This is more like it!!!! RESULTS HIGHLIGHTED WITHVERO ANNOUNCES 2010 FINANCIAL AND OPERATING RESULTS HIGHLIGHTED WITH A 101% INCREASE IN OIL PRODUCTION
CALGARY, Mar 8, 2011 (Canada NewsWire via COMTEX News Network) --
Vero Energy Inc. ("Vero" or the "Company") (TSX-VRO) today announces its 2010 financial results. Copies of the complete audited financial statements and management's discussion and analysis in respect thereof for the year ended December 31, 2010 will be available, in due course, through www.sedar.com or by visiting Vero's website at www.veroenergy.ca.
2010 HIGHLIGHTS
-- Increased average daily production by 23% to 8,522 boe/d from
6,941 in 2009.
-- Increased light oil production by 101% in 2010 to average 656
bbl/d. In the fourth quarter oil production increased 238% to
949 bbl/d from 280 bbl/d in the same quarter of 2009.
-- Fourth quarter 2010 liquids (oil and NGL) production rose to
25% of total production.
-- Operating costs decreased 13% to $ 8.02 per boe from $9.18 per
boe in 2009.
-- Funds flow netbacks increased 68% to $18.26 per boe from $10.87
per boe in 2009.
-- Funds flow was $56.8 million which is a 106% increase over 2009
($1.28 per basic and diluted share representing a 86% increase
over 2009).
-- Drilled 31 (24.5 net) wells with a 100% success rate. 30 (24.2
net) of these wells were horizontal and 61% of these wells
targeted light oil prospects. Vero was able to maintain its
production guidance from the beginning of the year even though
there was an emphasis on higher rate gas wells in the earlier
forecasts.
-- Net debt was $123.8 million at year-end or 2.0 times annualized
fourth quarter cash flow.
2011 UPDATE
-- Current production is approximately 9,000 boe/d (73 % natural
gas) based on field estimates.
-- Drilled 8 (6.2 net) horizontal wells to date that have been
completed or waiting on completion; waiting to complete 5 (4.0
net) wells, including 2 Notikewin horizontals, 2 Cardium oil
horizontals, and one Viking horizontal.
-- Currently drilling 3 (3.0 net) wells. Plans are for them to be
completed and brought on prior to quarter end or early in the
second quarter.
Financial and operational highlights for the quarter and year ended December 31, 2010 with comparative data for 2009 are as follows:
Three months ended Twelve months ended
December 31, December 31,
Financial
(
00's except per share % %
amounts) 2010 2009 Change 2010 2009 Change
Production revenue 27,624 22,500 23 109,220 78,144 39
Funds flow from 15,294 9,538 60 56,772 27,550 106
operations
Per basic share 0.33 0.23 43 1.28 0.69 86
Per diluted share 0.33 0.23 43 1.28 0.69 86
Net loss (3,359) (932) 261 (3,789) (20,056) (81)
Per basic share (0.07) (0.01) 600 (0.09) (0.50) (82)
Per diluted share (0.07) (0.01) 600 (0.09) (0.50) (82)
Capital expenditures 43,558 2,662 1,536 129,851 37,529 246
(net)
Net debt 123,814 88,911 39 123,814 88,911 39
Share Capital (000's)
Basic, weighted average 46,773 42,359 10 44,257 39,762 11
Basic, end of period 48,920 43,183 13 48,920 43,183 13
Diluted (treasury method) 46,773 42,359 10 44,257 39,762 11
Fully diluted 53,196 47,387 12 53,196 47,387 12
Daily Sales Volumes
Natural gas volumes 37,704 32,206 17 39,932 33,482 19
(mcf/d)
Light oil (boe/d) 949 280 238 656 327 101
Liquids (boe/d) 1,109 1,127 (2) 1,210 1,034 17
Corporate (boe/d) 8,341 6,775 23 8,522 6,941 23
Average Prices Realized
Natural gas ($/mcf) 4.08 4.94 (17) 4.39 4.33 1
Light Oil ($/bbl) 79.06 74.19 7 75.00 59.15 27
Liquids ($/bbl) 64.30 57.36 12 61.05 48.05 27
Corporate ($/boe) 36.00 36.10 - 35.00 30.84 13
Netbacks ($/boe)
Operating 23.01 21.94 5 21.69 15.99 36
Funds flow 19.93 15.30 30 18.26 10.87 68
Wells drilled
Gross 10 8 25 31 16 94
Net 6.7 6.4 5 24.5 13.9 76
(1) Funds flow from operations is calculated as funds provided by
operating activities from the statement of funds flows, adding
change in non-funds working capital and asset retirement
expenditures. Funds flow from operations is used to analyze the
Company's operating performance and leverage. Funds flow from
operations does not have a standardized measure prescribed by
Canadian Generally Accepted Accounting Principles and therefore may
not be comparable with the calculations of similar measures for
other companies.
