CALGARY, ALBERTA–(Marketwired – Nov. 7, 2013) – Sonde Resources Corp. (“Sonde” or the “Company”) (TSX:SOQ)(NYSE MKT:SOQ) announced today the release of its financial and operating results for the third quarter ended September 30, 2013. The Management’s Discussion and Analysis and Financial Statements for the quarter ended September 30, 2013 can be viewed on the System for Electronic Document Analysis and Retrieval (SEDAR) at www.sedar.com, and on the Securities and Exchange Commission’s Electronic Document Gathering and Retrieval System (EDGAR) at www.sec.gov. Shareholders have the ability to receive a hard copy of the Company’s complete third quarter financial statements free of charge upon request.
Sonde will be hosting a conference call on Friday, November 8, 2013 at 1:30 p.m. MDT to provide a report on the third quarter 2013 results. Mr. Rene P. Beaumier, Chief Financial Officer, will host the call. All interested parties may join the call by dialing 416-340-2216 or 866-223-7781. Please dial-in 15 minutes prior to the call to secure a line. The conference call will be archived for replay on the Sonde website within 48 hours of this conference call.
On September 25, 2013, Joint Oil approved the assignment to Viking and the definitive form of Assignment Agreement. The Assignment Agreement is subject to a condition that the previously disclosed Bank Guarantee, of which Viking will contribute US $40 million and Sonde will contribute US$10.995 million, must be fully funded prior to closing.
Sonde and Viking signed the Assignment Agreement in the form approved by Joint Oil on October 4, 2013, and on October 25, 2013, the deadline to fund the Bank Guarantee and to close the Assignment Agreement and the Viking farm-out was extended to November 15, 2013. No assurance can be provided that such funding will occur or that the farm-out will close.
Western Canada Strategic Alternatives Process
On January 9, 2013, Sonde announced that it had retained FirstEnergy Capital Corp. (“FirstEnergy”) to initiate a process to explore and evaluate potential strategic alternatives to enhance shareholder value with regard to Sonde’s Western Canadian production and exploratory acreage. As financial advisor to the Board of Directors of Sonde, FirstEnergy assisted in the process of analyzing and evaluating prospects and options available to the Company. As of November 7, 2013, the following transactions and potential transactions were undertaken by the Company.
During the nine months ended September 30, 2013 the Company sold 45,671 net acres of undeveloped land in the Montney play and 44,094 acres of undeveloped land in the Duvernay play, both in Central Alberta, to an unrelated third party. This land was classified as exploration and evaluation assets and had a net book value of $2.6 million.
In addition, the Company sold related property, plant and equipment associated with the Montney play, with a net book value of $5.9 million, to the same unrelated third party. These assets were sold for total proceeds of $6.1 million, resulting in a loss of $2.4 million.
The Company has exited the Montney play and divested certain licenses which contain Duvernay rights. Sonde retains undeveloped acreage in the Duvernay (44,341 acres net), Wabamun (50,736 acres net) and Detrital/Banff (46,677 acres net) plays. Of these lands, 85% have been purchased within the past 18 months, and as such, there are no land expiry issues. These land positions are typically large, consolidated and 100% working interest holdings with outstanding characteristics and growth potential.
(b) Arrangement Agreement with Marquee Energy Ltd.
As previously announced, on November 4, 2013 the Company entered into an Arrangement Agreement with Marquee Energy Ltd. (“Marquee”) whereby Marquee would acquire substantially all of the Western Canadian assets of Sonde, including all of its Southern Alberta properties (“the Assets”), (“the Transaction”). As consideration, Sonde will either receive:
- 0.72 of a Marquee Share for each Sonde Share outstanding, or in aggregate, 44,857,041 Marquee Shares; or
- alternatively, Sonde has an option until November 20, 2013 to elect to receive 0.34 of a Marquee Share for each Sonde Share outstanding, or in aggregate 21,182,492 Marquee Shares, in addition to Sonde receiving $15 million in cash (“the Cash Election”).
Sonde will transfer the Assets and related tax pools to a newly formed subsidiary of Sonde, which will either amalgamate with a wholly-owned subsidiary of Marquee or be directly acquired by Marquee pursuant to the a plan of arrangement. Sonde will distribute all Marquee Shares received to its shareholders, and retain the cash received if so elected.
