CALGARY, Nov. 21, 2018 /CNW/ - Ikkuma Resources
Corp. ("Ikkuma" or the "Corporation") (TSXV: IKM) is pleased
to report its financial and operating results for the three and
nine months ended September 30, 2018.
Financial and operational information is set out below and
should be read in conjunction with Ikkuma's September 30, 2018 unaudited interim financial
statements and the related management's discussion and analysis
("MD&A"). Ikkuma's condensed unaudited interim financial
statements and MD&A are available for review at
www.sedar.com and on the Corporation's website at
www.ikkumarescorp.com.
HIGHLIGHTS
- On August 24, 2018, Ikkuma
announced the proposed business combination with Pieridae Energy
Limited including the formation of a new private corporation.
- A special meeting of shareholders with respect to the proposed
business combination with Pieridae Energy Limited is scheduled to
be held on December 17, 2018.
- Achieved average production for the nine months ended
September 30, 2018 of 17,968 boe per
day, an increase of 197% compared to 6,043 boe per day for the same
period in 2017.
- Increased revenue for the nine months ended September 30, 2018 by 139% to $59.2 million compared to $24.8 million for the nine months ended
September 30, 2017.
- In line with Ikkuma's ongoing field optimization initiatives,
net operating expenses per boe were reduced by 9% to $9.82/boe for the three months ended September 30, 2018 compared to $10.79/boe for the three months ended
June 30, 2018.
- Decreased general and administrative expense per boe by 60% to
$0.83/boe for the nine months ended
September 30, 2018 as compared to
$2.09/boe for the nine months ended
September 30, 2017.
- On October 11, 2018, the
Corporation announced that it closed a conveyance and sale
agreement for the sale of a non-core dormant midstream facility for
a total consideration of $2.0
million.
- On November 14, 2018, the
Corporation announced that it obtained a $20.0 million senior secured term loan with
Alberta Investment Management Corporation and terminated its
amended and restated syndicated credit agreement with its banking
syndicate.
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|
|
(Expressed in
thousands of Canadian dollars
except per boe and share amounts)
|
Three Months
Ended
September 30,
|
Nine Months
Ended
September 30,
|
2018
|
2017
|
2018
|
2017
|
OPERATIONS
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|
|
|
|
|
|
|
|
Average daily
production
|
|
|
|
|
|
|
|
|
Natural gas
(mcf/d)
|
|
101,338
|
|
33,208
|
|
104,822
|
|
35,220
|
Light oil
(bbl/d)
|
|
160
|
|
52
|
|
199
|
|
53
|
NGLs
(bbl/d)
|
|
314
|
|
120
|
|
299
|
|
121
|
Total equivalent
(boe/d)
|
|
17,364
|
|
5,707
|
|
17,968
|
|
6,043
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Average
prices
|
|
|
|
|
|
|
|
|
Natural gas
($/mcf)
|
$
|
1.25
|
$
|
1.47
|
$
|
1.46
|
$
|
2.36
|
Light oil
($/bbl)
|
|
84.24
|
|
53.26
|
|
76.15
|
|
57.21
|
NGLs
($/bbl)
|
|
59.03
|
|
30.05
|
|
56.45
|
|
33.40
|
Operating
netback
|
|
|
|
|
|
|
|
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Revenue
($/boe)
|
$
|
11.34
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$
|
9.75
|
$
|
12.08
|
$
|
15.02
|
Realized gain on risk
management contracts ($/boe)
|
|
0.93
|
|
4.43
|
|
0.96
|
|
1.58
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Royalties
($/boe)
|
|
(0.36)
|
|
(0.38)
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|
(0.61)
|
|
(0.33)
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Net operating
expenses ($/boe)
|
|
(9.82)
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|
(9.42)
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|
(10.68)
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|
(8.60)
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Transportation
expenses ($/boe)
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|
(1.08)
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|
(1.67)
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|
(1.05)
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|
(1.91)
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Operating netback
(1) ($/boe)
|
$
|
1.01
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$
|
2.71
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$
|
0.70
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$
