CALGARY, Aug. 22, 2014 /CNW/ - Hawk Exploration Ltd. ("Hawk" or the
"Corporation") is pleased to announce its results for the three and six
months ended June 30, 2014. The Corporation's interim financial
statements for the three and six months ended June 30, 2014 and its
management's discussion and analysis for the three and six months ended
June 30, 2014 are available for viewing on SEDAR at www.sedar.com under Hawk's profile or on the Corporation's website at www.hawkexploration.ca under Investor Information - Financial Reports.
HIGHLIGHTS
Highlights for the three months ended June 30, 2013 were as follows:
-
Generated cash flow from operations of $1.9 million in the second
quarter, a 28% increase from the $1.6 million in cash flow in the
second quarter of 2013;
-
Averaged 659 boe/d of production in the second quarter of 2014, a 5%
increase over the 628 boe/d average production in the same period of
2013;
-
Earned comprehensive income of $0.3 million in the second quarter of
2014, a 1% increase over the second quarter of 2013;
-
Drilled three (2.9 net) wells in western Saskatchewan during the second
quarter of 2014;
-
Subsequent to the second quarter, entered into a new revolving credit
facility in the amount of $13.5 million with a Canadian bank; and
-
Subsequent to the second quarter, entered into a purchase and sale
agreement with Trihawk Energy Ltd. to acquire certain producing assets
in the plains region of Alberta and western Saskatchewan.
Selected financial and operational information for the three and six
months ended June 30, 2014 is provided as follows:
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| Three months ended June 30, |
| Six months ended June 30, |
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| 2014 |
|
2013
|
|
% Change
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| 2014 |
|
2013
|
|
% Change
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Financial ($000's except per share amounts) |
|
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|
|
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Petroleum and natural gas sales
|
| $ | 4,979 |
$
| 3,893
|
|
28%
| $ | 9,639 |
$
|
6,810
|
|
42%
|
Cash flow from operations (1)
|
|
| 1,949 |
|
1,613
|
|
21%
|
| 3,708 |
|
2,817
|
|
32%
|
|
Per share |
|
| 0.06 |
|
0.05
|
|
20%
|
| 0.11 |
|
0.08
|
|
38%
|
Comprehensive income (loss)
|
|
| 334 |
|
332
|
|
1%
|
| (317) |
|
173
|
|
(283%)
|
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Per share
|
|
| 0.01 |
|
0.01
|
|
0%
|
|
(0.01) |
|
0.01
|
|
(200%)
|
Capital expenditures (2) |
|
| 1,849 |
|
419
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|
341%
|
| 4,717 |
|
2,537
|
|
86%
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Working capital deficit - excluding bank
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debt and commodity contracts, end of period (1)
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| $ | 1,900 |
$
|
876
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117%
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Bank debt, end of period
|
|
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|
|
|
|
| 6,700 |
|
3,750
|
|
79%
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Total assets, end of period
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| $ | 36,849 |
|
31,227
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18%
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|
| Three months ended June 30, |
| Six months ended June 30, |
|
|
| 2013 |
|
2012
|
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% Change
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| 2013 |
|
2012
|
|
% Change
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Common Shares outstanding end of period:
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Class A Shares
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|
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|
|
| 34,726 |
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34,481
|
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1%
|
|
Class B Shares
|
|
|
|
|
|
|
|
| 1,080 |
|
1,080
|
|
-%
|
|
Options to acquire Class A Shares
|
|
|
|
|
|
|
|
| 3,200 |
|
2,473
|
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29%
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Operations |
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Production |
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Crude oil and natural gas liquids (bbl/d) |
|
| 643 |
|
598
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8%
|
| 662 |
|
598
|
|
11%
|
|
Natural gas (mcf/d)
|
|
