Angle Energy Inc. Announces 2013 Second Quarter Results and Updates 2013 Full-Year Guidance
08.08.2013 | Marketwire
CALGARY, Aug. 8, 2013 - Angle Energy Inc. ("Angle" or the "Company") (TSX:NGL) today announced the financial and operating results for the three and six months ended June 30, 2013. Angle reported strong earnings of $6.9 million for the second quarter of 2013 or $0.09 per share, an increase of approximately $4.5 million or 190% over the same period of 2012. The improvement is primarily a result of increased realized commodity prices and gains related to the sale of minor non-core assets.The Company has successfully transitioned to more profitable barrels of production, delivering greater netbacks and value on its invested capital. The commodity mixture Angle produces has changed materially versus the second quarter of 2012, with light crude oil and condensate now representing 30% of corporate production compared to 21% in the second quarter of 2012. Light crude oil, condensate and other natural gas liquids make up 56% of the Company's second quarter production compared to 44% in the second quarter of 2012.
COMPANY HIGHLIGHTS
- Funds from operations for the three and six months ended June 30, 2013 increased by 27% over the same periods in 2012 after adjusting for cash flow contributions related to the disposed non-core Edson assets. Funds from operations for the second quarter were $20.4 million or $0.25 per diluted share.
- Angle's operating netback in the second quarter was $26.84/boe, a 44% improvement over the average operating netback of $18.63/boe in the second quarter of 2012, reflecting the transition to more profitable production.
- Light crude oil and condensate production averaged 3,286 bbls/day in the second quarter, which was in line with first quarter 2013 production. Light crude oil and condensate production increased by over 16% versus the second quarter of 2012 and 23% versus the six month period ended June 30, 2012 after factoring out the light crude oil and condensate production related to the disposed non-core Edson assets (closed January 9, 2013) of approximately 445 bbls/day and 400 bbls/day for the three and six months ended June 30, 2012.
- Second quarter production was 10,926 boe/day, down 3.8% from first quarter 2013 production of 11,354 boe/day, due primarily to regulatory delays in tying in a Harmattan Mannville well, Ferrier pipeline constraints and a non-commercial Wabamun well.
- Angle identified a potential new project at Davey in the Lone Pine area. During the second quarter of 2013 a 100% working interest well was completed and tied-in with an Initial Production ("IP") 30 day rate of approximately 400 boe/day, with approximately 85% light crude oil and condensate volumes. The well has stabilized with an IP90 day rate of approximately 300 boe/day with approximately 76% light crude oil and condensate volumes.
- Capital investment in the second quarter of 2013 was $20.4 million (excluding proceeds from dispositions), which included $17.8 million on drilling, completions, equipping and tie-in of wells. Three gross (2.6 net) wells were drilled targeting Cardium light crude oil with a 100% success rate.
- For 2013 year-to-date, Angle invested $85.7 million (excluding proceeds from dispositions), which included $72.2 million on drilling, completions, equipping and tie-in of wells. A total of 20 gross (17.2 net) wells were drilled in the six months ended June 30, 2013 with a 95% success rate.
- The Company exited the second quarter with $215.2 million of net debt (including $60 million of convertible debentures).
The following table provides a summary of the Company's operating and financial results for the three and six months ended June 30, 2013 and 2012 and should be read in conjunction with Angle's interim consolidated financial statements and related Management's Discussion and Analysis ("MD&A"). The Company has filed its interim consolidated financial statements and related MD&A for the three and six months ended June 30, 2013 on www.sedar.com and www.angleenergy.com.
