Zargon Oil & Gas Ltd. ("Zargon" or the "Company") (TSX:ZAR)(TSX:ZAR.DB).
FINANCIAL & OPERATING HIGHLIGHTS (THREE MONTHS ENDED JUNE 30, 2013)
-- Second quarter 2013 production averaged 4,930 barrels of oil and liquids
per day, a four percent decrease from the preceding quarter and second
quarter 2013 natural gas production averaged 14.8 million cubic feet per
day, a three percent decrease from the preceding quarter. Total
production averaged 7,392 barrels of oil equivalent per day, a three
percent decrease from the preceding quarter. During the quarter, oil and
liquids production represented 67 percent of total production based on a
6:1 equivalent basis.
-- Funds flow from operating activities of $16.0 million were 15 percent
higher than the $13.9 million recorded in the prior quarter, and 29
percent higher than the $12.4 million reported in the second quarter of
2012. Funds flow from operating activities for the 2013 second quarter
included reductions of $1.1 million of asset retirement expenditures.
-- Three monthly cash dividends of $0.06 per common share were declared in
the second quarter of 2013 for a total of $5.4 million ($5.0 million
after accounting for the common shares issued under the Dividend
Reinvestment Plan ("DRIP") in lieu of cash dividends). These cash
dividends (net of the DRIP) were equivalent to a payout ratio of 31
percent of funds flow from operating activities.
-- Second quarter 2013 exploration and development capital expenditures
(excluding property acquisitions and dispositions) were $14.0 million
and included $7.3 million of expenditures related to the Little Bow ASP
tertiary oil recovery project.
-- Zargon's June 30, 2013 debt, net of working capital (excluding
unrealized derivative assets/liabilities) and using the full future face
value of the convertible debenture of $57.5 million, was $111.3 million
and is approximately 1.8 times the annualized 2013 first half funds flow
from operating activities. At June 30, 2013, Zargon had more than $110
million of available credit facilities remaining on its $165 million
borrowing base.
-- During the 2013 second quarter, Zargon disposed of assets in the Elswick
and Workman, Saskatchewan area for total proceeds of approximately $11.6
million. The assets were producing 130 barrels of oil per day.
Three Months Ended Six Months Ended June
June 30, 30,
----------------------------------------------------------------------------
Percent Percent
(unaudited) 2013 2012 Change 2013 2012 Change
----------------------------------------------------------------------------
Financial Highlights
Income and Investments ($
millions)
Gross petroleum and natural
gas sales 40.59 38.52 5 77.67 83.16 (7)
Funds flow from operating
activities 15.99 12.37 29 29.89 25.89 15
Cash flows from operating
activities 14.68 18.00 (18) 27.14 29.86 (9)
Cash dividends (net of
Dividend Reinvestment Plan) 5.01 7.45 (33) 9.76 14.90 (34)
Net earnings 1.13 10.54 (89) 1.35 8.53 (84)
Field capital and
administrative asset
expenditures 13.96 9.22 51 33.24 30.07 11
Net property and corporate
acquisitions/(dispositions) (11.54)(36.07) 68 (14.63)(35.97) 59
Net capital
expenditures/(dispositions) 2.42 (26.85) 109 18.61 (5.90) 415
Per Share, Basic
Funds flow from operating
activities ($/share) 0.53 0.42 26 0.99 0.88 13
Net earnings ($/share) 0.04 0.36 (89) 0.05 0.29 (83)
Cash Dividends ($/common share) 0.18 0.30 (40) 0.36 0.60 (40)
Balance Sheet at Period End ($
millions)
Property and equipment (D&P) 386.37 386.81 -
Exploration and evaluation
assets (E&E) 17.92 23.25 (23)
Total assets 437.88 446.41 (2)
Working capital deficiency 11.76 13.56 (13)
Long term bank debt 42.06 24.14 74
Convertible debentures at
maturity 57.50 57.50 -
Shareholders' equity 190.07 222.22 (14)
Weighted Average Shares
Outstanding for the Period
(millions) - Basic 30.00 29.52 2 29.95 29.46 2
Weighted Average Shares
Outstanding for the Period
(millions) - Diluted 30.21 32.62 (7) 30.11 32.65 (8)
Total Common Shares Outstanding
at Period End (millions) 30.04 29.64 1
----------------------------------------------------------------------------
Funds flow from operating activities is an additional GAAP term that
represents net earnings/loss and asset retirement expenditures except for
non-cash items.
Working capital deficiency excludes derivative assets/liabilities.
