CALGARY, Aug. 28, 2013 /CNW/ – Hawk Exploration Ltd. (“Hawk” or the “Corporation”) is pleased to announce its results for the three and six months ended June 30, 2013.
HIGHLIGHTS
Highlights for the three months ended June 30, 2013 were as follows:
Selected financial and operational information for the three and six months ended June 30, 2013 is provided as follows:
| Three months ended June 30, | Six months ended June 30, | |||||||||
| 2013 | 2012 | % Change | 2013 | 2012 | % Change | |||||
| Financial ($000’s except per share amounts) | ||||||||||
| Petroleum and natural gas sales | $ 3,893 | $ 2,800 | 39% | $ | 6,810 | $ | 5,689 | 20% | ||
| Funds flow from operations (1) | 1,613 | 1,277 | 26% | 2,817 | 2,739 | 3% | ||||
| Per share | 0.05 | 0.04 | 25% | 0.08 | 0.08 | 0% | ||||
| Comprehensive income (loss) | 332 | 47 | 601% | 173 | 557 | (69%) | ||||
| Per share | 0.01 | 0.00 | n/a | 0.01 | 0.01 | 0% | ||||
| Capital expenditures (2) | 419 | 1,471 | (72%) | 2,537 | 3,449 | (26%) | ||||
| Working capital deficit – excluding bank | ||||||||||
| debt and commodity contracts, end of period (3) | $ | 876 | $ | 2,051 | (58%) | |||||
| Bank debt, end of period | 3,750 | – | n/a | |||||||
| Total assets, end of period | $ | 31,227 | 28,746 | 9% | ||||||
| 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 | 2,473 | 3,540 | (30%) | |||||||
| Three months ended June 30, | Six months ended June 30, | |||||||||||
| 2013 | 2012 | % Change | 2013 | 2012 | % Change | |||||||
| Operations | ||||||||||||
| Production | ||||||||||||
| Crude oil and natural gas liquids (bbl/d) | 598 | 463 | 29% | 598 | 432 | 38% | ||||||
| Natural gas (mcf/d) | 178 | 139 | 28% | 168 | 164 | 2% | ||||||
| Total (boe/d) | 628 | 486 | 29% | 626 | 460 | 36% | ||||||
| Oil and liquids as percent of total | 95% | 95% | 0% | 96% | 94% | 2% | ||||||
| Average Selling Price | ||||||||||||
| Crude oil and ngls (per bbl) | $ | 70.44 | $ | 65.87 | 7% | $ | 61.97 | $ | 71.47 | (13%) | ||
| Natural gas (per mcf) | 3.61 | 1.90 | 90% | 3.47 | 2.07 | 68% | ||||||
| Total (per boe) | 68.13 | 63.27 | 8% | 60.13 | 67.96 | (12%) | ||||||
| Operating netback (per boe at 6:1) (4) | ||||||||||||
| Price | $ | 68.13 | $ | 63.27 | 8% | $ | 60.13 | $ | 67.96 | (12%) | ||
| Royalties | (14.18) | (12.96) | 9% | (11.11) | (14.14) | (21%) | ||||||
| Production expense | (18.69) | (18.21) | 3% | (18.14) | (17.86) | 2% | ||||||
| Transportation expense | (1.99) | (1.68) | 18% | (1.75) | (1.89) | (7%) | ||||||
| Operating netback ($/boe) | $ | 33.27 | $ | 30.42 | 9% | $ | 29.13 | $ | 34.07 | (15%) | ||
| (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. |
Operational Review and Update
During the second quarter of 2013, Hawk prepared leases for its drilling program in western Saskatchewan. Early in the third quarter of 2013, Hawk drilled two (1.8 net) vertical oil wells at Silverdale, one (1.0 net) vertical oil well at Aberfeldy and one (1.0 net) vertical oil well at Neilburg. All wells were successfully cased and completed and are now on production. The new Silverdale wells are currently producing a combined 100 (86 net) barrels of oil per day (“bopd”), while the Neilburg well is currently producing 35 bopd (35 net) and the Aberfeldy well is producing 10 bopd (10 net). Hawk plans to follow up with additional drilling on both the Silverdale and Neilburg discoveries. During the second quarter the Corporation also shot five separate 2D seismic programs in the Coleville, Lashburn, Rush Lakeand Onward areas of western Saskatchewan. These seismic programs are currently being interpreted and will be used to define future drilling locations.
Financial
Hawk achieved record funds flow from operations in the second quarter of 2013 of approximately $1.6 millioncompared to $1.3 million for the second quarter of 2012 due to both increased oil production and oil prices in the second quarter of 2013. Average Western Canadian Select (“WCS”) prices for the second quarter of 2013 increased 5% to $75.06 per bbl compared to $71.30 per bbl in the second quarter of 2012, while the differential between WCS and West Texas Intermediate crude oil (“Differential”) narrowed to $19.16 per bbl in the second quarter of 2013 compared to $22.18 per bbl for the second quarter of 2012. Compared to the first quarter of 2013, WCS prices for Q2 2013 increased 19% from $62.95 per bbl while the Differential decreased substantially from $31.40 per bbl in Q1 2013 to $19.16 per bbl in the second quarter of 2013.
Hawk generated an operating netback of $33.27 per boe for the second quarter of 2013 which is a 9 percent increase from the operating netback for the second quarter of 2012 of $30.42 per boe due to increased oil prices in Q2 2013. Production expenses increased slightly in Q2 2013 to average $18.69 per boe compared to $18.21 per boe in the second quarter of 2012 due to increased work-over costs in the second quarter of 2013 as well as increased road maintenance and snow removal costs associated with spring breakup and the melting of the large snow pack from the winter of 2013.
At June 30, 2013, Hawk had $3.75 million drawn on its existing $12 million credit facility, with the next review date to occur on or before October 1, 2013. The Corporation continues to maintain a solid balance sheet with net debt and working capital deficit of approximately $4.6 million at June 30, 2013 which equates to a net debt to annualized funds flow from operations of 0.8:1 where annualized funds flow from operations is based on funds flow for the six months ended June 30, 2013 of $2,817,000.
Outlook
The Corporation has a capital budget for the second half of 2013 of approximately $7 million that will focus on development opportunities in western Saskatchewan and east central Alberta targeting light and heavy crude oil. For the remainder of 2013, Hawk expects to one (0.7 net) vertical well in the Legal area of central Alberta targeting light oil in the Viking formation and expects to drill six (6.0 net) vertical wells targeting heavy oil in its core area of westernSaskatchewan and east central Alberta. Hawk’s current production is approximately 700 boe/d, based on field estimates.
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; 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