ArPetrol Ltd. announces first-quarter 2014 financial and operating results and reports positive working capital of $1.4 million
07:00 EDT Monday, May 26, 2014
CALGARY, May 26, 2014 /CNW/ - ArPetrol Ltd. ("ArPetrol" or the "Company") (TSXV: RPT) announces its financial and operating results for the three months ended March 31, 2014 and provides an operational update on activities to date this year as well as an outlook for the remainder of 2014. The Company's interim condensed consolidated financial statements and management's discussion and analysis (MD&A) for the reporting period have been filed on SEDAR at www.sedar.com and posted on the Company's website at www.arpetrol.com.
Summary for the First Quarter 2014
Operating and Financial
ArPetrol's working capital position continued to improve during the first quarter of 2014. The Company had a working capital of $1.4 million at the end of the first quarter of 2014 compared to a deficit of $0.8 million at the end of 2013. The largest contributor to 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. Ongoing discussions are progressing with this last vendor.
The Company had drawn $1.7 million on its short-term loan at the end of the first quarter 2014.
ArPetrol's first quarter production averaged 242 barrels of oil equivalent per day (boe/d). This is an increase of 78 boe/d from the fourth quarter of 2013 and an increase of 14 boe/d from the first quarter of last year. Fourth-quarter 2013 production was affected by well performance issues which were resolved before the end of the fourth-quarter.
The first-quarter 2014 average realized natural gas price was $4.21 per thousand cubic feet (Mcf), $0.56 per Mcf higher than the price realized in the fourth quarter of 2013 and $0.86 per Mcf higher than the first quarter of 2013. This higher price during 2014 reflects the Company's new gas sales contract signed during the year.
The average price realized for natural gas liquids (NGLs) in the quarter was $81.30 per barrel (bbl), a decrease of $1.41 per bbl over the fourth quarter of 2013. The reduced NGL pricing reflects the changing dynamics in the Argentine markets.
ArPetrol continues to generate strong gas processing revenues from its new gas processing contracts that it negotiated in 2013. During the first-quarter of 2014, gas processing revenues were $2.2 million consistent with the fourth-quarter of 2013 and double the $1.1 million earned in the first-quarter of 2013.
There were no capital expenditures during the quarter.
Net income for the quarter was $1,613,357 million compared to a net loss of $290,350 for the fourth quarter of 2013.
Summary of Results
(Cdn$ except shares outstanding
and per boe1 amounts) | Three Months Ended
March 31, |
| | 2014 | 2013 |
| Financial | | |
| Production sales | 650,151 | 477,544 |
| Processing sales | 2,246,910 | 1,127,507 |
| Funds flow from operations1 | 845,661 | (682,551) |
| Cash from operating activities | 903,213 | 2,175,384 |
| Comprehensive income | 2,464,939 | 2,205,035 |
| Fixed asset expenditures | - | 234,806 |
| Weighted average shares outstanding | | |
| | - basic and diluted 2 | 572,536,704 | 572,536,704 |
| | | |
| Operations | | |
| Production | | |
| | Natural gas - Mcf per day | 1,330 | 1,208 |
| | Natural gas liquids - bbls per day | 20 | 28 |
| Total - boe per day1 | 242 | 230 |
| | | |
| Average sales price | | |
| | Natural gas - $ per Mcf | 4.21 | 2.78 |
| | Natural gas liquids - $ per bbl | 81.30 | 68.94 |
| | | |
| Operating netback | | |
| | Production - $ per boe1 | 3.67 | (3.47) |
| | Processing - $ per Mcf processed1 | 0.21 | 0.05 |
| Note 1: See advisories at the end of this news release with respect to non-IFRS measures and boe presentation. |
| |
| Note 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. |
| |
| All values in this news release are in Canadian dollars unless otherwise indicated. |
Operational Update and Outlook
During the first quarter of 2014, ArPetrol continued its progress towards a stable revenue generating company with a balance sheet that supports its operations. The new gas processing contracts have provided ArPetrol with a significant increase in processing revenue and cash flow during the quarter 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. Ongoing discussions are progressing with this last vendor.
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.
Over the next few months, Arpetrol will re-structure the Company and develop a go forward strategic plan that will allow management to look at and fund growth opportunities in Argentina and elsewhere when they become available.