Three Months Ended June Six Months Ended June
30, 30,
----------------------------------------------------------------------------
Percent Percent
(unaudited) 2013 2012 Change 2013 2012 Change
----------------------------------------------------------------------------
Operating Highlights
Average Daily Production
Oil and liquids (bbl/d) 4,930 5,384 (8) 5,021 5,440 (8)
Natural gas (mmcf/d) 14.77 17.44 (15) 14.99 18.73 (20)
Equivalent (boe/d) 7,392 8,290 (11) 7,519 8,562 (12)
Average Selling Price
(before the impact of
financial risk management
contracts)
Oil and liquids ($/bbl) 80.44 73.17 10 75.97 77.59 (2)
Natural gas ($/mcf) 3.35 1.68 99 3.18 1.86 71
Netback ($/boe)
Gross petroleum and
natural gas sales 60.34 51.06 18 57.07 53.37 7
Royalties (10.51) (9.90) 6 (10.09) (10.22) (1)
Realized gain/(loss) on
derivatives 1.43 (0.92) 255 1.64 (2.42) 168
Operating expenses (18.10) (16.29) 11 (17.68) (16.43) 8
Transportation expenses (0.66) (0.51) 29 (0.66) (0.49) 35
Operating netback 32.50 23.44 39 30.28 23.81 27
Wells Drilled, Net - 0.2 (100) 5.1 9.8 (48)
Undeveloped Land at Period
End (thousand net acres) 300 368 (18)
----------------------------------------------------------------------------
The calculation of barrels of oil equivalent ("boe") is based on the
conversion ratio that six thousand cubic feet of natural gas is equivalent
to one barrel of oil.
Message to Shareholders
Zargon Oil & Gas Ltd. has released financial and operating results for the
second quarter of 2013 that demonstrated continued progress in our drive to
deliver our long term sustainable, dividend-paying energy producer objectives.
The quarter was highlighted by an ongoing successful property disposition
program and by the initiation of field construction of our Little Bow Alkaline
Surfactant Polymer ("ASP") tertiary oil recovery project in Southern Alberta.
Zargon's sustainability model entails the balancing of cash inflows and
outflows, the maintenance of a stable dividend, the eventual generation of
meaningful free cash flow per share growth, while continuing the shift toward
oil and liquids production. Zargon believes that the Little Bow ASP tertiary oil
recovery production provides the foundation for these sustainability objectives
by delivering a substantial low-decline, low-sustaining capital, high-netback
and long-life project to the Company.
The Company's focus for the remainder of 2013 will be to:
-- Deliver the Little Bow ASP project on-time and on-budget, with first
chemical injections to occur in January 2014;
-- Deliver a consistent dividend of $0.06 per common share per month;
-- Continue with an ongoing property divestiture program designed to high
grade and concentrate the company's asset portfolio; and
-- Maintain a strong balance sheet through substantial oil hedging programs
while limiting drilling capital to high-graded projects offering the
most attractive risk adjusted returns.
Little Bow Alkaline Surfactant Polymer ("ASP") Project
Zargon continues to make good progress with the Little Bow ASP project. This ASP
project entails the injection of a dilute chemical solution into a partially
depleted reservoir to recover incremental oil reserves. In its 2012 year end
review, McDaniel and Associates Consultants Ltd. assigned 4.4 million barrels of
probable undeveloped oil equivalent reserves to Zargon's working interest in
phases 1 and 2 of the project.
In the three months since the last report, Zargon has advanced the ASP project
on many fronts. At the site of the new ASP injection facility, civil
construction activities including earthworks and piling are essentially
complete. Mechanical field construction is underway. Long lead time equipment is
being delivered and packaged into pre-fabricated buildings for delivery to site
through the remainder of the summer.
Construction of the backbone of a new pipeline system for the ASP project has
been completed, and tie in of remaining project wells to this new system will
commence in the fall. The ASP project well workover program is also nearing
completion.
Chemical supply contracts have been negotiated. Operator training activities are
proceeding with the expectations of first chemical injections in January 2014
and incremental oil production by the second quarter of 2014.
The total construction capital cost of phases 1 and 2 of the Little Bow ASP
project is unchanged at approximately $60 million (as spent dollars). Of this
total, $6.5 million of expenditures were incurred in 2012, $5.0 million were
incurred in the 2013 first quarter and $7.3 million were incurred in the 2013
second quarter. For the remainder of 2013, an additional $30 million (inclusive
of $1 million for the first delivery of chemicals) is forecast to be spent. The
estimated total phase 1 and 2 chemical cost for the 2014-2019 chemical injection
period will be capitalized and remains at $66 million (as spent dollars). The
implementation of phase 2 of the project is scheduled for 2015 and is estimated
to cost $12 million.
