2012-02-15 04:00:11 -
CALGARY, ALBERTA -- (Marketwire) -- 02/15/12 -- Skope Energy Inc. ("Skope" or the "Company") (TSX:SKL) announced today the filing of its quarterly consolidated financial results as at and for the three and nine months ended December 31, 2011 and the accompanying Management's Discussion and Analysis.
OPERATIONAL AND FINANCIAL HIGHLIGHTS
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FINANCIAL HIGHLIGHTS
(000s, unless otherwise
stated) Q3 2012 Q2 2012 Q3 2011 YTD 2012
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Petroleum and natural
gas revenues 7,330 8,360 8,740 23,932
Royalties (1,240) (773) (863) (2,773)
Realized gain (loss)
on commodity
contracts 870 471 (14) 1,640
Operating expenses (3,394) (3,440) (3,637) (10,074)
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Operating Netback 3,566 4,618 4,226 12,725
G&A (841) (668) (485) (2,130)
Cash interest paid (1) (162) (179) (334) (546)
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Funds from operations 2,563 3,771 3,407 10,049
$ per share - Basic and
diluted 0.32 0.47 0.43 1.24
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Net loss (17,147) (2,436) (22,654) (20,797)
$ per share - Basic and
diluted (2.12) (0.30) (2.85) (2.57)
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Bank debt (current and
long term) 59,603 59,006 64,466 59,603
Working capital (2) 5,103 4,647 9,462 5,103
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Net debt 54,500 54,359 55,004 54,500
Total assets 105,430 124,637 137,401 105,430
Total shares outstanding 8,078 8,078 8,078 8,078
Weighted average shares
outstanding - Basic and
diluted 8,078 8,078 7,946 8,078
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OPERATIONAL HIGHLIGHTS
Average daily production
Natural gas (mcf/d) 25,744 25,916 27,211 25,510
Total (boe/d) 4,291 4,319 4,535 4,252
Average prices received
Natural gas ($/mcf) 3.09 3.51 3.49 3.41
$ per mcf
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Petroleum and natural
gas revenues 3.09 3.51 3.49 3.41
Royalties (0.52) (0.32) (0.34) (0.40)
Realized gain (loss)
on commodity
contracts 0.37 0.20 (0.01) 0.23
Operating expenses (1.43) (1.44) (1.45) (1.44)
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Operating netback 1.51 1.95 1.69 1.80
G&A (0.35) (0.28) (0.19) (0.30)
Cash interest paid (1) (0.07) (0.08) (0.13) (0.08)
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Funds from operations 1.09 1.59 1.37 1.42
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1. Cash interest paid represents cash interest paid on credit facility and
on realized losses on interest rate financial contracts.
2. Current assets less current liabilities, excluding fair value of
financial instruments and current portion of credit facility.
PRESIDENT'S MESSAGE TO SHAREHOLDERS
Skope is pleased to report to shareholders the Company's activities as at and for the three and nine months ended December 31, 2011.
Skope's operations continue to exceed expectations. Despite lower commodity prices, in the past year, Skope has repaid $8 million ($3 million subsequent to current quarter-end) of bank debt well in advance of its original budget. This is largely the result of capital spending efficiencies and commodity price hedging activities. The Company currently has approximately 54% of anticipated net production for calendar 2012 hedged at an average price of $4.21 per mcf. Production has remained steady at 25 to 26 mmcf/d with only $5.6 million of capital spent in calendar year 2011. Decline rates on production have moderated from 17% at acquisition to the current rate of approximately 8% to 10%. This is largely the result of focused field operations including swabbing, recompletions and workover operations. With sub-10% declines, capital required to maintain production is reduced dramatically. In light of low natural gas prices, Skope believes capital spending could be reduced further by focusing capital projects on work-overs and recompletions and further horizontal drilling as commodity prices allow.
Skope has drilled five horizontal wells in the Pendor area since the spring of 2010. Skope plans to establish an inventory of low cost production and reserve additions to be exploited as the inventory of workovers is depleted. Skope and its operator, Spur Resources Ltd., have been employing low-cost monobore drilling techniques, with relatively small hydraulic fracturing operations on these wells and are pleased with the results to date. Skope has identified over 20 potential follow-up locations for future development.
