RNS Number : 3941U
Caza Oil & Gas, Inc.
14 May 2008
May 14, 2008
CAZA OIL & GAS, INC. ("Caza" or the "Company") (TSX:CAZ) (AIM:CAZA)
INTERIM FINANCIAL REPORT - FIRST QUARTER RESULTS
Financial and Operating Results for the Three Months Ended March 31, 2008
Houston, Texas - May 14, 2008 - Caza Oil & Gas, Inc. is pleased to announce its financial and operating results for the three months
ended March 31, 2008.
First Quarter 2008 Highlights
Financial:
* Total revenue of $729,284 (Q1 2007 - $240,563).
* Net loss of $635,685 (Q1 2007 - $130,016).
* Capital expenditures totaled $4,153,166, (Q1 2007 - $4,173,579).
Operational:
* Sales volumes averaged 953 Mcfe/d, 168% higher than the volumes recorded in the comparative three-month period ended 2007.
* On a Mcf equivalent basis, natural gas accounted for 98% of first quarter 2008 volumes and NGLs 2%.
* Caza's realized natural gas price increased 12% to $8.41/Mcfe from $7.50/Mcfe in the comparative three-month period ended 2007.
* Most of the first quarter 2008 expenditures were incurred in the Gulf Coast area of Texas, Louisiana and New Mexico.
Outlook
Commodity prices have recently reached new highs and futures markets indicate that this trend should continue in the foreseeable future.
Caza currently has no arrangements in place that limit the upside of its oil and natural gas prices. These currently high prices will
provide the corporation with financial flexibility. Caza continues to build its prospect inventory for future drilling.
Commenting, Mike Ford, CEO of Caza said:
"This has been another growth period for the Company and the current market conditions provide continuing opportunities to grow Caza's
production, cash flow and net asset value. Caza continues to actively generate additional new prospects in addition to evaluating
opportunities to significantly increase the size of its business."
HIGHLIGHTS
(in United States dollars)
Three Months Ending March31, 2008 2007 %change
Financial
Gas and Condensate revenue 729,284 240,563 203
Net Income (loss) (635,685) (130,016) 389
Per share - basic and (0.01) (0.00)
diluted
Capital expenditures (net) 4,153,166 4,173,579 0
Operations
Sales volumes
Natural gas (mcf/d) 932 343 172
Natural gas liquids (bbls/d) 3 54
2
Combined (mcfe/d) 953 356
Operating netbacks ($/mcfe)
Average selling prices 8.41 7.50 12
Production expenses 0.92 0.69 33
Severance Taxes 0.59 0.65 -9
Transportation expenses 0.12 -
Operating netback 6.78 6.17 10
Share Data
Weighted average outstanding 95,821,000 72,827,556 32
Equity outstanding - end of
period
Common and exchangeable 95,821,000 73,000,000 31
shares
Warrants 20,700,000 22,400,000 -8
Stock options 6,605,000 3,965,000 67
About Caza:
Caza is engaged in the acquisition, exploration, development and production of hydrocarbons in the Texas Gulf Coast (on-shore), south
Louisiana, southeast New Mexico and the Permian Basin of West Texas regions of the United States of America through its subsidiary, Caza
Petroleum, Inc.
For further information contact:
Caza Oil & Gas, Inc.
John McGoldrick
Executive Chairman
+1 281 363 4442
Website: www.cazapetro.com
OR
Noble & Company Limited
Nick Naylor / Jamie Boyd
Nominated Adviser
+44 (0) 20 7763 2200
OR
Aquila Financial Ltd.
Peter Reilly
Financial Public Relations Advisers
+44 (0)118 979 4100
MANAGEMENT'S DISCUSSION AND ANALYSIS
The following interim Management's Discussion and Analysis ("MD&A") of the financial results for Caza Oil & Gas, Inc. ("Caza" or the
"Company") should be read in conjunction with the unaudited consolidated interim financial statements dated for the three month period ended
March 31, 2008, the annual information form, the audited consolidated financial statements and corresponding MD&A for the year ended
December 31, 2007. Additional information relating to the Company can be found on SEDAR at www.sedar.com. All figures herein have been
prepared in accordance with Canadian Generally Accepted Accounting Principles ("GAAP") otherwise stated. This MD&A is dated May 12, 2008.
