CALGARY, Nov. 27, 2013 /CNW/ – Hawk Exploration Ltd. (“Hawk” or the “Corporation”) is pleased to announce its results for the three and nine months ended September 30, 2013.
HIGHLIGHTS
Highlights for the three months ended September 30, 2013 were as follows:
Selected financial and operational information for the three and nine months ended September 30, 2013 is provided as follows:
| Three months ended Sept. 30, | Nine months ended Sept. 30, | ||||||||
| 2013 | 2012 | % Change | 2013 | 2012 | % Change | ||||
| Financial ($000’s except per share amounts) | |||||||||
| Petroleum and natural gas sales | $ 4,788 | $ 3,046 | 57% | $ | 11,598 | $ 8,736 | 33% | ||
| Cash flow from operations (1) | 2,105 | 1,432 | 47% | 4,922 | 4,170 | 18% | |||
| Per share | 0.06 | 0.04 | 50% | 0.14 | 0.12 | 17% | |||
| Comprehensive income | 67 | 69 | (3%) | 240 | 626 | (62%) | |||
| Per share | 0.00 | 0.00 | n/a | 0.01 | 0.02 | (50%) | |||
| Capital expenditures (2) | 3,342 | 2,852 | 17% | 5,879 | 6,301 | (7%) | |||
| Working capital deficit – excluding bank | |||||||||
| debt and commodity contracts, end of period (1) | $ | 2,613 | $ 3,371 | (22%) | |||||
| Bank debt, end of period | 3,250 | 100 | 3150% | ||||||
| Total assets, end of period | $ | 33,349 | 29,226 | 14% | |||||
| 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 Sept. 30, | Nine months ended Sept. 30, | ||||||||||||
| 2013 | 2012 | % Change | 2013 | 2012 | % Change | ||||||||
| Operations | |||||||||||||
| Production | |||||||||||||
| Crude oil and natural gas liquids (bbl/d) | 593 | 505 | 17% | 596 | 457 | 30% | |||||||
| Natural gas (mcf/d) | 123 | 126 | (2%) | 153 | 151 | 1% | |||||||
| Total (boe/d) | 613 | 526 | 17% | 621 | 482 | 29% | |||||||
| Oil and liquids as percent of total | 97% | 96% | 1% | 96% | 95% | 1% | |||||||
| Average Selling Price | |||||||||||||
| Crude oil and ngls (per bbl) | $ | 87.38 | $ | 64.91 | 35% | $ | 70.48 | $ | 69.03 | 2% | |||
| Natural gas (per mcf) | 2.51 | 2.37 | 6% | 3.21 | 2.15 | 49% | |||||||
| Total (per boe) | 84.95 | 62.89 | 35% | 68.38 | 66.10 | 3% | |||||||
| Netbacks (per boe at 6:1) (3) | |||||||||||||
| Price | $ | 84.95 | $ | 62.89 | 35% | $ | 68.38 | $ | 66.10 | 3% | |||
| Royalties | (17.54) | (11.34) | 55% | (13.25) | (13.11) | 1% | |||||||
| Production expense | (18.76) | (17.58) | 7% | (18.35) | (17.76) | 3% | |||||||
| Transportation expense | (1.75) | (1.58) | 11% | (1.75) | (1.78) | (2%) | |||||||
| Operating netback ($/boe) | $ | 46.90 | $ | 32.39 | 45% | $ | 35.03 | $ | 33.45 | 5% | |||
| G&A expense | (2.51) | (3.29) | (24%) | (3.14) | (3.25) | (3%) | |||||||
| Net cash interest expense | (0.81) | (0.01) | 80% | (0.77) | (0.01) | 76% | |||||||
| Realized gain (loss) on | |||||||||||||
| Commodity contracts | (3.67) | 0.47 | (881%) | (1.24) | 1.37 | (190%) | |||||||
| Cash flow netback ($/boe) | $ | 39.91 | $ | 29.56 | 35% | $ | 29.88 | $ | 31.56 | (5%) | |||
| (1) The terms cash flow from operations, cash flow from operations per share, working capital deficit and net debt to annualized cash flow ratio are additional GAAP financial measures. These measures are further described on page 3 of the Corporation’s MD&A for the three and nine months ended September 30, 2013 under the heading “Additional GAAP and Non-GAAP Financial Measures”. Users are cautioned that additional GAAP financial measures 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) Management uses the terms operating and cash flow netbacks per boe which are non-GAAP measures. These measures are key performance indicators however do not have a standardized meaning as prescribed by GAAP and therefore, may not be comparable with the calculation of similar measures by other entities. Management considers operating and cash flow netbacks to be important measures as they demonstrate profitability relative to current commodity prices. |
Operational Review and Update
During the third quarter of 2013, Hawk drilled four (3.7 net) vertical heavy oil wells in western Saskatchewan, all of which were successful and are currently on production at a combined rate of 145 (130 net) bbl/d. Late in the third quarter of 2013, Hawk also drilled one (0.7 net) vertical well in the Legal area of central Alberta targeting the Viking formation. This well encountered a gas cap, was production tested in the fourth quarter and is currently being evaluated as a potential gas well.
