CALGARY, ALBERTA--(Marketwired - Dec. 1, 2014) - Crown Point Energy Inc. ("Crown Point" or the "Company") (TSX VENTURE:CWV) today announced its operating and financial results for the three and nine months ended September 30, 2014. Crown Point also provided an outlook for the fourth quarter of 2014. All dollar amounts are expressed in US dollars unless otherwise stated.
"We are encouraged by rising prices for our production in Tierra Del Fuego ("TDF"), Argentina," said Murray McCartney, CEO of Crown Point. "Moreover, we have growing confidence that our TDF sales volumes will begin to rebound as a result of the 14-well TDF development, recompletion and exploration program now underway."
"We also made progress from a financial perspective, having announced a $15 million equity financing agreement with two strategic Argentina-based investors (the "Investors") subsequent to the end of the third quarter. On closing, this financing will strengthen our balance sheet and enhance our board, as two representatives of the Investors will join as directors."
Financial and Operating Summary
- Oil and gas revenue increased 4% in Q3 2014 from a year earlier.
- Revenue per BOE increased 22% in Q3 2014 from a year earlier, reflecting higher unit prices received for oil, natural gas and natural gas liquids at TDF.
- Subsequent to the end of Q3 2014, Crown Point placed the first two of eight and first two of four planned TDF development wells and recompletions into production, respectively. The Company believes its ongoing TDF development, recompletion and exploration program will both build new production and stimulate output from existing fields in TDF. TDF average daily sales volumes were 1,336 BOEPD during Q3 2014, down 1% from 1,343 BOEPD in Q2 2014 and down 15% from 1,566 BOEPD in Q3 2013 due to natural decline rates from existing wells.
- G&A expenses declined by 4% from Q2 2014 and by 8% from Q3 2013.
- Loss from continuing operations decreased to $0.9 million from a loss of $1.2 million a year earlier. In both periods, the loss per share from continuing operations was $0.01.
- In November 2014, the Company obtained and drew down a second loan facility with HSBC Argentina in the amount of ARS 14,500,000 ($1,700,000). In addition, Crown Point signed a $15,000,000 investment agreement under which it anticipates raising new capital through an issue of 51,724,138 common shares on a private placement basis at a price of $0.29 per share (approximately C$0.33 per share). A portion of these funds will be used to cover capital expenditures in TDF.
Crown Point's production is derived entirely from its 25.78% interest in three Exploitation Concessions in TDF where the Company is conducting an active development, recompletion and exploration program to expand production. Separately, Crown Point has a 100% interest in the prospective Cerro de Los Leones Exploration Concession in Mendoza province, an area surrounded by several large conventional oil pools. Certain prior year results were reclassified, reflecting discontinued operations at El Valle, Argentina.
Operations Outlook
- During the fourth quarter of 2014 and the first quarter of 2015, Crown Point expects to complete its 14-well TDF program and will disclose results as they become available. Commercial success on either exploration location could lead to additional drilling.
- Crown Point expects TDF revenue per BOE for Q4 2014 to be higher than the $30.45 per BOE realized in Q4 2013, but lower than the $32.41 per BOE realized in Q3 2014. The anticipated sequential quarterly decline is due to seasonal gas pricing factors. The Company believes market conditions in Argentina will continue to have a positive impact on natural gas prices. Unlike North America, there is insufficient domestic gas production in Argentina to meet the demand in the country.
- The Company expects TDF average daily sales volumes for Q4 2014 to be slightly higher than TDF average daily sales volumes of 1,336 BOEPD in Q3 2014. Actual daily sales volumes may differ from this estimate, largely depending on when the new wells and newly fracked recompleted wells are placed on production.
- The Company's exploration activity in Cerro de Los Leones is focused on the La Hoyada x-1 well, which earlier this year was cased as a potential oil discovery. Crown Point is evaluating the completion results to determine if long-term testing is warranted.
