NOT FOR DISTRIBUTION TO U.S. NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE
UNITED STATES OF AMERICA.
Manitok Energy Inc. (the "Corporation" or "Manitok") (TSX VENTURE:MEI) announces
its financial and operating results for the first quarter of 2014.
The full text of Manitok's first quarter report containing its unaudited
condensed interim financial statements as at and for the three months ended
March 31, 2014 and the related management's discussion and analysis are
available electronically on Manitok's profile on the System for Electronic
Document Analysis and Retrieval ("SEDAR") at www.sedar.com and also on Manitok's
website at www.manitokenergy.com. All dollar figures are in Canadian dollars
unless otherwise noted.
First Quarter 2014 Operational & Financial Highlights:
-- Record first quarter production averaged 5,351 boe/d (59% light oil and
liquids) which is a 49% increase over production of 3,586 boe/d (50%
light oil and liquids) in the first quarter of 2013. Production
continued to increase over comparable quarters despite closing an asset
divestiture of approximately 777 boe/d (34 % sweet natural gas and 60%
sour natural gas) on February 28, 2014.
-- Increased light oil production by 78% which increased Manitok's light
oil production weighting to 57% of total production as compared to 47%
of total production in the first quarter of 2013.
-- Recorded average production per diluted share growth of 46% and funds
from operations per diluted share growth of 91% when compared to the
first quarter of 2013.
-- Recorded funds from operations of $15.5 million ($0.21 per diluted
share) which is a 97% increase over funds from operations of $7.9
million ($0.11 per diluted share) in the first quarter of 2013.
-- Operating netback (excluding the realized gain or loss on financial
instruments) was $40.11/boe, which is a 44% increase over the operating
netback of $27.78/boe in the first quarter of 2013. While the increase
in netback was aided by increased production volume and stronger
commodity prices, Manitok also improved its operating cost structure in
the first quarter as a result of the divestiture of dry sweet and sour
natural gas assets in the central Alberta foothills where the operating
costs were higher than the Stolberg area on a per boe basis.
-- Capital expenditures were approximately $24.1 million, before $21.9
million in asset divestitures, which included drilling 9 (6.8 net) wells
for about $19.8 million and $2.4 million on equipment and facilities. Of
these 9 wells, 5 (2.8 net) were drilled in the Stolberg area and 4 (4.0
net) were drilled in the Entice area.
-- At March 31, 2014, net debt was approximately $26.6 million, which is
0.4 times annualized first quarter funds from operations.
-- Increased net undeveloped land to 293,197 acres as at March 31, 2014, a
46% increase from 200,271 acres as at March 31, 2013.
-- At March 31, 2014, there were 71,615,406 outstanding common shares of
Manitok ("Manitok Shares"). Subsequent to the first quarter and up to
May 27, 2014, a total of 1,881,800 Manitok Shares were purchased through
the normal course issuer bid program, at an average price of $2.47 per
Manitok Share and 543,668 Manitok Shares were issued through Manitok's
stock option plan, at an average price of $1.45 per share, for a total
net decrease in Manitok Shares of 1,338,132 since the first quarter of
2014. The total outstanding Manitok Shares as at May 27, 2014 was
70,277,274.
