Peyto Exploration & Development Corp. press release
Pine Cliff Energy Ltd. Announces Second Quarter Results
TSX - Toronto Stock Exchange · Natural Gas · Natural Gas Liquids · Oil · Canada
CALGARY, Aug. 26 /CNW/ - Pine Cliff Energy Ltd. (www.pinecliffenergy.com) (TSX-V:PNE) is pleased to announce its financial and operational results for the three months and six months ended June 30, 2009.
Highlights
Three Months Ended Six Months Ended June 30 June 30 June 30 June 30 For the periods ended 2009 2008 2009 2008 FINANCIAL ($) Revenue - Oil and Gas 111,773 138,415 305,498 281,531 Cash Flow from Operations (294,455) (224,141) (523,762) (523,762) Per Share Basic and Diluted (0.01) (0.00) (0.01) (0.01) Net Loss (325,010) (295,111) (823,542) (612,224) Per Share Basic and Diluted (0.01) (0.01) (0.02) (0.01) Capital Expenditures and Acquisitions 9,581 2,516,214 129,367 2,797,602 Total Assets 4,558,217 12,043,617 Working Capital 1,738,974 5,278,074 Shareholders' Equity 4,341,385 11,799,266 OPERATIONS Oil and NGLs Barrels Per Day 2 - 2 1 Average Price ($ per barrel) 62.14 - 55.74 104.38 Natural Gas MCF Per Day 312 142 352 155 Average Price ($ per MCF) 3.62 10.84 4.56 9.40 Total Barrels of Oil Equivalent (BOE) Per Day(1) 51 24 57 27 (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.
Report to Shareholders
Pine Cliff Energy Ltd. ("Pine Cliff" or "the Company") is pleased to report its operating and financial results for the three months and six months ended June 30, 2009.
The Board of Directors and Management recognize that there is a need to evaluate the overall direction for the Company and are presently assessing various options and opportunities available to add value on behalf of shareholders.
As a result of its unsuccessful completion of the three-well drill program on the Canadon Ramirez Concession in Argentina and the country's difficult political and business environment, the Company is reviewing its involvement in that region. In addition, positive changes in the Canadian energy sector and an increased availability in assets for sale have provided the impetus for Pine Cliff to once again focus its efforts domestically rather than internationally. The Company intends to increase its activities in Canada by aggressively pursuing acquisition opportunities and to participate in more drilling.
Operations
During the fourth quarter of 2008, Pine Cliff participated in drilling one natural gas well (15 percent working interest) in the Sundance area of Alberta. Production for this well for the first six months of 2009 has averaged approximately 225 MCF per day net to the company and total company production for the first six months of 2009 averaged 57 BOE per day (352 MCF per day of natural gas and 2 barrels per day of crude oil and NGLs).
Pine Cliff is considering participating in one gross exploration well (0.25 net) in the Laguna de Piedra concession, a property in Argentina which the Company has deemed highly prospective. Drilling is expected to take place in late 2009 or early 2010. Should the Company elect to participate in the well, its share of the costs will be approximately $500,000.
Financial:
The Company is currently focused on decreasing general and administrative (G&A) expenses and has reduced its consulting services and other international expenses in the second quarter of 2009. G&A expenditures decreased by approximately 23 percent quarter over quarter due to reduced contractor fees for services provided to the Company's South American activities and reduced management fees.
As of June 30, 2009, Pine Cliff had positive working capital of $1,738,974. These funds may be used to cover the Company's budgeted 2009 capital expenditures of $900,000 in relation to the drilling of its Laguna de Piedra Concession ($500,000) as well as miscellaneous capital costs in respect to its Canadian oil and gas operations.
Outlook
The Board of Directors and management feel confident that there will be investment opportunities in Canada in the near term and are continuing to pursue the available options.
FORWARD-LOOKING INFORMATION
Certain statements contained in this 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 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.