FINANCIAL AND OPERATING HIGHLIGHTS
Three Months Ended June 30 Six Months Ended June 30
2013 2012 %Change 2013 2012 %Change
($000s, except per share data)
FINANCIAL
Oil and natural gas revenues 43,667 43,665 - 86,978 91,832 (5)
Funds from operations (1) 20,368 20,280 - 43,863 41,798 5
Per share - basic ($) 0.25 0.25 - 0.54 0.53 2
Per share - diluted ($) 0.25 0.25 - 0.54 0.53 2
Cash flow from operating activities 25,254 19,414 30 44,186 40,252 10
Net income and comprehensive income 6,920 2,389 190 8,305 2,988 178
Per share - basic ($) 0.09 0.03 200 0.10 0.04 150
Per share - diluted ($) 0.09 0.03 200 0.10 0.04 150
Capital expenditures (2) 20,437 37,193 (45) 85,665 97,185 (12)
Total assets (end of period) 597,127 660,657 (10) 597,127 660,657 (10)
Net debt (end of period) (3) 215,196 223,490 (4) 215,196 223,490 (4)
Shareholders' equity (end of period) 333,634 371,866 (10) 333,634 371,866 (10)
COMMON SHARE DATA
Shares outstanding (000s)
At end of period 81,052 80,922 - 81,052 80,922 -
Weighted average - basic 81,052 80,921 - 81,052 79,295 2
Weighted average - diluted 81,271 80,967 - 81,178 79,583 2
OPERATING
Sales
Natural gas (mcf/d) 28,214 52,182 (46) 29,631 51,419 (42)
NGLs (bbls/d) 2,938 3,602 (18) 2,893 3,656 (21)
Light crude oil and condensate (bbls/d) 3,286 3,270 - 3,307 3,091 7
Total oil equivalent (boe/d) 10,926 15,569 (30) 11,139 15,318 (28)
Average wellhead prices
Natural gas ($/mcf) 3.71 2.03 83 3.48 2.17 60
NGLs ($/bbl) 23.73 24.22 (2) 24.91 28.87 (14)
Light crude oil and condensate ($/bbl) 91.46 85.14 7 90.83 90.47 -
Combined average ($/boe) 43.48 30.28 44 42.70 32.44 32
Netbacks ($/boe)
Operating (4) 26.84 18.63 44 27.99 19.25 45
Funds from operations (1) 20.49 14.32 43 21.76 15.00 45
Gross (net) wells drilled (#)
Natural gas - (-) 1 (1.0) -100 (-100) 3 (1.5) 8 (7.7) -63 (-81)
Oil 3 (2.6) 6 (6.0) -50 (-57) 17 (15.7) 18 (15.3) -6 (3)
Total 3 (2.6) 7 (7.0) -57 (-63) 20 (17.2) 26 (23.0) -23 (-25)
Average working interest (%) 87 100 (13) 86 88 (2)
(1) Funds from operations, funds from operations per share and funds from operations per boe are not recognized measures under International Financial Reporting Standards (IFRS). Refer to the Management's Discussion and Analysis for further discussion.
(2) Total capital investment, including acquisitions and excluding proceeds on dispositions.
(3) Current assets less current liabilities, bank debt and the $60 million face value of the convertible debentures, excluding current derivative instruments and held-for-sale assets and liabilities.
(4) Operating netback equals oil and natural gas revenues including realized gains and losses on derivative instruments less royalties, operating costs and transportation costs calculated on a per-boe basis. Operating netback is not a recognized measure under IFRS and therefore may not be comparable with the calculations of similar measures presented by other companies.
(5) For a description of the boe conversion ratio, refer to "Boe Conversions" in the Management's Discussion and Analysis and the Basis of Presentation noted below.
Financial Highlights
In the second quarter of 2013, oil and natural gas revenues were $43.7 million compared to $43.3 million in the first quarter of 2013. Funds from operations for the second quarter were $20.4 million or $0.25 per diluted share, down approximately $3.1 million from funds from operations for the first quarter of 2013. Funds from operations for the second quarter of 2013 were negatively impacted primarily by lower volumes and approximately $1.2 million related to one-time annual adjustments for gas cost allowance, freehold mineral taxes as well as third party processing fees and operating costs.
Second quarter production was 10,926 boe/day, down 3.8% from first quarter 2013 production of 11,354 boe/day and down by 30% versus the same period in 2012, again reflecting the transition to fewer but more profitable barrels of oil equivalent and the impact of the sale of the non-core Edson assets. Approximately 3,100 boe/day in production related to the disposed non-core Edson assets is included in the comparative numbers for the second quarter of 2012. Production decreased approximately 28% for the six months ended June 30, 2013 versus the same period of 2012, which includes approximately 2,890 boe/day of production related to the disposed Edson assets. Second quarter 2013 production (mainly natural gas) was negatively impacted by regulatory delays in tying in a Harmattan Mannville well, Ferrier pipeline constraints and a non-commercial Wabamun well that was plugged and abandoned.
Light crude oil and condensate production averaged 3,286 bbls/day in the second quarter, which was in line with first quarter 2013 and second quarter 2012 production. During the three months ended June 30, 2013, Angle's commodity volume mix was as follows:
- 44% natural gas versus 56% for the same period in 2012
- 30% light crude oil and condensate versus 21% for the same period in 2012
- 26% NGLs versus 23% for the same period in 2012
Angle's operating netback in the second quarter was $26.84/boe, a 44% improvement over the average operating netback of $18.63/boe in the second quarter of 2012, reflecting the transition to more profitable production. Operating netback was down from the first quarter of 2013 as a result of the one-time annual adjustments for gas cost allowance, freehold mineral taxes as well as third party processing fees and operating costs.
