Arsenal Energy Releases Q2 Results
CALGARY, ALBERTA, Aug 08, 2012 (Menafn - MARKETWIRE via COMTEX) --Arsenal Energy Inc. ("Arsenal" or the "Company") (pinksheets:AEYIF) is pleased to release its 2012 Q2 results.Production for the second quarter increased by 95% to 3,555 boe/dcompared to Q2 2011. Revenue increased by 45% to 18.4 million andcash flow increased by 52% to 6.5 million. Second quarter revenueand cash flow increases were not proportional to the productionincrease due to historically wide oil price differentials and lownatural gas prices.
Full financial details are contained in the financial statements andMD&A filed on SEDAR and on the Company's website.
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SUMMARY OF FINANCIAL AND OPERATIONAL RESULTS
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Three Months Ended June 30
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(000'S Cdn. except per share
amounts)20122011% Change
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FINANCIAL
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Oil and gas revenue18,44412,73045
Funds from operations6,5384,30252
Per share - basic and diluted0.040.0333
Net income (loss)7,0303,012133
Per share - basic and diluted0.040.02100
Total debt60,0549,932505
Capital expenditures11,2306,10584
Property dispositions(1,864)(126)1,379
Wells drilled (net)
Oil0.19--
Gas---
Dry---
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Total net wells drilled0.19--
Shares outstanding - end of period156,294161,761(3)
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OPERATIONAL
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Daily production
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Heavy oil (bbl/d)138190(27)
Light oil and NGLs (bbl/d)2,4441,31786
Natural gas (mcf/d)5,8371,908206
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Oil equivalent (boe @ 6:1)3,5551,82695
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Realized commodity prices (Cdn.)
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Heavy oil (bbl)64.2475.65(15)
Light oil and NGLs (bbl)74.8589.60(16)
Natural gas (mcf)1.873.90(52)
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Oil equivalent (boe @ 6:1)57.0276.62(26)
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Operating netback ( per boe)
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Revenue57.0276.62(26)
Royalty(12.17)(15.42)(21)
Operating cost(19.64)(22.76)(14)
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Operating netback per boe25.2038.44(34)
General and administrative(3.33)(7.50)(56)
Finance expenses(1.76)(1.95)(9)
Realized gains (losses) on risk
management contracts0.01(3.01)100
Other0.09(0.10)197
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Cash flow per Boe20.2125.89(22)
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SUMMARY OF FINANCIAL AND OPERATIONAL RESULTS
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Six Months Ended June 30
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(000'S Cdn. except per share
amounts)20122011% Change
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FINANCIAL
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Oil and gas revenue39,64224,34963
Funds from operations13,3379,40742
Per share - basic and diluted0.090.0650
Net income (loss)2,258(4,928)(146)
Per share - basic and diluted0.01(0.03)133
Total debt60,0549,932505
Capital expenditures18,60218,2562
Property dispositions(1,896)(598)217
Wells drilled (net)
Oil1.881.0383
Gas---
Dry-2.00-
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Total net wells drilled1.883.03(38)
Shares outstanding - end of period156,294161,761(3)
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OPERATIONAL
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Daily production
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Heavy oil (bbl/d)149195(23)
Light oil and NGLs (bbl/d)2,4821,38280
Natural gas (mcf/d)5,9962,017197
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Oil equivalent (boe @ 6:1)3,6311,91390
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Realized commodity prices (Cdn.)
