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Antrim Energy Inc. ("Antrim" or "the Company") (TSX:AEN) (AIM:AEY), an
international oil and gas exploration and production company, today reported its
financial and operational results for the three month period ended March 31,
2010.
All financial figures are unaudited and in US dollars unless otherwise noted
HIGHLIGHTS:
-- Two new gas wells in Argentina drilled and cased
-- Conditional sale of 30% interest in Causeway
-- Average gas price in Argentina increased 29% to $1.85 per mcf over Q1
2009
-- Financial flexibility with strong cash position of US$ 29.4 million and
no debt
In the first quarter 2010, average production in Argentina increased to 1,835
barrels of oil equivalent per day ("boepd") compared to 1,590 boepd in the first
quarter 2009. Oil and gas revenue decreased slightly to $3.1 million for the
three months ended March 31, 2010 compared to $3.2 million for the same period
in 2009. Higher gas sales volumes and higher product prices were offset by lower
oil sales volumes due to the sale of the Puesto Guardian field in 2010.
Antrim generated cash flow from operations of $0.2 million in first quarter 2010
compared to $0.3 million in 2009. Cash flow decreased due to higher general and
administrative costs and lower interest and other revenue partially offset by
lower operating costs. Current production in Argentina is approximately 1,800
boepd.
Antrim is in discussions with several potential industry partners to accelerate
the development of the Fyne and Greater Fyne areas. Discussions with floating
production storage and offloading ("FPSO") providers as well as local existing
infrastructure owners to select the most efficient production export route for
the Fyne Field are on-going. Engineering studies are continuing for a subsea
tieback scheme to nearby third party infrastructure.
On March 4, 2010, Antrim announced the signing of a Conditional Letter Agreement
("CLA") with Valiant Petroleum plc ("Valiant") to sell a 30% interest in
Causeway. Antrim will receive up to a $21.75 million carried contribution
towards the development costs of bringing the field to production start-up.
Completion of the transaction is subject to several conditions including the
sanction of a Field Development Plan ("FDP") by the UK Department of Energy and
Climate Change ("DECC") which is anticipated in early 2011.
In Argentina, commodity prices continue to rise as increasing mainland demand
has resulted in increased market prices since late 2009. The Company commenced
its eight well drilling program in late February targeting liquid-rich gas
bearing reservoirs in Tierra del Fuego. Of the five wells drilled to May 12,
2010, two were cased as gas wells that flow tested at rates of 2.5 and 10
million cubic feet per day plus liquids. The most recent well has been drilled
and logged with preliminary analysis indicating that it will also be cased for
gas production. Two wells were plugged and abandoned after failing to encounter
reservoir quality sands.
Financial and Operating Results (unaudited)
Three Months Ended March 31
2010 2009
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Financial Results ($000's) except per share
amounts)
----------------------------------------------
Revenue 3,116 3,225
Cash flow from operations 167 283
Cash flow from operations per share 0.00 0.00
Net (loss) (2,111) (1,850)
Net (loss) per share - basic (0.02) (0.01)
Total assets 289,518 259,066
Working capital 30,733 32,431
Expenditures on petroleum and natural gas
properties 990 2,467
Debt - -
Common Shares Outstanding (000's)
----------------------------------------------
End of period 135,353 135,322
Weighted average - basic 135,352 135,322
Weighted average - diluted 137,342 135,322
Production
----------------------------------------------
Oil, natural gas and NGL production (boe per
day) (1) 1,835 1,590
1. The boe conversion ratio of 6 mcf:1 bbl is based on an energy
equivalency conversion method primarily applicable at the burner tip and
does not represent a value equivalency at the wellhead.
OVERVIEW OF OPERATIONS
United Kingdom
Fyne Field
The conditional divestiture of an interest in Causeway in March 2010 allows
Antrim to concentrate on the development of its core UK asset, the Fyne Area
located in the central North Sea in block 21/28a. In addition to the 17.5
million barrels (net) of proved plus probable reserves in the Fyne licence,
Antrim holds 100% interest in three adjacent licences (total of four blocks)
comprising the Greater Fyne Area. Antrim's strategy in this core area is to
accelerate its development by working closely with industry partners. Antrim is
in discussions with several potential industry partners to accelerate the
development of the Fyne and Greater Fyne areas.
