TSX-V: CWV: Crown Point Energy Inc. (“Crown
Point”, the
“Company” or
"
we"
) today announced its
operating and financial results for the three months ended March
31, 2019.
Copies of the Company’s unaudited condensed
interim consolidated financial statements and management’s
discussion and analysis (“MD&A”) filings for
the three months ended March 31, 2019 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 ("USD") unless otherwise
stated.
In the following discussion, the three month
period ended March 31, 2019 may be referred to as “Q1 2019”, the
comparative three month period ended March 31, 2018 may be referred
to as “Q1 2018".
HIGHLIGHTS
During Q1 2019, the Company:
- Reported net cash from operating activities of $6.1 million, up
197% from $2.0 million in Q1 2018;
- Earned $12.0 million of oil and natural gas sales revenue, up
117% from $5.5 million earned in Q1 2018;
- Reported average daily sales volumes of 3,470 BOE per day, up
126% from 1,536 BOE per day in Q1 2018;
- Reported average daily production volumes of 4,328 BOE per day,
up 185% from 1,519 BOE per day in Q1 2018;
- Reported an operating netback of $20.76 per BOE, down 6% from
$22.12 per BOE in Q1 2018;
- Improved production from the SM x-1001 well by increasing the
choke size;
- Placed the third San Martin well, SM a-1003, on
production;
- Submitted requests for environmental approvals to drill two
exploration wells in the Cerra de Los Leones exploration permit
area;
- Repaid all bank debt consisting of a $1.7 million short-term
working capital loan.
The increase in net cash from operating
activities, oil and natural gas sales revenue, average daily sales
volumes and average daily production volumes in Q1 2019 as compared
to Q1 2018 was primarily due to the acquisition of St. Patrick Oil
& Gas Ltd. (“St. Patrick”) in June 2018 and
drilling success at the San Martin field located on the La
Angostura concession.
Subsequent to Q1 2019, the Company:
- Completed the right of first refusal sale of a 16.8251%
participating interest in the Tierra del Fuego concessions to the
Company’s partners for $17.5 million of cash consideration ($13.5
million plus a $4 million income tax gross-up) and contingent
consideration with an estimated fair value of $4.3 million.
OPERATIONAL UPDATE
Tierra del Fuego Concession
("TDF")
La Angostura ConcessionDuring Q1 2019, the San
Martin field located on the La Angostura concession produced a
total of 378,045 bbls of 35 API gravity oil (gross) (194,920 bbls
net) and 136 mmcf of (gross) associated natural gas (70 mmcf net).
Daily oil production averaged 4,200 bbls per day (gross) (net 2,242
bbls per day). Associated natural gas production averaged 1.51 mmcf
of gas per day (gross) (net 773 mcf per day).
The second appraisal well (SM a-1003), located
0.9 km north and west of the SM x-1001 discovery well, was placed
on stream on March 14, 2019. Co-mingled production from the upper
and lower Tobífera formations has averaged 120 bbls per day (net 60
bbls per day) with a 10% water cut since being placed on
production.
Las Violetas ConcessionThe LR x-1001 well,
drilled to the south of the Rio Chico gas processing facilities in
Q2 2018, was re-fractured and re-completed during Q1 2019. The flow
test recovered formation water with traces of oil and the well was
subsequently suspended.
Cerro de Los Leones Exploration Permit
(“CLL”)
The Company acquired 214 km2 of 3-D seismic in
Q3 2018 which is currently being used to finalize two drilling
locations in the northern CLL area. The two exploration
wells are planned for Q3 2019 at an aggregate budgeted cost of $3.7
million. Both wells will target lower Tertiary and upper Cretaceous
sandstones which are oil productive immediately north of CLL. The
requests for environmental approval have been submitted to the
provincial authorities.