| 95 |
|
178
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|
(47%)
|
| 110 |
|
168
|
|
(35%)
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Total (boe/d)
|
|
| 659 |
|
628
|
|
5%
|
| 680 |
|
626
|
|
9%
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Oil and liquids as percent of total
|
|
| 98% |
|
95%
|
|
3%
|
| 97% |
|
96%
|
|
1%
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Average Selling Price |
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|
|
|
|
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|
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|
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|
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Crude oil and ngls (per bbl)
|
| $ | 84.33 |
$
|
70.44
|
|
20%
| $ | 79.55 |
$
|
61.97
|
|
28%
|
|
Natural gas (per mcf) |
|
| 4.81 |
|
3.61
|
|
33% |
| 5.38 |
|
3.47
|
|
55%
|
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Total (per boe)
|
|
| 83.00 |
|
68.13
|
|
22%
|
| 78.27
|
|
60.13
|
|
30%
|
Operating netback (per boe at 6:1) (3) |
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Price
|
| $ | 83.00 |
$
|
68.13
|
|
22%
| $ | 78.27 |
$
|
60.13
|
|
30%
|
|
Royalties |
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| (17.23) |
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(14.84)
|
|
16%
|
| (16.15) |
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(11.65)
|
|
39%
|
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Production expense |
|
| (21.61) |
|
(18.03)
|
|
20%
|
| (21.51) |
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(17.60)
|
|
22%
|
|
Transportation expense |
|
| (1.81) |
|
(1.99)
|
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(9%)
|
| (1.73) |
|
(1.75)
|
|
(1%)
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Operating netback ($/boe)
|
| $ | 42.35 |
$
|
33.27
|
|
27%
| $ | 38.88 |
$
|
29.13
|
|
33%
|
(1) The terms cash flow from operations, cash flow from operations per
share, working capital deficit and net debt to annualized cash flow
ratio are additional GAAP financial measures. These measures are
further described on page 3 of the Corporation's MD&A for the three and
six months ended June 30, 2014 under the heading "Additional GAAP and
Non-GAAP Financial Measures". Users are cautioned that additional GAAP
financial measures may not be comparable with the calculation of
similar measures by other entities.
|
(2) Capital expenditures include cash exploration and evaluation
expenditure plus cash property, plant and equipment net of dispositions
and exclude asset retirement obligations and capitalized share-based
payments.
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(3) Management uses the terms operating and cash flow netbacks per boe
which are non-GAAP measures. These measures are key performance
indicators however do not have a standardized meaning as prescribed by
GAAP and therefore, may not be comparable with the calculation of
similar measures by other entities. Management considers operating and
cash flow netbacks to be important measures as they demonstrate
profitability relative to current commodity prices.
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Operational Review and Update
During the second quarter of 2014, Hawk drilled three (2.9 net) wells in
western Saskatchewan, however wet weather in this area delayed
completion activities until late July 2014. The Corporation drilled
one (1.0 net) vertical well targeting heavy oil in the Eureka area of
western Saskatchewan, which was a follow up to an exploration well
drilled in the fourth quarter of 2013. The new well encountered 21
meters of net oil pay in the Basal Mannville Formation, was completed
and placed on production at an average rate of 25 bopd. Hawk has
received approval for a horizontal well project and plans to drill its
first horizontal well at Eureka during the third or fourth quarter of
2014.
The Corporation also drilled two (1.9 net) vertical wells targeting
heavy oil in the Baldwinton and Neilburg areas of western Saskatchewan.
This Baldwinton well (0.9 net) was completed in the Sparky Formation
and placed on production at a rate of 20 (18 net) bopd while the
Neilburg well was completed and encountered uneconomic quantities of
oil and was subsequently suspended.
In July 2014, Hawk shot six square kilometers of three dimensional
("3D") seismic data in the Forest Bank area of western Saskatchewan
where the Corporation recently entered into a 1,440 acre farm-in
agreement ("Farm In") with a major company. The 3D seismic has been
interpreted and Hawk has identified a number of drilling prospects.
