ok q ok future
Artek Exploration Ltd. Announces Third Quarter 2013 Financial Results and Updates Operations
EARNINGS
CALGARY, ALBERTA--(Marketwired - Nov. 6, 2013) - Artek Exploration Ltd. (RTK.TO) of Calgary, Alberta ("Artek" or the "Company") is pleased to provide this summary of its financial and operating results for the three and nine months ended September 30, 2013. A complete copy of the Company's comparative financial statements for the three and nine months ended September 30, 2013, along with management's discussion and analysis in respect thereof will be filed on SEDAR and on the Company's website at www.artekexploration.com.
HIGHLIGHTS
|
Three Months Ended September 30 |
Nine Months Ended September 30 |
|
2013 |
2012 |
Change |
2013 |
2012 |
Change |
| (000s, except per share amounts) |
($) |
($) |
(%) |
($) |
($) |
(%) |
| Financial |
|
|
|
|
|
|
| Petroleum and natural gas revenues |
14,568 |
8,501 |
71 |
42,765 |
27,610 |
55 |
| Funds flow from operations (1) |
5,876 |
3,107 |
89 |
19,417 |
9,978 |
95 |
|
Per share - basic |
0.09 |
0.07 |
29 |
0.33 |
0.23 |
43 |
|
|
- diluted |
0.09 |
0.07 |
29 |
0.32 |
0.23 |
39 |
| Cash from operating activities |
3,934 |
2,959 |
33 |
16,930 |
9,391 |
80 |
| Net earnings (loss) |
283 |
(1,213) |
123 |
3,411 |
7,696 |
(56) |
|
Per share - basic |
0.00 |
(0.03) |
100 |
0.06 |
0.18 |
(67) |
|
|
- diluted |
0.00 |
(0.03) |
100 |
0.06 |
0.18 |
(67) |
| Capital expenditures |
38,349 |
14,857 |
158 |
76,753 |
42,134 |
82 |
| Dispositions |
-- |
-- |
-- |
-- |
19,444 |
-- |
| Net debt (at period-end) (2) |
68,918 |
61,406 |
12 |
68,918 |
61,406 |
12 |
| Shareholders' equity |
155,458 |
102,657 |
51 |
155,458 |
102,657 |
51 |
| (000s) |
(#) |
(#) |
(%) |
(#) |
(#) |
(%) |
| Share Data |
|
|
|
|
|
|
| At period-end |
|
|
|
|
|
|
|
Basic |
62,700 |
43,474 |
44 |
62,700 |
43,474 |
44 |
|
Options |
4,818 |
4,121 |
17 |
4,818 |
4,121 |
17 |
| Weighted average |
|
|
|
|
|
|
|
Basic |
62,620 |
43,455 |
44 |
58,945 |
43,442 |
36 |
|
Diluted |
64,355 |
43,826 |
47 |
60,608 |
43,835 |
38 |
|
|
|
(%) |
|
|
(%) |
| Operating |
|
|
|
|
|
|
| Production |
|
|
|
|
|
|
|
Natural gas (mcf/d) |
15,248 |
9,722 |
57 |
13,255 |
9,573 |
38 |
|
Crude oil (bbls/d) |
982 |
743 |
32 |
1,045 |
821 |
27 |
|
NGLs (bbls/d) |
360 |
193 |
87 |
333 |
160 |
108 |
|
Total (boe/d)(3) |
3,884 |
2,556 |
52 |
3,587 |
2,577 |
39 |
| Average wellhead prices (4) |
|
|
|
|
|
|
|
Natural gas ($/mcf) |
3.33 |
2.49 |
33 |
3.58 |
2.27 |
58 |
|
Crude oil ($/bbl) |
87.75 |
78.47 |
12 |
86.71 |
80.48 |
8 |
|
NGLs ($/bbl) |
50.61 |
50.95 |
1 |
50.74 |
60.98 |
(17) |
|
Total ($/boe)(5) |
39.93 |
36.50 |
9 |
43.34 |
38.30 |
13 |
| Royalties ($/boe) |
(7.80) |
(6.03) |
29 |
(8.03) |
(7.10) |
13 |
| Operating cost ($/boe) |
(10.68) |
(10.11) |
6 |
(10.30) |
(10.51) |
(2) |
| Transportation cost ($/boe) |
(1.89) |
(1.84) |
3 |
(1.92) |
(1.64) |
17 |
| Operating netback ($/boe)(6) |
19.56 |
18.52 |
6 |
23.10 |
19.05 |
21 |
| Drilling activity - gross (net) |
|
|
|
|
|
|
|
Development (#) |
3 (2.2) |
5 (2.4) |
|
9 (5.2) |
8 (5.0) |
|
|
Exploration (#) |
1 (0.6) |
-- (--) |
|
4 (2.8) |
2 (1.2) |
|
|
Total (#) |
4 (2.8) |
5 (2.4) |
|
13 (8.0) |
10 (6.2) |
|
| Average working interest (%) |
70 |
48 |
|
62 |
62 |
|
| Success rate (%) |
100 |
100 |
|
100 |
100 |
|
(1) Funds flow from operations is calculated using cash from operating activities, as presented in the statement of cash flows, before changes in non-cash working capital and settlement of decommissioning costs. 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 International Financial Reporting Standards ("IFRS"), and therefore, may not be comparable with the calculations of similar measures for other companies.