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5.76
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FINANCIAL
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|
|
|
|
|
|
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Petroleum and natural
gas revenues (2)
|
$
|
18,116
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$
|
5,120
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$
|
59,244
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$
|
24,777
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Cash provided by
operating activities
|
$
|
4,016
|
$
|
969
|
$
|
6,517
|
$
|
6,443
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Per share – basic and
diluted
|
$
|
0.04
|
$
|
0.01
|
$
|
0.06
|
$
|
0.07
|
Funds flow from (used
in) operations (1)
|
$
|
(1,647)
|
$
|
(1,212)
|
$
|
(4,730)
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$
|
3,562
|
Per share – basic and
diluted
|
$
|
(0.02)
|
$
|
(0.01)
|
$
|
(0.04)
|
$
|
0.04
|
Adjusted funds flow
(1)
|
$
|
(672)
|
$
|
(576)
|
$
|
(3,600)
|
$
|
4,316
|
Per share – basic and
diluted
|
$
|
(0.01)
|
$
|
(0.01)
|
$
|
(0.03)
|
$
|
0.05
|
Net loss and
comprehensive loss
|
$
|
(6,719)
|
$
|
(3,394)
|
$
|
(20,998)
|
$
|
(1,828)
|
Per share – basic and
diluted
|
$
|
(0.06)
|
$
|
(0.03)
|
$
|
(0.19)
|
$
|
(0.02)
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Capital
expenditures
|
$
|
852
|
$
|
10,050
|
$
|
3,217
|
$
|
21,207
|
Property
acquisitions
|
$
|
-
|
$
|
-
|
$
|
2,711
|
$
|
-
|
Net debt
(1,3)
|
$
|
68,613
|
$
|
40,912
|
$
|
68,613
|
$
|
40,912
|
Shares outstanding
('000s)
|
|
109,334,987
|
|
109,334,987
|
|
109,334,987
|
|
109,334,987
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Weighted average
shares outstanding
|
|
|
|
|
|
|
|
|
basic and diluted
('000s)
|
|
109,334,987
|
|
97,959,230
|
|
109,334,987
|
|
95,495,864
|
|
|
|
|
|
|
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(1)
Operating netback, funds flow from (used in) operations,
adjusted funds flow, net operating expenses and net debt are
non-IFRS measures. See "Non- IFRS Measures".
|
(2)
Before royalties.
|
(3)
Net debt includes Bank debt (as hereinafter defined), Term debt
(as hereinafter defined) and working capital deficiency (surplus),
excluding fair value of risk management contracts.
|
BUSINESS COMBINATION WITH PIERIDAE ENERGY LIMITED
On August 24, 2018, the
Corporation announced the proposed business combination with
Pieridae Energy Limited ("Pieridae") whereby Pieridae will
acquire all of the issued and outstanding shares of Ikkuma in
exchange for 0.1926 of a common share of Pieridae for each Ikkuma
common share. Additionally, Ikkuma shareholders will receive
0.1 of a share of a newly formed private corporation, Briko Energy
Corp. ("Briko") for each Ikkuma common share and 0.1 of a
common share purchase warrant of Briko for each Ikkuma common
share. Each whole common share purchase warrant will entitle
the holder to acquire one common share of Briko at an exercise
price of $1.10 per share at any time
on or before 180 days following the closing of the proposed
business combination with Pieridae. On October 26, 2018, the Corporation received the
necessary approval from Alberta Energy Regulator with respect to
the transfer of certain Cardium oil assets from Ikkuma to Briko
that were not intended to be acquired by Pieridae in the proposed
business combination.
SPECIAL MEETING OF IKKUMA SHAREHOLDERS
A Management Information Circular and Proxy Statement with
respect to the proposed business combination with Pieridae has been
mailed to Ikkuma shareholders with a special meeting of
shareholders scheduled to be held on December 17, 2018.
FINANCIAL AND OPERATING RESULTS
Average production for the nine months ended September 30, 2018 was 17,968 boe per day, an
increase of 197% compared to 6,043 boe per day for the same period
in 2017. The increase was primarily due to production volumes
related to the acquisition of assets located in the Alberta
Foothills and British Columbia Deep Basin (the "Foothills
Acquisition"), which closed on December 21,
2017. Due to the current low natural gas price environment,
Ikkuma shut-in a portion of its gas production during the third
quarter of 2018. Total production reported for the third
quarter of 2018 of 17,364 boe/d was impacted by shut in gas
production decisions that reduced production by approximately 2,000
boe/d.