In the fourth quarter of 2013, Hawk has drilled three (3.0 net) successful heavy oil wells in the Lloydminster area of western Saskatchewan. These three (3.0 net) wells have all been cased and are expected to be placed on production within the next two weeks. The Corporation is also currently drilling the final two (2.0 net) wells of its 2013 drilling program. The first of these wells is being drilled in the Chauvin area of east central Alberta and is targeting the McLaren and GP Formations, while the second well is being drilled in the Eureka area of western Saskatchewan and is targeting the Basal Mannville Formation.
Production for the third quarter of 2013 averaged 613 boe/d, a 17% increase from the 526 boe/d produced in the third quarter of 2012. Hawk’s current production is 680 boe/d, based on field estimates. With additional production additions from the wells drilled in the fourth quarter, Hawk expects an exit production rate of approximately 730 boe/d at the end of 2013.
Financial
Hawk achieved record cash flow from operations in the third quarter of 2013 of approximately $2.1 million compared to $1.4 million for the third quarter of 2012 due to increased oil production and increased oil prices in the third quarter of 2013. Average Western Canadian Select (“WCS”) prices for the third quarter of 2013 increased 26% to US$88.35 per bbl compared to US$70.03 per bbl in the third quarter of 2012, while the differential between WCS and West Texas Intermediate crude oil (“Differential”) improved to US$17.48 per bbl in the third quarter of 2013 compared to US$22.24 per bbl for the third quarter of 2012. Differentials, however, have widened again in the fourth quarter of 2013 which will lead to lower realized pricing in the fourth quarter.
Hawk generated a record operating netback of $46.90 per boe forthe third quarterof 2013 which is a 45 percent increase from the operating netback for the third quarter of 2012 of $32.39 per boe due to increased oil prices in Q3 2013. The Corporation’s average sales price in the third quarter of 2013 increased 35% to $84.95 per boe from $62.89 per boe.
At September 30, 2013, Hawk had $3.25 million drawn on its existing $12 million credit facility. The Corporation continues to maintain a solid balance sheet with net debt and working capital deficit of approximately $5.9 million at September 30, 2013 which equates to a net debt to annualized cash flow from operations of 0.9:1.
Outlook
The Corporation will continue to focus on the development of its heavy oil properties in western Saskatchewan and east central Alberta in 2014. The Corporation’s board of directors has approved a capital budget for 2014 of $10 million which will see Hawk drill approximately 14 net wells, the majority of which are planned to be vertical heavy oil wells in its above noted core area. The 2014 capital budget is expected to be operated entirely by Hawk with the Corporation able to control the nature and timing of the capital spending for the year.
Based on the approved budget, the Corporation’s production is expected to average approximately 800 boe/d for 2014 with an exit rate of approximately 950 boe/d and net debt at the end of 2014 of approximately $11 million. The capital budget is expected to be funded by way of cash flow from operations and the Corporation’s existing $12 Million credit facility. Differentials have again widened out in the fourth quarter of 2014 and the Corporation expects the Differential to remain volatile throughout 2014. The Corporation plans to monitor its cash flow for 2014 in light of the expected volatility in Differentials and its effect on Hawk’s overall realized oil prices and can adjust its capital spending accordingly to ensure it maintains financial flexibility.
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; the timing of and nature of capital expenditure program for 2014;the exit production rate at the end of 2013 and 2014;the average production rate for 2014; the debt and working capital amount at the end of 2014; and the expected sources of funding for the 2014 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