Peyto Exploration & Development Corp. press release
Pine Cliff Energy Ltd. Announces Fourth Quarter and Annual Results
TSX - Toronto Stock Exchange · Natural Gas · Natural Gas Liquids · Oil · Canada
CALGARY, April 7 /CNW/ - Pine Cliff Energy Ltd. ("Pine Cliff" or "the Company") (www.pinecliffenergy.com) (TSX Venture: PNE) is pleased to announce its financial and operational results for the three months and fiscal year ended December 31, 2008.
FINANCIAL AND OPERATIONAL
Annual Financial and Operational Highlights
2008 2007 2006 Financial Revenue - Oil and Gas $ 707,012 $ 582,950 $ 661,100 Cash Flow from Operations (725,525) (784,938) (168,809) Per Share Basic and Diluted (0.02) (0.02) (0.01) Net Loss (7,541,868) (1,381,454) (1,014,605) Per Share Basic and Diluted (0.17) (0.04) (0.03) Capital Expenditures and Acquisitions 5,377,190 2,797,763 271,926 Total Assets 5,570,015 12,445,994 4,494,010 Working Capital 2,316,982 8,378,110 2,963,513 Shareholders' Equity 5,044,701 12,205,066 4,239,638 Operations Oil and Liquids (barrels per day) 1 4 5 Natural Gas (MCF per day) 228 198 195
Quarterly Financial and Operational Highlights
2008 4th 3rd 2nd 1st
Financial Revenue - Oil and Gas $ 295,944 $ 129,537 $ 138,415 $ 143,116 Cash Flow from Operations (68,211) (332,184) (122,517) (202,613) Per Share Basic and Diluted (0.00) (0.01) (0.00) (0.01) Net Loss (6,423,691) (505,953) (295,111) (317,113) Per Share Basic and Diluted (0.14) (0.01) (0.01) (0.01) Capital Expenditures and Acquisitions 1,067,843 1,511,745 2,516,214 281,388 Total Assets 5,570,015 11,621,915 12,043,617 12,221,650 Working Capital 2,316,982 3,440,165 5,278,074 7,937,179 Shareholders' Equity 5,044,701 11,400,311 12,043,617 12,003,398 Operations Oil and Liquids (barrels per day) 2 1 - 4 Natural Gas (MCF per day) 453 146 142 168
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.
Production Three months ended Twelve months ended December September December December December 31, 2008 30, 2008 31, 2007 31, 2008 31, 2007 Crude oil and NGLs (barrels per day) 2 1 2 1 4 Natural gas (MCF per day) 453 146 182 228 198 Total BOE per day(1) 77 25 32 39 37 (1) Barrels of oil equivalent (BOE) 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.
During the fourth quarter the Company completed and placed on production one gross (0.15 net) natural gas well. The well averaged approximately 320 MCF per day net to the Company during the fourth quarter. Anticipated production for 2009 from this well is estimated at between 150 and 200 MCF per day net to the Company. The Company has an expected decline rate of approximately 20 percent on its other production.
Revenue Three months ended Twelve months ended December September December December December ($) 31, 2008 30, 2008 31, 2007 31, 2008 31, 2007 Revenue: Oil and gas sales 295,944 129,537 112,685 707,012 582,950 Average Realized Prices Crude oil and NGLs (per barrel) 53.46 119.90 68.33 90.68 62.75 Natural gas (per MCF) 6.92 8.74 6.16 8.05 6.91
Revenue from petroleum and natural gas sales for 2008 increased by $124,062 from 2007 due to increased natural gas prices and production volumes due to completion of the above mentioned well. The Company did not have hedging agreements in either 2008 or 2007 and presently does not have any future hedging agreements.
Royalties Three months ended Twelve months ended December September December December December ($) 31, 2008 30, 2008 31, 2007 31, 2008 31, 2007 Crown royalties 74,834 31,888 27,090 162,716 113,257 Gross overriding royalties 10,204 5,568 4,570 28,559 23,755 Total royalty expense 85,038 37,456 31,660 191,275 137,012
Crown royalties are significantly higher in 2008 due to the successful completion of the natural gas well during the fourth quarter of 2008. Gross overriding royalties are also higher for the same reason.
