CALGARY, Nov. 14, 2013 /CNW Telbec/ – Exall Energy Corporation (“Exall” or the “Company”) (TSX:EE and TSX:EE.DB) is pleased to announce its financial and operating results for the three and nine months ended September 30, 2013. Exall’s public filings can all be found at www.exall.com or www.sedar.com.
Highlights:
- A third quarter 2013 production average of 1,116 boe per day, a 13 percent increase over the same quarter in 2012, and the fourth highest quarterly average in the Company’s history.
- A third quarter 2013 Net Back of $49.70.
- A third quarter 2013 cash flow from operations of $2,893,000.
- A third quarter 2013 net corporate debt reduction of $2,280,000.
| HIGHLIGHTS | Three months ended September 30 |
Nine months ended September 30 |
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| In thousands of dollars | 2013 | 2012 | % change |
2013 | 2012 | % change |
|
| Financial ($) | |||||||
| Gross revenue | 9,999 | 7,060 | 42 | 28,956 | 23,458 | 23 | |
| Funds from operations | 2,893 | 3,291 | (12) | 11,375 | 11,707 | (3) | |
| Basic per share | 0.04 | 0.05 | (20) | 0.17 | 0.19 | (11) | |
| Diluted per share | 0.01 | 0.05 | (80) | 0.05 | 0.19 | (74) | |
| Net income (loss) | (373) | 588 | (163) | 874 | 2,862 | (69) | |
| Basic per share | (0.01) | 0.01 | (200) | 0.01 | 0.05 | (80) | |
| Diluted per share | (0.01) | 0.01 | (200) | 0.01 | 0.05 | (80) | |
| Capital expenditures, net | 221 | 7,051 | (97) | 8,080 | 39,960 | (80) | |
| HIGHLIGHTS | Three months ended September 30 |
Nine months ended September 30 |
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| 2013 | 2012 | % change |
2013 | 2012 | % change |
||
| Operations | |||||||
| Daily production | |||||||
| Crude oil (bbl) | 1,030 | 897 | 15 | 1,110 | 968 | 15 | |
| Natural gas liquids (bbl) | 17 | 16 | 6 | 19 | 19 | – | |
| Natural gas (mmcf) | 417 | 471 | (11) | 385 | 511 | (25) | |
| Total daily production (boe @ 6:1) | 1,116 | 991 | 13 | 1,193 | 1,072 | 11 | |
| Netback per boe (6:1) ($) | 49.70 | 51.73 | (4) | 49.73 | 53.14 | (6) | |
Corporate Developments
Outlook
Capital expenditures planned for the third quarter were largely postponed due to the ongoing process of restructuring the senior debt of the Company to comply with the desire of the senior lender to reduce their outstanding principal amount. Capital expenditures during the third quarter of 2013 were focused on maintaining the production momentum built through the first half of 2013 through minor workovers and pump and rod repairs. Q3 production from field estimates averaged 1,125 BOEPD as compared to Q2 average production of 1,161 BOEPD. Renewed drilling planned for Q4 is expected to add to those volumes. Preparations are under way to begin drilling in the early part of Q4.
http://files.newswire.ca/357/Exall_Energy.pdf
Capital expenditures through Q4 2013 and Q1 2014 will focus on the “low-hanging fruit” (LHF) opportunities. Initial planned drilling activities, which were commence in October, 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. Two additional infill locations between the North and Central Waterflood areas also planned through to breakup next year. These wells are all high-impact, low risk locations identified through previous drilling and could have a significant impact on the Company’s production if successful.
Other LHF opportunities include a recently approved water injection well in a previously unsupported part of the South Waterflood. That portion of the waterflood had been producing 90 BOEPD (65 BOPD net), however, since the installation of additional casing gas compressors the planned injection well is producing over 100 BOEPD and the project a total of 220 BOEPD (160 BOPD net) with one additional re-activation candidate. The Company is reviewing the planned scheme with a view to change the planned injection location to take advantage of the apparent support from another offsetting injection well. Other LHF opportunities include sand cleanouts on a number of horizontal wells, re-completions and re-activations to be completed through year-end, as well as the implementation of one additional water injection well.