Forward Looking Information
In addition to historical information, the MD&A contains forward-looking statements that are generally identifiable as any statements
that express, or involve discussions as to, expectations, beliefs, plans, objectives, assumptions or future events of performance (often,
but not always, through the use of words or phrases such as "will likely result," "expected," "is anticipated," "believes," "estimated,"
"intends," "plans," "projection" and "outlook") are not historical facts and may be forward-looking and may involve estimates, assumptions
and uncertainties which could cause actual results or outcomes to differ materially from those expressed in such forward-looking statements.
These statements are based on certain factors and assumptions regarding the results of operations, the performance of projected
activities and business opportunities. Specifically, we have used historical knowledge and current industry trends to project budgeted
expenditures for 2008. While we consider these assumptions to be reasonable based on information currently available to us, they may prove
to be incorrect.
Actual results achieved during the forecast period will vary from the information provided herein as a result of numerous known and
unknown risks and uncertainties and other factors. Such factors include, but are not limited to: risks associated with the Company's stage
of development; competitive conditions; share price volatility; risks associated with crude oil and natural gas exploration and development;
risks related to the inherent uncertainty of reserves and resources estimates; possible imperfections in title to properties; the volatility
of crude oil and natural gas prices and markets; environmental regulation and associated risks; loss of key personnel; operating and
insurance risks; the inability to add reserves; risks associated with industry conditions; the ability to obtain additional financing on
acceptable terms if at all; non*operator activities; the inability of investors in certain jurisdictions to bring actions to enforce
judgments; equipment unavailability; potential conflicts of interest; risks related to operations through subsidiaries; risks related to foreign operations; currency exchange rate risks and other
factors, many of which are beyond the control of the Company. Accordingly, there is no representation by Caza that actual results achieved
during the forecast period will be the same in whole or in part as that forecast. Further, Caza undertakes no obligation to update or revise
any forward-looking statement or statements to reflect events or circumstances after the date on which such statement is made or to reflect
the occurrence of unanticipated events, except as required by applicable securities laws.
Financial outlook information contained in this MD&A about prospective results of operations, financial position or cash flows is based
on assumptions about future events, including economic conditions and proposed courses of action, based on management's assessment of the
relevant information currently available. Readers are cautioned that such financial outlook information contained in this MD&A should not be
used for purposes other than for which it is disclosed herein.
Non-GAAP Measures
The financial data presented herein has been prepared in accordance with GAAP. The Company has also used certain measures of financial
reporting that are commonly used as benchmarks within the oil and natural gas production industry in the following MD&A discussion. The
measures are widely accepted measures of performance and value within the industry, and are used by investors and analysts to compare and
evaluate oil and natural gas exploration and producing entities. Most notably, these measures include operating netback and funds flow from
(used in) operations. Operating netback is a benchmark used in the crude oil and natural gas industry to measure the contribution of oil and
natural gas sales and is calculated by deducting royalties and operating costs from revenues. Funds flow from (used in) operations is cash
flow from operating activities before changes in non-cash working capital, and is used to analyze operations, performance and liquidity.
These measures are not defined under GAAP and should not be considered in isolation or as an alternative to conventional GAAP measures. These measures and their underlying calculations are not
necessarily comparable to a similarly titled measure of another entity. When these measures are used, they are defined as "non GAAP" and
should be given careful consideration by the reader.
Note Regarding Boe and Mcfe
Per barrel oil equivalent amounts ("boe") and one thousand cubic feet of gas equivalent ("Mcfe") amounts may be misleading, particularly
if used in isolation. A boe conversion of 6 Mcf of natural gas to 1 bbl of oil, or a Mcfe conversion ratio of 1 bbl of oil to 6 Mcf of
natural gas is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value
equivalency at the well head.
Currency
References to "dollars" and "$" are of U.S. dollars and references to "CDN$" are to Canadian dollars.