New Alberta Crown Royalty Framework (NRF)
Crown royalty rates in the fourth quarter averaged approximately 25 percent; slightly higher than preceding quarters due to the commencement of production from the new well. The NRF rates vary by prices as well as productivity levels. With the current low commodity prices, the new royalty rates should result in a reduction in the amount the Company will pay to the Province of Alberta.
Interest Income Three months ended Twelve months ended December September December December December ($) 31, 2008 30, 2008 31, 2007 31, 2008 31, 2007 Interest income 13,580 21,025 54,443 128,935 76,273
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 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 throughout most of 2008. Interest income for Q4 2008 decreased by $7,445 from Q3 2008 due to the lower cash balance on hand as $1.1 million was spent on capital projects in Canada and Argentina in the fourth quarter of 2008.
Interest income for 2009 is anticipated to further decline as the Company continues with its capital program.
Production Costs Three months ended Twelve months ended December September December December December ($) 31, 2008 30, 2008 31, 2007 31, 2008 31, 2007 Production costs 49,159 27,187 35,090 115,868 134,453 $ per BOE(1) 7.27 12.17 12.53 8.11 10.48 (1) Barrels of oil equivalent (BOE) 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.
Capacity constraints at the gas plant where the majority of the Company's natural gas production is processed have been resolved resulting in a lower cost per unit for processing. This, combined with higher production per well (due to the new well commencing production in Q4), has resulted in significant reductions in both total costs and production costs per BOE.
Production costs for 2009 are anticipated to be in the $6 to $7 per BOE range.
General and Administrative Three months ended Twelve months ended December September December December December ($) 31, 2008 30, 2008 31, 2007 31, 2008 31, 2007 G&A expense 339,344 358,105 335,593 1,338,621 1,294,929
General and administrative expenditures were similar between 2008 and 2007. The majority of the G&A expenses pertain to the Company's operations in Argentina. With the unsuccessful completion of the three well program on the Canadon Ramirez Concession, the Company's Board of Directors and management are reviewing the Company's involvement in Argentina. Any reduction in activity in Argentina should result in a future decline in G&A expenses.
Pine Cliff does not have any employees at the present time but has engaged Bonterra Energy Corp. (Bonterra Corp) a related party (see Related Party section), to provide management services and engage the services of consultants on a contract or temporary basis. Pine Cliff's subsidiary CanAmericas Energy Ltd. (CanAmericas) has also engaged the consulting services of two individual professionals as senior management and officers of CanAmericas.
Foreign Exchange Loss (Gain) Three months ended Twelve months ended December September December December December ($) 31, 2008 30, 2008 31, 2007 31, 2008 31, 2007 Foreign exchange loss (gain) (71,892) 26,816 (6,302) (149,010) 27,827
The Company maintains foreign denominated bank accounts to facilitate its foreign operations. The gain on foreign exchange in 2008 and the loss in 2007 relates to the depreciation (2007 appreciation) of the Canadian dollar with the U.S. dollar.
Late in Q3 and during Q4, the Company advanced sizable amounts of U.S. funds to the Company's Argentina operations to cover capital costs. Due to the rapid appreciation of the US dollar against the Canadian dollar, Pine Cliff experienced a significant gain in Q4. With the reduced cash balances and significantly less capital commitments (see Liquidity Section), it is anticipated that any 2009 gain or loss on foreign exchange will be modest.
Stock-Based Compensation
Stock-based compensation for 2008 was $381,503 (2007 - $178,826). The Company has a stock-based compensation plan. The Company records a compensation expense over the vesting period based on the fair value of options granted to employees of the management company (see section "Related Party Transactions"), directors and service providers in respect of the Company. The Company issued 1,108,000 stock options in Pine Cliff during the fourth quarter of 2007 and only 65,000 in 2008, causing an increase in stock based compensation for 2008 over 2007. The Company estimated the 2008 stock options fair value at $33,761 ($0.52 per option) using the Black-Scholes option pricing model, assuming a weighted average risk free interest rate of 2.89 percent, weighted average expected volatility of 72.0 percent, weighted average expected life of 2.5 years and no annual dividend rate. As of December 31, 2008 approximately $146,000 of unamortized stock based compensation exists with the majority expected to be amortized in 2009.
