First Calgary Petroleums Ltd. Reports First Quarter Results
TSX: FCP LSE: FPL
CALGARY, May 13 /CNW/ - First Calgary Petroleums Ltd. is pleased to
report financial results for the three months ended March 31, 2005.
Management's Discussion and Analysis
Management's discussion and analysis ("MD&A") should be read in
conjunction with the unaudited interim financial statements for the three
months ended March 31, 2005 and 2004 and the audited financial statements and
MD&A for the year ended December 31, 2004. In this discussion and analysis $
refers to the U.S. dollar and C$ refers to the Canadian dollar. Additional
information is available on FCP's website at www.fcpl.ca or on SEDAR's website
at www.sedar.com.
FCP operates in Algeria where it has the rights to explore and appraise
two large acreage blocks, Ledjmet Block 405b and Yacoub Block 406a. The
Company's rights and obligations are set out in hydrocarbon agreements with
Sonatrach, the national oil company of Algeria, which represents the interest
of the state.
Hydrocarbon Agreements
The hydrocarbon agreements require FCP to conduct certain drilling and
seismic activities over periods of time. The exploration and appraisal phases
of the agreements that extend for five years are divided into two periods with
each period containing a minimum work commitment. In each agreement, the first
period was for three years, and the Company then had the option to enter a
second exploration period of two years. Following the exploration and
appraisal phase of each agreement, the Company and Sonatrach will obtain
exploitation permits for any reserves determined to be commercial and all
lands not subject to an exploitation permit will be returned to the
government.
Ledjmet Block 405b
On Block 405b, FCP is party to a Production Sharing Contract (PSC) with
Sonatrach. The PSC allocates hydrocarbon production between FCP and Sonatrach
in accordance with a sliding scale formula based on such factors as production
levels, product prices and project investment. Pursuant to the formula, the
Company's annual share of production may range from 27.72 percent to
8.16 percent. All Algerian state royalties and income taxes are paid by
Sonatrach from its share of hydrocarbon production.
The Company is in the first year of the second exploration period. The
remaining work commitment for the second exploration period includes drilling
one exploration well prior to December 2006, estimated to cost $9 million. If
the Company fails to satisfy this work obligation, the rights, other than for
which an exploitation permit has been granted or requested, will be returned
and the Company will be liable to pay Sonatrach a penalty of $6.25 million.
Yacoub Block 406a
On Block 406a, FCP has a Joint Venture Agreement (JVA) with Sonatrach.
The JVA allocates 49 percent of the hydrocarbon production or equivalent
volume thereof to the Company. FCP is responsible for paying Algerian state
royalties and income taxes on its share of production. A portion of the total
recoverable natural gas reserves above a certain threshold will be considered
strategic reserves and excluded by Algerian law from the JVA.
The Company is in the second exploration period of the JVA, which will
end in November 2005. The remaining second period exploration period work
commitment is to finish drilling the ZCHW-1 exploration well and drill one
additional exploration well, RTN-1, having a combined estimated cost of
$16 million. If the Company fails to satisfy this work obligation, the rights,
other than for which an exploitation permit has been granted or requested,
will be returned and the Company will be liable to pay Sonatrach a penalty of
$12.75 million.
Capital Expenditures
Capital expenditures for the three months ended March 31, 2005 totaled
$12.5 million compared to $14.2 million in the first three months of 2004. Of
the 2005 expenditures:
- $9.7 million related to production testing the LES-2 well, drilling
the MLE-6 well and site preparation costs for the 2005 Block 406a
exploration wells;
- $0.9 million was spent completing the 2004 Block 406a 3D seismic
programme;
- $0.3 million was attributed to annual training bonuses; and
- $1.6 million related to administrative and support services for the
Algerian operations.
