Calgary, Alberta – Leucrotta Exploration Inc. (TSXV: LXE) (“Leucrotta” or the “Company”) is pleased to announce its financial and operating results for the three months and year ended December 31, 2020. All dollar figures are Canadian dollars unless otherwise noted.
|Three Months Ended December 31||Year Ended December 31|
|($000s, except per share amounts)||2020||2019||% Change||2020||2019||% Change|
|Oil and natural gas sales||6,515||6,870||(5)||23,586||27,645||(15)|
|Cash flow from operating activities||212||2,098||(90)||1,187||10,465||(89)|
|Per share – basic and diluted||–||0.01||(100)||0.01||0.05||(80)|
|Adjusted funds flow (1)||807||2,316||(65)||1,355||10,266||(87)|
|Per share – basic and diluted||–||0.01||(100)||0.01||0.05||(80)|
|Per share – basic and diluted||0.08||0.03||167||0.55||0.03||1,733|
|Capital expenditures and acquisitions||395||4,160||(91)||13,716||14,997||(9)|
|Proceeds on sale of properties and equipment (2)||–||–||–||8,206||4,767||72|
|Adjusted working capital (deficiency) (1)||(5,807)||125||(4,746)|
|Common shares outstanding (000s)|
|Weighted average – basic and diluted||200,525||200,525||–||200,525||200,525||–|
|End of period – basic||200,525||200,525||–|
|End of period – fully diluted||214,132||226,646||(6)|
(1) See “Non-GAAP Measures” section.
(2) The sale of equipment for proceeds of $4.8 million in 2019 is exclusive of $2.7 million deposit received in Q4 2018.
|OPERATING RESULTS (1)||Three Months Ended December 31||Year Ended December 31|
|2020||2019||% Change||2020||2019||% Change|
|Oil and NGLs (bbls/d)||645||765||(16)||856||820||4|
|Natural gas (mcf/d)||13,508||12,392||9||13,903||13,347||4|
|Oil equivalent (boe/d)||2,897||2,830||2||3,173||3,044||4|
|Oil and NGLs ($/bbl)||43.06||51.26||(16)||33.94||51.80||(34)|
|Natural gas ($/mcf)||3.18||2.86||11||2.55||2.49||2|
|Oil equivalent ($/boe)||24.44||26.39||(7)||20.31||24.88||(18)|
|Oil and NGLs ($/bbl)||3.09||–||100||1.79||–||100|
|Natural gas ($/mcf)||0.10||–||100||0.06||–||100|
|Oil equivalent ($/boe)||1.14||–||100||0.75||–||100|
|Net operating expenses (2)|
|Oil and NGLs ($/bbl)||10.46||8.43||24||9.98||8.34||20|
|Natural gas ($/mcf)||1.06||0.80||33||1.01||0.85||19|
|Oil equivalent ($/boe)||7.29||5.77||26||7.10||5.95||19|
|Net transportation and marketing expenses (2)|
|Oil and NGLs ($/bbl)||0.37||1.35||(73)||0.75||1.34||(44)|
|Natural gas ($/mcf)||1.37||1.46||(6||1.51||1.11||36|
|Oil equivalent ($/boe)||6.45||6.74||(4)||6.83||5.25||30|
|Operating netback (2)|
|Oil and NGLs ($/bbl)||29.14||41.48||(30)||21.42||42.12||(49|
|Natural gas ($/mcf)||0.65||0.60||8||(0.03)||0.53||(106|
|Oil equivalent ($/boe)||9.56||13.88||(31)||5.63||13.68||(59|
|Depletion and depreciation ($/boe)||(7.41)||(9.65||(23)||(8.50)||(9.56)||(11)|
|Asset impairment ($/boe)||(50.66)||(22.41)||126||(87.31)||(5.25)||1,563|
|General and administrative expenses ($/boe)||(4.36)||(4.76)||(8)||(3.90)||(4.30)||(9|
|Share based compensation ($/boe)||(1.33)||(0.20)||565||(0.54)||(0.51)||6|
|Gain on sale of assets ($/boe)||–||–||–||1.30||1.30||–|
|Loss on onerous contract ($/boe)||(7.88||–||100||(1.81)||–||100|
|Finance expense ($/boe)||(1.14)||(0.47)||143||(0.46)||(0.36)||28|
|Finance income ($/boe)||–||0.04||(100)||–||0.03||(100)|
|Unrealized gain on risk management
|Net loss ($/boe)||(62.67)||(23.57)||166||(95.46)||(4.97)||1,821|
(1) See “Frequently Recurring Terms” section.