OPERATIONAL AND FINANCIAL SUMMARY
Three months ended March 31, 2014 2013
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OPERATING
Average daily production
Light oil (bbls/d) 3,028 1,701
Natural gas (mcf/d) 13,352 10,810
NGLs (bbls/d) 98 83
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Total (boe/d) 5,351 3,586
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Average realized sales price
Light oil ($/bbl) 96.92 89.09
Natural gas ($/mcf) 6.51 3.70
NGLs ($/bbl) 97.92 84.25
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Total ($/boe) 72.88 55.39
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Undeveloped Land (end of period)
Gross (acres) 309,528 252,611
Net (acres) 293,197 200,271
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NETBACK AND COST ($ per boe)
Petroleum and natural gas sales 72.88 55.39
Realized gain (loss) on financial
instruments (4.10) 0.86
Royalty income 0.02 0.44
Royalty expenses (22.23) (16.12)
Operating expenses, net of recoveries (7.35) (9.14)
Transportation and marketing expenses (3.21) (2.79)
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Operating netback(1) 36.01 28.64
General and administrative expenses, net
of recoveries (3.51) (4.11)
Interest and financing expenses (0.41) (0.29)
Interest and other income 0.01 0.11
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Funds from operations netback(1) 32.10 24.35
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FINANCIAL
Petroleum and natural gas revenue ($000) 35,112 18,021
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Funds from operations ($000)(1) 15,461 7,861
Per share - basic ($)(1) 0.21 0.11
Per share - diluted ($)(1) 0.21 0.11
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Net income (loss) ($000) 331 (135)
Per share - basic ($) - -
Per share - diluted ($)(2) - -
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Common shares outstanding
End of period - basic 71,615,406 70,357,180
End of period - diluted 77,689,147 76,759,280
Weighted average for the period - basic 73,097,543 70,348,151
Weighted average for the period -
diluted 74,334,096 72,758,478
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Capital expenditures, net of divestitures
($000) 2,240 11,295
Working capital deficit ($000)(1) 19,947 6,354
Drawn on credit facilities ($000) 6,685 7,130
Total net debt ($000) (1) 26,632 13,484
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(1) Funds from operations, funds from operations per share, funds from
operations netback, operating netback, working capital deficit and net
debt do not have standardized meanings prescribed by generally accepted
accounting principles ("GAAP") and therefore should not be considered
in isolation. These reported amounts and their underlying calculations
are not necessarily comparable or calculated in an identical manner to
a similarly titled measure of other companies where similar terminology
is used. Where these measures are used they should be given careful
consideration by the reader. Refer to the Non-GAAP Financial Measures
section of this press release.
(2) The basic and diluted weighted average shares outstanding are the same
for periods in which the Corporation records a net loss.
Operational Update
Drilling and completions operations continue in Manitok's core areas although
spring break-up has limited operational activity particularly in southern
Alberta. Average production for the month of April 2014 was approximately 4,900
boe/d (61% oil) based on field estimates. This reflects the asset divestiture of
777 boe/d which closed on February 28, 2014.
Entice
To date, Manitok has successfully drilled and cased a total of 4 vertical wells
and 1 horizontal well in Entice. The wells were spaced across 4 of the 9
townships acquired through Encana Corporation ("Encana"), which are now held in
Prairie Sky Royalty Ltd., in an effort to test multiple hydrocarbon bearing
formations in the northern portion of the land base. All of the vertical wells
encountered multiple pay zones and Manitok is focusing on several potential new
pool discoveries in four different formations. The 4 vertical wells have proven
that there is multi- zone potential across the land base. The horizontal well
which targeted the Basal Quartz (Ellerslie) formation is being evaluated for
deliverability and reservoir extent, through production testing and pressure
build-up. Completion activity has been hampered to date by road bans associated
with spring break-up and wet weather. Manitok anticipates that its completion
operations and initial tests to determine commerciality of the potential new
pools will be completed by mid-June and a more detailed report of the results
will be provided at that time, along with information regarding the next phase
of drilling at Entice which is scheduled to commence immediately after spring
break-up. The lease agreement with Encana includes a $22.0 million capital
commitment for 2014 and to date Manitok has spent approximately $8.4 million.
Cordel-Stolberg
Of the last 4 (2.0 net) Cardium oil wells drilled (wells 23 to 26), 1 (0.3 net)
is currently on production through permanent facilities while 2 (1.4 net) are
currently on production through temporary facilities with tie-in to permanent
facilities expected in July 2014. These wells were drilled at the north end of
the field between producing wells in section 29 and a low rate well drilled in
2013 which defined the northern limits of the pool. The fourth well (0.3 net)
which was drilled to the deepest portion of the structure, about 800 meters from
the crest, encountered water with no oil cut. Manitok will use this well as a
water injector for its upcoming Stolberg waterflood program. The 3 producing
wells, when producing through permanent facilities in the third quarter of 2014,
are expected to add about 450 boe/d (256 net) of initial light oil production
along with associated gas.