(2) Net debt represents current assets less current liabilities and
bank debt (but excludes the potential future liability related to
the mark-to-market measurement of hedges). It does not have a
standardized meaning prescribed by Generally Accepted Accounting
Principles and it is therefore unlikely to be comparable to similar
measures presented by other companies.
(3) All barrels of oil equivalent conversions use 6 mcf to 1 barrel of
oil.
(4) Operating netback equals production revenue less royalties,
transportation and operating costs calculated on a per boe basis.
Funds flow netback uses the operating netback, adds interest and
other income and then subtracts interest and general and
administrative costs. Operating netback and funds flow from
operations netbacks are not standardized measures prescribed by
Canadian Generally Accepted Accounting Principles and therefore may
not be comparable with the calculations of similar measures for
other companies.
2010 IN REVIEW (all dollar amounts are in 000's except per share, boe, and per boe amounts unless specifically otherwise noted)
Vero is pleased to report to its shareholders that the Company has succeeded with its plans to transition to a more oil weighted producer. Natural gas prices started strong early in the year but fell off rapidly and continued to be soft throughout 2010 due to excess supply. As a result of continued low gas prices and early success in our Cardium horizontal drilling program, we decided to focus more on oil drilling. Our initial plans for 2010 included drilling approximately 15% of our total wells to target light oil. With the early successes realized, plans changed so that by the end of the year 61% of the wells drilled were for oil targets. The Company is pleased that throughout this shift we did not deviate from our initial average production guidance of 8,500 - 9,000 boed even though the typical gas well has 2.5 to 3 times higher production rates and 2 to 3 times more reserves than the oil wells. By concentrating drilling efforts on our expanding Cardium land base, the Company has grown oil production by 101% for the year and 238% for the last quarter of 2010 compared to 2009. Vero has also been able to increase the overall corporate liquids percentage to a current level of approximately 27% from the 20% average realized in 2009. Part of the transition plan was to take advantage of our early work and to increase land holdings in this play. We were very successful in this as we were able to increase our land holdings from 148 sections to 177 sections throughout the year through a combination of land sales, farmins on other land holders, and small strategic acquisitions. The Company invested in strategic infrastructure including: access roads, lease building, solution gas compression and pipelines. These expenditures required some high, initial capital expenditures in 2010 that will benefit the Company into the future. Our high netback oil production has become a significant contributor to the funds flows of the Company as over $50 per barrel of oil equivalent netbacks were realized from this play in the last two months of 2010. The Cardium has become increasingly exciting for us as we continue to learn about the play, better understand the geology, and continue to modify our horizontal drilling and completion techniques to maximize the returns. Vero drilled 17 (12.7 net) Cardium horizontal wells in 2010 with a 100% success rate. With our increased Cardium land base of approximately 177 (111 net) sections and ongoing delineation of the play our Cardium drilling inventory increased from 135 to 150 locations. With continued drilling and definition of the opportunity we could see this location count exceed 260 locations.
While the fourth quarter of 2010 was met with a continued low natural gas price environment, Vero delivered a 23% increase in average production levels over the fourth quarter of 2009. For the year ended 2010, Vero achieved 8,522 boe/d representing a 23% increase in average production from 2009. Decreasing corporate controllable costs are also showing their benefits as production revenues were only up 39% year over year in 2010, but funds flow from operations were 106% higher at $56.8 million or $1.28 per share (weighted average and diluted) compared to the $27.6 million (
.69 per share) in 2009. The net loss of $3.8 million in 2010 was markedly lower than the $20.1 million in 2009.
