CALGARY, Alberta, Aug. 09, 2017 (GLOBE NEWSWIRE) — Zargon Oil & Gas Ltd. (“Zargon” or the “Company”) (TSX:ZAR) (TSX:ZAR.DB.A).
FINANCIAL AND OPERATING HIGHLIGHTS (THREE MONTHS ENDED JUNE 30, 2017)
Production Guidance (1)
In a December 12, 2016 capital budget press release, Zargon provided annual 2017 guidance levels of 2,500 barrels of oil equivalent per day. First half 2017 production volumes of 2,540 barrels of oil equivalent per day exceeded guidance levels, and similarly, we anticipate to exceed the 2,500 barrels of oil equivalent per day guidance levels for the remainder of the year. These guidance levels are predicated on our unchanged $7.80 million 2017 capital program, of which the first half expenditures of $4.64 million included a disproportionate level of facility, waterflood implementation and well reactivation expenditures that will provide additional production volumes in the second half of 2017.
Strategic Alternatives Process Update (1)
In 2015, Zargon announced the formation of a Special Board Committee (the “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.
Last year’s $92.04 million of property sales and this year’s partial repayment and amendment of Zargon’s convertible debentures were a partial outcome of this process. With the bank debt elimination and debenture restructuring, the strategic alternatives process is continuing and may include a sale of the Company or a portion of the Company’s assets, a restructuring of the Company’s current capital structure, the addition of capital to further develop the potential of the assets, a merger, a farm-in or joint venture, or other such options as may be determined by the Company’s Board of Directors to be in the best interests of the Company and its stakeholders. Zargon’s Special Board Committee has engaged Macquarie Capital Markets Canada Ltd. (“Macquarie”) as its exclusive financial advisor related to this component of its strategic alternatives process.
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||
2017 | 2016 | Percent Change |
2017 | 2016 | Percent Change |
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Financial Highlights | ||||||||||||
Income and Investments ($ millions) | ||||||||||||
Gross petroleum and natural gas sales | 9.40 | 13.53 | (31 | ) | 19.09 | 23.15 | (18 | ) | ||||
Funds flow from operating activities | 1.14 | 3.56 | (68 | ) | 2.64 | 3.17 | (17 | ) | ||||
Cash flows from/(used in) operating activities | (0.59 | ) | 1.18 | (150 | ) | 1.94 | 3.25 | (40 | ) | |||
Net loss | (1.71 | ) | (5.27 | ) | 68 | (2.25 | ) | (14.09 | ) | 84 | ||
Field capital and administrative asset expenditures | 2.09 | 1.31 | 60 | 4.47 | 3.74 | 20 | ||||||
Net property acquisitions/(dispositions) | 0.04 | (0.05 | ) | 180 | 0.17 | (0.01 | ) | 1800 | ||||
Net capital expenditures | 2.13 | 1.26 | 69 | 4.64 | 3.73 | 24 | ||||||
Per Share, Basic | ||||||||||||
Funds flow from operating activities ($/share) | 0.04 | 0.12 | (67 | ) | 0.09 | 0.10 | (10 | ) | ||||
Net loss ($/share) | (0.06 | ) | (0.17 | ) | 65 | (0.07 | ) | (0.46 | ) | 85 | ||
Balance Sheet at Period End ($ millions) | ||||||||||||
Property and equipment (D&P) | 134.17 | 224.73 | (40 | ) | ||||||||
Exploration and evaluation assets (E&E) | 2.15 | 5.49 | (61 | ) | ||||||||
Total assets | 150.11 | 253.94 | (41 | ) | ||||||||
Net debt | 36.06 | 122.26 | (71 | ) | ||||||||
Convertible debentures at maturity | 41.94 | 57.50 | (27 | ) | ||||||||
Shareholders’ equity | 29.81 | 38.18 | (22 | ) | ||||||||
Weighted Average Shares Outstanding for the Period (millions) – Basic |
30.73 | 30.47 | 1 | 30.70 | 30.46 | 1 | ||||||
Weighted Average Shares Outstanding for the Period (millions) – Diluted |
30.73 | 30.47 | 1 | 30.70 | 30.46 | 1 | ||||||
Total Common Shares Outstanding at Period End (millions) |
30.75 | 30.47 | 1 | |||||||||
Funds flow from operating activities is an additional GAAP term that represents net earnings/loss except for non-cash items. As at March 31, 2017, it has been restated and no longer includes asset retirement expenditures. |
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Net debt is a non-GAAP measure that represents bank debt (if any) plus the convertible debenture of $41.94 million or $57.50 million (prior to March 31, 2017) and any working capital excluding unrealized derivative assets/liabilities. |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||
2017 | 2016 | Percent Change |
2017 | 2016 | Percent Change |
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Operating Highlights | |||||||||||||
Average Daily Production | |||||||||||||
Oil and liquids (bbl/d) | 1,921 | 3,413 | (44 | ) | 1,968 | 3,458 | (43 | ) | |||||
Natural gas (mmcf/d) | 3.47 | 3.58 | (3 | ) | 3.43 | 3.81 | (10 | ) | |||||
Equivalent (boe/d) | 2,500 | 4,010 | (38 | ) | 2,540 | 4,093 | (38 | ) | |||||
Average Selling Price (before the impact of financial risk management contracts) |
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Oil and liquids ($/bbl) | 49.10 | 42.36 | 16 | 49.20 | 35.22 | 40 | |||||||
Natural gas ($/mcf) | 2.59 | 1.16 | 123 | 2.52 | 1.41 | 79 | |||||||
Netback ($/boe) | |||||||||||||
Gross petroleum and natural gas sales | 41.34 | 37.09 | 11 | 41.53 | 31.07 | 34 | |||||||
Royalties | (4.89 | ) | (4.31 | ) | 13 | (4.59 | ) | (3.62 | ) | 27 | |||
Realized gain/(loss) on derivatives | (0.12 | ) | 2.35 | (105 | ) | 0.01 | 3.08 | (100 | ) | ||||
Operating expenses | (22.48 | ) | (17.00 | ) | 32 | (22.16 | ) | (17.77 | ) | 25 | |||
Transportation expenses | (0.01 | ) | (0.63 | ) | (98 | ) | (0.08 | ) | (0.42 | ) | (81 | ) | |
Operating netback | 13.84 | 17.50 | (21 | ) | 14.71 | 12.34 | 19 | ||||||
Wells Drilled, Net | – | – | – | – | – | – | |||||||
Undeveloped Land at Period End (thousand net acres) | 39 | 66 | (41 | ) | |||||||||
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. |