Peyto Exploration & Development Corp. press release
Pine Cliff Energy Ltd. Announces First Quarter Results
TSX - Toronto Stock Exchange · Natural Gas · Natural Gas Liquids · Oil · Canada
CALGARY, May 28 /CNW/ - Pine Cliff Energy Ltd. (www.pinecliffenergy.com) (TSX-V:PNE) is pleased to announce its financial and operational results for the three months ended March 31, 2008.
Highlights
For the three months ended March 31 December 31 March 31 2008 2007 2007 FINANCIAL ($) Revenue - oil and gas 143,116 112,685 198,515 Funds Flow from Operations(1) (159,541) (228,913) (165,886) Per Share - Basic (0.00) (0.01) (0.00) Per Share - Diluted (0.00) (0.01) (0.00) Loss (317,113) (381,561) (270,109) Per Share - Basic (0.01) (0.01) (0.01) Per Share - Diluted (0.01) (0.01) (0.01) Capital Expenditures 281,388 193,350 2,196,476 Total Assets 12,221,650 12,445,994 4,211,984 Working Capital 7,937,179 8,378,110 602,650 Shareholders' Equity 12,003,398 12,205,066 4,008,304 OPERATIONS Oil and NGL's - Barrels Per Day 4 2 7 Average Price ($ per barrel) 56.91 68.33 58.91 Natural Gas - MCF Per Day 168 182 226 Average Price ($ per MCF) 8.17 6.16 8.05 Total Barrels Per Day(2) 30 40 44
(1) Funds flow from operations is not a recognized measure under GAAP. Management believes that in addition to cash flow from operations, funds flow from operations is a useful supplemental measure as it demonstrates the Company's ability to generate the funds necessary to fund future growth through capital investment. Investors are cautioned, however, that this measure should not be construed as an indication of the Company's performance. The Company's method of calculating this measure may differ from other issuers and accordingly, it may not be comparable to that used by other issuers. For these purposes, the Company defines funds flow from operations as funds provided by operations before changes in non-cash operating working capital items excluding foreign exchange loss and asset retirement expenditures.
(2) BOE's are calculated using a conversion ratio of 6 MCF to 1 barrel of oil. The conversion is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead and as such may be misleading if used in isolation.
FORWARD-LOOKING INFORMATION
Certain statements contained in this press release include statements which contain words such as "anticipate", "could", "should", "expect", "seek", "may", "intend", "likely", "will", "believe" and similar expressions, statements relating to matters that are not historical facts, and such statements of our beliefs, intentions and expectations about development, results and events which will or may occur in the future, constitute "forward-looking information" within the meaning of applicable Canadian securities legislation and are based on certain assumptions and analysis made by us derived from our experience and perceptions. Forward-looking information in this press release includes, but is not limited to: expected cash provided by continuing operations; future capital expenditures, including the amount and nature thereof; oil and natural gas prices and demand; expansion and other development trends of the oil and natural gas industry; business strategy and outlook; expansion and growth of our business and operations; and maintenance of existing customer, supplier and partner relationships; supply channels; accounting policies; credit risks; and other such matters.
All such forward-looking information is based on certain assumptions and analyses made by us in light of our experience and perception of historical trends, current conditions and expected future developments, as well as other factors we believe are appropriate in the circumstances. The risks, uncertainties, and assumptions are difficult to predict and may affect operations, and may include, without limitation: the risks of foreign operations; foreign exchange fluctuations; equipment and labour shortages and inflationary costs; general economic conditions; industry conditions; changes in applicable environmental, taxation and other laws and regulations as well as how such laws and regulations are interpreted and enforced; the ability of oil and natural gas companies to raise capital; the effect of weather conditions on operations and facilities; the existence of operating risks; volatility of oil and natural gas prices; oil and gas product supply and demand; risks inherent in the ability to generate sufficient cash flow from operations to meet current and future obligations; increased competition; stock market volatility; opportunities available to or pursued by us; and other factors, many of which are beyond our control. The foregoing factors are not exhaustive.
Actual results, performance or achievements could differ materially from those expressed in, or implied by, this forward-looking information and, accordingly, no assurance can be given that any of the events anticipated by the forward-looking information will transpire or occur, or if any of them do, what benefits will be derived therefrom. Except as required by law, Pine Cliff disclaims any intention or obligation to update or revise any forward-looking information, whether as a result of new information, future events or otherwise.
The forward-looking information contained herein is expressly qualified by this cautionary statement.
General
Pine Cliff is pleased to report that during the past quarter it has been successful in advancing some of its projects.
