CALGARY, ALBERTA–(Marketwired – Feb. 17, 2016) – Gear Energy Ltd. (“Gear” or the “Company”) (TSX:GXE) is pleased to provide the following fourth quarter and year-end operating update to shareholders. For more information in conjunction with this release, please refer to Gear’s Annual Audited Financial Statements, Management’s Discussion and Analysis (“MD&A”) for the years ended December 31, 2015 and 2014, and 2015 Reserves Press Release titled “Gear Energy Ltd. Announces Year-End Reserves“, all of which are available for review on Gear’s website at www.gearenergy.com and on www.sedar.com.
Financial Summary
Three months ended | Twelve months ended | ||||||||||
(Cdn$ thousands, except per boe amounts) | Dec 31, 2015 | Dec 31, 2014 | Sep 30, 2015 | Dec 31, 2015 | Dec 31, 2014 | ||||||
FINANCIAL | |||||||||||
Cash flow from operations (1) | 4,682 | 20,602 | 7,416 | 39,208 | 76,044 | ||||||
Per weighted average diluted share | 0.06 | 0.29 | 0.10 | 0.54 | 1.12 | ||||||
Cash flow from operating activities | 3,801 | 13,425 | 9,873 | 40,545 | 65,922 | ||||||
Per weighted average diluted share | 0.05 | 0.19 | 0.14 | 0.56 | 0.97 | ||||||
Net loss | (26,501) | (29,999) | (63,360) | (96,519) | (13,080) | ||||||
Per weighted average diluted share | (0.35) | (0.42) | (0.89) | (1.34) | (0.20) | ||||||
Capital expenditures | 3,993 | 20,969 | 6,433 | 14,883 | 84,580 | ||||||
Net acquisitions (2) | – | (1,027) | – | (686) | 79,861 | ||||||
Net debt outstanding (1) | 65,972 | 98,404 | 71,753 | 65,972 | 98,404 | ||||||
Shares outstanding, weighted average, basic | 75,918 | 70,817 | 70,817 | 72,103 | 66,706 | ||||||
Shares outstanding, weighted average, diluted | 75,918 | 71,485 | 70,817 | 72,103 | 67,840 | ||||||
Shares outstanding, end of period | 85,484 | 70,817 | 70,817 | 85,484 | 70,817 | ||||||
OPERATING | |||||||||||
Production | |||||||||||
Oil and liquids (bbl/d) | 4,819 | 6,836 | 5,295 | 5,513 | 5,846 | ||||||
Natural gas (mcf/d) | 1,176 | 991 | 810 | 942 | 1,046 | ||||||
Total (boe/d) | 5,015 | 7,001 | 5,430 | 5,670 | 6,020 | ||||||
Average prices | |||||||||||
Oil and liquids ($/bbl) | 31.68 | 62.39 | 39.58 | 39.47 | 76.15 | ||||||
Natural gas ($/mcf) | 2.10 | 3.57 | 2.60 | 1.61 | 4.30 | ||||||
Oil equivalent ($/boe) | 30.93 | 61.42 | 38.98 | 38.84 | 74.69 | ||||||
Netback ($/boe) | |||||||||||
Commodity and other sales | 30.93 | 61.48 | 38.98 | 38.84 | 74.82 | ||||||
Royalties | 4.72 | 11.02 | 4.88 | 5.52 | 13.83 | ||||||
Operating costs | 16.63 | 19.94 | 17.53 | 17.72 | 20.96 | ||||||
Operating netback (before hedging) (1) | 9.58 | 30.52 | 16.57 | 15.60 | 40.03 | ||||||
Realized risk management gains (losses) | 3.86 | 3.98 | 1.80 | 7.34 | (0.99) | ||||||
Operating netback (after hedging) (1) | 13.44 | 34.50 | 18.37 | 22.94 | 39.04 | ||||||
General and administrative | 2.00 | 1.86 | 2.66 | 2.84 | 3.35 | ||||||
Interest | 1.28 | 1.31 | 1.34 | 1.36 | 1.36 | ||||||
Foreign exchange loss (gain) | 0.06 | (0.63) | (0.47) | (0.20) | (0.26) | ||||||
Corporate netback (1) | 10.10 | 31.96 | 14.84 | 18.94 | 34.59 | ||||||
TRADING STATISTICS ($ based on intra-day trading) |
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High | 1.10 | 4.86 | 1.86 | 2.62 | 6.41 | ||||||
Low | 0.40 | 1.96 | 0.67 | 0.40 | 1.96 | ||||||
Close | 0.53 | 2.50 | 0.68 | 0.53 | 2.50 | ||||||
Average daily volume (thousands) | 157 | 398 | 137 | 172 | 338 |
(1) | Cash flow from operations, net debt, operating netback and corporate netback, (or as sometimes referred to herein as cash flow netback), are non-GAAP measures and additional information with respect to these measures can be found under the heading “Non-GAAP Measures” in Gear’s MD&A. | |
(2) | Net acquisitions exclude non-cash items for decommissioning liability and deferred taxes and is net of post-closing adjustments |
HIGHLIGHTS
In light of continued oil price weakness, Gear focused on sustainability by adopting a cautious view throughout 2015. Of the total $39 million of cash flow generated through the year, $25 million or 64 per cent was directed towards reducing outstanding debt. In addition, Gear successfully raised net $9.5 million through an equity issuance in the fourth quarter of 2015. In total these activities resulted in net debt declining by 33 per cent from the prior year. In addition, $14.8 million, or 22 per cent of the total $66 million of current net debt was moved to a five year convertible debenture structure due in November 2020. With the remaining $14.2 million of cash flow Gear completed a 100 per cent successful 12 well horizontal heavy oil drilling program. The Gear team has a consistent track record of successfully and economically developing its asset base and remains confident in the strength and depth of its undeveloped opportunities. Gear believes that future capital investments can continue to yield strong positive rates of return with only a slight improvement in the oil price environment.
