Contact:
Steve Fitzmaurice
President, CEO and Chairman
Tel: (403) 264-0191 Ext 225
Email: steve@hawkexploration.ca
Dennis Jamieson
Chief Financial Officer
Tel: (403) 264-0191 Ext 234
Email: dennis@hawkexploration.ca
Selected financial and operational information for the year and three months ended December 31, 2012 are provided as follows:
| Three months ended December 31, | Year ended December 31, | |||||||||||
| 2012 | 2011 | % Change | 2012 | 2011 | % Change | |||||||
| Financial ($000’s except per share amounts) | ||||||||||||
| Petroleum and natural gas sales | $ | 3,294 | $ | 3,120 | 6% | $ | 12,030 | $ | 10,498 | 15% | ||
| Funds flow from operations (1) | 1,484 | 1,311 | 13% | 5,654 | 4,445 | 27% | ||||||
| Per share | 0.04 | 0.04 | -% | 0.16 | 0.16 | -% | ||||||
| Comprehensive income (loss) | (529) | (6,998) | 92% | 96 | (7,272) | n/a | ||||||
| Per share | (0.02) | (0.25) | 92% | 0.00 | (0.26) | n/a | ||||||
| Capital expenditures (2) | 2,919 | 1,698 | 72% | 9,221 | 11,025 | (16%) | ||||||
| Working capital deficit – excluding bank | ||||||||||||
| debt and commodity contracts, end of period(3) | $ | 3,206 | $ | 1,140 | 181% | |||||||
| Bank debt, end of period | 1,700 | 200 | 750% | |||||||||
| Total assets, end of period | $ | 30,713 | 25,273 | 22% | ||||||||
| Common Shares outstanding end of period: | ||||||||||||
| Class A Shares | 34,481 | 34,481 | -% | |||||||||
| Class B Shares | 1,080 | 1,080 | -% | |||||||||
| Options to acquire Class A Shares | 3,540 | 2,110 | 68% | |||||||||
| Operations | ||||||||||||
| Production | ||||||||||||
| Crude oil and natural gas liquids (bbl/d) | 558 | 399 | 40% | 482 | 371 | 30% | ||||||
| Natural gas (mcf/d) | 205 | 215 | (5%) | 165 | 290 | (43%) | ||||||
| Total (boe/d) | 592 | 435 | 36% | 510 | 420 | 21% | ||||||
| Oil and liquids as percent of total | 94% | 92% | 2% | 95% | 88% | 7% | ||||||
| Average Selling Price | ||||||||||||
| Crude oil and ngls (per bbl) | $ | 62.96 | $ | 83.25 | (24%) | $ | 67.27 | $ | 74.44 | (10%) | ||
| Natural gas (per mcf) | 3.31 | 3.29 | 1% | 2.52 | 3.76 | (33%) | ||||||
| Total (per boe) | 60.48 | 78.03 | (23%) | 64.46 | 68.46 | (6%) | ||||||
| Operating netback (per boe at 6:1) (4) | ||||||||||||
| Price | $ | 60.48 | $ | 78.03 | (23%) | $ | 64.46 | $ | 68.46 | (6%) | ||
| Royalties | (12.76) | (18.60) | (31%) | (13.01) | (13.82) | (6%) | ||||||
| Production expense | (14.94) | (19.68) | (24%) | (16.94) | (18.75) | (10%) | ||||||
| Transportation expense | (1.53) | (1.92) | (20%) | (1.71) | (1.80) | (5%) | ||||||
| Operating netback ($/boe) | $ | 31.25 | $ | 37.83 | (17%) | $ | 32.80 | $ | 34.09 | (4%) | ||
| (1) Management uses funds flow from operations and funds flow from operations per share to analyze operating performance, leverage and liquidity. Funds flow from operations and funds flow from operations per share as presented do not have any standardized meaning prescribed under Generally Accepted Accounting Principles (“GAAP”) and therefore 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. |
| (3) Working capital is a non-GAAP measure that includes trade and other accounts receivable, prepaid expenses, and trade and other accounts payables. |
| (4) Management considers operating netbacks as an important measure as it demonstrates profitability relative to current commodity prices. Operating netbacks do not have a standardized meaning prescribed by GAAP and therefore may not be comparable with the calculation of similar measures by other entities. |
HIGHLIGHTS
Highlights for the year ended December 31, 2012 were as follows:
Operational Review and Update
In 2012, Hawk drilled seventeen (9.2 net) wells resulting in fifteen (7.2 net) oil wells in its core area of western Saskatchewan and two (2.0 net) dry and abandoned wells also in western Saskatchewan. The drilling program in 2012 was concentrated in the Silverdale area in western Saskatchewan where Hawk drilled ten (2.8 net) successful vertical oil wells. At the end of 2012, Hawk had twelve (3.3 net) producing oil wells in the Silverdale area and production, net to Hawk, had increased from 18 bbl/d at the start of 2012 to approximately 200 bbl/d in December 2012. In the fourth quarter of 2012, Hawk shot 10.5 square kilometers of three dimensional seismic in the Silverdale area covering Hawk’s land and the land of two industry partners.
