Crown Point Energy Inc. (TSX.V:
CWV)
(“Crown Point”, the
“Company” or
"
we"
) today announced its
operating and financial results for the three and six months ended
June 30, 2019.
Copies of the Company’s unaudited condensed
interim consolidated financial statements and management’s
discussion and analysis (“MD&A”) filings for
the three and six months ended June 30, 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 and six
month periods ended June 30, 2019 may be referred to as “Q2 2019”
and “the June 2019 period”, respectively, and the comparative three
and six month periods ended June 30, 2018 may be referred to as “Q2
2018" and “the June 2018 period”, respectively.
HIGHLIGHTS
During Q2 2019, the Company:
- Reported net cash from operating activities of $3.6
million;
- Earned $13.7 million of oil and natural gas sales revenue, up
92% from $7.2 million earned in Q2 2018;
- Reported average daily sales volumes of 3,261 BOE per day, up
77% from 1,846 BOE per day in Q2 2018;
- Reported average daily production volumes of 3,068 BOE per day,
up 51% from 2,032 BOE per day in Q2 2018;
- Reported an operating netback of $24.46 per BOE, down 1% from
$24.73 per BOE in Q2 2018;
- Declared a quarterly cash dividend on its common shares of
$0.01 per share ($729,030) for Q2 2019 which was paid on July 15,
2019.
ROFR Sale
On April 26, 2019, St. Patrick Oil & Gas
Ltd. (“STP”) completed the previously disclosed
right of first refusal sale (“ROFR Sale”) of a
16.83% participating interest (representing 65.27% of STP’s
participating interest) in the Tierra del Fuego exploitation
concessions (“TDF Concessions”) to its partners
for $17.5 million of cash consideration. The partners will
also make future payments to STP equal to their proportionate share
of contingent royalty payments due to the vendor of STP that accrue
following closing of the ROFR Sale, which contingent consideration
has an estimated fair value of $3.8 million. As a result of
the disposition, the Company’s collective participating interest in
the TDF Concessions decreased from 51.56% to 34.73%.
OPERATIONAL UPDATE
Tierra del Fuego ("TDF")
La Angostura ConcessionDuring Q2 2019, the San
Martin field located on the La Angostura concession produced a
total of 389,385 bbls of 35 API gravity oil (gross) (135,252 bbls
net) and 139 mmcf of associated natural gas (48 mmcf net). Daily
oil production averaged 4,278 bbls per day (net 1,486 bbls per
day). Associated natural gas production averaged 1.53 mmcf of gas
per day (net 531 mcf per day).
Las Violetas ConcessionDuring Q2 2019, the
LFE-1001 well was fractured in the Tobífera formation and placed on
production on July 26 at an initial production rate of 535 mcf per
day of gas plus 3 bbls per day of liquids. See “Well-Flow Test
Results and Initial Production Rates”. Two other wells,
LF-1029 and AS.x-1001, are waiting for a workover rig to become
available in order to finish repairs and complete flow tests.
Cerro de Los Leones Exploration Permit
(“CLL”)
The Company acquired 214 km2 of 3-D seismic in
Q3 2018 which has been 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 $4.5 million. Both wells will
target lower Tertiary and upper Cretaceous sandstones which are oil
productive immediately north of the CLL Permit. The requests for
environmental approval have been submitted to the provincial
authorities.
OUTLOOK
The Company’s capital expenditure budget for
2019 is $13.8 million comprised of $9.3 million in TDF and $4.5
million in CLL based on expenditures for the following proposed
activities:
- Perform re-fracture stimulations on SM a-1003 and LR
x-1001;
- Four well workovers; one in the La Angostura concession, one in
the Rio Cullen concession and two 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 and complete two exploration wells in CLL.
