Arcan Resources Ltd. (TSX VENTURE:ARN) ("Arcan" or the "Corporation") reports
that production and reserves remained stable. The third quarter financial
metrics illustrate Arcan's progress towards bringing capital spending within
cash flow while delivering consistent results. Arcan expects to achieve its 2013
production target of 3,800 to 4,000 barrels of oil equivalent ("BOE") per day
and capital spending of $40.8 million, which is in line with its guidance.
"We're successfully demonstrating cost controls, while optimizing our
development and production," said Chief Executive Officer Terry McCoy. "This is
evident in our latest production and reserves figures, which have remained
stable over the last year despite a dramatic reduction in our capital spending.
We also continue to focus on reducing expenses and capital while realizing
production efficiencies towards an end goal of strengthening our balance sheet.
To that end we continue to review alternatives, such as monetizing assets,
further joint ventures, farm-outs or other arrangements, that would enhance its
valuation and financial flexibility while accelerating development of its
multi-year inventory of low-risk drilling opportunities."
Arcan has received an updated mid-year independent reserves evaluation showing
that its reserves are largely unchanged from the 2012 year-end reserves report.
This updated reserves report was prepared with an effective date of July 1, 2013
and was supplied to Arcan's banking syndicate, which reviewed the information
and confirmed the Corporation's existing borrowing base at $190 million.
FINANCIAL HIGHLIGHTS
Three Months Ended Nine Months Ended
--------------------------------------------------------
September 30, September 30, September 30, September 30,
2013 2012 2013 2012
--------------------------------------------------------
Financials ($000s
except per share
amounts)
Petroleum and
natural gas revenue 33,317 29,111 97,024 104,705
Pumping and
stimulation
services revenue 420 447 2,186 4,532
Cash flow from
operating
activities 8,655 5,432 32,711 38,934
Funds from
operations (1) 10,009 (1,589) 32,490 31,421
Per share basic
and diluted(1)(3) 0.10 (0.02) 0.33 0.32
Net income (loss) (4,622) (27,480) (6,530) (21,797)
Per share basic
and diluted (3) (0.05) (0.28) (0.07) (0.22)
Capital
expenditures, net -
cash 5,039 12,398 30,423 164,828
Total assets 612,031 640,443 612,031 640,443
Total liabilities 368,599 367,012 368,599 367,012
Debenture face value 171,250 171,250 171,250 171,250
Shareholders' equity 243,432 273,431 243,432 273,431
Bank loan 164,408 164,504 164,408 164,504
Net debt and working
capital (1) 318,053 290,178 318,053 290,178
----------------------------------------------------------------------------
Operating
Production:
Crude oil and NGLs
(barrels ("bbls")
per day) 3,616 3,861 3,898 4,603
Natural gas
(thousand cubic
feet ("Mcf") per
day) 662 339 393 460
--------------------------------------------------------
BOE per day (6:1)
(2) 3,726 3,917 3,964 4,679
Average realized
price:
Crude oil and NGLs
($ per bbl) 99.70 81.71 90.89 82.76
Natural gas ($ per
Mcf) 2.41 2.86 2.80 2.65
--------------------------------------------------------
Combined price per
BOE ($ per BOE) 97.17 80.78 89.66 81.66
----------------------------------------------------------------------------
Netback ($ per
BOE)(1)
Petroleum and
natural gas sales 97.17 80.78 89.66 81.66
Pumping and
stimulation
services revenue 1.23 1.24 2.02 3.53
Royalties (18.60) (14.94) (16.53) (12.47)
Production and
operating expenses (18.87) (24.00) (17.62) (20.32)
Cost of sales for
pumping and
stimulation
services (3.27) (5.01) (4.77) (4.34)
--------------------------------------------------------
Consolidated
operating netback
($ per BOE) (1) 57.66 38.07 52.76 48.06
Realized economic
hedging gains
(losses) - cash (6.21) 1.27 (1.14) (0.39)
Cash general and
administrative
expenses ("Cash
G&A") (8.44) (8.88) (7.21) (7.61)
Other - - - -
Finance expenses -
cash (13.06) (11.46) (12.31) (8.41)
--------------------------------------------------------
Corporate netback(1) 29.95 19.00 32.10 31.65
----------------------------------------------------------------------------
Common Shares
(000's)
Shares outstanding 97,860 97,860 97,860 97,860
Weighted average -
basic 97,860 97,859 97,860 97,818
Weighted average -
diluted 97,860 97,859 97,860 97,818
Notes:
(1) The reader is referred to the section "Non-IFRS Measurements".
(2) The reader is referred to the section "Legal Advisories".
(3) Basic and diluted weighted average shares are the same as the effect of
stock options and debentures were anti-dilutive.
