Condor Petroleum Inc. (“Condor” or the “Company”) (TSX: CPI), a
Canadian based oil and gas company focused on exploration and
production activities in Turkey and Kazakhstan, is pleased to
announce the release of its unaudited interim condensed
consolidated financial statements for the three and six months
ended June 30, 2021 together with the related management’s
discussion and analysis. These documents will be made available
under Condor’s profile on SEDAR at www.sedar.com and on the Condor
website at www.condorpetroleum.com. Readers are invited to review
the latest corporate presentation available on the Condor website.
All financial amounts in this news release are presented in
Canadian dollars, unless otherwise stated.
Q2 Highlights
- Condor continues to actively pursue
an agreement to operate producing gas fields in Uzbekistan and is
awaiting feedback from the Government of Uzbekistan on its
operating proposal.
- The Yakamoz 1
sidetrack well (“Yak 1-ST”) was drilled to a total depth of 2430
meters and encountered numerous strong gas shows in three of the
four expected gas target intervals. Log data collected while
drilling indicates reservoir-quality formations in the intervals
where the strong gas shows were observed.
- The
Company has contracted a drilling rig for the Akshoky North
(“Aks-1”) exploration prospect in Kazakhstan and plans to commence
drilling in late Q3 2021.
- A number
of measures have been taken by the Company to protect the safety
and health of its personnel, contractors and suppliers during the
COVID-19 pandemic and is well positioned for the challenges of the
current business environment, with a cash position of $9.6 million
as of June 30, 2021 and no debt.
-
Production decreased to an average of 79 boepd for the three months
ended June 30, 2021 from 107 boepd in 2020, sales decreased to $0.2
million for the three months ended June 30, 2021 from $0.5 million
in 2020 and the net loss increased to $3.7 million for the three
months ended June 30, 2021 from $2.7 million in 2020.
Uzbekistan Production
Contract
As previously disclosed, the Company presented
and submitted a detailed feasibility study and economic analysis to
the Government of Uzbekistan outlining the expected fiscal, social,
and environmental benefits for Uzbekistan if the Company were to
operate several existing gas fields. Condor also outlined the
various technologies that would be implemented to enhance gas
production rates and recoveries. The Company is awaiting feedback
and endorsement of its proposal. Notwithstanding meeting and travel
constraints imposed by COVID-19 related restrictions, the Company
continues to actively pursue this initiative.
If executed, the production contract is expected
to include multiple producing gas fields, associated gathering
pipelines, and gas treatment infrastructure. The fiscal and
operating terms expected to be defined in the production contract
include royalty rates, cost deductibility, gas marketing and
pricing, government participation, governance and steering
committee structures, baseline production levels and reimbursement
methodology.
Turkey Operations
The Yak 1-ST well was drilled to a total depth
of 2430 meters and encountered numerous strong gas shows in three
of the four expected gas target intervals. Log data collected
during drilling operations indicates reservoir-quality formations
in the intervals where the strong gas shows were observed. A
combination of drilling rig mechanical issues and wellbore
instability prevented production casing from being set across the
target intervals. Casing was cemented to 1380 meters which is 750
meters above the highest target interval and the well has been
suspended temporarily until the required equipment can be procured.
At that time, Yak 1-ST will be re-entered, cased and fully
evaluated. If commercial gas flowrates are confirmed, Yak 1-ST gas
will be initially trucked to the Company’s neighbouring Poyraz
Ridge Gas Facility while pipeline tie-in activities are
completed.
The Company is encouraged by the initial Yak
1-ST results as it confirmed the presence of both clastic and
carbonate reservoirs, an active hydrocarbon system, and gas shows
in the deepest Eocene formation, which had not previously been
discovered on the Company’s licenses. Based on the current data,
Yak 1-ST appears to be analogous to the Poyraz West 1-ST well,
which has been the most prolific producer in the Poyraz Ridge
field. Plans to re-enter Yak 1-ST are targeted for Q4 2021.
