CALGARY,
April 14, 2014 /CNW/ - ArPetrol Ltd.
("ArPetrol" or the "Company") (TSXV: RPT) is pleased to announce
its financial and operating results for the three months and year
ended December 31, 2013 and to
provide an operational update on activities this year to date as
well as an outlook for 2014. The consolidated financial statements
and management's discussion and analysis, have been filed on SEDAR
at www.sedar.com and posted on the Company's website at
www.arpetrol.com.
Fourth-Quarter and Fiscal 2013
Summary
Operating and Financial
ArPetrol's working capital position improved
significantly during the fourth-quarter of 2013. The Company
had a working capital deficit of $750,972 at the end of 2013 compared to a deficit
of $4.5 million at the end of the
third-quarter of 2013. The majority of this improvement comes
from the Company's success in reaching settlement agreements with
the outstanding vendors from its 2012 drilling program.
Currently, ArPetrol has successfully concluded settlements with all
but one of its drilling vendors.
The Company had drawn $1.5 million on its short-term loan at
year-end.
Fourth-quarter production averaged 164 barrels
of oil equivalent ("boe") per day. This is a decrease of 22
boe/d from the third-quarter of 2013 and a decrease of 88 boe/d
from the fourth-quarter of 2012. These decreases are due to
well performance issues. The performance issues were resolved
before the end of the fourth-quarter of 2013, resulting in
estimated average production of 242 boe/d for the first-quarter of
2014.
Fourth-quarter natural gas prices averaged
$3.65 per thousand cubic feet
("Mcf"), $0.30 per Mcf lower than the
price realized in the third-quarter of 2013 and $0.85 per Mcf higher than the fourth-quarter of
2012. This higher price during 2013 reflects the Company's
new gas sales contract signed during the year.
The average price realized for natural gas
liquids ("NGL") increased, with fourth-quarter 2013 prices of
$82.77 per barrel ("bbl"),
$0.98 per bbl higher than in the
third-quarter of 2013, and $17.28 per
bbl higher than in the same period in 2012. The changes in NGL
pricing reflect the changing dynamics in the Argentine markets.
During the fourth-quarter the Company continued
to see strong gas processing results with revenues of $2.2 million in the quarter and $6.6 million for the year. This compares to
$2.2 million in the third-quarter of
2013 and $4.2 million for 2012.
This increase in year-on-year revenues is the result of the new gas
processing contract effective July 1,
2013. These strong processing revenues are expected to
continue in 2014.
Capital expenditures for the fourth-quarter of
2013 and the year-ended 2013 were $6,886 and $175,310
respectively.
Summary of Results
|
Three Months
Ended Dec 31, |
Year ended Dec
31, |
|
(Unaudited) |
|
|
|
2013 |
2012 |
2013 |
2012 |
Financial |
|
|
|
|
(Cdn$ except shares outstanding and per
boe(1) amounts) |
|
|
|
|
|
|
|
|
|
Production sales |
432,047 |
519,332 |
1,995,079 |
1,991,401 |
Processing revenues |
2,220,761 |
1,101,797 |
6,602,270 |
4,203,390 |
Funds flow from operations (1) |
(1,316,293) |
(121,470) |
(2,005,538) |
(2,982,279) |
Cash generated from operating activities |
(2,135,525) |
(1,875,250) |
(3,929,268) |
(9,055,438) |
Net loss |
(290,350) |
13,071,369 |
3,726,040 |
25,772,561 |
Capital expenditures |
6,886 |
2,174,298 |
175,310 |
28,875,715 |
Weighted average shares outstanding
(millions) |
|
|
|
|
- basic and diluted
(2) |
572.5 |
572.5 |
572.5 |
572.5 |
|
|
|
|
|
Operations |
|
|
|
|
Production |
|
|
|
|
Natural gas - Mcf per day |
878 |
1,339 |
1,094 |
1,343 |
NGL - bbls per day |
18 |
29 |
23 |
24 |
Total - boe per day
(1) |
164 |
252 |
205 |
247 |
Average sales price |
|
|
|
|
Natural gas - $ per Mcf |
3.65 |
2.80 |
3.46 |
2.82 |
NGL - $ per bbl |
82.77 |
65.49 |
73.30 |
68.95 |
Average operating netback |
|
|
|
|
Production - $ per boe
(1) |
(1.99) |
(1.59) |
0.64 |
0.61 |
Processing - $ per Mcf
processed (1) |
0.18 |
0.04 |
0.12 |
0.06 |
Notes:
(1) See advisories at the end of this news release with respect to
non-IFRS measures and boe presentation.
