CALGARY, Aug. 14, 2013 /CNW Telbec/ – Exall Energy Corporation (“Exall” or the “Company”) (TSX:EE EE.DB) is pleased to announce its financial and operating results for the three and six months ended June 30, 2013. Exall’s public filings can all be found at www.exall.com or www.sedar.com.
- A second quarter 2013 production average of 1,161 boe per day a 4 percent increase over the same quarter in 2012, the third highest quarterly average in the Company’s history,
- A second quarter 2013 Net Back of $45.34,
- A second quarter 2013 cash flow from operations of $3,458,000,
- A second quarter 2013 net corporate debt reduction of $2,361,000.
|HIGHLIGHTS||Three months ended
|Six months ended
|In thousands of dollars||2013||2012||%
|Funds from operations||3,458||4,289||(19)||8,482||8,416||–|
|Basic per share||0.05||0.07||(28)||0.12||0.13||(7)|
|Diluted per share||0.02||0.05||(60)||0.05||0.11||(54)|
|Net income (loss) before tax||510||1,623||(68)||2,242||3,161||(29)|
|Basic per share||0.00||0.02||(100)||0.03||0.05||(40)|
|Diluted per share||0.00||0.02||(100)||0.01||0.04||(75)|
|Net income (loss)||351||1,201||(79)||1,247||2,281||(45)|
|Basic per share||0.00||0.02||(100)||0.01||0.04||(75)|
|Diluted per share||0.00||0.02||(100)||0.01||0.04||(75)|
|Capital expenditures, net||1,062||4,822||(77)||7,941||33,023||(75)|
|HIGHLIGHTS||Three months ended
|Six months ended
|Crude oil (bbl)||1,084||1,004||7||1,150||1,004||14|
|Natural gas liquids (bbl)||20||25||(20)||20||20||–|
|Natural gas (mmcf)||343||464||(26)||368||531||(30)|
|Total daily production (boe @ 6:1)||1,161||1,106||4||1,232||1,112||10|
|Netback per boe (6:1) ($)||45.34||55.70||(19)||49.74||53.78||(8)|
The second quarter of 2013 was a typically slow period for capital expenditures. Activities were focused on maintaining the production momentum built through the last quarter of 2012 and the first quarter of 2013, where we saw the Company’s average production recover to Q2 average production of 1,161 BOEPD, 11% lower than Q1 average of 1,303 BOEPD. This was largely due to breakup and three well workovers during the period, including a pump change in one of the best wells in the Central Waterflood area. Q3 production from field estimates is 1,200 BOEPD through July, 2013. Through continued vigilance the Company is expected to maintain the level of production at 1,200 to 1,300 BOEPD through the third quarter until renewed drilling is expected to add to volumes.
Capital expenditure starting in the third quarter will focus on the “low-hanging fruit” (LHF) opportunities identified through the previous part of the year. Initial planned drilling activities, which are expected to commence in September, are two sidetrack wells of wells in the North Waterflood which were drilled and completed in Q1 2013. The locations were chosen on the basis of the sand thickness penetrated and potential from improved sand quality and production in the targeted sidetrack locations. Both wells had been fracture stimulated but did not produce at the rates expected after this type of treatment. One of the wells will also provide further validation of the 3D seismic signature as it is directed at the second derivative target at the north end of current well control. Three additional infill locations between the North and Central Waterflood areas and a stepout earning well in the South are also planned through to breakup next year.
Other LHF opportunities include a recently approved water injection well in a previously unsupported part of the South Waterflood. The new water injection well is completed in both A and B sands, and is expected to support production in three offsetting wells. The wells had high initial productivity but declined substantially due to lack of pressure support. Further horizontal well cleanouts, re-completions and re-activations are also planned through year-end.
As noted in the Q1 Outlook, the 11-31 well was cased through the Wabamun for further testing. While the Company was aware that a vertical, fracture stimulated completion was likely to produce high water cuts, the intent was to prove movable light hydrocarbon presence in this area, which is located 4.5 km and 16 meters higher structurally than the area tested earlier by Exall. The 11.5 meter thick zone was perforated in the middle and hydrocarbon fracture stimulated. The well was swab tested, recovering first frac oil and then transitioning to light oil and formation water. The well is currently standing as a potential horizontal sidetrack and multi-frac candidate. Exall is seeking joint venture interest to advance the testing program and has engaged Sayers Securities to pursue joint ventures or farmin proposals for the Wabamun project. The public market does not currently reflect value for the Wabamun play and any interest in the project will bolster our valuation in that regard. The deadline for proposals is August 15.
As at June 30, 2013, the Company was not in compliance with the working capital covenant under its credit facility with ATB. While the ATB has not informed the Company that it intends to demand repayment of amounts owing under the credit facility in the near term, it has not provided the Company with a waiver confirming that they will not do so as a result of this working capital covenant violation. The ATB’s annual review of the credit facility is ongoing and although the Company expects that the ATB will extend the credit facility in 2013, the extension may be at a level less than the current credit facility amount and on different terms and a portion of the credit facility may have to be repaid in the near term. Should this be the case, the Company will require alternative forms of debt or equity financing or will need to dispose of certain assets to repay the outstanding indebtedness. The Company is currently in discussions with the ATB and other potential lenders in respect of a replacement credit facility or other viable alternative and will continue to adjust the scope of its development plans and anticipated expenditures in light of its working capital position. The failure of the Company to appropriately re-finance its credit facility would limit the ability of the Company to advance its overall business plan. Exall Energy expects it would be in a position to meet the working capital covenants contained in the expired ATB facility by the end of August, 2013.