The Yakamoz gas field is a parallel
Miocene-Eocene trend/fairway lying 2 km north of the existing
Poyraz Ridge gas field. Condor is currently integrating the Yak
1-ST data into its geological model to high grade prospective areas
for future seismic and additional exploration drilling, as multiple
thrust-fold and sub-thrust leads exist on the license.
Natural gas and associated condensate production
in Turkey decreased to 79 boepd in the second quarter of 2021 from
107 boepd in the second quarter of 2020 mainly due to natural
reservoir declines. The operating netback1 was ($0.1) million or
($13.39) per boe for the three months ended June 30, 2021 as
compared to $(0.1) million or $(7.31) per boe in 2020. Cash used in
operating activities before changes in non-cash working capital
decreased to $1.2 million in the second quarter of 2021 versus $2.6
million for the same period in 2020. An increase in gas production
would significantly enhance operating netbacks due to the strong
reference gas price of CA$7.77 per mcf as of August 1, 2021 and the
fact that production costs are primarily fixed. On July 25, 2021,
the fields were shut-in to perform annual scheduled maintenance on
the Poyraz Ridge Gas Facility and at the same time allow for a
30-day pressure build-up test on the wells. Production is scheduled
to resume in August 2021.
Kazakhstan Operations
Preparations are underway to drill the Akshoky
North post-salt exploration prospect in late Q3 2021. The usual
regulatory approvals to drill Aks-1 are being finalized and the
contract with the drilling company has been executed.
Aks-1 has a three-way fault closure with an
expected drill depth of 1100 meters and targets middle and lower
Jurassic sandstones. The Company’s high-resolution 3-D seismic was
used to identify this structure and the oil migration pathways
necessary to charge the trap. Multiple commercial analogues to the
Akshoky prospect have been discovered in the region and the
Company’s internal estimate of Prospective Resources for the
Akshoky structure is 20 million barrels (see Reserves
Advisory).
Other Initiatives
Given the Company’s proven track record in oil
and gas facility design and construction in the region, Condor has
been evaluating the potential to implement proven North American
modular liquified natural gas (“LNG”) midstream technologies and
processes in Central Asia. Condor continues to advance commercial
opportunities to displace diesel fuel in the industrial,
transportation, and power generation sectors by utilizing the
region’s abundant natural gas resources. Implementing LNG will
materially reduce operating costs, dependence on diesel imports,
and particulate and CO2 emissions. The Company’s strong regional
working relationships have been important in progressing high level
discussions with senior government officials and industry
representatives. Thus far, the Company has received positive
feedback and support from all levels of government.
Condor’s President and CEO, Don Streu, has been
appointed as the “Honorary Consul of the Republic of Kazakhstan”
for Alberta by Kazakhstan’s Ministry of Foreign Affairs. The honour
represented by this appointment reflects the substantial
investments that Condor has made in Kazakhstan and further
highlights the personal contributions and long-time dedication and
support that Mr. Streu has made to the country and the high level
of mutual respect and cooperation between Condor and the government
of Kazakhstan.