As noted in the Q1 and Q2 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 company engaged Sayers Securities to pursue joint ventures or farmin proposals for the 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 initiative generated considerable interest in the market; however no formal proposal was received, largely due to the lack of risk capital available in the equity market.
As at September 30, 2013, the Company had a working capital surplus, excluding bank indebtedness, of $0.1 million, and was in compliance with all covenants on the April 30, 2013 expired loan agreement. While the bank has not informed the Company that it intends to demand the loan, the bank’s annual review of the credit facility is ongoing. Although the Company expects that the bank will extend the facility in 2013, the extension is expected to be at a level less than the $36.0 million facility amount and on different terms and a portion of the 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, as at November 13, 2013 was in discussions with the bank and other potential lenders in regards to ongoing debt financing 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.
Overview
Exall’s average daily production for the third quarter of 2013 increased 13 percent to 1,116 barrels of oil equivalent per day (“BOEPD”) from 991 BOEPD in the third quarter of 2012. As at November 13, 2013 Exall’s net production rate was as outlined below:
| PRODUCTION BY REGION | ESTIMATED Q4 2013 |
Q3 2013 | Q2 2013 | Q1 2013 | Q4 2012 | Q3 2012 | ||
| Mitsue Waterfloods | ||||||||
| Oil | bbls/d | 1,068 | 1,028 | 1,082 | 1,216 | 1,041 | 884 | |
| Natural Gas | mmcf/d | 293 | 417 | 343 | 394 | 297 | 209 | |
| Liquids (bbls/d) | bbls/d | 7 | 17 | 20 | 19 | 14 | 8 | |
| BOEPD | 1,123 | 1,114 | 1,160 | 1,301 | 1,105 | 927 | ||
| Bow Island Heavy Oil | ||||||||
| Oil | bbls/d | 2 | 2 | 2 | 2 | 2 | 2 | |
| Natural Gas | mmcf/d | – | – | – | – | – | – | |
| Liquids | bbls/d | – | – | – | – | – | – | |
| BOEPD | 2 | 2 | 2 | 2 | 2 | 2 | ||
| Corporate Totals | ||||||||
| Oil | bbls/d | 1,070 | 1,030 | 1,084 | 1,218 | 1,042 | 897 | |
| Natural Gas | mmcf/d | 293 | 417 | 343 | 394 | 297 | 471 | |
| Liquids | bbls/d | 7 | 17 | 20 | 19 | 14 | 16 | |
| BOEPD | 1,125 | 1,116 | 1,161 | 1,303 | 1,106 | 991 | ||
Exall’s estimated fourth quarter 2013 average daily production at November 13, 2013 is approximately 1,125 BOEPD.
Results of Operations
Oil and gas exploration and development expenditures were $162 for the third quarter of 2013. During the third quarter of 2013 the Company did not participate in the drilling of any oil wells in the Marten Mountain / Mitsue area. Oil and gas property expenditures were $5,028 for the third quarter of 2012. During the third quarter of 2012 the Company spud 3.0 gross wells (2.17 net) in the Marten Mountain / Mitsue area.
Oil and gas exploration and development expenditures were $8,127 for the nine months ended September 30, 2013. During the nine month period ended 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 $38,052 for the nine month period ended September 30, of 2012. During the nine month period ended September 30, 2012 the Company spud 8.0 gross wells (5.45 net) in the Marten Mountain / Mitsue area.
As at September 30, 2013, the Company had 189,120 acres (140,843 acres net) of undeveloped land in Alberta, Canada.