Hawk expects to drill its first prospect on the Forest Bank property in
the third or fourth quarter of 2014 at which point Hawk will earn a 65%
percent working interest in one section of land covered under the Farm
In. The Corporation also expects to re-enter several existing wellbores
on the Forest Bank property later in 2014, after Hawk has earned an
interest in the Farm In lands. These wellbores are expected to be
recompleted in formations that have not been tested and appear to have
bypassed pay on logs.
Financial
Hawk achieved cash flow from operations in the second quarter of 2014 of
approximately $1.9 million compared to $1.6 million for the second
quarter of 2013 due to an 8 percent increase in oil production and a 19
percent increase in oil prices in the second quarter of 2014 compared
to the second quarter of 2013. Average Western Canadian Select ("WCS")
prices for the second quarter of 2014 increased 11% to US $82.95 per
bbl compared to US $75.06 per bbl in the second quarter of 2013 while a
weaker Canadian dollar, relative to the US dollar, led to a 19 percent
increase in Hawk's realized oil prices in the second quarter of 2014 to
$84.29 per bbl. The differential between WCS and West Texas
Intermediate crude oil ("Differential") increased slightly to US $20.04
per bbl in the second quarter of 2014 compared to US $19.16 per bbl for
the second quarter of 2013.
Hawk generated an operating netback of $42.35 per boe for the second
quarter of 2014, a 27 percent increase from the operating netback for
the second quarter of 2013 of $32.50 per boe due to increased oil
prices in Q2 2014. Production expenses increased in the second quarter
of 2014 to average $21.61 per boe compared to $18.03 per boe in the
second quarter of 2013 due to increased work-over costs in the second
quarter of 2014 as well as increased road maintenance due to wet spring
weather.
At June 30, 2014, Hawk had $6.7 million drawn on its existing $12
million credit facility. In August of 2014, Hawk entered into a new
$13.5 million revolving credit facility with another Canadian bank to
replace its existing $12 million facility. The Corporation continues to
maintain a solid balance sheet with net debt and working capital
deficit of approximately $8.6 million at June 30, 2014 which equates to
a net debt to annualized cash flow from operations of 1.2:1.
Outlook
The Corporation will continue to focus on developing its heavy oil
properties in east Central Alberta and western Saskatchewan and has set
a $10 million capital budget for 2014. Hawk expects to drill five (4.7
net) vertical wells and one (1.0 net) horizontal well in the second
half of 2014. Hawk plans to drill vertical wells at Forest Bank (1.0
net), in western Saskatchewan, and Cadogan (0.7 net), in east central
Alberta in the second half of 2014. The Corporation also expects to
drill a horizontal well (1.0 net) in the Eureka area of western
Saskatchewan in the second half of 2014. The remainder of Hawk's
capital program for 2014 is expected to include a combination of
additional vertical drilling in the Lloydminster area of Saskatchewan
and recompletion activities at Forest Bank.
Hawk's current production is approximately 680 boe/d, based on field
estimates. As a result of wet spring and summer weather in western
Saskatchewan that delayed drilling and completion activities, Hawk
expects its 2014 production to average between 700 to 725 boe/d, down
from its previous average 2014 production guidance of 800 boe/d.
Hawk is an emerging exploration company engaged in the exploration,
development and production of conventional crude oil and natural gas in
western Canada and is based in Calgary, Alberta. The Class A Shares of
Hawk trade on the TSX Venture Exchange under the trading symbols of
HWK.A.
Neither the TSX Venture Exchange nor its Regulation Services Provider
(as the term is defined in the policies of the TSX Venture Exchange)
accepts responsibility for the adequacy or accuracy of this release.