Selected Financial
Information
|
For the three months ended June 30
($000’s except per share amounts) |
|
2021 |
|
2020 |
|
|
Natural gas and condensate sales |
|
|
223 |
|
482 |
|
| Total revenue |
|
|
193 |
|
421 |
|
| Cash used in continuing
operations |
|
|
(1,264 |
) |
(2,735 |
) |
| Net loss from continuing
operations |
|
|
(3,727 |
) |
(2,756 |
) |
| Net loss from continuing
operations per share (basic and diluted) |
|
|
(0.08 |
) |
(0.06 |
) |
| Capital
expenditures |
|
|
2,414 |
|
154 |
|
|
For the six months ended June 30
($000’s except per share amounts) |
2021 |
|
2020 |
|
| Natural gas and condensate
sales |
|
585 |
|
1,216 |
|
| Total revenue |
|
508 |
|
1,060 |
|
| Cash used in continuing
operations |
|
(3,458 |
) |
(4,022 |
) |
| Net loss from continuing
operations |
|
(5,306 |
) |
(4,354 |
) |
| Net loss from continuing
operations per share (basic and diluted) |
|
(0.12 |
) |
(0.10 |
) |
| Capital
expenditures |
|
2,415 |
|
491 |
|
Results of Operations
Sales and operating
netback1
For the three months ended June
30
|
($000’s) |
Gas |
|
2021Condensate |
Total |
Gas |
2020Condensate |
|
Total |
|
Sales |
223 |
|
- |
223 |
|
474 |
|
8 |
|
482 |
|
| Royalties |
(30 |
) |
- |
(30 |
) |
(60 |
) |
(1 |
) |
(61 |
) |
| Production costs |
(185 |
) |
- |
(185 |
) |
(345 |
) |
(3 |
) |
(348 |
) |
|
Transportation and selling |
(90 |
) |
- |
(90 |
) |
(138 |
) |
(2 |
) |
(140 |
) |
|
Operating netback1 |
(82 |
) |
- |
(82 |
) |
(69 |
) |
2 |
|
(67 |
) |
| |
|
|
|
|
|
|
|
| ($/boe) |
|
|
|
|
|
|
|
| Sales |
36.58 |
|
- |
36.58 |
|
52.38 |
|
64.00 |
|
52.53 |
|
| Royalties |
(4.92 |
) |
- |
(4.92 |
) |
(6.63 |
) |
(8.00 |
) |
(6.65 |
) |
| Production costs |
(30.34 |
) |
- |
(30.34 |
) |
(38.12 |
) |
(24.00 |
) |
(37.93 |
) |
|
Transportation and selling |
(14.71 |
) |
- |
(14.71 |
) |
(15.25 |
) |
(16.00 |
) |
(15.26 |
) |
|
Operating netback1 |
(13.39 |
) |
- |
(13.39 |
) |
(7.62 |
) |
16.00 |
|
(7.31 |
) |
|
|
|
|
|
|
|
|
|
|
Sales volume (boe) |
6,097 |
|
- |
6,097 |
|
9,050 |
|
125 |
|
9,175 |
|
For the six months ended June 30
| |
|
|
|
|
|
|
|
|
|
($000’s) |
Gas |
2021Condensate |
Total |
Gas |
2020Condensate |
Total |
|
Sales |
574 |
|
11 |
|
585 |
|
1,174 |
|
42 |
|
1,216 |
|
| Royalties |
(76 |
) |
(1 |
) |
(77 |
) |
(151 |
) |
(5 |
) |
(156 |
) |
| Production costs |
(402 |
) |
(1 |
) |
(403 |
) |
(599 |
) |
(9 |
) |
(608 |
) |
|
Transportation and selling |
(196 |
) |
(2 |
) |
(198 |
) |
(282 |
) |
(9 |
) |
(291 |
) |
|
Operating netback1 |
(100 |
) |
7 |
|
(93 |
) |
142 |
|
19 |
|
161 |
|
| |
|
|
|
|
|
|
| ($/boe) |
|
|
|
|
|
|
| Sales |
39.05 |
|
91.67 |
|
39.47 |
|
55.41 |
|
84.34 |
|
56.07 |
|
| Royalties |
(5.17 |
) |
(8.33 |
) |
(5.20 |
) |
(7.13 |
) |
(10.04 |
) |
(7.19 |
) |
| Production costs |
(27.35 |
) |
(8.33 |
) |
(27.19 |
) |
(28.27 |
) |
(18.07 |
) |
(28.04 |
) |
|
Transportation and selling |
(13.31 |
) |
(19.17 |
) |
(13.36 |
) |
(13.31 |
) |
(18.07 |
) |
(13.42 |
) |
|
Operating netback1 |
(6.78 |
) |
55.84 |
|
(6.28 |
) |
6.70 |
|
38.16 |
|
7.42 |
|
|
|
|
|
|
|
|
|
|
|
Sales volume (boe) |
14,700 |
|
120 |
|
14,820 |
|
21,188 |
|
498 |
|
21,686 |
|
- Operating netback
is a non-GAAP measure and is a term with no standardized meaning as
prescribed by GAAP and may not be comparable with similar measures
presented by other issuers. See “Non-GAAP Financial Measures” in
this news release. The calculation of operating netback is aligned
with the definition found in the Canadian Oil and Gas Evaluation
Handbook.
