Mr. Ernie Sapieha reports
WALDRON ENERGY CORPORATION ANNOUNCES 2014 YEAR END RESULTS, 2014 YEAR END RESERVES AND OPERATIONS UPDATE
Waldron Energy Corp. has released its financial and operational results for the year and three months ended Dec. 31, 2014. The corporation's audited year-end financial statements and annual information form (AIF), including a statement on reserves data and other information specified in National Instrument 51-101, are available for review on SEDAR and on the corporation's website.
Fourth-quarter 2014 highlights:
-
Fourth-quarter 2014 production averaged 1,317 barrels of oil equivalent per day. This reflects
a reduction of approximately 250 boe per day resulting from the
temporary shut-in of the corporation's Strachan production and third
party volume allocation adjustments related to prior periods. Absent
such matters, normalized fourth-quarter 2014 production would have been
approximately 1,567 boe per day.
-
Realized natural gas pricing of $3.87 per thousand cubic feet, natural gas liquids pricing of $26.63 per
barrel and light oil pricing of $71.75 per barrel resulted in an average
realized price of $30.07 per boe.
-
Fourth-quarter 2014 funds from operations of $200,000 were
negatively impacted by the temporary shut-in of its Strachan production
as well as third party volume allocation adjustments related to prior
years. Combined, these items resulted in a reduction to fourth-quarter
2014 reported revenue of approximately $900,000. Partially
offsetting the reduction in revenue was a Crown royalty recovery of $300,000.
2014 OPERATIONAL HIGHLIGHTS
Three months ended Year ended
Dec. 31, Dec. 31,
2014 2013 2014 2013
Operating
Production
Natural gas (mcf/d) 5,786 7,347 6,605 8,364
NGL (bbl/d) 180 305 239 355
Light crude oil (bbl/d) 173 154 158 154
Boe/day 1,317 1,684 1,498 1,903
Realized pricing
Natural gas ($/Mcf) $ 3.87 $ 3.72 $ 4.84 $ 3.40
Natural gas liquids ($/bbl) 26.63 54.49 55.55 50.70
Light crude oil ($/bbl) 71.75 79.83 89.75 86.14
Average realized price ($/boe) 30.07 33.38 39.66 31.39
Netback per boe
Sales price $ 30.07 $ 33.38 $ 39.66 $ 31.39
Realized gain (loss) on commodity
contracts 2.62 (0.59) (1.53) (0.12)
Royalties (0.54) (3.59) (4.83) (3.61)
Operating expenses (17.67) (11.60) (16.10) (11.96)
Transportation expenses (2.57) (2.10) (2.35) (1.79)
Operating netback per boe $ 11.91 $ 15.50 $ 14.67 $ 13.91
Operating netback ($000s) $ 1,443 $ 2,401 $ 8,019 $ 9,664
2014 FINANCIAL HIGHLIGHTS
($000s except for per-share amounts)
Three months ended Year ended
Dec. 31, Dec. 31,
2014 2013 2014 2013
Operating netback (1) $ 1,443 $ 2,401 $ 8,019 $ 9,664
Per share basic and
diluted (1)(3) 0.02 0.06 0.13 0.24
Petroleum and natural gas sales 3,644 5,172 21,581 21,805
Funds from operations (2) 233 1,169 3,706 5,322
Per share basic and
diluted (2)(3) 0.00 0.03 0.06 0.13
Net (loss) (27,526) (2,425) (29,859) (8,690)
Per share basic and diluted (3) (0.44) (0.06) (0.50) (0.21)
Capital expenditures, net of
dispositions 1,795 2,514 10,567 3,779
Net proceeds from the issuance
of equity - 6,427 2,778 6,427
Proceeds on sale of gross
overriding royalty - - 7,000 -
Net debt (4) 26,500 29,104
Property and equipment 53,444 75,528
Exploration and evaluation
assets 4,872 9,538
Shareholders equity 19,295 46,249
(1) Operating netback is a non-generally accepted accounting principles
measure, and the corporation calculates this measure as revenue, net of
any realized gains or losses on commodity price contracts, less royalties,
and operating and transportation expenses.
(2) Funds from operations is a non-GAAP measure, and the corporation
calculates this measure as cash provided from operations before changes
in non-cash working capital, transaction, and other costs and
decommissioning expenses.
(3) At Dec. 31, 2014, there were 3,276,167 (Dec. 31, 2013: 1,983,667) options
outstanding that were not included in the calculation of weighted average
shares outstanding as the effect would be anti-dilutive.
(4) Net debt is a non-GAAP measure, and the corporation calculates this
measure as current assets less current liabilities, excluding commodity
price contracts.
Operations update
The corporation is also pleased to announce that certain of its Strachan area production has been put back on-line as of Feb. 11, 2015. Production of its Strachan area assets has averaged approximately 350 boe per day of sales volumes since coming on-line, notwithstanding the fact that only certain of the corporation's wells in the area are now flowing. On Feb. 5, 2015, the corporation had announced that its Strachan production of approximately 300 boe to 350 boe per day had been temporarily shut-in by the operator of the third party natural gas processing plant in the area as a result of the plant operating at capacity as well as certain recent operational issues at the plant. The corporation continues to work with the operator of the plant to bring all of Waldron's volumes back on production, and Waldron has made commitments for firm service effective May 1, 2015. In the interim, the corporation's production volumes will continue to be produced on an interruptible basis, and the corporation anticipates its firm service contract with the pipeline operator may continue to provide an advantage in flowing volumes through the plant during the interruptible service period.
First-quarter 2015 production is estimated to be 1,300 boe to 1,400 boe per day, which was impacted by the temporary shut-in of its Strachan volumes. Current production is estimated to be 1,400 boe to 1,450 boe per day.