(2) All outstanding warrants, stock options and convertible
debentures were excluded in calculating the weighted-average number
of dilutive common share outstanding, as they were determined to be
anti-dilutive.
Reserves
The Company has obtained an independent audit of
the natural gas and natural gas liquid reserves attributable to
ArPetrol's interest in the Faro Virgenes concession as prepared by
Gaffney, Cline & Associates Inc. effective December 31, 2013 (the "GCA Report").
The GCA Report presented a 4% increase in proved
plus probable natural gas reserves (gross after losses due to
shrinkage and consumption) from 42,210 million cubic feet ("MMcf")
as of December 31, 2012 to 43,860
MMcf as of December 31, 2013. This
increase was a product of adjustment to these losses, which more
than compensated for gas volumes produced and sold in 2013.
The GCA Report further presented a 9% decrease to the net present
value of future net revenue of proved plus probable reserves
(before deducting income tax; discounted at 10%) from US$123 million as of December 31, 2012 to US$112 million as of December 31, 2013. This decrease in value matched
against an increase in reserves is primarily the result of
optimistic assumptions regarding plant revenues. In the 2012
report prepared by Gaffney, Cline & Associates Inc. plant
revenue assumptions were based on the status of negotiations at the
time of the report. These assumptions were higher than the
actual contract prices achieved by ArPetrol in late 2013. The
2013 GCA Report incorporates these revised contracted volumes and
prices in the forecast of future value.
The GCA Report was prepared using assumptions
and methodology guidelines consistent with the Canadian Oil and Gas
Evaluation Handbook and in accordance with National Instrument
51-101, Standards of Disclosure for Oil and Gas Activities.
The Company's natural gas and NGL reserves are located in the
Province of Santa Cruz in
Argentina.
Oil and Gas Reserves Based on Forecast Prices
and Costs
|
|
Natural Gas |
|
Natural Gas Liquids |
Reserves |
|
Gross(1)
(MMcf)(2) |
|
Net(1)
(MMcf) |
|
Gross(1)
(Mbbl)(2) |
|
Net(1)
(Mbbl) |
Proved Developed Producing(3)(6) |
|
1,624 |
|
1,381 |
|
28 |
|
24 |
Proved Developed
Non-Producing(3)(7) |
|
- |
|
- |
|
- |
|
- |
Proved Undeveloped(3)(8) |
|
25,739 |
|
21,881 |
|
411 |
|
349 |
Total Proved(3) |
|
27,363 |
|
23,262 |
|
439 |
|
373 |
Total Probable(4) |
|
16,497 |
|
14,024 |
|
262 |
|
223 |
Total Proved Plus Probable(3)(4) |
|
43,860 |
|
37,286 |
|
701 |
|
596 |
Total Possible(5) |
|
15,158 |
|
12,886 |
|
240 |
|
204 |
Total Proved Plus Probable Plus
Possible(3)(4)(5) |
|
59,018 |
|
50,172 |
|
941 |
|
800 |
Net Present Values of Future Net Revenue Based on Forecast
Prices and Costs
Reserves |
|
Before
Deducting Income Tax
Discounted at 10%
(US$MM) |
|
After
Deducting Income Tax
Discounted at 10%
(US$MM) |
Proved Developed Producing(3)(6) |
|
16 |
|
16 |
Proved Developed
Non-Producing(3)(7) |
|
- |
|
- |
Proved Undeveloped(3)(8) |
|
35 |
|
21 |
Total Proved(3) |
|
51 |
|
37 |
Total Probable(4) |
|
61 |
|
40 |
Total Proved Plus Probable(3)(4) |
|
112 |
|
77 |
Total Possible(5) |
|
51 |
|
33 |
Total Proved Plus Probable Plus
Possible(3)(4)(5) |
|
163 |
|
110 |
Notes: |
(1) |
"Gross Reserves" are ArPetrol's
working interest (operating or non-operating) share before
deduction of royalties and without including any royalty interests
of ArPetrol. "Net Reserves" are ArPetrol's working interest
(operating or non-operating) share after deduction of royalty
obligations plus ArPetrol's royalty interests in reserves. |
(2) |
"MMcf" means million cubic feet and
"Mbbl" means thousand barrels. |
(3) |
"Proved" reserves are those reserves