Based on the current construction schedule, we forecast that the Little Bow ASP
project will provide 250 barrels of oil per day of incremental production in
2014, which will be comprised of an initial production response in the 2014
second quarter and a 2014 year end rate of 500 barrels of oil per day. Phase 1
and 2 incremental production rates are forecast to exceed 1,350 barrels of oil
per day in 2016. Using these rates with an estimated field oil price of $68 Cdn.
per barrel (assuming an Edmonton par price of $85 Cdn. per barrel), a 12 percent
incremental tertiary royalty rate (internal estimate of 4.9 million barrels of
incremental oil reserves), and operating costs of $12 per barrel of incremental
oil, the project is forecast to provide a field netback of approximately $50 per
barrel of incremental oil production volumes and deliver a property recycle
ratio of about 2.0 times.
Follow-on capital expenditures (including chemical costs) for phases 3 and 4 of
the Little Bow ASP project are expected to be completed by 2019 with forecasted
total combined phases 1 to 4 project peak production rates of 2,300 barrels of
oil per day expected to occur in 2020. For further information regarding the
Little Bow ASP project, please refer to our updated corporate presentation,
which is available at www.zargon.ca.
Other Field Activities
In addition to the $7.3 million of ASP capital expenditures, Zargon executed a
$6.7 million capital program in the 2013 second quarter on conventional oil
exploitation assets. This conventional capital program did not entail the
drilling of any wells and was focused on the final tie-ins for the 5.1 net wells
drilled in the first quarter and on long term infrastructure projects.
For the remainder of the year, Zargon is planning on drilling an additional 10
net high-graded oil exploitation wells, roughly equally divided between our
Taber South Sunburst, Bellshill Lake drainage and Little Bow acceleration wells.
In aggregate, Zargon has identified more than 85 horizontal locations in six
conventional (non-ASP) oil exploitation projects, which will provide a
high-graded drilling inventory for many years. Each of these six oil
exploitation projects are (or will be) pressure supported by water injections or
natural reservoir aquifers and consequently provide long-life low-decline oil
volumes that will support future dividends. For further information regarding
Zargon's conventional oil exploitation projects, please refer to our updated
corporate presentation, which is available at www.zargon.ca.
Property Dispositions Update
During the 2013 second quarter, property dispositions of $11.6 million were
concluded, which related to the sale of 130 barrels of oil per day from the
Workman and Elswick, Saskatchewan properties in the Williston Ba sin core area.
With these second quarter dispositions concluded, Zargon has sold $15.1 million
of the $20 million of property dispositions that were budgeted for 2013.
For the remainder of the year, Zargon will continue to actively pursue property
dispositions that reduce our property footprint by selling (or trading) our very
large non-strategic property inventory. Over time, we anticipate that these
dispositions will enable Zargon to realize a lower cost structure through a
disciplined focus on our growing tertiary ASP oil recovery business and the
stable production volumes coming from the measured exploitation of our core,
conventional long-life low-decline oil properties.
2013 and 2014 Outlook
Zargon's 2013 non-ASP field capital budget has been set at $40 million (before
dispositions) of which approximately $19 million remains to be spent in the
remaining two quarters. Additionally, our 2013 capital budget included $20
million of property dispositions, of which $15.1 million have been completed by
the end of the second quarter.
ASP capital expenditures in the second half of 2013 to complete phase 1 of the
project are budgeted at $30 million, and include $1 million for the initial
charge of ASP chemicals. For 2014, ASP capital expenditures will be limited to
$10 million of chemical costs. Combined with our initial estimate of the 2014
conventional program of $35 million, the total 2014 capital program is forecast
to be $45 million. Based on this 2014 capital program, we expect oil production
to steadily grow from first quarter levels throughout 2014 as stable
conventional oil production volumes are augmented by growing Little Bow ASP oil
production volumes.
Also, Zargon has entered into a significant oil hedging program to provide a
measure of stability and predictability to cash flows during the ASP
construction and early production phase. For the remainder of 2013, Zargon has
hedged 3,000 barrels per day at $97.06 US/bbl WTI, while for 2014 an average of
2,600 barrels per day is hedged at $91.90 US/bbl WTI and for the first quarter
of 2015 an average of 400 barrels per day is hedged at $91.73 US/bbl WTI.
