high-growth junior producer
Exploration, development and acquisition of Petroleum and Natural Gas - Alberta
Message: Arcan Resources Ltd. Announces First Quarter 2009 Results
| May 19, 2009 | |
| Arcan Resources Ltd. Announces First Quarter 2009 Results | |
|
CALGARY, ALBERTA--(Marketwire - May 19, 2009) - Arcan Resources Ltd. (TSX VENTURE:ARN) ("Arcan" or the "Company") announces today the filing of its first quarter 2009 financial statements and management's discussion and analysis. These documents can be retrieved electronically from the SEDAR system under Arcan's profile at www.sedar.com. FIRST QUARTER 2009 HIGHLIGHTS - Drilled and tied in one (0.5 net) successful exploration gas well in the first quarter of 2009; - Received Good Production Practices ("GPP") approval on the GG pool in Hamburg, converted one well to an injector, installed two pump jacks and constructed light vehicle all season access; - Production decreased to 1,350 boe per day for the three months ended March 31, 2009 down 9% from the 1,477 boe per day for the three months ended March 31, 2008 and down 8% from the fourth quarter of 2008, although oil production was up over those periods; - April 2009 production averaged over 1,700 boe per day, new exploration well on production; - Operating netbacks of $25.53 per boe (revenue of $47.16 per boe and operating cost of $11.12 per boe) were down 52% from $53.47 in the first quarter of 2008 and down 9% from $28.15 in the fourth quarter of 2008; - Funds from operations decreased 68% to $2.0 million (0.05 per diluted share) in the first quarter of 2009 from $6.2 million (0.16 per diluted share) in the first quarter of 2008 and consistent with the $2.0 million (0.05 diluted per share) in the fourth quarter of 2008; and - Arcan extended its $50 million bank line to April 2010. Financial and
Operating Summary Quarter Ended
----------------------------------------------------
March 31, March 31, % Change period December 31,
2009 2008 over period 2008
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Financials ($000s except
per share amounts)
Oil and NGL sales 4,929 9,199 (46) 6,442
Natural gas sales 802 1,876 (57) 1,657
Total petroleum and
natural gas revenue 5,731 11,075 (48) 8,099
Funds from operations(1) 1,966 6,203 (68) 1,987
Per share basic(1) 0.05 0.17 (71) 0.05
Per share diluted(1) 0.05 0.16 (69) 0.05
Net Income (loss) (1,290) 1,645 (178) (772)
Per share basic and
diluted (0.03) 0.04 (175) (0.02)
Capital expenditures
- cash 3,177 9,556 (67) 9,980
Total Assets 150,398 133,213 13 149,724
Total Liabilities 63,264 51,126 24 61,493
Shareholders' equity 87,133 82,087 6 88,231
Bank Loan 41,194 22,574 82 29,633
Net debt and working
capital 42,073 33,495 26 40,405
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Operating, General and
Administrative (G&A)
Production:
Crude oil (bbls per day) 1,110 1,083 2 1,102
Natural gas (mcf per day) 1,444 2,366 (39) 2,199
Total (boe per day)(6:1) 1,350 1,477 (9) 1,468
Average realized price:
Crude oil ($ per bbl) 49.36 93.32 (47) 63.55
Natural gas ($ per mcf) 6.17 8.72 (29) 8.19
Combined average (incl.
processing revenue)
($ per boe) 47.16 82.37 (43) 59.95
Netback ($ per boe)
Petroleum and natural
gas sales 47.16 82.37 (43) 59.95
Royalties (10.51) (17.70) (41) (13.93)
Operating and
transportation
expenses (11.12) (11.20) (1) (17.88)
Operating netback(2) 25.53 53.47 (52) 28.15
G&A expenses - cash (7.11) (5.07) 40 (9.67)
Interest expense - net (2.23) (2.01) 11 (2.15)
Corporate netback(3) 16.19 46.39 (65) 16.32
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Common Shares (000s)
Shares outstanding,
end of period 37,869 37,827 0 37,869
Weighted average
shares - basic 37,829 36,716 3 37,869
Weighted average
shares - diluted(4) 37,829 37,664 0 37,869
(1) The reader is referred to the section - "Special Note Regarding
Non-GAAP Measures" in this press release.
