Horn Petroleum Corporation (TSX VENTURE:HRN) ("Horn" or the "Company") is
pleased to announce its financial and operating results for the three and nine
months ended September 30, 2013.
-- During the nine months ended September 30, 2013, Horn increased its
investment in intangible exploration assets by $1.9 million. The
majority of the costs incurred during the first nine months of 2013
related to Production Sharing Agreement ("PSA") related expenditures and
general and administrative costs.
-- Efforts are currently focused on making preparations for a seismic
acquisition campaign in the Dharoor Valley area which will include a
regional seismic reconnaissance grid in the previously unexplored
eastern portion of the basin as well as prospect specific seismic to
delineate a drilling candidate in the western portion of the basin where
an active petroleum system was confirmed by the most recent drilling at
the Shabeel-1 and Shabeel North-1 well locations. The Company continues
to pursue efforts to drill an exploration well in the Nugaal Valley
block and is working with the Puntland government to move this project
forward.
-- Horn continues to actively pursue new venture opportunities.
-- Horn continues to investigate potential joint venture partnerships for
its Dharoor Valley and Nugaal Valley exploration areas.
-- As at September 30, 2013, the Company had cash of $4.5 million and
working capital of $4.5 million as compared to cash of $9.5 million and
working capital of $4.4 million at December 31, 2012.
Horn President and CEO, David Grellman, commented, "We remain very encouraged by
the exploration potential of our Jurassic rift basins in Puntland. We have
committed to the next exploration phase in both PSAs and plan to aggressively
explore both areas to confirm this potential. We are also optimistic that the
political progress in Somalia will continue and allow oil and gas exploration in
the region to expand."
Third Quarter 2013 Financial and Operating Highlights
Consolidated Statement of Net Income (Loss) and Comprehensive Income (Loss)
(Thousands of United States Dollars)
---------------------------------------------------------------------------
Three months Three months Nine months Nine months
ended ended ended ended
September 30, September 30, September 30, September 30,
2013 2012 2013 2012
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Operating expenses
Stock-based
compensation $ 128 $ 185 $ 398 $ 553
Management fees 215 225 660 674
Office and
general 62 72 158 162
Professional fees 48 18 90 101
Stock exchange
and filing fees 4 13 47 63
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457 513 1,353 1,553
Finance expense - - 40 -
Finance income (281) (23,049) (4,107) (8,978)
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Net income (loss)
and comprehensive
income (loss)
attributable to
common
shareholders (176) 22,536 2,714 7,425
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Net income (loss)
per share
Basic $ 0.00 $ 0.23 $ 0.03 $ 0.09
Diluted $ 0.00 $ 0.23 $ 0.03 $ 0.09
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Weighted average
number of shares
outstanding for
the purpose of
calculating
earnings per share
Basic 96,849,316 97,047,684 96,849,316 84,609,519
Diluted 96,849,316 97,060,483 96,872,691 84,851,947
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Operating expenses decreased $0.1 million and $0.2 million for the three and
nine months ended September 30, 2013, respectively, due mainly to a reduction in
stock-based compensation expense. The reduction in stock-based compensation
expense can be attributed to a reduction in the remaining life of the stock
options.
Financial income and expense for the three and nine months ended September 30,
2013 and 2012 is made up of the following items:
---------------------------------------------------------------------------
Three months Three months Nine months Nine months
ended ended ended ended
September 30, September 30, September 30, September 30,
2013 2012 2013 2012
---------------------------------------------------------------------------
Fair market value
adjustment -
warrants $ (268) $ (22,947) $ (4,098) $ (8,443)
Interest and other
income (2) (15) (9) (61)
Foreign exchange
(gain) loss (11) (87) 40 (474)
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Financial income $ (281) $ (23,049) $ (4,107) $ (8,978)
Financial expense $ - $ - $ 40 $ -
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---------------------------------------------------------------------------
The fair market value of the warrant liability decreased in the first nine
months of 2013 resulting in a gain in the statement of operations as a result of
a decrease in the volatility of the Company's share price combined with a
reduction in the remaining life of the stock options.
The foreign exchange gains and losses are the direct result of changes in the
value of the Canadian dollar in comparison to the US dollar. The Company's cash
holdings are primarily in US and Canadian currency.
