TORONTO, ONTARIO -- (Marketwired) -- 05/12/15 -- Candax Energy Inc. ("Candax" or the "Company") (TSX: CAX), a company focused on mature oil field development in Tunisia, today announced financial and operating results for the quarter ended March 31, 2015. The unaudited financial statements, notes and MD&A pertaining to the period are available on the System for Electronic Document Analysis and Retrieval ("SEDAR") at www.sedar.com and by visiting www.candax.com. All monetary figures reported herein are U.S. dollars unless otherwise stated.
Selected Operational & Financial Highlights
-- Average production, net of royalties, for the quarter ended March 31, 2015 was 423 bopd compared to 491 bopd for the same period last year. The decrease was mainly a result of a voluntary production curtailment program in February and March to enable the release of the rented storage barge waiting for the final repair of the oil storage tank; -- Revenue for the three month period ended March 31, 2015 was $2.2 million compared to $nil million for the same period last year. The revenue came from a low quantity lifting operated by ETAP with the rented heated barge on February 21, 2015. The quantity of oil lifted during the period for both Equity and Domestic Market Obligation ("DMO") amounted to 44,827 barrels at an average price of $48 per barrel; The Company reported a loss for the quarter ended March 31, 2015 of $3.7 million compared to a loss of $1.5 million for the same period last year. The difference relies mainly on operating losses due to the fall of oil price and the costs associated to the repair of the oil storage tank with the rental of a heated barge. The Company continues to decrease its general and administrative expenses; -- As at March 31, 2015, Candax held cash and cash equivalents of $6.5 million; -- As at March 31, 2015, Candax had loans and borrowings of $38.7 million with a current-portion of $7.3 million including $3.5 million of senior debt due to Geofinance NV waived until June 1, 2015; -- Considering the high daily rental cost of the heated barge in conjunction with the decrease of the crude oil price, Maretap decided to release the heated storage barge subsequent to the February lifting. As a consequence, Maretap and Ecumed implemented a production reduction program, using internal storage facilities, until the full repair of the Tank at the terminal was completed at the end of March 2015 as expected, resulting in a final loss of production of approximately 10,000 bbls.
"The financial loss of the first quarter of 2015 is disappointing but was anticipated due to the repair of the oil storage tank and the low price of crude oil," said Pierre-Henri Boutant, CFO of Candax.
The Company has initiated discussions with third parties to implement strategic and financial alternatives and now needs more time to continue these discussions.
During the three-month period ended March 31, 2015, the Company had a net loss of $3.7 million, positive cash flow from its operations of $0.5 million, and positive working capital of $0.7 million. As at March 31, 2015, the cash balance of $6.5 million, the trade and other receivables of $1.0 million and the crude oil inventory position cover the current liabilities.
The Company's operating loss for the first quarter of the year 2015 is mainly explained by the low quantity of oil sold at a low average price of $48 per barrel. The loss was also exacerbated by the heavy cost of renting a heated storage barge to compensate the unavailability of the oil storage tank, and the associated curtailment of the production program. The Company's profitability is expected to revert back to normal for the three-month period ended June 30, 2015. The positive cash generated was not sufficient to cover the $2.4 million of capital expenditures during the period, including the exercise of the compressor purchase option for $1.5 million.
Management has prepared projected cash flow information for a period of 15 months ending June 30, 2016. Revenue has been assessed based on capacity for the 2 upcoming liftings of 120,000 barrels. The Brent crude price assumptions retained for 2015 and 2016 are $60/bbl and $70/bbl respectively. On this basis, the revenue from the Company's production is estimated to be $8.3 million resulting in a cash outflow used in its operations of $1.3 million. During this period, the quantity of oil in inventory is deemed to increase by 55,000 barrels.
The Company is expecting to monitor its cash flow by using pre-financing operations over its lifting, or by reducing the quantity of oil lifted to advance lifting and thus anticipate the cash proceeds.
The Company will fund its forecast capital expenditures of $1.9 million through its working capital.
The projected cash flows of the Company do not include the principal repayment of its contractual obligation to its major shareholder to service its debt of $3.5 million. The Company has obtained an extension of its waiver period until June 1, 2015 and discussions are still ongoing with the lender as Candax will not be in a position to repay the remaining $3.5 million of debt in full as at June 1, 2015 based on current business assumptions.
The projected cash flows of the Company do not include some additional operations under discussion in early May 2015. The Company has accepted the Maretap (operator of Ezzaouia) proposition to use the pulling unit available on Ezzaouia to perform a perforating job on EZZ-11. The company is anticipating additional costs of approximatively $1.0 million to cover the above-mentioned operation and additional revenue if the operation is successful.
