TSX-V: CWV: Crown Point Energy Inc. (“Crown
Point”, the
“Company” or
"
we"
) today announced its
operating and financial results for the three and nine months ended
September 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 nine months ended September 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 the
nine months ended September 30, 2019 may be referred to as “Q3
2019” and “the September 2019 period”, respectively, and the
comparative three and nine months ended September 30, 2018 may be
referred to as “Q3 2018” and “the September 2018 period”,
respectively.
Q3 2019 SUMMARY
During Q3 2019, the Company:
- Reported net cash from operating activities of $3.8
million;
- Earned $9.6 million of oil and natural gas sales revenue, down
42% from $16.6 million earned in Q3 2018, primarily as a result of
the disposition of a 16.83% participating interest in the Company's
Tierra del Fuego concessions in April 2019 (the
"Disposition");
- Reported average daily sales volumes of 2,518 BOE per day, down
31% from 3,668 BOE per day in Q3 2018, primarily as a result of the
Disposition;
- Reported average daily production volumes of 2,504 BOE per day,
down 29% from 3,515 BOE per day in Q3 2018, primarily as a result
of the Disposition;
- Reported an operating netback of $21.08 per BOE, down 33% from
$31.37 per BOE in Q3 2018, primarily as a result of lower commodity
prices;
- Declared and paid a quarterly cash dividend on its common
shares of $0.01 per share for Q3 2019 and a special cash dividend
on its common shares of $0.015 per share, for a total cash dividend
of $0.025 per share ($1.8 million).
OPERATIONAL UPDATE
Tierra del Fuego ("TDF")
La Angostura ConcessionDuring Q3 2019, the San
Martin field produced a total of 360,478 bbls of 35 API gravity oil
(125,212 bbls net) and 124 mmcf of associated natural gas (43 mmcf
net). Daily oil production averaged 3,918 bbls per day (net 1,361
bbls per day). Natural gas sales during Q3 2019 were
disrupted due to maintenance and repair work to the YPF operated
gas sales line used to transport San Martin associated gas
production to the sale point. Natural gas sales were discontinued
on May 20, 2019 and restored on September 6, 2019 after completion
of repairs, and recommissioning of the gas pipeline.
Las Violetas ConcessionNo drilling was carried
out on the Las Violetas concession during Q3 2019. Two 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 was used to finalize two drilling locations in the
northern CLL area at an aggregate budgeted cost of $4.5 million.
Both wells are targeting Tertiary and upper Cretaceous sandstones
which are oil productive immediately north of the CLL Permit.
The first well was spud in on October 20, 2019 and cased on
November 2, 2019, after encountering five meters of oil bearing
sands in the middle Tertiary Agua de Piedra formation; the second
well will be drilled during the latter part of November 2019.
On October 18, 2019, the Company requested a
four month extension (to February 23, 2020) to accommodate the
drilling and evaluation of both wells.
OUTLOOK
The Company’s capital spending for Q4 2019 is
budgeted at $5.2 million comprised of $2.1 million in TDF and $3.1
million in CLL based on expenditures for the following proposed
activities:
- 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.
The Company’s capital spending for fiscal 2020
is budgeted at $8.6 million comprised of $5.2 million in TDF and
$3.4 million in CLL based on expenditures for the following
proposed activities:
- Drill and complete one well in the San Martin concession;
- Perform five well workovers: two in the Los Flamencos area and
one in the San Luis area of the Las Violetas concession, one in the
La Angostura concession and one in the Rio Chico concession;
- Complete water handling facilities at San Martin to improve
production capacity;
- Other improvements to facilities in TDF; and
- Perform a re-entry on one CLL well.
SUMMARY OF FINANCIAL
INFORMATION
(expressed in $, except shares outstanding) |
|
September 302019 |
December 312018 |
|
Working capital (deficit) |
|
16,099,824 |
(1,562,992 |
) |
Exploration and evaluation
assets |
|
9,849,382 |
9,032,994 |
|
Property and equipment |
|
30,716,811 |
54,750,958 |
|
Non-current contingent
consideration receivable |
|
1,966,122 |
– |
|
Total assets |
|
71,480,288 |
85,128,625 |
|
Non-current financial
liabilities |
|
3,756,446 |
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 |
Nine months ended |
|
September 30 |
September 30 |
|
2019 |
|
2018 |
2019 |
|
2018 |
Oil and natural gas sales revenue |
9,595,656 |
|
16,560,691 |
35,357,653 |
|
29,260,963 |
Income before taxes |
1,503,428 |
|
4,880,620 |
6,929,059 |
|
7,403,157(1) |
Net income (loss) |
(319,888 |
) |
4,074,610 |
(529,560 |
) |
3,398,707(1) |
Net income (loss) per share
(2) |
(0.00 |
) |
0.06 |
(0.01 |
) |
0.07(1) |
Net cash from operating
activities |
3,752,375 |
|
4,516,249 |
13,432,262 |
|
13,921,964 |
Net cash per share – operating
activities (2) |
0.05 |
|
0.06 |
0.18 |
|
0.27 |
Funds flow from operating
activities (3) |
2,406,576 |
|
10,380,308 |
8,499,645 |
|
13,894,546 |
Funds flow per share –
operating activities (2)(3) |
0.03 |
|
0.14 |
0.12 |
|
0.27 |
Weighted average number of shares |
72,903,038 |
|
72,903,038 |
72,903,038 |
|
51,950,657 |
|
|
|
|
|
(1) Restated. See “Restatement of
Comparative Figures” in the Company’s September 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) "Funds flow from operating activities" and "Funds flow
per share – operating activities" are non-IFRS measures. See
"Non-IFRS Measures" in the "Advisory" section of this press release
and in the Company’s September 30, 2019 MD&A for a
reconciliation of these measures to the nearest comparable IFRS
measures.