Operating Netback Summary
The following table reconciles the Company's operating netback which is considered to be a non-GAAP measure:
Three Months Ended Three Months Ended Year Ended
(on a Mcfe basis) March 31, 2008 March 31, 2007 December
31, 2007
Oil and natural gas revenue $ 8.41 $ 7.50 $ 6.68
Production expenses (0.92) (0.69) (1.63)
Severance expenses (0.59) (0.65) (0.61)
Transportation expenses (0.12) - (0.10)
Operating netback (non-GAAP) $ 6.78 $ 6.17 $ 4.43
FINANCIAL AND OPERATING RESULTS
Petroleum and Production Revenue
Three Months Ended Three Months Ended
March 31, 2008 March 31, 2007
Natural gas
Production (Mcf) 84,855 30,866
Revenue ($) 692,908 229,116
Price ($/Mcf) 8.17 7.42
Natural gas liquids
Production (bbls) 316 202
Revenue ($) 36,376 11,447
Price ($/bbl) 115.24 56.63
Combined
Production (Mcfe) 86,749 32,079
Revenue ($) 729,284 240,563
Price ($/Mcfe) 8.41 7.50
Mcfe/d 953 356
Natural gas and condensate revenues increased 203% to $729,284 for the three-month period ended March 31, 2008 from $240,563 for the
three-month period ended March 31, 2007 (the "comparative period"). Caza production increased 170% to 86,749 Mcfe for the three-month period
ended March 31, 2008 up from 32,079 Mcfe for the comparative period. This represents an average daily production rate increase of 168% for
the three months ended March 31, 2008 of 953 Mcfe/d as compared to 356 Mcfe/d for the comparative period. The average natural gas price
received by Caza increased 12% to $8.41 per Mcfe during the three-month period ended March 31, 2008 from $7.50 per Mcfe during the
comparative period. The increase in revenues and production from the first quarter of 2007 are a result of the Matthys McMillan well coming
on line in the third quarter of 2007. . Presently the Company has not hedged any of its production and does not have any commodity price
management programs in place.
Production Expenses
Severance taxes and transportation expenses totaled $61,456 ($0.71/Mcfe) for the three-month period ended March 31, 2008, representing
an increase of 196% from $20,780 ($0.65/Mcfe) incurred during the comparative period and an average increase of 12% in the price of natural
gas to $8.41 from $7.50 in the comparative period. Severance tax is a tax imposed by states on natural resources such as crude oil, natural
gas and condensate extracted from the ground. The tax is calculated by applying a rate to the dollar amount of production from the property
or a set dollar amount applied to the volumes produced from the property. The increase in severance taxes and transportation costs are a
result of the Matthys McMillan well coming on line in the third quarter of 2007.
Production expenses for the three-month period ended March 31, 2008 were $79,431 compared to $22,005 for the comparative period. Caza's
average lifting cost for the three-month period ended March 31, 2008 was $0.92 per Mcfe versus $0.69 per Mcfe for the comparative period.
This increase in lifting costs occurred as a result of increases of operating expenses on a few of Caza's wells. This increase of lifting
cost was however offset by lower lifting costs per Mcfe on the Matthys McMillan and SL 18582 wells.
Depletion, Depreciation and Accretion
Depletion, depreciation, amortization and accretion expense for the first three months of 2008 increased to $322,502 ($3.80/Mcfe) from
$46,597 ($1.51/Mcfe) in the comparative period. The increased expense resulted from drilling costs associated with, and production from, the
additional wells drilled during 2007.
Costs of acquiring unproved properties of $15,181,096 were excluded from depletable costs in accordance with Canadian Institute of
Chartered Accountants Accounting Guideline 16. A proportionate amount of the carrying value will be transferred to the depletable pool as
reserves are proven up through the execution of Caza's exploration program.
General and Administrative Expenses
Three Months Ended Three Months Ended
March 31, 2008 March 31, 2007
General and administrative ($) 1,263,945 485,105
General and administrative recovery (43,118) (7,006)
($)
Net general and administrative ($) 1,220,827 478,099
General and administrative ($/Mcfe) 14.57 15.12
Net general and administrative 14.07 14.90
($/Mcfe)
General and administrative expenses were $1,220,827 for the three-month period ended March 31, 2008 and $478,099 for the comparative
period. Stock-based compensation expense in the amount of $184,588 are included in general and administrative expenses for the three-month
period ended March 31, 2008 ($93,701 in 2007). Increased salaries, wages and consulting fees were primarily responsible for the increase in
total general and administrative expenses. During the three-month period ended March 31, 2008, Caza capitalized general and administrative
expenses relating to exploration and development activities of $344,143, of which $67,349 related to capitalized stock-based compensation.