The Transaction is subject to the approval of the Alberta Court of Queen’s Bench under the Business Corporations Act (Alberta), the receipt of all necessary regulatory and stock exchange approvals, the requisite approval from 2/3 of the Sonde shareholders, and satisfaction of certain other closing conditions that are customary for a transaction of this nature. It is anticipated that a Sonde shareholder meeting will be held in late December, 2013 following the mailing of an information circular regarding the Transaction in early December, 2013. Assuming approval of the Transaction by Sonde shareholders, closing is expected to occur shortly thereafter.
The Board of Directors of Sonde unanimously supports the Transaction, has unanimously determined that the Transaction is fair to Sonde shareholders and in the best interest of Sonde and has agreed to unanimously recommend that the shareholders of Sonde vote in favor of the Transaction. Certain Sonde shareholders, including all officers and directors, who collectively hold over 12% of the issued and outstanding Sonde Shares, have entered into agreements with Marquee pursuant to which they have agreed to vote their shares in favour of the Transaction at the Sonde shareholder meeting.
Sonde will retain its current cash and working capital balances of approximately $19.4 million as at September 30, 2013, in addition to cash received in the Transaction should Sonde make the Cash Election. In addition, Sonde will retain ownership of approximately 100,000 net acres of Western Canada exploration assets, split approximately equally between its Eaglesham area Wabamun play and west central Alberta Duvernay play. Sonde will continue to seek strategic alternatives for the Western Canada exploration acreage, which could include cash sales, farm-outs, other forms of merger, or other options.
See the Company’s news release dated November 5, 2013 and the Company’s Management’s Discussion and Analysis and Financial Statements for the quarter ended September 30, 2013 for further discussion regarding the Transaction.
2013 Western Canada drilling program
No wells were drilled during the three and nine months ended September 30, 2013 due to the strategic alternatives process discussed above. During the three and nine months ended September 30, 2013, Sonde continued its well re-activation program. Sonde performed 21 and 35 net workovers and recompletions during the three and nine months ended September 30, 2013.
|Third quarter financial and operational review|
|(CDN$ thousands, except where otherwise noted)||Q3
|Petroleum & natural gas sales(1)||6,483||6,071||7||5,631||15|
|Net loss per share – basic and diluted||(0.07||)||(0.08||)||(13||)||(0.03||)||133|
|Funds from operations (2)||1,191||593||101||494||141|
|Funds from operations per share(2)||0.02||0.01||100||0.01||(90||)|
|Working capital surplus||19,399||17,187||13||34,865||(44||)|
|Average shares outstanding||62,301||62,301||–||62,301||–|
|Natural gas (mcf/d)||8,244||7,423||11||8,757||(6||)|
|Crude oil (bbl/d)||494||461||7||523||(6||)|
|Natural gas liquids (bbl/d)||160||161||(1||)||172||(7||)|
|Natural gas ($/mcf)||2.52||3.90||(35||)||2.36||7|
|Crude oil ($/bbl)||97.77||83.58||17||77.09||27|
|Natural gas liquids ($/bbl)||62.43||49.72||26||52.24||20|
|Average sales price ($/boe)||39.00||40.59||(4||)||32.46||20|
- Petroleum and natural gas sales and realized losses on financial instruments net of royalties and transportation.
- Non-IFRS measure reconciled in our MD&A filed on www.sedar.com
For the three months ended September 30, 2013, funds from operations was $1.2 million compared to funds from operations of $0.5 million for the same period in 2012. This was primarily the result of a 7% increase in net petroleum and natural gas revenue and an 87% decrease in well workover expense.
For the three months ended September 30, 2013, production averaged 2,028 boe/d, compared to 1,858 boe/d for the three months ended June 30, 2013 and 2,155 boe/d for the three months ended September 30, 2012. The increase in production during the three months ended September 30, 2013 compared to the three months ended June 30, 2013 is due to significant third-party natural gas processing plant outages in Central Alberta and weather related access issues experienced during the three months ended June 30, 2013. The decrease in production compared to the three months ended September 30, 2012 is due to natural decline and constrained capex due to the Western Canada strategic alternatives process.
The success of the Company’s ongoing operations are dependent upon a number of factors, including but not limited to, the price of energy commodity products, the Company’s ability to manage price volatility, increasing production and related cash flows, controlling costs, availability of experienced service industry personnel and equipment, capital spending allocations, the ability to attract equity investment, the completion of the proposed arrangement with Marquee Energy Ltd., hiring and retaining qualified personnel and managing political and government risk, particularly with respect to its interests in North Africa.