Operational Highlights
Highlights of Angle's second quarter operations were previously released in a press release dated July 3, 2013. The first half of 2013 was focused on drilling Cardium light crude oil projects in Harmattan and Ferrier with 14 gross (12.7 net) wells of the 20 gross (17.2 net) wells rig released.
During the second quarter, Angle drilled and rig released three gross (2.6 net) horizontal wells, all of which targeted oil in the Cardium. Additionally, three horizontal wells (3.0 net) are currently testing Cardium light crude oil potential, one in Ferrier and two in Harmattan.
Capital investment in the second quarter of 2013 was $20.4 million (excluding proceeds from the disposition of minor non-core properties of $3.8 million and an adjustment to the Edson proceeds of $0.2 million), which included $17.8 million on drilling, completions, equipping and tie-in of wells. Three gross (2.6 net) wells were drilled targeting Cardium oil with a 100% success rate. For 2013 year-to-date, Angle invested $85.7 million (excluding proceeds from disposition of $76.2 million), which included $72.2 million on drilling, completions, equipping and tie-in of wells. A total of 20 gross (17.2 net) wells were drilled in the six months ended June 30, 2013 with a 95% success rate.
Angle identified a potential new project at Davey in the Lone Pine area. During the quarter a 100% working interest well was completed and tied-in with IP30 rates of approximately 400 boe/day, with approximately 85% light crude oil and condensate volumes. The well has stabilized with an IP90 rate of approximately 300 boe/day with approximately 76% light crude oil and condensate volumes. The Company spud a second well in the third quarter with well results expected prior to the end of the third quarter. Angle has accumulated a significant land position of approximately 41 net sections in the area and, pending the results of the second well, will initiate a longer-term drilling program to test and exploit the area.
The Company commissioned the Harmattan central oil battery, with initial capacity of 4,000 bbls/day of light crude oil, and related emulsion gathering lines. The battery was completed on time and on budget, and is expected to reduce Harmattan Cardium operating costs by approximately $1.50/boe.
For the three months ended June 30, 2013 operating expenses per boe increased to $6.36/boe compared to the prior year comparable period of $5.72/boe. For the six months ended June 30, 2013 operating expenses per boe increased to $5.81/boe from $5.55/boe in the comparable period of 2012. The increase in operating costs per barrel is a function of the Company producing a higher percentage of light crude oil and NGLs, which carries a higher operating cost per boe versus the production of natural gas. In addition, there were several one-time 2012 third party operating cost and processing fee adjustments received during the quarter that resulted in a higher cost per boe. The impact was an increase to operating cost per boe of approximately $0.48 and $0.24 for the three and six months ended June 30, 2013, respectively.
2013 CAPITAL PROGRAM AND GUIDANCE
Angle completed a mid-year review of capital investment for the remainder of 2013, emphasizing light crude oil growth, project rate of return, and maintaining an appropriate level of leverage. The Company has liquidity in its borrowing base of $275 million, including $60 million in convertible debentures, and is well-positioned to manage its capital investment and cash flows.
The Company expects to invest between $145 million and $150 million for 2013, with $86 million already invested in the first half of 2013. This projected full-year capital is at the low end of the $145 to $160 million guidance provided in January 2013. Natural gas drilling of approximately seven net wells for the year has been deferred, with two oil wells added to the program. Angle continues to pursue a target of net debt to annualized fourth-quarter funds from operations ratio of approximately 2:1.
Full-year capital investment includes approximately $100 million to $105 million on drilling and completions, $22 million on equipping and tie-ins, $13 million on facilities, $6 million on geological and geophysical, land and lease retention, and $4 million in other, including $2 million in capitalized general and administrative expenses ("G&A").
In the second half of 2013, Angle will focus on its projects in the Cardium light crude oil in Harmattan and Ferrier, and the emerging light crude oil play at Davey. Approximately 17.0 gross wells (14.0 net) are planned. The average operating netback for the production added from the focus projects is estimated to be over $40/boe.
As a result, the Company expects to drill at least 37 wells (31.1 net) in 2013 and is forecasting full-year average production to be approximately 10,500 boe/day to 10,800 boe/day, with an exit rate of between 10,500 boe/day and 11,000 boe/day. Angle continues to focus on the higher value light crude oil and liquids barrels, and estimates that light crude oil and liquids will comprise approximately 56% of the total average annual production per day.
Angle has currently hedged approximately 70% of its 2013 natural gas production at an average price of $3.31/mcf AECO, and has hedged approximately 60% of its 2013 light crude oil and condensate production at an average price of $95.20 WTI for the balance of 2013.