Three wells have been drilled in the Canadón Ramirez property in Argentina. Testing and evaluating has commenced on the first well and then will move to the second and third wells. It is anticipated that all tests will be completed in the next six weeks. Results will be released on a timely basis. Pine Cliff has a 49 percent participating interest in this property.
The 3D seismic program has been completed on the Laguna de Piedra concession in Argentina. The evaluation and processing should be completed in Q2, 2008 to determine whether there are economic drill locations. Pine Cliff has a 25 percent participating interest in this property.
Pine Cliff has committed to pay 100 percent of costs totaling $4,620,000 U.S. including value added tax of 21 percent to earn a 60 percent participating interest in a permit in the San Jorge basin in Argentina. Earn-in for this property is subject to final granting of the concession for this property by the Provincial government to the Farmor. The finalization for this large concession is expected to be completed in Q3, 2008.
The Company is continuing to assess and evaluate properties in Canada with the intention of growing its activities in the Western Canadian Sedimentary Basin.
The company will continue with a more aggressive approach towards participating in domestic and international activities.
Production
Production was approximately 26% less in the first quarter of 2008 than the first quarter of 2007. During the third quarter of 2007 one of the Company's commingled gas wells with various production zones started to produce sand and production fell significantly. The operator of the well performed an unsuccessful workover in December of 2007 to attempt to properly optimize production from all zones. To properly repair the wellbore would involve a procedure whereby the cost currently exceeds the benefits. The operator will therefore leave the wellbore as is. As a result of the workover, production for this commingled gas well decreased again in the first quarter of 2008.
Revenue
Revenue from petroleum and natural gas sales was $143,116 during the first quarter of 2008 compared to $198,515 for the first quarter of 2007. The decrease is primarily attributable to a decrease in production. There was a modest increase in revenue of $30,431 over the fourth quarter of 2007 due to higher natural gas prices.
Royalties
Royalties consist of Crown royalties of $34,130 (Q1 2007 - $30,790 and Q4 2007 - $27,091) paid to the Province of Alberta and gross overriding royalties of $2,738 (Q1 2007 - $6,552 and Q4 2007 - $4,569). Crown royalties were higher in the first quarter of 2008 than the first quarter of 2007 as there were wells on a crown royalty holiday in Q1 2007. Quarter over quarter saw a slight increase in crown royalties due to higher commodity prices. Lower gross overriding royalties in the first quarter of 2008 compared to the first and last quarters of 2007 resulted from lower production on wells subject to these royalties.
Interest Income
The Company maintains both Canadian and U.S. investment accounts that pay interest at prime less various percentages as long as the Company maintains certain minimum account balances. The Company has increased its cash balance with regard to proceeds received from the rights offering done in the fourth quarter of 2007. The Company was therefore earning interest at higher rates and on an increased cash balance.
Production Costs
Production costs for the three months ended March 31, 2008 were $26,249 or $9.55 per BOE versus $40,956 or $10.31 per BOE in the first quarter of 2007. Production costs per BOE are lower due to decreased natural gas compression and processing costs. BOE's are calculated using a conversion ratio of 6 MCF to 1 barrel of oil. The conversion is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead and as such may be misleading if used in isolation. Q4 2007 production costs of $35,090 or $12.53 per BOE were higher than Q1 2008 due to capacity constraints at the gas plant in the previous quarter. The Company had incurred increased processing fees in relation to its Sundance gas production.
General and Administrative
General and administrative expense for the first three months of 2008 was $282,129 compared to $294,919 for the first three months of 2007 and $329,773 for the fourth quarter of 2007. The decrease of $13,000 in Q1 2008 over Q1 2007 was due primarily to less legal fees and traveling costs with regards to negotiations for its subsidiary CanAmericas Energy Ltd. ("CanAmericas") activities in South America.
The decrease of $47,000 in Q1 2008 from Q4 2007 was also primarily due to decreased legal fees relating to operational development with regard to its subsidiary CanAmericas' activities in South America.
Pine Cliff does not have any employees at the present time but engages the services of consultants on a contract or temporary basis. Pine Cliff's subsidiary CanAmericas has also engaged the services of two individual professionals as senior management and officers of CanAmericas.
Foreign Exchange Gain (Loss)
The Company maintains foreign denominated bank accounts to facilitate its foreign operations. The gain on foreign exchange of $2,310 for the first quarter of 2008 and $6,302 for the last quarter of 2007 relates to the depreciation of the Canadian dollar from December 31, 2007 to March 31, 2008, as apposed to a foreign exchange loss of $8,420 for the first quarter of 2007 as the Canadian dollar appreciated over that quarter.