-- Net capital expenditures were within funds from operations in the third
quarter of 2013 and for the first nine months of 2013. Arcan has
maintained relatively flat production through the past five quarters
despite reducing it's a capital spending program to operate within funds
from operations.
-- Funds from operations increased by three percent to $32.5 million for
the nine months ended September 30, 2013, up from $31.4 million for the
nine months ended September 30, 2012 despite significantly lower capital
expenditures. For the third quarter of 2013, funds from operations were
$10.0 million compared to $12.8 million during the second quarter of
2013 and up from negative funds from operations of $1.6 million in the
third quarter of the 2012.
-- Reduced net capital expenditures by 82 percent to $30.4 million for the
nine months ended September 30, 2013, down from $164.8 million for the
nine months ended September 30, 2012. For the third quarter of 2013, net
capital expenditures were $5.0 million which was comprised of the
drilling of 2 wells (1.5 net). This compares to $8.3 million in the
second quarter of 2013 and $12.4 million of net capital expenditures
during the third quarter of 2012.
-- Cash G&A expenses decreased by 20 percent to $7.8 million for the nine
months ended September 30, 2013, down from $9.8 million for the nine
months ended September 30, 2012. For the third quarter of 2013, Cash G&A
expenses were $2.9 million including one-time costs associated with
closing down StimSol Canada Inc.'s pumping and stimulation division.
This compares to $2.8 million in the second quarter of 2013 and $3.2
million incurred in the third quarter of 2012.
-- Arcan's draw on its bank line has remained consistent from the second
quarter of 2013 and also consistent with September 30, 2012. Arcan has
drawn $164.4 million on its credit facility of $190.0 million as at the
end of the third quarter of 2013. Arcan intends to fund future
expenditures from cash flow and focus on debt reduction through the
remainder of 2013 and into 2014.
-- Arcan continued to build on its hedging program in the quarter to add
security to its product pricing over the next three years.
OPERATIONAL HIGHLIGHTS
-- Production averaged 3,964 BOE per day for the nine months ended
September 30, 2013, and was 3,726 BOE per day during the third quarter
of 2013. This compares to 4,679 BOE per day for the nine months ended
September 30, 2012, and 3,917 BOE per day during the third quarter of
2012. The year over year reduction reflects initial well rates, which
have since moderated, from the large capital program during early 2012
and included production from assets that were subsequently sold. Third
quarter 2013 production dipped slightly after being impacted by a third
party oil pipeline failure in July, as well as normal and expected
seasonal factors. Third party facility issues resulted in significant
production shut-ins during early October with a few additional days
anticipated at the end of November, which are expected to impact the
fourth quarter of 2013. In spite of external facility and pipeline
issues, Arcan estimates it is on track to reach its annual average
production target of 3,800 and 4,000 BOE per day.
-- Reduced production and operating expenses by thirteen percent to $17.62
per BOE for the nine months ended September 30, 2013, down from $20.32
per BOE for the nine months ended September 30, 2012. For the third
quarter of 2013 production and operating expenses were $18.87 per BOE,
well below the same seasonal quarter of 2012 where production and
operating expenses were $24.00 per BOE. The cause for the reductions is
ongoing operating efficiencies being implemented in the field. Costs
were up modestly from the second quarter of 2013, where they were $16.56
per BOE, mainly due to the effects of seasonality.
-- Continued waterflood response in Deer Mountain Unit #2 demonstrating a
flat production profile from August 2012 through the third quarter of
2013 with no drilling activity. The waterflood in Ethel was expanded in
the second quarter of 2012 to include two new patterns and these
patterns are exhibiting positive early results.
-- Drilling costs continue to decline following the careful and disciplined
review of drilling and completions operations earlier in 2013. Arcan
continues to implement improvements to various aspects of its field
operations with the goal of drilling and completing wells at costs
between $4.5 million to $5.0 million.
-- The Ethel pipeline corridor is being finalized with the natural gas
sales and emulsion pipelines operational and the connection of the oil
sales pipeline expected in 2014.
-- Completed the drilling of two (1.5 net) budgeted wells in the quarter.
The first well was 100% Arcan and the second well was the last farm-out
option well where Arcan pays 20 percent of the costs to retain a 48
percent ownership.
-- Upcoming drilling activities include one well scheduled for December
2013 and an additional three to five wells planned for drilling in the
first quarter of 2014. The wells will target priority locations
throughout Arcan's land base and will be drilled using funds from
existing cash flow.
FINANCIAL STATEMENTS AND MANAGEMENT'S DISCUSSION AND ANALYSIS:
Arcan has filed its unaudited condensed interim consolidated financial
statements and the accompanying management's discussion and analysis for the
three and nine-month periods ended September 30, 2013, with the Canadian
securities regulatory authorities. These filings are available for review at
www.sedar.com or www.arcanres.com.
