Another Solid Quarter & very healthy growth for Petroshale.
PetroShale loses $578,000 in Q2
2014-08-26 07:25 ET - News Release
Mr. M. Bruce Chernoff reports
PETROSHALE ANNOUNCES SECOND QUARTER 2014 RESULTS AND SIGNIFICANT RESERVES INCREASE
PetroShale Inc. has released its financial and operating results for the second quarter ended June 30, 2014, along with increases to the company's United States reserves. The Company's unaudited consolidated financial statements and corresponding Management's Discussion and Analysis (MD&A) for the three and six month periods ended June 30, 2014, are available on SEDAR at www.sedar.com, on the OTCQX website at www.otcqx.com, and on PetroShale's website at www.petroshaleinc.com. Copies of the materials can also be obtained upon request without charge by contacting the Company directly.
Q2 Highlights:
-- Reported production for the quarter of 298 boe/d (Company interest, gross of royalty) weighted 95% to light crude oil and liquids (232 boe/d net of royalty interest), an 89% increase over the same period in 2013; -- Commissioned an updated interim reserves report on PetroShale's U.S. properties which demonstrates a 525% increase in proved plus probable ("P+P") booked reserves over the December 31, 2013 report, as well as an increase of 425% in the net present value (discounted at 10%) of the P+P reserves; -- Realized strong operating netbacks of $57.86 per boe (Company interest, gross of royalty, and excluding the impact of hedging - $74.18 per boe net of royalty interest and excluding hedging), which reflects the Company's high quality production, combined with a strong pricing environment; -- Generated $2.1 million in revenue net of royalties during the period, an increase of 98% over the previous quarter, and 101% higher than the same period in 2013, reflecting the growth in the Company's production supported by a strong commodity price environment; -- Increased the capacity of the subordinated loan facility provided by the Company's two largest shareholders from U.S.$20 million to U.S.$30 million, which enhances PetroShale's ongoing financial flexibility to fund further acquisitions and capital programs; -- Completed a private placement of 5 million common voting shares at a price of $1.30 per share, raising gross proceeds of $6.5 million, which were used to repay outstanding debt and to fund capital expenditures; -- Subsequent to quarter end, purchased additional properties in North Dakota through a variety of transactions, for total cash consideration of U.S.$4.4 million; and -- As at June 30, 2014, PetroShale was participating in 8 gross (1.3 net) wells that were in the process of being either drilled or completed. Currently, that activity has increased to 13 gross (2.0 net) wells.
Results of Oil and Gas Activities For the three months ended June 30, 2014 June 30, 2013 ---------------------------------------------------------------------------- Sales volumes Oil and natural gas liquids (Bbl/d) 283 151 Natural gas (Mcf/d) 90 45 ---------------------------------------------------------------------------- Barrel of oil equivalent (Boe/d) 298 158 Barrel of oil equivalent, net of royalty (Boe/d) 232 122 Operating Netbacks ($/Boe) Revenue $ 98.82 $ 93.37 Royalties (21.79) (21.36) Realized hedge loss (0.70) - Operating costs (11.80) (11.38) Production taxes (7.37) (3.33) ---------------------------------------------------------------------------- Operating netback $ 57.16 $ 57.30 ---------------------------------------------------------------------------- Operating netback prior to hedging $ 57.86 $ 57.30 ---------------------------------------------------------------------------- Operating netback prior to hedging, on a net of royalty basis $ 74.18 $ 74.30 ----------------------------------------------------------------------------
Earnings before interest, taxes, depreciation and amortization ("EBITDA") was $824,000 for the three month period ended June 30, 2014 compared to $412,000 for the quarter ended June 30, 2013, an increase of 100%. For the second quarter ended June 30, 2014 the Company reported a net loss of $578,000 ($0.02 per share), compared to a loss of $605,000 ($0.02 per share) for the three month period ended June 30, 2013.
U.S. Reserves Update As at June 30, 2014:
The reserves data in this press release is based upon an evaluation by Netherland, Sewell & Associates, Inc. ("NSAI") with respect to PetroShale's assets in the United States, with an effective date of June 30, 2014. The reserves data summarizes PetroShale's crude oil and natural gas reserves in the United States and the net present values of future net revenue for these reserves using forecast prices and costs, not including the impact of any price risk management activities. The Reserve Report was prepared in accordance with the standards contained in the COGE Handbook and the reserve definitions contained in NI 51-101 and CSA 51-324.
U.S. Reserves Highlights:
-- P+P reserves in the U.S. as at June 30, 2014 increased by 525% to 4,100 Mboe (3,223 Mboe net of royalty) compared to December 31, 2013; -- Total U.S. proved reserves increased 516% to 3,124 Mboe (2,452 Mboe net of royalty); -- Before tax net present value (discounted at 10%) ("NPV10") of the Company's U.S. P+P reserves totaled U.S.$63.5 million at June 30, 2014, an increase of 425% over the U.S.$12.1 million NPV10 as at December 31,2013; and -- The NPV10 of total proved reserves increased 376% from U.S.$10.7 million to U.S.$51.0 million.
