CALGARY,
Nov. 27, 2013 /CNW/ - Hawk
Exploration Ltd. ("Hawk" or the "Corporation") is pleased to
announce its results for the three and nine months ended
September 30, 2013.
HIGHLIGHTS
Highlights for the three months ended September 30, 2013 were as follows:
- Generated record cash flow from operations of $2.1 million in the third quarter, a 47% increase
from the $1.4 million of cash flow
generated in the third quarter of 2012;
- Achieved an operating netback of $46.90 per boe in the third quarter of 2013, a
45% increase over the third quarter 2012 operating netback of
$32.39 per boe ;
- Averaged production of 613 boe/d in the third quarter of 2013,
an increase of 17% from 526 boe/d of production in the third
quarter of 2012 while production for the nine months ended
September 30, 2013 has increased by
29% to 621 boe/d compared to 482 for the same period of 2012;
- Drilled five (4.4 net) wells in the third quarter of 2013
resulting in four (3.7 net) successful heavy oil wells and one (0.7
net) capped gas well; and
- Subsequent to the third quarter, drilled three (3.0 net)
successful heavy oil wells in the Lloydminster area of western Saskatchewan.
Selected financial and operational information
for the three and nine months ended September 30, 2013 is provided as follows:
|
|
|
|
|
|
|
|
|
|
Three months ended
Sept. 30, |
|
Nine months ended
Sept. 30, |
|
2013 |
2012 |
% Change |
|
|
2013 |
2012 |
% Change |
Financial ($000's
except per share amounts) |
|
|
|
|
|
|
|
|
Petroleum and natural
gas sales |
$ 4,788 |
$ 3,046 |
57% |
|
$ |
11,598 |
$ 8,736 |
33% |
Cash flow from
operations (1) |
2,105 |
1,432 |
47% |
|
|
4,922 |
4,170 |
18% |
|
Per share |
0.06 |
0.04 |
50% |
|
|
0.14 |
0.12 |
17% |
Comprehensive
income |
67 |
69 |
(3%) |
|
|
240 |
626 |
(62%) |
|
Per share |
0.00 |
0.00 |
n/a |
|
|
0.01 |
0.02 |
(50%) |
Capital expenditures
(2) |
3,342 |
2,852 |
17% |
|
|
5,879 |
6,301 |
(7%) |
Working capital
deficit - excluding bank |
|
|
|
|
|
|
|
|
|
debt and commodity contracts, end
of period (1) |
|
|
|
|
$ |
2,613 |
$ 3,371 |
(22%) |
Bank debt, end of
period |
|
|
|
|
|
3,250 |
100 |
3150% |
Total assets, end of
period |
|
|
|
|
$ |
33,349 |
29,226 |
14% |
Common Shares
outstanding end of period: |
|
|
|
|
|
|
|
|
|
Class A
Shares |
|
|
|
|
|
34,481 |
34,481 |
-% |
|
Class B
Shares |
|
|
|
|
|
1,080 |
1,080 |
-% |
|
Options to acquire Class A
Shares |
|
|
|
|
|
2,473 |
3,540 |
(30%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
Sept. 30, |
|
Nine months ended Sept.
30, |
|
|
2013 |
|
2012 |
% Change |
|
|
2013 |
|
|
2012 |
% Change |
Operations |
|
|
|
|
|
|
|
|
|
|
|
|
Production |
|
|
|
|
|
|
|
|
|
|
|
|
|
Crude oil and natural gas liquids
(bbl/d) |
|
593 |
|
505 |
17% |
|
|
596 |
|
|
457 |
30% |
|
Natural gas (mcf/d) |
|
123 |
|
126 |
(2%) |
|
|
153 |
|
|
151 |
1% |
|
Total (boe/d) |
|
613 |
|
526 |
17% |
|
|
621 |
|
|
482 |
29% |
Oil and liquids as
percent of total |
|
97% |
|
96% |
1% |
|
|
96% |
|
|
95% |
1% |
Average Selling
Price |
|
|
|
|
|
|
|
|
|
|
|
|
|
Crude oil and ngls (per
bbl) |
$ |
87.38 |
$ |
64.91 |
35% |
|
$ |
70.48 |
|
$ |
69.03 |
2% |
|
Natural gas (per mcf) |
|
2.51 |
|
2.37 |
6% |
|
|
3.21 |
|
|
2.15 |
49% |
|
Total (per boe) |
|
84.95 |
|
62.89 |
35% |
|
|
68.38 |
|
|
66.10 |
3% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Netbacks (per boe
at 6:1) (3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Price |
$ |
84.95 |
$ |
62.89 |
35% |
|
$ |
68.38 |
|
$ |
66.10 |
3% |
|
Royalties |
|
(17.54) |
|
(11.34) |
55% |
|
|
(13.25) |
|
|
(13.11) |
1% |
|
Production expense |
|
(18.76) |
|
(17.58) |
7% |
|
|
(18.35) |
|
|
(17.76) |
3% |
|
Transportation expense |
|
(1.75) |
|
(1.58) |
11% |
|
|
(1.75) |
|
|
(1.78) |
(2%) |
Operating netback ($/boe) |
$ |
46.90 |
$ |
32.39 |
45% |
|
$ |
35.03 |
|
$ |
33.45 |
5% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
G&A expense |
|
(2.51) |
|
(3.29) |
(24%) |
|
|
(3.14) |
|
|
(3.25) |
(3%) |
|
Net cash interest
expense |
|
(0.81) |
|
(0.01) |
80% |
|
|
(0.77) |
|
|
(0.01) |
76% |
|
Realized gain (loss) on |
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity
contracts |
|
(3.67) |
|
0.47 |
(881%) |
|
|
(1.24) |
|
|
1.37 |
(190%) |
Cash flow netback ($/boe) |
$ |
39.91 |
$ |
29.56 |
35% |
|
$ |
29.88 |
|
$ |
31.56 |
(5%) |
(1) The terms cash flow from operations, cash flow
from operations per share, working capital deficit and net debt to
annualized cash flow ratio are additional GAAP financial measures.