Depletion, Depreciation and Amortization and Dry Hole Exploration Costs
The Company through its subsidiary CanAmericas spent $7,503,452 on exploration activities in Argentina to earn interests in specific properties. During 2008, the Company completed a three well exploration program on the Canadon Ramirez Concessions in Argentina. The program resulted in no significant reserves being discovered and as a result $6,171,140 of costs related to this Concession were expensed as dry hole costs, which included $34,130 for estimated future abandonment costs. The remaining $1,366,442 relates to the Laguna de Piedra Concession that if the development of this property is successful and proved reserves are obtained, this amount will be depleted on the unit of production basis, otherwise this amount will be charged to operations.
At December 31, 2008, the estimated total undiscounted amount required to settle the asset retirement obligations was $123,602 (2007 - $69,182). These obligations will be settled based on the useful lives of the underlying assets, which extend up to 13 years into the future. This amount has been discounted using a credit-adjusted risk-free interest rate of five percent. The discount rate is reviewed annually and adjusted if considered necessary. A change in the rate would not have a significant impact on the amount recorded for asset retirement obligations.
During 2008, the Company provided $330,465 (2007 - $296,724) for depletion, depreciation and accretion of its property and equipment. The increase is related to increased production volumes in 2008 due to the production from the Company's new well in Q4.
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 so it is not liable for current income tax in 2008. However, the Government of Argentina charges a capital tax equal to one percent of capital employed in the country and as a result the Company has reported a current tax expense of $23,132.
Non-Controlling Interest
A private foreign company (Foreign Corp.) owns seven percent of CanAmericas Energy Ltd. (CanAmericas), a 93 percent owned subsidiary of Pine Cliff. The loss applicable to non-controlling interest for 2008 was $25,179 (2007 - $49,791). The expense of $25,179 has completely eliminated the investment amount by Foreign Corp.
Loss Three months ended Twelve months ended December September December December December ($) 31, 2008 30, 2008 31, 2007 31, 2008 31, 2007 Loss 6,423,691 505,953 381,561 7,541,868 1,381,454 Loss per share (0.14) (0.01) (0.01) (0.17) (0.04)
The increase in the 2008 loss over 2007 was predominantly due to the provision for dry hole costs of $6,171,140 relating to the unsuccessful exploration of the Canadon Ramirez Concession. The Company is currently planning to proceed with the drilling of the Laguna de Piedra Concession in 2009; however, Pine Cliff's management and Board of Directors are currently examining the Company's involvement in Argentina and may reduce its activities in that country which may result in reducing overall Company costs.
Cash Flow from Operations Three months ended Twelve months ended December September December December December ($) 31, 2008 30, 2008 31, 2007 31, 2008 31, 2007 Cash flow from operations (68,211) (332,184) (67,733) (725,525) (784,938) Cash flow from operations per share (0.00) (0.01) (0.00) (0.02) (0.02)
Cash flow deficiency decreased in 2008 over 2007 as the Company realized a foreign exchange gain and had an increase in revenue due to a the new well that came on production in Q4 2008, which was partially offset by a reduction in non-cash working capital adjustments. The decrease in cash flow deficiency from Q4 2008 from Q3 2008 was primarily due to the realized foreign exchange gain and increased oil and gas sales from the new well.
Liquidity and Capital Resources
As of December 31, 2008, Pine Cliff had positive working capital of $2,316,982 (December 31, 2007 - $8,378,110). These funds will be used to cover the Company's budgeted 2009 capital expenditures of $750,000 in relation to the drilling of its Laguna de Piedra Concession as well as miscellaneous capital costs in respect of its Canadian oil and gas operations. The Company is currently focusing on reducing general and administrative expenses related to its Argentina operations with a goal to bring operating cash flow into balance.