GEAR ENERGY LTD. | |||||||||
BALANCE SHEETS (unaudited) | |||||||||
As at December 31 | |||||||||
(Cdn$ thousands) | 2015 | 2014 | |||||||
ASSETS | |||||||||
Current assets | |||||||||
Accounts receivable | $ | 5,872 | $ | 15,295 | |||||
Prepaid expenses | 2,101 | 2,078 | |||||||
Inventory | 3,440 | 6,810 | |||||||
Risk management contracts | 9,173 | 13,691 | |||||||
20,586 | 37,874 | ||||||||
Deferred income tax asset | 26,243 | 16,501 | |||||||
Property, plant and equipment | 178,905 | 320,343 | |||||||
Total assets | $ | 225,734 | $ | 374,718 | |||||
LIABILITIES | |||||||||
Current liabilities | |||||||||
Accounts payable and accrued liabilities | $ | 6,860 | $ | 23,687 | |||||
Conversion approval option | 1,800 | – | |||||||
Debt | 55,725 | 98,900 | |||||||
64,385 | 122,587 | ||||||||
Debentures | 12,230 | – | |||||||
Decommissioning liability | 54,959 | 74,114 | |||||||
Total liabilities | 131,574 | 196,701 | |||||||
SHAREHOLDERS’ EQUITY | |||||||||
Share capital | 241,535 | 231,067 | |||||||
Contributed surplus | 12,377 | 10,183 | |||||||
Deficit | (159,752 | ) | (63,233 | ) | |||||
Total shareholders’ equity | 94,160 | 178,017 | |||||||
Total liabilities and shareholders’ equity | $ | 225,734 | $ | 374,718 | |||||
GEAR ENERGY LTD. | ||||||||||||||||
STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (unaudited) | ||||||||||||||||
For the years ended December 31 | ||||||||||||||||
(Cdn$ thousands) | ||||||||||||||||
Share Capital | Contributed Surplus | Deficit | Total Equity | |||||||||||||
Balance at December 31, 2013 | $ | 166,869 | $ | 9,446 | $ | (50,153 | ) | $ | 126,162 | |||||||
Issued on offering of common shares | 63,500 | – | – | 63,500 | ||||||||||||
Exercise of stock options | 3,346 | (874 | ) | – | 2,472 | |||||||||||
Share issue costs, net of deferred tax benefit of $881 | (2,648 | ) | – | – | (2,648 | ) | ||||||||||
Share-based compensation | – | 1,611 | – | 1,611 | ||||||||||||
Net loss for the year | – | – | (13,080 | ) | (13,080 | ) | ||||||||||
Balance at December 31, 2014 | $ | 231,067 | $ | 10,183 | $ | (63,233 | ) | $ | 178,017 | |||||||
Issued on offering of common shares | 11,000 | – | – | 11,000 | ||||||||||||
Share issue costs, net of deferred tax benefit of $197 | (532 | ) | – | – | (532 | ) | ||||||||||
Share-based compensation | – | 2,194 | – | 2,194 | ||||||||||||
Net loss for the year | – | – | (96,519 | ) | (96,519 | ) | ||||||||||
Balance at December 31, 2015 | $ | 241,535 | $ | 12,377 | $ | (159,752 | ) | $ | 94,160 | |||||||
GEAR ENERGY LTD. | |||||||||||||||||
STATEMENTS OF LOSS AND COMPREHENSIVE LOSS (unaudited) | |||||||||||||||||
Three Months Ended December 31 |
Twelve Months Ended December 31 |
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(Cdn$ thousands, except per share amounts) | 2015 | 2014 | 2015 | 2014 | |||||||||||||
Sales of crude oil, natural gas and natural gas liquids | $ | 14,274 | $ | 39,558 | $ | 80,374 | $ | 164,116 | |||||||||
Royalties | (2,178 | ) | (7,100 | ) | (11,415 | ) | (30,394 | ) | |||||||||
Other income | – | 42 | – | 289 | |||||||||||||
REVENUE | 12,096 | 32,500 | 68,959 | 134,011 | |||||||||||||
Gain on risk management contracts | 7,761 | 16,000 | 10,662 | 13,637 | |||||||||||||
19,857 | 48,500 | 79,621 | 147,648 | ||||||||||||||
EXPENSES | |||||||||||||||||
Operating | 7,672 | 12,840 | 36,671 | 46,049 | |||||||||||||
General and administrative | 923 | 1,197 | 5,882 | 7,351 | |||||||||||||