that can be estimated with a high degree of certainty to be
recoverable. It is likely that the actual remaining quantities
recovered will exceed the estimated proved reserves. |
(4) |
"Probable" reserves are those
additional reserves that are less certain to be recovered than
proved reserves. It is equally likely that the actual remaining
quantities recovered will be greater or less than the sum of the
estimated proved plus probable reserves. |
(5) |
"Possible" reserves are those
additional reserves that are less certain to be recovered than
probable reserves. There is a 10% probability that the quantities
actually recovered will equal or exceed the sum of the estimated
proved plus probable plus possible reserves. |
(6) |
"Developed Producing" reserves are
those reserves that are expected to be recovered from completion
intervals open at the time of the estimate. These reserves may be
currently producing or, if shut in, they must have previously been
on production, and the date of resumption of production must be
known with reasonable certainty. |
(7) |
"Developed Non-Producing" reserves
are those reserves that either have not been on production, or have
previously been on production but are shut in and the date of
resumption of production is unknown. |
(8) |
"Undeveloped" reserves are those
reserves expected to be recovered from known accumulations where a
significant expenditure (for example, when compared to the cost of
drilling a well) is required to render them capable of production.
They must fully meet the requirements of the reserves
classification (proved, probable, possible) to which they are
assigned. |
(9) |
The reserve estimates provided herein
are estimates only and there is no guarantee that the estimated
reserves will be recovered. |
(10) |
Actual natural gas and NGL reserves
may be greater than or less than the estimates provided
herein. |
(11) |
The future net revenue estimates
provided herein do not represent fair market value. |
(12) |
The pricing assumptions used in the
GCA report with respect to net present values of future net revenue
(forecast) are based on ArPetrol's future scenario of gas and NGL.
The forecast gas prices start with US$2.50/MMBtu equivalent to
US$2.775/Mcf according to an existing contract, increasing to
US$4.00/MMBtu in 2014, escalated at 5% per year thereafter. Future
capital costs were derived from development program forecasts
prepared by ArPetrol for the field. Recent historical operating
expense data were utilized as the basis for operating cost
projections. Capital and operating expenses were indexed at 4% per
year since 2013 to account for inflation. |
All values in this news release are in Canadian
dollars unless otherwise indicated.
Outlook
Since July of 2013 the Company has made
significant improvements in its revenue generation and in its
balance sheet. The new gas processing contracts have provided
ArPetrol with a significant increase in processing revenue and cash
flow during the last half of 2013 and this is expected to continue
during 2014. The Company has also improved its balance sheet
by concluding settlement agreements with all but one vendor from
the 2012 drilling program.
The Company's 2014 outlook includes estimated
production of 200 to 240 boe/d, estimated processing volumes of 70
to 80 MMcf/d and estimated capital expenditures for maintenance and
improvements of $0.8 million to $1.2
million. In 2014, the Company is forecast to be
self-funding through projected cash flows, covering its capital
expenditures and, barring any unforeseen circumstances, the
repayment of its short-term loan by the year-end. In addition
ArPetrol will continue to look at growth opportunities when they
become available.