The following consolidated financial statements and notes to the consolidated financial statements have been provided for further details.
Pine Cliff Energy Ltd. Consolidated Balance Sheets
As at December 31
2008 2007 Assets Current Cash $ 2,624,556 $ 5,769,448 Restricted term investment (Note 3) - 2,689,601 Accounts receivable 107,200 71,904 Prepaid expenditures 29,602 28,468 2,761,358 8,559,421
Property and Equipment (Note 7) Property and equipment 3,878,550 4,638,837 Accumulated depletion and depreciation (1,069,893) (752,264) 2,808,657 3,886,573 $ 5,570,015 $12,445,994 Liabilities Current Accounts payable and accrued liabilities $ 444,376 $ 181,311
Asset Retirement Obligations (Note 8) 80,938 34,438 525,314 215,749 Non-controlling Interests (Note 5) - 25,179 Commitments (Note 10) Shareholders' Equity (Note 9) Share capital 14,588,722 14,588,722 Contributed surplus 722,968 341,465 Deficit (10,266,989) (2,725,121) Accumulated other comprehensive income - - 5,044,701 12,205,066 $ 5,570,015 $12,445,994
Pine Cliff Energy Ltd. Consolidated Statements of Loss, Comprehensive Loss and Deficit
For the years ended December 31
2008 2007 Revenue Oil and gas sales $ 707,012 $ 582,950 Royalties (191,275) (137,012) Interest income 128,935 76,273 644,672 522,211 Expenses Production costs 115,868 134,453 General and administrative 1,338,621 1,294,929 Foreign exchange loss (gain) (149,010) 27,827 Stock-based compensation 381,503 178,826 Dry hole exploration costs (Note 7) 6,171,140 - Depletion, depreciation and accretion 330,465 296,724 8,188,587 1,932,759 Loss Before Taxes and Non-controlling Interests (7,543,915) (1,410,548) Taxes (Note 6) Current 23,132 - Future - 20,697 23,132 20,697 Loss before Non-Controlling Interests (7,567,047) (1,431,245) Loss applicable to non-controlling interests (Note 5) 25,179 49,791 Loss and Comprehensive Loss for the Year (7,541,868) (1,381,454) Deficit, beginning of year (2,725,121) (1,343,667) Deficit, end of year $(10,266,989) $ (2,725,121) Loss Per Share - Basic and Diluted (Note 9) $ (0.17) $ (0.04)
Pine Cliff Energy Ltd. Consolidated Statements of Cash Flow
For the years ended December 31
2008 2007 Operating Activities Loss for the year $(7,541,868) $(1,381,454) Items not affecting cash Stock-based compensation 381,503 178,826 Dry hole exploration costs 6,171,140 - Depletion, depreciation and accretion 330,465 296,724 Unrealized foreign exchange loss (gain) - 27,827 Future income taxes - 20,697 Loss applicable to non-controlling interests (25,179) (49,791) (683,939) (907,171) Change in non-cash working capital Accounts receivable (35,296) 113,097 Prepaid expenditures (1,134) (25,814) Accounts payable and accrued liabilities (5,156) 34,950 (41,586) 122,233 Cash Used in Operating Activities (725,525) (784,938) Financing Activities Issue of shares under employee stock option plan - 74,750 Issue of shares pursuant to rights offering - 9,143,919 Issue costs - (71,309) Cash Provided by Financing Activities - 9,147,360 Investing Activities Property and equipment expenditures (5,377,190) (2,797,763) Restricted term investment 2,689,601 (2,689,601) Change in non-cash working capital Accounts payable and accrued liabilities 268,222 7,197 Cash Used In Investing Activities (2,419,367) (5,480,167) Unrealized foreign Exchange Gain (Loss) on Cash Held in Foreign Currency - (27,827) Net Cash Inflow (Outflow) (3,144,892) 2,854,428 Cash, Beginning of Year 5,769,448 2,915,020 Cash, End of Year $2,624,556 $5,769,448 Cash Interest Paid $ - $ - Cash Taxes Paid $ 34,126 $ -