Gross Company Interest Reserves
UNITED STATES OIL & GAS ASSETS AS AT JUNE 30, 2014 RESERVES OIL NATURAL GAS BOE Gross Net Gross Net Gross Net RESERVES CATEGORY (Mbbls) (Mbbls) (MMcf) (MMcf) (Mboe) (Mboe) PROVED: Developed Producing 378.3 291.8 369.6 284.6 439.9 339.2 Developed Non-Producing 20.0 15.3 23.6 18.0 23.9 18.3 Undeveloped 2,335.9 1,840.0 1,944.3 1,526.2 2,659.9 2,094.4 ---------------------------------------------------------------------------- TOTAL PROVED 2,734.2 2,147.0 2,337.4 1,828.8 3,123.8 2,451.8 PROBABLE 848.8 670.8 762.8 600.4 975.9 770.9 ---------------------------------------------------------------------------- TOTAL PROVED PLUS PROBABLE 3,583.0 2,817.8 3,100.3 2,429.2 4,099.7 3,222.7 ---------------------------------------------------------------------------- Columns may not add due to rounding.
Net Present Value of Future Net Revenue
UNITED STATES OIL & GAS ASSETS AS AT JUNE 30, 2014 BEFORE INCOME TAXES DISCOUNTED AT (%/year) ------------------------------------------------- 0% 5% 10% 15% 20% (USD (USD (USD (USD (USD RESERVES CATEGORY $000s) $000s) $000s) $000s) $000s) -------------------------------------------------- PROVED: Developed Producing 19,510.7 14,472.3 11,685.0 9,944.6 8,757.6 Developed Non-Producing 1,003.7 849.5 743.2 666.6 609.0 Undeveloped 93,254.2 57,811.4 38,538.4 26,688.7 18,736.6 ---------------------------------------------------------------------------- TOTAL PROVED 113,768.6 73,133.2 50,966.5 37,299.9 28,103.1 PROBABLE 31,833.6 19,417.5 12,568.6 8,344.5 5,527.9 ---------------------------------------------------------------------------- TOTAL PROVED PLUS PROBABLE 145,602.2 92,550.7 63,535.2 45,644.4 33,631.0 ---------------------------------------------------------------------------- Columns may not add due to rounding.
Pricing Assumptions - Forecast Prices and Costs:
Following are select crude oil and natural gas price and inflation rate assumptions used by NSAI as of June 30, 2014 in estimating the U.S. reserves data using forecast prices and costs.
---------------------------------------------------------------------------- NSAI Average GAS OIL U.S. Henry Hub WTI Crude Gas Price Oil ($US/MMBtu) ($US/bbl) ----------------------- ----------------------- ----------------------- ----------------------- At June 30, 2014 ---------------------------------------------------------------------------- 2014 $ 3.960 $ 94.75 2015 $ 4.180 $ 93.18 2016 $ 4.550 $ 91.92 2017 $ 5.030 $ 94.24 2018 $ 5.460 $ 95.96 2019 $ 5.760 $ 97.29 2020 $ 5.920 $ 98.88 2021 $ 6.100 $ 100.74 2022 $ 6.260 $ 102.61 2023 $ 6.440 $ 104.55 2024 $ 6.730 $ 106.44 2025 $ 6.865 $ 108.57 2026 $ 7.002 $ 110.74 2027 $ 7.142 $ 112.95 2028 $ 7.285 $ 115.21 Thereafter: 2% per year 2% per year
Message to Shareholders:
For the first half of 2014, the team at PetroShale continued to focus on the execution of our strategy centered around acquiring and consolidating working interests ("WI") in the most prolific and attractive areas of the North Dakota Bakken.
This strategy is proving successful and during the second quarter, we purchased an additional working interest of approximately 9.5% in two of our existing wells in Stockyard Creek, and acquired an interest in two additional acreage parcels in McKenzie County. At the end of the quarter, we were participating in 8 gross (1.3 net) wells that were in the process of being either drilled or completed. Subsequent to the end of the quarter, we further expanded our asset base by acquiring additional properties in North Dakota through several transactions. Currently, our drilling and completions activity has increased to 13 gross (2.0 net) wells. With continued drilling activity by our partners in North Dakota, along with pursuing additional acquisitions, we intend to grow production, leading to enhanced revenue, cash flows, and greater reserves bookings over time.
We were extremely pleased with the significant increases in reserves and net present values reflected in our updated U.S. reserves report as at June 30, 2014. Compared to December 31, 2013, our total proved reserves on the U.S. assets increased by 516% from 0.5 million boe, to more than 3.1 million boe. On a P+P basis, U.S. booked reserves increased 525% from 0.7 million boe to approximately 4.1 million boe. The underlying value of the U.S. reserves are reflected in higher NPV10 values: our U.S. assets total proved reserve value increased 376% to $51.0 million, and the P+P NPV10 rose 425% to $63.5 million. Over a six month period, we have significantly enhanced the volume and value of our asset base for shareholders.
In June, we strengthened our financial position with the closing of a private placement of 5 million common voting shares at a price of $1.30 per share, and generated gross proceeds of $6.5 million. Directors and officers of the Company demonstrated their continued commitment and belief in the strategy by subscribing for approximately 3.4 million of these 5 million shares. We used the net proceeds to repay a portion of our outstanding debt, which along with the extension of our subordinated loan facility, affords us greater financial flexibility as we strive to pursue additional acquisitions and grow our asset base in the North Dakota Bakken.
PetroShale is well positioned for growth, and we look forward to keeping our shareholders updated on our ongoing activities and expansion.