These measures are further described on page 3 of the Corporation's
MD&A for the three and nine months ended September 30, 2013
under the heading "Additional GAAP and Non-GAAP Financial
Measures". Users are cautioned that additional GAAP financial
measures may not be comparable with the calculation of similar
measures by other entities. |
(2) Capital expenditures include cash exploration
and evaluation expenditure plus cash property, plant and equipment
net of dispositions and exclude asset retirement obligations and
capitalized share-based payments. |
(3) Management uses the terms operating and cash
flow netbacks per boe which are non-GAAP measures.
These measures are key performance indicators however
do not have a standardized meaning as prescribed by GAAP and
therefore, may not be comparable with the calculation of similar
measures by other entities. Management considers operating and cash
flow netbacks to be important measures as they demonstrate
profitability relative to current commodity prices.
|
Operational Review and Update
During the third quarter of 2013, Hawk drilled four (3.7 net)
vertical heavy oil wells in western Saskatchewan, all of which were successful and
are currently on production at a combined rate of 145 (130 net)
bbl/d. Late in the third quarter of 2013, Hawk also drilled one
(0.7 net) vertical well in the Legal area of central Alberta targeting the Viking formation. This
well encountered a gas cap, was production tested in the fourth
quarter and is currently being evaluated as a potential gas
well.
In the fourth quarter of 2013, Hawk has drilled
three (3.0 net) successful heavy oil wells in the Lloydminster area of western Saskatchewan. These three (3.0 net) wells have
all been cased and are expected to be placed on production within
the next two weeks. The Corporation is also currently drilling the
final two (2.0 net) wells of its 2013 drilling program. The first
of these wells is being drilled in the Chauvin area of east central Alberta and is targeting the McLaren and GP
Formations, while the second well is being drilled in the Eureka
area of western Saskatchewan and
is targeting the Basal Mannville Formation.
Production for the third quarter of 2013
averaged 613 boe/d, a 17% increase from the 526 boe/d produced in
the third quarter of 2012. Hawk's current production is 680 boe/d,
based on field estimates. With additional production additions from
the wells drilled in the fourth quarter, Hawk expects an exit
production rate of approximately 730 boe/d at the end of 2013.
Financial
Hawk achieved record cash flow from operations in the third quarter
of 2013 of approximately $2.1 million
compared to $1.4 million for the
third quarter of 2012 due to increased oil production and increased
oil prices in the third quarter of 2013. Average Western Canadian
Select ("WCS") prices for the third quarter of 2013 increased 26%
to US$88.35 per bbl compared to
US$70.03 per bbl in the third quarter
of 2012, while the differential between WCS and West Texas
Intermediate crude oil ("Differential") improved to US$17.48 per bbl in the third quarter of 2013
compared to US$22.24 per bbl for the
third quarter of 2012. Differentials, however, have widened again
in the fourth quarter of 2013 which will lead to lower realized
pricing in the fourth quarter.
Hawk generated a record operating netback of
$46.90 per boe for the third quarter
of 2013 which is a 45 percent increase from the operating netback
for the third quarter of 2012 of $32.39 per boe due to increased oil prices in Q3
2013. The Corporation's average sales price in the third quarter of
2013 increased 35% to $84.95 per boe
from $62.89 per boe.
At September 30,
2013, Hawk had $3.25 million
drawn on its existing $12 million
credit facility. The Corporation continues to maintain a solid
balance sheet with net debt and working capital deficit of
approximately $5.9 million at
September 30, 2013 which equates to a
net debt to annualized cash flow from operations of 0.9:1.
Outlook
The Corporation will continue to focus on the development of its
heavy oil properties in western Saskatchewan and east central Alberta in 2014. The Corporation's board of
directors has approved a capital budget for 2014 of $10 million which will see Hawk drill
approximately 14 net wells, the majority of which are planned to be
vertical heavy oil wells in its above noted core area. The 2014
capital budget is expected to be operated entirely by Hawk with the
Corporation able to control the nature and timing of the capital
spending for the year.