Petroleum and natural gas revenues increased 139% to
$59.2 million for the nine months
ended September 30, 2018 compared to
$24.8 million for the nine months
ended September 30, 2017. The
increase was primarily due to increased production volumes
associated with the Foothills Acquisition.
Field optimization initiatives have been successful in reducing
net operating costs per boe. Net operating expenses per boe
decreased 9% to $9.82/boe for the
three months ended September 30, 2018
compared to $10.79/boe for the three
months ended June 30, 2018.
Operating netbacks for the nine months ended September 30, 2018 were $0.70 per boe compared to $5.76 per boe for same period in 2017. This
decrease in operating netbacks was primarily due to a 38% reduction
in realized natural gas prices.
With increased production, general and administrative expense
per boe decreased by 60% to $0.83 per
boe for the nine months ended September 30,
2018 compared to $2.09 per boe
for the nine months ended September 30,
2017.
Adjusted funds flow for the nine months ended September 30, 2018 of negative $3.6 million included realized gains of
$4.7 million associated with the
Corporation's risk management program. In comparison,
adjusted funds flow for the nine months ended September 30, 2017 was $4.3 million and included $2.6 million of realized gains on risk management
contracts.
Capital expenditures for the nine months ended September 30, 2018 were $3.2 million compared to $21.2 million for the nine months ended
September 30, 2017.
Net debt, which includes the Corporation's syndicated credit
facility (the "Bank debt"), second lien senior secured term debt
facility ("Term debt") and working capital deficiency (excluding
fair value of risk management contracts) was $68.6 million as at September 30, 2018 compared to $58.0 million as at December 31, 2017. Bank debt was $4.5 million as at September 30, 2018 compared to $10.4 million as at December 31, 2017.
PROPERTY DISPOSITION
On October 11, 2018, the
Corporation announced that it closed a conveyance and sale
agreement for the sale of a non-core dormant midstream facility in
the Alberta foothills for a total
consideration of $2.0 million.
Proceeds from this property disposition were used to reduce
Bank debt.
FINANCING
On November 14, 2018, Ikkuma
completed a financing for a $20.0
million senior secured term loan with Alberta Investment
Management Corporation ("AIMCo"). The term loan bears annual
interest at 9.5% and matures on the earliest of the closing of the
Corporation's proposed business combination with Pieridae and
March 31, 2022. Proceeds from the
term loan were used to repay Bank debt and allowed the Corporation
to proceed with its flow-through drilling program in the amount of
$12.1 million to be spent by
December 31, 2018.
As a result of completing the financing with AIMCo and repaying
all outstanding Bank debt, the Corporation has terminated its
amended and restated syndicated credit agreement with its banking
syndicate.
ABOUT IKKUMA
Ikkuma Resources Corp. is a diversified growth-oriented public
oil and gas company listed on the TSX Venture Exchange under the
symbol "IKM", with holdings in both conventional and unconventional
projects in Western Canada. The Corporation is focussed in
the Foothills Region of Western
Canada with a team that has extensive experience in the area
with the unique skills at successfully exploiting a complex and
potentially prolific play type. Corporate information can be
found at: www.ikkumarescorp.com.
Forward-Looking Statements and Information and Cautionary
Statements
This press release contains forward‑looking statements and
forward‑looking information within the meaning of applicable
securities laws including, without limitation, those listed under
"Risk Factors" and "Forward-looking Statements and Information" in
Ikkuma's Annual Information Form and in its other filings available
on SEDAR at www.sedar.com. The use of any of the words
"expect", "anticipate", "continue", "estimate", "objective",
"ongoing", "may", "will", "project", "should", "believe", "plans",
"intends" and similar expressions are intended to identify
forward‑looking statements or information. Forward-looking
statements and information in this press release includes, but is
not limited to, the expected closing of the business combination
with Pieridae, the holding of a special meeting of Ikkuma
shareholders on December 17, 2018,
the completion of the $12.1 million
flow through drilling program by December
31, 2018 and the expected maintenance of an interest in
certain Cardium oil assets resulting from the receipt of shares in
Briko. Although Ikkuma believes that the expectations and
assumptions on which the forward‑looking statements and information
are based are reasonable, undue reliance should not be placed on
the forward‑looking statements and information because Ikkuma
cannot give any assurance that they will prove to be correct.
