Cub Energy Inc.: Announces Year-End Financial and Operational Results
26 Marzo 2014 - 7:32PM
Marketwired Canada
Cub Energy Inc. ("Cub" or the "Company") (TSX VENTURE:KUB), a Black Sea
region-focused upstream oil and gas company, reports its audited financial and
operating results for the year ended December 31, 2013.
In 2013, Cub achieved several key accomplishments including record production
volumes and revenue and operational success on the Company's 100% working
interest Rusko-Komarovske ("RK") licence. Additionally, the fourth quarter of
2013 was the Company's seventh consecutive quarter of production growth.
Operational Highlights
-- Production averaged 1,542 boe/d (95% natural gas) for the year ended
December 31, 2013 for an increase of 27% over 1,210 boe/d in 2012;
-- Exit rate of 2,070 boe/d for the year ended December 31, 2013 for an
increase of 35% over 1,531 boe/d in 2012;
-- Current production of approximately 1,800 boe/d;
-- Achieved average natural gas prices of $11.26/Mcf and condensate price
of $87.90/bbl for the year ended December 31, 2013;
-- A shallow pool gas discovery was made on the RK licence with the RK-22
well in western Ukraine which was tied-in and brought on production in
late 2013;
-- A new pool gas discovery was made on the Makeevskoye licence in eastern
Ukraine in the Serpukhovian Zone with the M-16 well and was tied-in and
on production in 2013;
-- Tested gas on a new reservoir on the Olgovskoye licence in eastern
Ukraine with the O-15 well, which was also tied in and brought on
production in 2013. This deeper pool discovery has the potential for
offset development;
-- Krutogorovskoye licence in eastern Ukraine was successfully converted to
20-year production licence; and
-- The expansion of the Makeevskoye and Olgovskoye production and
processing facility was completed in 2013. Gas began flowing on March 6,
2014 resulting in increased capacity to 68 MMcf/d from the previous 30
MMcf/d and it's expected to take 30 to 60 days to become fully
operational.
Financial Highlights
-- Netback of $40.15/Boe or $6.69/Mcfe for the fourth quarter 2013 and
netback of $41.02/Boe or $6.84/Mcfe for the year ended December 31,
2013;
-- Revenue from hydrocarbon sales by KUB-Gas for the year ended December
31, 2013 increased 18% to $117.7 million (2012 - $99.6 million) of which
the Company's 30% share was $35.3 million (2012 - $29.9 million);
-- Revenue from hydrocarbon sales by the Company, outside of KUB-Gas, for
the year ended December 31, 2013 increased 94% to $3.3 million (2012 -
$1.7 million). The 2012 period represented nine months of production;
-- The total pro-rata revenue from hydrocarbon sales, a non-IFRS measure
combining the Company's revenue and 30% of the allocated KUB-Gas
revenue, totaled $38.6 million (2012 - $31.5 million) for the year ended
December 31, 2013;
-- During the year ended December 31, 2013, the Company received $9.8
million (2012 - $Nil) in the form of dividends from KUB-Gas representing
the distribution of excess cash flow;
-- Net loss for the year ended December 31, 2013 was $3.0 million or $0.01
per share which was impacted by a $5.2 million impairment charge on the
Turkish licences (2012 - net income of $2.3 million or $0.01 per share).
Excluding the $5.2 million impairment charge, the net income for the
year ended December 31, 2013 would have been $2.2 million;
-- The Company's unsecured line of credit with Pelicourt Limited was
increased to $5.0 million and remained undrawn at December 31, 2013.
Subsequent to the year ended December 31, 2013, the Company drew down
$1.0 million; and
-- Capital expenditures of $8.9 million (2012 $2.0 million) for the year
ended December 31, 2013 and the pro-rata capital expenditures, a non-
IFRS measure combining the Company's capital expenditures and 30% of the
allocated KUB-Gas capital expenditures, totaled $17.9 million (2012 -
$12.6 million) for the year ended December 31, 2013.
