Peyto Exploration & Development Corp. press release
Pine Cliff Energy Ltd. Announces Third Quarter Results
TSX - Toronto Stock Exchange · Natural Gas · Natural Gas Liquids · Oil · Canada
Nov. 19, 2009 (Canada NewsWire Group) --
CALGARY, Nov. 19 /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 nine months ended September 30, 2009.
Highlights
Three Months Ended Nine Months Ended For the September 30 September 30 September 30 September 30 periods ended 2009 2008 2009 2008 FINANCIAL ($) Revenue - Oil and Gas 93,177 129,537 398,675 411,068 Cash Flow from Operations (74,702) (305,368) (598,464) (734,432) Per Share Basic and Diluted (0.00) (0.01) (0.01) (0.02) Net Loss (263,808) (505,953) (1,087,350) (1,118,177) Per Share Basic and Diluted (0.01) (0.01) (0.02) (0.02) Capital Expenditures and Acquisitions 600,732 1,511,745 730,099 4,309,347 Total Assets 4,900,934 11,621,915 Working Capital 991,619 3,440,165 Shareholders' Equity 4,089,767 11,400,311 OPERATIONS Oil and NGLs Barrels Per Day 1 1 1 1 Average Price ($ per barrel) 62.98 119.90 58.10 110.45 Natural Gas MCF Per Day 295 146 332 152 Average Price ($ per MCF) 3.13 8.74 4.13 9.18 Total Barrels of Oil Equivalent (BOE) Per Day(1) 51 24 57 25 (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 nine months ended September 30, 2009.
The Board of Directors and management continue to recognize that there is a need to evaluate the overall direction for the Company and continue to seek opportunities to add value.
Operations
Production during the third quarter of 2009 remained relatively stable quarter over quarter and averaged approximately 51 barrels of oil equivalent (BOE) per day as compared to 53 BOE per day in the second quarter of 2009.
During the third quarter of 2009, Pine Cliff participated in drilling two natural gas wells (0.3 net) on its Sundance property in Alberta. The wells are expected to be completed and tied-in for production prior to the end of November 2009. This additional production will assist the Company in advancing its operations to a position where it will generate positive cash flow. The Company will continue to evaluate drilling opportunities in this area.
Pine Cliff is reviewing its involvement in South America, is presently evaluating the political and business environment and has actively reduced its consulting services and other expenses in this area since the second quarter of 2009.
Positive changes in the Canadian energy sector and increased opportunities have focused Pine Cliff's efforts domestically rather than internationally. The Company intends to increase its activities in Canada by aggressively pursuing acquisitions and participating in a more active drill program.
Financial:
The Company continues to focus on decreasing general and administrative (G&A) expenses. G&A expenditures decreased by approximately 25 percent in the first nine months of 2009 compared to the first nine months of 2008 and by approximately 30 percent quarter over quarter. The decrease is due mainly to reduced contractor fees for services provided to the Company's South American activities and reduced management fees.
As of September 30, 2009, Pine Cliff had positive working capital of $991,619. These funds will be used to carry out the Company's remaining 2009 capital expenditures of approximately $400,000 relating to the completion and tie-in of the above-mentioned Sundance natural gas wells.
Outlook
The Board of Directors and management remain confident that Pine Cliff will be able to take advantage of the many opportunities that are available, redirect more of its activities towards a domestic perspective and reduce its activities in foreign jurisdictions.
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.