Consolidated Balance Sheets
(Thousands United States Dollars)
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September 30, December 31,
2013 2012
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ASSETS
Current assets
Cash and cash equivalents $ 4,475 $ 9,545
Accounts receivable 237 596
Prepaid expenses 12 109
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4,724 10,250
Long-term assets
Intangible exploration assets 89,249 87,302
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89,249 87,302
Total assets $ 93,973 $ 97,552
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LIABILITIES AND EQUITY ATTRIBUTABLE TO COMMON
SHAREHOLDERS
Current liabilities
Accounts payable and accrued liabilities $ 109 $ 2,741
Due to related party 39 -
Current portion of warrants 38 3,080
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186 5,821
Long-term liabilities
Warrants - 1,056
---------------------------------------------------------------------------
- 1,056
Total liabilities 186 6,877
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Equity attributable to common shareholders
Share capital 86,494 86,494
Contributed surplus 2,919 2,521
Retained earnings 4,374 1,660
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Total equity attributable to common
shareholders 93,787 90,675
---------------------------------------------------------------------------
Total liabilities and equity attributable to
common shareholders $ 93,973 $ 97,552
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The decrease in total assets from December 31, 2012 to September 30, 2013 is the
result of a decrease in cash and cash equivalents which is due to operating
expenditures and the settlement of accounts payables and accrued liabilities.
The increase in net working capital from December 31, 2012 to September 30, 2013
is mainly due to the $3.0 million decrease in current portion of warrant
liabilities resulting from the revaluation of warrant liability.
Consolidated Statement of Cash Flows
(Thousands United States Dollars)
---------------------------------------------------------------------------
Three months Three months Nine months Nine months
ended ended ended ended
September 30, September 30, September 30, September 30,
2013 2012 2013 2012
---------------------------------------------------------------------------
Cash flows provided
by (used in):
Operations:
Net income (loss)
for the period $ (176) $ 22,536 $ 2,714 $ 7,425
Item not affecting
cash:
Stock-based
compensation 128 185 398 553
Fair market value
adjustment -
warrants (268) (22,947) (4,098) (8,443)
Unrealized
foreign exchange
(gain) loss (11) 38 40 (323)
Changes in non-
cash operating
working capital (15) (43) 44 (78)
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(342) (231) (902) (866)
Investing:
Intangible
exploration
expenditures (243) (8,996) (1,947) (29,986)
Changes in non-
cash investing
working capital (426) (184) (2,220) 639
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(669) (9,180) (4,167) (29,347)
Financing:
Common shares
issued - 175 - 16,948
Advances from
related party 266 219 731 755
Payments to
related party (227) (87) (692) (853)
Repayment of an
advance issued
to a related
party - - - 1,488
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39 307 39 18,338
Effect of exchange
rate changes on
cash and cash
equivalents
denominated in
foreign currency 11 (38) (40) 323
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Increase (decrease)
in cash and cash
equivalents (961) (9,142) (5,070) (11,552)
Cash and cash
equivalents,
beginning of the
period $ 5,436 $ 25,203 $ 9,545 $ 27,613
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Cash and cash
equivalents, end
of the period $ 4,475 $ 16,061 $ 4,475 $ 16,061
---------------------------------------------------------------------------
Supplementary
information:
Interest paid Nil Nil Nil Nil
Income taxes paid Nil Nil Nil Nil
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The decrease in cash in three and nine months ended September 30, 2013 is mainly
the result of intangible exploration expenditures, operating expenses and the
settlement of accounts payable and accrued liabilities.
Consolidated Statement of Equity
(United States Dollars)
---------------------------------------------------------------------------
September 30, September 30,
2013 2012
---------------------------------------------------------------------------
Share capital:
Balance, beginning of period $ 86,494 $ 75,782
Private placement, net of issue costs - 8,941
Exercise of warrants - 1,331
Exercise of options - 440
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Balance, end of period 86,494 86,494
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Contributed surplus:
Balance, beginning of period $ 2,521 $ 646
Exercise of warrants - 1,148
Stock-based compensation 398 553
Exercise of options - (110)
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Balance, end of period 2,919 2,237
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Earnings (deficit):
Balance, beginning of period $ 1,660 $ (1,319)
Net income (loss) for the period 2,714 7,425
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Balance, end of period 4,374 6,106
---------------------------------------------------------------------------
Equity attributable to common shareholders $ 93,787 $ 94,837
---------------------------------------------------------------------------
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The Company's consolidated financial statements, notes to the financial
statements, management's discussion and analysis for the three and nine months
ended September 30, 2013 and the 2012 Annual Information Form have been filed on
SEDAR (www.sedar.com) and are available on the Company's website
(www.hornpetroleum.com).