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Three Months Three Months Year Year
Ended Ended Ended Ended
(in thousands of US December 31, December 31, December 31, December 30,
dollars) 2013 2012 2013 2012
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Petroleum and natural
gas revenue 745 606 3,250 1,666
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Pro-rata petroleum and
natural gas revenue(1) 9,761 8,805 38,575 31,542
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Net profit (loss) (5,304) (136) (3,013) 2,290
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Earnings (loss) per
share - basic and
diluted (0.02) 0.00 (0.01) 0.01
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Funds generated from
(used in) operations(2) 857 (1,611) 2,474 (3,931)
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Pro-rata funds generated
from operations 2,111 2,692 9,814 12,187
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Capital expenditures (3) 2,789 304 8,851 1,843
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Pro-rata capital
expenditures 4,900 4,738 17,861 12,627
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Pro-rata netback ($/boe) 40.15 47.60 41.02 51.39
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Pro-rata netback ($Mcfe) 6.69 7.93 6.84 8.57
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December 31, December 31,
2013 2012
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Working capital 942 9,577
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Cash and cash equivalents 1,617 10,116
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Long-term debt - -
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Notes:
1. Pro-rata petroleum and natural gas revenue is a non-IFRS measure that
adds the Company's petroleum and natural gas revenue earned in the
respective periods to the Company's 30% equity share of the KUB-Gas
petroleum and natural gas sales that the Company has an economic
interest in.
2. Funds from operations is a non-IFRS measure and is defined as cash flow
from operating activities, excluding changes in non-cash working
capital.
3. Pro-rata funds from operations is a non-IFRS measure that adds the
Company's funds from operations in the respective periods to the
Company's 30% equity share of the KUB-Gas funds from operations that the
Company has an economic interest in. The KUB-Gas funds from operations
is calculated as the income from equity investment less the KUB-Gas
depletion and depreciation.
4. Capital expenditures includes the purchase of property, plant and
equipment and the purchase of exploration and evaluation assets. Pro-
rata capital expenditures is a non-IFRS measure that adds the Company's
capital expenditures in the respective periods to the Company's 30%
equity share of the KUB-Gas capital expenditures that the Company has an
economic interest in.
Mikhail Afendikov, Chief Executive Officer of Cub Energy, commented, "We
successfully drilled, completed and tied-in the RK-22 well, which was our first
well drilled in western Ukraine and is 100% owned and operated by Cub. Cub will
be devoting significant capital to develop its 100% owned assets in western
Ukraine with at least four drilling operations planned. At KUB-Gas in eastern
Ukraine, we had a new gas pool discovery in the Serpukhovian zone along with our
successful development drilling, workover and fracture stimulation programs. We
continue to create shareholder value with our production growth in eastern and
western Ukraine."
Outlook
In 2014, the Company will continue its drilling operations on the RK-21 well on
its 100% owned Tysagaz assets in western Ukraine with further plans to drill the
RK-23 and RK-24 development wells and re-enter the RK-1 well.
Operations expected in the remainder of 2014 for KUB-Gas in eastern Ukraine
include the drilling of four wells, five fracture stimulations and a workover of
the O-6 well and construction of pipeline to tie-in wells as needed. The
Makeevskoye and Olgovskoye production and processing facilities became
operational in March 2014 and increased the facilities processing capability to
approximately 68 MMcf/d from 30 MMcf/d.
To date, the unrest in Ukraine has had limited impact on the Company's
operations; however, the final resolution and the effects of the political and
economic crisis are difficult to predict and could negatively affect the
Company's results and financial position. With the uncertainty of gas prices in
Ukraine created by the unrest between Russia and Ukraine, it is possible that
the programs could get constrained.
Supporting Documents
Cub's complete quarterly reporting package, including the audited annual
financial statements, associated Management's Discussion and Analysis and the
2013 Annual Information Form, have been filed on SEDAR (www.sedar.com) and
posted on the Company's website at www.cubenergyinc.com. All currency references
in this press release are in US dollars except as otherwise indicated.