In July of 2011, Skope completed its first two horizontal wells in the Pendor area targeting the Second White Specks and Medicine Hat formations. Early results were sufficiently encouraging to continue the horizontal drilling program in the Pendor area. During the second fiscal quarter, Skope drilled an additional horizontal well in the Bow Island formation. During the third fiscal quarter, Skope drilled two additional horizontal wells in Mannville and Second White Specks formations.
Of particular note is the 16-7-1-8W4 horizontal Mannville well (80% Skope working interest) which was brought on stream on January 6, 2012. The well was drilled using monobore technology with a 730 meter horizontal section and a 10-stage fracture. Since it came on stream, production has been steady at 25 bbl/day of 37 degree API light oil, 1.0 mmcf/d of natural gas (192 boe/d) and an 85% water cut. The net cost to Skope for the Mannville well was approximately $0.6 million ($0.8 million gross). Skope and its partner, Spur, have identified 2 to 4 follow-up Mannville locations. Skope has an 80% interest in the well. The results of this Mannville well are in early stages and may not be reflective of future production results.
Financing Activities
As previously announced, Skope has recently amended its credit facility and is continuing to pursue equity, debt and/or other financing alternatives. Net proceeds from any financing will first be applied to reduce outstanding amounts under the credit facility to $25 million or less and any remaining proceeds may be used to fund potential future acquisitions. The Company is currently pursuing various financing options to maximize shareholder value; however, there is no assurance that the Company will able to complete such financing. Readers should refer to Skope's consolidated financial results as at and for the three and nine months ended December 31, 2011 and the accompanying Management's Discussion and Analysis for further information.
On behalf of the Board of Directors,
Henry Cohen, President and Chief Executive Officer
FILINGS
Skope has filed with Canadian securities regulatory authorities it's unaudited financial statements as at and for the three and nine months ended December 31, 2011 and the accompanying Management's Discussion and Analysis. These filings are available under Skope's SEDAR profile at www.sedar.com and on it's website at www.skopeenergy.com.
INFORMATION REGARDING SKOPE
Skope is a Canadian public company in the business of oil and natural gas exploration, development and production in Western Canada with a focus on shallow natural gas. Skope's assets consist of an 80% working interest in a package of producing shallow gas assets, located in southeast Alberta and southwest Saskatchewan.
Skope's common shares are listed on the TSX under the symbol "SKL".
FORWARD LOOKING STATEMENTS
This news release contains forward looking statements. These statements relate to future events or the Company's future performance. All information and statements contained herein that are not clearly historical in nature constitute forward looking statements, and the words "may", "will", "should", "could", "expect", "plan", "intend", "anticipate", "believe", "estimate", "propose", "predict", "potential", "continue", or the negative of these terms or other comparable terminology are generally intended to identify forward looking statements. These statements involve known or unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward looking statements. Undue reliance should not be placed on these forward looking statements, as there can be no assurance that the plans, intentions or expectations upon which they are based will occur. In particular, this news release contains forward-looking statements relating, but not limited to:
-- drilling, development, exploration and production plans and focus and
the timing thereof;
-- future capital and operating cost reductions, economics and
efficiencies;
-- anticipated 2012 net production;
-- future hedging activities;
-- Skope's business model strategy, goals and management focus;
-- future liquidity and the Company's access to sufficient debt and equity
capital;
-- source of funding the Company's planned capital expenditures and
required debt repayments;
-- Skope's asset base and future prospects for development and growth;
-- expectations regarding the business environment, industry conditions and
future commodity prices; and
-- the Company's plans to obtain additional financing and the use of
proceeds therefrom.
In addition, this news release contains early production results from Skope's recent Mannville well. The initial results are not necessarily indicative of long-term performance or of ultimate recovery.
Management has included forward-looking information in this news release in order to provide security holders with a more complete perspective on the Company's future operations and such information may not be appropriate for other purposes. These forward-looking statements are based on certain assumptions and are subject to a number of risks concerning anticipated financial performance, business prospects, strategies, regulatory developments, current and future commodity prices and exchange rates, applicable royalty rates, tax laws, future well production rates and reserve volumes, future operating costs, the performance of existing wells, the success of its exploration and development activities, the sufficiency and timing of budgeted capital expenditures in carrying out planned activities, the availability and cost of labor and services, the impact of increasing competition, conditions in general economic and financial markets, availability of drilling and related equipment, effects of regulation by governmental agencies, and the ability to obtain adequate financing on acceptable terms all of which are subject to change based on a variety of factors.
