Crown Point Announces Results for the Three Months Ended March 31, 2014 and Provides Operational Update
May 28 2014 - 7:05PM
Marketwired Canada
Crown Point Energy Inc. ("Crown Point" or the "Company") (TSX VENTURE:CWV) today
announces its operating and financial results for the three months ended March
31, 2014. Copies of the Company's unaudited condensed interim consolidated
financial statements and related Management's Discussion and Analysis ("MD&A")
are being filed with Canadian securities regulatory authorities and will be made
available under the Company's profile at www.sedar.com and on the Company's
website at www.crownpointenergy.com. All dollar figures are expressed in United
States dollars unless otherwise stated.
FINANCIAL AND OPERATING HIGHLIGHTS
"During the first quarter Crown Point focused on advancing initiatives designed
to grow production and capture exploration upside from our core operating
regions," said Murray McCartney, CEO of Crown Point Energy. "In the near-term,
our core objectives include drilling additional wells in our 10-well development
and exploration drilling program at Tierra del Fuego and completing and testing
the La Hoyada x-1 exploration well at Cerro de Los Leones to assess its
potential as conventional Vaca Muerta discovery."
Highlights include:
-- Cerro de Los Leones: Drilled, logged and cased the La Hoyada x-1
exploration well as a potential conventional Vaca Muerta oil discovery.
Completion operations for the La Hoyada x-1 well commenced in late May.
-- Tierra del Fuego: Signed a drilling contract with San Antonio
International to provide a drilling rig for our initial 10 well drilling
program. Contract is extendable for three years. The first well drilled
LF-1008 has been cased as a potential natural gas well with 11 metres of
gross sand in the Springhill.
-- Argentina New Gas Incentive Program: On March 30, 2014, Crown Point
submitted to the Argentine Government its formal proposal for
participation in the New Gas Incentive Program for smaller companies
announced in November 2013.
-- Average Daily Sales Volumes: 1,571 BOEPD.
-- Operating Netback per BOE: $14.19.
Q1 FINANCIAL AND OPERATING RESULTS
Results for the three months ended March 31, 2014 include:
-- Average Daily Sales Volumes: 1,571 BOEPD for the three months ended
March 31, 2014, as compared to 1,994 BOEPD for the three months ended
March 31, 2013. This decrease was in part a result of the termination of
NGL exports in mid-May 2013 in connection with the Company's decision to
leave the majority of NGL production in the gas stream, the effect of
staged compressor maintenance and natural declines in oil and gas
production.
-- Operating Netback per BOE: $14.19 for the three months ended March 31,
2014, as compared to $15.53 for the three months ended March 31, 2013.
Total Company operating netbacks decreased in the 2014 period compared
to the 2013 period due mainly to a decrease in NGL and gas prices earned
in the 2014 period which were partially offset by lower royalties and
operating costs.
-- Funds Flow From Operations: $0.75 million for the three months ended
March 31, 2014, compared to $2.32 million for the three months ended
March 31, 2013. The Company did not receive any proceeds from the sale
of Petroleo Plus Credits in the 2014 period as compared to $1.2 million
received and recognized in the 2013 period.
Operating Netbacks - Total Company
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Three months ended
March 31
2014 2013
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Total sales volumes (BOE) 141,430 179,461
Average daily sales volumes
(BOEPD) 1,571 1,994
Per BOE Per BOE
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Total oil and gas revenue ($) 4,443,425 31.42 6,384,168 35.57
Total royalties ($) (827,858) (5.85) (1,242,077) (6.92)
Total operating costs ($) (1,609,201) (11.38) (2,354,872) (13.13)
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Total operating netback ($) 2,006,366 14.19 2,787,219 15.53
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OPERATIONS
CERRO DE LOS LEONES, NEUQUEN BASIN, ARGENTINA
The Company's 100% interest in the Cerro de Los Leones exploration concession
covers approximately 306,646 acres in the Mendoza portion of the Neuquen Basin.
On February 12, 2014 the Company announced that it had drilled, logged, cased
and rig released the La Hoyada x-1 exploration well as a potential Vaca Muerta
oil discovery. The La Hoyada x-1 well was drilled to a total depth of 1,953
metres and encountered persistent oil shows and gas while drilling through the
Vaca Muerta formation which consisted of 125 metres of shale and 84 metres of
imbedded fractured igneous intrusives. Completion operations on the La Hoyada
well commenced in late May. If the well is successfully completed it will be
placed on a production test with the potential for further drilling at Cerro de
Los Leones later in 2014.
TIERRA DEL FUEGO, ARGENTINA
The Company's 25.78% working interest in the Tierra del Fuego area of Argentina
covers approximately 489,000 acres (126,000 net acres) in the Austral Basin and
includes the Las Violetas, Angostura Sur and Rio Cullen exploitation
concessions. The primary term of all three concessions expires in November 2026.
Crown Point's Tierra del Fuego Concessions are high quality natural gas weighted
assets possessing the capability to deliver increased levels of production and
reserves in an expected increasing natural gas price market.