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Heavy oil (bbl)71.3569.143
Light oil and NGLs (bbl)78.5882.07(4)
Natural gas (mcf)2.023.77(46)
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Oil equivalent (boe @ 6:1)59.9970.31(15)
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Operating netback ( per boe)
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Revenue59.9970.31(15)
Royalty(13.45)(13.22)2
Operating cost(20.48)(19.81)3
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Operating netback per boe26.0737.28(30)
General and administrative(3.06)(6.66)(54)
Finance expenses(1.66)(1.30)28
Realized gains (losses) on risk
management contracts(1.18)(2.23)(47)
Other0.020.07(73)
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Cash flow per Boe20.1827.16(26)
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Financial
Funds from operations for Q2 2012 totaled 6.5 million or 0.04 pershare versus 4.3 million or 0.03 per share for Q2 2011. Theincrease in cash flow is due to increased production volumes from anacquisition in November 2011 and from new Bakken wells in NorthDakota. Wide oil price differentials and low gas prices resulted in adecrease in operating netbacks to 25.20 per boe in Q2 2012 from38.44/boe in Q2 2011. Operating costs and royalties were marginallylower compared to the same period in 2011. Unit overhead decreasedfrom 7.50/boe to 3.33/boe due to higher year over year production.
Oils produced and sold in Western Canada and North Dakota arecurrently discounted to West Texas Intermediate (WTI) which in turnis discounted to world prices. These discounts are caused by therapid rate of production growth in North Dakota and Alberta and theresulting transportation bottlenecks that have developed throughoutthe system. In the second quarter, Arsenal's blended oil salesreceived a price 20 below WTI which was, in turn, 15 below worldprices.
Arsenal recorded net income of 7 million for the second quarter. Theincome included the reversal of a mark to market loss recorded in thefirst quarter from Arsenal's hedge program. The six month net incomeof 2.3 million is more indicative of the company's profitability.
Operations
Production averaged 3,555 boe/d during the second quarter, up 95%compared to the second quarter of 2011. The increase was from newBakken wells in North Dakota and from an acquisition that closed inNovember of 2011. Arsenal's Q2 production mix was 73% oil and liquidsand 27% natural gas.
In the first quarter of 2012, Arsenal drilled the Anthony RobertBakken horizontal well and spud the Wade Morris Bakken horizontalwell, both in North Dakota. Both wells were completed with multistagefracks and placed on production in June. Results from the AnthonyRobert were previously released. The Wade Morris well plugged offwith frack sand during the cleanup flow. The well was placed onproduction at 200 bbls/d from the heel for two weeks at which time acoiled tubing rig opened up the first mile of the horizontal section.The well was then flowed for two weeks at 400 bbls/d. A service rigis currently on the well drilling out the remaining horizontalsection and installing equipment for pumping operations. Arsenal hasan 84% WI in each well. Arsenal anticipates that both wells will betype North Dakota Bakken wells.
Outlook
Arsenal has been advised by joint interest operators of theirintention to drill 10 (1.5 net) Bakken North Dakota horizontalsbefore yearend. The average cost of a North Dakota Bakken well hasdeclined to 8.3 million from 10 million at Stanley and from 8.5million to 8 million at Lindahl in 2011 due to a more competitiveservice company pricing environment.
Arsenal expects to spud the first of two horizontal wells into theGlauconite channel system at Princess, Alberta in the second week ofAugust. The wells should be completed with multistage fracks by theend of September and placed on production. If the program issuccessful, Arsenal has a large follow up program.
As previously announced, in the deep basin of Alberta, Arsenal hasacquired 9,600 net acres of land on an emerging Cardium play. Wellsdrilled by other operators in the play are coming on stream atapproximately 4 mmcf/d of gas with 50 bbls/mmcf of liquids. Most ofthe liquids are high netback condensates. Arsenal is planning to testits acreage in 2013.
The oil price differentials for the remainder of the year look to benarrowing. Rail capacity in North Dakota has increased to 250,000bbls/d and a similar amount of pipeline capacity should come on overthe next 6 to 12 months. Bakken differentials should narrow to thelevel of light Canadian streams. Month to month volatility is veryhigh and differentials are difficult to hedge. Volumes are expectedto increase during Q3 with the addition of the Anthony Robert andWade Morris Bakken North Dakota wells and the two Glauconitehorizontals at Princess. Arsenal is preparing drill sites on 4operated high working interest (74%) Bakken North Dakota horizontalwells but plans to hold off initiating drilling operations untilpricing becomes more transparent.
To receive Company news releases via e-mail, please adviseinfo@arsenalenergy.com and specify "Arsenal Press Releases" in thesubject line.
