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 8 /CNW/ - Pine Cliff Energy Ltd. (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, 2007. It has been a challenging year for the Company. As advised in previous releases, Pine Cliff elected to focus most of its activities in South America and a lesser amount in North America. This focus may have to be modified in the future.
Throughout most of 2007 the Company was successful in advancing its assessment and evaluation of its large land position in Argentina (1,165,000 gross acres; 605,000 net acres). However, in November 2007, unannounced and without industry consultation, the Argentina Federal government increased the export tax on crude oil to a rate of 100 percent for all revenue over $42 West Texas Intermediate price.
This increased export tax made it necessary for the Company to reassess the economics for the projects in Argentina. It has been concluded that although the net backs will not be as good, they are still economical but at a lower rate of return. Pine Cliff will therefore continue with its planned drill program in April whereby three anomalies will be drilled and will continue with its aero-magnetic and aero-gravity survey and will acquire 39 square miles of 3D seismic on its largest property in the San Jorge Basin. The Company is currently conducting a 39 square mile 3D seismic program over its property in the Neuquen Basin.
Another reason for continuing in Argentina is that the increased export tax will likely result in a reduction in activity in that country and that may cause the Argentine government to reassess this increased export tax.
The Company also believes because of energy shortages in Argentina, the government will have to make energy policy changes to stimulate investment in the oil and gas sector.
Overall the position in Argentina is still of benefit to Pine Cliff. A land position of this magnitude is difficult to obtain and provides the potential for a large number of drill locations on anomalies that may be large in size.
In 2008 Pine Cliff will also increase its activities in Canada and the United States. The focus will be to acquire production and to participate in more drilling.
HIGHLIGHTS 2007 2006 Financial
Revenue - Oil and Gas $ 582,950 $ 661,100 Funds flow from Operations (1) (934,998) (424,248) Per Share Basic (0.02) (0.01) Per Share Fully Diluted (0.02) (0.01) Net Loss (1,381,454) (1,014,605) Per Share Basic (0.04) (0.03) Per Share Fully Diluted (0.04) (0.03) Capital Expenditures and Acquisitions 2,797,763 271,926 Shareholders' Equity 12,205,066 4,239,638 Shares Outstanding (December 31) 45,275,695 36,523,041
Operations
Oil and Liquids (barrels per day) 4 5 Average Price ($ per barrel) 62.75 63.88 Natural Gas (MCF per day) 198 195 Average Price ($ per MCF) 6.91 7.58 Total Barrels per Day (BOE per day) (2) 37 38
Reserves (3)
Oil and Liquids (barrels) Proved Developed Producing (Gross) 4,800 10,200 Proved plus Probable (Gross) 6,900 13,700 Natural Gas (MCF) Proved Developed Producing (Gross) 251,000 326,000 Proved plus Probable (Gross) 363,000 440,000
Share Trading Statistics
Share Prices (based on daily closing price) High $1.60 $0.76 Low $0.40 $0.40 Close $0.75 $0.65 Daily Average Trading Volume 6,783 3,754
(1) Funds flow from operations is not a recognized measure under GAAP. Management believes that in addition to net earnings, funds flow from operations is a useful supplemental measure as it demonstrates the Company's ability to generate the cash 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, 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.
(3) Gross reserves relate to the Company's ownership of reserves before royalty interests.
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.
REVIEW OF OPERATIONS
Reserves
The Company engaged the services of Sproule Associates Limited to prepare a reserve evaluation with an effective date of December 31, 2007. The reserves are located in the Province of Alberta. The majority of the Company's production is comprised of natural gas. The Company's main gas producing area is located in the Sundance area of West Central Alberta. The gross reserve figure in the following charts represents the Company's ownership interest before royalties and the net figure is after deductions for royalties.
SUMMARY OF OIL AND GAS RESERVES AS OF DECEMBER 31, 2007 FORECAST PRICES AND COSTS
RESERVES Natural Natural Gas Gas Liquids Gross Net Gross Net RESERVE CATEGORY (MMcf) (MMcf) (Mbbl) (Mbbl) PROVED Developed Producing 251 199 5 3 TOTAL PROVED 251 199 5 3 PROBABLE 112 87 2 1 TOTAL PROVED PLUS PROBABLE 363 286 7 4
RECONCILIATION OF COMPANY GROSS RESERVES BY PRINCIPAL PRODUCT TYPE FORECAST PRICES AND COSTS
Natural Gas Gross Proved Gross Plus Gross Prob- Prob- Proved able able (MMcf) (MMcf) (MMcf) December 31, 2006 326 114 440 Technical Revisions (7) (3) (10) Economic factors 5 1 6 Production (73) - (73) December 31, 2007 251 112 363
SUMMARY OF NET PRESENT VALUES OF FUTURE NET REVENUE AS OF DECEMBER 31, 2007 FORECAST PRICES AND COSTS
NET PRESENT VALUE OF FUTURE NET REVENUE After Income Taxes Discounted at (%/year) 0 5 10 15 20 (M$) RESERVE CATEGORY PROVED Developed Producing 1,164 1,102 896 805 732 TOTAL PROVED 1,164 1,102 896 805 732 PROBABLE 602 440 336 267 219 TOTAL PROVED PLUS PROBABLE 1,766 1,452 1,232 1,072 951
Alberta Gas Year Edmonton Par Reference Propane Butane Pentane Price Price Plantgate (Cdn $ (Cdn $ (Cdn $ (Cdn $ (Cdn $ per barrel) per MCF) per barrel) per barrel) per barrel) 2008 88.17 6.19 52.29 65.72 90.30 2009 84.54 6.94 50.14 63.01 86.58 2010 83.16 7.46 49.32 61.98 85.17 2011 81.26 7.50 48.20 60.57 83.23 2012 80.73 7.41 47.88 60.17 82.68 2013 81.25 7.58 48.19 60.56 83.21 2014 82.88 7.76 49.16 61.78 84.88 2015 84.55 7.94 50.14 63.02 86.59 2016 86.25 8.12 51.15 64.28 88.33 2017 87.98 8.31 52.18 65.58 90.10
Natural gas and liquid prices escalate at 2% thereafter.
