$
|
13,786
|
$
|
(183,438)
|
$
|
142,232
|
Exercise of stock
options
|
|
2,022
|
|
-
|
|
-
|
|
(573)
|
|
-
|
|
1,449
|
Cancellation of
warrants
|
|
-
|
|
(206)
|
|
-
|
|
206
|
|
-
|
|
-
|
Share issue costs,
net of deferred tax of $2
|
|
(5)
|
|
-
|
|
-
|
|
-
|
|
-
|
|
(5)
|
Issued on conversion
of convertible
|
|
|
|
|
|
|
|
|
|
|
|
|
|
debentures
|
|
323
|
|
-
|
|
(57)
|
|
-
|
|
-
|
|
266
|
Share-based
compensation
|
|
-
|
|
-
|
|
-
|
|
1,759
|
|
-
|
|
1,759
|
Net income for the
year
|
|
-
|
|
-
|
|
-
|
|
-
|
|
10,229
|
|
10,229
|
Balance at
December 31, 2017
|
$
|
311,240
|
$
|
129
|
$
|
2,592
|
$
|
15,178
|
$
|
(173,209)
|
$
|
155,930
|
GEAR ENERGY
LTD.
|
STATEMENTS OF
INCOME (LOSS) AND COMPREHENSIVE INCOME (LOSS)
(unaudited)
|
|
|
|
Three Months
Ended
December
31
|
Twelve Months
Ended
December
31
|
(Cdn$ thousands,
except per share amounts)
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
REVENUE
|
|
|
|
|
|
|
|
|
|
Sales of crude oil,
natural gas and natural gas liquids
|
$
|
30,047
|
$
|
22,654
|
$
|
102,551
|
$
|
64,400
|
|
Royalties
|
|
(2,705)
|
|
(2,144)
|
|
(10,454)
|
|
(6,006)
|
|
|
27,342
|
|
20,510
|
|
92,097
|
|
58,394
|
|
|
|
|
|
|
|
|
|
|
|
Realized cash (loss)
gain on risk management contracts
|
|
(476)
|
|
139
|
|
(1,524)
|
|
8,801
|
|
Unrealized (loss)
gain on risk management contracts
|
|
(5,261)
|
|
(5,586)
|
|
2,010
|
|
(16,478)
|
|
|
|
21,605
|
|
15,063
|
|
92,583
|
|
50,717
|
|
|
|
|
|
|
|
|
|
|
EXPENSES
|
|
|
|
|
|
|
|
|
|
Operating
|
|
10,456
|
|
9,275
|
|
39,586
|
|
29,156
|
|
General and
administrative
|
|
1,253
|
|
1,479
|
|
5,347
|
|
5,378
|
|
Interest and
financing charges
|
|
540
|
|
484
|
|
1,986
|
|
2,209
|
|
Depletion,
depreciation and amortization
|
|
10,450
|
|
9,052
|
|
37,896
|
|
26,917
|
|
Accretion
|
|
578
|
|
461
|
|
2,199
|
|
1,660
|
|
Share-based
compensation
|
|
420
|
|
497
|
|
1,759
|
|
1,409
|
|
Transaction
costs
|
|
-
|
|
-
|
|
-
|
|
1,485
|
|
Gain on asset
disposition
|
|
-
|
|
-
|
|
(445)
|
|
(1,300)
|
|
Loss on conversion
approval option
|
|
-
|
|
-
|
|
-
|
|
1,000
|
|
Other
|
|
1
|
|
1
|
|
101
|
|
484
|
|
|
|
23,698
|
|
21,249
|
|
88,429
|
|
68,398
|
|
|
|
|
|
|
|
|
|
|
Deferred tax recovery
(expense)
|
|
9,040
|
|
(6,005)
|
|
6,075
|
|
(6,005)
|
Net income (loss) and
comprehensive income (loss)
|
$
|
6,947
|
$
|
(12,191)
|
$
|
10,229
|
$
|
(23,686)
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per
share, basic
|
$
|
0.04
|
$
|
(0.07)
|
$
|
0.05
|
$
|
(0.18)
|
Net income (loss) per
share, diluted
|
$
|
0.03
|
$
|
(0.07)
|
$
|
0.05
|
$
|
(0.18)
|
GEAR ENERGY
LTD.
