CALGARY, Feb. 2, 2015 /CNW/ – Connacher Oil and Gas Limited (CLL – TSX; “Connacher” or the “Company”) provides its forecast (“Forecast”) for 2015 in the context of its previously announced recapitalization transaction (the “Recapitalization”). This Forecast is based upon the following assumptions:
Commodity Price Assumptions
Diluent Costs
Transportation and Marketing
Production and Operating Expenses
Capital Expenditures
General and Administrative Costs
The following table sets forth the estimated average production, bitumen netback, general and administrative expenses and capital expenditures for each of the quarters in 2015.
Q1 2015 |
Q2 2015 |
Q3 2015 |
Q4 2015 |
|||||
Production (bbl/d) |
15,221 |
14,962 |
13,598 |
14,750 |
||||
($’000) |
||||||||
Dilbit sales |
60,095 |
61,703 |
58,888 |
67,501 |
||||
Diluent, transportation and handling costs |
(47,444) |
(48,813) |
(47,196) |
(51,936) |
||||
Net realized bitumen sales |
12,651 |
12,890 |
11,692 |
15,565 |
||||
Royalties |
(127) |
(151) |
(175) |
(278) |
||||
Production and operating expenses |
(23,463) |
(23,665) |
(23,757) |
(24,146) |
||||
Bitumen netback |
(10,939) |
(10,926) |
(12,240) |
(8,859) |
||||
General and administrative expenses |
8,248 |
8,248 |
8,248 |
8,248 |
||||
Capital Expenditures |
13,777 |
4,956 |
7,040 |
3,961 |
||||
The above does not include the effect nor the cost of the contemplated Recapitalization nor any interest expense on current or anticipated future debt, nor any potential gain or loss which might arise from commodity hedging.
The Recapitalization
On January 30, 2015 Connacher announced the Recapitalization aimed at significantly reducing the Company’s debt and annual interest expense, and providing additional liquidity to fund ongoing operations. The Recapitalization provides for, among other things:
Additional details regarding the Recapitalization, including the terms of the New Convertible Notes and New Term Loan Facility are contained in the summary term sheets attached to the January 30, 2015 news release.
The Recapitalization is the result of the Company’s initiative, announced December 1, 2014, to devise and implement a strategy to address its liquidity and capital structure. The recent extraordinary shift in commodity prices has severely constrained Connacher’s ability to generate cash flow in a context where the Company has a significant debt burden. A reduction in outstanding indebtedness and corresponding interest expense and infusion of new capital is necessary in order to preserve substantial value in the resources, assets and operations of the Company and positions Connacher to regain access to growth capital when commodity markets improve.
About Connacher
Connacher is a Calgary-based in-situ oil sands developer, producer and marketer of bitumen. The Company holds a 100 per cent interest in approximately 450 million barrels of proved and probable bitumen reserves and operates two steam assisted gravity drainage facilities located on the Company’s Great Divide oil sands leases near Fort McMurray, Alberta.
[expand title=”Advisories & Contact”]Forward-Looking Information
This press release contains forward looking information, including but not limited to, the estimates of future production, dilbit sales, diluent, transportation and handling costs, net realized bitumen sales, royalties, production and operating costs, bitumen netback, general and administrative expenses and capital expenses and statements regarding the anticipated benefits of the Recapitalization.
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. Specific details regarding these expectations are reflected in the assumptions provided above. 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: that 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 current and future operations.
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, 2013. 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.
Non-GAAP measures
This press release contains terms commonly used in the oil and gas industry, but which do not have a standardized meaning, such as bitumen netback. Bitumen netback is not defined by the financial measures used by Connacher to prepare its financial statements and are referred to herein as non-GAAP measures. Bitumen netback is calculated by deducting the related diluent, transportation and handling, field production and operating expenses, and royalties from dilbit sales. This metric assists in assessing the Company’s ability to generate a cash margin on a per unit-of-production basis. These non-GAAP measures should not be considered an alternative to, or more meaningful than, cash provided by operating activities or net earnings (loss) as determined in accordance with GAAP as an indicator of Connacher’s performance. Management believes that in addition to net earnings (loss), bitumen netback is a useful financial measurement which assists in demonstrating the Company’s ability to make interest payments, fund capital expenditures necessary for future growth or to repay debt. Connacher’s determination of bitumen netback may not be comparable to that reported by other companies. Reconciliation of actual results to the Forecast will be included in future financial reporting, together with reconciliations of bitumen netback to net earnings.
SOURCE Connacher Oil and Gas Limited