The following cautionary statements are specifically required by NI 51-101.
It should not be assumed that the estimates of future net revenue presented in the above tables represent the fair market value of the reserves. There is no assurance that the forecast prices and costs assumptions will be attained and variances could be material.
Disclosure provided herein in respect of BOE's may be misleading, particularly if used in isolation. In accordance with NI 51-101, a BOE conversion ratio of 6mcf:1bbl has been used in all cases in this disclosure. This BOE conversion ratio is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.
Estimates of reserves and future net revenues for individual properties may not reflect the same confidence level as estimates of reserves and future net revenues for all properties due to the effects of aggregation.
Land Holdings
The Company's holdings of natural gas leases and rights as of December 31, 2007 and 2006 are as follows: 2007 2006 Gross Net Gross Net Acres Acres Acres Acres Alberta, Canada 7,360 2,802 7,360 2,802 San Jorge Basin, Argentina 912,810 542,410 - - Neuquen Basin, Argentina 252,048 63,012 - - 1,172,218 608,224 7,360 2,802
Petroleum and Natural Gas Capital Expenditures
The following table summarizes petroleum and natural gas capital expenditures incurred by the Company on acquisitions, land, seismic, exploration and development drilling and production facilities for the years ended December 31:
2007 2006 Exploration and development costs $2,790,208 $ 226,193 Acquisitions - - Land costs - - Net petroleum and natural gas capital expenditures $2,790,208 $ 226,193
PROPERTY DISCUSSIONS
Pine Cliff's only producing property is located in the Sundance area of West Central Alberta. The Company has a 13.7% average working interest in 5,280 acres (723 net) of Crown land in the area. There are currently 5 (0.53 net) wells producing. The wells are producing from multiple Cretaceous sands ranging from the Cadomin to the Belly River. Current production from the five wells is approximately 1,550 mcf/day gross, 186 mcf/day net to Pine Cliff. NGL's are produced in association with the natural gas.
There continues to be significant industry activity in the area and the Company continues to monitor and evaluate non-producing properties for additional prospective drilling locations as the information becomes available. The increased activity in the area has caused pipeline pressures to increase as new wells are brought on stream, adversely affecting Pine Cliff's wells periodically. A third party plant expansion completed in November should alleviate this problem.
In 2006 Pine Cliff had decided to pursue oil and gas opportunities in South America. In 2007, the Company was successful in negotiating three separate farm-in agreements to acquire an interest in over 50 gross (26 net) townships of land in Argentina.
Canadón Ramirez Farm-In, Argentina
The Company through its 93 percent owned subsidiary, CanAmericas Energy Ltd. ("CanAmericas") has earned a 49% interest in 47,940 gross acres (23,490 net acres) of an exploitation concession situated in the western part of the San Jorge Basin by committing to fund 100% of exploration costs totaling $US 5,500,000 over the next two years. The commitment includes conducting a 3D seismic program and drilling three wells in the first year at an estimated cost of $US 4,630,000. In the second year of the commitment CanAmericas is committed to spend the remainder of the $US 5,500,000 on drilling.
The acreage is bordered by several producing oil fields. Over 40 separate prospective reservoirs belonging to the Upper-Mid Cretaceous-aged Bajo Barreal and Castillo Formations are known to exist within the farm in area at depths between 600 - 1,500 meters. Additionally, Neocomian aged source rocks within the farm in area have been proven to be oil generating and over pressured.
CanAmericas has completed a 190 square kilometer 3D seismic survey and will be commencing with a three well drilling program in April 2008 which is to be completed by the end of May. An agreement was made with an adjacent operator to trade seismic data providing Pine Cliff with data over a total of 240 square kilometers. This has allowed CanAmericas to tie in its seismic data to seismic conducted over an existing producing oil field.
San Jorge Basin Farm-In, Argentina
The Company through its 93 percent owned subsidiary, CanAmericas, has negotiated exclusive rights to progressively earn a 60% interest in 864,870 gross acres (518,920 net acres) of an exploration permit situated in the north-central San Jorge basin. CanAmericas has the right to become operator of the Permit and will likely decide to do so after it has completed its due diligence.
