Mr. James Evaskevich reports
YANGARRA ANNOUNCES YEAR END 2013 FINANCIAL, OPERATING RESULTS AND RESERVES
Yangarra Resources Ltd. has released its 2013 financials and reserves.
Financial and operating highlights for 2013
During the year ended Dec. 31, 2013, the company completed the
following significant milestones:
- Average daily production was 2,206 barrels of oil equivalent per day, a 15-per-cent increase from 2012.
- Yangarra had funds flow from operations of $26-million (21 cents per share, basic), a
76-per-cent increase from 2012.
- Earnings before interest, taxes, depletion and depreciation, amortization,
and changes in commodity contracts was $27-million.
- Operating costs, including $1.26 per boe of transportation costs, were
$7.56 per boe.
- Yangarra had an operating netback of $36.18 per boe, a 42-per-cent increase from the $25.48 per
boe reported in 2012.
- The company had general and administrative costs of $2.06 per boe, which represents an 18-per-cent decrease from 2012.
- Yangarra's royalties were at 5 per cent of oil and gas revenue.
- Yangarra had $1.2-million of realized hedging gains.
- Fourth quarter of 2013 production was 2,764 boe per day, with funds flow from
operations of $8-million (six cents per share, basic).
- Total capital expenditures were $47-million versus $19.8-million in
2012. With the equity raise late in 2013 the company accelerated the
fourth quarter capital expenditures to $26-million.
- As at Dec. 31, 2013, the company had current bank debt,
subordinated debt and a working capital deficit, excluding mark to market
on commodity contracts and flow-through share obligations, of $44.6-million, compared with $36.3-million at Dec. 31, 2012.
- The annualized fourth quarter debt-to-cash-flow ratio was 1.4:1.
Reserve report highlights:
- Yangarra increased its proved plus probable reserves by 39 per cent to 17.5 million boe and increased its proved reserves by 32 per cent to 9.4 million boe.
- The net present value of its proved plus probable reserves at Dec. 31, 2013, discounted at 10 per cent, was $251.1-million, an increase of 50 per cent
compared with Dec. 31, 2012.
- The company replaced 2013 production by 283 per cent on a proved basis and 614 per cent on a proved
plus probable basis.
- Yangarra achieved finding and development costs, including changes in future
capital, of $14.07 per boe ($8.18 excluding changes in future capital) on
its proved plus probable reserves and of $17.58 per boe on proved reserves ($15.25
excluding changes in future capital).
- Yangarra generated a finding and development recycle ratio of 2.57 times on
its proved plus probable reserves, including changes in future capital (4.42
times excluding changes in future capital), based on the company's 2013
operating netback of $36.18 per boe.
- The company has a reserve life index of 16 years on a total proved plus probable basis
based on the company's December, 2013, production rate of 3,000 boe per day.
- Yangarra had future development costs (proved plus probable) of $125-million, which is
2.5 times the 2014 capital budget.
- The company had a net asset value of $206-million as at Dec. 31, 2013, which is $1.40
per common share.
Operations update
During the first quarter of 2014 the company drilled six gross (5.9 net)
wells in the Cardium formation. A total of four gross (3.9 net) wells were
put on production during the quarter, with the final two (two net)
expected to be on stream at quarter-end. The company experienced 11
days of shut-in production (approximately 1,200 boe per day) due to the
TransCanada pipeline rupture near Rocky Mountain House and an
additional 150 boe per day (average) for the quarter of Keyera curtailments at
other facilities. The company expects first quarter production to be
approximately 2,800 boe per day and full-year guidance remains at 3,200
boe per day. The company will continue to drill through breakup as
conditions permit, with six gross (5.2 net) wells planned for the second
quarter.
President's message to shareholders
"Yangarra is currently drilling its 71st horizontal well in central Alberta. The experience gained by drilling
this many wells with the team we have put in place over the past four
years has been key to reducing costs to a point where we are top
decile in drilling and completions, operating costs, and general and administrative costs. We
are currently concentrating on 'oilier' targets in the Cardium and
Glauconite horizons where we have significant inventory. We also have
a large undrilled inventory in 'gassier' Cardium, Glauconite and Rock
Creek zones that we will drill as natural gas prices continue to
improve. These 'gassier' targets are extremely 'liquids rich,' however,
the 'oilier' targets still command higher internal rates of return. Half-cycle IRRs in 2013 were 65 per cent, recycle ratios were 2.57
(P+P including changes in future capital) in 2013 and annual production
growth is forecast to be 45 per cent in 2014.