Non-IFRS Measures – This document contains references to funds from operations and funds from operations per share, which are not defined under IFRS as issued by the International Accounting Standards Board and are therefore non-IFRS financial measures that do not have any standardized meaning prescribed by IFRS and are, therefore, unlikely to be comparable to similar measures presented by other issuers.
Management of the Company believes funds from operations and funds from operations per share are relevant indicators of the Company’s financial performance, and ability to fund future capital expenditures. Funds from operations should not be considered an alternative to or more meaningful than cash flow from operating activities, as determined in accordance with IFRS, as an indicator of the Company’s performance. In Sonde’s MD&A, a reconciliation has been prepared of funds from (used for) operations to cash provided by operating activities, the most comparable measure calculated in accordance with IFRS.
Boe Presentation – Production information is commonly reported in units of barrel of oil equivalent (“boe”). For purposes of computing such units, natural gas is converted to equivalent barrels of oil using a conversion factor of six thousand cubic feet to one barrel of oil. This conversion ratio of 6 mcf:1 bbl is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. Such disclosure of boe’s may be misleading, particularly if used in isolation. Additionally, given the value ratio based on the current price of crude oil as compared to natural gas is significantly different from the energy equivalency of 6 mcf:1 bbl, utilizing a conversion ratio of 6 mcf:1 bbl may be misleading as an indication of value. Readers should be aware that historical results are not necessarily indicative of future performance. Natural gas production is expressed in thousand cubic feet (“mcf”). Oil and natural gas liquids are expressed in barrels (“bbl”).
Forward-Looking Information – This news release contains “forward-looking information” within the meaning of applicable Canadian securities laws and “forward looking statements” within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. These statements include, among others, the timing of the potential closing of the Viking farm-out agreement, the potential completion and closing of the Transaction with Marquee, the mailing of an information circular related to the Transaction with Marquee, the receipt of all of the requisite approvals associated with the Transaction with Marquee, the the potential distribution of all Marquee Shares received by Sonde as a result of the Transaction to Sonde’s shareholders, Sonde’s expected retention of the cash received from Marquee if so elected, proposed exploration and development activities and sources of liquidity. There can be no assurances that the Western Canada strategic review process will result in a transaction on terms and conditions acceptable to Sonde or at all.
Such forward-looking information or statements are based on a number of risks, uncertainties and assumptions which may cause actual results or other expectations to differ materially from those anticipated and which may prove to be incorrect. Assumptions have been made regarding, among other things, market and operating conditions, management’s expectations regarding future growth, plans for and results of exploration and development activities, availability of capital, future commodity prices and differentials, and capital and other expenditures.
Actual results could differ materially due to a number of factors, including, without limitation, changes in market conditions, operational risks in development, exploration and production; commodity price volatility; the uncertainty of reserve estimates; risks and uncertainties involving geology of oil and gas deposits; the uncertainty of estimates and projections in relation to production; volatility in the capital markets and changes in the availability of capital generally; risks in conducting foreign operations, including political and fiscal instability and the possibility of civil unrest or military action; changes in government policies or laws; risk that government approvals may be delayed or withheld; and commercial risks related to the Joint Oil Block. Additional assumptions and risks relating to the Company and its business and affairs, including assumptions and risks relating to the estimation of reserves, are set out in detail in the Company’s AIF, available on SEDAR at www.sedar.com, and the Corporation’s annual report on Form 40-F on file with the U.S. Securities and Exchange Commission.
Although management believes that the expectations reflected in the forward-looking information or forward-looking statements are reasonable, prospective investors should not place undue reliance on forward-looking information or forward-looking statements because Sonde can provide no assurance those expectations will prove to be correct. Sonde bases its forward-looking statements and forward-looking information on information currently available and do not assume any obligation to update them unless required by law.
Sonde Resources Corp. is a Calgary, Alberta, Canada based energy company engaged in the exploration and production of oil and natural gas. Its operations are located in Western Canada and offshore North Africa. See Sonde’s website at www.sonderesources.com to review further detail on Sonde’s operations.
Rene P. Beaumier
Chief Financial Officer
(403) 216-2374 (FAX)