OUTLOOK
The Company’s capital expenditure budget for
2019 is $15.0 million comprised of $11.3 million in TDF and $3.7
million in CLL based on expenditures for the following proposed
activities:
- Drill two appraisal wells on San Martin structure in the La
Angostura concession;
- Perform re-fracture stimulations on SM a-1003 and LR
x-1001;
- Three well workovers; one in the La Angostura concession, one
in the Rio Cullen concession and one in the Las Violetas
concession;
- Install oil treatment and water handling facilities at San
Martin to improve production capacity and reduce trucking
costs;
- Other improvements to facilities in TDF; and
- Drill two exploration wells in CLL.
The $11.3 million budget for TDF is based on the
Company’s share of the budget proposed by the UTE´s operator.
The Company is currently evaluating the budget proposal.
SUMMARY OF FINANCIAL
INFORMATION
(expressed in $, except shares outstanding) |
|
March 312019 |
December 312018 |
|
Working capital (deficit) |
|
642,453 |
(1,562,992 |
) |
Exploration and evaluation
assets |
|
9,043,030 |
9,032,994 |
|
Property and equipment |
|
54,449,248 |
54,750,958 |
|
Total assets |
|
83,390,910 |
85,128,625 |
|
Non-current financial
liabilities |
|
5,989,998 |
4,744,616 |
|
Share capital |
|
131,745,215 |
131,745,215 |
|
Total
common shares outstanding |
|
72,903,038 |
72,903,038 |
|
(expressed in $, except shares outstanding) |
|
Three months ended |
|
|
March 31 |
|
|
|
2019 |
2018 |
Oil and natural gas sales revenue |
|
|
12,012,185 |
5,541,446 |
Income before taxes |
|
|
3,317,053 |
909,144 |
Net income |
|
|
2,978,175 |
272,779 |
Net income per share (1) |
|
|
0.04 |
0.01 |
Cash flow from operations |
|
|
6,050,373 |
2,039,243 |
Cash flow per share –
operations (1) |
|
|
0.08 |
0.06 |
Adjusted funds flow from
operations (2) |
|
|
3,735,080 |
1,724,635 |
Adjusted funds flow per share
– operations (1)(2) |
|
|
0.05 |
0.05 |
Weighted average number of shares |
|
|
72,903,038 |
32,903,038 |
|
|
|
|
|
(1) All per share figures are based on the basic
weighted average number of shares outstanding in the period.
The effect of options is anti-dilutive. Per share amounts may
not add due to rounding.(2) "Adjusted funds flow from operations"
and "Adjusted funds flow per share - operations" are non-IFRS
measures. See "Non-IFRS Measures" in the "Advisory" section
of this press release and in the Company’s March 31, 2019 MD&A
for a reconciliation of these measures to the nearest comparable
IFRS measures.
TDF Sales Volumes
|
|
|
Three months ended |
|
|
|
March 31 |
|
|
|
|
2019 |
2018 |
Light oil bbls per day |
|
|
|
1,612 |
649 |
NGL bbls per day |
|
|
|
18 |
14 |
Natural
gas mcf per day |
|
|
|
11,036 |
5,240 |
BOE per
day |
|
|
|
3,470 |
1,536 |
|
|
|
|
|
|
TDF Operating Netback
The Company’s operating netback was lower in Q1
2019 as compared to Q1 2018 due to a decrease in oil and natural
gas prices and the effect of export taxes, which was partially
offset by a decrease in operating costs per BOE.
|
|
|
Three months ended |
|
|
|
March 31 |
Per BOE |
|
|
|
2019 |
|
2018 |
|
Oil and gas revenue ($) |
|
|
|
38.46 |
|
40.09 |
|
Export tax ($) |
|
|
|
(2.68 |
) |
– |
|
Royalties ($) |
|
|
|
(5.65 |
) |
(6.29 |
) |
Operating costs ($) |
|
|
|
(9.37 |
) |
(11.68 |
) |
Operating netback (1) ($) |
|
|
|
20.76 |
|
22.12 |
|
|
|
|
|
|
|
(1) "Operating netback" is a
non-IFRS measure. See "Non-IFRS Measures".
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 TWO OF THE LARGEST
PRODUCING BASINS IN ARGENTINA, THE AUSTRAL BASIN IN THE PROVINCE OF
TIERRA DEL FUEGO AND THE NEUQUÉN BASIN IN THE PROVINCE OF MENDOZA.
