CALGARY, ALBERTA–(Marketwired – March 8, 2016) – Arsenal Energy Inc. (“Arsenal” or the “Company”) (TSX:AEI)(OTCQX:AEYIF) is pleased to release its 2015 financial and operational results.
Financial:
SUMMARY OF FINANCIAL RESULTS | |||||||||
Three Months Ended December 31 |
Year Ended December 31 |
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(000s Cdn. $ except per share amounts) | 2015 | 2014 | 2015 | 2014 | |||||
FINANCIAL | |||||||||
Oil and gas revenue | 11,528 | 25,283 | 55,082 | 117,114 | |||||
Funds from operations | 2,531 | 16,906 | 30,354 | 54,563 | |||||
Per share – basic | 0.13 | 0.98 | 1.63 | 3.29 | |||||
Per share – diluted | 0.13 | 0.95 | 1.62 | 3.22 | |||||
Cash and stock dividends paid | 388 | 1,186 | 1,688 | 4,378 | |||||
Per share | 0.020 | 0.070 | 0.090 | 0.265 | |||||
Net income (loss) | (26,499 | ) | 15,367 | (43,980 | ) | 25,641 | |||
Per share – basic | (1.37 | ) | 0.89 | (2.37 | ) | 1.55 | |||
Per share – diluted | (1.37 | ) | 0.81 | (2.37 | ) | 1.54 | |||
Total debt | 53,816 | 65,198 | 53,816 | 65,198 | |||||
Capital expenditures | 2,699 | 9,025 | 20,302 | 53,534 | |||||
Property acquisitions | – | – | – | 152 | |||||
Property dispositions | (26 | ) | (100 | ) | (1,882 | ) | (100 | ) | |
Common Share Trading Range | |||||||||
High | 1.94 | 9.25 | 6.72 | 9.80 | |||||
Low | 1.05 | 5.25 | 1.05 | 4.52 | |||||
Close | 1.22 | 6.77 | 1.22 | 6.77 | |||||
Average daily volume | 24,193 | 24,524 | 22,420 | 25,091 | |||||
Shares outstanding – end of period | 19,423 | 17,877 | 19,423 | 17,877 |
Full financial details are contained in the financial statements and MD&A filed on SEDAR and on the Company’s website.
Cashflow from operations for Q4 2015 totaled $2.5 million or $0.13 per share basic and diluted versus $16.9 million or $0.98 per share basic and $0.95 per share diluted for Q4 2014. The decrease in cash flow is attributable to a 35% drop in the revenue per boe and from lower production volumes. For 2015, cash flow totaled $30.4 million $1.63 per share basic and $1.62 per share diluted versus $54.6 million or $3.29 per share basic and $3.22 per share diluted in 2014. Lower production, lower prices and hedging gains accounted for the decrease in 2015 from 2014.
The loss recorded for 2015 was $44.0 million or $2.37 per share basic and diluted versus income of $25.6 million or $1.55 per share basic and $1.54 per share diluted. Lower operating margin resulting from lower production and commodity prices and property impairments significantly contributed to the loss in 2015.