On July 3, 2013 Angle announced the initiation of a broad public process to identify and evaluate strategic alternatives to enhance shareholder value. The Company formed a Special Committee to oversee the process and has engaged outside advisors.
Expected results for full-year 2013 from the current capital investment program are as follows:
Total Corporate
Gross Wells 37.0
Net Wells 31.1
Capital Investment ($MM) $145 - $150
Cash Flow ($MM) $90
Dec. 31, 2013 Net Debt ($MM) $230 - $235
2013 Average Production (boe/day) 10,500 - 10,800
2013 Average Production Gas 44%
Exit 2013 Production (boe/day) 10,500 - 11,000
Exit 2013 Production Gas 44%
2013 Commodity Pricing Assumptions
Gas ($/GJ) $3.05
WTI ($/bbl) $98.00
Differential to Edmonton Light ($/bbl) -$4.00
Edmonton Light ($/bbl) $94.00
CONFERENCE CALL
Management of Angle Energy will be holding a conference call for investors, financial analysts, media and any interested persons on Thursday August 8, 2013 at 8:30 a.m. Mountain Time (10:30 a.m. Eastern Time) to discuss our 2013 second quarter results and outlook.
The investor conference call details are as follows:
Live call dial-in number: 1-800-760-3510
Participant Code: 293706
ABOUT ANGLE
Angle Energy Inc. is a public, Calgary-based oil and gas exploration and development company incorporated in 2004. Angle's objective is to build shareholder value through the profitable growth of its high quality asset base through a combination of drilling and strategic acquisitions. Angle's proven and dedicated team of industry specialists are focused on identifying and developing high quality assets in the Western Canadian Sedimentary Basin, with an emphasis in west central Alberta. Common shares of Angle are listed for trading on the Toronto Stock Exchange under the symbol "NGL."
Basis of Presentation
Production 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 crude oil using a conversion factor of six thousand cubic feet of gas to one barrel of oil. This conversion ratio of 6:1 is based on an energy equivalent conversion for the individual products, primarily applicable at the burner tip, and does not represent a value equivalency at the wellhead. Such disclosure of boe may be misleading, particularly if used in isolation.
Future Outlook and Forward-Looking Information
Information set forth in this press release contains estimates and forward-looking statements and are made as of August 8, 2013, including production levels and product mix, impact of operating expenses and estimated cash flows on forecast net debt levels, identification of new projects and drilling results. These forward-looking statements are subject to the corporate directives mentioned herein and based on assumptions as of that date and the reader should refer to the forward-looking statements section disclosed in June 30, 2013 Management Discussion and Analysis and the most recent Annual Information Form as filed on SEDAR. By their nature, estimates and forward-looking statements are subject to numerous risks and uncertainties, some of which are beyond Angle's control, including the impact of reservoir quality, decline rates, volatility of commodity prices, drilling techniques, costs of third party services, general economic conditions, industry conditions, environmental risks, competition and interest from other industry participants, the lack of availability of qualified personnel or management, ability to access sufficient capital, the outcome of the previously announced strategic alternative process, including the failure to realize the benefits from or failure to complete a transaction pursuant to the strategic alternatives process and the ability to identify and consummate business opportunities.
New factors emerge from time to time, and it is not possible for Management to predict all of such factors and to assess in advance the impact of each such factor on the Company's business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statement. The impact of any one factor on a particular forward-looking statement is not determinable with certainty as such factors are dependent upon other factors, and the Company's course of action would depend upon its assessment of the future considering all information then available.
Readers are cautioned that the assumptions and factors discussed in this press release are not exhaustive and that the assumptions used in the preparation of such information, although considered reasonable at the time of preparation, may prove to be imprecise, and as such, undue reliance should not be placed on forward-looking statements. Angle's actual results, performance or achievement could differ materially from those expressed in, or implied by, these estimates and forward-looking statements, and accordingly, no assurance can be given that any of the events anticipated by the estimates and forward-looking statements will transpire or occur, or if any of them do so, what benefits that Angle or its shareholders will derive there from. Unless required by law, Angle disclaims any intention or obligation to update or revise any estimates and forward-looking statements, whether as a result of new information, future events or otherwise. The estimates and forward looking statements are expressly qualified by these cautionary statements.
Contact
Angle Energy Inc.
Heather Christie-Burns, President and Chief Operating Officer
(403) 263-4534
(403) 263-4179 (FAX)
Angle Energy Inc.
Gregg Fischbuch, Chief Executive Officer
(403) 263-4534
(403) 263-4179 (FAX)
Angle Energy Inc.
Ken Hillier, Chief Financial Officer
(403) 263-4534
(403) 263-4179 (FAX)
www.angleenergy.com