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Enter Symbol
or Name
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CA



Lynden Energy Corp
Symbol LVL
Shares Issued 130,198,411
Close 2016-05-03 C$ 0.455
Market Cap C$ 59,240,277
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Lynden loses $2.3-million (U.S.) in Q3 fiscal 2016

2016-05-03 18:49 ET - News Release

Mr. Colin Watt reports

LYNDEN ENERGY REPORTS FINANCIAL RESULTS FOR THE THREE AND NINE MONTHS ENDED MARCH 31, 2016

Lynden Energy Corp. has released financial and operating results for the three and nine months ended March 31, 2016. (All monetary references in this press release are in U.S. dollars.)

Highlights

The company's financial and operating performance for the three and nine months ended March 31, 2016, include the following highlights:

  • Primarily as a result of a significant drop in commodity prices, petroleum and natural gas sales decreased by 33 per cent compared with the three months ended March 31, 2015.
  • Realized prices decreased 38 per cent per barrel of oil, 37 per cent per thousand cubic feet of gas, but increased 41 per cent per bbl of natural gas liquids compared with the three months ended March 31, 2015.
  • Average daily production was 1,329 barrels of oil equivalent per day in the three months ended March 31, 2016, compared with 1,350 boe per day in the three months ended March 31, 2015.

Results of operations

Nine months ended March 31, 2016

Net loss for the nine months ended March 31, 2016, was ($9.9-million) or (eight cents) per basic and diluted share, compared with net income of $33,000 or nil per basic and diluted share for the nine months ended March 31, 2015. The net loss was primarily due to: (1) an $8.0-million decrease in oil and gas revenues; and (2) a $6.1-million increase in exploration and impairment charges in the period. The net loss for the nine months ended March 31, 2016, also resulted in an income tax recovery of $1.2-million compared with income tax expense of $1.4-million for the nine months ended March 31, 2015.

Three months ended March 31, 2016

Net loss for the three months ended March 31, 2016, was ($2.3-million) or (two cents) per basic and diluted share, compared with net loss of ($2.1-million) or (two cents) per basic and diluted share for the three months ended March 31, 2015, and was primarily due to lower oil and gas revenues of $1.2-million, offset by lower depletion, depreciation and accretion expense of $300,000, and an equity investment loss of nil (2015: $400,000) in the three months ended March 31, 2016.

Petroleum and natural gas revenues

The attached table provides summary information regarding oil revenues, natural gas and natural gas liquid revenues, production, average product prices, and average production costs and expenses for the three and nine months ended March 31, 2016, and 2015. The company determines a barrel of oil equivalent using the ratio of 6,000 cubic feet of natural gas to one boe, and one barrel of NGL to one boe. The ratios of 6,000 cubic feet of natural gas to one boe and one barrel of NGL to one boe do not assume price equivalency, and, given price differentials, the price for one boe of natural gas or NGL may differ significantly from the price for a barrel of oil.

                                FINANCIAL AND OPERATING HIGHLIGHTS
                                             ($000s) 

                                            Three months ended                Nine months ended   
                                                 March 31,                         March 31,       
                                          2016             2015             2016             2015
Net revenues
Oil                                $     1,849      $     2,976      $     7,505      $    13,686
Natural gas                                320              485            1,087            1,785
NGL                                        314              239              979            2,122
                                       -------          -------          -------          -------
                                         2,483            3,700            9,570           17,593
Production and operating
expenses                                (2,041)          (1,959)          (5,062)          (4,651)
                                       -------          -------          -------          -------
Netback                            $       442      $     1,741      $     4,508      $    12,942
                                       =======          =======          =======          =======
Production
Oil (Mbbl)                                  64               64              199              205
Natural gas (MMcf)                         174              167              500              507
NGL (Mbbl)                                  28               30               85               91
Total barrel of oil
equivalent (Mboe)                          121              122              367              381
Total average daily
production (boe/d)                       1,329            1,350            1,336            1,389
Average prices
Oil (per bbl)                      $     28.76      $     46.48      $     37.76      $     66.62
Natural gas (per Mcf)              $      1.84      $      2.91      $      2.17      $      3.52
NGL (per bbl/d)                    $     11.35      $      8.03      $     11.49      $     23.40
Total average barrel of
oil equivalent (per boe)           $     20.53      $     30.45      $     26.08      $     46.28
Costs and expenses (per boe)
Lease operating                    $     12.76      $     11.48      $     11.44      $      8.90
Production and ad valorem
taxes                              $      4.11      $      4.64      $      2.34      $      3.32
Depletion, depreciation
and accretion                      $     19.62      $     22.25      $     19.74      $     21.46
Impairments                        $     (0.20)     $         -      $     17.82      $      1.18
General and administrative         $      6.48      $      6.62      $      5.44      $      4.51

Capital requirements and sources of liquidity

The company's primary sources of liquidity have been available cash on hand, cash generated from operations, borrowings under its credit facility and proceeds from asset dispositions. To date, the company's primary use of capital in this fiscal year has been for the acquisition, development and exploration of oil and natural gas properties. During the nine months ended March 31, 2016, the company spent approximately $12.0-million on capital expenditures on property, plant and equipment, which amount includes expenditures for activities included in the company's fiscal 2015 capital budget.