Since forward‑looking statements and information address future
events and conditions, by their very nature they involve inherent
risks and uncertainties. Actual results could differ
materially from those currently anticipated due to a number of
factors and risks. These include but are not limited to the
risks associated with the oil and gas industry in general (e.g.,
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 production, costs and expenses; failure to obtain
necessary regulatory approvals for planned operations; health,
safety and environmental risks; uncertainties resulting from
potential delays or changes in plans with respect to exploration or
development projects or capital expenditures; volatility of
commodity prices, currency exchange rate fluctuations; imprecision
of reserve estimates; and competition from other explorers) as well
as general economic conditions, stock market volatility, and the
ability to access sufficient capital. We caution that the
foregoing list of risks and uncertainties is not
exhaustive.
In addition, the reader is cautioned that historical results
are not necessarily indicative of future performance. The
forward-looking statements and information contained in this press
release are made as of the date hereof and Ikkuma undertakes no
obligation to update publicly or revise any forward‑looking
statement or information, whether as a result of new information,
future events or otherwise, unless so required by applicable
securities laws.
Certain information set out herein may be considered as
"financial outlook" within the meaning of applicable securities
laws. The purpose of this financial outlook is to provide
readers with disclosure regarding Ikkuma's reasonable expectations
as to the anticipated results of its proposed business activities
for the periods indicated. Readers are cautioned that the
financial outlook may not be appropriate for other
purposes.
Non-IFRS Measures
This press release provides certain financial measures that
do not have a standardized meaning prescribed by IFRS. These
non-IFRS financial measures may not be comparable to similar
measures presented by other issuers. Funds flow from (used
in) operations, operating netback, net operating expenses and net
debt are not recognized measures under IFRS. Management
believes that in addition to net income (loss), funds flow from
(used in) operations, operating netback and net debt are useful
supplemental measures that demonstrate the Corporation's ability to
generate the cash necessary to repay debt or fund future capital
investment. Investors are cautioned, however, that these measures
should not be construed as an alternative to net income (loss),
determined in accordance with IFRS, as an indication of Ikkuma's
performance. Funds flow from operations is calculated by
adjusting net income (loss) for depletion and depreciation,
exploration and evaluation expense, impairment, gain (loss) on sale
of petroleum, natural gas and equipment, share-based payments,
unrealized gain (loss) on financial instruments and accretion.
Operating netback equals the total of petroleum and natural
gas sales, realized gains or losses on commodity contracts, less
royalties, transportation and operating expenses. Net operating
expense is a non-IFRS measure calculated as operating expenses less
other income. Other income includes gas processing income
earned from fees charged to third parties at facilities where
Ikkuma has an ownership interest. Net debt is the total of cash and
cash equivalents plus accounts receivable, plus prepaids and
deposits, less accounts payable and accrued liabilities, Term debt
and Bank debt.
Oil and Gas Advisory
In this press release, the abbreviation boe means a barrel of
oil equivalent derived by converting gas to oil in the ratio of 6
Mcf of gas to 1 bbl of oil (6 Mcf:1 bbl). Boe may be
misleading, particularly if used in isolation. A boe
conversion ratio of 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. 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 Mcf:1 bbl, utilizing a conversion ratio on a 6 Mcf
of gas to 1 bbl of oil basis may be misleading as an indication of
value.
NEITHER TSX VENTURE EXCHANGE NOR ITS REGULATION SERVICES
PROVIDER (AS THAT TERM IS DEFINED IN THE POLICIES OF THE TSX
VENTURE EXCHANGE) ACCEPTS RESPONSIBILITY FOR THE ADEQUACY OR
ACCURACY OF THIS RELEASE.
SOURCE Ikkuma Resources Corp.