CALGARY, ALBERTA–(Marketwired – Nov. 14, 2016) – Zargon Oil & Gas Ltd. (“Zargon” or the “Company”) (TSX:ZAR)(TSX:ZAR.DB)
FINANCIAL & OPERATING HIGHLIGHTS (THREE MONTHS ENDED SEPTEMBER 30, 2016)
Three Months Ended September 30, |
Nine Months Ended September 30, |
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2016 | 2015 | Percent Change | 2016 | 2015 | Percent Change | ||||||||||||||
Financial Highlights | |||||||||||||||||||
Income and Investments ($ millions) | |||||||||||||||||||
Gross petroleum and natural gas sales | 12.33 | 16.23 | (24 | ) | 35.47 | 52.96 | (33 | ) | |||||||||||
Funds flow from/(used in) operating activities | (0.61 | ) | 3.29 | (119 | ) | 2.64 | 20.52 | (87 | ) | ||||||||||
Cash flows from operating activities | 3.19 | 7.65 | (58 | ) | 6.44 | 21.30 | (70 | ) | |||||||||||
Cash dividends | – | 0.91 | (100 | ) | – | 6.36 | (100 | ) | |||||||||||
Net earnings/(loss) | 13.81 | (41.16 | ) | 134 | (0.28 | ) | (49.81 | ) | 99 | ||||||||||
Field capital and administrative asset expenditures | 1.76 | 6.85 | (74 | ) | 5.50 | 17.65 | (69 | ) | |||||||||||
Net property acquisitions/ (dispositions) |
(92.05 | ) | 0.53 | – | (92.06 | ) | 0.48 | – | |||||||||||
Net capital expenditures/ (dispositions) |
(90.29 | ) | 7.38 | (1323 | ) | (86.56 | ) | 18.13 | (577 | ) | |||||||||
Per Share, Basic | |||||||||||||||||||
Funds flow from/(used in) operating activities ($/share) | (0.02 | ) | 0.11 | (118 | ) | 0.09 | 0.68 | (87 | ) | ||||||||||
Net earnings/(loss) ($/share) | 0.45 | (1.36 | ) | 133 | (0.01 | ) | (1.65 | ) | 99 | ||||||||||
Cash Dividends ($/common share) | – | 0.03 | (100 | ) | – | 0.21 | (100 | ) | |||||||||||
Balance Sheet at Period End ($ millions) | |||||||||||||||||||
Property and equipment (D&P) | 151.98 | 277.76 | (45 | ) | |||||||||||||||
Exploration and evaluation assets (E&E) | 3.12 | 6.33 | (51 | ) | |||||||||||||||
Total assets | 218.38 | 325.64 | (33 | ) | |||||||||||||||
Net debt | 32.99 | 116.96 | (72 | ) | |||||||||||||||
Shareholders’ equity | 51.86 | 108.39 | (52 | ) | |||||||||||||||
Weighted Average Shares Outstanding for the Period (millions) – Basic | 30.50 | 30.29 | 1 | 30.47 | 30.27 | 1 | |||||||||||||
Total Common Shares Outstanding at Period End (millions) | 30.56 | 30.30 | 1 |
Funds flow from operating activities is an additional GAAP term that represents net earnings/loss and asset retirement expenditures except for non-cash items. |
Net debt is a non-GAAP measure that represents bank debt plus the convertible debenture of $57.50 million and any working capital excluding unrealized derivative assets/liabilities. |
Cash dividends were suspended after the October 2015 dividend paid on November 16, 2015. |
Three Months Ended September 30, |
Nine Months Ended September 30, |
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2016 | 2015 | Percent Change | 2016 | 2015 | Percent Change | ||||||||||||||
Operating Highlights | |||||||||||||||||||
Average Daily Production | |||||||||||||||||||
Oil and liquids (bbl/d) | 2,915 | 3,633 | (20 | ) | 3,275 | 3,760 | (13 | ) | |||||||||||
Natural gas (mmcf/d) | 3.39 | 5.28 | (36 | ) | 3.67 | 5.28 | (30 | ) | |||||||||||
Equivalent (boe/d) | 3,480 | 4,513 | (23 | ) | 3,887 | 4,640 | (16 | ) | |||||||||||
Average Selling Price (before the impact of financial risk management contracts) | |||||||||||||||||||
Oil and liquids ($/bbl) | 43.41 | 44.67 | (3 | ) | 37.76 | 47.76 | (21 | ) | |||||||||||
Natural gas ($/mcf) | 2.20 | 2.66 | (17 | ) | 1.66 | 2.73 | (39 | ) | |||||||||||
Netback ($/boe) | |||||||||||||||||||
Gross petroleum and natural gas sales | 38.50 | 39.08 | (1 | ) | 33.31 | 41.81 | (20 | ) | |||||||||||