Total sales decreased to $0.2 million on 6,097
boe or $36.58 per boe for the three months ended June 30, 2021
(2020: $0.5 million on 9,175 boe or $52.53 per boe) and decreased
to $0.6 million on 14,820 boe or $39.47 per boe for the six months
ended June 30, 2021 (2020: $1.2 million on 21,686 boe or $56.07 per
boe). Overall sales have decreased to date in 2021 versus the same
periods in 2020 due mainly to decreased natural gas production and
sales volumes and decreased natural gas sales prices.
Operating netbacks decreased to $(0.08) million
or $(13.39) per boe for the three months ended June 30, 2021 from
$(0.07) million or $(7.31) per boe for the same period in 2020 and
decreased to $(0.1) million or $(6.28) per boe for the six months
ended June 30, 2021 from $0.2 million or $7.42 per boe in 2020 due
mainly to decreased gas production and sales volumes and decreased
gas prices.
COVID-19 Pandemic
In March 2020, the World Health Organization
declared the COVID-19 outbreak to be a pandemic. Responses to the
spread of COVID-19 have resulted in various disruptions to business
operations and an increase in economic uncertainty, with more
volatile commodity prices and currency exchange rates. The Company
is well positioned for the challenges of the current business
environment, with a cash position of $9.6 million as of June 30,
2021 and no debt.
Non-GAAP Financial Measures
The Company refers to “operating netback” in
this news release, a term with no standardized meaning as
prescribed by GAAP and which may not be comparable with similar
measures presented by other issuers. This additional information
should not be considered in isolation or as a substitute for
measures prepared in accordance with GAAP. Operating netback is
calculated as sales less royalties, production costs and
transportation and selling costs on a dollar basis and divided by
the sales volume for the period on a per barrel of oil equivalent
basis. The reconciliation of this non-GAAP measure is presented in
the “Results of Operations” section of this news release. This
non-GAAP measure is commonly used in the oil and gas industry to
assist in measuring operating performance against prior periods on
a comparable basis and has been presented to provide an additional
measure to analyze the Company’s sales on a per barrel of oil
equivalent basis and its ability to generate funds.
Reserves Advisory
This news release includes information
pertaining to the internally generated estimates of Company
resources effective March 1, 2021 which was prepared by a qualified
reserves evaluator in accordance with the definitions, standards
and procedures contained in the Canadian Oil and Gas Evaluation
Handbook and National Instrument 51-101, Standards of Disclosure
for Oil and Gas Activities ("NI 51-101"). Additional reserve
information as required under NI 51-101 is included in the
Company's Annual Information Form filed on SEDAR.
Statements relating to reserves and resources
are deemed to be forward looking statements, as they involve the
implied assessment, based on certain estimates and assumptions,
that the reserves and resources described exist in the quantities
predicted or estimated. The reserve and resource estimates
described herein are estimates only. The actual reserves and
resources may be greater or less than those calculated. Estimates
with respect to reserves and resources that may be developed and
produced in the future are often based upon volumetric
calculations, probabilistic methods and analogy to similar types of
reserves, rather than upon actual production history. Estimates
based on these methods generally are less reliable than those based
on actual production history. Subsequent evaluation of the same
reserves based upon production history will result in variations,
which may be material, in the estimated reserves.