Management Changes
Dr. Ian Moffat
will be resigning as VP Exploration effective May 1, 2014. The Company would like to
extend its sincere appreciation to Ian for his significant
contribution to the Company over the past three years and wish him
the very best in his next endeavor.
The Company is pleased to announce that
Jason James has joined its Board of
Directors effective April 8,
2014. Mr. James is a Chartered Accountant and has over
16 years of corporate finance, accounting and business development
experience in the oil and gas industry including the midstream
sector.
About ArPetrol Ltd.
ArPetrol is a Calgary-based publicly traded company engaged
in oil and natural gas exploration, development and production and
third-party natural gas processing in Argentina, where it owns and operates a gas
processing facility with capacity of 85 MMcf per day. The Company's
common shares are listed on the TSXV under the symbol "RPT".
Forward-Looking Information
This news release contains certain forward‐looking information
relating, but not limited, to the Company's reserves and related
future net revenue, projected cash flows and achieving positive
cash flow in 2014, processing revenue and cash flow, estimated
production volumes, processing volumes and capital expenditures,
the repayment of the Company's short term loan and the timing
thereof, the pursuit of growth opportunities, the pending
completion of final documentation and negotiation of settlements
arrangements with certain creditors, the Company's ability to
continue to operate as a going concern and the availability of
future financing. Forward-looking information typically
contains statements with words such as "anticipate", "believe",
""forecast", expect", "plan", "intend", "estimate", "propose",
"project", or similar words suggesting future outcomes. The
Company cautions readers and prospective investors in the Company's
securities not to place undue reliance on forward‐looking
information as, by its nature, it is based on current expectations
regarding future events that involve a number of assumptions,
inherent risks and uncertainties, which could cause actual results
to differ materially from those anticipated by the Company.
Forward-looking information is based on management's current
expectations and assumptions regarding, among other things, the
ability to sustain consistent processing and production volumes,
future production and processing revenue, future economic
conditions, future currency and exchange rates, the ability to
repatriate funds from Argentina,
future pricing, continued political stability in the areas in which
the Company is operating, the reduction of G&A and expenses,
and the Company's continued ability to obtain and retain qualified
management and staff and equipment in a timely and cost-efficient
manner. A number of factors could cause actual results to differ
materially from those anticipated by the Company, including but not
limited to risks associated with the oil and natural gas industry
(e.g., operational risks; the ability to retain staff and
equipment; and health, safety and environmental risks), weather
delays and natural disasters, union activities, change in
government policies, currency fluctuations and controls, a change
in the manner and rates at which the Company is exchanging its
currency, the risk of disruptions at the gas plant, increased
maintenance costs or other expenditures at the gas plant,
interruptions to production and processing revenue, production
declines, changes in commodity prices and revenues, increased
costs, unavailability of funding, and other risks associated with
international activity and Argentina. ArPetrol operates outside of
Canada and as such, is subject to
a number of political risks over which it has no control. The
forward-looking information included herein is expressly qualified
in its entirety by this cautionary statement. The forward-looking
information included herein is made as of the date hereof and the
Company assumes no obligation to update or revise any
forward‐looking information to reflect new events or circumstances,
except as required by law.
Non-IFRS Measures
This news release includes references to
financial measures commonly used in the oil and natural gas
industry. The terms "operating netback" (production and processing
revenue less royalties, turnover taxes and operating expenses) and
"funds flow from operations" (cash generated from operating
activities before changes in non-cash working capital, and
translation adjustment on operating items) do not have any
standardized meaning under International Financial Reporting
Standards ("IFRS") and may not be comparable with similar measures
presented by other companies. Funds flow from operations should not
be considered an alternative to, or more meaningful than, cash
generated from operating activities, net income (loss) or other
measures determined in accordance with IFRS, as an indicator of the
Company's performance.