Liquidity and Capital Resources
FCP continues to rely on equity to fund its operations and capital
programmes. During the quarter ended March 31, 2005, the Company received
$0.4 million in proceeds for the issuance of 504,377 common shares from the
exercise of options and warrants. The fully-diluted number of shares
outstanding was 191,684,961 at the following dates:
May 6, March 31, December 31,
FULLY-DILUTED SHARES OUTSTANDING 2005 2005 2004
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Common shares 183,605,460 183,591,052 183,086,675
Employee stock options 7,629,501 7,629,501 7,629,501
Common share purchase warrants - 14,408 68,785
Non-employee stock options 450,000 450,000 900,000
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Fully-diluted shares outstanding 191,684,961 191,684,961 191,684,961
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The Company had working capital of $38 million at March 31, 2005 compared
to $52.1 million at December 31, 2004. Changes in the Company's working
capital are primarily a function of the timing and magnitude of its equity
financings and capital expenditures. The reduction in working capital in the
three months ended March 31, 2005 is attributed to $12.5 million of capital
expenditures, $0.4 million in proceeds from the exercise of options and
warrants, $0.5 million used to fund operations and a foreign currency charge
of $1.5 million.
The Company has sufficient working capital at March 31, 2005 to fund its
capital programme and work commitments. Beyond the current planned
expenditures and obligations, it is expected the Company will require
additional capital to fund future operations and capital spending.
In addition, the development of the Company's reserves through to
commercial production will require significant funding that is expected to be
in the form of equity, joint ventures or some combination thereof.
Operating Results and Selected Quarterly Information
2005 2004
(000's of U.S.
dollars) Q1 Q4 Q3 Q2 Q1
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Interest Income $ 659 $ 386 $ 251 $ 238 $ 415
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Expenses
General and
administrative 1,139 1,165 904 1,048 910
Stock-based
compensation 746 1,442 975 1,375 1,389
Foreign exchange
loss (gain) 1,527 (820) (2,151) 1,137 292
Write-off Yemen
investment - - - - -
Earthquake
donation - - - - -
Other expenses
(recovery) (33) (102) 109 92 90
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3,379 1,685 (163) 3,652 2,681
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Income (loss) (2,720) (1,299) 414 (3,414) (2,266)
Loss per share (0.01) (0.01) 0.00 (0.02) (0.01)
Share capital 377,857 377,288 172,895 172,376 171,897
Working capital
(deficiency) 38,016 52,115 19,858 48,664 74,659
Capital assets 322,572 310,053 137,911 107,267 82,886
Other liabilities (370) (339) (239) (174) (151)
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Shareholders'
equity $360,218 $361,829 $157,530 $155,757 $157,394
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(000's of U.S. 2003
dollars) Q4 Q3 Q2
---------------------------------------------------
Interest Income $ 315 $ 81 $ 118
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Expenses
General and
administrative 962 660 539
Stock-based
compensation 3,579 233 214
Foreign exchange
loss (gain) (283) (192) 633
Write-off Yemen
investment 1,035 - -
Earthquake
donation - - 1,000
Other expenses
(recovery) 253 34 97
---------------------------------------------------
5,546 735 2,483
---------------------------------------------------
Income (loss) (5,231) (654) (2,365)
Loss per share (0.03) (0.01) (0.02)
Share capital 165,181 62,463 62,295
Working capital
(deficiency) 83,111 (1,150) 10,383
Capital assets 68,708 52,106 41,061
Other liabilities (124) (92) (91)
---------------------------------------------------
Shareholders'
equity $151,695 $ 50,864 $ 51,353
---------------------------------------------------
Interest and other income increased to $0.6 million in the three months
ended March 31, 2005 as a result of higher average cash and term-deposit
balances on hand in the quarter from the December 2004 equity financing.
General and administrative expenses were $1.1 million in the three months
ended March 31, 2005 compared with $0.9 million in the comparable 2004 period.
The increase is primarily attributed to additional resources required for the
operation of the Algerian petroleum and natural gas projects, including
employee levels, administrative support and travel, and expenses related to
the strategic review process.
Stock-based compensation expense was $0.7 million in the three months
ended March 31, 2005 compared with $1.4 million in the comparable 2004 period.
The decrease in expense is primarily attributed to fewer options granted in
2004.
The Company recorded a foreign exchange loss of $1.5 million during the
three months ended March 31, 2005. The loss primarily resulted from the
effects of the strengthening U.S. dollar against Canadian dollar and British
pound deposits held during the quarter.
Business Risks and Uncertainties
The MD&A for the year ended December 31, 2004 includes an overview of
certain of the business risks and uncertainties facing the Company. Those
risks remain in effect as at March 31, 2005.
Outlook
Operationally, the Company is proceeding with the drilling of two
exploration wells on Block 406a and planning for further drilling and
development work on Block 406a and Block 405b. As previously announced, FCP
continues to work with its advisers to evaluate strategic alternatives.