(2) Current assets less current liabilities, excluding fair value of derivative contracts.
(3) For a description of the boe conversion ratio, refer to the advisories contained herein.
(4) Product prices include realized gains/losses from financial derivative contracts.
(5) Oil equivalent price includes minor sulphur sales revenue.
(6) Operating netback equals revenue less royalties, transportation and operating costs calculated on a per boe basis. Operating netback does not have a standardized measure prescribed by IFRS, and therefore, may not be comparable with the calculations of similar measures for other companies.
Third Quarter Financial and Operating Highlights
- Increased average production to 3,884 boe/d, up 52% from the third quarter of 2012 and 19% from the second quarter of 2013.
- Improved crude oil and liquids volumes 43% to 1,342 bbls/d, of which 73% was oil and condensate, representing 35% of total production.
- Increased funds flow from operations 89% to $5.9 million and 29% on a diluted per share basis to $0.09 per share compared to the third quarter of 2012.
- Closed the Fireweed asset acquisition in northeastern British Columbia, which included approximately 600 boe/d (21% liquids) of production for a total cash consideration of $14.8 million net of adjustments. This transaction builds on our strategy of continuing to consolidate a significant resource base in our core Inga/Fireweed area of operations, and as a result, has increased our aggregated area land holdings to 107 (61 net) sections with Doig rights and 120 (71 net) sections with Montney rights along with important infrastructure additions.
- Drilled 4 (2.8 net) wells (100% success rate), including 3 (1.8 net) wells at Inga, two of which are northern and southern pool extensions and 1 (1.0 net) exploration discovery well at Mulligan in the Peace River Arch area of Alberta.
- Invested $38.3 million in capital expenditures, including $14.8 million for the Fireweed asset acquisition and $2.6 million on undeveloped land acquisitions in our core operating areas.
- Increased operating bank line to $90.0 million from $75.0 million in October 2013.
FINANCIAL SUMMARY
Artek's average production for the three-month period ended September 30, 2013 was 3,884 boe/d (35% liquids), up 52% from the previous year and 19% from the second quarter of 2013. Liquids production was down slightly in the short-term as a result of adding 600 boe/d (21% liquids) through the Fireweed asset acquisition and bringing on-stream over 400 boe/d of net production (10-14% liquids) at Mulligan. With a liquids-weighted program planned through year-end, the Company anticipates exiting 2013 with liquids production in the 38% to 40% range. An anomalously wet summer and third party plant interruptions at both Inga and Mulligan resulted in restriction or shut-ins of over 300 boe/d during the quarter. During the period, funds flow increased 89% to $5.9 million and 29% on a diluted per share basis to $0.09 per share from last year. The Company's operating netback was $19.56/boe in the third quarter, up 6% from the previous year but down from $25.28/boe in the second quarter due to the short term reduction in liquids percentage and a 15% decrease in natural gas prices quarter to quarter.
Subsequent to September 30, 2013, the Company's bank operating line was increased to $90.0 million from $75.0 million with the next review scheduled for January 2014.
Artek has entered into several commodity contracts to protect its cash flow and support its capital budget for the remainder of the year. The Company has put a floor price of $3.00/GJ on 6,000 mmbtu/d of natural gas production for the period April to October 2013. As part of the same transaction for the same period, Artek sold a call on 600 bbls/d of crude oil production at an average price of CDN$101.37/bbl WTI. The Company has also entered into natural gas production swaps on 2,000 mmbtu/d from April to December 2013 at a fixed price of $3.27/GJ and 1,000 mmbtu/d at a fixed price of $3.41/GJ from April to October 2013. Lastly, 200 bbls/d of crude oil production has been fixed at CDN$96.00/bbl WTI for the period June to December 2013, 100 bbls/d has been fixed at CDN$103.00/bbl from August to December 2013 and the AECO Basis for 3,000 mmbtu/d has been fixed at CDN$0.445/mmbtu from November to December 2013.