TDF Development Drilling Program (8 wells)
A complete list and current status of development wells is provided in the table below:
| |
|
|
|
|
| # |
Well Name |
Spud Date |
Production Start /
Anticipated Test
Finish Date |
On-stream Date |
| 1 |
LF-1024 |
July 2014 |
Oct 2014 |
October 6, 2014 |
| 2 |
LF-1027 |
June 2014 |
Nov 2014 |
November 15, 2014 |
| 3 |
LFE-1002 |
Sept 2014 |
Dec 2014 |
TBD |
| 4 |
LF-1008 |
May 2014 |
Dec 2014/Q1 2015 |
TBD |
| 5 |
LFE-1003 |
Jan 2015 |
Q1 2015 |
TBD |
| 6 |
LF-1025 |
Dec 2014 |
Q1 2015 |
TBD |
| 7 |
LF-1029 |
Feb 2015 |
Q1 2015 |
TBD |
| 8 |
LF-1028 |
Aug 2014 |
Suspended (1) |
TBD |
| |
| (1) This well may be re-entered at a later date for remedial work. It was cased as a potential Springhill gas well but due to borehole conditions could not be successfully cemented. |
| |
TDF Recompletion Program (4 wells)
A complete list and current status of recompletion wells is provided in the table below:
| |
|
|
|
|
| # |
Well Name |
Latest Previous
Production Year |
Production Start /
Anticipated Test
Finish Date |
On-stream Date |
| 1 |
LF-1003 |
2012 |
Oct 2014 |
October 1, 2014 |
| 2 |
LFE.x-1 |
2009 |
Oct 2014 |
October 27, 2014 |
| 3 |
LF-1013 |
Never in production |
Dec 2014 |
TBD |
| 4 |
LAz.x-2 |
Never in production |
Dec 2014 |
TBD |
| |
|
|
|
|
TDF Exploration Drilling Program (2 wells)
Crown Point spud both exploration wells in Q4 2014 and expects to commence testing as shown in the table below:
| |
|
|
|
| # |
Well Name |
Spud Date |
Anticipated
Testing Date |
| 1 |
SL.x-1003 |
Oct 2014 |
Dec 2014 |
| 2 |
PQ.x-1001 |
Nov 2014 |
TBD (1) |
| |
| (1) PQ.x-1001 will be drilled and logged and, if warranted, completed and tested before the end of the year. |
| |
Capital Expenditures, Financing Initiatives, Liquidity and Capital Resources
Crown Point estimates $2.8 million to $3.5 million of capital expenditures for Q4 2014, primarily for the completion of the TDF drilling and fracking programs. Crown Point expects to fund its obligations, along with its other anticipated expenses for the fourth quarter, from funds flow from continuing operations, working capital (which totaled approximately $2.2 million at the end of Q3 2014), $1.7 million of loan proceeds and the first tranche of the $15 million equity financing proceeds as noted below.
Crown Point expects to complete the investment in two tranches, of which the first tranche will involve the issue of 25,965,704 shares, equivalent to 19.9% of Crown Point's issued and outstanding shares following the issuance of the first tranche. This tranche will result in aggregate gross proceeds of $7,530,054 to Crown Point.
The second tranche, totaling 25,758,434 shares for aggregate gross proceeds of $7,469,946 to Crown Point, will be completed as soon as possible after approval of the investment by Crown Point's shareholders other than the Investors. Such approval is required because the investment may make the Investors a "control person" under the rules of the TSX Venture Exchange.
The Company's financial statements have been prepared on a going concern basis which contemplates the realization of assets and the payment of liabilities in the ordinary course of business. During the nine months ended September 30, 2014, the Company incurred a net loss of approximately $12.1 million. As noted above, as at September 30, 2014, the Company had working capital of approximately $2.2 million and significant future capital commitments to develop its properties. The Company is in the process of raising new capital pursuant to a $15 million financing as described above. The closing of the financing is subject to certain conditions, including applicable stock exchange and shareholder approvals. There is no certainty that such approvals will be obtained on a timely basis or at all.
The ability of the Company to continue as a going concern and the recoverability of its assets is dependent upon the existence of economically recoverable reserves and on the Company's ability to obtain additional financing to continue the development of the Company's properties, generate funds therefrom and meet current and future obligations. The need to obtain capital to fund the existing and ongoing operations creates a material uncertainty that may cast significant doubt about the Company's ability to continue as a going concern. The Company's September 30, 2014 financial statements do not reflect adjustments in the carrying values of the assets and liabilities, expenses and the statements of financial position classifications that would be necessary if the going concern assumption were not appropriate. Such adjustments could be material.
If both tranches of the financing are successfully concluded in a timely fashion, Crown Point expects that it will have the working capital it requires to meet current financial obligations for the next 12 months.