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
Non-IFRS Measures: Non-IFRS measures do not have
any standardized meanings prescribed by IFRS and may not be
comparable with the calculation of similar measures used by other
entities. Non-IFRS measures should not be considered
alternatives to, or more meaningful than, measures determined in
accordance with IFRS as indicators of the Company’s
performance. This press release contains the terms “adjusted
funds flow from operations” and "adjusted funds flow per share –
operations" which should not be considered alternatives to, or more
meaningful than, cash flow from operations and cash flow per share
– operations as determined in accordance with IFRS as an indicator
of the Company’s performance. Management uses adjusted funds
flow from operations to analyze operating performance and considers
adjusted 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. Adjusted funds flow per share
– operations is calculated using the basic and diluted weighted
average number of shares for the period consistent with the
calculations of earnings per share. For a reconciliation of
adjusted funds flow from operations to cash flow from operations,
which is the most directly comparable measure calculated in
accordance with IFRS, see the Company's MD&A. This press
release also contains other industry benchmarks and terms,
including “operating netbacks” (calculated on a per unit basis as
oil, natural gas and NGL revenues less export tax, royalties and
operating costs), which is a non-IFRS measure. See "TDF
Operating Netback" for the calculation of operating netback.
Management believes this measure is a useful supplemental measure
of the Company’s profitability relative to commodity prices.
Readers are cautioned, however, that operating netbacks should not
be construed as an alternative to other terms such as net income as
determined in accordance with IFRS as measures of
performance. Crown Point’s method of calculating this measure
may differ from other companies, and accordingly, may not be
comparable to similar measures used by other companies.
Abbreviations and BOE Presentation: "3-D" means
three dimensional, "API" means American Petroleum Institute
gravity, being an indication of the specific gravity of crude oil
measured on the API gravity scale, "bbls" means barrels, "BOE"
means barrels of oil equivalent, "km2" means square kilometres,
“mcf” means thousand cubic feet, "mmcf" means millions cubic feet,
"NGL" means natural gas liquids. All BOE conversions in this press
release are derived by converting natural gas to oil in the ratio
of six mcf of gas to one bbl of oil. BOE may be misleading,
particularly if used in isolation. A BOE conversion ratio of
six mcf of gas to one bbl of oil (6 mcf: 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. Given that the value ratio based on the current
price of crude oil as compared to natural gas in Argentina is
significantly different from the energy equivalency conversion
ratio of 6:1, utilizing a conversion on a 6:1 basis is misleading
as an indication of value.
Forward-looking Information: This document
contains forward-looking information. This information
relates to future events and the Company’s future
performance. All information and statements contained herein
that are not clearly historical in nature constitute
forward-looking information, and the words “may”, “will”, “should”,
“could”, “expect”, “plan”, “intend”, “anticipate”, “believe”,
“estimate”, “propose”, “predict”, “potential”, “continue”, “aim”,
"budget" or the negative of these terms or other comparable
terminology are generally intended to identify forward-looking
information. Such information represents the Company’s
internal projections, estimates, expectations, beliefs, plans,
objectives, assumptions, intentions or statements about future
events or performance. This information involves known or
unknown risks, uncertainties and other factors that may cause
actual results or events to differ materially from those
anticipated in such forward-looking information.