The Company's forecast is also highly sensitive to Brent crude price volatility, and to the Company's production programs. A 10% change in one of these business assumptions would have a financial impact of $0.8 million on cash flow over the 15-month period.
These uncertainties cast significant doubt upon the Company's ability to continue as a going concern.
To address its financing obligations, the Company is actively working on strategic and financial alternatives including but not limited to, the sale of the Company, some of its subsidiaries or all or a portion of its assets, a recapitalization, a joint venture or any combination thereof. The outcome of this matter cannot be predicted at this time.
On April 16, 2015, the Company received a letter advising it that the TSX is reviewing the eligibility for continued listing on the TSX of the securities of the Company. The TSX initiated its delisting review because the price and market value of the publicly-held common shares of the Company have fallen below levels required under the TSX Company Manual and the financial condition and operating results of the Company no longer satisfy the listing requirements of the TSX Company Manual. Under the TSX's remedial review process, the Company has been granted 120 days to comply with all requirements for continued listing.
The Company will study all available options during the 120 days period. In addition to working with the TSX during this period, management will evaluate strategic and financial alternatives to correct the deficiencies noted. There can be no assurance that the Company will be able to achieve compliance with the TSX's listing requirements within the required time frame or will secure a strategic alternative. To the extent the shares of Candax are delisted, the Company will continue to be regulated by the Canadian securities regulators.
Review of Key Operations
Candax has 100% ownership of El Bibane, 100% ownership of Robbana and 45% ownership of Ezzaouia, on which Candax has partnered with ETAP, the Tunisian state oil and Gas Company. El Bibane and Robbana are operated from Tunis by Ecumed, a 100% subsidiary of Candax. Ezzaouia is operated from Tunis by Maretap, a 50/50 joint venture between ETAP and Ecumed.
During the first quarter, production from the Ezzaouia asset decreased to 139 bopd (net) from 241 bopd (net) during the same period last year. This was a result of stop of production on EZZ-1, 9 and 18 enhanced by the curtailment program on production.
Maretap is now progressing with the maintenance campaign on its beam-pump activated wells on the Ezzaouia field with a pulling unit. The production of wells EZZ-9 and EZZ-1 has restarted and the pulling unit is mobilized for additional intervention on EZZ-11 and EZZ-18.
The Tunisian authority Direction Generale de L'Energie (DGE), has confirmed by letter dated December 26, 2014 its decision to allow the continuation of Ezzaouia exploitation beyond 2019. Under the terms of the concession, the licensing authority undertakes to give the concession holder preferential rights to extend the license, under terms to be mutually agreed.
Given the positive results of the gas cycling pilot associated with the encouraging production forecast predicted by the updated reservoir simulator, it was decided to exercise the purchase option of the second gas compressor, which is now under the full ownership of Ecumed. Despite the production curtailment program, the net production after royalties for the first quarter of 2015 reached 259 bopd, equivalent to the last quarter of 2014.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION AND STATEMENTS
This press release includes "forward looking statements", within the meaning of applicable securities legislation, which are based on the opinions and estimates of Management and are subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ materially from those projected in the forward looking statements.
Forward-looking statements are often, but not always, identified by the use of words such as "seek", "anticipate", "budget", "plan", "continue", "estimate", "expect", "forecast", "may", "will", "project", "predict", "potential", "targeting", "intend", "could", "might", "should", "believe" and similar words suggesting future outcomes or statements regarding an outlook. Such risks and uncertainties include, but are not limited to, risks associated with the oil and gas industry (including operational risks in exploration development and production; delays or changes in plans with respect to exploration or development projects or capital expenditures; the uncertainty of reserve estimates; the uncertainty of estimates and projections in relation to production, costs and expenses; the uncertainty surrounding the ability of Candax Energy Inc. to obtain all permits, consents or authorizations required for its operations and activities; and health safety and environmental risks), the risk of commodity price and foreign exchange rate fluctuations, the ability of Candax Energy Inc. to fund the capital and operating expenses necessary to achieve the business objectives of Candax Energy Inc., the uncertainty associated with commercial negotiations and negotiating with foreign governments and risks associated with international business activities, as well as those risks described in public disclosure documents filed by Candax Energy Inc. Due to the risks, uncertainties and assumptions inherent in forward-looking statements, prospective investors in securities of Candax Energy Inc. should not place undue reliance on these forward-looking statements. Statements in relation to "reserves" are deemed to be forward-looking statements, as they involve the implied assessment, based on certain estimates and assumptions, that the reserves described can be profitably produced in the future.
Candax is an international energy company with offices in Toronto and Tunis. The Candax group is engaged in exploration and the production of oil and gas in Tunisia and holds a royalty interest in an exploration permit in Madagascar.
Candax Energy Inc.