Corridor Resources Inc. (“Corridor”) (TSX:CDH) announced today its
first quarter financial results.
The following table provides a summary of
Corridor’s financial and operating results for the three months
ended March 31, 2018, with comparisons to the three months ended
March 31, 2017. Corridor's unaudited financial statements and
management's discussion and analysis for the first quarter have
been filed on SEDAR at www.sedar.com and are available on
Corridor's website at www.corridor.ca.
All amounts referred to in this press release
are in Canadian dollars unless otherwise stated.
Selected
Financial Information |
|
|
Three months ended March 31 |
thousands of dollars except per share amounts |
2018 |
2017 |
Sales |
$ 11,835 |
$4,467 |
Net
income |
$ 5,569 |
$1,825 |
Net income
per share - basic and diluted |
$ 0.063 |
$0.021 |
Cash flow
from operations (1) |
$ 9,645 |
$3,683 |
Working
capital |
$ 56,992 |
$33,226 |
Total assets |
$ 127,921 |
$105,316 |
Q1 2018 Netback Analysis |
|
|
Three months ended March 31 |
thousands of dollars except $/boe (2) |
2018 |
2017 |
|
|
|
Natural gas
production per day (mmscfpd) |
9.9 |
7.2 |
Barrels of oil equivalent per day (boepd) |
1,653 |
1,196 |
Average
natural gas price ($/mscf) |
$ 12.90 |
$6.45 |
|
|
|
Natural gas
sales |
$ 11,506 |
$4,166 |
Realized
financial derivatives gain (loss) |
(1,078) |
1,094 |
Other
revenues |
329 |
301 |
Royalties |
(384) |
(92) |
Transportation expense |
(78) |
(428) |
Production expense |
(702) |
(789) |
Field operating netback |
$ 9,593 |
$4,252 |
|
|
|
Natural gas
revenues ($/boe) |
$ 77.36 |
$38.69 |
Realized
financial derivatives gain ($/boe) |
(7.25) |
10.16 |
Other
revenues ($/boe) |
2.22 |
2.80 |
Royalties
($/boe) |
(2.59) |
(0.86) |
Transportation expense ($/boe) |
(0.52) |
(3.97) |
Production expense ($/boe) |
(4.72) |
(7.33) |
Field operating netback ($/boe) |
$ 64.50 |
$39.49 |
General and administrative expenses ($/boe) |
(4.09) |
(6.05) |
Interest, foreign exchange gains (losses) and other
($/boe) |
4.44 |
0.76 |
Cash flow from operations ($/boe) (1) |
$ 64.85 |
$34.20 |
(1) Cash flow from operations is a non-IFRS
measure. Cash flow from operations represents net earnings
adjusted for non-cash items including depletion, depreciation and
amortization, deferred income taxes, share-based compensation and
other non-cash expenses. See "Non-IFRS Financial Measures" in
Corridor’s MD&A for the three months ended March 31, 2018. |
(2) For the purpose of calculating unit revenues and
costs, natural gas has been converted to barrels of oil equivalent
(“boe”) on the basis of six thousand cubic feet (“mscf”) of natural
gas being equal to one barrel of oil. Boe may be misleading,
particularly if used in isolation. A boe conversion ratio of six
mscf to one barrel is based on an energy equivalency conversion
method primarily applicable at the burner tip and does not
represent a value equivalency at the wellhead. |
2018 First Quarter Highlights
- Corridor’s cash flow from operations increased to $9,645
thousand in Q1 2018 from $3,683 thousand in Q1 2017 due primarily
to higher natural gas sales and lower transportation expenses.
- Achieved a cash flow from operations of $64.85/BOE, a 90%
increase over Q1 2017.
- Natural gas sales for Q1 2018 increased to $11,506 thousand
from $4,166 thousand for Q1 2017 due to the increase in the average
natural gas sales price to $12.90/mscf in Q1 2018 from $6.45/mscf
in Q1 2017 and to the increase in the average daily natural gas
production to 9.9 mmscfpd in Q1 2018 from 7.2 mmscfpd in Q1 2017.
The increase in Corridor's average daily natural gas production is
primarily due to the higher flush production achieved in Q1 2018
following the comprehensive shut-in of most of Corridor’s natural
gas wells at the McCully Field for an eight month period between
April and December 2017 as compared to the flush production
achieved in Q1 2017 after a more limited partial shut-in of natural
gas production for a three-month period between September and
November 2016.
- Transportation expense significantly decreased to $78 thousand
in Q1 2018 from $428 thousand in Q1 2017 due in part to forward
sale agreements in place for the delivery of natural gas production
to the local Maritimes market as opposed to the New England market.
