NOT FOR DISTRIBUTION TO UNITED STATES NEWS WIRE SERVICES OR DISSEMINATION IN
UNITED STATES
Iona Energy Inc. ("Iona" or the "Company") (TSX VENTURE:INA) announces its
financial results for the three months ended March 31, 2014.
FINANCIAL & OPERATING HIGHLIGHTS
(in United States dollars (tabular amounts in thousands) except as otherwise noted)
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Three months ended March 31,
2014 2013 Change
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Financial
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Crude oil and natural gas
revenues $ 35,648 $ 1,858 1,819%
Cost of sales (6,508) (796) (718%)
Depletion, Depreciation &
Amortization (18,928) (966) (1,859%)
Gross Profit 10,212 96 10,538%
Gross Profit before DD&A 29,140 1,062 2,641%
Income (loss) Before Tax 717 (22,163) 103%
Income (loss) After Tax (338) (11,945) 97%
Per share - basic ($) (0.00) (0.03)
Per share - diluted ($) (0.00) (0.03)
Funds Flow(1) 27,088 (9,664) 381%
Per share - basic ($) 0.07 (0.03)
Per share - diluted ($) 0.07 (0.03)
Adjusted EBITDA(1) 27,143 3,281 790%
Per share - basic ($) 0.07 0.01
Per share - diluted ($) 0.07 0.01
March 31, December 31,
2014 2013
Cash and cash equivalents $ 34,713 $ 19,808
Restricted cash 81,997 85,114
Working capital surplus(1) 88,776 79,075
Secured bonds 263,629 $ 262,450
Common shares, end of period 366,831 366,831
Fully diluted, end of period(1) 366,831 369,225
Weighted average common shares - basic 366,831 360,849
Weighted average common shares-fully diluted 366,831 363,078
Three months Three months
ended ended
March 31, December 31,
2014 2013 Change
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Operational
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Crude oil and natural gas
production (boepd)(2)
Crude oil 3,475 2,585 34%
Natural Gas 680 765 (11%)
Total 4,155 3,350 24%
Realized sales prices
Crude oil ($/boe) 107.87 112.15 (4)%
Natural Gas ($/mmcf)(3) 12.04 12.88 (7)%
Average ($/boe) 101.59 103.84 (2)%
Operating costs(1)(4) ($/boe) $ 20.01 $ 24.94 (20)%
Netback(1) ($/boe) $ 81.58 $ 78.90 3%
1. Non-GAAP measure - see "non-IFRS Measures" section within MD&A.
2. Based on 17.55% economic interest of volumes from Huntington.
3. $916,000 of Q3 revenue, which had been understated in Q3, has been
included in the Company's Q4 revenue. Realized sales prices have been
normalized. Revenue numbers for Q3 2013 have not been restated.
4. $2.1 million of operating costs, which had been understated in Q3, has
been included in the Company's Q4 operating costs. Realized operating
costs have been normalized. Operating costs for Q3 have not been
restated.
FINANCIAL
-- Iona reached a new corporate quarterly average production record of
4,155 boepd across Q1 2014, as Huntington produced at 3,896 boepd.
-- The Company realized record quarterly revenue of $35.6 million (Q1 2013
- $1.9 million) (Q4 2013 - $33.8 million) for the three month period
ended March 31, 2014.
-- Revenues of $35.6 million for the three months ended March 31, 2014
consisted of $28.9 million (Dec 31, 2013 - $25.2 million) from oil
production, $4.3 million (March 31, 2013 - $1.9 million) (Dec 31, 2013 -
$5.5 million) from gas production and $2.4 million (Dec 31, 2013 - $3.1
million) from the Company's royalty interest at Huntington.
-- The average realized oil price for the three month period ended March
31, 2014 was $107.87 per barrel and the average realized gas price for
the three month period ended March 31, 2014 was $12.04 per mcf.
-- Record netbacks of $81.58/boe for the first quarter ended March 31,
2014.
-- First quarter 2014 funds flow of $27.1 million.
-- The Company has corporate tax pools of approximately $331 million and
does not expect to pay UK taxes until 2017 or later.
-- The Company's current production is not subject to any crown or third
party royalties on any revenues, now or in the foreseeable future.
