CALGARY, Nov. 13, 2013 /CNW/ – Connacher Oil and Gas Limited (TSX: CLL) (“Connacher” or the “Company”) announces the release of its financial and operating results for the third quarter ending September 30, 2013 (“Q3 2013”) and conference call details. Selected financial and operational information is outlined below and should be read in conjunction with the Company’s unaudited financial statements and the related MD&A which are available at www.connacheroil.com or www.sedar.com.
Q3 2013 Highlights:
- EBITDA of $36.8 million, a 54% increase from Q2 2013 ($24 million)
- Bitumen production averaged 11,788 bbl/d
- Bitumen netback of $46.57/bbl, a 46% increase from Q2 2013 ($31.79/bbl)
- Funds flow from continuing operations of $16.4 million
- Reduced diluent blend ratio (“DBR”) to 18% from 20% in Q2 2013
- Dilbit sales by rail increased to 90% of total sales from 80% in Q2 2013
- Commenced steaming new SAGD well pairs at Pod One
- Converted infill wells from steam injection to production
- Capital expenditures of $35 million
Q3 2013 Financial and Operational Summary
The following summarizes the operating and financial results for the three and nine month periods ended September 30, 2013. To properly reflect the disposition of Montana Refining Company, Inc. (the “Refinery”) and the Company’s conventional assets in the financial statements, the results attributable to the Refinery and conventional assets have been segregated from ongoing operations and separately disclosed as “Discontinued Operations”.
|Three months ended Sept 30||Nine months ended Sept 30|
|FINANCIAL ($000 except per share amounts)||2013||2012||2013||2012|
|Revenue, net of royalties (continuing operations)||122,719||100,829||334,652||289,987|
|EBITDA (continuing operations) (1)||36,775||10,118||71,860||29,488|
|Funds flow (continuing operations) (1)||16,410||(10,432)||12,577||(33,090)|
|Net earnings (loss) (continuing operations)||(2,357)||(25,379)||(81,040)||(68,645)|
|Net earnings (loss) (discontinued operations)||–||13,697||–||(8,657)|
|Net earnings (loss)||(2,357)||(11,682)||(81,040)||(77,302)|
|Per share, basic and diluted||–||(0.03)||(0.18)||(0.17)|
|Capital expenditures – continuing operations||35,305||4,968||83,992||25,706|
|Cash on hand||50,982||39,643|
|OPERATIONAL||Three months ended Sept 30||Nine months ended Sept 30|
|Average benchmark prices|
|Heavy oil differential ($/bbl)||(18.15)||(21.65)||(23.26)||(22.06)|
|Western Canada Select ($/bbl)||91.75||70.05||77.19||74.34|
|Daily production volumes – continuing operations|
|Selected Highlights ($/bbl)|
|Realized bitumen sales||96.68||58.52||77.21||55.43|
|Transportation and handling costs||(24.79)||(20.40)||(22.21)||(14.15)|
|Net bitumen revenue||66.24||35.97||51.38||38.79|
|Production and operating expenses||(19.67)||(20.35)||(20.25)||(18.40)|
|Bitumen netback – per barrel(1)||$46.57||$15.62||$31.13||$20.39|
|(1)||A non-GAAP measure, which is defined in the Advisory section of the Company’s Management’s Discussion and Analysis
for the periods ended September 30,2013 and September 30, 2012 (“MD&A”). Bitumen netback is reconciled to net loss in
the MD&A. EBITDA from continuing operations is reconciled to net loss in the MD&A and funds flow from continuing
operations is reconciled to cash flow from operating activities in the MD&A
At September 30, 2013, the Company’s working capital surplus was $33 million, including $51 million of cash on hand. Based on current covenant calculations, the Company is able to fully utilize the $95 million under the bank facility. The maximum available bank credit line at the end of Q3 2013 is $74 million, net of existing letters of credit.
Long term debt, consisting solely of the Company’s outstanding Second Lien Senior Notes due in 2018 and 2019 (the “Notes”), totaled $871 million. Under the note indenture for the Company’s Notes, the Company has a first lien debt basket that permits the Company to incur first lien debt of up to $170 million (inclusive of commitments under the bank facility).
Total capital expenditures during the quarter were approximately $35 million ($77 million YTD 2013). Capital expenditures of $26 million were incurred in Q3 2013 to increase production and decrease operating costs, with the remaining $9 million for maintenance expenditures.
Bitumen production at Great Divide averaged 11,788 bbl/day in Q3 2013, up 2% from Q2 2013.
Cash flow from operating activities (continuing operations) was $43 million in Q3 2013 compared to $21 million in Q2 2013. The increase was primarily driven by higher realized pricing and decreased diluent use.