Advisory Regarding Forward-Looking Statements
Certain information with respect to the Company contained in this report
contains forward-looking statements. These forward-looking statements are
based on assumptions and are subject to numerous risks and uncertainties, some
of which are beyond FCP's control, including the impact of general economic
conditions, industry conditions, volatility of commodity prices, currency
exchange rate fluctuations, reserve estimates, environmental risks,
competition from other explorers, stock market volatility and the ability to
access sufficient capital. FCP's actual results, performance or achievement
could differ materially from those expressed in, or implied by, these
forward-looking statements and, accordingly, no assurance can be given that
any events anticipated by the forward-looking statements will transpire or
occur.
May 6, 2005
FIRST CALGARY PETROLEUMS LTD.
Consolidated Balance Sheets
(Expressed in thousands of U.S. dollars)
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March 31 December 31
2005 2004
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(Unaudited) (Audited)
Assets
Current assets:
Cash and short-term deposits (note 2) $ 52,010 $ 81,874
Accounts receivable 200 357
Deposits and prepaid expenses 602 758
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52,812 82,989
Property, plant and equipment 322,572 310,053
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$ 375,384 $ 393,042
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Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable and accrued liabilities
(note 3) $ 14,796 $ 30,874
Asset retirement obligations 370 339
Shareholders' equity:
Capital stock (note 4) 377,857 377,288
Contributed surplus (note 4) 9,981 9,441
Cumulative translation adjustment 6,502 6,502
Deficit (34,122) (31,402)
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360,218 361,829
Operations and commitments (note 1)
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$ 375,384 $ 393,042
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See accompanying notes to interim consolidated financial statements.
FIRST CALGARY PETROLEUMS LTD.
Consolidated Statements of Operations and Deficit
(Expressed in thousands of U.S. dollars)
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Three months ended March 31
(Unaudited) 2005 2004
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Revenue:
Interest $ 659 $ 415
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Expenses:
General and administrative 1,139 910
Foreign exchange loss 1,527 292
Stock-based compensation (note 4) 746 1,389
Capital taxes (recovery) (54) 70
Depreciation and accretion 21 20
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3,379 2,681
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Loss for the period (2,720) (2,266)
Deficit, beginning of period (31,402) (24,837)
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Deficit, end of period $ (34,122) $ (27,103)
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Loss per share (note 4) $ (0.01) $ (0.01)
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See accompanying notes to interim consolidated financial statements.
FIRST CALGARY PETROLEUMS LTD.
Consolidated Statements of Cash Flows
(Expressed in thousands of U.S. dollars)
-------------------------------------------------------------------------
Three months ended March 31
(Unaudited) 2005 2004
-------------------------------------------------------------------------
Operating activities:
Loss for the period $ (2,720) $ (2,266)
Items not involving cash:
Foreign exchange loss 1,863 240
Stock-based compensation 746 1,389
Depreciation and accretion 21 20
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(90) (617)
Change in non-cash working capital (2,821) (287)
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(2,911) (904)
Financing activities:
Proceeds from exercise of warrants 119 6,063
Proceeds from exercise of options 259 513
Issue costs (15) -
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363 6,576
Investing activities:
Property, plant and equipment expenditures (12,509) (14,171)
Change in non-cash working capital (12,944) 59
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(25,453) (14,112)
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Decrease in cash and short-term deposits (28,001) (8,440)
Effect of exchange rate fluctuations on cash
and short-term deposits (1,863) (240)
Cash and short-term deposits, beginning of
period 81,874 95,185
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Cash and short-term deposits, end of period $ 52,010 $ 86,505
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See accompanying notes to interim consolidated financial statements.
FIRST CALGARY PETROLEUMS LTD.
Notes to Interim Consolidated Financial Statements
Three months ended March 31, 2005 (unaudited)
(Expressed in thousands of U.S. dollars unless otherwise indicated
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The interim consolidated financial statements of First Calgary
Petroleums Ltd. ("the Company") have been prepared by management in
accordance with accounting principles generally accepted in Canada
following the same accounting policies as the consolidated financial
statements for the year ended December 31, 2004. The disclosures
included below are incremental to those included with the annual
consolidated financial statements. The interim consolidated financial
statements should be read in conjunction with the consolidated
financial statements and the notes thereto for the year ended
December 31, 2004.
