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Corridor Resources Inc
Symbol C : CDH
Shares Issued 88,924,465
Close 2019-05-13 C$ 0.73
Recent Sedar Documents

Corridor Resources earns $2.96-million in Q1 2019

2019-05-13 16:58 ET - News Release

Mr. Steve Moran reports

CORRIDOR ANNOUNCES FIRST QUARTER RESULTS

Corridor Resources Inc. has released its first quarter financial results for 2019.

The attached table provides a summary of Corridor's financial and operating results for the three months ended March 31, 2019, with comparisons with the three months ended March 31, 2018. Corridor's unaudited financial statements and management discussion and analysis for the first quarter have been filed on SEDAR and are available on Corridor's website.

Selected financial information                    Three months ended March 31,
($000s, except per-share amounts)                         2019           2018

Sales                                                 $  6,009       $ 11,835
Net income                                            $  2,960       $  5,569
Net income per share -- basic and diluted             $  0.033       $  0.063
Field operating netback                               $  7,950       $  9,593
Cash flow from operations (1)                         $  7,550       $  9,645
Working capital                                       $ 64,034       $ 56,992
Total assets                                          $127,927       $127,921

Q1 2019 netback analysis                          Three months ended March 31,
($000s except $/boe) (2)                                  2019           2018

Natural gas sales                                     $  5,670       $ 11,506
Other revenues                                             339            329
Realized financial derivatives gains (losses)            2,846         (1,078)
Royalties                                                 (159)          (384)
Transportation expense                                       -            (78)
Production expense                                        (746)          (702)
Field operating netback                               $  7,950       $  9,593
Natural gas production per day (mmscfpd)                   9.0            9.9
Barrels of oil equivalent per day (boepd)                1,500          1,653
Average natural gas price ($/mscf)                    $   7.00       $  12.90
Natural gas revenues ($/boe)                          $  42.00       $  77.36
Other revenues ($/boe)                                $   2.51       $   2.22
Realized financial derivatives 
gains (losses) ($/boe)                                $  21.08       $  (7.25)
Royalties ($/boe)                                     $  (1.18)      $  (2.59)
Transportation expense ($/boe)                               -       $  (0.52)
Production expense ($/boe)                            $  (5.53)      $  (4.72)
Field operating netback ($/boe)                       $  58.88       $  64.50
General and administrative expenses ($/boe)           $  (4.46)      $  (4.09)
Interest, foreign exchange and other ($/boe)          $   1.50       $   4.44
Cash flow from operations (1) netback ($/boe)         $  55.92       $  64.85

Notes:
(1) Cash flow from operations is a non-IFRS (international financial 
reporting standards) financial measure. Cash flow from operations 
represents net earnings adjusted for non-cash items, including depletion, 
depreciation and amortization, deferred income taxes, share-based 
compensation, and other non-cash expenses. See "non-IFRS financial 
measures" in Corridor's management discussion and analysis for the 
three months ended March 31, 2019.
(2)For the purpose of calculating unit revenues and costs, natural gas 
has been converted to barrels of oil equivalent on the basis of 6,000 
standard cubic feet of natural gas being equal to one barrel of oil.  
Boe may be misleading, particularly if used in isolation. The boe 
conversion ratio of 6,000 standard cubic feet to one barrel is based on 
an energy equivalency conversion method primarily applicable at the 
burner tip and does not represent a value equivalency at the wellhead.

2019 first quarter highlights:

  • Cash flow from operations of $7.55-million;
  • Top-decile cash flow from operations netback of $55.92 per barrel of oil equivalent;
  • Average realized natural gas sales price, including financial derivatives gains of $10.51 per thousand standard cubic feet in Q1 2019, as compared with $11.69 per thousand standard cubic feet in Q1 2018;
  • At March 31, 2019, Corridor had cash and cash equivalents of $60,659,000, working capital of $64,034,000 and no outstanding debt.

Update on guidance to March 31, 2019

The attached table provides a comparison of Corridor's results for the period from April 1, 2018, to March 31, 2019, as compared with the guidance disclosed in Corridor's press release dated Nov. 13, 2018, and updated in the press release dated Dec. 19, 2018.

                                                 Actual results               Guidance

AGT average natural gas price                $4.10 (U.S.)/mmbtu     $5.44 (U.S.)/mmbtu
USD/CAD average exchange rate                     $1.30 USD/CAD          $1.26 USD/CAD
Average sales price realized 
(including financial hedges)                         $9.48/mscf             $9.96/mscf
Average daily natural gas production                4.0 mmscfpd            3.9 mmscfpd
Field operating netback                           $11.4-million          $11.4-million
Cash flow from operations (1)                      $9.9-million           $9.5-million
Field operating netback per mscf                     $7.80/mscf             $8.06/mscf
Cash flow from operations (1) per mscf               $6.75/mscf             $6.70/mscf
Working capital as at March 31, 2019                $64-million          $63.4-million

(1) Cash flow from operations is a non-IFRS financial measure. Cash flow from 
operations represents net earnings adjusted for non-cash items, including 
depletion, depreciation and amortization, deferred income taxes, share-based 
compensation, and other non-cash expenses.