(2) Operating netback is calculated as revenue less royalties and
operating expenses.
(3) Corporate netback is calculated as Operating netback less G&A and
interest.
(4) In computing the net loss per diluted share in the respective periods,
nil shares were added to the weighted average number of shares
outstanding because they were anti-dilutive.
The world remains cautious however it appears that pessimism is slowly being reduced. Arcan's management believes recent market activity has been translated as a possible completion of the bottom in the markets and might be a reversal of the downward trend. For Arcan, the first quarter of 2009 marked significant reductions in commodity prices, the implementation of the new royalty rates in Alberta, global financial liquidity crises and massive sell-offs in equity markets as well as significant new lows in Arcan's share trading price. The market for junior energy stocks has rebounded sharply off the lows, moving Arcan into the $1.00 per share trading range, still at a deep discount to year end and strip pricing net asset value. Arcan's light oil provides solid netbacks as oil prices have moved in an upward direction from US $40 to $60 WTI while natural gas pricing continues to be far more challenging and may face price fluctuations for a period of time to come. Through this turbulent period Arcan continues to focus on building long-term value for the future. Arcan expects to operate through 2009 on cash flow from operations and its bank line which has been reviewed and is secured until April 2010. To support its cash flow, Arcan entered into a fixed price oil swap contract to receive $64.40 per barrel in exchange for Canadian dollar WTI on oil production of 500 barrels per day for the period from April 1 to December 31, 2009. Arcan expended $3.2 million on its properties and infrastructure during the quarter ended March 31, 2009. During the first quarter of 2009, Arcan focused on its core light oil properties. In February 2009 Arcan received GPP in its Hamburg GG pool. Arcan pipelined and converted one well to a water injector well, installed pump jacks on two other producing wells and built an all season light vehicle access road. After final injection approvals were received in early May in Hamburg injection levels have climbed to over 2,000 bbls per day. When gas/oil ratios have stabilized in Hamburg, Arcan expects to increase its production from existing producing wells. Also, Arcan is reviewing drilling plans in light of the recent Alberta royalty reduction incentives, with the possibility of drilling its first well as early as August 2009 within the Hamburg GG pool. Arcan exited the quarter with $42.1 million in debt and working capital and plans to prudently invest in capital items within its cash flow and its $50 million secure bank lines for the balance of the year. Production was 1,350 boe per day in the first qurter of 2009, down approximately 118 boe per day from the fourth quarter of 2008, due mainly to the sale of a gas well at the end of 2008 which produced approximately 70 boe per day, as well as shut in production in Hamburg as wells were re-worked and pump jacks were being installed. Production was elevated to over 1,700 boe per day in April as the new Hamburg 50% working interest natural gas well commenced production on April 1, 2009 to take advantage of the new royalty incentives. This well was on production for approximately two weeks before being shut-in for a build up test, and is now back on production. Arcan is estimating average production of 1,300 to 1,700 boe per day for 2009. Hamburg, McLeod and Deer Mountain are accessible for drilling in late July and Arcan is currently reviewing its development plans for that timeframe. If commodity prices warrant, Arcan will take advantage of its infill drilling locations in the Hamburg GG pool as early as August as well productivity, current oil pricing and royalty incentives provide those wells with approximately a 100 day payout. As well, Arcan is working with its drilling partner to set drilling plans that would commence as early as the end of July 2009 on a number of exploration prospects. Finally, Arcan continues to explore for ways to continue development of the Deer Mountain assets, where ultimately cash flow from Hamburg may be the most prudent avenue for development. Arcan expects to maintain its production base in 2009 through a prudent level of investment based on anticipated cash flow. Arcan's earlier investments provide the Company with a long-life, highly concentrated, Company-controlled asset base. Paramount to Arcan and to its management team, is adding value for the Company's shareholders. For 2009, Arcan is are implementing plans to hold down costs and turn drilling success and water injection into solid reserve bookings, allowing Arcan to continue to solidify its value. Outlook Enhanced recovery schemes require