Quarterly Financial and Operational Highlights
2009 3rd 2nd 1st Financial ($) Revenue - Oil and Gas 93,177 111,773 193,725 Cash Flow from Operations (74,702) (294,455) (229,307) Per Share Basic and Diluted (0.00) (0.01) (0.01) Net Loss (263,808) (325,010) (498,532) Per Share Basic and Diluted (0.01) (0.01) (0.01) Capital Expenditures and Acquisitions 600,732 9,581 119,786 Total Assets 4,900,934 4,558,217 4,966,907 Working Capital 991,619 1,738,974 1,903,038 Shareholders' Equity 4,089,767 4,341,385 4,644,004 Operations Oil and NGLs (barrels per day) 1 2 1 Natural Gas (MCF per day) 295 312 392 2008 4th 3rd 2nd 1st Financial ($) Revenue - Oil and Gas 295,944 129,537 138,415 143,116 Cash Flow from Operations (68,211) (305,368) (224,141) (204,923) Per Share Basic and Diluted 0.00 (0.01) 0.00 0.00 Net Loss (6,423,691) (505,953) (295,111) (317,113) Per Share Basic and Diluted (0.14) (0.01) (0.01) (0.01) Capital Expenditures and Acquisitions 1,067,843 1,511,745 2,516,214 281,388 Total Assets 5,570,015 11,621,915 12,043,617 12,221,650 Working Capital 2,316,982 3,440,165 5,278,074 7,937,179 Shareholders' Equity 5,044,701 11,400,311 12,043,617 12,003,398 Operations Oil and NGLs (barrels per day) 2 1 - 4 Natural Gas (MCF per day) 453 146 142 168 2007 4th 3rd 2nd 1st Financial ($) 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 Nine months ended Sept. 30, June 30, Sept. 30, Sept. 30, Sept. 30, 2009 2009 2008 2009 2008 Crude oil and NGLs (barrels per day) 1 2 1 1 1 Natural gas (MCF per day) 295 312 146 332 152 Total BOE per day(1) 51 53 24 57 25 (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 Q3 2009, the Company participated in drilling two (0.3 net, 15 percent working interest in each well) natural gas wells on its Sundance property in Canada. The operator of the property has indicated that the wells will be completed and tied-in for production prior to the end of November 2009.
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 nine months of 2009 from this well is 208 MCF per day net to the Company.
Revenue
Three months ended Nine months ended Sept. 30, June 30, Sept. 30, Sept. 30, Sept. 30, ($) 2009 2009 2008 2009 2008 Revenue: Oil and gas sales 93,177 111,773 129,537 398,675 411,068 Average Realized Prices Crude oil and NGLs (per barrel) 62.98 62.14 119.90 58.10 110.45 Natural gas (per MCF) 3.13 3.62 8.74 4.13 9.18
Revenue from petroleum and natural gas sales for the first nine months of 2009 decreased by $12,393 from the first nine months of 2008 due to a 55 percent decrease in commodity prices for natural gas. This was mostly offset by the increased production from the gas well discussed above. A decrease in revenue from Q3 2009 to Q2 2009 was due to lower production volumes and reduced commodity prices for natural gas. Natural gas prices remain volatile due to numerous factors including drilling activity, supply shut-ins and industrial and weather related demand. The Company did not have hedging agreements in either 2009 or 2008 and presently does not have any future hedging agreements.
Royalties
Three months ended Nine months ended Sept. 30, June 30, Sept. 30, Sept. 30, Sept. 30, ($) 2009 2009 2008 2009 2008 Crown royalties (4,421) (49,052) 31,888 (8,917) 87,882 Gross overriding royalties 2,120 2,533 5,568 9,449 18,355 Total royalty expense (2,301) (46,519) 37,456 532 106,237
Crown royalties are lower in the first nine months of 2009 compared to the first nine 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. A further crown royalty adjustment of $5,800 was made in Q3 2009 related to reworks done of prior periods by the operator of Pine Cliff's other natural gas wells. Gross overriding royalties were also lower due to the significant decrease in natural gas prices. Gross overriding royalties were lower for Q3 2009 compared to Q2 2009 for the same reason.
Interest Income
Three months ended Nine months ended Sept. 30, June 30, Sept. 30, Sept. 30, Sept. 30, ($) 2009 2009 2008 2009 2008 Interest income 16 284 21,025 6,081 115,355
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 three quarters of 2008.
Production Costs
Three months ended Nine months ended Sept. 30, June 30, Sept. 30, Sept. 30, Sept. 30, ($) 2009 2009 2008 2009 2008 Production costs 36,848 24,680 27,187 119,337 66,709 $ per BOE 7.92 5.30 12.17 7.68 9.70
Production costs were higher in the first nine months of 2009 versus the first nine months of 2008 due to higher production volumes. The increase in production costs in the third quarter of 2009 compared to the second quarter of 2009 was due to adjustments to prior period charges in the second quarter.
General and Administrative
Three months ended Nine months ended Sept. 30, June 30, Sept. 30, Sept. 30, Sept. 30, ($) 2009 2009 2008 2009 2008 G&A expense 174,363 249,238 358,105 748,598 999,277
General and administrative (G&A) expenditures decreased by $250,679 from the first nine months of 2009 compared to the first nine months of 2008. The decrease in G&A expenses is due to reduced contractor fees for services provided to the Company's South American activities and reduced management fees. The decrease in G&A expenditures in Q3 2009 compared to Q2 2009 is for the same reasons. The majority of the G&A expenses pertain to the Company's operations in Argentina. With the unsuccessful completion of the three-well drill program on the Canadon Ramirez Concession, the Company's Board of Directors and management are reviewing the Company's involvement in Argentina and have reduced its consulting services and other international expenses since Q2 2009.