"A recent farm-in was negotiated, in which the company added significant
acreage to its Cardium inventory. Yangarra has been active at Crown
land sales and has been successful closing deals with industry to add
additional future drilling locations. The company has added two future
drilling locations for every location drilled in each of the past four
years and we have visibility to do the same going forward.
"Yangarra is focused on adding shareholder value and to properly gauge
this we have calculated full-cycle rates of return, which we believe is more indicative of value creation. All capital
costs for each year are included in this calculation including land,
infrastructure, geological work et cetera.
"According to Yangarra's 2013 year-end engineering report, the company is
valued at $1.40 per share (2P (pretax) discounted at 10 per cent, net of debt). The
financing late last year provided the necessary liquidity to achieve
the outstanding reserve additions generated by the company in the
fourth quarter of 2013. There is significant additional intrinsic value
not booked in the reserve report in our 53,000 acres (including farm-in
acreage) of undeveloped Cardium and Glauconite land, and for our 39,040-acre net Duvernay land position.
"Toronto-Dominion Bank recently opined that liquids-rich Duvernay lands may be worth
$2,000 to $4,000 per acre in Pembina/Willesden Green, which positions our
shareholders with great option value in this rapidly developing play.
Yangarra has recently retained the services of two experienced shale
professionals to develop the asset, with plans in progress to drill a
vertical stratagraphic test well.
"I would like to thank the shareholders for their support. I thank my
colleagues at Yangarra for their ongoing dedication to the development
of the company. They have delivered seamless reliable operations, and
demonstrated their ability to quickly interpret, react and adapt to the
technical results of our development drilling efforts. I also wish to
take this opportunity to thank my fellow directors for their support
and leadership."
STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
2013 2013 2012 Year ended Year ended Year ended
Q4 Q3 Q4 2013 2012 2011
Petroleum and natural gas sales $ 11,087,956 $ 9,372,931 $ 4,842,343 $ 34,726,657 $ 21,327,157 $ 20,742,259
Net income (loss) for the
period (before tax) $ 1,576,908 $ 39,646 $ (2,409,766) $ 4,146,706 $ 21,174 $ 4,872,697
Net income (loss) for the
period $ 750,851 $ 11,330 $ 340,623 $ 2,585,699 $ (217,712) $ 1,385,698
Net income (loss) per share,
basic and diluted $ 0.01 $ 0.00 $ 0.00 $ 0.02 $ (0.00) $ 0.01
Oil and gas reserves
The attached tables summarize certain information contained in the
independent reserves report prepared by AJM Deloitte as of Dec. 31,
2013. The report was prepared in accordance with definitions, standards
and procedures contained in the Canadian oil and gas evaluation
handbook and National Instrument 51-101, standards of
disclosure for oil and gas activities.
SUMMARY OF OIL AND GAS RESERVES
(based on forecast price and costs)
Light and medium oil (mbbl) Natural gas liquids (mbbl) Natural gas (mmcf)
Working interest Company share Working interest Company share Working interest Company share
(gross) (gross) (net) (gross) (gross) (net) (gross) (gross) (net)
Reserves category
Proved developed
producing 988 993 820 711 754 539 12,095 13,209 11,130
Proved developed
non-producing 215 216 194 65 67 53 1,634 1,679 1,511
Proved
undeveloped 1,276 1,289 1,118 866 923 705 14,806 16,304 14,351
Total proved 2,479 2,498 2,132 1,642 1,744 1,297 28,535 31,192 26,992
Probable 2,392 2,401 2,031 1,308 1,357 1,010 24,227 25,590 22,739
Total proved
plus probable 4,871 4,899 4,163 2,950 3,101 2,307 52,762 56,782 49,731
Total boe as at Total boe as at
Dec. 31, 2031 (mboe) Dec. 31, 2012 (mboe)
Working interest Company share Working interest Company share
(gross) (gross) (net) (gross) (gross) (net)
Reserves category
Proved developed producing 3,715 3,949 3,214 2,076 2,381 2,042
Proved developed non-producing 552 563 499 433 443 386
Proved undeveloped 4,610 4,929 4,215 4,039 4,338 3,765
Total proved 8,877 9,441 7,928 6,548 7,163 6,193
Probable 7,738 8,023 6,831 5,058 5,356 4,473
Total proved plus probable 16,615 17,464 14,759 11,606 12,518 10,667
Finding and development costs
Yangarra's finding and development costs for 2013, 2012 and the three-year average are
presented in the attached tables below. The costs used in the F&D calculation
are the capital costs related to land acquisition and retention,
drilling, completions, tangible well sites, tie-ins, and facilities,
plus the change in estimated future development costs as per the
independent reserve report. Acquisition costs are net of any proceeds
from dispositions of properties. Due to the timing of capital costs
and the subjectivity in the estimation of future costs, the aggregate
of the exploration and development costs incurred in the most recent
financial year and the change during that year in estimated future
development costs generally will not reflect total finding and
development costs related to reserve additions for that year. The
reserves used in this calculation are company net reserve additions,
including revisions.