Antrim is also in discussion with floating production storage and offloading
("FPSO") providers as well as local existing infrastructure owners to select the
most efficient production export route for the Fyne Field. An FPSO
pre-qualification process has been conducted and engineering studies are
continuing for an alternative subsea tieback scheme to nearby third party
infrastructure. The production system is being engineered to handle up to 20,000
barrels of oil per day ("bopd") directly from the Fyne Field, with potential
capacity add-ons to handle additional volume from the satellite fields.
Antrim intends to select the optimum development scheme and prepare a FDP for
submission in late 2010.
In addition to the Fyne development, Antrim is evaluating drilling prospects on
its surrounding licences (the 'Greater Fyne Area', Antrim 100%) with a view to
drilling in 2011. These licences hold a best estimate of 54.9 million barrels
recoverable prospective resources with a range of 29.7 million barrels (low
estimate) to 105.5 million barrels (high estimate). These prospective resources
have been risked for chance of discovery but not for chance of development. If a
discovery is made, there is no certainty that it will be developed, or if it is
developed, there is no certainty as to the timing of such development. The
prospective resources referenced herein were estimated by Mr. Terry Lederhouse,
P. Eng., Vice President, Commercial of the Company. Within the meaning of NI
51-101, Mr. Lederhouse is a qualified reserve evaluator but is not independent
in respect to the Company. The estimates were prepared in accordance with the
procedures contained in the Canadian Oil and Gas Evaluation Handbook.
26th UK Offshore Licensing Round
In April 2010, Antrim participated in the 26th UK licensing round building on
the success already established in the Greater Fyne Area. The results of our
bids are expected in the second half of 2010.
Causeway Field
Antrim signed a Conditional Letter Agreement with Valiant to sell a 30% interest
in Causeway in March 2010. In return, Antrim will receive up to $21.75 million
contributed to the development costs of bringing the field to production
startup. Completion of the transaction is subject to several conditions,
including sanction of the FDP by DECC. As part of the transaction, Antrim will
transfer related tax losses and has transferred operatorship of the field to
Valiant. Valiant will endeavor to finalize a revised FDP with respect to the
development of the Causeway Field for submission to DECC during 2010. Following
completion of the transaction, Antrim will retain a 35.5% working interest in
the Causeway Field.
Argentina
Antrim's interest in Argentina has shifted with a greater focus on its core
assets in Tierra del Fuego (Antrim 25.78%). An eight well drilling program in
Tierra del Fuego, designed to increase gas and NGL production from the Los
Flamencos gas field, commenced in late February 2010. Of the five wells drilled
to May 12, 2010, two were cased as gas wells that flow tested at rates of 2.5
and 10 million cubic feet per day plus liquids. The most recent well has been
drilled and logged with preliminary analysis indicating that it will also be
cased for gas production. Two wells were plugged and abandoned after failing to
encounter reservoir quality sands.
The Company has applied for "Gas Plus" pricing incentives for new gas that will
be produced from the wells being drilled in 2010. If approved by the federal
authorities, this will permit Antrim to sell its gas in the higher-priced
industrial market on the mainland.
Additional export capacity from the Tierra del Fuego area is anticipated later
this year with the completion of a 600 million cubic feet per day capacity gas
pipeline across the Straits of Magellan that will tie into the national gas
network accessing the high demand Buenos Aires Province. Antrim, as part of a
larger Tierra del Fuego consortium of companies, has contributed to the
construction of the new pipeline through the purchase of interest bearing bonds.
Antrim has sold its non-operated 40% working interest in Puesto Guardian
effective January 1, 2010, for consideration in the form of a $1.4 million
non-interest bearing promissory note. The Puesto Guardian Field was reaching the
end of its economic life and the purchaser will retain responsibility of all
abandonment and environmental remediation work on the concession.
Effective February 25, 2010, Antrim relinquished its non-operated 70% working
interest in Medianera and its non-operated 70% working interest in Tres Nidos
Sur. Medianera production, as previously reported, was shut-in in February 2009.
Well abandonment and seismic and drilling obligations on the properties have
been assumed by the operator of both concessions.