In addition, this document may contain forward-looking
information attributed to third party industry sources. Crown
Point believes that the expectations reflected in this
forward-looking information are reasonable; however, undue reliance
should not be placed on this forward-looking information, as there
can be no assurance that the plans, intentions or expectations upon
which they are based will occur. This press release contains
forward-looking information concerning, among other things, the
following: under "Operational Update – Cerro de Los Leones
Exploration Permit ("CLL")", the expected timing and budget for two
exploration wells and the anticipated play targets fort the
exploration wells and the associated anticipated benefits; under
"Outlook", our estimated capital expenditures for fiscal 2019, the
allocation of such capital expenditures between our TDF and CLL
concessions, the anticipated elements of this capital program, and
the Company’s continued evaluation of its fiscal 2019 budget
proposal; under "About Crown Point", all elements of the Company’s
business strategy. The reader is cautioned that such information,
although considered reasonable by the Company, may prove to be
incorrect. Actual results achieved during the forecast period will
vary from the information provided in this document as a result of
numerous known and unknown risks and uncertainties and other
factors. A number of risks and other factors could cause actual
results to differ materially from those expressed in the
forward-looking information contained in this document including,
but not limited to, the following: the risks and other factors
described under “Business Risks and Uncertainties” in our MD&A
for the three month period ended March 31, 2019 and under “Risk
Factors” in the Company’s most recently filed Annual Information
Form, which is available for viewing on SEDAR at www.sedar.com. In
addition, note that information relating to reserves and resources
is deemed to be forward-looking information, as it involves the
implied assessment, based on certain estimates and assumptions that
the reserves and resources described can be economically produced
in the future. With respect to forward-looking information
contained in this document, the Company has made assumptions
regarding, among other things: the impact of inflation rates in
Argentina and the devaluation of the Argentine peso against the USD
on the Company; the impact of increasing competition; the general
stability of the economic and political environment in which the
Company operates, including operating under a consistent regulatory
and legal framework in Argentina; future oil, natural gas and NGL
prices (including the effects of governmental incentive programs
thereon); 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;
the ability of the Company to service its debt repayments when
required; 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; currency, exchange and interest rates; the
regulatory framework regarding royalties, taxes and environmental
matters in the jurisdictions in which the Company operates; and the
ability of the Company to successfully market its oil and natural
gas products. Management of Crown Point has included the
above summary of assumptions and risks related to forward-looking
information included in this document in order to provide investors
with a more complete perspective on the Company’s future
operations. Readers are cautioned that this information may
not be appropriate for other purposes. Readers are cautioned that
the foregoing lists of factors are not exhaustive. The
forward-looking information contained in this document are
expressly qualified by this cautionary statement. The
forward-looking information contained herein is made as of the date
of this document and the Company disclaims any intent or obligation
to update publicly any such forward-looking information, whether as
a result of new information, future events or results or otherwise,
other than as required by applicable Canadian securities laws.
Analogous Information: Certain information
contained herein may be considered "analogous information" as
defined in National Instrument 51-101. In particular, this document
discloses that the lower Tertiary and upper Cretaceous sandstones
are oil productive immediately north of CLL. Such analogous
information has not been prepared in accordance with National
Instrument 51-101 and the Canadian Oil and Gas Evaluation Handbook
and Crown Point is unable to confirm whether such information has
been prepared by a qualified reserves evaluator. Such information
is not intended to be a projection of future results. Such
information is based on independent public data and public
information received from other producers and Crown Point has no
way of verifying the accuracy of such information. Such information
has been presented to help demonstrate the basis for Crown Point's
business plans and strategies. There is no certainty that such
results will be achieved by Crown Point and such information should
not be construed as an estimate of future reserves or resources or
future production levels.
Well-Flow Test Results and Initial Production
Rates: Any references in this document to well-flow test
results, swab test rates and/or initial production rates are useful
in confirming the presence of hydrocarbons, however, such test
results and rates are not determinative of the rates at which such
wells will continue production and decline thereafter. While
encouraging, readers are cautioned not to place reliance on such
test results and rates in calculating the aggregate production for
the Company. Well-flow test results, swab test rates and initial
production rates may be estimated based on other third party
estimates or limited data available at the time. Well-flow test
result data should be considered to be preliminary until a pressure
transient analysis and/or well-test interpretation has been carried
out. In all cases in this document, well-flow test results and
initial production results are not necessarily indicative of
long-term performance of the relevant well or fields or of ultimate
recovery of hydrocarbons.
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 inquiries please contact:
Brian Moss
President & CEO
Ph: (403) 232-1150
Crown Point Energy Inc.
bmoss@crownpointenergy.com
Marisa Tormakh
Vice-President, Finance & CFO
Ph: (403) 232-1150
Crown Point Energy Inc.
mtormakh@crownpointenergy.com
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