up-front capital investments, with returns being generated over a period of years. Successful water injection operations at Hamburg and Deer Mountain were major milestones and are expected to generate increased recoveries over the longer term, creating significantly enhanced reserves and net asset value. With significant investments in infrastructure in place, Arcan now looks to continue to take advantage of its deep development inventory to continue to increase net asset value per share. Arcan's anticipated plans for 2009 and beyond include: - Infill development drilling in the Hamburg GG pool in conjunction with our waterflood is aimed at increasing production and significantly extending the life and value of the asset. Arcan has had exploration successes over the past year and it is expanding its exploration base for next winter as Arcan moves into B.C. to take advantage of the more favourable royalty regime. - At McLeod, Arcan has not focused on natural gas drilling since 2007 but continue to accumulate deeper, higher-impact targets for future drilling when natural gas prices improve. Arcan, if the farm-out is elected by its industry partner, may drill one play in this area whereby Arcan will earn 50% of a well, if successful. Drilling is anticipated to start in the third quarter of 2009. - Expand Deer Mountain through the combination of Arcan's new battery, full water handling facility, expanded water injection scheme, drilling of new injection/production patterns in the unit and drilling of new patterns located off the unit on our 56 sections of undeveloped lands along the reef. Arcan's 2009 capital program is expected to remain within cash flow and debt capacities and will continue to focus on growth through exploration and development in its three core areas of Deer Mountain, McLeod and Hamburg. The Company's strengths include $110 million of tax pools, a strong slate of directors, experienced staff, excess productive capacity for tie-in, recently initiated and growing waterfloods, new drilling plans and growth potential. Arcan is building for the future! At March 31, 2009 Arcan had 13 full time office employees and 9 full time field employees. Additional information regarding Arcan's results, the management's discussion and analysis for the three months ended March 31, 2009 as compared to the three months ended March 31, 2008 and December 31, 2008, the unaudited interim financial statements for the three months ended March 31, 2009 and 2008 together with the notes thereto as well as the audited financial statements for the year ended December 31, 2008 and 2007, together with the notes related thereto and other documents filed on SEDAR, including historical financial statements, the information circular dated April 9, 2009 relating to the Company's annual general and special meeting to be held on May 20, 2009 and the Company's Annual Information Form dated April 3, 2009 for the year ended December 31, 2008., together with the notes related thereto, are available under Arcan's SEDAR profile at www.sedar.com. Arcan Resources Ltd. is an Alberta, Canada corporation that is principally engaged in the exploration, development and acquisition of petroleum and natural gas located in Canada's Western Sedimentary Basin. Arcan has 37,868,560 common shares, 586,631 Warrants, 750,000 performance warrants, and 3,638,500 stock options outstanding. BOE Presentation - Production and reserve information is commonly reported in units of barrel of oil equivalent ("boe"). For purposes of computing such units, natural gas is converted to equivalent barrels of oil using a conversion factor of six thousand cubic feet to one barrel of oil. Boe's may be misleading, particularly if used in isolation. A boe conversion ratio of six thousand cubic feet of natural gas to one barrel of oil (i.e., 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. Readers should be aware that historical results are not necessarily indicative of future performance. Special Note Regarding Non-GAAP Measures - This press release contains financial terms that are not considered measures under Canadian generally accepted accounting principles ("GAAP"), such as "funds from (used in) operations". This measures is commonly utilized in the oil and gas industry and is considered informative for management and shareholders. Specifically, "funds from (used in) operations" represents net loss for the period adjusted for non-cash items in the statement of operations. This term should not be considered an alternative to, or more meaningful than cash flow from operating activities as determined under GAAP as an indicator of the Corporation's performance. Management considers this term to be important as it helps evaluate performance and demonstrates the Corporation's ability to generate sufficient cash to fund future growth opportunities. |
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