Certain statements contained in this press release constitute
forward-looking statements. All forward-looking statements are based on
the Corporation's beliefs and assumptions based on information
available at the time the assumption was made. The use of any of the
words "anticipate", "continue", "estimate", "expect", "may", "will",
"project", "should", "believe" and similar expressions are intended to
identify forward-looking statements. These statements involve known and
unknown risks, uncertainties and other factors that may cause actual
results or events to differ materially from those anticipated in such
forward-looking statements. Hawk believes the expectations reflected in
those forward-looking statements are reasonable, but no assurance can
be given that these expectations will prove to be correct. Such
forward-looking statements included in this press release should not be
unduly relied upon. These statements speak only as of the date of this
press release.
In particular, but without limiting the forgoing, this press release
contains forward-looking statements pertaining to the following: the
performance characteristics of Hawk's oil and natural gas properties;
business strategies and plans; projections of market prices and cost;
supply and demand for oil and natural gas; planned development of the
Corporation's oil and natural gas properties; capital expenditure
programs for the remainder of 2014; the timing of and nature of capital
expenditure program for 2014;expected annual average production rates
for 2014; and the expected sources of funding for the capital
expenditure program.
The material factors and assumptions used to develop these forward
looking statements include, but are not limited to: the ability of the
Corporation to engage drilling contractors, to obtain and transport
equipment, services, supplies and personnel in a timely manner and at
an acceptable cost to carry out its activities and plans; the ability
of the Corporation to market its oil and natural gas and to transport
its oil and natural gas to market; the timely receipt of regulatory
approvals and the terms and conditions of such approval; the ability of
the Corporation to obtain drilling success consistent with
expectations; and the ability of the Corporation to obtain capital to
finance its exploration, development and operations.
Actual results could differ materially from those anticipated in these
forward-looking statements as a result of the risk factors including,
without limitation: volatility in market prices for oil and natural
gas; liabilities inherent in oil and natural gas operations;
uncertainties associated with estimating oil and natural gas reserves;
competition for, among other things, capital, acquisitions of reserves,
undeveloped lands and skilled personnel; incorrect assessments of the
value of acquisitions and exploration and development programs;
geological, technical, drilling and processing problems; changes in tax
laws and incentive programs relating to the oil and natural gas
industry; failure to realize the anticipated benefits of acquisitions;
general business and market conditions; and certain other risks
detailed from time to time in Hawk's public disclosure documents
(including, without limitation, the other factors discussed under "Risk
Factors" in the Corporation's most recently filed Annual Information
Form).
Statements relating to "reserves" or "resources" are deemed to be
forward-looking statements, as they involve the implied assessment,
based on certain estimates and assumptions that the resources and
reserves described can be profitably produced in the future. Readers
are cautioned that the foregoing lists of factors are not exhaustive.
The forward-looking statements contained in this press release are
expressly qualified by this cautionary statement. Except as required
under applicable securities laws, Hawk does not undertake any
obligation to publicly update or revise any forward-looking statements.
Barrels of oil equivalent (boe) may be misleading, particularly if used
in isolation. A boe conversion ratio of six thousand cubic feet (mcf)
of natural gas to one barrel (bbl) of oil is based on an energy
conversion method primarily applicable at the burner tip and is not
intended to represent a value equivalency at the wellhead. All boe
conversions in this press release are derived by converting natural gas
to oil in the ratio of six thousand cubic feet of natural gas to one
barrel of oil. Certain financial amounts are presented on a per boe
basis, such measurements may not be consistent with those used by other
companies.
SOURCE Hawk Exploration Ltd.
<p> </p> <p> <b>Steve Fitzmaurice</b><br/> President, CEO and Chairman<br/> Tel: (403) 264-0191 Ext 225<br/> Email: <a href="mailto:steve@hawkexploration.ca">steve@hawkexploration.ca</a> </p> <p> <b>Dennis Jamieson</b><br/> Chief Financial Officer<br/> Tel: (403) 264-0191 Ext 234<br/> Email: <a href="mailto:dennis@hawkexploration.ca" font-weight="bold">dennis@hawkexploration.ca</a> </p>