Quarterly Financial and Operational Highlights
2009 2008 2nd 1st 4th 3rd Financial ($) Revenue - Oil and Gas 111,773 193,725 295,944 129,537 Cash Flow from Operations (294,455) (229,307) (68,211) (305,368) Per Share Basic and Diluted (0.01) (0.01) 0.00 (0.01) Net Loss (325,010) (498,532) (6,423,691) (505,953) Per Share Basic and Diluted (0.01) (0.01) (0.14) (0.01) Capital Expenditures and Acquisitions 9,581 119,786 1,067,843 1,511,745 Total Assets 4,558,217 4,966,907 5,570,015 11,621,915 Working Capital 1,738,974 1,903,038 2,316,982 3,440,165 Shareholders' Equity 4,341,385 4,644,004 5,044,701 11,400,311 Operations Oil and NGLs (barrels per day) 2 1 2 1 Natural Gas (MCF per day) 312 392 453 146
2008 2nd 1st Financial ($) Revenue - Oil and Gas 138,415 143,116 Cash Flow from Operations (224,141) (204,923) Per Share Basic and Diluted 0.00 0.00 Net Loss (295,111) (317,113) Per Share Basic and Diluted (0.01) (0.01) Capital Expenditures and Acquisitions 2,516,214 281,388 Total Assets 12,043,617 12,221,650 Working Capital 5,278,074 7,937,179 Shareholders' Equity 12,043,617 12,003,398 Operations Oil and NGLs (barrels per day) - 4 Natural Gas (MCF per day) 142 168
2007 4th 3rd 2nd 1st
Financial ($) Revenue - Oil and Gas 112,685 95,160 176,590 198,515 Cash Flow from Operations (234,653) (172,281) (262,144) (115,860) Per Share Basic and Diluted (0.01) (0.01) (0.01) 0.00 Net Loss (381,561) (383,540) (346,274) (270,109) Per Share Basic and Diluted (0.01) (0.01) (0.01) (0.01) Capital Expenditures and Acquisitions 193,350 174,289 233,648 2,196,476 Total Assets 12,445,994 4,173,333 3,946,888 4,211,984 Working Capital 8,378,110 (314,684) 182,319 602,650 Shareholders' Equity 12,205,066 3,371,089 3,749,025 4,008,304 Operations Oil and NGLs (barrels per day) 2 1 5 7 Natural Gas (MCF per day) 182 163 226 226
Production
Three months ended Six months ended June 30, March 31, June 30, June 30, June 30, 2009 2009 2008 2009 2008 Crude oil and NGLs (barrels per day) 2 1 - 2 1 Natural gas (MCF per day) 312 392 142 352 155 Total BOE per day(1) 51 64 24 57 27 (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 of 2008, a natural gas well that is not operated by Pine Cliff was completed and placed on production (0.15 net) by the operator. Production for the first six months of 2009 from this well is 225 MCF per day net to the Company. The Company has an expected annual decline rate of approximately 20 percent on its overall production.
Revenue
Three months ended Six months ended June 30, March 31, June 30, June 30, June 30, ($) 2009 2009 2008 2009 2008 Revenue: Oil and gas sales 111,773 193,725 138,415 305,498 281,531 Average Realized Prices Crude oil and NGLs (per barrel) 62.14 48.06 - 55.74 104.38 Natural gas (per MCF) 3.62 5.32 10.84 4.56 9.40
Revenue from petroleum and natural gas sales for the first half of 2009 increased by $23,967 from the first half of 2008 due to increased production volumes, partially offsetting a 51 percent decrease in commodity prices for natural gas. A decrease in revenue from Q2 2009 to Q1 2009 was due to lower production volumes and reduced commodity prices for natural gas. The Company did not have hedging agreements in either 2009 or 2008 and presently does not have any future hedging agreements.