About Arcan Resources Ltd.
Arcan Resources Ltd. is an Alberta, Canada corporation that is principally
engaged in the exploration and development of light oil resources located in the
Western Canadian Sedimentary Basin.
Legal Advisories
BOEs may be misleading, particularly if used in isolation. The calculation of
BOEs is based on a conversion ratio of six Mcf of natural gas to one bbl of oil
based on an energy equivalency conversion primarily applicable at the burner tip
and does not represent a value equivalency at the wellhead. In addition, given
that the value ratio based on the current price of oil as compared to natural
gas is significantly different from six to one, utilizing a BOE conversion ratio
of six Mcf to one bbl would be misleading as an indication of value.
Additional information about the Corporation, including the Corporation's AIF
for the year ended December 31, 2012, is available under Arcan's profile on
SEDAR at www.sedar.com.
Non-IFRS Measurements
Arcan's financial statements have been prepared in accordance with IFRS.
Readers are cautioned that this news release contains the term "funds from
operations", which should not be considered an alternative to, or more
meaningful than, "cash provided by operating activities" or "net earnings" as
determined in accordance with IFRS as an indicator of Arcan's performance. Arcan
also presents "funds from operations per share", whereby funds from operations
are divided by the basic and diluted weighted average number of common shares of
Arcan (each, a "share") outstanding to determine per share amounts. Arcan also
presents "net debt and working capital" which should not be considered an
alternative to, or more meaningful than, "current liabilities" or "working
capital". Net debt and working capital is calculated by subtracting the current
liabilities (excluding bank debt), bank debt, and convertible debentures from
its current assets.
Operating netbacks are presented on an operating segment and consolidated basis.
"Operating netbacks" for the exploration and production segment, or "exploration
and production netbacks", represent Arcan's petroleum and natural gas revenue,
less royalties and production and operating expenses. "Operating netbacks" for
the pumping and stimulation segment, or "pumping and stimulation operating
netbacks", represent pumping and stimulation services revenue, less cost of
sales for pumping and stimulation services. "Consolidated operating netbacks"
represent the sum of the operating netbacks for the exploration and production
and pumping and stimulation segments. "Corporate netbacks" represent Arcan's
consolidated operating netback, plus other revenue, plus or minus realized
economic hedging gains or losses, less Cash G&A and cash interest expenses in
order to determine the amount of funds generated by production. Operating and
corporate netbacks have been presented on a per BOE basis, as well.
The measures referenced above do not have any standardized meaning prescribed by
IFRS and therefore may not be comparable to similar measures presented by other
companies. Management believes that funds from operations, net debt and working
capital and both operating and corporate netbacks are useful supplemental
measures as they indicate Arcan's ability to fund future growth through capital
investment and/or to repay debt. These measures have been described and
presented in this news release in order to provide shareholders and potential
investors with additional information regarding Arcan's liquidity and its
ability to generate funds to finance its operations. Please see the section
"Financial Highlights" for reconciliations between both operating netbacks and
corporate netbacks to revenue.
Arcan determines funds from operations as cash flow from operating activities
before changes in non-cash working capital as follows:
----------------------------------------------------------------------------
Funds from Operations
----------------------------------------------------------------------------
Three Months Ended Nine Months Ended
----------------------------------------------------------------------------
September 30, September 30, September 30, September 30,
($000s) 2013 2012 2013 2012
----------------------------------------------------------------------------
Cash flow from
operating
activities (per
IFRS) 8,655 5,432 32,771 38,934
----------------------------------------------------------------------------
Change in non-cash
working capital and
RSU's 1,354 (7,021) (281) (7,513)
----------------------------------------------------------------------------
Funds from
operations 10,009 (1,589) 32,490 31,421
----------------------------------------------------------------------------
Arcan determines net debt and working capital as follows:
----------------------------------------------------------------------------
Net debt and working capital
----------------------------------------------------------------------------
As At
----------------------------------------------------------------------------
September 30, September 30,
($000s) 2013 2012
----------------------------------------------------------------------------
Current assets 20,341 46,823
----------------------------------------------------------------------------
Current liabilities (excluding bank debt and
convertible debentures) 25,678 29,751
----------------------------------------------------------------------------
Bank loan 164,408 164,504
----------------------------------------------------------------------------
Debentures 148,308 142,746
----------------------------------------------------------------------------
Net debt and working capital (318,053) (290,178)
----------------------------------------------------------------------------
Forward-Looking Information and Statements
This news release contains certain forward-looking information and statements
within the meaning of applicable securities laws. The use of any of the words
''expect'', ''anticipate'', ''continue'', "considering", "would", ''estimate'',
''guidance'', ''objective'', ''ongoing'', ''may'', ''will'', ''project'',
''should'', ''believe'', ''plans'', ''intends'', "possible" and similar
expressions are intended to identify forward-looking information or statements.