Royalties | (4.60 | ) | (5.91 | ) | (22 | ) | (3.91 | ) | (5.99 | ) | (35 | ) | |||||||
Realized gain/(loss) on derivatives | (0.13 | ) | 5.60 | (102 | ) | 2.12 | 12.16 | (83 | ) | ||||||||||
Operating expenses | (17.79 | ) | (21.15 | ) | (16 | ) | (17.78 | ) | (20.85 | ) | (15 | ) | |||||||
Transportation expenses | (0.54 | ) | (0.80 | ) | (33 | ) | (0.46 | ) | (0.70 | ) | (34 | ) | |||||||
Operating netback | 15.44 | 16.82 | (8 | ) | 13.28 | 26.43 | (50 | ) | |||||||||||
Wells Drilled, Net | – | 3.0 | (100 | ) | – | 3.0 | (100 | ) | |||||||||||
Undeveloped Land at Period End (thousand net acres) | 48 | 78 | (38 | ) |
The calculation of barrels of oil equivalent (“boe”) is based on the conversion ratio that six thousand cubic feet of natural gas is equivalent to one barrel of oil. |
Message to Shareholders
Zargon Oil & Gas Ltd. has released its financial and operating results for the third quarter of 2016.
Remaining Zargon Assets
With the completion of the Q3 2016 property sales, Zargon’s remaining assets are highlighted by the Alberta Little Bow Alkaline Surfactant Polymer (“ASP”) tertiary recovery project, the Alberta Taber and Bellshill Lake low decline oil properties and the remaining Williston Basin North Dakota properties, which are characterized by the following attributes:
Q4 2016 Guidance
Fourth quarter 2016 production and cost guidance for Zargon’s remaining assets are provided below:
We intend to set our 2017 capital budget in early January 2017 in the context of the business environment at that time. Our inventory of opportunities include reactivations, recompletions and facility upgrades that are projected to provide low cost production additions.
Additional information regarding Zargon’s low decline, oil exploitation properties are available on our website at www.zargon.ca.
Strategic Alternatives Process Update
Last year, Zargon announced the formation of a Special Board Committee to examine alternatives that would maximize shareholder value in a manner that would recognize the Company’s fundamental inherent value related to Zargon’s long-life, low-decline conventional oil assets and the significant long term oil potential related to the Little Bow ASP project.
The realization of $92.04 million of cash proceeds from the Q3 2016 property sales was a partial outcome of this process. With the elimination of the Company’s bank debt, the strategic alternatives process is continuing, but has been refocused to include, among other alternatives, a restructuring of the Company’s current capital structure, the addition of capital to further develop the potential of the assets, the sale of the Company or a portion of the Company’s assets, a merger, a farm-in or joint venture, or other such options as may be determined by the Company’s Board of Directors to be in the best interests of the Company and its stakeholders. Zargon’s Special Board Committee has engaged Macquarie Capital Markets Canada Ltd. (“Macquarie”) as its exclusive financial advisor related to this component of its strategic alternatives process. The Company has not set a definitive schedule to complete its evaluation and no decision on any particular alternative has been reached at this time. Zargon does not intend to disclose developments with respect to this process unless and until the Board of Directors has approved a definitive transaction or other course of action or otherwise deems disclosure of developments is appropriate or otherwise required by law. There are no guarantees that the process will result in a transaction of any form or, if a transaction is entered into, as to its terms or timing.
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