The natural gas prices for volumes sold under these forward sale
agreements are based on natural gas prices at AGT but are subject
to lower transportation expenses. Corridor had forward sale
agreements for the sale of
4,755 mmbtupd of natural gas production to
the local Maritimes market for the period from
December 1, 2016 to March 31, 2017, and for substantially all of
its natural gas production for the period from December 1, 2017 to
March 31, 2018, resulting in lower transportation expense in Q1
2018.
- At March 31, 2018, Corridor had cash and cash equivalents of
$54,950 thousand, working capital of $56,992 thousand, and no
outstanding debt.
Update on Guidance
The following table provides a comparison of
Corridor’s results for the period from April 1, 2017 to March 31,
2018 as compared to the guidance disclosed in Corridor’s press
release dated February 13, 2018.
|
Actual results |
February 13, 2018 guidance |
AGT average natural gas price |
$ US 4.56/mmbtu |
$ US 4.93/mmbtu |
USD/CAD average
exchange rate |
$ 1.27 USD/CAD |
$ 1.25
USD/CAD |
Average daily natural
gas production |
3.1 mmscfpd |
3.0
mmscfpd |
Field operating
netback |
$ 10.8 million |
$ 10.8
million |
Cash flow from
operations(1) |
$ 8.4 million |
$ 7.8
million |
Field operating netback
per mscf |
$ 9.37/mscf |
$
9.73/mscf |
Cash flow from
operations(1) per mscf |
$ 7.31/mscf |
$
7.02/mscf |
Working
capital as at March 31, 2018 |
$ 57.0 million |
$ 57.1 million |
(1) “Cash
flow from operations” is a non-IFRS financial measure. Cash flow
from operations represents net earnings adjusted for non-cash items
including depletion, depreciation and amortization, deferred income
taxes, share-based compensation and other non-cash expenses.
See "Non-IFRS Financial Measures" in Corridor’s MD&A for the
three months ended March 31, 2018. |
Corridor achieved its forecast field operating
netback of $10.8 million for the period from April 1, 2017 to March
31, 2018 despite weaker than forecast natural gas prices at AGT
during February and March 2018. This is due to Corridor’s financial
hedges and forward sale agreements in place, daily production
optimization efforts and a strengthening in the US dollar during
February and March 2018. Corridor’s cash flow from operations
for the period from April 1, 2017 to March 31, 2018 increased to
$8.4 million from the previously disclosed guidance of $7.8 million
due to the fluctuation in the USD/CAD exchange rate late in the
quarter which resulted in higher than expected foreign exchange
gains in Q1 2018.
Operations Review
New Brunswick
Beginning in 2015, Corridor has employed a
production optimization strategy whereby it has restricted its
production (to varying degrees) in the McCully Field in New
Brunswick during the months from spring to fall. These
extended shut-ins allow the producing horizons in Corridor’s wells
to build up reservoir pressure, which has resulted in increased
“flush” production rates once the wells returned to unrestricted
production. Corridor typically plans the timing of the start-up of
the McCully field production to coincide with peak winter pricing
when natural gas prices have historically traded at significant
premiums at Algonquin city-gates (AGT). Corridor’s production
optimization objective is to achieve a similar field operating
netback as if it had produced continuously throughout the year,
while deferring production volumes for the future.
To assess the effectiveness of this optimization
strategy, Corridor conducted a lookback analysis from April 1, 2017
to March 31, 2018 comparing actual results for this period to the
results management would have expected had Corridor continued to
produce continuously with no shut-in or corresponding flush
production. Based on this review, management has estimated
that Corridor’s field operating netback was $2.3 million higher
than the results management would have expected with continuous
production and 0.9 bscf of production was preserved for future
sales. Since we initiated this production optimization strategy,
management estimates that Corridor has generated $2.1 million more
field operating netback over the last three years than it would
have generated had Corridor produced continuously during this
period, while preserving a total of approximately 1.8 bscf for
future production. As a result of the success with this
strategy, Corridor has once again initiated a shut-in of natural
gas production at the McCully Field on May 1, 2018.
Old Harry
Corridor’s review of the recently completed
controlled source electromagnetic survey conducted in Q4 2017 and
the reprocessing of 760 kilometers of 2D seismic over the Old Harry
structure is ongoing and expected to be completed in June
2018. Once management has completed its fully integrated
geotechnical model of the Old Harry structure, Corridor intends to
update its shareholders of its go forward plans for this
prospect.
Annual Shareholders’ Meeting
Corridor’s annual meeting of shareholders will
be held at the offices of Bennett Jones LLP, 4500 Bankers Hall
East, 855 – 2nd Street S.W., Calgary Alberta on Tuesday, May 15,
2018 at 3:00 p.m. (MDT), after which Steve Moran, President and
CEO, will make a presentation. This presentation will be made
available on Corridor's website at www.corridor.ca on or about May
15, 2018.
