Condor Energies Inc. (“Condor” or the “Company”) (TSX: CDR), a
Canadian based energy transition company with activities in Turkiye
and Kazakhstan, is pleased to announce the release of its unaudited
interim condensed consolidated financial statements for the three
months ended March 31, 2023 together with the related management’s
discussion and analysis. These documents will be made available
under Condor’s profile on SEDAR at www.sedar.com and on the Condor
website at www.condorenergies.ca. Readers are invited to review the
latest corporate presentation available on the Condor website. All
financial amounts in this news release are presented in Canadian
dollars, unless otherwise stated.
Highlights
- The Company is
awaiting final approval from the Government of Kazakhstan for its
95% working interest in a lithium brine mining license in
Kazakhstan. Procurement and contracting of long-lead equipment for
2023 drilling activities continues.
- Natural gas
production in Turkiye increased 3% in the first quarter of 2023 to
18,536 Mcf or an average of 206 Mcf/d from 18,003 Mcf or an average
of 200 Mcf/d for the first quarter of 2022.
- The Company
continues to actively pursue an agreement to operate multiple
mid-sized existing natural gas fields in Uzbekistan.
- In Kazakhstan,
activities are ongoing to secure a long-term LNG feed gas supply
contract.
Lithium License Acquisition
The Company is awaiting final approval from the
Government of Kazakhstan for its 95% working interest in a lithium
brine mining license in Kazakhstan (the “Lithium License”). A prior
well drilled in the Lithium License for hydrocarbon exploration
encountered and tested lithium brine deposits with lithium
concentrations of up to 130 milligrams per litre as reported by the
Ministry of Geology of the Republic of Kazakhstan. Title transfer
for the License is expected to be completed in the second quarter
of 2023.
The Lithium License provides subsurface
exploration rights for solid minerals until April 3, 2025. Within
the 6800-hectare Lithium License area, a well drilled in 1975 flow
tested multiple horizons and discovered lithium concentrations in
the Devonian-aged and Carboniferous-aged intervals. Based on
wireline logs, the tested Devonian sand interval is 70 meters and
the tested Carboniferous sand interval is 118 meters. The untested
Devonian and Carboniferous sand intervals provide an additional 863
meters of lithium brine potential.
During 2023, the Company plans to drill and test
up to two wells to confirm the lateral extension and lithium
concentrations in the tested and untested intervals, well
deliverability rates, conduct preliminary engineering for the
production facilities, and prepare a National Instrument 43-101
compliant mineral resources or mineral reserves report. Procurement
and contracting of long-lead equipment for these drilling
activities is underway.
The Company intends to produce the lithium by
utilizing closed-looped Direct Lithium Extraction (“DLE”)
technologies. With the lithium already in brine solution and
applying existing DLE production technologies, the Company expects
to have a much smaller environmental footprint than existing
lithium production operations. Furthermore, the Company is
evaluating the construction of a solar power generation project to
support the long-term expansion of the project to achieve net-zero
emissions. Also, given that the Company’s Lithium License is not
associated with legacy oil wells, a less complex and capital
intensive DLE technology is envisioned for separation of lithium
from the brine.
Turkiye Operations
Gas production for the first quarter of 2023
increased 3% to 18,536 Mcf or an average of 206 Mcf/d from 18,003
Mcf or an average of 200 Mcf/d for the first quarter of 2022. The
Poyraz Ridge field has been producing for over five years and water
production is increasing which requires additional well workovers
to help mitigate its impact along with natural pressure declines.
Artificial lift equipment recently installed on select wells has
contributed to the above noted increased gas rates and additional
wells are being evaluated for future artificial lift
applications.
Posted Turkish gas prices for the first quarter
of 2023 averaged $28.60 per Mcf as compared to $16.36 per Mcf in
the first quarter of 2022, in Canadian dollar terms, but have
decreased to $19.04 per Mcf as of May 1, 2023.
The Company is seeking a partner to fund
development plans at the Yakamoz field, which is located 2 km north
of the existing Poyraz Ridge field. The Company was encouraged with
the results from the previously drilled Yak 1-ST, as it encountered
numerous strong gas shows while confirming reservoir-quality
formations and an active hydrocarbon system and, despite being
temporarily suspended, casing pressure has built up at the surface,
indicating a gas presence. Development of the Yakamoz field would
consist of re-entering, casing and fully evaluating the Yak 1-ST
well, drilling the Yak-2 well and additional production wells as
required. If successful, the Yakamoz field would be tied by
pipeline into the Poyraz Ridge production and sales facilities.