Vero's exploration and development capital spending in 2010 was $124,445, which was 133% higher than the $53,507 spent in 2009 as the Company drilled 31 gross (24.5 net) wells versus 16 gross (13.9 net) wells drilled in 2009. Vero's net debt was $123,814 at December 31, 2010 representing an increase of 38% from December 31, 2009. The active drilling program in 2010 and $8,888 of producing property acquisitions accounted for much of the increase. In addition Vero spent $7 million on land acquisitions which included $4 million in respect of its new venture into the shale gas play of British Columbia.
Recognizing natural gas price volatility; the Company concentrated its remaining drilling efforts on liquids rich natural gas which provide good returns even in a low natural gas sales price environment. In addition Vero embarked on a venture into the shale gas plays of north east British Columbia with a crown land acquisition in the Cordova Embayment. This area has long tenure that has potential for solid future organic growth. The Company will spend minimal capital at this time and the ultimate pace of development can parallel the price of natural gas.
On the liquidity front, Vero increased its borrowing base with its syndicate of banks to $140 million in May of 2010. Even in the face of lower gas price decks, this borrowing base was maintained in its mid-year review as a result of Vero's strong drilling success. Vero added to its financial resources during the latter part of 2010 with a $35 million common/flow-through share equity issuance. This financing gave Vero enhanced financial flexibility.
2011 OUTLOOK
Based on field estimates Vero is currently producing 9,000 boe/d. Due to heavy industry demand for fracturing services, the timing of our completions continue to see delays which constantly push back on-production dates for new wells. Currently Vero has five wells that are waiting on completions and also has three drilling rigs operating. Completions of the wells being drilled are expected to occur by mid - April but will depend on the availability of completion services and the onset of spring break-up in Western Canada. After the completion of our first quarter wells that are waiting on completion or that are currently drilling, Vero forecasts that production should be in the 10,500 - 11,000 boe/d range.
Vero will continue to follow its philosophy of being flexible with its capital spending. Vero has built its forecasts around current strip prices for natural gas of $3.50/GJ and oil at $94 per boe. The plan can be accelerated, pulled back or redirected depending on commodity prices. Plans for 2011 include investing approximately $100 million in exploration and development projects. This includes the planned drilling of 26-28 net horizontal wells with 18-20 targeting Cardium prospects. The Company believes continuing the focus on this play is a prudent business plan with future development costs of proved plus probable reserves in the $15- $20 per boe range and the solid netbacks this play is delivering. The remainder of the 2011 horizontal liquids rich gas wells to be drilled will be predominately in the Notikewin and Wilrich formations, and to a lesser extent Bluesky and Rock Creek zones. The first quarter of 2011 will see us drill and complete approximately 10 (8.6 net) horizontal wells and one vertical well. Five of these wells are planned as horizontal Cardium oil wells, four are planned high impact, liquids-rich, Notikewan horizontal wells, and one horizontal Viking gas well. The company forecasts 2011 average production to be 10,000-10,500 boed (71-73% Natural gas). The second quarter will be one where cash flow is anticipated to exceed capital expenditures as we slow spending due to spring break-up. Vero's budget will be continually reviewed by management as the year unfolds.
Vero's capital and operating cost structure continues to be at the forefront of our planning. Vero strives to add efficiencies wherever possible. Vero has been successful in the pursuit of lower operating costs throughout 2010 and expects costs to decline in 2011 to the mid $7 per boe level. Capital spending will be consistent with our "transitional" strategy to increase our liquids weighting to approximately 30-35% of our production portfolio by the end of 2011.
In summary, within its range of existing opportunities, Vero has been successful in shifting its focus to a greater proportion of oil production. This will continue in 2011 and the increase in our corporate netbacks levered to our increased oil production confirms that the transition has had and will continue to have, solid economics. Vero will continue to prudently manage its asset base to ensure maximum flexibility from a financial and business strategy standpoint throughout 2011. I look forward to updating you on our future successes.