CORPORATE
-- The TSX Venture Exchange approved Iona's application to graduate to Tier
1 of the TSX Venture Exchange and Iona commenced trading as a Tier 1
issuer on Wednesday, January 8, 2014.
-- Iona was included in the 2014 TSX Venture 50(R), a ranking reserved for
the strong performing companies listed on the TSX Venture Exchange.
-- On March 21, 2014 the Company's Bonds commenced trading on the Nordic
ABM under the ticker IEC01 PRO.
KEY PROJECT HIGHLIGHTS
Huntington (17.55% Economic Interest)
-- Iona's Q1 2014 average production including royalties at Huntington
increased 30% over Q4 2013, from 2,998 boepd to 3,896 boepd, as
operational and weather-related downtime at the field continued to
improve. Further, cargo schedule optimization has increased oil
liftings, taking advantage of good weather windows as and when
available. Huntington production for February and March was relatively
unfettered with only minor interruptions due to weather and a planned
maintenance related two-day shutdown of CATS.
-- On March 1, 2014, the Voyageur FPSO passed its Performance & Reliability
Test and as of March 31, 2014, the field had produced 4.5 million
barrels of oil equivalent, with Iona's net share of production totalling
0.7 million barrels of oil equivalent.
-- On April 12, 2014, Huntington production was suspended as work commenced
to replace a number of straub couplings that are part of the inert gas
system on the floating production, storage and offloading ("FPSO")
facility. On April 24, 2014, the Operator, E.ON E&P UK Ltd, informed the
partners that the replacement work had been completed ahead of schedule
and that production restart had commenced. However, on April 26, 2014
the Huntington partnership was advised that due to an unplanned shutdown
issue involving the Central Area Transmission System ("CATS") riser
system, multiple fields producing through the system were shut in until
May 10, 2014.
-- As of May 9, 2014, Huntington has offloaded 24 cargos and produced 5.6
million barrels of oil equivalent with Iona's net share of production
being above 1.0 million barrels of oil equivalent. The Huntington
partnership continues to realize Brent prices, with an average price to
date of USD$108/bbl, and gas prices, which remain robust in the UK,
above USD$10.00/mcf.
-- Since May 11, 2014, the FPSO and the Huntington reservoir have been
producing, hitting gross production of 30,000 boe/d on May 14, 2014.
Trent & Tyne (20% Working Interest)
-- The net average daily production rate from Trent & Tyne to Iona during
the three months ended March 31, 2014 was 1.6 MMcf/d compared to 2.1
MMcf/d average during the three months ended December 31, 2013. Trent &
Tyne production continues to be severely reduced due to the intermittent
performance of the fresh water maker at Tyne. On April 16, 2014 the Tyne
44/18-T6 ("T6") well resumed production at 13 MMcf/d. The well has been
subsequently choked back to 3 MMscfpd in order to manage salt
deposition. Iona is currently investigating mitigation measures.
-- In the operating envelope of the Tyne field, and in particular the T6
well, salt deposition in the wellbore tubulars is a significant risk to
production. As super-saline formation water enters the wellbore tubulars
it experiences a drop in both temperature and pressure. This causes salt
to drop out of solution and deposit in the well. It is a well-known
issue in the gas fields of the UK Southern Gas Basin and elsewhere with
highly saline formation waters. Standard industry practice is to install
a water washing system to the wells. Fresh water is pumped down the
wells and this washes salt deposits to surface. A water maker takes
seawater and, by reverse osmosis, generates fresh water for the water
washing system. Salt build-up is sufficiently quick to preclude
producing wells such as T6 without continual water washing. It is
routine procedure to suspend production while the water maker is out of
commission. Operational improvements to enhance the performance and
reliability of the Tyne water maker are being implemented and should be
rectified during the second half of 2014.
-- Subsequent to the quarter end the Company, through its wholly owned UK
subsidiary, Iona UK Developments Co Limited, entered into a Sale and
Purchase Agreement ("SPA") with Perenco UK Limited ("Perenco"), to
purchase Perenco's remaining 80% working interest, rights, and
obligations in the Trent & Tyne fields (including the Trent East
Discovery Area).
