News: Antrim Energy earns $812,000 (U.S.) in Q2 Antrim Energy earns $812,000 (U.S.) in Q2
2015-08-26 18:05 ET - News Release
Mr. Anthony Potter reports
ANTRIM ENERGY INC. ANNOUNCES 2015 SECOND QUARTER RESULTS
Antrim Energy Inc. has released its financial results for the three- and six-month periods ended June 30, 2015.
All financial figures are unaudited and in U.S. dollars unless otherwise noted.
Highlights
- Commencement of four-well abandonment program in U.K. central North Sea;
- Significant cost reduction expected from summer 2015 abandonment program;
- Continue to evaluate new opportunities for transformative upside potential;
- Strong financial position, including cash at June 30, 2015, of $13.5-million;
- Large reduction in continuing G&A (general and administrative) costs.
Corporate
Over the past year, the company has sought and evaluated a number of international opportunities with the objective of providing shareholders with exposure to attractive growth opportunities with an emphasis on existing or near-term oil and gas production and cash flow. It is the company's view that the falling commodity price environment should lead to an increase in M&A (mergers and acquisitions) activity within the junior E&P (exploration and production) sector. The company's robust balance sheet and long-term potential put it in a strong position to benefit from industry consolidation. So far this year, much of the anticipated increase in M&A has not occurred, as sellers or those in need of capital have been reluctant to transact at what they perceive to be the bottom or near bottom of the cycle and those with capital to invest have been either unwilling to take additional risk or pay a potential premium in a volatile and still declining market environment.
Along with others that believe that parties in the sector are only now beginning to adjust their expectations, the company remains hopeful that a transformative transaction can be concluded. Completion of the Fyne and Erne abandonment program currently under way and subsequent reimbursement by former joint venture partners of their portion of these costs will provide clarity as to Antrim's financial position and its contribution toward any future M&A transaction.
Ireland
Frontier exploration licence (FEL) 1-13, Antrim 25 per cent
In 2013, Kosmos Energy Ltd. farmed into Antrim's licensing option over the Skellig block and assumed operatorship of the block. Kosmos subsequently acquired 3-D seismic, results from which reinforced Antrim's interpretation based on 2-D seismic and strongly indicated the presence of Lower Cretaceous slope fan and channel deposits similar in geometry and seismic character to many of the recent Cretaceous oil discoveries offshore West Africa.
In December, 2014, Kosmos prepared a prospect inventory, which includes several leads previously identified and highlights three prospects, including two tilted Jurassic fault blocks and a Cretaceous submarine fan. Two of the three prospects were included as leads in the prospective resources evaluated by McDaniel & Associates Consultants Ltd. in accordance with National Instrument 51-101 in a report dated effective June 30, 2014. In the McDaniel report, prospective resources were assigned to 17 leads within the Skellig block, further details of which are included in Antrim's AIF (annual information form) for the year ended Dec. 31, 2014. A second Jurassic prospect identified by Kosmos has yet to be reviewed by McDaniel, pending receipt of additional information. Additional work planned for 2015 to mitigate drilling risk among the top three identified prospects includes trace inversion, AVO mapping and modelling, spectral decomposition, and attribute extraction.
FEL 1-13 has a 15-year term, with an initial three-year term followed by three four-year terms. At least three months before the end of the initial term, a work program for the second term must be proposed. That program must include the drilling of an exploration well. At the end of the initial three-year term (July 4, 2016), 25 per cent of the acreage must be relinquished.
Fyne licence
P077 block 21/28a -- Fyne, Antrim 100 per cent
U.K. seaward licences require licensees to permanently abandon all suspended wells prior to licence expiry. In June, 2015, the company entered into a contract with Offshore Installation Services Ltd. (OIS) to permanently plug and abandon three suspended wells on the Fyne licence and one suspended well on the Erne licence in the U.K. central North Sea. The well abandonment campaign commenced on July 8, 2015, and includes six central North Sea wells from another operator, allowing Antrim to share certain common costs and thus offering significant cost savings. The first phase of the 10-well abandonment program was completed on Aug. 15, 2015, and the final phase is expected to be completed early September, 2015. The estimated total gross cost for abandonment of Antrim's four wells is five million pounds ($7.9-million), with the estimated net cost to Antrim totalling 2.1 million pounds ($3.25-million).
The company is in discussion with the Oil and Gas Authority (OGA), formerly DECC (the Department of Energy and Climate Change), with respect to the relinquishment of and the possible reapplication for the licence. The carrying value of the Fyne licence at June 30, 2015, is nil (Dec. 31, 2014 -- nil).
Erne licence
P1875 block 21/29d -- Erne, Antrim 50 per cent
Previous discoveries on the Erne licence are not commercial on their own, but may be economic to develop as tie-backs to an adjacent production facility if such a facility were available. The carrying value of the Erne licence at June 30, 2015, is nil (Dec. 31, 2014 -- nil).
Financial discussion of continuing operations
FINANCIAL RESULTS (in thousands of U.S. dollars, except per-share amounts) Three months ended Six months ended June 30, June 30, 2015 2014 2015 2014 Cash flow used in operations(1) $ (857) $ (2,510) $ (388) $ (3,689) Cash flow used in operations per share(1) (0.00) (0.01) (0.00) (0.02) Net income (loss) -- continuing operations 812 (3,666) 1,273 (5,204) Net income (loss) per share -- basic, continuing operations 0.00 (0.02) 0.01 (0.03) Net income (loss) 812 (223) 1,273 (8,684) Net income (loss) per share -- basic 0.00 (0.00) 0.01 (0.05) Total assets 15,611 19,430 15,611 19,430 Working capital 10,423 17,512 10,423 17,512 Capital expenditures -- continuing operations 58 53 86 195 (1) Cash flow used in operations and cash flow used in operations per share are non-IFRS (international financial reporting standards) measures.
Cash flow and net income (loss) from continuing operations
In the first half of 2015 cash flow used in operations was $400,000, compared with cash flow used in operations of $3.7-million for the corresponding period in 2014. Cash flow used in operations decreased due to lower G&A costs and a $900,000 foreign exchange gain in the first half of 2015 as a result of a significant decline in the period in the value of the Canadian dollar relative to the U.S. dollar. Excluding foreign exchange gains and losses, cash flow used in operations in the first half of 2015 was $1.3-million, compared with $3.2-million for the corresponding period in 2014.
In the first half of 2015, Antrim had net income from continuing operations of $1.3-million, compared with a net loss from continuing operations of $5.2-million for the corresponding period in 2014. Net income increased due to lower expected decommissioning obligations, foreign exchange gains and lower G&A costs.
Financial resources and liquidity
Antrim had a working capital surplus at June 30, 2015, of $10.4-million, compared with a working capital surplus of $15.1-million as at Dec. 31, 2014. Working capital decreased due to the classification of decommissioning obligations to be incurred in 2015 under the current four-well abandonment program as a current liability, G&A expenses and actual decommissioning costs incurred in the period.
Outlook
The company plans to look for additional M&A opportunities and assess those opportunities based on, amongst other criteria, strategic fit, focus on near-term appraisal/development, use of funds, transformative potential with upside potential for Antrim shareholders, and current or near-term cash flow.
The board of Antrim views the company's strong financial position as a competitive advantage in the current volatile oil price environment, and the company will continue to seek ways to reduce its G&A costs to further protect its financial position. G&A costs in 2015 are budgeted to be approximately 50 per cent of G&A in 2014.
Antrim's second quarter 2015 interim report (including the management's discussion and analysis and the consolidated financial statements) is available on SEDAR and on the company's website.
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