Exall realized the following netbacks from oil and gas operations:
| THREE MONTHS ENDED SEPTEMBER 30, |
NINE MONTHS ENDED SEPTEMBER 30, |
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| NETBACK PER BOE (6:1) $ | 2013 | 2012 | % CHANGE |
2013 | 2012 | % CHANGE |
| Production revenue | 97.41 | 77.43 | 26 | 88.94 | 79.90 | 11 |
| Royalties | 36.27 | 13.28 | 173 | 27.95 | 13.55 | 106 |
| Operating expenses | 11.44 | 12.42 | (8) | 11.26 | 13.21 | (15) |
| Operating netbacks ($/boe) | 49.70 | 51.73 | (4) | 49.73 | 53.14 | (6) |
| Financial Contracts | 5.83 | – | 100 | 1.84 | – | 100 |
| Administrative expenses | 5.14 | 6.50 | (21) | 4.82 | 4.94 | (2) |
| Abandonment expenses | – | – | – | – | 1.20 | (100) |
| Interest expenses | 10.55 | 9.14 | 15 | 8.13 | 6.96 | 17 |
| Corporate netbacks ($/boe) | 28.18 | 36.09 | (35) | 34.94 | 40.04 | (13) |
Operating netbacks in the third quarter of 2013 decreased 4 percent to $49.70 per boe compared to the third quarter 2012 operating netbacks of $51.73 per boe. This is the result of the overall royalty expense increase of 173 percent on a third quarter over third quarter basis as a result of wells having produced out their allowable production under the NOWPP and reverting from a 5% rate to the Alberta maximum Royalty Rate of 40% with no new wells being brought on at the 5% NOWPP rate.
Operating netbacks for the nine month period ending September 30, 2013 decreased 6 percent to $49.73 per boe compared to the nine month period ending September 30, 2012 operating netbacks of $53.14 per boe. This is the result of the overall royalty expense increase of 106 percent on a nine month over nine month basis as a result of wells having produced out their allowable production under the NOWPP and reverting from a 5% rate to the Alberta maximum Royalty Rate of 40% with 2 new wells being brought on at the 5% NOWPP rate.
Corporate netbacks in the third quarter of 2013 decreased 22 percent to $28.18 per boe compared to the third quarter 2012 corporate netbacks of $36.09 per boe. This is the result of 1) the overall royalty expense increase of 173 percent on a third quarter over third quarter basis as a result of wells having produced out their allowable production under the NOWPP and reverting from a 5% rate to the Alberta maximum Royalty Rate of 40% with no new wells being brought on at the 5% NOWPP rate, 2) the loss on financial contracts incurred during the third quarter, the Canadian $99.05 WTI Hedge resulted in a loss during the quarter as a result of geo-political risks increasing the price of WTI during the quarter, prices that have now reversed, and 3) the overall interest expense increase of 15 percent on a third quarter over third quarter basis.
Corporate netbacks for the nine month period ending September 30, 2013 decreased 13 percent to $34.94 per boe compared to the nine month period ending September 30, 2012 corporate netbacks of $40.04 per boe. This is the result of 1) the overall royalty expense increase of 106 percent on a nine month over nine month basis as a result of wells having produced out their allowable production under the NOWPP and reverting from a 5% rate to the Alberta maximum Royalty Rate of 40% with 2 new wells being brought on at the 5% NOWPP rate, 2) the loss on financial contracts incurred during the third quarter, the Canadian $99.05 WTI Hedge resulted in a loss during the third quarter as a result of geo-political risks increasing the price of WTI during the quarter, prices that have now reversed, and 3) the overall interest expense increase of 17 percent on a third quarter over third quarter basis.
Net income, as a result, for the third quarter of 2013 was negative $373,000 or a loss of $0.01 per share compared to a net income for the third quarter of 2012 of $588,000 or $0.01 per share.
About Exall
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-central Alberta.
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.
Reader Advisory
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
PDF available at: http://stream1.newswire.ca/media/2013/11/14/20131114_C7559_DOC_EN_33369.pdf
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For further information:
Exall Energy Corporation
Frank S. Rebeyka
Vice Chairman
Tel: 403-815-6637
Roger N. Dueck
President & CEO
Tel: 403-237-7820 x 223
info@exall.com
Please visit Exall Energy’s website at: www.exall.com
Renmark Financial Communications Inc.
Maurice Dagenais: mdagenais@renmarkfinancial.com
Nadia Marks : nmarks@renmarkfinancial.com
Tel.: (514) 939-3989 or (416) 644-2020
www.renmarkfinancial.com