Outlook
Antrim's strong financial position which includes unrestricted cash available of
$29.4 million and no debt provides Antrim with financial and operational
flexibility.
With the expectation that Causeway will be funded to production and with the
intention to acquire a development partner for Fyne, Antrim's other North Sea
activity will be weighted towards adding value by exploring for new hydrocarbons
and appraising existing discoveries.
The Company will also concentrate on the high value production assets in Tierra
del Fuego with a view to increasing production in a rising price commodity
market. The Antrim team intends to grow the Argentine operation primarily
through new in-country opportunities using the cash flow from existing Argentine
operations.
Antrim is also considering other global exploration opportunities.
Antrim views the bilateral strategy as central to its corporate development,
balancing longer term and capital-intensive investments in the UK North Sea with
shorter investment cycle on-shore exploration and production opportunities.
Antrim's daily production in Argentina is expected to average approximately
1,800 net boepd in 2010.
About Antrim
Antrim Energy Inc. is a Canadian, Calgary based high-growth junior oil and gas
exploration and production company with assets in the UK North Sea and
Argentina. Antrim is listed on the Toronto Stock Exchange (AEN) and on the
London Stock Exchange's Alternative Investment Market (AEY). Visit
www.antrimenergy.com for more information.
Forward-Looking Statements
This MD&A and any documents incorporated by reference herein contain certain
forward-looking statements and forward-looking information which are based on
Antrim's internal reasonable expectations, estimates, projections, assumptions
and beliefs as at the date of such statements or information. Forward-looking
statements often, but not always, are identified by the use of words such as
"seek", "anticipate", "believe", "plan", "estimate", "expect", "targeting",
"forecast", "achieve" and "intend" and statements that an event or result "may",
"will", "should", "could" or "might" occur or be achieved and other similar
expressions. These statements are not guarantees of future performance and
involve known and unknown risks, uncertainties, assumptions and other factors
that may cause actual results or events to differ materially from those
anticipated in such forward-looking statements and information. Antrim believes
that the expectations reflected in those forward-looking statements and
information are reasonable but no assurance can be given that these expectations
will prove to be correct and such forward-looking statements and information
included in this MD&A and any documents incorporated by reference herein should
not be unduly relied upon. Such forward-looking statements and information speak
only as of the date of this MD&A or the particular document incorporated by
reference herein and Antrim does not undertake any obligation to publicly update
or revise any forward-looking statements or information, except as required by
applicable laws.
In particular, this MD&A and any documents incorporated by reference herein,
contain specific forward-looking statements and information pertaining to the
quality of and future net revenues from Antrim's reserves of oil, natural gas
liquids ("NGL") and natural gas production levels. This MD&A may also contain
specific forward-looking statements and information pertaining to commodity
prices, foreign currency exchange rates and interest rates, capital expenditure
programs and other expenditures, supply and demand for oil, NGL's and natural
gas, expectations regarding Antrim's ability to raise capital, to continually
add to reserves through acquisitions and development, the schedules and timing
of certain projects, Antrim's strategy for growth, Antrim's future operating and
financial results, treatment under governmental and other regulatory regimes and
tax, environmental and other laws and the start up of production from the
Causeway or Fyne fields in the UK North Sea.
With respect to forward-looking statements contained in this MD&A and any
documents incorporated by reference herein, Antrim has made assumptions
regarding Antrim's ability to finalize the sale of a portion of Causeway to
Valiant, obtain access to sub-sea or floating facilities including
transportation and production storage offloading providers in the UK North Sea
for production from Fyne and Causeway, obtain additional drilling rigs and other
equipment in a timely manner, obtain regulatory approvals, timing of completion
of the pipeline across the Straits of Magellan, future oil and natural gas
production levels from Antrim's properties and the price obtained from the sales
of such production, the level of future capital expenditure required to exploit
and develop reserves, the ability of Antrim's partners to meet their commitments
as they relate to the Company and more specifically the ability of Valiant to
honour its commitments are identified in the Conditional Letter Agreement.
Antrim's ability to obtain financing on acceptable terms, the general stability
of the economic and political environment in which Antrim operates and the
future of oil and natural gas pricing. In respect to these assumptions, the
reader is cautioned that assumptions used in the preparation of such information
may prove to be incorrect.