Outlook
Based on the encouragement provided by the Shabeel wells, the Company and its
partners entered the next exploration period in both the Dharoor Valley and
Nugaal Valley PSAs which carry a commitment to drill one well in each block
within an additional three year term ending October 2015. The current
operational plan is to contract a seismic crew to acquire additional data in the
Dharoor Valley block and to hold discussions with the Puntland Government
regarding drill ready prospects in the Nugaal Valley block. The focus of the
Dharoor Valley block seismic program will be to delineate new structural
prospects for the upcoming drilling campaign.
Horn has been in discussions with potential joint venture partners and also is
reviewing new venture opportunities in the region. Somalia is going through an
unprecedented period in its history with a real opportunity for all stakeholders
to assist in the rebuilding of the country. The first internationally recognized
Federal government took power in 2012 following over 20 years of transitional or
no government. The Company actively engages with a range of governments and
organizations, domestic and international, around how Somalia can best develop a
stable Federal state including the institutions and systems it needs to properly
manage its natural resources.
Horn holds a 60% working interest in the Dharoor and Nugaal Valley blocks and is
the operator. The other partners in the blocks are Range Resources (20%) and Red
Emperor (20%). Africa Oil Corporation holds an approximate 45% equity interest
in Horn.
Horn Petroleum Corporation is a Canadian oil and gas company with assets in
Puntland, Somalia. The Corporation holds a 60% interest and operatorship in the
Dharoor and Nugaal blocks encompassing a Jurassic Rift Basin on trend and
analogous to the large oil fields in Yemen. The Corporation's shares are listed
on the TSX Venture Exchange under the symbol "HRN".
ON BEHALF OF THE BOARD
David Grellman, President and CEO
FORWARD LOOKING INFORMATION
Certain statements made and information contained herein constitute
"forward-looking information" (within the meaning of applicable Canadian
securities legislation). Such statements and information (together, "forward
looking statements") relate to future events or the Company's future
performance, business prospects or opportunities. Forward-looking statements
include, but are not limited to, statements with respect to estimates of
reserves and or resources, future production levels, future capital expenditures
and their allocation to exploration and development activities, future drilling
and other exploration and development activities, ultimate recovery of reserves
or resources and dates by which certain areas will be explored, developed or
reach expected operating capacity, that are based on forecasts of future
results, estimates of amounts not yet determinable and assumptions of
management.
All statements other than statements of historical fact may be forward-looking
statements. Statements concerning proven and probable reserves and resource
estimates may also be deemed to constitute forward-looking statements and
reflect conclusions that are based on certain assumptions that the reserves and
resources can be economically exploited. Any statements that express or involve
discussions with respect to predictions, expectations, beliefs, plans,
projections, objectives, assumptions or future events or performance (often, but
not always, using words or phrases such as "seek", "anticipate", "plan",
"continue", "estimate", "expect, "may", "will", "project", "predict",
"potential", "targeting", "intend", "could", "might", "should", "believe" and
similar expressions) are not statements of historical fact and may be
"forward-looking statements". Forward-looking statements involve known and
unknown risks, uncertainties and other factors that may cause actual results or
events to differ materially from those anticipated in such forward-looking
statements. The Company believes that the expectations reflected in those
forward-looking statements are reasonable, but no assurance can be given that
these expectations will prove to be correct and such forward-looking statements
should not be unduly relied upon. The Company does not intend, and does not
assume any obligation, to update these forward- looking statements, except as
required by applicable laws. These forward-looking statements involve risks and
uncertainties relating to, among other things, changes in oil prices, results of
exploration and development activities, uninsured risks, regulatory changes,
defects in title, availability of materials and equipment, timeliness of
government or other regulatory approvals, actual performance of facilities,
availability of financing on reasonable terms, availability of third party
service providers, equipment and processes relative to specifications and
expectations and unanticipated environmental impacts on operations. Actual
results may differ materially from those expressed or implied by such
forward-looking statements.
ON BEHALF OF THE BOARD
"David Grellman"
President and CEO
Neither the TSX Venture Exchange nor its Regulation Services Provider (as that
term is defined in the policies of the TSX Venture Exchange) accepts
responsibility for the adequacy or accuracy of this release.
FOR FURTHER INFORMATION PLEASE CONTACT:
Horn Petroleum Corporation
Sophia Shane
Corporate Development
(604) 689-7842
(604) 689-4250 (FAX)
hornpetroleum@namdo.com
www.hornpetroleum.com
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