References herein to barrels of oil equivalent
(“boe”) are derived by converting gas to oil in the ratio of six
thousand standard cubic feet (“Mscf”) of gas to one barrel of oil
based on an energy conversion method primarily applicable at the
burner tip and does not represent a value equivalency at the
wellhead. Given the value ratio based on the current price of crude
oil as compared to natural gas is significantly different from the
energy equivalency of 6 Mscf to 1 barrel, utilizing a conversion
ratio at 6 Mscf to 1 barrel may be misleading as an indication of
value, particularly if used in isolation.
"Proved" reserves are those reserves that can be
estimated with a high degree of certainty to be
recoverable. It is likely that the actual remaining quantities
recovered will exceed the estimated Proved reserves.
"Probable" reserves are those additional
reserves that are less certain to be recovered than Proved
reserves. It is equally likely that the actual remaining
quantities recovered will be greater or less than the sum of the
estimated Proved plus Probable reserves.
"Possible" reserves are those additional
reserves that are less certain to be recovered than Probable
reserves. There is a 10 percent probability that the quantities
actually recovered will equal or exceed the sum of Proved plus
Probable plus Possible reserves. It is unlikely that the actual
remaining quantities recovered will exceed the sum of the estimated
Proved plus Probable plus Possible reserves.
“Prospective Resources” disclosed herein are
those quantities of petroleum estimated, as of a given date, to be
potentially recoverable from undiscovered accumulations by
application of future development projects. Prospective Resources
have both an associated chance of discovery (geological chance of
success) and a chance of development (economic, regulatory, market
and facility, corporate commitment or political risks). The chance
of commerciality is the product of these two risk components. There
is no certainty that any portion of the Prospective Resources will
be discovered and, if discovered, there is no certainty that it
will be developed or, if it is developed, there is no certainty as
to either the timing of such development or whether it will be
commercially viable to produce any portion of the resources.
Unless otherwise stated herein, any reference to
“Prospective Resources” refers to Condor Working Interest, Mean
Recoverable, Prospective Resources, Unrisked.
The estimated total costs required to develop
the Akshoky North prospect is USD 44 million per internal
estimates. Commercial production is planned to commence in 2.5 to
3.5 years from initial prospect discovery using currently
established and proven drilling, completion and facility
technology. The project is based on conceptual studies.
Forward-Looking Statements
Certain statements in this news release
constitute forward-looking statements under applicable securities
legislation. Such statements are generally identifiable by the
terminology used, such as “anticipate'', “appear”, “believe'',
“intend”, “expect”, “plan”, “estimate”, “budget'', “outlook'',
“scheduled”, “may”, “will”, “should”, “could”, “would”, “in the
process of” or other similar wording. Forward-looking information
in this news release includes, but is not limited to, information
concerning: the timing and ability to execute a production contract
with the Government of Uzbekistan under favorable terms, or at all,
the fields and exploration areas to be included and the terms and
conditions including but not limited to royalty rates, cost
recovery, profit allocation, gas marketing and pricing, government
participation, governance, baseline production levels and
reimbursement methodology; the expected benefits related to the
Company’s proposal to the Government of Uzbekistan and the timing
and ability to receive feedback and endorsement of the proposal, if
at all; the timing and ability to re-enter, case and fully evaluate
the Yakamoz structure and confirm commercial gas flowrates; the
timing of and ability to drill new wells, the expected drilling
depths, the expected number and location of target formations and
the ability of the new wells to become producing wells; the timing
and ability to tie the Yakamoz field into the Company’s existing
gas plant; the timing and ability to pursue other initiatives and
commercial opportunities; projections and timing with respect to
crude oil, natural gas and condensate production; expected markets,
prices costs and operating netbacks for future oil, gas and
condensate sales; the timing and ability to obtain various
approvals and conduct the Company’s planned exploration and
development activities; the timing and ability to access oil and
gas pipelines; the timing and ability to access domestic and export
sales markets; anticipated capital expenditures; forecasted capital
and operating budgets and cash flows; anticipated working capital;
sources and availability of financing for potential budgeting
shortfalls; the timing and ability to obtain future funding on
favorable terms, if at all; general business strategies and
objectives; the timing and ability to obtain exploration contract,
production contract and operating license extensions; the potential
for additional contractual work commitments; the ability to meet
and fund the contractual work commitments; the satisfaction of the
work commitments; and treatment under governmental regulatory
regimes and tax laws.