Stock Based Compensation
Stock based compensation for Q1 2008 was $115,445 and $37,276 for Q1 2007 (Q4 2007 - $90,783). The Company has a stock-based compensation plan for Pine Cliff. The Company records a compensation expense over the vesting period based on the fair value of options granted to employees, directors and consultants. The Company issued 1,108,000 stock options in Pine Cliff during 2007 and none in the first quarter of 2008. The Company estimated the 2007 stock options fair value at $547,080 ($0.49 per option) using the Black-Scholes option pricing model, assuming a weighted average risk free interest rate of 4.14 percent, weighted average expected volatility of 64.8 percent, weighted average expected life of 2.5 years and no annual dividend rate. As of March 31, 2008 approximately $385,000 of unamortized stock based compensation exists and will be amortized over two years, approximately $285,000 in 2008 and $100,000 in 2009.
Depletion, Depreciation, and Accretion
The Company follows the successful efforts method of accounting for petroleum and natural gas properties and related equipment. Costs of acquiring unproved properties are capitalized. When petroleum and natural gas properties are found to contain proved reserves as determined by Company engineers, the related net book value is depleted on the unit-of-production basis, calculated by field. The costs of dry holes and abandoned properties are charged to operations. Geological costs, lease rentals and carrying costs are charged to income as incurred. Costs of drilling exploratory and development wells that result in additions to proved reserves are capitalized and depleted on the unit-of-production basis. Tangible equipment is depreciated on a straight-line basis over ten years.
During the first quarter of 2008 the Company expensed $65,469 (2007 - $79,606) for depletion, depreciation and accretion of its property and equipment. The decrease is related to reduced production volumes in the first quarter of 2008. The fourth quarter of 2007 had a slightly higher depletion, depreciation and accretion amount of $73,464 due to slightly higher production.
Income Taxes
The Company follows the liability method of accounting for income taxes under which the income tax provision is based on the temporary differences in the accounts calculated using income tax rates expected to apply in the year in which the temporary differences will reverse. The Company has sufficient tax pools such that it is not liable for current income tax. However the Company is subject to a 1% Argentina capital tax on assets in Argentina. These amounts are deductible from future income earned in Argentina.
The Company has the following tax pools which can be used to reduce future taxable income:
Rate of Utilization % Amount Undepreciated capital costs 25 $ 347,514 Foreign exploration expenditures 10 2,775,198 Share issue costs 20 121,908 Canadian exploration expenditures 100 392,110 Canadian development expenditures 30 405,397 Canadian oil and gas expenditures 10 699,243 Non-capital loss carry forward(x) 100 1,898,481 $ 6,639,851 (x) $735,057 expires 2026, $929,726 expires 2027 and $233,698 expires in 2028
Non-Controlling Interest
As described above, Foreign Corp. owns seven percent of CanAmericas. The Q1 2008 amount of $23,342 (Q1 2007 - $12,659 and Q4 2007 - $21,296) of loss applicable to non-controlling interest relates to their share of revenues and costs associated with CanAmericas South American activities.
Loss
Loss in the first quarter of 2008 was $317,113 ($270,109 in the first quarter of 2007). The increase in the loss was due mainly to increased stockbased compensation expense and a 1% Argentina capital tax of $27,889 (2007 - $Nil).
The decrease in losses of $66,448 in Q1 2008 compared to the Q4 2007 loss was primarily due to higher oil and gas commodity prices, increased interest income, lower general and administrative costs and lower production costs in Q1 2008 over Q4 2007.
Funds Flow From Operations
Negative Funds flow from operations decreased to ($159,541) in the first quarter of 2008 compared to ($228,913) for the last quarter of 2007 from ($165,886) in the first quarter of 2007. The increase compared to Q1 2007 was due primarily to increased interest income and lower production and administration costs. This increase in funds flow was partially offset by lower oil and gas revenue due to lower production levels. The increase in funds flow from Q1 2008 compared to Q4 2007 was due to increased oil and gas sales from higher commodity prices and lower general and administrative costs offset by decreased production.
The following reconciliation compares funds flow for the first three months of 2008 and 2007 to the Company's cash flow from operating activities as calculated according to Canadian generally accepted accounting principles:
For the three month periods ending March 31, 2008 2007 Cash flow from operating activities ($204,923) ($115,860) Items not affecting funds flow Accounts receivable 34,543 (85,858) Prepaid expenses 5,059 5,716 Accounts payable and accrued liabilities 3,470 38,536 Foreign exchange gain (loss) 2,310 (8,420) Funds flow for the period ($159,541) ($165,886)
Commitments
The Company has three farm-in agreements in South America which require future expenditure commitments as outlined in Note 9 to the financial statements.