Exall’s debt to cash flow at June 30, 2013, excluding the Convertible Debentures was 2.7 times. It is Exall’s goal to continue to reduce its overall debt exposure to exit the 2014 year with a fourth quarter annualized cash flow that would see the debt to cash flow at December 31, 2014, including the Convertible Debentures, being in the order of 1.0 – 1.5 times. This would then give Exall 27 months to establish a $23.0 million fund to pay out the Convertible Debentures in March of 2017, subject to the Debentures not being converted or repurchased.
Exall’s average daily production for the second quarter of 2013 increased 4 percent to 1,161 barrels of oil per day (“boe/d”) from 1,106 boe/d in the second quarter of 2012. As at August 13, 2013 Exall’s net production rate was as outlined below:
|PRODUCTION BY REGION||ESTIMATED
|Q2 2013||Q1 2013||Q4 2012||Q3 2012||Q2 2012|
|Bow Island Heavy Oil|
|Jayar Natural Gas & Liquids|
Exall’s estimated third quarter 2013 average daily production at August 13, 2013 is approximately 1,264 boepd. The Company groups the Waterflood Approvals in the Marten Mountain area into three project areas; the South WF, Central WF and North WF. The production issues faced in these three project areas are being successfully addressed, as described below.
Reservoir conformance issues presented challenges in the South WF during 2012. Optimization efforts aimed at improving well performance and oil recovery have had a positive effect. Polymer treatments were performed on two injection wells resulting in reduced water cuts in one adjacent well, along with an increase in oil production. Current production from the South WF area is 382 boepd (277 boepd net).
The Central WF continues to perform well as the result of well optimization and the installation of an Electric Submersible Pump (ESP) into the newest producing well in the Central WF scheme. The new oil well, which was producing 165 boepd, is now producing at 304 boepd (219 boepd net). The Central WF project is currently producing 590 boepd (411 boepd net).
A water source well was drilled, completed and equipped during Q4 2012 and injection of water has begun in the North WF Approval area. Optimization efforts in the North WF and the addition of two producing wells have increased production to an average of 830 boepd (566 boepd net).
Results of Operations
Oil and gas exploration and development expenditures were $1,162 for the second quarter of 2013 and $7,859 for the six months ended June 30, 2013 During the first six months of 2013 the Company participated in the drilling of 2.0 gross oil wells (1.59 net) in the Marten Mountain / Mitsue area.
Oil and gas property expenditures were $7,859 for the second quarter of 2012 and $32,909 for the six months ended June 30, 2012. During the six months ended June 30, 2012 the Company drilled, cased, completed and tied-in 5.0 gross wells (3.28 net) in the Marten Mountain / Mitsue area.
As at June 30, 2013, the Company had 189,120 acres (140,843 acres net) of undeveloped land in Alberta, Canada.
Production for the second quarter of 2013 of 1,161 boe per day represents a 4% increase over 2012. Funds from operations for the second quarter of 2013 of $3.5 million or $0.05 per share was primarily the result of the increased production, increased commodity prices received (Exall’s prices received were up 12% in Q2 2013 averaging $87.10 per boe compared to $77.44 per boe in 2012), increased royalty prices paid during the quarter (Exall’s royalties paid were up 242% during the second quarter of 2013 averaging $29.16 per boe compared to $8.51 per boe in 2012), and flat operating costs paid during the second quarter of 2013 (Exall’s operating costs were down 5% during the second quarter of 2013 averaging $12.60 per boe compared to $13.23 per boe in 2012).
|Three months ended
|Six months ended
|Netback per boe (6:1) $||2013||2012||%
|Operating netbacks ($/boe)||45.34||55.70||(19)||49.74||53.78||(8)|
Net income, as a result, for the second quarter of 2013 was $351,000 or $0.00 per share compared to a net income for the second quarter of 2012 of $1,209,000 or $0.02 per share.
Exall is a junior oil and gas company active in its business of oil and gas exploration, development and production from its properties in Alberta. Exall Energy is currently developing the new Mitsue area “Marten Mountain” discovery in north-centralAlberta.
Exall Energy currently has 66,634,854 common shares outstanding. The Company’s common shares are listed on the Toronto Stock Exchange under the trading symbol EE. The Company’s convertible debentures are listed on the Toronto Stock Exchange under the trading symbol EE.DB.
This news release contains forward-looking statements, which are subject to certain risks, uncertainties and assumptions, including those relating to results of operations and financial condition, capital spending, financing sources, commodity prices and costs of production. By their nature, forward-looking statements are subject to numerous risks and uncertainties that could significantly affect anticipated results in the future and, accordingly, actual results may differ materially from those predicted. A number of factors could cause actual results to differ materially from the results discussed in such statements, and there is no assurance that actual results will be consistent with them. Such factors include fluctuating commodity prices, capital spending and costs of production, and other factors described in the Company’s most recent Annual Information Form under the heading “Risk Factors” which has been filed electronically by means of the System for Electronic Document Analysis and Retrieval (“SEDAR”) located at www.sedar.com. Such forward-looking statements are made as at the date of this news release, and the Company assumes no obligation to update or revise them, either publicly or otherwise, to reflect new events, information or circumstances, except as may be required under applicable securities law.
For the purposes of calculating unit costs, natural gas has been converted to a barrel of oil equivalent (boe) using 6,000 cubic feet equal to one barrel (6:1), unless otherwise stated. The boe conversion ratio of 6 mcf: 1 bbl is based on an energy equivalency conversion method and does not represent a value equivalency; therefore boe may be misleading if used in isolation. This conversion conforms to the Canadian Securities Regulators’ National Instrument 51-101 – Standards of Disclosure for Oil and Gas Activities.
SOURCE EXALL ENERGY CORPORATION
For further information:
Exall Energy Corporation
Frank S. Rebeyka
Roger N. Dueck
President & CEO
Tel: 403-237-7820 x 223
Please visit Exall Energy’s website at: www.exall.com