SUMMARY OF FINANCIAL
INFORMATION
(expressed in $, except shares outstanding) |
June 30 2019 |
|
December 31 2018 |
Working capital (deficit) |
18,120,190 |
|
(1,562,992) |
Exploration and evaluation
assets |
9,068,380 |
|
9,032,994 |
Property and equipment |
31,680,733 |
|
54,750,958 |
Non-current contingent
consideration receivable |
2,378,955 |
|
– |
Total assets |
77,233,200 |
|
85,128,625 |
Non-current financial
liabilities |
4,463,077 |
|
4,744,616 |
Share capital |
56,755,215 |
|
131,745,215 |
Total
common shares outstanding |
72,903,038 |
|
72,903,038 |
|
|
|
|
(expressed in $, except shares outstanding) |
Three months ended |
|
Six months ended |
|
June 30 |
|
June 30 |
|
2019 |
|
2018 |
|
2019 |
|
2018 |
Oil and natural gas sales revenue |
13,749,812 |
|
|
7,158,826 |
|
25,761,997 |
|
|
12,700,272 |
Income before taxes |
2,108,578 |
|
|
1,613,393 (1) |
|
5,425,631 |
|
|
2,522,537 (1) |
Net loss |
(3,187,847 |
) |
|
(948,682) (1) |
|
(209,672 |
) |
|
(675,903) (1) |
Net loss per share (2) |
(0.04 |
) |
|
(0.02) (1) |
|
(0.00 |
) |
|
(0.02) (1) |
Cash flow from operations |
3,629,514 |
|
|
7,366,472 |
|
9,679,887 |
|
|
9,405,715 |
Cash flow per share –
operations (2) |
0.05 |
|
|
0.15 |
|
0.13 |
|
|
0.23 |
Adjusted funds flow from
operations (3) |
2,357,989 |
|
|
1,789,603 |
|
6,093,069 |
|
|
3,514,238 |
Adjusted funds flow per share
– operations (2)(3) |
0.03 |
|
|
0.04 |
|
0.08 |
|
|
0.09 |
Weighted average number of shares |
72,903,038 |
|
|
49,606,335 |
|
72,903,038 |
|
|
41,300,828 |
|
|
|
|
|
|
|
|
|
|
(1) Restated. See “Restatement of
Comparative Figures” in the Company’s June 30, 2019 MD&A for
details of the restatement. (2) 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.(3) "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 June 30, 2019 MD&A
for a reconciliation of these measures to the nearest comparable
IFRS measures.
TDF Sales Volumes
|
Three months ended |
|
Six months ended |
|
June 30 |
|
June 30 |
|
2019 |
|
2018 |
|
2019 |
|
2018 |
Light oil bbls per day |
2,163 |
|
669 |
|
1,889 |
|
659 |
NGL bbls per day |
10 |
|
14 |
|
14 |
|
14 |
Natural
gas mcf per day |
6,530 |
|
6,981 |
|
8,771 |
|
6,115 |
BOE per
day |
3,261 |
|
1,846 |
|
3,365 |
|
1,692 |
|
|
|
|
|
|
|
|
TDF Operating Netback
The Company’s operating netback was lower in Q2
2019 and the June 2019 period as compared to Q2 2018 and the June
2018 period due to the effect of export taxes which were
implemented by the federal government of Argentina in September
2018.
|
Three months ended |
|
Six months ended |
|
June 30 |
|
June 30 |
Per BOE |
2019 |
|
2018 |
|
2019 |
|
2018 |
Oil and gas revenue ($) |
46.33 |
|
|
42.61 |
|
|
42.30 |
|
|
41.47 |
|
Royalties ($) |
(7.15 |
) |
|
(6.90 |
) |
|
(6.38 |
) |
|
(6.63 |
) |
Export taxes ($) |
(3.55 |
) |
|
– |
|
|
(3.10 |
) |
|
– |
|
Operating costs ($) |
(11.17 |
) |
|
(10.98 |
) |
|
(10.25 |
) |
|
(11.29 |
) |
Operating netback (1) ($) |
24.46 |
|
|
24.73 |
|
|
22.57 |
|
|
23.55 |
|
|
|
|
|
|
(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 for 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;
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
and six month periods ended June 30, 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. In addition to the foregoing, the Company has
made assumptions regarding various matters relating to its
quarterly dividend program, and as a result the amount of future
cash dividends declared and paid by the Company, if any, will be
subject to the discretion of the board of directors and may vary
depending on a variety of factors and conditions existing from time
to time, including fluctuations in commodity prices, production
levels, capital expenditure requirements, debt service
requirements, operating costs, royalty burdens, foreign exchange
rates, interest rates, compliance with any restrictions on the
declaration and payment of dividends contained in any agreements to
which the Company or any of its subsidiaries is a party from time
to time (including, without limitation, the agreements governing
the credit facilities and other debt instruments of the Company and
its subsidiaries), and the satisfaction of liquidity and solvency
tests imposed by the Business Corporations Act (Alberta) for the
declaration and payment of dividends. 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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