PROVED FINDING AND DEVELOPMENT COSTS
(in millions of dollars, except where noted)
2013 2012 2011-2013
Capital expenditures $ 47.0 $ 19.8 $ 130.8
Change in future capital 7.2 23.8 41.3
Total capital for F&D $ 54.2 $ 43.6 $ 172.1
Reserve additions, net production (mboe) 3,083 2,409 8,005
Proved F&D costs -- including future capital ($/boe) 17.58 18.09 21.50
Proved F&D costs -- excluding future capital ($/boe) 15.25 8.22 15.85
Proved recycle ratio
Including future capital 2.06 1.41
Excluding future capital 2.37 3.10
PROVED PLUS PROBABLE FINDING AND DEVELOPMENT COSTS
(in millions of dollars, except where noted)
2013 2012 2011-2013
Capital expenditures $ 47.0 $ 19.8 $ 130.8
Change in future capital 33.9 35.7 78.3
Total capital for F&D $ 80.9 $ 55.5 $ 209.1
Reserve additions, net production (mboe) 5,750 4,459 13,141
Proved plus probable F&D costs -- including future capital ($/boe) 14.07 12.45 15.91
Proved plus probable F&D costs -- excluding future capital ($/boe) 8.18 4.44 9.96
Proved plus probable recycle ratio
Including future capital 2.57 2.05
Excluding future capital 4.42 5.74
Advance notice bylaw
Yangarra is announcing that its board of directors approved the adoption
of an advance notice bylaw. Among other
things, the advance notice bylaw fixes a deadline by which
shareholders must submit a notice of director nominations to Yangarra
prior to any annual or special meeting of shareholders where directors
are to be elected and sets forth the information that a shareholder
must include in the notice for it to be valid.
The advance notice bylaw is similar to the advance notice requirements
adopted by many other Canadian public companies. Specifically, the
advance notice bylaw requires advance notice to the corporation in
circumstances where nominations of persons for election as a director
of Yangarra are made by shareholders other than pursuant to a
requisition of a meeting made pursuant to the provisions of the
Business Corporations Act (Alberta) or a shareholder
proposal made in accordance with the provisions of the act.
In the case of an annual meeting of shareholders, notice to the
corporation must be given not less than 30 or more than 65 days prior
to the date of the annual meeting. In the event that the annual meeting
is to be held on a date that is less than 50 days after the date on
which the first public announcement of the date of the annual meeting
was made, notice may be given not later than the close of business on
the 10th day following such public announcement.
In the case of a special meeting of shareholders (which is not also an
annual meeting), notice to the corporation must be given not later than
the close of business on the 15th day following the day on which the
first public announcement of the date of the special meeting was made.
The advance notice bylaw is effective immediately. At the next meeting
of shareholders of the corporation, shareholders will be asked to
confirm and ratify the advance notice bylaw. The full text of the
advance notice bylaw is available under Yangarra's profile at SEDAR.
Annual general meeting of shareholders
The company's annual general and special meeting of shareholders is
scheduled for 10 a.m. on Tuesday, May 27, 2014, in the Tillyard
Management Conference Centre, main floor, 715 5th Ave. SW, Calgary,
Alta.
Year-end disclosure
The company's annual report (financial statements, notes to the
financial statements, and management's discussion and analysis) will be
filed on SEDAR and will be available on the company's website.
Additional reserve information, as required under NI 51-101, will be
included in the company's annual information form, which will be filed
on SEDAR by April 30, 2014.
We seek Safe Harbor.
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