Liquidity and Capital Resources
As of March 31, 2008, Pine Cliff had positive working capital of $7,937,179 (December 31, 2007 - $8,378,110). These funds will be used to fund future exploration and development of Canadian and international properties.
The TSX Venture Exchange does not accept responsibility for the adequacy
or accuracy of this release.
Additional information relating to the Company may be found on SEDAR.COM. as well as on the Company's website at www.pinecliffenergy.com or by contacting George F. Fink, President, and CEO or Garth E. Schultz, Vice President - Finance, and CFO at (403) 269-2289 or by fax at (403) 265-7488
PINE CLIFF ENERGY LTD. CONSOLIDATED BALANCE SHEETS As at March 31, 2008 (unaudited) and December 31, 2007
2008 2007 Assets Current Cash $ 7,978,752 $ 5,769,448 Restricted term investment - 2,689,601 Accounts receivable 106,447 71,904 Prepaid expenditures 33,527 28,468 8,118,726 8,559,421 Property and Equipment (Note 5) Property and equipment 4,920,226 4,638,837 Accumulated depletion and depreciation (817,302) (752,264) Net Property and Equipment 4,102,924 3,886,573 $12,221,650 $12,445,994 Liabilities Current Accounts payable and accrued liabilities $ 181,547 $ 181,311
Asset Retirement Obligations 34,868 34,438 Non-Controlling Interests (Note 4) 1,837 25,179 218,252 240,928 Commitments (Note 9) Shareholders' Equity Share capital (Note 7) 14,588,722 14,588,722 Contributed surplus 456,910 341,465 Deficit (3,042,234) (2,725,121) Accumulated other comprehensive income - - 12,003,398 12,205,066 $12,221,650 $12,445,994
PINE CLIFF ENERGY LTD. CONSOLIDATED STATEMENTS OF LOSS, COMPREHENSIVE LOSS AND DEFICIT For the three months ended March 31 (unaudited)
2008 2007
Revenue Oil and gas sales $ 143,116 $ 198,515 Royalties (36,868) (37,342) Interest income 68,168 17,236 174,416 178,409 Expenses Production costs 26,249 40,956 General and administrative 282,129 294,919 Foreign exchange loss (gain) (2,310) 8,420 Stock based compensation 115,445 37,276 Depletion, depreciation and accretion 65,469 79,606 486,982 461,177 Loss Before Taxes and Non-Controlling Interests (312,566) (282,768) Taxes (Note 6) Current 27,889 - Future - - 27,889 - Loss before Non-Controlling Interests (340,455) (282,768) Loss applicable to non-controlling interests (Note 4) 23,342 12,659 Loss and Comprehensive Income for the Period (317,113) (270,109) Deficit, Beginning of Period (2,725,121) (1,343,667) Deficit, End of Period ($3,042,234) ($1,613,776) Loss Per Share - Basic and Diluted ($0.01) ($0.01)
Weighted Average Common Shares Basic 45,275,695 36,532,219 Diluted 46,133,294 37,701,514
PINE CLIFF ENERGY LTD. CONSOLIDATED STATEMENTS OF CASH FLOW For the three months ended March 31 (unaudited)
2008 2007
Operating Activities Loss for the period ($317,113) ($270,109) Items not affecting cash Stock based compensation 115,445 37,276 Depletion, depreciation and accretion 65,469 79,606 Foreign exchange loss (gain) (2,310) 8,420 Loss applicable to non-controlling interests (23,342) (12,659) (161,851) (157,466) Change in non-cash working capital Accounts receivable (34,543) 85,858 Prepaid expenditures (5,059) (5,716) Accounts payable and accrued liabilities (3,470) (38,536) (43,072) 41,606 Cash Used in Operating Activities (204,923) (115,860) Financing Activities Issue of shares under stock option plan - 1,500 Cash Provided by Financing Activities - 1,500 Investing Activities Property and equipment expenditures (281,388) (2,196,476) Proceeds on disposal of restricted term investments 2,689,601 - Change in non-cash working capital Accounts payable and accrued liabilities 3,704 - Cash Provided by (Used in) Investing Activities 2,411,917 (2,196,476) Foreign Exchange (Loss) Gain on Cash Held in Foreign Currency 2,310 (8,420) Net Cash Inflow (Outflow) 2,209,304 (2,319,256) Cash, Beginning of Period 5,769,448 2,915,020 Cash, End of Period $ 7,978,752 $ 595,764