Operations Review - Second Half Liquids Focus
During the quarter, Artek drilled 4 (2.8 net) wells with a 100% success rate, including three horizontal Doig wells at Inga and a horizontal well at Mulligan targeting Charlie Lake oil. Total capital investment during the quarter was $38.3 million, including $14.8 million for the Fireweed asset acquisition and $23.5 million of exploration and development capital that included $2.6 million on undeveloped land acquisitions in our core operating areas, and $3.2 million of pipeline and facilities investment to accommodate exploration successes at Inga South and the Mulligan areas.
Late in the third quarter, Artek drilled an Inga vertical pilot well from a pad at 13-16-87-23 W6 which the Company believes is a significant pool extension at Inga South. The well is more than 3 miles south of the closest producer on lands largely acquired in 2013 and not evaluated in our December 31, 2012 reserve report. The vertical well encountered 65 metres of clean Doig sand (versus the average of approximately 40 metres in the producing Inga pool to the north) and was drilled out horizontally in October. The well has recently been completed using a 17 stage propane frac and after 128 hours of total production test period, the well was flowing at an average restricted rate of 4.2 mmcf/d (24% load propane) and 1,230 bbl/d of free condensate over the last 6 hours of the test at a flowing pressure of 937 PSI or 1,760 boe/d (net of load) of which 70% was condensate delivering a free liquids ratio of 387 bbls/mmcf. The Inga South stepout well at 13-16 (Artek's 16th Doig horizontal well), has produced one of the highest test rates and the uppermost free condensate yield of wells drilled by the Company on the play to date. The Company believes the well validates an additional seven sections of land as prospective for high liquids yield Doig. Earlier in the quarter, Artek drilled two Inga horizontal wells that averaged approximately 850 boe/d at 43% liquids over the first 30 days of production. The average 30 day production rate for the Inga Doig horizontal wells drilled to date continues to track in excess of 1,000 boe/d at approximately 42% liquids. The remainder of the Doig drilling for the year is focused at the south end of the Doig pool trend where higher liquids yields have been historically realized. A second Doig horizontal is currently being drilled one mile further south of the new Inga South discovery at 10-17-87-23 W6M to further delineate this extension and should be finished drilling in the third week of November with the completion scheduled for the end of November. Artek is scheduled to spud a final Doig well prior to year end also in the Inga South area.
Artek is also drilling an exploration horizontal Montney well at Inga South from the 10-17-87-23W6M pad. The vertical pilot well drilled at 13-16 was drilled and logged into the Montney with encouraging results on logs. The well should reach total depth in late November and is scheduled for completion in December. The Company's previous two Montney wells have realized very high liquids ratios in excess of 100 bbls/mmcf. Industry is having success on similarly high liquids yield Montney by utilizing slickwater and greater numbers of fracs and as a result Artek is planning to complete the well using up to a 30 stage slickwater frac program which represents a significant increase in effort. The Company and its partner in the Inga area continue to increase their landholdings bringing total Montney mineral rights in the Inga/Fireweed area to over 87,800 (51,500 net) acres or approximately 129 (75 net) sections.
The Company also drilled a 100% horizontal well in the Mulligan area targeting crude oil in the Charlie Lake. Artek's Mulligan horizontal well at 13-10-82-8 W6M was drilled to a lateral length of approximately 1,500 metres and completed using an 18-stage energized water-based fracing system. After a 79-hour clean up test period, the well was flowing at an average rate of 1.1 mmcf/d and 310 bbls/d of 34° API medium gravity crude or a total test rate of approximately 500 boe/d, of which 62% was oil over the last six hours of the production test. We are very encouraged by the results and expect to have the well on production by mid-November. The Company has accumulated approximately 32 (30 net) sections of land that Artek believes are prospective for multi-zone oil and liquids-rich natural gas on this Triassic stratigraphic play that is sandwiched between recent industry activity at Spirit River and the Cecil Triassic oil developments. Industry is developing the trend at four to six horizontal wells per section that could with continued success, add significantly to the Company's inventory of oil and liquids-rich natural gas locations.
Outlook
Subject to timing of current wells and its final operations of the year, Artek is forecasting fourth quarter production volumes of approximately 4,300 to 4,500 boe/d. With the two horizontal wells currently drilling at Inga and a final Doig horizontal expected to spud in December, the Company anticipates spending approximately $19 million during the fourth quarter, thereby bringing total capital investment for the year to approximately $95 million (including the asset purchase at Fireweed that closed in the third quarter). The Company is maintaining its guidance with exit production expected to be between 4,800 and 5,000 boe/d (38% to 39% liquids) that, along with the early exploration success experienced during the final quarter of the year, should deliver excellent momentum going into 2014. We look forward to updating you on our remaining operational results.