Corridor achieved its forecast field operating netback of $11.4-million for the period from April 1, 2018, to March 31, 2019, as Corridor's financial hedges and an increase in the U.S.-dollar/Canadian-dollar average exchange rate during Q1 2019 exceeded expectations and offset weaker than forecast natural gas prices at AGT (Algonquin Gas Transmission) in Q1 2019. Corridor's cash flow from operations for the period from April 1, 2018, to March 31, 2019, increased to $9.9-million due to lower-than-estimated general and administrative expenses and higher foreign exchange gains during that period. As a result, Corridor's working capital at March 31, 2019, increased by $600,000 over the forecasted amount to $64-million.

Guidance up to March 31, 2020

Since 2015, Corridor has determined to shut in most of its producing natural gas wells in the McCully field in New Brunswick for a portion of the summer/fall period and to time the start-up of production, and the associated recovery of flush volumes, with peak winter pricing to maximize cash flow from operations and retain Corridor's reserves for production in future years. In accordance with this strategy, Corridor shut in all its natural gas production at the McCully field on May 1, 2019.

A key component of this production optimization strategy is to enter into financial hedges to mitigate the risks associated with the volatility of natural gas prices when natural gas production resumes after a shut-in period. Accordingly, as previously announced, Corridor entered into a financial hedge for 2,500 million British thermal units per day of natural gas production at a fixed price of $9 (U.S.) per million British thermal units for the period from Dec. 1, 2019, to March 31, 2020. This financial hedge results in approximately one-third of Corridor's estimated production being hedged during the period from Dec. 1, 2019, to March 31, 2020, and is expected to generate approximately $3.6-million of natural gas sales out of estimated total of $12.4-million for this period.

Corridor's guidance for the period from April 1, 2019, to March 31, 2020, is as shown in the attached table.

                       
AGT average natural gas price                               $4.59 (U.S.)/mmbtu
USD/CAD exchange rate                                            $1.30 USD/CAD 
Average realized natural gas price                                  $9.88/mscf    
Average daily natural gas production                               3.4 mmscfpd    
Field operating netback                                           $9.7-million  
Cash flow from operations (1)                                     $8.1-million  
Field operating netback per mscf                                    $7.76/mscf    
Cash flow from operations (1) per mscf                              $6.47/mscf    
Capital expenditures (for the year 
ending Dec. 31, 2019)                                             $1.8-million  
Working capital estimate (as at March 31, 2020)                  $69.7-million 

(1) Cash flow from operations is a non-IFRS financial measure. Cash flow from 
operations represents net earnings adjusted for non-cash items, including 
depletion, depreciation and amortization, deferred income taxes, share-based 
compensation, and other non-cash expenses.

Corridor's capital budget of $1.8-million for the 2019 calendar year relates to gas-plant-related maintenance, other corporate assets and costs to enhance the company's efforts to secure a joint venture partner for the Frederick Brook shale.

Annual shareholder meeting

Corridor's annual meeting of shareholders will be held at the offices of Bennett Jones LLP, 4500 Bankers Hall East, 855 2nd St. SW, Calgary, Alta., on Tuesday, May 14, 2019, at 3 p.m. MDT, after which Steve Moran, president and chief executive officer, will make a presentation. This presentation will be made available on Corridor's website or about May 14, 2019.

President's message

"We are very pleased with our results from the first quarter of 2019," said Mr. Moran. "Despite lower-than-historical natural gas prices at AGT this past winter, Corridor achieved a top-decile field operating netback of $58.88 per barrel of oil equivalent. Corridor's ongoing production optimization and hedging strategies have contributed to achieve excellent cash flow from operations. Corridor is in a superior financial position with a strong balance sheet and $64-million of working capital at March 31, 2019."

Corridor is a Canadian junior resource company engaged in the exploration for and development and production of petroleum and natural gas onshore in New Brunswick and offshore in the Gulf of St. Lawrence. Corridor currently has natural gas production and reserves in the McCully field near Sussex, N.B. In addition, Corridor has a shale gas prospect in New Brunswick and an offshore conventional hydrocarbon prospect in the Gulf of St. Lawrence.

We seek Safe Harbor.

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