President’s Message
“We are very pleased with our results from the
first quarter of 2018” said Steve Moran, President and CEO. “Strong
natural gas prices at AGT, sales to the Maritimes market and
Corridor’s production optimization and hedging strategy have all
contributed to achieve excellent cash flow from operations and a
top decile netback of $64.85 per boe. Corridor is in a good
financial position with a strong balance sheet and $57 million of
working capital at March 31, 2018. We continue to patiently
evaluate new opportunities to deploy our working capital. We
will be selective in any opportunities we may decide to
pursue.”
Corridor is a Canadian junior resource company
engaged in the exploration for and development and production of
petroleum and natural gas onshore in New Brunswick and offshore in
the Gulf of St. Lawrence. Corridor currently has natural gas
production and reserves in the McCully Field near Sussex, New
Brunswick. In addition, Corridor has a shale gas prospect in New
Brunswick and an offshore conventional hydrocarbon prospect in the
Gulf of St. Lawrence.
For further information: Contact: Steve
Moran, President and CEOCorridor Resources Inc.#301, 5475 Spring
Garden Road, Halifax, Nova Scotia B3J
3T2
Ph: (902) 429-4511 F: (902) 429-0209 Web: www.corridor.ca
Forward Looking Statements
This press release contains certain
forward-looking statements and forward-looking information
(collectively referred to herein as "forward-looking statements")
within the meaning of Canadian securities laws. All statements
other than statements of historical fact are forward-looking
statements. Forward-looking information typically contains
statements with words such as "anticipate", "believe", "plan",
"continuous", "estimate", "expect", "may", "will", "project",
"should", or similar words suggesting future outcomes. In
particular, this press release contains forward-looking statements
pertaining to: the characteristics of Corridor’s properties;
business plans and strategies (including plans to shut-in
production to take advantage of expected price differentials and
Corridor’s optimization strategy, including entering into hedging);
exploration and development plans, including timing of such plans;
processing of the CSEM data and the 2D seismic data base over the
Old Harry structure; the benefits and timing of such reprocessing;
expectations regarding Corridor’s positioning for 2018; plans to
provide future guidance and timing of such plans; and expectations
regarding natural gas prices.
Statements relating to "reserves" are
forward-looking statements, as they involve the implied assessment,
based on certain estimates and assumptions that the reserves
described exist in the quantities predicted or estimated and can
profitably be produced in the future.
Undue reliance should not be placed on
forward-looking statements, which are inherently uncertain, are
based on estimates and assumptions, and are subject to known and
unknown risks and uncertainties (both general and specific) that
contribute to the possibility that the future events or
circumstances contemplated by the forward-looking statements will
not occur. There can be no assurance that the plans,
intentions or expectations upon which forward-looking statements
are based, will in fact be realized. Actual results will
differ, and the difference may be material and adverse to the
Corporation and its shareholders. Forward-looking statements
are based on the Corporation's current beliefs as well as
assumptions made by, and information currently available to, the
Corporation concerning anticipated financial performance, business
prospects, strategies, regulatory developments, future natural gas
and oil commodity prices, exchange rates, future natural gas
production levels, the ability to obtain equipment in a timely
manner to carry out development activities, the ability to market
natural gas successfully to current and new customers, the impact
of increasing competition, the ability to obtain financing on
acceptable terms, the ability to add production and reserves
through development and exploration activities, and the terms of
agreements with third parties such as the Corporation's forward
sales contracts and hedging contracts. Although management
considers these assumptions to be reasonable based on information
currently available to it, they may prove to be incorrect. By
their very nature, forward-looking statements involve inherent
risks and uncertainties (both general and specific) and risks that
forward-looking statements will not be achieved. These
factors include, but are not limited to, risks associated with oil
and gas exploration, development and production, operational risks,
development and operating costs, substantial capital requirements
and financing, volatility of natural gas and oil prices, government
regulation, environmental, hydraulic fracturing, third party risk,
dependence on key personnel, co-existence with mining operations,
availability of drilling equipment and access, variations in
exchange rates, expiration of licenses and leases, reserves and
resources estimates, trading of common shares, seasonality,
disclosure controls and procedures and internal controls over
financial reporting, competition, conflicts of interest, issuance
of debt, title to properties, hedging, information systems,
litigation and aboriginal land and rights claims. Further
information regarding these factors may be found under the heading
"Risk Factors" in the Corporation’s Annual Information Form for the
year ended December 31, 2017. Readers are cautioned that the
foregoing list of factors that may affect future results is not
exhaustive.
The forward-looking statements contained in this
press release are made as of the date hereof and Corridor does not
undertake any obligation to update publicly or to revise any of the
included forward-looking statements, except as required by
applicable law. The forward-looking statements contained herein are
expressly qualified by this cautionary statement.