For the initial step of the corporate re-structuring, the Board of Directors of Arpetrol has determined that it is in the best interests of the company to implement the consolidation of the issued and outstanding Arpetrol shares on the basis of one (1) new post-consolidation share for every twenty five (25) shares pre-consolidation shares held. The company believes that such a consolidation may enhance the marketability of the common shares as an investment and may facilitate future financings, issuance of shares or any other form of securities, as the company is subject to the TSX Venture Exchange minimum pricing rules for financings. Share consolidation was approved at Arpetrol annual and special shareholder meeting held on August 21, 2013.
Based upon the number of issued and outstanding Arpetrol shares as of May 22, 2014, the issued and outstanding Arpetrol shares would be reduced from 572,536,704 to approximately 22,901,468 shares. It is expected that the share consolidation will become effective on June 2ND, 2014 subject to receiving regulatory approvals.
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 million cubic feet per day. The Company's common shares are listed on the TSXV under the symbol "RPT".
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 sales and processing sales less royalties, turnover taxes and operating expenses)and "funds flow from operations" (cash generated from operating activities before changes in refundable Argentinean taxes, foreign exchange on non-cash working capital, non-cash working capital, and translation adjustment on operating items) do not have any standardized meaning under International Financial Reporting Standards (IFRS), which have been incorporated into GAAP, 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 loss or other measures determined in accordance with IFRS, as an indicator of the Company's performance.
See the MD&A for the three months ended March 31, 2014, 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 netback and a detailed calculation of such netbacks is presented in the MD&A for the three months ended March 31, 2014.
Boe Presentation
Production information is commonly reported in units of barrels of oil equivalent (boe). For purposes of computing such units, natural gas is converted to equivalent barrels of oil using a conversion factor of six thousand cubic feet (Mcf) to one barrel (bbl). 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.
Forward-Looking Information
This news release contains certain forward‐looking statements relating, but not limited, to operational information, the ability to maintain processing rates and revenue in the same range as realized in the first quarter, the ability to negotiate a settlement agreement with the remaining service provider, the ability to reduce future expenses, the ability to be self-funding and maintain positive cash flow in 2014, estimated production volumes, processing volumes and capital expenditures, the repayment of the Company's short term loan and timing thereof, the pursuit of growth opportunities, and the ability or inability to continue as a going concern. Forward‐looking information typically contains statements with words such as "anticipate", "believe", "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 willingness of the remaining creditor to settle outstanding amounts, future operations and transactions, future capital and other expenditures (including the amount, nature, timing, availability and sources of funding thereof), stable processing volumes, future production and processing revenue, future economic conditions, future currency and exchange rates, future pricing, the ability to repatriate funds from Argentina, 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. Although the Company believes the expectations and assumptions reflected in such forward‐looking information are reasonable, they may prove to be incorrect.
Forward‐looking information involves significant known and unknown risks and uncertainties. A number of factors could cause actual results to differ materially from those anticipated by the Company, including but not limited to uncertainty regarding the willingness of the remaining creditor to negotiate a settlement or whether it will commence legal proceedings , risks associated with the oil and natural gas industry (e.g., operational risks for its producing assets risks inherent in future drilling programs and the operation of the gas plant, and health, safety and environmental risks), the ability to retain management and staff, the ability to continue as a going concern, difficulties that may be encountered to repatriate funds, weather-induced delays and natural disasters, interruptions to production and processing revenue, production declines, the uncertainty regarding future revenues, union activities and labour issues in Argentina, change in government policies, the risk of commodity price changes, the risk of foreign exchange rate fluctuations (which may not be as favourable as those currently experienced), currency controls and a change in the manner and rates at which the Company is exchanging currency, and risks associated with international activity and political risks over which it has no control (including risks related to the general economic and business conditions in Argentina, economic, social or political instability or change, the uncertainty of negotiating with foreign governments, expropriation and/or nationalization, changes in export or exchange policies, adverse determinations or rulings by governmental authorities, and changes in energy policies or in the personnel administering them).
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.
Additional information relating to the Company is also available on SEDAR at www.sedar.com.
AR Petrol's head office address is 700, 815 8 Avenue S.W., Calgary, AB T2P 3P2
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.
For further information:
Ian Habke, President and Chief Financial Officer
i.habke@arpetrol.com
ArPetrol Ltd.