(2) See “Non-GAAP Measures” section.
Selected financial and operational information outlined in this news release should be read in conjunction with Leucrotta’s audited financial statements and related Management’s Discussion and Analysis (“MD&A”) for the year ended December 31, 2020, which are available for review under the Company’s profile on The System for Electronic Document Analysis and Retrieval (“SEDAR”) at www.sedar.com.
Subsequent to December 31, 2020, the Company disposed of natural gas assets located in Doe, BC for gross proceeds of $30.0 million. The disposed assets were comprised of 10.25 sections of non-strategic land with three wells producing approximately 375 boe/d and one shut-in well. The disposition closed April 1, 2021.
In conjunction with the disposition, the Company’s demand loan facility of $8.0 million was reduced to $2.0 million and the covenant to enter into and maintain forward commodity price contracts was removed from the credit facility. The demand letter of credit facility was unchanged and remains at $4.0 million.
On March 31, 2021, the Company closed a bought-deal public financing through a syndicate of underwriters. The Company issued 45.2 million units of the Company (“Units”) at a price of $0.73 per Unit for gross proceeds of $33.0 million. A Unit is comprised of one common share of the Company and 0.5 common share purchase warrants. Each whole common share purchase warrant entitles the holder to purchase one common share at an exercise price of $1.00 per common share expiring on March 31, 2023.
The Company has received an extension from the TSX Venture Exchange to complete it’s previously announced non-brokered private placement of up to 2.0 million flow-through units of the Company (the “Private Placement”). The Private Placement closing date has been extended from April 29, 2021 to May 28, 2021. Full details of the Private Placement can be found in the Company’s news release dated March 15, 2021, available under the Company’s profile on SEDAR at www.sedar.com.
We are very pleased with the recent events of 2021 that have allowed us to initiate the Mica Project. (1) After years of hard work to capture and delineate the large resource base at Mica, we are finally in a position to develop the resource for the benefit of all shareholders. With the Mica Project expected to ramp up to over 30,000 boe/d (1) within a 5-year timeframe, Leucrotta anticipates having very high production growth rates for several years.
(1) Full details of the Mica Project are more fully described in the Company’s news release dated March 15, 2021 and the (final) short form prospectus of the Company dated March 26, 2021, both available under the Company’s profile on SEDAR at www.sedar.com.
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”, “adjusted working capital (deficiency)”, “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 uses adjusted funds flow to analyze performance and considers it 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 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 year ended December 31, 2020, which is available under the Company’s profile on SEDAR at www.sedar.com.
Management uses adjusted working capital (deficiency) as a measure to assess the Company’s financial position. Working capital (deficiency) includes current assets less current liabilities excluding the effects of any current portion of risk management contracts.
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 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.
The “Mica Project” referenced in this news release is a conceptual development study of Leucrotta’s resources (Prospective and Contingent Resources) of tight oil and shale gas in the Lower Montney formations on 30 net sections (30 gross) of land in the Mica Area. Leucrotta’s average working interest in the lands is 100%. The evaluation is an unrisked full development of the resource with multi-stage frac’ed horizontal wells using best-estimate type curves scheduled over a 5-year time period, effective January 2021. A total of $543 million of capital (undiscounted) is required for the project with an initial cash outlay of $112 million before payout is anticipated (5.5 years). The assumed commodity price is a flat WTI USD$50.00/bbl; AECO CAD$2.25/GJ; FX 1.28 CAD/USD forecast. There is no assurance that the forecast price and cost assumptions used in the evaluation will be attained and variances could be material. The actual scope of the project will be dependent upon the availability of funding, regulatory approvals, seasonal restrictions, oil and natural gas prices, costs, actual drilling results, additional reservoir information that is obtained, and other factors. There is uncertainty that it will be commercially viable to produce any portion of the resources. For the prospective resources there is no certainty that any portion of the resources will be discovered and if discovered, there is no certainty that it will be commercially viable to produce any of those resources. The evaluation is an internal estimate prepared in accordance with the COGE handbook by a qualified reserves evaluator.