SUMMARY FINANCIAL INFORMATION
| |
|
|
| (expressed in $, except shares outstanding) |
September 30
2014 |
December 31
2013 |
| Working capital |
2,160,388 |
15,049,226 |
| Exploration and evaluation assets |
15,102,925 |
10,350,417 |
| Property and equipment |
26,092,980 |
32,029,851 |
| Total assets |
52,443,977 |
64,868,464 |
| Non-current financial liabilities (1) |
1,843,946 |
3,942,392 |
| Share capital |
101,334,798 |
101,334,798 |
| Total common shares outstanding |
104,515,222 |
104,515,222 |
| |
|
|
| |
|
|
|
|
| (expressed in $, except shares outstanding) |
Three months ended
September 30 |
|
Nine months ended
September 30 |
|
| |
2014 |
|
2013 |
|
2014 |
|
2013 |
|
| Oil and gas revenue |
3,982,151 |
|
3,823,254 |
|
10,693,832 |
|
11,425,921 |
|
| Petroleo Plus Credits |
- |
|
- |
|
363,539 |
|
- |
|
| Net loss from continuing operations |
(946,711 |
) |
(1,155,271 |
) |
(3,670,453 |
) |
(5,617,052 |
) |
| Net loss per share from continuing operations (2) |
(0.01 |
) |
(0.01 |
) |
(0.04 |
) |
(0.06 |
) |
| Net income (loss) from discontinued operations |
16,649 |
|
1,302,249 |
|
(8,446,258 |
) |
(5,731,259 |
) |
| Net income (loss) per share from discontinued operations (2) |
0.00 |
|
0.01 |
|
(0.08 |
) |
(0.05 |
) |
| Funds flow from continuing operations |
682,713 |
|
881,808 |
|
1,866,022 |
|
862,631 |
|
| Funds flow per share from continuing operations(2) |
0.01 |
|
0.01 |
|
0.02 |
|
0.01 |
|
| Weighted average number of shares |
104,515,222 |
|
104,515,222 |
|
104,515,222 |
|
104,515,222 |
|
| |
|
|
|
|
|
|
|
|
| (1) Non-current financial liabilities are comprised of bank debt. The total amount outstanding at September 30, 2014 is $3,161,050 of which $1,317,104 is classified as current and $1,843,946 is long-term (December 31, 2013 - $4,113,800; $171,408 current and $3,942,392 long-term). |
| (2) All per share figures are based on the basic weighted average number of shares outstanding in the period. The effect of options is anti-dilutive in loss periods. There were no in-the-money-stock options in the income period. |
| |
Copies of the Company's unaudited condensed interim consolidated financial statements and related Management's Discussion and Analysis ("MD&A) are being filed with Canadian securities regulatory authorities and will be made available under the Company's profile at www.sedar.com and on the Company's website at www.crownpointenergy.com.
About Crown Point
Crown Point Energy Inc. is an international oil and gas exploration and development company headquartered in Calgary, Canada, incorporated in Alberta, Canada, trading on the TSX Venture Exchange and operating in South America. Crown Point's exploration and development activities are focused in the Austral and Neuquén basins in Argentina. Crown Point has a strategy that focuses on establishing a portfolio of producing properties, plus production enhancement and exploration opportunities to provide a basis for future growth.
Advisory
Certain Oil and Gas Disclosures: Barrels of oil equivalent ("BOE") may be misleading, particularly if used in isolation. A boe conversion ratio of six thousand Mcf to one bbl of oil (6 Mcf:1 bbl) is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. Given that the value ratio based on the current price of crude oil as compared to natural gas in Argentina is significantly different from the energy equivalency conversion ratio of 6:1, utilizing a conversion on a 6:1 basis is misleading as an indication of value. "BOEPD" means barrels of oil equivalent per day.
Non-IFRS Measures: This press release discloses "funds flow from operations" which does not have standardized meanings under International Financial Reporting Standards ("IFRS") and as such may not be comparable with the calculation of similar measures used by other entities. Funds flow from operations should not be considered an alternative to or more meaningful than, cash flow from operating activities as determined in accordance with IFRS as an indicator of the Company's performance. Management uses funds flow from operations to analyze operating performance and considers funds flow from operations to be a key measure as it demonstrates the Company's ability to generate cash necessary to fund future capital investment. A reconciliation of funds flow from operations to cash flow from operating activities is presented in the MD&A under "Non-IFRS Measures".
Forward looking information: This press release contains forward-looking information. This information relates to future events and the Company's future performance. All information and statements contained herein that are not clearly historical in nature constitute forward-looking information, and the words "may", "will", "should", "could", "expect", "plan", "intend", "anticipate", "believe", "estimate", "propose", "predict", "potential", "continue", "aim", or the negative of these terms or other comparable terminology are generally intended to identify forward-looking information. Such information represents the Company's internal projections, estimates, expectations, beliefs, plans, objectives, assumptions, intentions or statements about future events or performance. This information involves known or unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking information. In addition, this press release may contain forward-looking information attributed to third party industry sources. Crown Point believes that the expectations reflected in this forward-looking information are reasonable; however, undue reliance should not be placed on this forward-looking information, as there can be no assurance that the plans, intentions or expectations upon which they are based will occur.