In particular, but without limiting the foregoing, this news release contains
forward-looking information and statements pertaining to, among other things,
the following: anticipated commodity prices for both oil and natural gas; the
potential of significant asset divestitures, including a sale of the core Deer
Mountain Unit #2 asset; the ability of Arcan to pay down debt and retain
financial flexibility; the timing, method and results of drilling and waterflood
operations; anticipated production volumes; impact of and estimated waterflood
recoveries; ability of Arcan to spend capital below operating cash flow during
the balance of 2013 and on a going-forward basis; future revenues; future
liquidity and financial capacity and resources including the availability of
such resources; the impact of third party facility issues on production; Arcan's
expected cash flows; results of operations and financial ratios; the impact of
asset sales on production; the finalization of the Ethel pipeline corridor and
the timing thereof; the volume and product mix of Arcan's oil and gas
production; matters relating to the joint venture agreement; Arcan's risk
management programs; Arcan's 2013 capital program including the costs associated
therewith; Arcan's pursuit and examination of asset divestments, joint ventures,
farm-outs and other similar arrangements, as well as sales of non-core assets;
expectations respecting the financing and completion of Arcan's capital program;
the expected benefits of continued infrastructure development; and the expected
benefits of Arcan's hedging program.
The forward-looking information and statements contained in this news release
reflect several material factors and expectations and assumptions of Arcan
including, without limitation: that Arcan will continue to conduct its
operations in a manner consistent with past operations; new well completions;
the accuracy of current horizontal production data, historical well production
and waterflood results; the general continuance of current or, where applicable,
assumed industry conditions; continuity of reservoir conditions across Arcan's
land base; availability of sources to fund Arcan's capital and operating
requirements as needed; the continuance of existing and, in certain
circumstances, proposed tax and royalty regimes; expectations respecting Arcan's
reserves generally; the continuance of laws and regulations relating to
environmental matters; ability to retain key employees and executives;
assumptions relating to the cost of future wells; the ability of Arcan to
operate a capital expenditure program that is less than funds from operations;
and certain commodity price and other cost assumptions.
Arcan believes the material factors, expectations and assumptions reflected in
the forward-looking information and statements are reasonable at this time but
no assurance can be given that these factors, expectations and assumptions will
prove to be correct. The forward-looking information and statements included in
this news release are not guarantees of future performance and should not be
unduly relied upon. Such information and 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 information
or statements including, without limitation: changes in commodity prices;
unanticipated operating results or production declines; for reasons currently
unforeseen, the current drilling locations identified by Arcan may prove to be
unsuitable or unavailable and drilling on the locations identified may not
occur; third party pipeline issues may adversely impact Arcan in a manner or
magnitude which is currently unanticipated; changes in tax or environmental laws
or royalty rates; increased debt levels or debt service requirements; reductions
to the amounts available under Arcan's credit facility as well as amendments
thereto that are unfavourable to Arcan; inaccurate estimation of Arcan's oil and
gas reserves volumes; limited, unfavourable or no access to debt or equity
capital markets; increased costs and expenses; the impact of competitors;
reliance on industry partners; circumstances may arise, including changes in
accounting policies, regulations or economic conditions, which could change the
assumptions, estimates or expectations or the information provided; shareholder
value may not be maximized in the manner suggested by Arcan or at all; there may
be circumstances where, for unforeseen reasons, a reallocation of funds may be
necessary as may be determined at the discretion of Arcan and there can be no
assurance as at the date of this news release as to how those funds may be
reallocated; should any one of a number of issues arise, Arcan may find it
necessary to alter its current business strategy and/or capital expenditure
program; and certain other risks detailed from time to time in Arcan's public
disclosure documents including, without limitation, those risks identified in
this news release, and in Arcan's annual information form for the year ended
December 31, 2012, copies of which are available on Arcan's SEDAR profile at
www.sedar.com.
The forward-looking information and statements contained in this news release
speak only as of the date of this news release, and Arcan does not assume any
obligation to publicly update or revise them to reflect new events or
circumstances, except as may be required pursuant to applicable laws.
Neither 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:
Arcan Resources Ltd.
Terry McCoy
Chief Executive Officer
(403) 262-0321
tmccoy@arcanres.com
Arcan Resources Ltd.
Douglas Penner
President
(403) 262-0321
dpenner@arcanres.com
www.arcanres.com
Grafico Azioni (TSXV:ARN)
Storico
Da Apr 2024 a Mag 2024
Grafico Azioni (TSXV:ARN)
Storico
Da Mag 2023 a Mag 2024