The company's fiscal 2016 (July 1, 2015, to June 30, 2016) capital budget for drilling, completion, recompletion and infrastructure was originally established at approximately $18.9-million, and has since been revised downward to approximately $10.4-million for the following:

  • $4.7-million, or 45 per cent, for the participation in the drilling and completion of six gross (2.44 net) vertical Midland basin wells;
  • $4.1-million, or 39 per cent, for the participation in the drilling and completion of one gross (0.43 net) horizontal Midland basin wells;
  • $1.6-million, or 16 per cent, for the participation in the drilling and completion of three gross (1.50 net) vertical Mitchell Ranch project wells.

Based upon current oil and natural gas prices, the company believes that its cash and cash equivalents on hand, its cash flow from operations, and additional borrowings under its credit facility will provide it with sufficient liquidity to complete its fiscal 2016 capital program, excluding any acquisitions it may enter into. The company is not contractually bound to drill any wells to which it has not first consented.

In April, 2015, the company entered into a NYMEX-based oil price put contract for 9,000 barrels of oil per month from September, 2015, to August, 2016 (12 months), with a strike price of $50 per bbl as a hedge against some of the effects of commodity volatility during the period of the contract.

As at March 31, 2016, the credit facility has a borrowing base of $40.0-million, of which $36.5-million was drawn down. Payments under the credit facility will be required to the extent that outstanding principal and interest exceed the borrowing base. Changes in the borrowing base are made based on the bank's engineering valuation of the company's oil and gas reserves. The borrowing base is redetermined semi-annually; however, the company may request two additional redeterminations of the borrowing base annually. The lender's next engineering valuation of the company's oil and gas reserves and redetermination of the borrowing base are anticipated to be completed in June, 2016.

The credit facility contains certain mandatory covenants, including minimum current ratio and cash flow requirements, and other standard business operating covenants. During the three months ended March 31, 2016, the company did not comply with a mandatory covenant, the interest coverage ratio, which non-compliance has been waived by the lenders. Amounts owing on the credit facility are payable when the credit facility expires in August, 2016, unless otherwise extended by the parties, or payable on demand in the event of default. As a result of the credit facility expiring in less than one year, the amount due under the credit facility has been classified as a current liability. As a result of the entry into a definitive agreement with Earthstone Energy Inc., under which Earthstone will acquire the company in an all-stock transaction, the company does not currently plan on an extension of the credit facility.

Future cash flows are subject to a number of variables, including, but not limited to, the level of oil and natural gas production and prices.

Significant additional capital expenditures will be required to more fully develop the company's properties. The company cannot assure that additional capital will be available on acceptable terms or at all. If it requires additional capital for that or other reasons, it may seek such capital through traditional reserve base borrowings, joint venture partnerships, production payment financings, asset sales, offerings of debt and equity securities, or other means. It cannot assure you that needed capital will be available on acceptable terms or at all. If it is unable to obtain capital when needed or on acceptable terms, it may be required to curtail its current drilling program, which could result in a loss of acreage through lease expirations. In addition, it may not be able to complete acquisitions that may be favourable to the company or finance the capital expenditures necessary to maintain its production or replace its reserves.

A capital budget has not yet been formally established for the first half of fiscal 2017 (July 1, 2016, to Dec. 31, 2016); however, the company anticipates significantly reduced levels of capital expenditures in the period compared with the prior period. Currently, plans anticipate one gross (0.40 net) horizontal well in Howard county, and one (0.50 net) vertical Mitchell Ranch project well in the first half of fiscal 2017, at an estimated capital cost to the company of $3.7-million.

Proposed business combination

On Dec. 17, 2015, Lynden and Earthstone Energy announced a definitive agreement under which Earthstone will acquire Lynden in an all-stock transaction under a plan of arrangement pursuant to the Business Corporations Act (British Columbia). Under the Earthstone agreement, Lynden shareholders will receive 0.02842 of a share of Earthstone common stock in exchange for each share of Lynden common stock held. As previously announced, the special meeting of securityholders will be held on May 12, 2016, at which meeting the Lynden securityholders will be asked to approve the transaction. Following the transaction, shareholders of Earthstone and Lynden are expected to own approximately 79 per cent and 21 per cent, respectively, of the combined company on a fully diluted basis. Additional details regarding the transaction, including, but not limited to, required securityholder, regulatory and court approvals, are contained in the company's previous filings with the Securities and Exchange Commission.

We seek Safe Harbor.

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