Subject to completion of the due diligence, the exclusive rights commit CanAmericas to fund 100% of the costs to conduct an aero-magnetic and aero-gravity survey over the entire permit area, acquire 39 square miles of 3D seismic, and drill two exploration wells to earn a 30% participating interest in the entire permit. The surveys are to be completed within one year of the effective date of the agreement and the wells are to be drilled within two years of the effective date.
CanAmericas will earn an additional 30% in the entire permit by drilling two additional wells within three years of the effective date of the agreement. CanAmericas will receive 100 percent of cash flow from this property until it has recovered 100 percent of its costs for the two work programs. The estimated cost for both work programs is $US 4,620,000. After completion of the two work programs costs will be shared on a 60 percent CanAmericas and 40 percent farmor basis.
Principal reservoir objectives are multiple sands of the Upper-Mid Cretaceous Bajo Barreal and Castillo Formations which are known to exist throughout the permit at depths ranging between 300 - 1,500 meters. A producing oil field lies adjacent to the southern border of this permit and existing seismic data and well control suggests the productive trend may extend into the southern portion of this permit. Additionally, numerous oil and gas shows encountered by older wells drilled throughout the permit during the 1960's - 1980's prove that the permit contains an active hydrocarbon system.
CanAmericas will initially acquire the regional aero-gravity and aero-magnetic surveys over the entire permit and with this information, and existing well and 2D seismic coverage, will determine where to best conduct the required 3D seismic survey. The 3D coverage is expected to assist in better understanding strategraphic environments that were previously identified from existing 2D seismic coverage.
CanAmericas commitment and earn-in in this property is subject to final granting of the concession for this property by the provincial government to the Farmor. The finalization for this concession is ongoing and is expected to be completed in the second quarter of 2008. The work commitments are expected to commence shortly thereafter.
Laguna de Piedra Farm-In, Argentina
The Company through its 93 percent owned subsidiary, CanAmericas, has earned a 25 percent interest in 252,944 gross acres (63,236 net acres) of the Laguna de Piedra exploration concession operated by Golden Oil, and is situated on the southeast flank of the prolific Neuquen Basin. The concession is adjacent to the Estacion Fernandex Oro oil field situated to the northwest, and adjacent to Flor de Roca, General Roca, and Don Jose oil fields to the north. These fields collectively produce from the Lower Cretaceous - Jurassic aged Quintuco, Lotena, Los Molles, and Punta Rosada Formations. Additionally, it is believed that the PreCuyo interval may also have significant potential, as it lies on trend with Chevron's La Yassera and Loma Negra fields, and is in a similar deposition setting as Petrolifera's recent Puesto Morales Field discoveries. Expected target depths range from 500 to 2,200 meters. There are 140 kilometers of existing 2D seismic lines, but no well has ever been drilled on the block. Plans include reprocessing the existing seismic date, and acquiring 100 square kilometers of proprietary 3D seismic to mature the inventory of existing leads. The 3D seismic will be shot in April of 2008. CanAmericas share of the 3D program is estimated at $US 1,080,000.
FINANCIAL AND OPERATIONAL
Quarterly Financial and Operational Highlights
2007 4th 3rd 2nd 1st Financial
Revenue - Oil and Gas $ 112,685 $ 95,160 $ 176,590 $ 198,515 Funds Flow from Operations(1) (228,913) (287,764) (252,435) (165,886) Per Share Basic (0.01) (0.01) (0.01) (0.00) Per Share Diluted (0.01) (0.01) (0.01) (0.00) Net Loss (381,561) (383,510) (346,274) (270,109) Per Share Basic (0.01) (0.01) (0.01) (0.01) Per Share 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 Shareholder's Equity 12,205,066 3,371,089 3,749,025 4,008,304 Operations Oil and Liquids (barrels per day) 2 1 5 7 Natural Gas (MCF per day) 182 163 226 226
2006 4th 3rd 2nd 1st Financial
Revenue - Oil and Gas $ 170,231 $ 90,386 $ 108,413 $ 292,070 Funds Flow from Operations(1) (51,833) (113,095) (337,020) 77,700 Per Share Basic (0.00) (0.00) (0.01) 0.00 Per Share Diluted (0.00) (0.00) (0.01) 0.00 Net Loss (209,575) (211,784) (526,107) (67,139) Per Share Basic (0.01) (0.01) (0.01) (0.00) Per Share Diluted (0.01) (0.01) (0.01) (0.00) Capital Expenditures and Acquisitions 19,227 (3,463) 124,236 131,926 Total Assets 4,494,010 4,700,305 4,892,079 5,373,147 Working Capital 2,963,513 3,030,822 3,175,577 3,625,133 Shareholder's Equity 4,239,638 4,411,915 4,589,015 5,093,951 Operations Oil and Liquids (barrels per day) 3 5 4 9 Natural Gas (MCF per day) 226 131 139 284
(1) Funds flow from operations is not a recognized measure under GAAP. Management believes that in addition to net earnings, funds flow from operations is a useful supplemental measure as it demonstrates the Company's ability to generate the cash 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, foreign exchange loss and asset retirement expenditures.