Manitok is currently drilling 2 wells in Stolberg. The first well is targeting
Cardium oil in the back-limb of the Stolberg structure in the center of the
field, between the producing wells at the north and south ends of the field,
which is anticipated to be a highly fractured area of the field. It is the first
well of a 3 to 4 well pad where Manitok has a 30% working interest in each well.
As part of the drilling program for the first well, a pilot hole was drilled to
test for Cardium oil in the fore-limb of the Stolberg structure. The pilot hole
was designed to gather both pressure and phase data from the fore-limb. The
results showed the Cardium fore-limb's thickness is consistent with that found
in most of the back-limb, the formation is oil bearing and at original reservoir
pressure. This indicates that this part of the structure is not communicating
with any of the 3 previously drilled fore-limb wells in the south end of the
field or with the wells on the back-limb. Manitok is adjusting its drilling
schedule to accommodate drilling a well into this newly discovered portion of
the structure as soon as it is feasible. If successful, the Corporation will add
several follow up locations to its current inventory. The current back-limb
target will be production tested once drilling operations are finished which is
anticipated to be within the next 2 weeks. The drilling rig will immediately
move to the second well on the pad once production testing is complete.
The second well is a potential natural gas well targeting an upper formation in
the Mannville group. Currently the well is drilling the horizontal section and
it is anticipated to reach total depth in the next week. Early indications are
encouraging as pressure responses and gas detection during drilling have been
very positive. Once the drilling operation is finished, the well will be
production tested immediately. If successful, the well can be tied-in and
producing by early in the third quarter. The drilling rig will then move to a
pad at the south end of the field where it will begin the first of up to 3
Cardium oil wells on a pad. Manitok will be in a position to release more
information on the two wells mentioned above by mid-June.
In addition, the Cordel waterflood pilot as approved by the Alberta Energy
Regulator is progressing. Manitok has successfully established water injection
capability in the injection well. Facility design for the injection plant is
complete and injection scheduled to commence in the next 30 days.
Quirk Creek
Activity in Quirk Creek has been limited due to spring break-up. A total of 2
wells have been drilled and 1 well was placed on production in early April 2014.
Based on field estimates, the production rate has averaged approximately 30
boe/d (net). The completion of the second well was suspended when road bans
associated with spring break-up prohibited Manitok from moving in the drilling
rig required to complete the well. Manitok anticipates that it will commence the
completion on the second well in the next two weeks, weather permitting.
Additional capital will not be allocated to the area until the second well has
been properly evaluated.
2014 Guidance
The 2014 guidance remains unchanged from the Corporation's press release dated
February 27, 2014, a copy of which is available under Manitok's profile on SEDAR
at www.sedar.com.
About Manitok
Manitok is a public oil and gas exploration and development company focusing on
conventional oil and gas reservoirs in the Canadian foothills and southeast
Alberta. The Corporation will utilize its experience to develop the untapped
conventional oil and liquids-rich natural gas pools in both the foothills and
southeast Alberta areas of the Western Canadian Sedimentary Basin.
Forward-looking Statements
This press release contains forward-looking statements. More particularly, this
press release contains statements concerning planned exploration and development
activities, planned capital expenditures, the breakdown of planned capital
expenditures by area, the development and growth potential of Manitok's
properties and the anticipated increase in production from 3 producing wells in
Cordel-Stolberg area due to producing through permanent facilities.
The forward-looking statements in this press release are based on certain key
expectations and assumptions made by Manitok, including expectations and
assumptions concerning the success of future drilling and development
activities, the performance of existing wells, the performance of new wells, the
successful application of technology, prevailing weather conditions, commodity
prices, royalty regimes and exchange rates and the availability of capital,
labour and services.