Orlando (75% Working Interest)
-- Subsequent to March 31, 2014, the Company has determined that some items
required to deliver Orlando first oil in 2015 will not be completed
during 2014 and 2015, and Iona now aims to achieve first oil from
Orlando as early as possible in 2016. Iona continues to be in discussion
with the Operator of the Ninian Central Platform and DECC regarding
specific timing of infrastructure access which drives the timing of
first oil delivery.
-- The manufacture of line pipe and Xmas trees is substantially complete.
The copper cores for the umbilical are also complete and delivered to
the umbilical assembly plant. Manufacture of the control system is
ongoing and contractual arrangements for the balance of the project
supply chain are in the process of being finalized. Additionally, piping
tie-ins to the NCP have now been completed.
Highlights Subsequent to the Quarter End
Subsequent to the quarter end the Company, through its wholly owned UK
subsidiary, Iona UK Developments Co Limited, entered into a Sale and Purchase
Agreement ("SPA") with Perenco UK Limited ("Perenco"), to purchase Perenco's
remaining 80% working interest, rights, and obligations in the Trent & Tyne
fields (including the Trent East Discovery Area).
Upon satisfaction of certain conditions as set out in the SPA, the Company shall
pay to Perenco the sum of $20,000,000, as adjusted pursuant to any adjustments
as per the SPA and assume all decommissioning liabilities in relation to
Licenses being purchased. Payment shall be made no later than six (6) calendar
months after the date of the SPA or on such later date as agreed in writing. For
further information please see the Company's April 29, 2014 news release,
available on the Company's website and SEDAR.
On April 29, 2014, Iona appointed Mr. Richard Ames as the Company's Executive
Vice President.
On May 6, 2014 the bondholders voted in favour of amending the bond agreement to
include restricted cash within the definition of cash and cash equivalents. The
amendment is applied retroactively from the date of issue so that the amendment
applies to the covenant calculation as at March 31, 2014 and December 31, 2013.
CHANGE IN PRESENTATION CURRENCY
This press release is presented in United States dollars ("US dollars"). In
2013, the Company changed its presentation currency from the Canadian dollars
("CAD") to the US dollar. The change in presentation currency is to better
reflect the Company's business activities and to improve investors' ability to
compare the Company's financial results with other publicly traded businesses in
the oil and gas industry. In making this change to the US dollar presentation
currency, the Company followed the guidance in IAS 21 The Effects of Changes in
Foreign Exchange Rates and have applied the change retrospectively as if the new
presentation currency had always been the Company's presentation currency. In
accordance with IAS 21, the financial statements for all years and periods
presented have been translated to the new US dollar presentation currency. For
the 2013 comparative balances, assets and liabilities have been translated into
the presentation currency (US dollars) at the rate of exchange prevailing at the
reporting date. Items impacting income (loss) or comprehensive income (loss)
were translated at the average exchange rates for the reporting period, or at
the exchange rates prevailing at the date of transactions.
NON-GAAP FINANCIAL MEASURES
Throughout this press release, the Company uses the terms "funds flow", "funds
flow per share - basic". "funds flow per share - diluted", "Adjusted EBITDA",
"Adjusted EBITDA per share - basic", "Adjusted EBITDA per share - diluted",
"working capital" and "operating netback". These terms do not have any
standardized meaning as prescribed by IFRS and, therefore, may not be comparable
with the calculation of similar measures presented by other issuers. Management
uses working capital and operating netback measures. Working capital is
calculated as current assets less current liabilities, and is used to evaluate
the Corporation's financial leverage. Operating netback is a benchmark common in
the oil and gas industry and is calculated as total petroleum and natural gas
sales, less production and transportation expenses, calculated on a per barrel
equivalent ("boe") basis of sales volumes using a conversion. Operating netback
is an important measure in evaluating operational performance as it demonstrates
field level profitability relative to current commodity prices. Working capital
and operating netback as presented do not have any standardized meaning
prescribed by IFRS and therefore may not be comparable with the calculation of
similar measures for other entities.