Advisory
All barrels of oil equivalent (boe) conversions in this report aredeprived by converting natural gas to oil at the ratio of sixthousand cubic feet (Mcf) of natural gas to one barrel (bbl) of oil.Certain financial values are presented on a boe basis and suchmeasurements may not be consistent with those used by othercompanies. Boe amounts may be misleading, particularly if used inisolation. A boe conversion ratio has been calculated using aconversion rate of six thousand cubic feet of natural gas to onebarrel of oil (6 mcf:1 bbl) and is based on an energy equivalencyconversion method applicable at the burner tip and does not representa value equivalency at the wellhead.
Certain financial measures referred to in this release, such as fundsfrom operations and funds from operations per share, are notprescribed by generally accepted accounting principles (GAAP). Fundsfrom operations is a key measure that demonstrates the ability togenerate cash to fund expenditures. Funds from operations iscalculated by taking the cash provided by operations from theconsolidated statement of cash flows and adding back changes innon-cash working capital. Funds from operations per share iscalculated using the same methodology for determining net income pershare. These non- GAAP financial measures may not be comparable tosimilar measures presented by other companies. These financialmeasures are not intended to represent operating profits for theperiod nor should they be viewed as an alternative to cash providedby operating activities, net income or other measures of financialperformance calculated in accordance with GAAP.
Management uses certain industry benchmarks such as field netback toanalyze financial and operating performance. Field netback has beencalculated by taking oil and gas revenue less royalties, operatingcosts and transportation costs. This benchmark does not have astandardized meaning prescribed by GAAP and may not be comparable tosimilar measures presented by other companies. Management considersfield netback as an important measure to demonstrate profitabilityrelative to commodity prices.
Certain statements and information contained in this press release,including but not limited to management's assessment of Arsenal'sfuture plans and operations, production, reserves, revenue, commodityprices, operating and administrative expenditures, funds fromoperations, capital expenditure programs and debt levels containforward-looking statements. All statements other than statements ofhistorical fact may be forward looking statements. These statements,by their nature, are subject to numerous risks and uncertainties,some of which are beyond Arsenal's control including the effect ofgeneral economic conditions, industry conditions, changes inregulatory and taxation regimes, volatility of commodity prices,escalation of operating and capital costs, currency fluctuations, theavailability of services, imprecision of reserve estimates,geological, technical, drilling an processing problems, environmentalrisks, weather, the lack of availability of qualified personnel ormanagement, stock market volatility, the ability to access sufficientcapital from internal and external sources and competition from otherindustry participants for, among other things, capital, services,acquisitions of reserves, undeveloped lands and skilled personnelthat may cause actual results or events to differ materially fromthose anticipated in the forward looking statements. Suchforward-looking statements although considered reasonable bymanagement at the time of preparation, may prove to be incorrect andactual results may differ materially from those anticipated in thestatements made and should not unduly be relied on. These statementsspeak only as of the date of this press release. Arsenal does notintend and does not assume any obligation to update theseforward-looking statements, whether as a result of new information,future events or otherwise, except as required by applicable law.Arsenal's business is subject to various risks that are discussed inits filings on the System for Electronic Document Analysis andRetrieval (SEDAR).
Contacts:
Arsenal Energy Inc.
Tony van Winkoop
President and Chief Executive Officer
(403) 262-4854
(403)-265-6877 (FAX)
info@arsenalenergy.com
Arsenal Energy Inc.
J. Paul Lawrence
Vice President, Finance and CFO
(403) 262-4854
(403)-265-6877 (FAX)
info@arsenalenergy.com
Arsenal Energy Inc.
1900, 639 - 5th Avenue S.W.
Calgary, Alberta, T2P 0M9
(403) 262-4854
(403)-265-6877 (FAX)
info@arsenalenergy.com
www.arsenalenergy.com
SOURCE: Arsenal Energy Inc.
mailto:info@arsenalenergy.com
mailto:info@arsenalenergy.com
mailto:info@arsenalenergy.com
http://www.arsenalenergy.com
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