Although Manitok believes that the expectations and assumptions on which the
forward-looking statements are based are reasonable, undue reliance should not
be placed on the forward-looking statements because Manitok can give no
assurance that they will prove to be correct. Since forward-looking statements
address future events and conditions, by their very nature they involve inherent
risks and uncertainties. Actual results could differ materially from those
currently anticipated due to a number of factors and risks. These include, but
are not limited to, risks associated with the oil and gas industry in general
(e.g., operational risks in development, exploration and production; delays or
changes in plans with respect to exploration or development projects or capital
expenditures; the uncertainty of reserves estimates; the uncertainty of
estimates and projections relating to production, costs and expenses; and
health, safety and environmental risks), uncertainty as to the availability of
labour and services, commodity price and exchange rate fluctuations, unexpected
adverse weather conditions, general business, economic, competitive, political
and social uncertainties, capital market conditions and market prices for
securities and changes to existing laws and regulations. Certain of these risks
are set out in more detail in Manitok's current Annual Information Form, which
is available on Manitok's SEDAR profile at www.sedar.com.
Forward-looking statements are based on estimates and opinions of management of
Manitok at the time the statements are presented. Manitok may, as considered
necessary in the circumstances, update or revise such forward-looking
statements, whether as a result of new information, future events or otherwise,
but Manitok undertakes no obligation to update or revise any forward-looking
statements, except as required by applicable securities laws.
Non-GAAP Financial Measures
This press release contains references to measures used in the oil and natural
gas industry such as "funds from operations", "funds from operations netback",
"funds from operations per share", "operating netback", "working capital
deficit", and "net debt". These measures do not have standardized meanings
prescribed by GAAP and therefore should not be considered in isolation. These
reported amounts and their underlying calculations are not necessarily
comparable or calculated in an identical manner to a similarly titled measure of
other companies where similar terminology is used. Where these measures are used
they should be given careful consideration by the reader. These measures have
been described and presented in this press release in order to provide
shareholders and potential investors with additional information regarding the
Corporation's liquidity and its ability to generate funds to finance its
operations.
Funds from operations should not be considered an alternative to, or more
meaningful than, cash provided by operating, investing and financing activities
or net income as determined in accordance with GAAP, as an indicator of
Manitok's performance or liquidity. Funds from operations is used by Manitok to
evaluate operating results and Manitok's ability to generate cash flow to fund
capital expenditures and repay indebtedness. Funds from operations denotes cash
flow from operating activities as it appears on the Corporation's Statement of
Cash Flows before decommissioning expenditures and changes in non-cash operating
working capital. Funds from operations is also derived from net income (loss)
plus non-cash items including deferred income tax expense, depletion and
depreciation expense, exploration and evaluation expense, impairment expense,
stock-based compensation expense, accretion expense, unrealized gains or losses
on financial instruments and gains or losses on asset divestitures. Funds from
operations netback is calculated on a per boe basis and funds from operations
per share is calculated as funds from operations divided by the weighted average
number of common shares outstanding. Operating netback denotes petroleum and
natural gas revenue and realized gains or losses on financial instruments less
royalty expenses, operating expenses and transportation and marketing expenses
calculated on a per boe basis. Working capital deficit includes current assets
less current liabilities excluding the current portion of the amount drawn on
the credit facilities, the current portion of the fair value of financial
instruments and the deferred premium on financial instruments. Manitok uses net
debt as a measure to assess its financial position. Net debt includes current
assets less current liabilities excluding the current portion of the fair value
of financial instruments and the deferred premium on financial instruments.
Barrels of Oil Equivalent
The term barrels of oil equivalent ("boe") may be misleading, particularly if
used in isolation. Per boe amounts have been calculated using a conversion ratio
of six thousand cubic feet (6 mcf) of natural gas to one barrel (1 bbl) of crude
oil. The boe conversion ratio of 6 mcf to 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. Given that the value ratio
based on the current price of crude oil as compared to natural gas is
significantly different from the energy equivalency of 6:1, utilizing a
conversion on a 6:1 basis may be misleading as an indication of value.
Neither the TSX Venture Exchange nor its Regulation Services Provider (as that
term is defined in the policies of the TSX Venture Exchange) accepts
responsibility for the adequacy or accuracy of this release.
FOR FURTHER INFORMATION PLEASE CONTACT:
Manitok Energy Inc.
Massimo M. Geremia
President & Chief Executive Officer
403-984-1751
mass@manitok.com
www.manitokenergy.com
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