CALGARY, ALBERTA–(Marketwired – May 27, 2016) – Hawk Exploration Ltd. (“Hawk” or the “Corporation”) (TSX VENTURE:HWK.A) announces its results for the three months ended March 31, 2016. The Corporation’s interim financial statements for the three months ended March 31, 2016 and management’s discussion and analysis for the three months ended March 31, 2016 are available for viewing on SEDAR at www.sedar.com or on Hawk’s website at www.hawkexploration.ca under Investor Information – Financial Reports. All amounts herein are reported in Canadian dollars, unless otherwise stated.
HIGHLIGHTS
Highlights for the three months ended March 31, 2016 were as follows:
| Selected financial and operational information for the three months ended March 31, 2016 is provided as follows: | ||||||||||||
| Three months ended March 31, | ||||||||||||
| 2016 | 2015 | % Change | ||||||||||
| Financial ($000’s except per share amounts) | ||||||||||||
| Petroleum and natural gas sales | $ | 884 | $ | 2,450 | (64 | %) | ||||||
| Cash flow (used in) from operations (1) | (512 | ) | 730 | (170 | %) | |||||||
| Per share | (0.01 | ) | 0.02 | (150 | %) | |||||||
| Comprehensive loss | (1,309 | ) | (738 | ) | (77 | %) | ||||||
| Per share | (0.03 | ) | (0.02 | ) | (50 | %) | ||||||
| Capital expenditures (2) | 2 | 727 | (100 | %) | ||||||||
| Working capital deficit – excluding bank debt and commodity contracts, end of period (1) | $ | 933 | $ | 1,445 | (35 | %) | ||||||
| Bank debt, end of period | 9,950 | 9,550 | 4 | % | ||||||||
| Total assets, end of period | $ | 30,941 | 38,937 | (21 | %) | |||||||
| Common Shares outstanding end of period: | ||||||||||||
| Class A Shares | 45,576 | 45,576 | – | % | ||||||||
| Options to acquire Class A Shares | 4,485 | 4,527 | (1 | %) | ||||||||
| Operations | ||||||||||||
| Production | ||||||||||||
| Crude oil and natural gas liquids (bbl/d) | 491 | 758 | (35 | %) | ||||||||
| Natural gas (mcf/d) | 113 | 125 | (1 | %) | ||||||||
| Total (boe/d) | 510 | 779 | (35 | %) | ||||||||
| Oil and liquids as percent of total | 96 | % | 97 | % | (1 | %) | ||||||
| Three months ended March 31, | ||||||||||||
| 2016 | 2015 | % Change | ||||||||||
| Average Selling Price | ||||||||||||
| Crude oil and ngls (per bbl) | $ | 19.34 | $ | 35.43 | (45 | %) | ||||||
| Natural gas (per mcf) | 1.87 | 2.83 | (34 | %) | ||||||||
| Total (per boe) | 19.04 | 34.94 | (46 | %) | ||||||||
| Operating netback (per boe at 6:1) (3) | ||||||||||||
| Price | $ | 19.04 | $ | 34.94 | (46 | %) | ||||||
| Royalties | (2.36 | ) | (6.27 | ) | (62 | %) | ||||||
| Production expense | (21.60 | ) | (17.04 | ) | 27 | % | ||||||
| Transportation expense | (1.42 | ) | (1.26 | ) | 13 | % | ||||||
| Operating netback ($/boe) | $ | (6.34 | ) | $ | 10.37 | (161 | %) | |||||
(1) The terms cash flow (used in) from operations, cash flow (used in) 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 months ended March 31, 2016 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.
Financial
Western Canadian Select (“WCS”) prices for the first quarter of 2016 averaged US$19.21 per bbl compared to US$33.90 per bbl in the first quarter of 2015, a 44% decrease. Hawk’s realized oil and NGL prices decreased by 46% in the first quarter of 2016 to $19.34 per bbl compared to $35.43 per bbl in the first quarter of 2015. As a result of the dramatic decrease in heavy oil prices in the first quarter of 2016, Hawk recorded negative cash flow from operations of approximately $0.5 million compared to positive cash flow from operations of $0.7 million for the first quarter of 2015.
Hawk’s operating netback for the first quarter of 2016 was a negative $6.34 per boe compared to a positive operating netback $10.37 per boe for the first quarter of 2015. This decrease is due mainly to the 46% decrease in the Corporation’s average realized sales price in the first quarter of 2016 as well as an increase in production expenses per boe in the first quarter of 2016 offset by lower royalty expense per boe.
Outlook
The first quarter of 2016 presented a challenging price environment for most Canadian oil companies and an even more challenging environment for those Canadian companies producing heavy oil; however, the oil pricing environment has recently improved. WCS posted prices averaged US$27.89 per bbl for the month of April 2016 which is a 45% increase in WCS prices over the first quarter of 2016. The current posted WCS price is approximately US$33.70 per bbl which is a 69% increase over the first quarter of 2016. The improved pricing environment for WCS oil is due to both improved West Texas Intermediate prices as well as narrower WCS heavy oil differentials and is expected to improve the Corporation’s second quarter 2016 financial results compared to the first quarter of 2016.
The Corporation has shut-in approximately 135 bbl/d of higher operating cost oil production due to the low commodity prices. Hawk expects to reactivate some, or all of the shut-in production should there be a continued and sustained improvement in heavy oil pricing.
Hawk has initiated a formal process to seek value maximizing proposals with a view to enhance shareholder value which may result in a corporate sale or material asset sale transaction. During this process, the Corporation will continue to focus on its near and long term business plan, centered on a commitment to effective cost management.
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 of Hawk trade on the TSX Venture Exchange under the trading symbol of HWK.A.
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