To date in 2013, Hawk has drilled three (2.0 net) vertical oil wells at Silverdale and one (1.0 net) vertical oil well at Dulwich, all in western Saskatchewan. Three (2.0 net) of these wells drilled in the first quarter of 2013 were on production prior to March 31, 2013. The other one (1.0 net) well is expected to be placed on production after spring breakup. Hawk’s production for the first quarter of 2013 was approximately 630 boe/d based on field estimates.
Financial
Hawk achieved record funds flow from operations in 2012 of approximately $5.6 million compared to $4.4 million for 2011. The Corporation generated an operating netback of $32.80 per boe in 2012 which is 4 percent lower than operating netbacks for 2011 of $34.09 per boe due to lower realized pricing in 2012. Due to the strong production growth at Silverdale during 2012, Hawk was able to realize a 10 percent reduction in operating costs in 2012 to $16.94 per boe compared to$18.75 per boe in 2011.
Revenue for the year increased by 15 percent to $12 million in 2012 from $10.5 million in 2011 as a result of increased annual production offset by a 6 percent reduction in average realized sales price. Hawk’s annual production increased to 510 boe/d, with oil and liquids production contributing 482 bbl/d, or 95 percent of total annual production, while the Corporation’s average realized oil price decreased 10 percent in 2012 to average $67.27 per bbl compared to $74.44 per bbl in 2011. Hawk’s hedging program, initiated in 2011, contributed realized gains in 2012 of approximately$257,000 compared to $38,000 in 2011.
At December 31, 2012, Hawk had $1.7 million drawn on its existing $12 million credit facility, with the next review date to occur on or before May 31, 2013. The Corporation continues to maintain a solid balance sheet with net debt and working capital deficit of approximately $4.9 million atDecember 31, 2012 which equates to a net debt to annual funds flow from operations of 0.9:1.
Outlook
The Corporation has set a $10 million capital budget for 2013 that will focus on development opportunities in western Saskatchewan and east central Alberta targeting light and heavy crude oil both through horizontal and vertical drilling. Hawk is expecting a prolonged spring breakup in 2013 due to the large snowpack in place in western Saskatchewan and eastern Alberta. As a result, the Corporation’s drilling program is expected to be delayed until the end of the second quarter or the start of the third quarter of 2013, depending on weather and surface conditions. Additionally, the expected spring breakup may impact Hawk’s ability to truck oil from our well sites or access wells in need of repair and servicing which may have a negative impact on Hawk’s production in the second quarter of 2013. For the remainder of 2013, Hawk expects to drill six (5.5 net) vertical wells and two (2.0 net) horizontal wells in its core area of western Saskatchewan and east central Alberta. Hawk’s current production is approximately 650 boe/d, with oil comprising 96 percent of total production.
Annual General Meeting
Hawk’s annual general meeting of shareholders will be held on Tuesday, June 11, 2013 at 3:00 pm at the offices of McCarthy Tetrault LLP, Suite 3300, 421-7th Avenue SW, Calgary, AB.
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 and Class B Shares of Hawk trade on the TSX Venture Exchange under the trading symbols of HWK.A and HWK.B, respectively.
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 2013; the timing of and nature of capital expenditure program for 2013; the length and severity of 2013 spring breakup conditions and the impact on second quarter 2013 production and operating activities; 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.
Steve Fitzmaurice
President, CEO and Chairman
Tel: (403) 264-0191 Ext 225
Email: steve@hawkexploration.ca
Dennis Jamieson
Chief Financial Officer
Tel: (403) 264-0191 Ext 234
Email: dennis@hawkexploration.ca