Investors are cautioned that such information, although considered reasonable by the Company, may prove to be incorrect. Actual results achieved will vary from the information provided in this news release as a result of numerous known and unknown risks and uncertainties certain of which are beyond Skope's control. Skope's actual results, performance or achievement could differ materially from those expressed in, or implied by, these forward-looking statements and, accordingly, no assurance can be given that any of the events anticipated by the forward-looking statements will transpire or occur, or if any of them do so, what benefits that Skope will derive therefrom.
Such risks and uncertainties include, without limitation: risks associated with Skope's ability to continue to receive the support of its lender, Skope's ability to obtain additional financing on acceptable terms and on the timing contemplated; the impact of general economic and credit conditions; continued volatility in commodity prices, and the impact of continued low and/or declining natural gas prices on Skope's cash flow and financial position; the uncertainty of estimates and projections relating to test rates, reserves, production, costs and expenses; general economic, market and business conditions, volatility in market prices for crude oil and natural gas and hedging activities related thereto, limited, unfavourable, or a lack of access to external sources of capital, risks associated with the oil and gas industry in general such as operational risks in development, exploration and production; delays or changes in plans with respect to exploration or development projects or capital expenditures; the uncertainty of reserve estimates; the uncertainty of estimates and projections relating to test rates, reserves, production, costs and expenses; health, safety and environmental risks; competition; and changes in legislation, including but not limited to tax laws, royalties and environmental regulations.
Readers are cautioned that the foregoing lists of factors are not exhaustive. The forward-looking statement disclosure contained in this news release is expressly qualified by this cautionary statement.
These forward-looking statements are made as of the date of this news release and the Company disclaims any intent or obligation to update publicly any forward-looking statements, whether as a result of new information, future events or results or otherwise, other than as required by applicable securities laws.
Additional information regarding Skope is available under the Company's profile on SEDAR at www.sedar.com or on the Company's website at www.skopeenergy.com.
NON-IFRS FINANCIAL MEASURES
Skope uses the following terms for measurement within this news release that do not have a standardized prescribed meaning under International Financial Reporting Standards ("IFRS") or previously Canadian Generally Accepted Accounting Principles ("GAAP") and these measurements may not be comparable with the calculation of similar measurements of other entities.
The terms "funds from operations", "operating netback" and "operating netback per mcf" in this news release are not recognized measures under IFRS or previously GAAP. Management of Skope believes that these terms are useful supplemental measures to evaluate operating performance and assess leverage. Users are cautioned however, that these measures should not be construed as an alternative to net earnings or cash flow from operating activities determined in accordance with IFRS or previously GAAP as an indication of Skope's performance.
Skope considers funds from operations to be an important measure of its ability to generate the funds necessary to finance capital expenditures and repay debt. All references to funds from operations throughout this news release are based on cash provided by operating activities before the change in non-cash working capital. Skope's method of calculating funds from operations may differ from that of other companies and, accordingly, may not be comparable to measures used by other companies. Readers may refer to a reconciliation of funds from operations to cash provided by operating activities in Skope's Management's Discussion and Analysis dated February 13, 2012 which has been has been filed under Skope's SEDAR profile at www.sedar.com and on it's website at www.skopeenergy.com.
FREQUENTLY USED TERMS
In this news release, the following terms are defined as follows:
"bbl" Barrel
"bbl/d" Barrels per day
"boe" Barrel(s) of oil equivalent
"boe/d" Barrel(s) of oil equivalent per day
"mcf" Thousand cubic feet
"mcf/d" Thousand cubic feet per day
"mmcf" Million cubic feet
"mmcf/d" Million cubic feet per day
51-101 ADVISORY
In conformity with National Instrument 51-101, Standards for Disclosure of Oil and Gas Activities ("NI 51-101"), natural gas volumes have been converted to barrels of oil equivalent using a conversion rate of six thousand cubic feet of natural gas to one barrel of oil. A boe conversion ratio of 6 mcf to 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 are cautioned that the term "boe" may be misleading, particularly if used in isolation. In addition, given that the value ratio based on the current price of crude oil as compared to natural gas is significantly different from the energy equivalency of 6:1, conversion on a 6:1 basis may be misleading as an indication of value.
Contacts:
Skope Energy Inc.
Daniel Belot
Vice President Finance and CFO
403-538-8018
daniel.belot@skopeenergy.com :
