Calgary, Alberta – LEUCROTTA EXPLORATION INC. (TSXV: LXE) (“Leucrotta” or the “Company”) is pleased to announce its financial and operating results for the three and nine months ended September 30, 2020. All dollar figures are Canadian dollars unless otherwise noted.
|Three Months Ended September 30||Nine Months Ended September 30|
|($000s, except per share amounts)||2020||2019||% Change||2020||2019||% Change|
|Oil and natural gas sales||5,841||6,113||(4)||17,071||20,775||(18)|
|Cash flow from operating activities||368||950||(61)||975||8,367||(88)|
|Per share – basic and diluted||–||–||–||–||0.04||(100)|
|Adjusted funds flow (1)||586||1,825||(68)||548||7,950||(93)|
|Per share – basic and diluted||–||0.01||(100)||–||0.04||(100)|
|Net (loss) earnings||(2,525)||(1,181)||114||(94,158)||611||(15,510)|
|Per share – basic and diluted||(0.01)||(0.01)||–||(0.47)||–||(100)|
|Proceeds on sale of properties and equipment (2)||–||1,625||(100)||8,206||4,767||72|
|Working capital (deficiency)||(4,421)||2,153||(305)|
|Common shares outstanding (000s)|
|Weighted average – basic||200,525||200,525||–||200,525||200,525||–|
|Weighted average – diluted||200,525||200,525||–||200,525||200,710||(-)|
|End of period – basic||200,525||200,525||–|
|End of period – fully diluted||218,527||226,646||(4)|
(1) See “Non-GAAP Measures” section.
(2) The sale of equipment for proceeds of $4.8 million in 2019 is exclusive of $2.7 million deposit received in Q4 2018.
|OPERATING RESULTS (1)||Three Months Ended September 30||Nine Months Ended September 30|
|2020||2019||% Change||2020||2019||% Change|
|Oil and NGLs (bbls/d)||790||829||(5)||926||838||11|
|Natural gas (mcf/d)||13,739||13,414||2||14,036||13,669||3|
|Oil equivalent (boe/d)||3,080||3,065||–||3,266||3,116||5|
|Oil and NGLs ($/bbl)||38.21||47.81||(20)||31.81||51.96||(39)|
|Natural gas ($/mcf)||2.42||2.00||21||2.34||2.38||(2)|
|Oil equivalent ($/boe)||20.62||21.68||(5)||19.08||24.42||(22)|
|Oil and NGLs ($/bbl)||1.93||–||100||1.49||–||100|
|Natural gas ($/mcf)||0.06||–||100||0.05||–||100|
|Oil equivalent ($/boe)||0.76||–||100||0.63||–||100|
|Net operating expenses (2)|
|Oil and NGLs ($/bbl)||10.19||8.55||19||9.87||8.31||19|
|Natural gas ($/mcf)||1.04||0.88||18||0.99||0.86||15|
|Oil equivalent ($/boe)||7.24||6.17||17||7.05||6.01||17|
|Net transportation and marketing expenses (2)|
|Oil and NGLs ($/bbl)||0.32||1.23||(74)||0.84||1.33||(37)|
|Natural gas ($/mcf) (3)||1.45||1.07||36||1.56||1.01||54|
|Oil equivalent ($/boe)||6.53||4.99||31||6.95||4.79||45|
|Operating netback (2)|
|Oil and NGLs ($/bbl)||25.77||38.03||(32)||19.61||42.32||(54)|
|Natural gas ($/mcf)||(0.13)||0.05||(360)||(0.26)||0.51||(151)|
|Oil equivalent ($/boe)||6.09||10.52||(42)||4.45||13.62||(67)|
|Depletion and depreciation ($/boe)||(10.08)||(9.69)||4||(8.82)||(9.53)||(7)|
|Asset impairment ($/boe)||–||–||–||(98.22)||–||100|
|General and administrative expenses ($/boe)||(3.94)||(3.88)||2||(3.77)||(4.16)||(9)|
|Share based compensation ($/boe)||(0.64)||(0.34)||88||(0.31)||(0.61)||(49)|
|Gain (loss) on sale of equipment ($/boe)||–||(0.41)||(100)||1.68||1.69||(1)|
|Finance expense ($/boe)||(0.33)||(0.40)||(18)||(0.25)||(0.33)||(24)|
|Finance income ($/boe)||–||0.03||(100)||–||0.03||(100)|
|Net (loss) earnings ($/boe)||(8.90)||(4.17)||113||(105.24)||0.71||(14,923)|
(1) See “Frequently Recurring Terms” section.