Funds flow is calculated based on cash flow from operating activities before
changes in non-cash working capital. Adjusted EBITDA is calculated as net income
before finance costs, derivative gains and losses, taxes, depletion,
depreciation and amortization. Funds flow or Adjusted EBITDA per share - basic
and funds flow or Adjusted EBITDA per share - diluted are calculated as funds
flow or Adjusted EBITDA divided by the number of weighted average basic and
diluted shares outstanding, respectively. Management utilizes funds flow and
Adjusted EBITDA as key measures to assess the ability of the Company to finance
dividends, operating activities, capital expenditures and debt repayments. Funds
flow and Adjusted EBITDA as presented are not intended to represent cash flow
from operating activities, net earnings or other measures of financial
performance calculated in accordance with IFRS.
Notes:
Further details on the above are provided in the Consolidated Financial
Statements and Management's Discussion and Analysis for the quarter ended March
31, 2014 and the year and quarter ended December 31, 2013, which have been filed
with securities regulatory authorities in Canada. These documents are available
on the System for Electronic Document Analysis and Retrieval (SEDAR) at
www.sedar.com and on the Company's website: www.ionaenergy.com.
Iona is an oil and natural gas acquisition, appraisal, and development
corporation active through its 100% wholly owned United Kingdom subsidiary, Iona
Energy Company (UK) Ltd. in the United Kingdom's Continental Shelf ("UKCS").
Forward-looking statements
Some of the statements in this announcement are forward-looking, including
statements regarding Iona's plans for the development of its properties,
statements regarding acquisitions, estimated production levels, anticipated
effects of the UK small field allowance, and estimates of the net present value
of future net revenue of proved and probable reserves from Iona's properties.
Forward-looking statements include statements regarding the intent, belief and
current expectations of Iona Energy Inc. or its officers with respect to various
matters, including assumptions regarding Huntington production rates. When used
in this announcement, the words "expects," "believes," "anticipate," "plans,"
"may," "will," "should", "scheduled", "targeted", "estimated" and similar
expressions, and the negatives thereof, whether used in connection with
estimated production levels and future activity or otherwise, are intended to
identify forward-looking statements. Such statements are not promises or
guarantees, and are subject to risks and uncertainties that could cause actual
outcome to differ materially from those suggested by any such statements,
including without limitation, the risk that Iona's development plans change as a
result of new information or events or the risk that proposed transactions are
not completed. These forward-looking statements speak only as of the date of
this announcement. Iona Energy Inc. expressly disclaims any obligation or
undertaking to release publicly any updates or revisions to any forward-looking
statement contained herein to reflect any change in its expectations with regard
thereto or any change in events, conditions or circumstances on which any
forward-looking statement is based except as required by applicable securities
laws.
Note: "Boe" means barrel of oil equivalent on the basis of 6 mcf of natural gas
to 1 bbl of oil. Boes 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.
It should not be assumed that the present worth of estimated future net revenue
represents the fair market value of the reserves disclosed in this press
release. The reserve and related revenue estimates set forth in this press
release are estimates only and the actual reserves and realized revenue may be
greater or less than those calculated. The estimates of reserves and future net
revenue for individual properties may not reflect the same confidence level as
estimates of reserves and future net revenue for all properties, due to the
effects of aggregation. As used in this press release, "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 proved plus probable plus possible reserves.
Additionally, this press release uses certain abbreviations as follows:
Oil and Natural Gas Liquids Natural Gas
-------------------------------- ----------------------------------------
bbls barrels mcf thousand cubic feet
Mbbls thousand barrels mcf/d thousand cubic feet per day
MMbbls million barrels MMcf millions of cubic feet
bbls/d barrels per day MMcf/d millions of cubic feet per day
bopd barrels of oil per day Bcf billion cubic feet
NGLs natural gas liquids
Neither the TSX Venture Exchange Inc. nor its Regulation Services Provider (as
that term is defined in policies of the TSX Venture Exchange) accepts
responsibility for the adequacy or accuracy of this release.
FOR FURTHER INFORMATION PLEASE CONTACT:
Iona Energy Inc.
Neill A. Carson
Chief Executive Officer
+011 (44) 1224 228400
Iona Energy Inc.
Graham Heath
Interim Chief Financial Officer
+1 (403) 605-6726
Iona Energy Inc.
Dave Ricciardi
Investor Relations
+1 (403) 978 4894
info@ionaenergy.com
www.ionaenergy.com
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