Mr. Steven Johnson reports
WRANGLER WEST REPORTS 2011 OPERATING AND FINANCIAL RESULTS
Wrangler West Energy Corp. has filed on SEDAR its audited financial
statements and related management's discussion and analysis (MD&A)
for the year ended Dec. 31, 2011, with comparative data for the year
ended Dec. 31, 2010.
Effective Jan. 1, 2011, Wrangler West began preparing financial
statements and comparative information according to international
financial reporting standards. Previously, the company prepared
financial statements according to Canadian generally accepted
accounting principles. All documents may be viewed at SEDAR.
OPERATIONAL HIGHLIGHTS
Year ended Dec. 31,
2011 2010
Production
Crude oil and NGL (bbl/d) 189 282
Natural gas (mcf/d) 4,263 3,935
Total production (boe/d) 899 938
Prices
Crude oil and NGL ($/bbl) 86.46 70.82
Natural gas ($/mcf) 3.78 4.36
Per boe ($)
Petroleum and natural gas revenue 36.09 39.55
Royalties (6.40) (6.28)
Operating expenses (14.17) (13.41)
Netback 15.52 19.86
General and administrative (3.82) (3.33)
Interest (0.49) (0.81)
Current income tax benefit - 0.04
Funds flow from operations 11.21 15.76
Share-based payments (0.33) (0.65)
Depletion and depreciation (15.16) (16.39)
Impairment of property, plant and equipment - (3.73)
Gain (loss) on sale of assets (2.84) 0.37
Accretion (0.20) (0.22)
Deferred income tax benefit 1.83 1.26
Net loss
Wrangler West converts petroleum and natural gas reserves and volumes to
a common unit of measure on a basis of six thousand cubic feet of natural gas equals one barrel (bbl) of oil. Disclosure using
barrels of oil equivalent (boe) may be misleading, particularly if
used in isolation. The basis for the boe conversion ratio of six thousand cubic feet equals one bbl is an energy equivalency conversion method, primarily
applicable at the burner tip. This conversion rate does not represent
a value equivalency at the wellhead. The company calculates boe per day
based on total production for the period divided by the number of days
during the period.
Wrangler West Energy has provided its operating and financial results for the year ended Dec. 31, 2011.
2011 highlights
-
$11.8-million of revenue;
-
$3.7-million of funds flow from operations;
-
$4.9-million in capital expenditures;
-
Renewed credit facility.
Review of 2011
For the year ended Dec. 31, 2011, Wrangler West produced 899 barrels
of oil equivalent per day, a decrease of 4 per cent compared
with the same period one year ago. Wrangler West's production base is
approximately 80 per cent natural gas. During a period of strong oil
prices in 2011, Wrangler West maximized the value of Grand Forks crude
oil properties through the sale of this asset for $4.9-million.
In 2011, the company's netback was lower by 22 per cent as the price
Wrangler West received for natural gas declined 13 per cent from the
same period in 2010. For the year ended Dec. 31, 2011, crude oil
prices were 22 per cent higher, compared with the same period one year
ago. Total operating expenses for 2011 increased a modest 1 per cent
compared with the same period in 2010.
In 2011, Wrangler West conducted exploration activities using available
cash flow and the credit facility. The company drilled and cased two
natural gas wells and one oil well during 2011. At year-end, two wells
were on production and one well was deemed not economic to tie in at
prevailing natural gas prices. During 2011 fourth quarter, Wrangler
West renewed its credit facility and has in place a credit agreement
totalling $13.4-million, of which $8.4-million is a revolving operating
demand loan and $5.0-million is a non-revolving demand loan dedicated
to acquisitions and development.
Throughout 2011, the company undertook seismic programs that provided
geophysical data to increase its land position for oil prospects.
Wrangler West pursued a defensive strategy focused on conventional oil
exploration, rather than horizontal resource exploration which features
high costs and well-financed, aggressive competition for resource play
assets. Conventional oil drilling is compatible with Wrangler West's
capital and financial structure.