Royalties
Three months ended Six months ended June 30, March 31, June 30, June 30, June 30, ($) 2009 2009 2008 2009 2008 Crown royalties (49,052) 44,556 21,864 (4,496) 55,994 Gross overriding royalties 2,533 4,796 10,049 7,329 12,787 Total royalty expense (46,519) 49,352 31,913 2,833 68,781
Crown royalties are lower in the first six months of 2009 compared to the first six months of 2008 due to a $58,000 crown royalty holiday adjustment received in the second quarter of 2009 related to 2008 crown royalty payments made on the new natural gas well. Gross overriding royalties were also lower due to the significant decrease in the commodity prices for natural gas. Crown and gross overriding royalties were lower for Q2 2009 compared to Q1 2009 for the same reasons.
Interest Income
Three months ended Six months ended June 30, March 31, June 30, June 30, June 30, ($) 2009 2009 2008 2009 2008 Interest income 284 5,781 26,162 6,065 94,330
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 was earning interest at higher rates and on an increased cash balance throughout the first half of 2008. Interest income for Q2 2009 and Q1 2009 decreased significantly due to the lower cash balance on hand.
Production Costs
Three months ended Six months ended June 30, March 31, June 30, June 30, June 30, ($) 2009 2009 2008 2009 2008 Production costs 24,680 57,809 13,273 82,489 39,522 $ per BOE 5.30 10.08 7.25 7.94 8.51
Production costs were higher in the first six months of 2009 versus the first six months of 2008 due to higher production volumes. The decrease in production costs in the second quarter of 2009 compared to the first quarter of 2009 was due to decreased production volumes and adjustments to prior period charges.
General and Administrative
Three months ended Six months ended June 30, March 31, June 30, June 30, June 30, ($) 2009 2009 2008 2009 2008 G&A expense 249,238 324,997 359,043 574,235 641,172
General and administrative (G&A) expenditures decreased by $66,937 from the first half of 2009 compared to the first half of 2008. The decrease in G&A expenses is due to reduced contractor fees for services provided to the Company's South American activities and reduced management fees. The decrease in G&A expenditures in Q2 2009 compared to Q1 2009 is for the same reasons. The majority of the G&A expenses pertain to the Company's operations in Argentina. With the unsuccessful completion of the three-well drill program on the Canadon Ramirez Concession, the Company's Board of Directors and management are reviewing the Company's involvement in Argentina and have reduced its consulting services and other international expenses in Q2 2009.
Pine Cliff does not have any employees at the present time but has engaged Bonterra Energy Corp. (Bonterra Corp) a related party (see Related Party section), to provide management services and engage the services of consultants on a contract or temporary basis. Pine Cliff's subsidiary CanAmericas Energy Ltd. (CanAmericas) has also engaged the consulting services of an individual professional as senior management and officer of CanAmericas.
Foreign Exchange Loss (Gain)
Three months ended Six months ended June 30, March 31, June 30, June 30, June 30, ($) 2009 2009 2008 2009 2008 Foreign exchange loss (gain) 16,432 7,043 (101,624) 23,475 (103,934)
The Company maintains foreign denominated bank accounts to facilitate its foreign operations. The loss on foreign exchange in the first half of 2009 relates to the appreciation of the Canadian dollar with the Argentine peso and U.S. dollar versus a depreciation in 2008.
Stock-Based Compensation
Three months ended Six months ended June 30, March 31, June 30, June 30, June 30, ($) 2009 2009 2008 2009 2008 Stock-based compensation 22,392 97,834 90,979 120,226 206,424
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 decrease in stock-based compensation in 2009 is due to the amortization in 2008 of most of the stock-based compensation, on the 1,108,000 options issued in the fourth quarter of 2007. The Company issued 40,000 stock options in Pine Cliff during the first six months of 2009. The Company estimated the 2009 stock options fair value at $3,350 ($0.08 per option) using the Black-Scholes option pricing model, assuming a weighted average risk free interest rate of 1.24 percent, weighted average expected volatility of 96.0 percent, weighted average expected life of 2.5 years and no annual dividend rate. Of the options outstanding as of June 30, 2009, $23,400 of stock-based compensation is remaining to be expensed in 2009 and 2010.