(2) See “Non-GAAP Measures” section.
(3) Includes $0.35/mcf and $0.44/mcf of unutilized firm transportation expenses for the three and nine months ended September 30, 2020, respectively.
Selected financial and operational information outlined in this news release should be read in conjunction with Leucrotta’s unaudited condensed interim financial statements and related Management’s Discussion and Analysis (“MD&A”) for the three and nine months ended September 30, 2020, which are available for review at www.sedar.com.
In Q3 2020, Leucrotta’s capital spending continued to be minimal in order to maintain low debt levels during uncertain times. Leucrotta will continue to minimize capital expenditures and reduce debt throughout the remainder of the year. Production decreased to 3,080 boe/d in Q3 2020 as flush production came off at Two Rivers, in addition to Two Rivers being shut-in during September for a third party turn-around. Q3 2020 returned to positive cash flow despite low gas prices in Chicago and significant costs of unutilized transportation.
In Q4 2020, Leucrotta mitigated its remaining twelve months of unutilized transportation for a loss of $2.2 million and signed a new bank credit facility that totals $12 million providing Leucrotta with sufficient credit. With commodity prices continuing to increase, Leucrotta will be able to further reduce debt in 2021.
Leucrotta is working on several initiatives to help accelerate the development of its large Montney resource base in 2021 and we look forward to reporting on further business developments in the near future.
FREQUENTLY RECURRING TERMS
The Company uses the following frequently recurring industry terms in this news release: “bbls” refers to barrels, “mcf” refers to thousand cubic feet, and “boe” refers to barrel of oil equivalent. Disclosure provided herein in respect of a boe may be misleading, particularly if used in isolation. A boe conversion rate of six thousand cubic feet of natural gas to one barrel of oil equivalent has been used for the calculation of boe amounts in this news release. This boe conversion rate is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.
This news release refers to certain financial measures that are not determined in accordance with IFRS (or “GAAP”). This news release contains the terms “adjusted funds flow”, “adjusted funds flow per share”, “operating netback”, “net operating expenses”, and “net transportation and marketing expenses” which do not have any standardized meaning prescribed by GAAP and therefore may not be comparable to similar measures used by other companies. The Company uses these measures to help evaluate its performance.
Management considers adjusted funds flow to be a key measure as it demonstrates the Company’s ability to generate the cash necessary to fund future capital investments and abandonment obligations and to repay debt, if any. Adjusted funds flow is a non-GAAP measure and has been defined by the Company as cash flow from operating activities excluding the change in non-cash working capital related to operating activities and expenditures on decommissioning obligations. The Company also presents adjusted funds flow per share whereby amounts per share are calculated using weighted average shares outstanding, consistent with the calculation of net earnings (loss) per share. Adjusted funds flow is reconciled from cash flow from operating activities under the heading “Cash Flow from Operating Activities and Adjusted Funds Flow” in the Company’s MD&A for the three and nine months ended September 30, 2020, which is available on SEDAR at www.sedar.com.
Management considers operating netback an important measure as it demonstrates its profitability relative to current commodity prices. Operating netback, which is calculated as average unit sales price less royalties, net operating expenses, and net transportation and marketing expenses, represents the cash margin for every barrel of oil equivalent sold. Operating netback per boe is reconciled to net earnings (loss) per boe under the heading “Operating Netback”.
Net operating expenses is calculated as operating expenses less processing revenues. Management uses net operating expenses to determine the current periods’ cash cost of operating expenses less processing revenue and net operating expenses per boe is used to measure operating efficiency on a comparative basis. The measure approximates the Company’s operating expenses relative to its produced volumes by excluding third party operating costs.
Net transportation and marketing expenses is calculated as transportation expenses less marketing revenues. Management uses net transportation and marketing expenses to determine the current periods’ cash cost of transportation expenses less marketing revenue and net transportation and marketing expenses per boe is used to measure transportation efficiency on a comparative basis as well as the Company’s ability to mitigate the cost of excess committed capacity.