Production Guidance
In the May 14, 2013 first quarter results press release, Zargon provided updated
second quarter 2013 oil production rate guidance of 4,800 barrels of oil and
liquids per day. Actual second quarter volumes were 4,930 barrels of oil and
liquids per day or about three percent above guidance. The May press release
also set Zargon's second quarter 2013 natural gas production guidance of 15.0
million cubic feet per day. Second quarter actual volumes were 14.8 million
cubic feet per day or about one percent below guidance.
For the remainder of the year, production volumes will continue to depend on the
magnitude and timing of our property disposition programs along with related
timing of our conventional property drilling programs. For the 2013 third
quarter, oil and liquids production guidance is set at 4,650 barrels of oil per
day and includes the second quarter dispositions of 130 barrels of oil and
liquids per day. Third quarter natural gas production guidance is set at 14.7
million cubic feet per day.
Full-year 2013 average oil and liquids production is now expected to range
between 4,750 to 4,850 barrels of oil per day, with exit rates ranging from
4,500 to 4,650 barrels of oil per day. Full-year 2013 average natural gas
production is now expected to range from 14.7 to 14.9 million cubic feet per
day, with exit rates ranging from 14.4 to 14.7 million cubic feet per day.
Looking forward, we expect that first quarter 2014 production volumes will
represent both an oil production low and a turning point for Zargon, as in
subsequent quarters, significant production volumes will begin to materialize
from the ASP project which will augment stable production volumes from
conventional oil exploitation properties.
Suspension of Dividend Reinvestment Plan ("DRIP")
Commencing with Zargon's September 2013 dividend payable on October 15, 2013
Zargon's Board of Directors has suspended Zargon's Dividend Reinvestment Plan
until further notice. The DRIP had permitted shareholders to apply their cash
dividends to the purchase of Zargon common shares at 95 percent of the average
market price. Shareholders who had elected to participate in the DRIP will now
receive cash dividends on the payment date. At such time as the Corporation
elects to reinstate the DRIP, shareholders that were enrolled at suspension and
remain enrolled at reinstatement will automatically resume participation in the
DRIP.
Forward-Looking Statements
This press release offers our assessment of Zargon's future plans and operations
as at August 8, 2013, and contains certain forward-looking information and
statements within the meaning of applicable securities laws. The use of any of
the words "anticipate", "continue", "estimate", "expect", "forecast", "may",
"will", "project", "should", "plan", "intend", "believe" and similar expressions
(including the negatives thereof) are intended to identify forward-looking
information or statements. In particular, but without limiting the foregoing,
this news release contains forward-looking information and statements pertaining
to the following: guidance as to our 2013 and 2014 capital budgets, including
the allocation thereof and the sources of funding and various plans, forecasts
and estimates as to drilling cost reduction initiatives, and other operational
forecasts and plans and results therefrom under the heading "Little Bow Alkaline
Surfactant Polymer ("ASP") Project", "Other Field Activities", "Property
Dispositions Update" and "2013 and 2014 Outlook "; our plans with respect to our
Little Bow ASP project and the results therefrom referred to under the heading
"Little Bow Alkaline Surfactant Polymer ("ASP") Project"; our plans for our
hedges under the heading "2013 and 2014 Outlook"; our plans for our DRIP program
under the heading "Suspension of Dividend Reinvestment Plan ("DRIP")"; and all
matters, including guidance as to our estimated 2013 and 2014 production and
production mix, and anticipated decline rates, under the heading "Production
Guidance".
The forward-looking information and statements included in this news release are
not guarantees of future performance and should not be unduly relied upon. Such
information and statements involve known and unknown risks, uncertainties and
other factors that may cause actual results or events to differ materially from
those anticipated in such forward-looking information or statements including,
without limitation: those relating to results of operations and financial
condition; general economic conditions; industry conditions; changes in
regulatory and taxation regimes; volatility of commodity prices; escalation of
operating and capital costs; currency fluctuations; the availability of
services; imprecision of reserve estimates; geological, technical, drilling and
processing problems; environmental risks; weather; the lack of availability of
qualified personnel or management; stock market volatility; the ability to
access sufficient capital from internal and external sources; and competition
from other industry participants for, among other things, capital, services,
acquisitions of reserves, undeveloped lands and skilled personnel. Risks are
described in more detail in our Annual Information Form, which is available on
www.zargon.ca and on www.sedar.com. Forward-looking statements are provided to
allow investors to have a greater understanding of our business.