Disposition process
As previously announced on Dec. 2, 2014, the corporation has engaged Cormark Securities Inc. as financial adviser in order to pursue the sale of a material portion of the assets of the corporation, either in one transaction or in a combination of transactions; a merger or other business combination; the outright sale of the corporation; or some combination thereof. The disposition process is continuing, and the corporation expects to provide an announcement upon the conclusion of the disposition process.
Credit facility update
During the first quarter 2014, the corporation completed a $6-million secured subordinated debenture financing that carries an interest rate of 9.5 per cent per annum. The debenture had a maturity date of Feb. 28, 2015, which, subsequent to Dec. 31, 2014, was extended to March 31, 2015. In conjunction with the closing of the subordinated debenture financing and then subsequently in conjunction with the sale of the gross overriding royalty, and in accordance with the terms of the subordinated debenture, the corporation's senior lender had revised its borrowing base to $20.6-million, resulting in combined credit facilities of the corporation of $26.6-million as at Dec. 31, 2014. During the fourth quarter 2014, the corporation's senior lender completed a borrowing base review, and the availability of the senior lender credit facility was reduced to $19.3-million subsequent to Dec. 31, 2014, resulting in combined credit facilities of the corporation of $25.3-million. The next review is expected to occur on or before April 1, 2015. The corporation continues to work with its lenders to demonstrate a justifiable lending base and renegotiate lending terms, if required. The corporation also expects that the outcome of the disposition process may assist in its discussion with its lenders.
Sale of gross overriding royalty
On June 18, 2014, Waldron closed the sale of a 3-per-cent gross overriding royalty on its existing land base for proceeds of $7-million. The royalty transaction also includes an incremental 7-per-cent gross overriding royalty on two Ferrybank Falher wells that had yet to be drilled at the time of closing, and includes a provision that $750,000 is to be returned to the royalty owner for each of two horizontal Ferrybank Falher wells not drilled. The first of the two qualifying wells was drilled during the third quarter 2014. The second of the two wells is required to be drilled by mid-April, 2015, in order to avoid the repayment of $750,000. The corporation is currently negotiating with the royalty owner regarding the second well commitment.
The corporation also has an option to purchase the GORR back for 15 months from the closing date at a price of 30 per cent above the original proceeds on the royalty sale, less any royalties paid under the GORR agreement and less two-thirds of any amounts returned as a result of any failure to drill the Ferrybank wells.
Private placements
On Jan. 15, 2014, Waldron closed a private placement for 2,222,223 common shares of Waldron at 45 cents per share for gross proceeds of $1.0-million.
On July 30, 2014, Waldron closed a private placement for 5,459,545 common shares of Waldron, issued on a flow-through basis, at 33 cents per share for gross proceeds of $1.8-million.
2014 reserves summary
Waldron is pleased to provide the following summary results from its annual independent reserve evaluation completed by GLJ Petroleum Consultants (GLJ) for all of the corporation's properties effective Dec. 31, 2014. These estimates were prepared in accordance with National Instrument 51-101 -- Standards of Disclosure for Oil and Gas Activities, and the full reserves information is included in the corporation's AIF, which will be available under the corporation's profile on SEDAR.
The associated tables summarize the corporation's gross and net interests in proved and probable reserves at Dec. 31, 2014, as assessed in the GLJ report prepared in accordance with NI 51-101 using the GLJ Jan. 1, 2015, forecast prices and cost assumptions.
RESERVES SUMMARY (1)
Total oil
Oil and NGLs Natural gas (2) equivalent (3)
Gross Net Gross Net Gross Net
Reserves category (Mbbl) (Mbbl) (Mmcf) (Mmcf) (Mboe) (Mboe)
Proved
Producing 1,023 756 12,790 10,944 3,155 2,580
Developed non-producing 84 68 1,236 1,040 290 241
Undeveloped 318 256 2,438 2,164 724 617
Total proved 1,425 1,080 16,464 14,148 4,169 3,438
Probable 1,523 1,158 17,958 15,451 4,515 3,734
Total proved plus probable 2,948 2,238 34,422 29,599 8,684 7,172
(1) Numbers in this table are subject to rounding.
(2) Natural gas volumes include solution gas volumes associated with the
corporation's light and medium crude oil reserves.
(3) Natural gas is converted to barrels of oil equivalent (boe) at a
ratio of 6,000 standard cubic feet to one barrel of oil.
Net present values of future net revenue
The associated table summarizes Waldron's share of the net present value of future net revenue attributable to its reserves before taxes but prior to the provision for interest and general and administrative expenses.
NET PRESENT VALUES OF FUTURE NET REVENUE (1)(2)(3)(4)(5)(6)
Before income taxes discounted at (%/year)
0% 5% 10% 15%
Reserves category (M$) (M$) (M$) (M$)
Proved
Producing $46,537 $33,812 $26,741 $22,223
Developed non-producing 2,241 1,796 1,453 1,185
Undeveloped 7,437 4,558 2,891 1,860
Total proved 56,215 40,166 31,086 25,267
Probable 58,504 30,773 17,413 10,027
Total proved plus probable 114,719 70,938 48,498 35,294
(1) Gross reserves are the corporation's total interest share before the
deduction of royalties and without including any royalty interest of
the corporation.
(2) Utilizes GLJ escalated price forecasts as of Jan. 1, 2015.
(3) Natural gas volumes include solution gas volumes associated with the
corporation's light and medium crude oil reserves.
(4) Natural gas is converted to barrels of oil equivalent (boe) at a
ratio of 6,000 standard cubic feet to one barrel of oil.
(5) Numbers in this table are subject to rounding.
(6) Estimates of future net revenue disclosed herein may not represent fair
market value.
We seek Safe Harbor.
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