Operations:
SUMMARY OF OPERATIONAL RESULTS | ||||||||
Three Months Ended December 31 |
Year Ended December 31 |
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(000s Cdn. $ except per share amounts) | 2015 | 2014 | 2015 | 2014 | ||||
OPERATIONAL | ||||||||
Daily production | ||||||||
Heavy oil (bbl/d) | 4 | 49 | 19 | 45 | ||||
Medium oil and NGLs (bbl/d) | 1,617 | 2,000 | 1,662 | 1,890 | ||||
Light oil and NGLs (bbl/d) | 1,095 | 1,651 | 1,218 | 1,549 | ||||
Natural gas (mcf/d) | 3,731 | 6,247 | 4,856 | 6,098 | ||||
Oil equivalent (boe/d @ 6:1) | 3,338 | 4,742 | 3,707 | 4,500 | ||||
Realized commodity prices ($Cdn.) | ||||||||
Heavy oil (bbl) | 16.54 | 75.01 | 42.48 | 79.58 | ||||
Medium oil and NGLs (bbl) | 40.42 | 66.18 | 46.18 | 81.40 | ||||
Light oil and NGLs (bbl) | 48.02 | 70.94 | 51.28 | 88.15 | ||||
Natural gas (mcf) | 1.96 | 3.46 | 2.25 | 4.41 | ||||
Oil equivalent (boe @ 6:1) | 37.54 | 57.96 | 40.70 | 71.30 | ||||
Netback ($ per boe) | ||||||||
Revenue | 37.54 | 57.96 | 40.70 | 71.30 | ||||
Royalty | (7.44 | ) | (12.19 | ) | (8.50 | ) | (15.41 | ) |
Operating and transportation | (17.73 | ) | (17.58 | ) | (16.18 | ) | (18.73 | ) |
Operating netback per boe | 12.36 | 28.18 | 16.03 | 37.16 | ||||
General and administrative | (2.85 | ) | (1.59 | ) | (3.03 | ) | (2.45 | ) |
Cash portion of share based compensation | – | – | (0.09 | ) | – | |||
Interest and other financing | (1.82 | ) | (1.56 | ) | (1.60 | ) | (1.69 | ) |
Realized gain (loss) on risk management contracts | (0.25 | ) | 14.62 | 10.96 | 0.75 | |||
Other (FX and current tax) | 0.80 | (0.90 | ) | 0.16 | (0.54 | ) | ||
Fund from operations per Boe | 8.24 | 38.75 | 22.43 | 33.22 |
Average production of 3,338 boe/d during the fourth quarter was 30% lower when compared to the fourth quarter of 2014. The drop is due to uneconomic wells being shut-in and normal production declines in the absence of new well production coming on-stream. Production for 2015 averaged 3,707 boe/d versus 4,500 boe/d in 2014. Property sales, uneconomic wells being shut-in, well declines and limited production adds contributed to lower production in 2015.
During Q1, 2015 Arsenal participated in new drill operations on 6 gross (0.89 net) Bakken/ThreeForks horizontal wells in Lindahl, North Dakota. All of the wells were originally scheduled to be on production in August of last year. The operator has delayed startup until March of 2016.
During the fourth quarter, funded from the issuance of flow through shares, Arsenal drilled five exploratory wells at Princess resulting in two oil wells, two gas wells, and one dry hole. Arsenal has decided to delay tie in operations of the successful wells until prices improve. The drilling successes proved up an additional inventory of drillable locations. Including the wells at Lindahl and Princess, Arsenal estimates that approximately 700 bbls/d of oil production plus additional gas reserves are behind pipe.
Outlook
Subsequent to quarter end, Arsenal reached an agreement to sell its 300 boe/d natural gas property at Desan. The property is cash flow negative and the Company could not envision a scenario under which it could become cash flow positive again. The sale is scheduled to close in mid-March with expected proceeds of approximately $1 million dedicated to reducing debt. The Company will also dispose of approximately $3.1 million of abandonment liabilities in the transaction.
In January, the Company entered into a process to market some or all of its US properties. Those properties currently produce approximately 1,000 boe/d with additional volumes behind pipe awaiting tie in. They are low cost with a long life and are, as expected, attracting industry interest. In addition to the US sale, Arsenal will market its 250 bbl/d light oil property at Evi. The goal of the property sales is to substantially reduce or eliminate the Company’s indebtedness.
The property sales, if and when completed, will reposition the balance sheet and should allow the Company to pursue growth at Princess. Capital efficiencies at Princess are competitive with some of the best plays currently under development in North America. Over the last few years Arsenal has spent considerable capital building a land and seismic base and derisking the play. Costs and risks going forward should be substantially lower.
2016 Budget
The current forecast calls for capital spending during 2016 of approximately $6.5 million. All of the capital in the forecast is allocated to tie ins, drilling and acquisitions at Princess. The Company plans to continue with reductions to operating and overhead costs as it repositions its asset base.
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