You are cautioned that the assumptions used in the preparation of such
information and statements, including, among other things: future oil and
natural gas prices; future capital expenditure levels; future production levels;
future exchange rates; the cost of developing and expanding our assets; our
ability to obtain equipment in a timely manner to carry out development
activities; our ability to market our oil and natural gas successfully to
current and new customers; the impact of increasing competition; the
availability of adequate and acceptable debt and equity financing and funds from
operations to fund our planned expenditures; and our ability to add production
and reserves through our development and acquisition activities, 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. Our
actual results, performance, or achievement could differ materially from those
expressed in, or implied by, these forward-looking statements. We can give no
assurance that any of the events anticipated will transpire or occur, or if any
of them do, what benefits we will derive from them. The forward-looking
information and statements contained in this document is expressly qualified by
this cautionary statement. Our policy for updating forward-looking statements is
that Zargon disclaims, except as required by law, any intention or obligation to
update or revise any forward-looking statements, whether as a result of new
information, future events or otherwise.
Additional GAAP and Non-GAAP Financial Measures
Zargon uses the following terms for measurement within this press release that
do not have a standardized prescribed meaning under 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 flow from operating activities" and "operating netback per boe"
in this press release are not recognized measures under GAAP. Management of
Zargon believes that in addition to net earnings and cash flows from operating
activities as defined by GAAP, 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 flows from operating activities determined in accordance with
GAAP as an indication of Zargon's performance.
Zargon considers funds flow from operating activities to be an important measure
of Zargon's ability to generate the funds necessary to finance capital
expenditures, pay dividends and repay debt. All references to funds flow from
operating activities throughout this press release are based on cash provided by
operating activities before the change in non-cash working capital since Zargon
believes the timing of collection, payment or incurrence of these items involves
a high degree of discretion and, as such, may not be useful for evaluating
Zargon's operating performance. Zargon's method of calculating funds flow from
operating activities may differ from that of other companies and, accordingly,
may not be comparable to measures used by other companies. Funds flow from
operating activities per basic share is calculated using the same weighted
average basic shares outstanding as is used in calculating earnings per basic
share. See Zargon's Management's Discussion and Analysis ("MD&A") as filed on
www.zargon.ca and on www.sedar.com for the periods ended June 30, 2013 and 2012
for a discussion of cash flows from operating activities and funds flow from
operating activities.
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 ("boe") using a conversion rate of six thousand cubic
feet of natural gas to one barrel of oil. In certain circumstances, natural gas
liquid volumes have been converted to a thousand cubic feet equivalent ("mcfe")
on the basis of one barrel of natural gas liquids to six thousand cubic feet of
gas. Boes and mcfes may be misleading, particularly if used in isolation. A
conversion ratio of one barrel to six thousand cubic feet of natural gas is
based on an energy equivalency conversion method primarily applicable at the
burner tip and does not represent a value equivalency at the wellhead. 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,
utilizing a conversion ratio on a 6:1 basis may be misleading as an indication
of value.
Filings
Zargon has filed with Canadian securities regulatory authorities its unaudited
financial statements for the three and six months ended June 30, 2013 and the
accompanying MD&A. These filings are available on www.zargon.ca and under
Zargon's SEDAR profile on www.sedar.com.
About Zargon
Based in Calgary, Alberta, Zargon's securities trade on the Toronto Stock
Exchange and there are currently approximately 30.043 million common shares
outstanding.
Zargon Oil & Gas Ltd. is a Calgary based oil and natural gas company working in
the Western Canadian and Williston sedimentary basins that has delivered a long
history of returns and dividends (distributions). Zargon's business is focused
on oil exploitation projects that profitably increase oil production and
recovery factors from existing oil reservoirs.
In order to learn more about Zargon, we encourage you to visit Zargon's website
at www.zargon.ca where you will find a current shareholder presentation,
financial reports and historical news releases.
FOR FURTHER INFORMATION PLEASE CONTACT:
C.H. Hansen
President and Chief Executive Officer
J.B. Dranchuk
Vice President, Finance and Chief Financial Officer
Zargon Oil & Gas Ltd.
403-264-9992
zargon@zargon.ca
www.zargon.ca
Transatlantic Mining Corporation (TSXV:ASP)
Gráfico Histórico do Ativo
De Mai 2024 até Jun 2024
Transatlantic Mining Corporation (TSXV:ASP)
Gráfico Histórico do Ativo
De Jun 2023 até Jun 2024