Net loss
Caza incurred a net loss of $635,685 ($7.33/Mcfe) for the first three months of 2008 compared to a net loss of $130,016 ($4.05/Mcfe)
during the comparative period. The increase in net loss from the comparative period occurred as a result of increases in staff numbers and
the costs related to being a publicly listed company.
Investments
Interest income for the three-month period ended March 31, 2008 was $91,452 down from $146,043 during the same period in 2007. Interest
was earned on the proceeds from initial private placement, which was principally completed in the fourth quarter of 2006, and from Caza's
initial public offering, which was completed December 12, 2007. Caza invested the proceeds from these financings in short-term money market
funds. The Company does not hold any asset backed paper.
Funds flow from (used in) operations (Non-GAAP)
The following is a reconciliation of funds flow used in operations to net loss.
March 31, 2008 March 31, 2007
Net loss (635,685) (130,016)
Non-cash items, net 286,373 107,191
Funds flow used in operations (349,312) (22,825)
Funds flow per share - basic and diluted (0.00) (0.00)
Capital Expenditures
By Type ($) March 31, 2008 March 31, 2007
Drilling and completions 3,117,882 488,581
Seismic 150,000 61,100
Facilities and Lease Equipment 940,732 42,129
Office Furnishings & Equipment 14,083 294,874
Leasehold Geological/Geophysical 137,754 1,132,884
Other Costs (Recovery) (207,285) 2,154,011
Total 4,153,166 4,173,579
Caza began drilling operations on the Bel Minerals 1 well located in Calcasieu Parish, Louisiana in December of 2007 and reached total
depth in January of 2008. Data obtained from the well indicated the well did not justify a completion attempt and was abandoned. During
the quarter ended March 31, 2008, Caza drilled 2 gross natural gas wells (0.68 net) and began completion operations to tie the wells into
their respective gathering systems. Drilling activities during the quarter were concentrated in the Wilcox 116 prospect located in Texas and
Lynch property located in New Mexico. Given Caza's current working capital surplus of approximately $5.4 million we anticipate participating
in the drilling of 3 gross (0.95 net) wells and completing the 2 wells drilled during the first quarter.
Outstanding Share Data
Caza is authorized to issue an unlimited number of common shares without par value, of which 69,319,000 common shares are currently
issued and outstanding. The number of exchangeable shares that are currently issuable is 26,502,000.
Holders of common shares are entitled to one vote per share on all matters voted on a poll by shareholders, and are entitled to receive
dividends when and if declared by the board of directors out of funds legally available for the payment of dividends. Upon Caza's
liquidation or winding up or other distribution of its assets among its shareholders for the purpose of winding up its affairs, holders of
common shares are entitled to share pro rata in any assets available for distribution to shareholders after payment of all obligations of
the Company. Holders of common shares do not have any cumulative voting rights or pre*emptive rights to subscribe for any additional common
shares.
The following table sets forth the classes and number of outstanding equity securities of the Company and the number of issued and
issuable Common Shares on a fully diluted basis. See note 5 to the financial statements.
Issued and Issuable
Securities
Common Shares
Issued and outstanding 69,319,000
Issuable from Exchangeable Shares 26,502,000
Issuable from exercise of Warrants 22,000,000
Issuable from exercise of IPO Broker Warrants 700,000
Issuable from exercise of Stock Options 6,605,000
Total Common Shares issued and issuable 125,126,000
Exchangeable Shares Issued
Shares of Caza Petroleum common stock 9,465
exchangeable for Caza Common Shares at a ratio
of 1 to 2,800
Warrants Issued
Warrants to purchase 1.1 Common Shares per 20,000,000
Warrant
Private Placement Broker Warrants 2,400,000
Expiration of Private Placement Broker (2,400,000)
Warrants (Note 5(c)
IPO Broker Warrants 700,000
Total Warrants 20,700,000
Stock Options Issued
Management Stock Options 6,605,000
Commitments
The following is a summary of the estimated costs required to fulfill Caza's remaining contractual commitments as at March 31, 2008:
Type of Obligation ($) Total
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