Share-based compensation | 518 | 635 | 2,194 | 1,611 | |||||||||||||
Interest and financing charges | 592 | 842 | 2,815 | 2,980 | |||||||||||||
Accretion | 325 | 450 | 1,508 | 1,453 | |||||||||||||
Depletion, depreciation and amortization | 8,564 | 15,429 | 40,399 | 48,330 | |||||||||||||
Impairment | 10,840 | 53,800 | 96,660 | 53,800 | |||||||||||||
Exploration expense | – | 3,284 | – | 3,284 | |||||||||||||
Gain on asset disposition | (15 | ) | – | (15 | ) | (540 | ) | ||||||||||
Loss (gain) on foreign exchange | 28 | (408 | ) | (429 | ) | (581 | ) | ||||||||||
29,447 | 88,069 | 177,685 | 163,737 | ||||||||||||||
Deferred tax (expense) recovery | (16,911 | ) | 9,570 | 9,545 | 3,009 | ||||||||||||
Net loss and comprehensive loss | $ | (26,501 | ) | $ | (29,999 | ) | $ | (96,519 | ) | $ | (13,080 | ) | |||||
Net loss per share, basic and diluted | $ | (0.35 | ) | $ | (0.42 | ) | $ | (1.34 | ) | $ | (0.20 | ) | |||||
GEAR ENERGY LTD. | |||||||||||||||||
STATEMENTS OF CASH FLOWS (unaudited) | |||||||||||||||||
Three Months Ended December 31 |
Twelve Months Ended December 31 |
||||||||||||||||
(Cdn$ thousands) | 2015 | 2014 | 2015 | 2014 | |||||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES | |||||||||||||||||
Net loss | $ | (26,501 | ) | $ | (29,999 | ) | $ | (96,519 | ) | $ | (13,080 | ) | |||||
Add items not involving cash: | |||||||||||||||||
Unrealized (gain) loss on risk management contracts | (5,980 | ) | (13,436 | ) | 4,517 | (15,804 | ) | ||||||||||
Share-based compensation | 518 | 635 | 2,194 | 1,611 | |||||||||||||
Bad debt expense (recovery) | 20 | 9 | 9 | (1 | ) | ||||||||||||
Accretion | 325 | 450 | 1,508 | 1,453 | |||||||||||||
Depletion, depreciation and amortization | 8,564 | 15,429 | 40,399 | 48,330 | |||||||||||||
Impairment | 10,840 | 53,800 | 96,660 | 53,800 | |||||||||||||
Exploration expense | – | 3,284 | – | 3,284 | |||||||||||||
Gain on asset disposition | (15 | ) | – | (15 | ) | (540 | ) | ||||||||||
Deferred tax expense (recovery) | 16,911 | (9,570 | ) | (9,545 | ) | (3,009 | ) | ||||||||||
Decommissioning liabilities settled | (650 | ) | (728 | ) | (1,383 | ) | (2,636 | ) | |||||||||
Change in non-cash working capital | (231 | ) | (6,449 | ) | 2,720 | (7,486 | ) | ||||||||||
3,801 | 13,425 | 40,545 | 65,922 | ||||||||||||||
CASH FLOW FROM FINANCING ACTIVITIES | |||||||||||||||||
(Repayments) borrowings of debt under demand credit facility | (23,830 | ) | 12,238 | (43,175 | ) | 33,983 | |||||||||||
Issuance of debentures, net of issue costs | 13,990 | – | 13,990 | – | |||||||||||||
Issuance of share capital, net of share issue costs | 10,271 | – | 10,271 | 62,444 | |||||||||||||
431 | 12,238 | (18,914 | ) | 96,427 | |||||||||||||
CASH FLOW USED IN INVESTING ACTIVITIES | |||||||||||||||||
Property, plant and equipment expenditures | (3,993 | ) | (20,969 | ) | (14,883 | ) | (84,580 | ) | |||||||||
Acquisition and disposition of petroleum and natural gas properties | 14 | 738 | 699 | (83,141 | ) | ||||||||||||
Change in non-cash working capital | (253 | ) | (5,432 | ) | (7,447 | ) | 4,531 | ||||||||||
(4,232 | ) | (25,663 | ) | (21,631 | ) | (163,190 | ) | ||||||||||
DECREASE IN CASH AND CASH EQUIVALENTS | – | – | – | (841 | ) | ||||||||||||
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD | – | – | – | 841 | |||||||||||||
CASH AND CASH EQUIVALENTS, END OF PERIOD | $ | – | $ | – | $ | – | $ | – |
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