Pine Cliff does not have any employees at the present time but has engaged Bonterra Energy Corp. (Bonterra Corp) a related party (see Related Party section), to provide management services and engage the services of consultants on a contract or temporary basis. Pine Cliff's subsidiary CanAmericas Energy Ltd. (CanAmericas) has also engaged the consulting services of an individual professional as senior management and officer of CanAmericas.
Foreign Exchange Loss (Gain)
Three months ended Nine months ended Sept. 30, June 30, Sept. 30, Sept. 30, Sept. 30, ($) 2009 2009 2008 2009 2008 Foreign exchange loss (gain) 4,771 16,432 26,816 28,246 (77,118)
The Company maintains foreign denominated bank accounts to facilitate its foreign operations. The loss on foreign exchange in the first nine months of 2009 relates to the appreciation of the Canadian dollar with the Argentine peso and U.S. dollar versus depreciation in 2008.
Stock-Based Compensation
Three months ended Nine months ended Sept. 30, June 30, Sept. 30, Sept. 30, Sept. 30, ($) 2009 2009 2008 2009 2008 Stock-based compensation 12,190 22,392 106,998 132,416 313,422
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 nine 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 September 30, 2009, $11,180 of stock-based compensation is remaining to be expensed in 2009, 2010 and 2011.
Depletion, Depreciation, and Accretion and Dry Hole Exploration Costs
During the first nine months of 2009, the Company expensed $277,468 (2008 - $201,336) for depletion, depreciation and accretion of its property and equipment. The increase is related to increased production volumes in the first three quarters of 2009. The Company incurred $82,203 of capital costs in the first three quarters 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 three quarters 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 so 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 $ 343,117 Foreign exploration expenditures 10 5,373,217 Share issue costs 20 45,622 Canadian exploration expenditures 100 392,110 Canadian development expenditures 30 949,190 Canadian oil and gas expenditures 10 545,733 Non-capital loss carry forward* 100 4,839,645 $12,488,634 $700,214 expires 2026, $1,523,672 expires 2027, $1,684,143 expires in 2028 and $931,616 expires in 2029
Non-Controlling Interest
A private foreign company (Foreign Corp.) owns seven percent of CanAmericas Energy Ltd. (CanAmericas), a 93 percent owned subsidiary of Pine Cliff. In 2008, losses in CanAmericas exceeded the non-controlling interest investment and therefore none of CanAmericas' loss in 2009 was allocated to the non-controlling interest.
Loss
Three months ended Nine months ended Sept. 30, June 30, Sept. 30, Sept. 30, Sept. 30, ($) 2009 2009 2008 2009 2008 Loss (263,808) (325,010) (505,953) (1,087,350) (1,118,177) Loss per share (0.01) (0.01) (0.01) (0.02) (0.02)
The decrease in loss for the first nine months of 2009 compared to the first nine months of 2008 was predominantly due to crown royalty recoveries, reduced general and administrative costs and lower stock based compensation than 2008. These cost reductions were partially offset by lower interest income and increased production costs, depletion and depreciation and accretion, taxes, dry hole costs and a foreign exchange loss instead of a foreign exchange gain in 2009. The decrease in the Q3 2009 loss compared to Q2 2009 loss was predominantly due to the reduced G&A costs.
Cash Flow (Deficiency) from Operations
Three months ended Nine months ended Sept. 30, June 30, Sept. 30, Sept. 30, Sept 30, ($) 2009 2009 2008 2009 2008 Cash flow (deficiency) from operations (74,702) (294,455) (305,368) (598,464) (734,432) Cash flow (deficiency) from operations per share (0.00) (0.01) (0.01) (0.01) (0.02)
Cash flow deficiency decreased in the first three quarters of 2009 compared to the first three quarters of 2008 as the Company decreased its general and administrative costs. This decrease was partially offset by lower interest income and increased production costs. The reduction in cash flow deficiency from Q3 2009 compared to Q2 2009 was primarily due to an increase in non-cash working capital adjustments and reduced G&A 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 $90,000 (2008 - $178,200). As at September 30, 2009, amounts owing to Bonterra Corp were $916 (December 31, 2008 - $592). This agreement with Bonterra Corp that can be cancelled by giving 90 days notice.