Connacher incurred a net loss of $2.4 million or $nil per share for Q3 2013, compared with a net loss in Q2 2013 of $32 million or $0.07 per share.
Operations Update and Outlook
Based upon field estimates, Great Divide production in the month of October 2013 was 11,800 bbl/day.
Production on Pad 102 is experiencing positive results from the infill wells, with Pod One average production in October of 6,200 bbl/d. The SOR for all of Pad 102 has been less than 3 since the infills came on production. These results highlight Connacher’s strategy to match reservoir performance with steam capacity. The four new SAGD well pairs at Pad 104 are currently steaming and are expected to be converted to SAGD production in late Q4 2013 to early Q1 2014.
At Algar, October field estimates for production are 5,600 bbl/d, with rod pump conversions on Pad 201 impacting production. SAGD+® process trials will continue at Algar until the end of the year on 203-1, with testing focusing on optimizing commercial solvent injection rates. We plan to initiate another test one of the new well pairs on Pad 104 in Q3 2014.
The 2013 growth capital plan spend is nearing completion. In the third quarter growth capital expenditures were $26 million and we expect to spend approximately $5 million in the fourth quarter. The total growth capital spent in 2013 is approximately $68 million in line with the 2013 plan.
For 2014 the growth capital plan is being finalized and will be provided at a later date, as we would like to continue to evaluate the performance of the new infill and SAGD wells. Connacher is able to undertake drilling and facilities projects throughout the year and is not materially impacted by seasonal windows and therefore has the flexibility in the timing of capital expenditures.
In the third quarter we moved approximately 90% of our dilbit to markets by rail outside Alberta. This is the highest proportion of sales by rail and provided strong bitumen netbacks. We will continue to move dilbit by rail to markets that offer favorable pricing however the proportion moved by rail will vary due to market conditions.
Q3 2013 Conference Call Details
Connacher will host its quarterly conference call on November 14, 2013 at 8AM MST. Interested participants can call in to (888) 231-8191. Please use the Conference ID# 87705434. Participants are encouraged to call in 5 minutes prior to commencement. For those wishing to access the call online, the webcast URL is: http://event.on24.com/r.htm?e=701364&s=1&k=9A8E7C7926C3AADDC61187364C4C64FA
Connacher Oil and Gas Limited is a focused in situ oil sands developer, producer and marketer of bitumen. The Company’s principal assets are holdings in the Great Divide oil sands project in northern Alberta, south of Fort McMurray.
Forward Looking Information
This press release contains forward looking information including the expected timing of realizing the production impacts of 2013 capital spending, future production and the timing thereof, future exploration and development activities, future SAGD+® process trials, the Company’s ability to rely on the debt basket provided for under the Note Indenture related to the Company’s existing second lien senior notes and general operational and financial performance in future periods.
Forward looking information is based on management’s expectations regarding the Company’s future financial position, the Company’s future growth, results of operations and production, future commodity prices and foreign exchange rates, future capital and other expenditures (including the amount, nature and sources of funding thereof), plans for and results of drilling activity, environmental matters, business prospects and opportunities and future economic conditions. Forward looking information involves significant known and unknown risks and uncertainties, which could cause actual results to differ materially from those anticipated. These risks include, but are not limited to: the risks associated with the oil and gas industry (e.g., operational risks in development, exploration and production; delays or changes in plans with respect to exploration or development projects or capital expenditures; the uncertainty of reserve and resource estimates, the uncertainty of geological interpretations, the uncertainty of estimates and projections relating to production, costs and expenses, and health, safety and environmental risks), risk of commodity price and foreign exchange rate fluctuations, risks associated with the impact of general economic conditions, risks and uncertainties associated with maintaining the necessary regulatory approvals and securing the financing to proceed with the operation and continued expansion of the Great Divide oil sands project.
In addition, reported average production levels may not be reflective of sustainable production rates and future production rates may differ materially from the production rates reflected in this press release due to, among other factors, difficulties or interruptions encountered during the production of bitumen.
Additional risks and uncertainties affecting Connacher and its business and affairs are described in further detail in Connacher’s Annual Information Form for the year ended December 31, 2012. Although Connacher believes that the expectations in such forward looking information are reasonable, there can be no assurance that such expectations shall prove to be correct. The forward looking information included in this press release is expressly qualified in its entirety by this cautionary statement. The forward looking information included herein is made as of the date of this press release and Connacher assumes no obligation to update or revise any forward looking information to reflect new events or circumstances, except as required by law.
SOURCE Connacher Oil and Gas Limited
For further information:
Chief Executive Officer
Chief Financial Officer