Remaining reserves Net present value
Company (Mboe) Before income tax ($ thousand)
Gross (1) Gross (2) Net (3) at 0% at 5% at 10% at 15%
Proved developed producing 942.1 942.1 775.5 18,208 15,407 13,443 11,988
Proved developed non-producing 192.8 192.8 162.7 5,469 4,571 3,881 3,339
Proved undeveloped 132.7 132.7 113.3 3,684 2,997 2,455 2,025
Total proved 1,267.6 1,267.6 1,051.5 27,362 22,976 19,779 17,353
Total probable 730.0 730.0 593.9 22,391 16,129 12,228 9,323
Total proved plus probable 1,997.7 1,997.7 1,645.4 49,753 39,105 32,007 26,676
(1) Gross reserves: remaining reserves attributable to the property
(2) Company gross reserves: Company's working interest share of the remaining reserves
attributable to the property, before deduction of any royalties.
(3) Company net reserves: Gross remaining reserves of properties in which the company has
an interest, less all Crown, freehold, and overriding royalties
and interest owned by others.
Wrangler West's corporate crude oil and natural gas reserves were
evaluated by Sproule Associates Ltd. with an effective
date of Dec. 31, 2011. Reserves totalled 1.3 MMboe in the proved
category and 2.0 MMboe in the proved plus probable category resulting
in a net present value of $32-million discounted at 10 per cent and
based on Sproule's Dec. 31, 2011, commodity price forecast.
Business environment
Natural gas exploration, especially "dry" gas, remains economically
challenging due to the oversupply condition the industry continues to
face. Elevated drilling activity for liquids-rich natural gas also
produces associated natural gas which is then added to already high
storage volumes. The unseasonably warm North American winter resulted
in lower-than-historical rates of drawdown from natural gas storage.
The slow economic recovery also contributed to natural gas prices
tumbling to their lowest value in the past 10 years.
It has been said, "When those who know it best like it the least, a
great opportunity is created for the contrarian." The natural gas
industry will undergo another challenging year throughout 2012 as the
bottom of the price cycle continues to be redefined. A natural gas
price of $1.75 per thousand cubic feet barely covers operating expenses, royalties and
overhead, let alone provides any return on invested capital. Shut-in
natural gas will be a prominent feature of any recovery scenario.
Drilling activity for oil and liquids-rich natural gas remains robust.
Consumers appear to have adapted to a higher oil price, in the range of
$100 per barrel, as the North American economy slowly improves.
However, the supply/demand imbalance for oil and natural gas in the
global economy represents a significant arbitrage opportunity for
export of these commodities currently trapped in North America. The
foregone revenue stream will attract both government support and
sophisticated capital. Long-term energy policy entered political
arenas on both sides of the Canadian border with the Keystone pipeline
being interrupted by the United States' federal election and potential
environmental issues requiring a managed solution. With the lack of
export opportunities, Northern Gateway appears to be the Canadian
alternative of choice although the project is likely at least a half a
decade away from providing a viable horizon to potential new markets.
Positioning Wrangler West
In the long term, anticipated market structure changes will provide
access to new and growing demand for oil and natural gas which will be
positive for the industry. However, in the near term, small
conventional oil and natural gas producers will continue to struggle
with the constraints of the current business environment. Rewards will
only be realized through successful exploration by companies that can
survive by prudently managing through the current down cycle.
In 2011, Wrangler West replaced oil and natural gas reserves even as the
backdraft from the "shale gale" continued to erode the value of natural
gas assets. To manage through this storm, Wrangler West disposed of
crude oil assets which enhanced the balance sheet and positioned the company to
capitalize on any upturn.
STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(Stated in thousands of dollars)
Year ended Year ended
Dec. 31, 2011 Dec. 31, 2010
Revenue
Petroleum and natural gas sales $11,842 $13,541
Royalties (2,099) (2,150)
------- -------
9,743 11,391
Expenses
Operating 4,651 4,592
General and administrative 1,252 1,141
Share-based payments 108 222
Depletion and depreciation 4,975 5,613
Impairment of property, plant and equipment - 1,276
(Gain) loss on sale of assets 933 (126)
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Results from operating activities (2,176) (1,327)
Finance
Interest and accretion 226 350
------- -------
(Loss) before income tax (2,402) (1,677)
Current income tax benefit - (15)
Deferred income tax benefit (599) (431)
------- -------
Net (loss) and comprehensive (loss) $(1,803) $(1,231)
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Net (loss) per share
Basic and diluted $(0.28) $(0.19)
We seek Safe Harbor.
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