Drilling of the first well of the initial ten well program commenced on May 8,
2014. The well has been drilled to total depth and has been cased as a potential
gas well. The well encountered approximately 11 metres of sand in the Springhill
formation. Drilling of the second well LF-1027 is expected to commence in a few
days.
Commencing late in June, a fracture stimulation program will be performed on
four producing wells in the Los Flamencos natural gas pool. A similar program
undertaken in 2010 significantly improved deliverability from five wells in the
Los Flamencos pool.
Outlook:
The Company's efforts over the next few quarters will be focused principally on
two areas in Argentina: Tierra del Fuego for lower risk natural gas focused
repeatable drilling and Cerro de Los Leones for completion and testing of the La
Hoyada X-1 exploration well, the first in a potential high impact oil
exploration program in the Neuquen basin.
Management expects that production additions from the drilling and fracture
stimulation program will commence in July and, as a result, management expects
to see rising production volumes and field sales receipts through to the end of
the year. Financially, this is expected to have a positive impact on the
Company's income statement as spot market natural gas prices continue to rise in
Argentina. The balance of the 10 well program on the Las Violetas Exploitation
Concession will consist of seven more development wells in the Los Flamencos gas
pool and two exploration wells, one on the Puesto Quince prospect and another
near the southern San Luis natural gas pool. All of the drilling locations have
been fully imaged with 3-D seismic. The Puesto Quince prospect lies to the
northeast of the Los Flamencos and Los Patos producing pools and is adjacent to
the Rio Chico gas pool. The feature has a seismically mapped aerial extent of
approximately 50 km2. The San Luis exploration prospect has been defined with
3-D seismic and is located on a separate fault block near the San Luis gas pool.
At Cerro de Los Leones the Company has commenced completion operations on the La
Hoyada x-1 well. If the completion operations are successful, the Company plans
to place the well on a production test with the potential for further drilling
at Cerro de Los Leones in late 2014.
Oil price realizations in Argentina were temporarily impacted by the peso
devaluation and economic conditions during the first quarter of 2014. In May,
oil prices were negotiated to be greater than the price received prior to the
peso devaluation of early 2014, or approximately $9 per barrel greater than the
price realized in the first quarter. The Company believes market conditions will
continue to have a positive impact on oil and natural gas prices as there is not
sufficient hydrocarbon production in Argentina to meet the demand for energy
consumption in the country. The Company also expects to realize benefits from
the Gas Plan II natural gas subsidy program that has been applied for by Crown
Point. This new hydrocarbon subsidy program provides an incentive for producers
to effectively earn higher gas prices for increases in natural gas production
above base production levels.
About Crown Point
Crown Point Energy Inc. is an international oil and gas exploration and
development company headquartered in Calgary, Canada, incorporated in Canada,
trading on the TSX Venture Exchange and operating in South America. Crown
Point's exploration and development activities are focused in the Golfo San
Jorge, Neuquen and Austral basins in Argentina. Crown Point has a strategy that
focuses on establishing a portfolio of producing properties, plus production
enhancement and exploration opportunities to provide a basis for future growth.
Advisory
Certain Oil and Gas Disclosures: Barrels of oil equivalent (BOE) may be
misleading, particularly if used in isolation. A boe conversion ratio of six
thousand cubic feet (6 Mcf) to one barrel (1 bbl) is based on an energy
equivalency conversion method primarily applicable at the burner tip and does
not represent a value equivalency at the wellhead. In addition, given that the
value ratio based on the current price of crude oil in Argentina as compared to
the current price of natural gas in Argentina is significantly different from
the energy equivalency of 6:1, utilizing a conversion on a 6:1 basis may be
misleading as an indication of value. "BOEPD" means barrels of oil equivalent
per day. "Mcf" means thousand cubic feet. "Mbbls" means thousands of barrels.
Non-IFRS Measures: This press release discloses "funds flow from operations" and
"operating netbacks", which do not have standardized meanings under
International Financial Reporting Standards ("IFRS") and as such may not be
comparable with the calculation of similar measures used by other entities.
Funds flow from operations should not be considered an alternative to or more
meaningful than, cash flow from operating activities as determined in accordance
with IFRS as an indicator of the Company's performance. Management uses funds
flow from operations to analyze operating performance and considers funds flow
from operations to be a key measure as it demonstrates the Company's ability to
generate cash necessary to fund future capital investment. A reconciliation of
funds flow from operations to cash flow from operating activities is presented
in the MD&A under "Non-IFRS Measures". Operating netbacks are calculated on a
per unit basis as oil, natural gas and natural gas liquids revenues less
royalties, transportation and operating costs. Management believes this measure
is a useful supplemental measures of the Company's profitability relative to
commodity prices. See "Operating Netbacks - Total Company".