See the management's discussion and analysis for
the year ended December 31, 2013,
filed on SEDAR at www.sedar.com and on the Company's website, for
further discussion, including a reconciliation of funds flow from
operations to cash generated from operating activities which is the
most directly comparable measure calculated in accordance with
IFRS. There is no IFRS measure that is reasonably comparable to
operating netbacks and a detailed calculation of such netbacks is
presented in the "Results of Operations" section.
Reserves and Oil and Gas Advisories
BOE Presentation. Production
information is commonly reported in units of barrels of oil
equivalent. For purposes of computing such units, natural gas is
converted to equivalent barrels of oil using a conversion factor of
six thousand cubic feet to one barrel. This conversion ratio of 6:1
represents energy equivalency, which is primarily applicable at the
burner tip, and does not represent a value equivalency at the
wellhead. Such disclosure of boe may be misleading, particularly if
used in isolation.
Price Deck Assumptions
|
|
|
|
Natural Gas |
|
NGL |
|
|
Year |
|
|
|
(US$/MMBtu) |
|
(US$/bbl) |
|
|
2014 |
|
|
|
3.64 |
|
80.00 |
|
|
2015 |
|
|
|
4.00 |
|
83.20 |
|
|
2016 |
|
|
|
4.20 |
|
86.53 |
|
|
2017 |
|
|
|
4.41 |
|
89.99 |
|
|
2018 |
|
|
|
4.63 |
|
93.59 |
|
|
2019 |
|
|
|
4.86 |
|
97.33 |
|
|
2020 |
|
|
|
5.11 |
|
101.23 |
|
|
2021 |
|
|
|
5.36 |
|
105.27 |
|
|
2022 |
|
|
|
5.63 |
|
109.49 |
|
|
2023 |
|
|
|
5.91 |
|
113.86 |
|
|
2024 |
|
|
|
6.21 |
|
118.42 |
|
|
2025 |
|
|
|
6.52 |
|
123.16 |
|
|
2026 |
|
|
|
6.84 |
|
128.08 |
|
|
There are numerous uncertainties inherent in
estimating quantities of reserves and related future net revenue.
The reserves and related future net revenue set forth above are
estimates only. In general, estimates of economically recoverable
natural gas and NGL reserves and the related future net revenue are
based upon a number of variable factors and assumptions, such as
historical production from the properties, production rates,
ultimate reserve recovery, timing and amount of capital
expenditures, the scope and timing of the development program,
expected pricing and gas processing revenue, marketability of oil
and natural gas, royalty rates, the assumed effects of regulation
by governmental agencies and future operating costs, all of which
may vary materially. For these reasons, estimates of the
economically recoverable natural gas and NGL reserves attributable
to any particular group of properties, classification of such
reserves based on risk of recovery and estimates of future net
revenues associated with reserves prepared by different engineers,
or by the same engineers at different times, may vary. The
Company's actual production, revenues, taxes and development and
operating expenditures with respect to its reserves will vary from
estimates thereof and such variations could be material. Additional
information regarding ArPetrol's reserves data and the risks and
the level of uncertainty associated therewith can be found in the
Company's statement of reserves data and other oil and gas
information for the year ended December 31,
2012 which is available on SEDAR at www.sedar.com.
The reserve data provided in this news release
presents only a portion of the disclosure required under National
Instrument 51-101, Standards of Disclosure for Oil and Gas
Activities. All of the required information will be contained
in the Company's statement of reserves data and other oil and gas
information for the year ended December 31,
2013 which will be available on SEDAR at www.sedar.com prior
to the end of April 2014.
Additional information relating to the Company is also available
on SEDAR at www.sedar.com.
Neither the TSXV nor its Regulation
Services Provider (as defined in the policies of the TSXV) accepts
responsibility for the adequacy or accuracy of this
release.
SOURCE ArPetrol Ltd.