Antrim's actual results could differ materially from those anticipated in these
forward-looking statements and information as a result of assumptions proving
inaccurate and of both known and unknown risks, including risks associated with
the exploration for and development of oil and natural gas reserves, operational
risks and liabilities that are not covered by insurance, volatility in market
prices for oil, NGLs and natural gas, changes or fluctuations in oil, NGLs and
natural gas production levels, changes in foreign currency exchange rates and
interest rates, the ability of Antrim to fund its substantial capital
requirements and operations, risks associated with ensuring title to the
Company's properties, liabilities and unexpected events inherent in oil and gas
operations, including geological, technical, drilling and processing problems,
the accuracy of oil and gas reserve estimates and estimated production levels as
they are affected by the Antrim's exploration and development drilling and
estimated decline rates, in particular the future production rates at the
Causeway and Fyne fields in the UK North Sea and at the Tierra del Fuego
properties in Argentina. Additional risks include the ability to effectively
compete for, among other things, capital, acquisitions of reserves, undeveloped
lands and skilled personnel, incorrect assessments of the value of acquisitions,
Antrim's success at acquisition, exploitation and development of reserves,
changes in general economic, market and business conditions in Canada, North
America, Argentina, South America, the United Kingdom, Europe and worldwide,
actions by governmental or regulatory authorities including changes in income
tax laws or changes in tax laws, royalty rates and incentive programs relating
to the oil and gas industry and more specifically, changes to the capped market
price in Argentina, changes in environmental or other legislation applicable to
Antrim's operations, and Antrim's ability to comply with current and future
environmental and other laws, adverse regulatory rulings, order and decisions
and risks associated with the nature of the Common Shares.
Statements relating to "resources" are deemed to be forward-looking statements.
The estimates of remaining recoverable prospective resources have been risked
for chance of discovery, but have not been risked for chance of development. If
a discovery is made, there is no certainty that it will be developed or, if it
is developed, there is no certainty as to the timing of such development.
Many of these risk factors, other specific risks, uncertainties and material
assumptions are discussed in further detail throughout the MD&A and in Antrim's
management discussion and analysis for the year ended December 31, 2009. Readers
are specifically referred to the risk factors described in this MD&A under "Risk
Factors" and in other documents Antrim files from time to time with securities
regulatory authorities. Copies of these documents are available without charge
from Antrim or electronically on the internet on Antrim's SEDAR profile at
www.sedar.com. Readers are cautioned that this list of risk factors should not
be construed as exhaustive.
The calculation of barrels of oil equivalent ("boe") is based on a conversion
rate of six thousand cubic feet of natural gas ("mcf") to one barrel of crude
oil ("bbl"). Boe's may be misleading, particularly if used in isolation. A boe
conversion ratio of 6 mcf: 1 bbl is based on an energy equivalency conversion
method primarily applicable at the burner tip and does not represent a value
equivalency at the wellhead.
Qualified Person Review
In accordance with AIM guidelines, Mr. Kerry Fulton, P. Eng and Vice President,
Operations for Antrim, is the qualified person that has reviewed the technical
information contained in this MD&A.
Antrim Energy Inc.
Consolidated Balance Sheets
As at March 31, 2010 and December 31, 2009 (unaudited)
----------------------------------------------------------------------------
2010 2009
$ $
------------------------------
Assets
Current assets
Cash and cash equivalents 29,375,148 31,168,669
Accounts receivable 3,050,390 3,278,166
Inventory and prepaid expenses 847,422 937,513
------------------------------
33,272,960 35,384,348
Petroleum and natural gas properties 253,869,990 248,012,987
Office equipment 535,391 447,160
Investments and other non-current assets 1,839,629 1,274,384
------------------------------
289,517,970 285,118,879
------------------------------
------------------------------
Liabilities
Current liabilities
Accounts payable and accrued liabilities 2,540,046 3,424,596
------------------------------
2,540,046 3,424,596
------------------------------
Asset retirement obligation 5,382,974 5,696,945
------------------------------
7,923,020 9,121,541
------------------------------
Commitments and contingencies
Shareholders' equity
Share capital 311,947,912 311,946,244
Contributed surplus 16,107,319 15,605,999
Deficit (51,697,746) (49,586,859)
Accumulated other comprehensive loss 5,237,465 (1,968,046)
------------------------------
281,594,950 275,997,338
------------------------------
289,517,970 285,118,879
------------------------------
------------------------------
Antrim Energy Inc.