Sincerely,
"Signed"
Douglas J. Bartole President and Chief Executive Officer March 8, 2011
FINANCIAL STATEMENTS
Below is selected financial statement information for the year ended December 31, 2010 with comparative data for December 31, 2009. For full disclosure of our audited financials statements with notes and the Management, Discussion and Analysis, please visit our website or SEDAR.
VERO ENERGY INC.
Statements of Operations, Comprehensive Loss and Retained Earnings
(in thousands of dollars, except per share data)
2010 2009
REVENUE
Production revenue 108,874 78,144
Realized gain (loss) on risk management 523 (2,938)
activities
Unrealized loss on risk management (177) (1,245)
activities
109,220 73,961
Royalties (11,568) (11,127)
Interest and other 197 217
97,849 63,051
EXPENSES
Operating 24,950 23,254
Transportation 4,892 3,235
General and administrative 6,171 5,851
Stock based compensation 3,171 4,851
Interest and bank charges 5,241 4,406
Depletion, depreciation and accretion 58,799 47,961
103,224 89,558
LOSS BEFORE INCOME TAXES (5,375) (26,507)
INCOME TAXES
Future income tax recovery (1,586) (6,451)
(1,586) (6,451)
NET LOSS AND COMPREHENSIVE LOSS (3,789) (20,056)
RETAINED EARNINGS, BEGINNING OF PERIOD 5,784 25,851
Repurchase of shares - (11)
RETAINED EARNINGS, END OF PERIOD 1,995 5,784
NET LOSS PER SHARE
Basic (0.09) (0.50)
Diluted (0.09) (0.50)
VERO ENERGY INC.
Balance Sheets
As at December 31,
(in thousands of dollars) 2010 2009
ASSETS
CURRENT
Accounts receivable 27,458 29,541
Prepaid expenses and deposits 3,241 4,566
Loans receivable - 2,289
30,699 36,396
Property and equipment 359,195 287,645
Goodwill 19,913 19,913
409,807 343,954
LIABILITIES
CURRENT
Accounts payable and accrued liabilities 60,349 47,588
Current portion of risk management contracts 1,422 1,132
Bank debt 94,164 77,719
155,935 126,439
Risk management contracts - 113
Asset retirement obligations 5,636 5,379
Future income taxes 16,273 15,286
177,844 147,217
SHAREHOLDERS' EQUITY
Share capital 218,764 181,343
Contributed surplus 11,204 9,610
Retained Earnings 1,995 5,784
231,963 196,737
409,807 343,954
VERO ENERGY INC.
Statement of Cash Flows
(in thousands of dollars, except per share data)
2010 2009
CASH FLOWS RELATED TO THE
FOLLOWING ACTIVITIES:
OPERATING
Net loss (3,789) (20,056)
Adjustments for:
Unrealized loss on 177 1,245
risk management activities
Stock based 3,171 4,851
compensation
Depletion, 58,799 47,961
depreciation and accretion
Future income taxes (1,586) (6,451)
56,772 27,550
Asset retirement costs (341) (571)
Changes in non-cash working 4,652 (24,835)
capital
61,083 2,144
FINANCING
Increase (decrease) in 16,445 2,300
bank debt
Proceeds from issuance
of common shares, net of
share issue costs 32,660 25,636
Loans to officers / 2,289 (1,939)
directors
Stock option exercises 4,857 -
Repurchase of shares - (86)
56,251 25,911
INVESTING
Additions to petroleum and (124,445) (53,507)
natural gas properties
Purchase of petroleum and (7,988) (350)
natural gas assets
Additions to administrative (27) (7)
assets
Proceeds on sale of 3,609 16,335
petroleum properties
Changes in non-cash working 11,517 9,474
capital
(117,334) (28,055)
NET INCREASE (DECREASE) IN CASH
AND
CASH EQUIVALENTS - -
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD - -
CASH AND CASH EQUIVALENTS, END OF
PERIOD - -
Vero Energy Inc. is a Calgary based oil and natural gas exploration and development company. Vero's common shares trade on The Toronto Stock Exchange under the symbol "VRO".