This press release contains forward-looking information concerning, among other things, the following: the Company's assessment that TDF sales volumes will begin to rebound as a result of its ongoing 14-well TDF development, recompletion and exploration program now underway and that on closing of the proposed $15 million financing, the financing will strengthen the Company's balance sheet and also reinforce its board, as two representatives of the investors will join as directors; the Company's description of a pending and proposed $15 million financing, including the closing conditions, the expectation that the financing will be completed in two tranches, the expected use of proceeds and the expected gross proceeds from each closing; the Company's belief that it can stabilize (and possibly increase) production at TDF with recent drilling successes; various matters under the heading "Operations Outlook" including, Crown Point's expectation that it will complete its 14 well program at TDF in Q4 2014 or Q1 2015 and that commercial successes could lead to further drilling; Crown Point's expectation for revenues in Q4 2014 and the Company's assessment of current Argentine market conditions on natural gas prices; the Company's forecast TDF daily sales volumes for Q4 2014; the Company's possible plans for future testing operations at its La Hoyada well in Cerro de Los Leones in 2015; the Company's assessment of its ability to continue as a going concern and the potential risks and consequences to the Company as a result of the same, including the potential loss or forfeiture of certain assets; the Company's assessment that if both tranches of the financing are successfully concluded in a timely fashion, that it expects that it will have sufficient working capital to meet current financial obligations for the next 12 months; the Company's assessment of the potential for re-entry operations being conducted at LF-1028 for remedial work; the Company's expectation that testing operations at SL x-1003 and PQ x 1001 will occur in the fourth quarter of 2014; Crown Point's estimates of its future capital commitments and how it expects that it may satisfy such commitments, including pursuant to the completion of the $15 million financing described herein; the Company's assessment on its ability to meet its capital commitments in the next 12 months, the potential sources of funds to meet such commitments; and the Company's belief that completion of both tranches of the proposed $15 million financing are concluded in a timely manner, the Company will have sufficient funds to meet its financial obligations over the next 12 months. The reader is cautioned that such information, although considered reasonable by the Company, may prove to be incorrect. Actual results achieved during the forecast period will vary from the information provided in this press release as a result of numerous known and unknown risks and uncertainties and other factors.
A number of risks and other factors could cause actual results to differ materially from those expressed in the forward-looking information contained in this press release including, but not limited to, the risk the Company is not able to complete all or a portion of its proposed $15 million financing in a timely manner (or at all) or on the terms it presently contemplates; the risks and other factors described under "Business Risks and Uncertainties" in the MD&A and under "Risk Factors" in the Company's Annual Information Form, which is available for viewing on SEDAR at www.sedar.com.
In addition, note that information relating to reserves is deemed to be forward-looking information, as it involves the implied assessment, based on certain estimates and assumptions, that the reserves described can be economically produced in the future.
With respect to forward-looking information contained in this press release, the Company has made assumptions regarding, among other things: the impact of increasing competition; the general stability of the economic and political environment in which the Company operates; the timely receipt of any required regulatory approvals; the ability of the Company to fully complete its proposed $15 million financing in a timely manner (or at all) or on the terms it presently contemplates; the ability of the Company to continue as a going concern without the loss or forfeiture of any assets; the ability of the Company to obtain qualified staff, equipment and services in a timely and cost efficient manner; drilling results; the costs of obtaining equipment and personnel to complete the Company's capital expenditure program; the ability of the operator of the projects which the Company has an interest in to operate the field in a safe, efficient and effective manner; the ability of the Company to obtain financing on acceptable terms when and if needed; field production rates and decline rates; the ability to replace and expand oil and natural gas reserves through acquisition, development and exploration activities; the timing and costs of pipeline, storage and facility construction and expansion and the ability of the Company to secure adequate product transportation; future oil and natural gas prices; currency, exchange and interest rates; the regulatory framework regarding royalties, taxes and environmental matters in the jurisdictions in which the Company operates; and the ability of the Company to successfully market its oil and natural gas products. Management of Crown Point has included the above summary of assumptions and risks related to forward-looking information included in this press release in order to provide investors with a more complete perspective on the Company's future operations. Readers are cautioned that this information may not be appropriate for other purposes.
Readers are cautioned that the foregoing lists of factors are not exhaustive. The forward-looking information contained in this press release are expressly qualified by this cautionary statement.
The forward-looking information contained herein is made as of the date of this press release and the Company disclaims any intent or obligation to update publicly any such forward-looking information, whether as a result of new information, future events or results or otherwise, other than as required by applicable Canadian securities laws.
Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this news release.