About Cub Energy Inc.
Cub Energy Inc. (TSX VENTURE:KUB) is an upstream oil and gas company, with a
proven track record of exploration and production cost efficiency in the Black
Sea region. The Company's strategy is to implement western technology and
capital, combined with local expertise and ownership, to increase value in its
undeveloped land base, creating and further building a portfolio of producing
oil and gas assets within a high pricing environment.
For further information please contact us or visit our website: www.cubenergyinc.com
Oil and Gas Equivalents
A barrel of oil equivalent ("boe") or units of natural gas equivalents ("Mcfe")
is calculated using the conversion factor of 6 Mcf (thousand cubic feet) of
natural gas being equivalent to one barrel of oil. A boe conversion ratio of 6
Mcf: 1 bbl (barrel) or an Mcfe conversion of 1bbl: 6 Mcf is based on an energy
equivalency conversion method primarily applicable at the burner tip and does
not represent a value equivalency at the wellhead and is not based on either
energy content or current prices. While the boe ratio is useful for comparative
measures, it does not accurately reflect individual product values and might be
misleading, particularly if used in isolation. As well, given that the value
ratio, based on the current price of crude oil to natural gas, is significantly
different from the 6:1 energy equivalency ratio, using a 6:1 conversion ratio
may be misleading as an indication of value.
Reader Advisory
Except for statements of historical fact, this news release contains certain
"forward-looking information" within the meaning of applicable securities law.
Forward-looking information is frequently characterized by words such as "plan",
"expect", "project", "intend", "believe", "anticipate", "estimate" and other
similar words, or statements that certain events or conditions "may" or "will"
occur. Cub believes that the expectations reflected in the forward-looking
information are reasonable; however there can be no assurance those expectations
will prove to be correct. We cannot guarantee future results, performance or
achievements. Consequently, there is no representation that the actual results
achieved will be the same, in whole or in part, as those set out in the
forward-looking information.
Forward-looking information is based on the opinions and estimates of management
at the date the statements are made, and are subject to a variety of risks and
uncertainties and other factors that could cause actual events or results to
differ materially from those anticipated in the forward-looking information.
Some of the risks and other factors that could cause the results to differ
materially from those expressed in the forward-looking information include, but
are not limited to: general economic and political conditions in Ukraine and
globally; industry conditions, including fluctuations in the prices of natural
gas; governmental regulation of the natural gas industry, including
environmental regulation; unanticipated operating events or performance which
can reduce production or cause production to be shut in or delayed; failure to
obtain industry partner and other third party consents and approvals, if and
when required; competition for and/or inability to retain drilling rigs and
other services; the availability of capital on acceptable terms; the need to
obtain required approvals from regulatory authorities; stock market volatility;
volatility in market prices for natural gas; liabilities inherent in natural gas
operations; competition for, among other things, capital, acquisitions of
reserves, undeveloped lands, skilled personnel and supplies; incorrect
assessments of the value of acquisitions; geological, technical, drilling,
processing and transportation problems; changes in tax laws and incentive
programs relating to the natural gas industry; failure to realize the
anticipated benefits of acquisitions and dispositions; and other factors.
Readers are cautioned that this list of risk factors should not be construed as
exhaustive.
This cautionary statement expressly qualifies the forward-looking information
contained in this news release. We undertake no duty to update any of the
forward-looking information to conform such information to actual results or to
changes in our expectations except as otherwise required by applicable
securities legislation. Readers are cautioned not to place undue reliance on
forward-looking information.
Neither the 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 release.
FOR FURTHER INFORMATION PLEASE CONTACT:
Cub Energy Inc.
Mikhail Afendikov
Chairman and Chief Executive Officer
(713) 677-0439
mikhail.afendikov@cubenergyinc.com
Cub Energy Inc.
Lionel C. McBee
Director of Investor Relations
(713) 577-1955
lionel.mcbee@cubenergyinc.com
www.cubenergyinc.com
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