1. Operations and commitments:
The Company's operations are in Algeria where it has the rights to
explore, appraise and develop two blocks, Yacoub Block 406a ("Block
406a") and Ledjmet Block 405b ("Block 405b"). The Company's rights
and obligations in each block are set out in agreements with
Sonatrach, the national oil company of Algeria. These agreements are
structured such that the Company has committed to conduct certain
minimum exploration activities over a period of time and in return
earns an interest in commercial discoveries.
(a) Block 406a:
In 2000 the Company entered into a joint venture agreement with
Sonatrach to explore Block 406a in the Berkine Basin. The
Company is in the second exploration period which expires in
November 2005. The remaining work obligation for the second
exploration period is to complete drilling the ZCHW-1
exploration well and drill an additional exploration well,
estimated to cost $16 million. If the Company fails to satisfy
the work obligations, the rights, other than for areas for which
an exploitation permit has been granted or requested, could be
forfeited and the Company will be liable to pay Sonatrach a
penalty of $12.75 million. In addition to the work commitments,
the Company is obligated to pay an annual training bonus in the
amount of $150 thousand for the duration of the contract.
(b) Block 405b:
In 2001 the Company entered into a production sharing contract
with Sonatrach to explore and appraise Block 405b in the Berkine
Basin. The Company is in the second exploration period which
expires in December 2006. The remaining work obligation for the
second exploration period is to drill one exploration well,
estimated to cost $9 million. Should the Company fail to satisfy
the work obligation of the second exploration period, the
rights, other than for areas for which an exploitation permit
has been granted or requested, could be forfeited and the
Company will be liable to pay Sonatrach a penalty of $6.25
million. In addition to the work commitments, the Company is
obligated to pay an annual training bonus in the amount of
$150 thousand for the duration of the contract.
The contract provides the Company with the right to appraise and
develop the MLE reserves discovered with the MLE-1 well. As
compensation for the right to access the MLE discovery, the
Company is committed to pay Sonatrach a reserve-based access fee
of $0.25 per barrel of oil equivalent calculated on the total
estimated recoverable MLE reserves. The access fee will be
determined at the time the MLE reserves are declared commercial
by Sonatrach and will be payable as a deduction from Sonatrach's
share of the MLE development expenditures.
While the Company currently has sufficient resources to meet its
required work commitments, these resources may be directed to other,
optional capital programmes depending on the success of expenditures
and other opportunities which become available to the Company. In
addition, the development of the Block 405b reserves through to
commercial production will require additional funding in the form of
equity, debt, joint ventures or some combination thereof. The
Company has retained Lehman Brothers Europe Limited and Canaccord
Capital Corporation to assist the Company in seeking and evaluating
strategic alternatives.
2. Cash and short-term deposits:
The Company considers deposits in banks, certificates of deposit and
short-term investments with original maturities of three months or
less as cash and short-term deposits. The components of cash and
short-term deposits are as follows:
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March 31 December 31
2005 2004
---------------------------------------------------------------------
Cash on deposit:
U.S. dollars $ 7,088 $ 1,833
British pounds 363 1,574
Canadian dollars 180 482
Algerian dinars 176 577
Bank term deposits:
British pounds 38,813 54,823
Canadian dollars 5,390 22,079
U.S. dollars - 506
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$ 52,010 $ 81,874
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3. Accounts payable and accrued liabilities:
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March 31 December 31
2005 2004
---------------------------------------------------------------------
Trade payables:
U.S. dollars $ 9,843 $ 13,004
Algerian dinars 3,565 3,746
Canadian dollars 599 2,151
British pounds 289 423
Capital accrual:
U.S. dollars 500 11,550
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$ 14,796 $ 30,874
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4. Capital stock:
(a) Issued share capital:
---------------------------------------------------------------------
Number of
Shares Amount
---------------------------------------------------------------------
Common shares:
Balance, December 31, 2004 183,086,675 $ 377,288
Issued on exercise of share purchase
warrants (i) 54,377 119
Issued on exercise of non-employee stock
options (d) 450,000 259
Transfer from contributed surplus on
exercise of stock options and warrants - 206
Share issue costs - (15)
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Balance, March 31, 2005 183,591,052 $ 377,857
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(i) During the three months ended March 31, 2005, 54,377 common
shares were issued pursuant to the exercise of 21,613 common
share purchase warrants at C$5.00 per share and 32,764
common share purchase warrants at C$1.11 per share.