Forward looking information: Certain information set forth in this document,
including: our belief that the La Hoyada x-1 well is a potential Vaca Muerta oil
discovery; our intention to perform a fracture stimulation program on four
producing wells in the Los Flamencos natural gas pool and the timing thereof and
our expectations for the results thereof; the ability of our first quarter
initiatives to grow production and capture exploration upside from our core
operating regions; our core objectives to drill additional wells in our 10-well
development and exploration drilling program at Tierra del Fuego ("TDF") and
complete and test the La Hoyada x-1 exploration well at Cerro de Los Leones to
assess its potential as a conventional Vaca Muerta discovery; our belief that
the LF-1008 well is a potential natural gas well and our expectations regarding
when completion operations will commence; our belief that our interests in the
TDF area possess the capability of delivering increased levels of production and
reserves in an expected increasing natural gas price market; our expectation
that a second well will commence drilling at TDF in a few days; our expectation
that if the La Hoyada x-1 well is successfully completed it will be placed on a
production test with the potential for further drilling at Cerro de Los Leones
later in 2014; our intention to focus our efforts over the next few quarters
principally on TDF for lower risk natural gas focused repeatable drilling and
Cerro de Los Leones for completion and testing of the La Hoyada x-1 exploration
well, the first in a potential high impact oil exploration program in the basin;
the details of our initial 10 well drilling program on the Las Violetas
Exploitation Concession at TDF, including the type and general location of wells
to be drilled; our expectation that production additions from the drilling and
fracture stimulation program at TDF will commence in July, that we will see
rising production volumes and field sales receipts through to the end of the
year, and that this will have a positive impact on our income statement as spot
market natural gas prices continue to rise in Argentina; our belief that if we
access the New Gas Subsidy Program it could further increase pricing received;
and our belief that market conditions will continue to have a positive impact on
oil and natural gas prices; is considered forward-looking information, and
necessarily involve risks and uncertainties, certain of which are beyond Crown
Point's control.
Such risks include but are not limited to: risks associated with oil and gas
exploration, development, exploitation, production, marketing and
transportation; risks associated with operating in Argentina, including risks of
changing government regulations (including the adoption of, amendments to, or
the cancellation of government incentive programs or other laws and regulations
relating to commodity prices, taxation, currency controls and export
restrictions, in each case that may adversely impact Crown Point),
expropriation/nationalization of assets, price controls on commodity prices,
inability to enforce contracts in certain circumstances, the potential for a
sovereign debt default or a hyperinflationary economic environment, and other
economic and political risks; loss of markets and other economic and industry
conditions; volatility of commodity prices; currency fluctuations; imprecision
of reserve estimates; environmental risks; competition from other producers;
inability to retain drilling services; incorrect assessment of value of
acquisitions and failure to realize the benefits therefrom; delays resulting
from or inability to obtain required regulatory approvals; the lack of
availability of qualified personnel or management; stock market volatility and
ability to access sufficient capital from internal and external sources; and
economic or industry condition changes.
Actual results, performance or achievements could differ materially from those
expressed in, or implied by, the forward-looking information and, accordingly,
no assurance can be given that any events anticipated by the forward-looking
information will transpire or occur, or if any of them do so, what benefits that
Crown Point will derive therefrom. With respect to forward-looking information
contained herein, the Company has made assumptions regarding: the impact of
increasing competition; the general stability of the economic and political
environment in Argentina; the timely receipt of any required regulatory
approvals; the ability of the Company to obtain qualified staff, equipment and
services in a timely and cost efficient manner; drilling results; the costs of
obtaining equipment and personnel to complete the Company's capital expenditure
program; the ability of the operator of the projects which the Company has an
interest in to operate the field in a safe, efficient and effective manner; the
ability of the Company to obtain financing on acceptable terms when and if
needed; field production rates and decline rates; the ability to replace and
expand oil and natural gas reserves through acquisition, development and
exploration activities; the timing and costs of pipeline, storage and facility
construction and expansion and the ability of the Company to secure adequate
product transportation; future oil and natural gas prices; currency, exchange
and interest rates; the regulatory framework regarding royalties, commodity
price controls, import/export matters, taxes and environmental matters in
Argentina; and the ability of the Company to successfully market its oil and
natural gas products. Additional information on these and other factors that
could affect Crown Point are included in reports on file with Canadian
securities regulatory authorities, including under the heading "Risk Factors" in
the Company's annual information form, and may be accessed through the SEDAR
website (www.sedar.com). Furthermore, the forward-looking information contained
in this document are made as of the date of this document, and Crown Point does
not undertake any obligation to update publicly or to revise any of the included
forward looking information, whether as a result of new information, future
events or otherwise, except as may be expressly required by applicable
securities law.
Neither 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 news release.
FOR FURTHER INFORMATION PLEASE CONTACT:
Crown Point Energy Inc.
Murray McCartney
President & CEO
(403) 232-1150
mmccartney@crownpointenergy.com
Crown Point Energy Inc.
Arthur J.G. Madden
Vice-President & CFO
(403) 232-1150
amadden@crownpointenergy.com
Crown Point Energy Inc.
Brian J. Moss
Executive Vice-President & COO
(403) 232-1150
(403) 232-1158 (FAX)
bmoss@crownpointenergy.com
www.crownpointenergy.com
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