TDF Sales Volumes
|
|
Three months ended |
Nine months ended |
|
|
September 30 |
September 30 |
|
|
2019 |
2018 |
2019 |
2018 |
Light oil bbls per day |
|
1,556 |
1,982 |
1,777 |
1,105 |
NGL bbls per day |
|
6 |
14 |
11 |
14 |
Natural
gas mcf per day |
|
5,741 |
10,030 |
7,750 |
7,435 |
BOE per
day |
|
2,518 |
3,668 |
3,080 |
2,358 |
|
|
|
|
|
|
The Company’s average daily sales volumes were
lower in Q3 2019 as compared to Q3 2018 due mainly to lower
production from natural gas wells, a delivery restriction in the
terminal Cruz del Sur since September 17, 2019 that required the
UTE to reduce production volumes from the San Martin wells, and the
decrease in the Company’s working interest in the TDF Concessions
from 51.56% to 34.73% on April 26, 2019.
TDF Operating Netback
The Company’s operating netback was lower in Q3
2019 and the September 2019 period as compared to Q3 2018 and the
September 2018 period due to a decrease in the average price of
Brent combined with a decrease in natural gas prices in Q3 2019,
the effect of export taxes which were implemented by the federal
government of Argentina in September 2018 and higher delivery
expenses charged at the terminal.
|
|
Three months ended |
Nine months ended |
|
|
September 30 |
September 30 |
Per BOE |
|
2019 |
|
2018 |
|
2019 |
|
2018 |
|
Oil and gas revenue ($) |
|
41.42 |
|
49.08 |
|
42.05 |
|
45.46 |
|
Royalties ($) |
|
(6.71 |
) |
(8.68 |
) |
(6.47 |
) |
(7.70 |
) |
Export taxes ($) |
|
(2.31 |
) |
– |
|
(2.88 |
) |
– |
|
Operating costs ($) |
|
(11.32 |
) |
(9.03 |
) |
(10.55 |
) |
(10.11 |
) |
Operating netback (1) ($) |
|
21.08 |
|
31.37 |
|
22.15 |
|
27.65 |
|
|
|
|
|
|
|
(1) "Operating netback" is a
non-IFRS measure. See "Non-IFRS Measures" in the "Advisory"
section of this press release.
SUBSEQUENT
EVENTS
AT A SPECIAL MEETING OF SHAREHOLDERS HELD ON
OCTOBER 30, 2019, THE COMPANY’S SHAREHOLDERS VOTED IN FAVOUR OF A
SPECIAL RESOLUTION AUTHORIZING THE BOARD OF DIRECTORS OF THE
COMPANY TO REDUCE THE STATED CAPITAL OF THE COMPANY’S COMMON SHARES
BY UP TO $0.185 PER SHARE (UP TO APPROXIMATELY $13.5 MILLION) TO
PERMIT THE COMPANY TO PAY A SPECIAL DISTRIBUTION (“RETURN OF
CAPITAL”) TO THE COMPANY’S SHAREHOLDERS.
On November 15, 2019, the board of directors
approved a reduction of the stated capital of the Company’s common
shares by $0.185 per share for a Return of Capital of approximately
$13.5 million. The Return of Capital is subject to any
approvals required by the TSX Venture Exchange.
In light of the Return of Capital, the board of
directors has determined not to declare a fourth quarter dividend
on its common shares and to suspend the Company's quarterly
dividend payment until further notice.
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 “funds
flow from operating activities” and "funds flow per share –
operating activities" which should not be considered alternatives
to, or more meaningful than, net cash from operating activities and
net cash per share – operating activities as determined in
accordance with IFRS as an indicator of the Company’s
performance. Management uses funds flow from operating
activities to analyze operating performance and considers funds
flow from operating activities to be a key measure as it
demonstrates the Company’s ability to generate cash necessary to
fund future capital investment. Funds flow per share –
operating activities 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 funds flow from operating activities to net cash from operating
activities, 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 (loss) 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 operations that the Company
intends to conduct on the CLL permit and the anticipated timing and
budget; under "Outlook", our estimated capital expenditures for Q4
2019 and fiscal 2020, the allocation of such capital expenditures
between our TDF Concessions and CLL Permit and the operational
activities that we expect to complete during Q4 2019 and fiscal
2020; 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 nine month periods ended September 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 Argentina, 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 Argentina; 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.
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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