(b) Employee stock options:
Pursuant to the Stock Option Plan, the Company has 12,176,230
common shares reserved for issuance. Stock options granted under
the plan have a term of five years and vesting terms are
determined at the discretion of the Board, ranging between two
and three years. The exercise price of each option is equal to
the market price of the shares on the date preceding the date of
the grant. There has been no change to the number of stock
options outstanding during the three months ended March 31,
2005.
The following table summarizes information about the options
outstanding and exercisable at March 31, 2005:
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Options Outstanding Options Exercisable
---------------------------------------------------------------------
Weighted
Average Weighted Weighted
Range of Remaining Average Average
Exercise Contractual Exercise Exercise
price Options Life Price Options Price
---------------------------------------------------------------------
C$0.50-0.95 2,173,500 1.5 years C$ 0.63 2,173,500 C$ 0.63
C$1.25-1.90 930,334 2.2 years 1.26 930,334 1.26
C$2.36-2.95 1,030,334 2.9 years 2.60 980,334 2.59
C$4.72-4.72 2,518,333 3.6 years 4.72 1,675,000 4.72
C$7.45-7.81 518,000 3.9 years 7.67 406,333 7.67
C$10.95-15.77 459,000 4.3 years 11.68 129,000 11.30
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7,629,501 2.8 years C$ 3.47 6,294,501 C$ 2.79
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(c) Common share purchase warrants:
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Weighted
Average
Number of Exercise
Warrants Price
---------------------------------------------------------------------
Outstanding, December 31, 2004 68,785 C$ 3.15
Exercised (54,377) 2.66
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Outstanding, March 31, 2005 14,408 C$ 5.00
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Subsequent to March 31, 2005, the remaining 14,408 common share
purchase warrants were exercised.
(d) Non-employee stock options:
In 2002 the Company granted consultants options to acquire
900,000 common shares at a price of C$0.70 per share. At March
31, 2005, 450,000 of these options remain outstanding, are fully
vested and expire January 24, 2007.
(e) Stock-based compensation expense:
For the three months ended March 31, 2005, the Company recorded
$0.7 million (2004 - $1.4 million) as stock-based compensation
expense with a corresponding increase in contributed surplus.
There were no options granted during the first three months of
2005. The fair value of the options granted in the first three
months of 2004 was estimated to be C$4.20 per option and was
determined using the Black-Scholes option pricing model with the
following assumptions: expected volatility of 83 per cent,
risk-free interest rate of 3.4 per cent and expected lives of 3
years.
(f) Contributed surplus:
The changes in contributed surplus balance are as follows:
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Balance, December 31, 2004 $ 9,441
Amortization of expense for options previously granted 746
Options and warrants exercised, transfer to share
capital (206)
---------------------------------------------------------------------
Balance, March 31, 2005 $ 9,981
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(g) Per share amounts:
The loss per share is based on the weighted average shares
outstanding for the period. The weighted average shares
outstanding for the three months ended March 31, 2005 were
183,535,492 (2004 - 163,763,347). The effect upon conversion of
outstanding options and warrants is anti-dilutive.
5. Segmented information:
The Company's activities are conducted in two geographic segments:
Canada and Algeria. All activities relate to exploration and
development of petroleum and natural gas in Algeria.
Three months ended March 31 Canada Algeria Total
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2005
Capital expenditures $ 17 $ 12,492 $ 12,509
Assets 52,360 323,024 375,384
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2004
Capital expenditures $ 2 $ 14,169 $ 14,171
Assets 87,030 82,882 169,912
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For further information: Kenneth C. Rutherford, Vice President, Finance
& Chief Financial Officer, First Calgary Petroleums Ltd., Suite 900, 520 - 5
Avenue SW, Calgary, AB, T2P 3R7, tel: (403) 264-6697, fax: (403) 264-3955,
email: info(at)fcpl.ca, web site: www.fcpl.ca; European contacts:
James Henderson, PELHAM PUBLIC RELATIONS, Tel: +44 (0) 207 743 6673; Carina
Corbett, 4C COMMUNICATIONS LTD., Tel: +44 (0) 207 907 4761
(FPL)
END
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