Based on the approved budget, the Corporation's
production is expected to average approximately 800 boe/d for 2014
with an exit rate of approximately 950 boe/d and net debt at the
end of 2014 of approximately $11
million. The capital budget is expected to be funded by way
of cash flow from operations and the Corporation's existing
$12 Million credit facility.
Differentials have again widened out in the fourth quarter of 2014
and the Corporation expects the Differential to remain volatile
throughout 2014. The Corporation plans to monitor its cash flow for
2014 in light of the expected volatility in Differentials and its
effect on Hawk's overall realized oil prices and can adjust its
capital spending accordingly to ensure it maintains financial
flexibility.
Hawk is an emerging exploration company engaged
in the exploration, development and production of conventional
crude oil and natural gas in western Canada and is based in Calgary, Alberta. The Class A Shares and Class
B Shares of Hawk trade on the TSX Venture Exchange under the
trading symbols of HWK.A and HWK.B, respectively.
Neither the TSX Venture Exchange nor its
Regulation Services Provider (as the term is defined in the
policies of the TSX Venture Exchange) accepts responsibility for
the adequacy or accuracy of this release.
Certain statements contained in this press
release constitute forward-looking statements. All forward-looking
statements are based on the Corporation's beliefs and assumptions
based on information available at the time the assumption was made.
The use of any of the words "anticipate", "continue", "estimate",
"expect", "may", "will", "project", "should", "believe" and similar
expressions are intended to identify forward-looking statements.
These statements involve known and unknown risks, uncertainties and
other factors that may cause actual results or events to differ
materially from those anticipated in such forward-looking
statements. Hawk believes the expectations reflected in those
forward-looking statements are reasonable, but no assurance can be
given that these expectations will prove to be correct. Such
forward-looking statements included in this press release should
not be unduly relied upon. These statements speak only as of the
date of this press release.
In particular, but without limiting the
forgoing, this press release contains forward-looking statements
pertaining to the following: the performance characteristics of
Hawk's oil and natural gas properties; business strategies and
plans; projections of market prices and cost; supply and demand for
oil and natural gas; planned development of the Corporation's oil
and natural gas properties; the timing of and nature of capital
expenditure program for 2014;the exit production rate at the end of
2013 and 2014;the average production rate for 2014; the debt and
working capital amount at the end of 2014; and the expected sources
of funding for the 2014 capital expenditure program.
The material factors and assumptions used to
develop these forward looking statements include, but are not
limited to: the ability of the Corporation to engage drilling
contractors, to obtain and transport equipment, services, supplies
and personnel in a timely manner and at an acceptable cost to carry
out its activities and plans; the ability of the Corporation to
market its oil and natural gas and to transport its oil and natural
gas to market; the timely receipt of regulatory approvals and the
terms and conditions of such approval; the ability of the
Corporation to obtain drilling success consistent with
expectations; and the ability of the Corporation to obtain capital
to finance its exploration, development and operations.
Actual results could differ materially from
those anticipated in these forward-looking statements as a result
of the risk factors including, without limitation: volatility in
market prices for oil and natural gas; liabilities inherent in oil
and natural gas operations; uncertainties associated with
estimating oil and natural gas reserves; competition for, among
other things, capital, acquisitions of reserves, undeveloped lands
and skilled personnel; incorrect assessments of the value of
acquisitions and exploration and development programs; geological,
technical, drilling and processing problems; changes in tax laws
and incentive programs relating to the oil and natural gas
industry; failure to realize the anticipated benefits of
acquisitions; general business and market conditions; and certain
other risks detailed from time to time in Hawk's public disclosure
documents (including, without limitation, the other factors
discussed under "Risk Factors" in the Corporation's most recently
filed Annual Information Form).
Statements relating to "reserves" or
"resources" are deemed to be forward-looking statements, as they
involve the implied assessment, based on certain estimates and
assumptions that the resources and reserves described can be
profitably produced in the future. Readers are cautioned that the
foregoing lists of factors are not exhaustive. The forward-looking
statements contained in this press release are expressly qualified
by this cautionary statement. Except as required under applicable
securities laws, Hawk does not undertake any obligation to publicly
update or revise any forward-looking statements.
Barrels of oil equivalent (boe) may be
misleading, particularly if used in isolation. A boe conversion
ratio of six thousand cubic feet (mcf) of natural gas to one barrel
(bbl) of oil is based on an energy conversion method primarily
applicable at the burner tip and is not intended to represent a
value equivalency at the wellhead. All boe conversions in this
press release are derived by converting natural gas to oil in the
ratio of six thousand cubic feet of natural gas to one barrel of
oil. Certain financial amounts are presented on a per boe basis,
such measurements may not be consistent with those used by other
companies.
SOURCE Hawk Exploration Ltd.