Consolidated Statements of Income (Loss) and Deficit
For the Three Months ended March 31, 2010 and 2009 (unaudited)
----------------------------------------------------------------------------
2010 2009
$ $
------------------------------
Revenue
Oil and gas 3,115,814 3,225,083
Royalties (457,963) (353,205)
Export tax (57,065) (10,397)
------------------------------
2,600,786 2,861,481
Interest and other income 478,067 580,809
------------------------------
3,078,853 3,442,290
------------------------------
Expenses
Operating 1,347,654 1,736,275
General and administrative 1,534,375 1,380,521
Stock-based compensation 339,236 856,532
Depletion and depreciation 1,655,090 1,241,936
Accretion of asset retirement obligations 79,177 130,797
Foreign exchange (gain) loss 231,250 24,007
------------------------------
5,186,782 5,370,068
------------------------------
Loss for the period before income taxes (2,107,929) (1,927,778)
Income tax expense (recovery)
Current 2,958 2,937
Future - (80,790)
------------------------------
2,958 (77,853)
------------------------------
Net Loss for the period (2,110,887) (1,849,925)
Deficit - Beginning of period (49,586,859) (37,027,268)
------------------------------
Deficit - End of period (51,697,746) (38,877,193)
------------------------------
------------------------------
Net loss per common share
Basic (0.02) (0.01)
Diluted (0.02) (0.01)
Antrim Energy Inc.
Consolidated Statements of Comprehensive Income (Loss) and Accumulated
Other Comprehensive Income (Loss)
For the Three Months ended March 31, 2010 and 2009 (unaudited)
----------------------------------------------------------------------------
2010 2009
$ $
------------------------------
Net loss for the period (2,110,887) (1,849,925)
Comprehensive income (loss)
Unrealized (loss) gain on translation of
consolidated financial statements into
reporting currency 7,205,511 (6,999,541)
------------------------------
Comprehensive income (loss) 5,094,624 (8,849,466)
------------------------------
Accumulated other comprehensive income (loss)
- Beginning of period (1,968,046) (31,318,787)
Change in accounting policy - (2,938,629)
Other comprehensive (loss) income 7,205,511 (6,999,541)
------------------------------
Accumulated other comprehensive loss - End of
period 5,237,465 (41,256,957)
------------------------------
------------------------------
Antrim Energy Inc.
Consolidated Statements of Cash Flows
For the Three Months ended March 31, 2010 and 2009 (unaudited)
----------------------------------------------------------------------------
2010 2009
$ $
------------------------------
Cash Provided by (used in)
Operating Activities
Net loss for the period (2,110,887) (1,849,925)
Items not involving cash:
Depletion and depreciation 1,655,090 1,241,936
Accretion of asset retirement obligations 79,177 130,797
Stock-based compensation expense 339,236 856,532
Foreign exchange (gain) loss 204,071 (15,106)
Future income taxes - (80,790)
------------------------------
166,687 283,444
Change in non-cash working capital items 182,597 (559,312)
------------------------------
349,284 (275,868)
------------------------------
Financing Activities
Issue of common shares 992 -
Share issue expenses - -
------------------------------
992 -
------------------------------
Investing Activities
Office equipment (156,923) (5,859)
Petroleum and natural gas properties (990,304) (2,467,303)
Other non-current assets (565,681) 1,644
Change in non-cash working capital items (975,148) (721,339)
------------------------------
(2,688,056) (3,192,857)
------------------------------
Effects of foreign exchange on cash 544,259 (628,728)
Net (decrease) increase in cash and cash
equivalents (1,793,521) (4,097,453)
Cash and cash equivalents - Beginning of
period 31,168,669 35,337,007
------------------------------
Cash and cash equivalents - End of period 29,375,148 31,239,554
------------------------------
------------------------------
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