Depletion, Depreciation, and Accretion and Dry Hole Exploration Costs
During the first six months of 2009, the Company expensed $194,639 (2008 $128,544) for depletion, depreciation and accretion of its property and equipment. The increase is related to increased production volumes in the first half of 2009. The second quarter of 2009 had a slightly lower depletion, depreciation and accretion amount of $88,099 compared to Q1 2009 of $106,540 due to slightly lower production. The Company incurred $60,036 of capital costs in the second quarter of 2009 related to the three wells drilled in the Canadon Ramirez Concession in Argentina. These costs were written off as dry hole costs as the 2008 three-well exploration program was unsuccessful. No amounts were expensed to dry hole costs in the first half of 2008.
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 one percent 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 $ 356,778 Foreign exploration expenditures 10 5,295,915 Share issue costs 20 58,320 Canadian exploration expenditures 100 392,110 Canadian development expenditures 30 499,820 Canadian oil and gas expenditures 10 560,482 Non-capital loss carry forward(x) 100 4,556,066 $ 11,719,491 (x) $620,121 expires 2026, $1,523,672 expires 2027, $1,684,143 expires in 2028 and $728,130 expires in 2029
Non-Controlling Interest
A private foreign company (Foreign Corp.) owns seven percent of CanAmericas Energy Ltd. (CanAmericas), a 93 percent owned subsidiary of Pine Cliff. In 2008, losses in CanAmericas exceeded the non-controlling interest investment and therefore none of CanAmericas' loss in 2009 was allocated to the non-controlling interest.
Loss
Three months ended Six months ended June 30, March 31, June 30, June 30, June 30, ($) 2009 2009 2008 2009 2008 Loss (325,010) (498,532) (295,111) (823,542) (612,224) Loss per share (0.01) (0.01) (0.01) (0.01) (0.01)
The increase in loss for the first six months of 2009 compared to the first six months of 2008 was predominantly due to decreased interest income, increased depletion and dry hole costs and a foreign exchange loss versus a foreign exchange gain in 2008 partially offset by reduced G&A costs in 2009. The decrease in the Q2 2009 loss compared to Q1 2009 loss was predominantly due to the crown royalty recovery, reduced G&A costs and lower stock-based compensation.
Cash Flow from Operations
Three months ended Six months ended June 30, March 31, June 30, June 30, June 30, ($) 2009 2009 2008 2009 2008 Cash flow from operations (294,455) (229,307) (224,141) (523,762) (429,064) Cash flow from operations per share (0.01) (0.01) (0.00) (0.01) (0.01)
Cash flow deficiency increased in the first half of 2009 compared to the first half of 2008 as the Company had decreased interest income, increased production costs and increased taxes and a decrease in non-cash working capital adjustments, which were partially offset by higher oil and gas sales, a crown royalty recovery and decreased G&A costs. The reduction in cash flow from Q2 2009 compared to Q1 2009 was primarily due to a decrease in non-cash working capital adjustments, which was partially offset by lower G&A and production costs.
Related Party Transactions
Pine Cliff has a management agreement with Bonterra Corp, a wholly owned subsidiary of Bonterra Oil & Gas Ltd. (a company with common directors and management with Pine Cliff), to have Bonterra Corp provide executive services (President and CEO, CFO and COO), accounting services, oil and gas administration and office administration. The management fee consists of a monthly fee of $10,000 (2008 - $19,800), three percent of net earnings before income taxes plus minor general and administrative expenses incurred by Bonterra that were specifically attributable to Pine Cliff. Total fees for 2009 were $60,000 (2008 - $118,800). As at June 30, 2009, amounts owing to Bonterra Corp were $779 (December 31, 2008 - $592).