CALGARY, ALBERTA -- (Marketwired) -- 11/06/13 -- Arsenal Energy Inc. ("Arsenal") (TSX: AEI) is pleased to release its Q3 2013 results. Cash flow for the third quarter was a record, $11.7 million, a 17% increase from Q2 2013 and a 50% increase compared to Q3 2012.
The Board of Directors ("BOD") has declared a quarterly dividend of $0.06 per common share. The dividend is payable on November 29, 2013 to shareholders of record at the close of business on November 15, 2013. The ex-dividend date is November 13, 2013.
Financial
Operating netbacks increased to $39.33/boe in Q3 2013 from $27.17/boe in Q3 2012. The higher netbacks are due to higher realized unit prices and slightly lower operating costs. Funds from operations for Q3 2013 were a record, totaling $11.7 million or $0.73 per share basic versus $7.8 million or $0.50 per share basic for Q3 2012. Funds from operations were adversely affected by a $2.0 million or $5.10/boe realized loss from hedges. Unit overhead remained relatively stable at $3.25/boe.
Due to hedging losses of $4.7 million, Arsenal recorded a third quarter net loss of $0.6 million. Debt plus working capital at quarter end was $69.1 million. Based on Q3 2013 cash flow, Arsenal's debt to cash flow ratio has fallen to 1.5/ 1.0.
SUMMARY OF FINANCIAL AND OPERATIONAL RESULTS
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Three Months Ended Nine Months Ended
September 30 September 30
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(ooo'S Cdn. $ except per % %
share amounts) 2013 2012 Change 2013 2012 Change
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FINANCIAL
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Oil and gas revenue 30,177 20,175 50 73,699 59,817 23
Funds from operations 11,695 7,782 50 28,846 21,119 37
Per share - basic 0.73 0.50 46 1.82 1.35 35
Per share - diluted 0.72 0.49 47 1.81 1.33 35
Net income (loss) (627) (1,474) (57) (2,317) 784 (396)
Per share - basic (0.04) (0.09) (59) (0.15) 0.05 (395)
Per share - diluted (0.04) (0.09) (59) (0.15) 0.05 (395)
Total debt 69,147 65,074 6 69,147 65,074 6
Capital expenditures 12,404 13,330 (7) 33,099 31,932 4
Property dispositions (296) (32) 824 (4,230) (1,928) 119
Shares outstanding - end of
period (ooo's) 16,070 15,641 3 16,070 15,641 3
Net wells drilled
Oil 3.00 3.10 7.70 4.98
Gas 1.10 - 1.10 -
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Total net wells drilled 4.10 3.10 8.80 4.98
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SUMMARY OF FINANCIAL AND OPERATIONAL RESULTS
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Three Months Ended Nine Months Ended
September 30 September 30
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(ooo'S Cdn. $ except per % %
share amounts) 2013 2012 Change 2013 2012 Change
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OPERATIONAL
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Daily production
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Heavy oil (bbl/d) 75 81 (7) 68 126 (46)
Medium oil and NGL's (bbl/d) 1,401 1,380 2 1,396 1,433 (3)
Light oil and NGLs (bbl/d) 1,759 1,346 31 1,453 1,132 28
Natural gas (mcf/d) 6,523 5,319 23 6,183 5,768 7
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Oil equivalent (boe/d @ 6:1) 4,323 3,694 17 3,947 3,652 8
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Realized commodity prices
($Cdn.)
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Heavy oil (bbl) 86.26 67.52 28 74.23 70.53 5
Medium oil and NGL's (bbl) 91.74 72.09 27 80.01 75.89 5
Light oil and NGLs (bbl) 99.09 76.00 30 92.60 78.30 18
Natural gas (mcf) 2.86 2.26 26 3.02 2.09 44
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Oil equivalent (boe @ 6:1) 75.88 59.37 28 68.39 59.78 14
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Operating netback ($ per
boe)
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Revenue 75.88 59.37 28 68.39 59.78 14
Royalty (17.15) (11.00) 56 (14.37) (12.62) 14
Operating cost (19.39) (21.20) (9) (19.88) (20.72) (4)
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Operating netback per boe 39.33 27.17 45 34.14 26.44 29
General and administrative (3.25) (3.26) - (3.27) (3.13) 5
Finance expenses (1.57) (1.75) (10) (1.75) (1.69) 3
Realized gains (losses) on
risk management contracts (5.10) 0.70 (827) (2.06) (0.54) 282
Other - 0.04 - (0.28) 0.03
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Fund from operations per Boe 29.41 22.90 28 26.77 21.11 27
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Full financial and operating details are contained in the financial statements and MD&A filed on SEDAR and on the Company's website.
Operations
Production averaged a record 4,323 boe/d during the second quarter, up 17% compared to the third quarter of 2012. Quarterly production levels in 2013 were positively impacted by the addition of the John Paul and Ron Carter horizontal Bakken wells. Both wells were completed with multistage fracks and placed on production in July. Arsenal's Q3 production mix was 75% liquids and 25% natural gas.
Operating costs averaged $19.39/boe during the third quarter. This is a 9% drop compared to Q3 2012 and a continuation of a long term trend of declining operating costs as low operating cost Bakken production increases.