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STATEMENTS OF CASH
FLOWS (unaudited)
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Three Months
Ended
December
31
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Twelve Months
Ended
December
31
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(Cdn$
thousands)
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2017
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2016
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|
2017
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2016
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|
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CASH FLOWS FROM
OPERATING ACTIVITIES
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Net income
(loss)
|
$
|
6,947
|
$
|
(12,191)
|
$
|
10,229
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$
|
(23,686)
|
Add items not
involving cash:
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|
|
|
|
|
|
|
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Unrealized loss
(gain) on risk management contracts
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5,261
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|
5,584
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(2,010)
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16,478
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|
Bad debt (recovery)
expense
|
|
(3)
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|
(1)
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(3)
|
|
108
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|
Depletion,
depreciation and amortization
|
|
10,450
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|
9,052
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|
37,896
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|
26,917
|
|
Accretion
|
|
578
|
|
461
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|
2,199
|
|
1,660
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|
Share-based
compensation
|
|
420
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|
497
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|
1,759
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|
1,409
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|
Gain on asset
disposition
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-
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-
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(445)
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|
(1,300)
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|
Loss on conversion
approval option
|
|
-
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|
-
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-
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|
1,000
|
|
Deferred tax
(recovery) expense
|
|
(9,040)
|
|
6,005
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|
(6,075)
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|
6,005
|
Decommissioning
liabilities settled
|
|
(1,260)
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(210)
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|
(2,577)
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|
(1,853)
|
Change in non-cash
working capital
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(3,389)
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|
(2,309)
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|
(4.205)
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|
(1,432)
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|
|
|
9,964
|
|
6,888
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|
36,768
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|
25,306
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|
|
|
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CASH FLOW FROM
FINANCING ACTIVITIES
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Borrowings
(repayments) of debt under credit facility
|
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1,937
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(2,372)
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10,182
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(24,562)
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Repayment of debt
assumed on corporate acquisition
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-
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-
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-
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(8,393)
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Convertible debenture
issue costs
|
|
-
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-
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|
-
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|
5
|
Issuance of share
capital, net of share issue costs
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|
-
|
|
981
|
|
1,442
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|
19,789
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|
|
1,937
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(1,391)
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11,624
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|
(13,161)
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CASH FLOW USED IN
INVESTING ACTIVITIES
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|
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Property, plant and
equipment expenditures
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|
(12,307)
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|
(6,067)
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(47,765)
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|
(14,368)
|
Acquisition of
petroleum and natural gas properties
|
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(46)
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|
(103)
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|
(2,261)
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(220)
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Disposition of
petroleum and natural gas properties
|
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(11)
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|
285
|
|
511
|
|
1,087
|
Change in non-cash
working capital
|
|
463
|
|
388
|
|
1,123
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|
1,356
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|
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(11,901)
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(5,497)
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(48,392)
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(12,145)
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INCREASE IN CASH
AND CASH EQUIVALENTS
|
|
-
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-
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|
-
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|
-
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CASH AND CASH
EQUIVALENTS, BEGINNING OF PERIOD
|
|
-
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-
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|
-
|
|
-
|
CASH AND CASH
EQUIVALENTS, END OF PERIOD
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
Forward-looking Information and Statements
This press
release contains certain forward-looking information and statements
within the meaning of applicable securities laws. The use of any of
the words "expect", "anticipate", "continue", "estimate",
"objective", "ongoing", "may", "will", "project", "should",
"believe", "plans", "intends", "strategy" and similar expressions
are intended to identify forward-looking information or statements.
In particular, but without limiting the foregoing, this press
release contains forward-looking information and statements
pertaining to the following: expectations with respect to commodity
prices and differentials; the potential for a reduction on a boe
basis for forecasted revenue; the expectation that additional oil
takeaway capacity appears to be coming into the market with greater
pipeline capacity (through re-configurations) and incremental rail
services; Gear's intent to largely execute its 2018 capital program
as previously disclosed; the intent to defer some of Gear's planned
first quarter heavy oil drilling locations into the summer; the
expectation that Gear may potentially substitute and accelerate
some of its light oil drilling locations in place of heavy oil
drilling locations in the first half of the year; and the
expectation that Gear will be able to adjust capital accordingly to
balance growth opportunities with the maintenance of a strong
balance sheet.
