2019-05-15 06:11 MT - News Release

Mr. Mikhail Afendikov reports

CUB ENERGY ANNOUNCES NET EARNINGS OF US $1.0 MILLION FOR FIRST QUARTER OF 2019

Cub Energy Inc. has provided its unaudited interim financial and operating results for the three months ended March 31, 2019. All dollar amounts are expressed in United States Dollars unless otherwise noted. This update includes results from KUB-Gas LLC, in which Cub has a 35-per-cent equity ownership interest; Tysagaz LLC, Cub's 100-per-cent-owned subsidiary; and CNG LLC, which Cub has a 50-per-cent equity ownership interest.

Mikhail Afendikov, chairman and chief executive officer of Cub, said: "We wish to report net income [of] $1.0-million during the three months ended March 31, 2019, and recorded $1.7-million in dividends from its eastern Ukraine investment. Kub-Gas successfully maintained deliverability of over 14 million cubic feet per day during the first quarter of 2019. In western Ukraine, preparatory works are under way for the first three wells on the jointly owned Uzhgorod licence, expected to be drilled this year. All three wells are to be financed 100 per cent by our partner."

Financial highlights

• The company reported net income of $1.0-million or nil per share during the three months ended March 31, 2019, as compared with net income of $800,000 or nil per share during the same period in 2018.
• Netbacks of $24.49/boe or $4.08/million cubic feet equivalent were achieved for the three months ended March 31, 2019, as compared with netback of $25.93/barrels of oil equivalent or $4.32/Mcfe for the comparative 2018 period.
• The company recorded $1.7-million in dividends during the three months March 31, 2019, compared with $1.0-million in dividends in the first quarter of 2018.

Operational highlights

• Kub-Gas recompleted the Olgovskoye-7 (O-7) well during 2019 and it is currently being tested.
• Achieved average natural gas price of $7.11/million cubic feet and condensate price of $42.57/barrel during the three months ended March 31, 2019, as compared with $7.16/Mcf and $60.60/bbl for the first quarter of 2018.
• Production averaged 895 barrels of oil equivalent per day (97 per cent weighted to natural gas and the remaining to condensate) for the three months ended March 31, 2019, as compared with 837 boe/d for the 2018 first quarter.
• The company and its partner plan to drill a three-well exploration program at Uzhgorod in mid-2019, dependent on timing of permitting and weather conditions. To date, the long-lead items for drilling have been delivered and road construction to the drill pads has commenced. The costs for the first three wells are financed 100 per cent by the company's partner.

                (in thousands of U.S. dollars)                 

                                                  Three months ended
                                                March 31,   March 31,
                                                    2019        2018

Petroleum and natural gas revenue                    $49          $-                                
Pro-rata petroleum and natural gas revenue         3,452       3,427                            
Revenue from gas trading                           4,479       5,670                            
Net income                                           962         779                              
Income per share -- basic and diluted               0.00        0.00                             
Funds generated from operations                      (35)      1,768                            
Capital expenditures                                   -         134                              
Pro rata capital expenditures                         56         335                              
Pro rata netback ($/boe)                           24.49       25.93                            
Pro rata netback ($Mcfe)                            4.08        4.32                             
                                                                                                               

Outlook

In eastern Ukraine, Kub-Gas is focused on additional recompletion operations given the success of the O-3 and O-9 recompletions in 2018. The O-7 recompletion was performed in 2019 and is awaiting testing. Three other recompletion opportunities are in the permitting phase. Kub-Gas may drill one additional well in late 2019 on the Makeevskoye licence and kick off a 3-D seismic program on the WO licence to delineate known structures found from 2-D seismic.

In western Ukraine, the company and its partner plan to start a three-well exploration program in the Uzhgorod licence in mid-2019 on structures defined by 3-D seismic. The three-well program is to be financed 100 per cent by the company's partner.

Supporting documents

Cub's complete quarterly reporting package, including the unaudited interim financial statements and associated management's discussion and analysis, has been filed on SEDAR and has been posted on the company's website.

About Cub Energy Inc.

Cub Energy is an upstream oil and gas company, with a proven record of exploration and production cost efficiency in Ukraine. 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.

We seek Safe Harbor.

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