During the third quarter Arsenal drilled 2 oil wells at Princess (2 net), one gas well at Princess (0.6 net), one oil well at Chauvin (1 net), and one gas well (0.5 net) in the deep basin. It is anticipated that all of the new wells will be tied in and placed on production in the fourth quarter.
Dividend
The Board of Directors has declared a quarterly dividend of $0.06 per common share. The dividend is payable on November 29, 2013 to shareholders of record at the close of business on November 15, 2013. The ex-dividend date is November 13, 2013. The policy of the Board is to target a dividend level at 10% of cash flow, adjusted based on forecasts
for cash flows, capital requirements, and other factors as the Board of Directors may consider appropriate from time to time.
Outlook
For the fourth quarter Arsenal plans to drill two wells at Princess and tie in all of the third quarter drills. Capex for the quarter is forecast at $6.2 million. Average volumes for the quarter, are expected to be slightly below Q3 but exit volumes should be in accordance with previous guidance of approximately 4,400 boe/d.
Oil prices began trending lower in September and differentials have widened significantly. Cash flow is forecasted for Q4 at approximately $10 million.
Advisory
All barrels of oil equivalent (boe) conversions in this report are deprived by converting natural gas to oil at the ratio of six thousand cubic feet (Mcf) of natural gas to one barrel (bbl) of oil. Certain financial values are presented on a boe basis and such measurements may not be consistent with those used by other companies. Boe amounts may be misleading, particularly if used in isolation. A boe conversion ratio has been calculated using a conversion rate of six thousand cubic feet of natural gas to one barrel of oil (6 Mcf: 1 bbl) and is based on an energy equivalency conversion method applicable at the burner tip and does not represent a value equivalency at the wellhead.
Certain financial measures referred to in this release, such as funds from operations and funds from operations per share, are not prescribed by generally accepted accounting principles (GAAP). Funds from operations are a key measure that demonstrates the ability to generate cash to fund expenditures. Funds from operations is calculated by taking the cash provided by operations from the consolidated statement of cash flows and adding back changes in non-cash working capital. Funds from operations per share are calculated using the same methodology for determining net income per share. These non-GAAP financial measures may not be comparable to similar measures presented by other companies. These financial measures are not intended to represent operating profits for the period nor should they be viewed as an alternative to cash provided by operating activities, net income or other measures of financial performance calculated in accordance with GAAP.
Management uses certain industry benchmarks such as field netback to analyze financial and operating performance. Field netback has been calculated by taking oil and gas revenue less royalties, operating costs and transportation costs. This benchmark does not have a standardized meaning prescribed by GAAP and may not be comparable to similar measures presented by other companies. Management considers field netback as an important measure to demonstrate profitability relative to commodity prices.
There is no assurance that future dividends will be declared or the timing or amount of any future dividend. The payments of dividends or distributions in the future are within the discretion of the Corporation's Board of Directors and are dependent on numerous factors including the Corporation's cash flow, capital expenditure budgets, earning, financial conditions, the satisfaction of the applicable solvency test in the Corporation's governing statue (the Business Corporation Act (Alberta)), and such other factors as the Board of Directors may consider appropriate from time to time. The Corporation's ability to continue to pay dividends in the future is also subject to many other factors including falling commodity prices, repatriation restrictions, disruptions or reductions in production or collection of receivables following sales of production. Dividend payments to shareholders will be subject to applicable statutory deductions and tax withholdings prescribed by the applicable law. There is also no assurance that future drawdowns of the secured term loan facility will be available to the Corporation when requested or at all.
Certain statements and information contained in this press release, including but not limited to management's assessment of Arsenal's future plans and operations, production, reserves, revenue, commodity prices, operating and administrative expenditures, funds from operations, capital expenditure programs and debt levels contain forward- looking statements. All statements other than statements of historical fact may be forward looking statements. These statements, by their nature, are subject to numerous risks and uncertainties, some of which are beyond Arsenal's control including the effect of general economic conditions, industry conditions, changes in regulatory and taxation regimes, volatility of commodity prices, escalation of operating and capital costs, currency fluctuations, the availability of services, imprecision of reserve estimates, geological, technical, drilling an processing problems, environmental risks, weather, the lack of availability of qualified personnel or management, stock market volatility, the ability to access sufficient capital from internal and external sources and competition from other industry participants for, among other things, capital, services, acquisitions of reserves, undeveloped lands and skilled personnel that may cause actual results or events to differ materially from those anticipated in the forward looking statements. Such forward-looking statements although considered reasonable by management at the time of preparation, may prove to be incorrect and actual results may differ materially from those anticipated in the statements made and should not unduly be relied on. These statements speak only as of the date of this press release. Arsenal does not intend and does not assume any obligation to update these forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law. Arsenal's business is subject to various risks that are discussed in its filings on the System for Electronic Document Analysis and Retrieval (SEDAR).
Contacts:
Arsenal Energy Inc.
Tony van Winkoop
President and Chief Executive Officer
(403) 262-4854 or Toll free: 1(866) 405-4854
(403) 265-6877 (FAX)
Arsenal Energy Inc.
J. Paul Lawrence
Vice President Finance and Chief Financial Officer
(403) 262-4854 or Toll free: 1(866) 405-4854
(403) 265-6877 (FAX)
Arsenal Energy Inc.
Suite 1900, 639 - 5th Avenue SW
Calgary, Alberta T2P 0M9
info@arsenalenergy.com
www.arsenalenergy.com