The forward-looking information and statements contained in this
press release reflect several material factors and expectations and
assumptions of Gear including, without limitation: that Gear will
continue to conduct its operations in a manner consistent with past
operations; the general continuance of current industry conditions;
the continuance of existing (and in certain circumstances, the
implementation of proposed) tax, royalty and regulatory regimes;
the accuracy of the estimates of Gear's reserves and resource
volumes; certain commodity price and other cost assumptions; and
the continued availability of adequate debt and equity financing
and cash flow from operations to fund its planned expenditures.
Gear believes the material factors, expectations and assumptions
reflected in the forward-looking information and statements are
reasonable but no assurance can be given that these factors,
expectations and assumptions will prove to be correct.
To the extent that any forward-looking information contained
herein may be considered a financial outlook, such information has
been included to provide readers with an understanding of
management's assumptions used for budgeting and developing future
plans and readers are cautioned that the information may not be
appropriate for other purposes. The forward-looking information and
statements included in this press release are not guarantees of
future performance and should not be unduly relied upon. Such
information and statements involve known and unknown risks,
uncertainties and other factors that may cause actual results or
events to differ materially from those anticipated in such
forward-looking information or statements including, without
limitation: changes in commodity prices; changes in the demand for
or supply of Gear's products; unanticipated operating results or
production declines; changes in tax or environmental laws, royalty
rates or other regulatory matters; changes in development plans of
Gear or by third party operators of Gear's properties, increased
debt levels or debt service requirements; inaccurate estimation of
Gear's oil and gas reserve and resource volumes; limited,
unfavorable or a lack of access to capital markets; increased
costs; a lack of adequate insurance coverage; the impact of
competitors; and certain other risks detailed from time to time in
Gear's public documents including in Gear's most current annual
information form which is available on SEDAR at www.sedar.com.
The forward-looking information and statements contained in this
press release speak only as of the date of this press release, and
Gear does not assume any obligation to publicly update or revise
them to reflect new events or circumstances, except as may be
required pursuant to applicable laws.
NON-GAAP Measures
This press release contains the
terms cash flow from operations, net debt, operating netback and
corporate netback, which do not have standardized meanings under
Canadian generally accepted accounting principles ("GAAP") and
therefore may not be comparable with the calculation of similar
measures by other companies. Management believes that these key
performance indicators and benchmarks are key measures of financial
performance for Gear and provide investors with information that is
commonly used by other oil and gas companies. Cash flow from
operations is calculated as cash flow from operating activities
before changes in noncash operating working capital and
decommissioning liabilities settled. Net debt is calculated as debt
less current working capital items, excluding risk management
contracts. Operating netbacks are presented both before and after
taking into account the effects of hedging and are calculated based
on the amount of revenues received on a per unit of production
basis after royalties and operating costs. Corporate netbacks are
presented after taking into account the effects of hedging and are
calculated based on the amount of revenues received on a per unit
of production basis after royalties, operating costs, general and
administrative expenses, interest and foreign exchange gain or
loss. Additional information relating to certain of these non-GAAP
measures, including the reconciliation between cash flow from
operations and cash flow from operating activities, can be found in
the MD&A.
Barrels of Oil Equivalent
Disclosure provided herein
in respect of BOEs may be misleading, particularly if used in
isolation. A BOE conversion ratio of six Mcf to one Bbl is based on
an energy equivalency conversion method primarily applicable at the
burner tip and do not represent a value equivalency at the
wellhead. Additionally, given that the value ratio based on the
current price of crude oil, as compared to natural gas, is
significantly different from the energy equivalency of 6:1;
utilizing a conversion ratio of 6:1 may be misleading as an
indication of value.
Initial and Other Production Rates
Any references in
this document to initial production rates or production rates of
new wells over a period of time are useful in confirming the
presence of hydrocarbons, however, such rates are not determinative
of the rates at which such wells or other future wells will
continue production and decline thereafter. Additionally, such
rates may also include recovered "load oil" fluids used in well
completion stimulation. There is no certainty that other wells on
such properties will achieve such production levels. Readers are
cautioned not to place reliance on such rates in calculating the
aggregate production for Gear.
SOURCE Gear Energy Ltd.