This news release also includes forward-looking
information regarding COVID-19 including, but not limited to:
travel restrictions including shelter in place orders, curfews and
lockdowns which may impact the timing and ability of Company
personnel, suppliers and contractors to travel internationally,
travel domestically and to access or deliver services, goods and
equipment to the fields of operation; the risk of shutting in or
reducing production due to travel restrictions, Government orders,
crew illness, and the availability of goods, works and essential
services for the fields of operations; and decreases in the demand
for oil and gas; decreases in natural gas, condensate and crude oil
prices.
By its very nature, such forward-looking
information requires Condor to make assumptions that may not
materialize or that may not be accurate. Forward-looking
information is subject to known and unknown risks and uncertainties
and other factors, which may cause actual results, levels of
activity and achievements to differ materially from those expressed
or implied by such information. Such risks and uncertainties
include, but are not limited to: regulatory changes; the timing of
regulatory approvals; the risk that actual minimum work programs
will exceed the initially estimated amounts; the results of
exploration and development drilling and related activities;
imprecision of reserves estimates and ultimate recovery of
reserves; historical production and testing rates may not be
indicative of future production rates, capabilities or ultimate
recovery; the historical composition and quality of oil and gas may
not be indicative of future composition and quality; general
economic, market and business conditions; industry capacity;
uncertainty related to marketing and transportation; competitive
action by other companies; fluctuations in oil and natural gas
prices; the effects of weather and climate conditions; fluctuation
in interest rates and foreign currency exchange rates; the ability
of suppliers to meet commitments; actions by governmental
authorities, including increases in taxes; decisions or approvals
of administrative tribunals and the possibility that government
policies or laws may change or government approvals may be delayed
or withheld; changes in environmental and other regulations; risks
associated with oil and gas operations, both domestic and
international; international political events; and other factors,
many of which are beyond the control of Condor. Capital
expenditures may be affected by cost pressures associated with new
capital projects, including labor and material supply, project
management, drilling rig rates and availability, and seismic
costs.
These risk factors are discussed in greater
detail in filings made by Condor with Canadian securities
regulatory authorities including the Company’s Annual Information
Form, which may be accessed through the SEDAR website
(www.sedar.com).
Readers are cautioned that the foregoing list of
important factors affecting forward-looking information is not
exhaustive. The forward-looking information contained in this news
release are made as of the date of this news release and, except as
required by applicable law, Condor does not undertake any
obligation to update publicly or to revise any of the included
forward-looking information, whether as a result of new
information, future events or otherwise. The forward-looking
information contained in this news release is expressly qualified
by this cautionary statement.
Abbreviations
The following is a summary of abbreviations used in this news
release:
|
USD |
United States dollars |
| boe |
Barrels of oil equivalent * |
| boepd |
Barrels of oil equivalent per
day |
| Mscf |
Thousand standard cubic feet |
* Barrels of oil equivalent (“boe”) are derived
by converting gas to oil in the ratio of six thousand standard
cubic feet (“Mscf”) of gas to one barrel of oil based on an energy
conversion method primarily applicable at the burner tip and does
not represent a value equivalency at the wellhead. Given the value
ratio based on the current price of crude oil as compared to
natural gas is significantly different from the energy equivalency
of 6 Mscf to 1 barrel, utilizing a conversion ratio at 6 Mscf to 1
barrel may be misleading as an indication of value, particularly if
used in isolation.
The TSX does not accept responsibility
for the adequacy or accuracy of this news release.
For further information, please contact Don
Streu, President and CEO or Sandy Quilty, Vice President of Finance
and CFO at 403-201-9694.
Condor Petroleum (TSX:CPI)
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