General elections are scheduled to take place in
Turkiye on May 14, 2023 comprising Presidential elections to select
the President and parliamentary elections to select Members of
Parliament to the Grand National Assembly. The previous general
election in Turkiye was conducted in 2018.
Uzbekistan Production Contract and LNG
Strategy
The Company continues to actively pursue an
agreement to operate multiple mid-sized existing natural gas fields
in Uzbekistan to optimize production and increase domestic gas
supply by utilizing modern production technologies and techniques.
The agreement is expected to include eight producing gas fields,
associated gathering pipelines, gas treatment infrastructure and
the rights to explore and develop certain exploration areas
surrounding the respective gas fields.
In addition, the Company has presented a
proposal to the Government of Uzbekistan to use a portion of the
increased gas production for LNG feedstock and provide the
resulting LNG to mining operators and other users to displace
diesel fuel usage. The Company’s LNG strategy in Uzbekistan would
create a vertically integrated business with self-sufficient gas
supply and by replacing expensive diesel with cleaner and cheaper
LNG, decrease the mines operating costs, reduce the country’s
dependency on diesel imports, and positively impact the country’s
carbon reduction efforts by reducing overall
carbon emissions.
LNG Initiatives in
Kazakhstan
The Company continues to mature opportunities to
implement proven North American modular LNG technologies and
processes in Central Asia to displace diesel fuel usage in the
industrial, transportation and power generation sectors. Kazakhstan
is experiencing a natural gas shortage as internal demand continues
to increase without sufficient new gas field development, which is
impacting the Company’s ability to secure a long-term LNG feedstock
gas supply contract.
Front-end engineering for a 125,000 gallons per
day modular LNG facility has been completed. Design on a scaled
down trailer-mounted version is also underway to utilize feed gas
supplied from stranded gas assets that aren’t commercially viable
due to pipeline infrastructure costs or from the associated gas
from producing crude oil fields. The potential to profitably
generate LNG at feed gas site locations is one of the many
advantages that the Company’s LNG approach provides.
RESULTS OF OPERATIONS
Production
|
For the three months ended March 31 |
2023 |
2022 |
Change |
Change % |
|
Natural gas (Mcf) |
18,536 |
18,003 |
533 |
3 |
% |
| Natural
gas (Mcf per day) |
206 |
200 |
6 |
3 |
% |
|
|
|
|
|
|
Natural gas production increased 3% to 18,536
Mcf or an average of 206 Mcf per day for the three months ended
March 31, 2023 from 18,003 Mcf or an average of 200 Mcf per day in
the same period in 2022 due mainly to the ongoing workover program
that is offsetting increased water production and natural pressure
declines. The Company also produced 10 barrels of condensate in the
three months ended March 31, 2023 (2022: nil).
Operating netback
For the three months ended March 31
|
Operating netback 1 |
2023 |
2022 |
|
|
Gas |
Condensate |
Total2 |
Gas and Total2 |
|
(000's) |
|
|
|
|
|
|
Sales |
396 |
|
15 |
|
411 |
|
260 |
|
|
Royalties |
(57 |
) |
(2 |
) |
(59 |
) |
(34 |
) |
|
Production costs |
(228 |
) |
(10 |
) |
(238 |
) |
(151 |
) |
|
Transportation and selling |
(7 |
) |
(3 |
) |
(10 |
) |
(26 |
) |
|
Operating netback 1 |
104 |
|
- |
|
104 |
|
49 |
|
|
|
|
|
|
|
|
|
|
(Mcf) |
|
(bbl) |
|
|
(Mcf) |
|
|
Sales volume |
15,556 |
|
118 |
|
|
16,335 |
|
|
|
|
|
|
|
|
|
($ per unit) |
($/Mcf) |
|
($/bbl) |
|
|
($/Mcf) |
|
|
Sales |
25.46 |
|
126.95 |
|
|
15.92 |
|
|
Royalties |
(3.66 |
) |
(16.93 |
) |
|
(2.08 |
) |
|
Production costs |
(14.66 |
) |
(84.63 |
) |
|
(9.24 |
) |
|
Transportation and selling |
(0.45 |
) |
(25.39 |
) |
|
(1.59 |
) |
|
Operating netback 1 |
6.69 |
|
- |
|
|
3.01 |
|
1 Operating
netback is a non-GAAP measure and is a term with no standardized
meaning as prescribed by GAAP and may not be comparable with
similar measures presented by other issuers. See “Non-GAAP
Financial Measures” in this news release. The calculation of
operating netback is aligned with the definition found in the
Canadian Oil and Gas Evaluation Handbook.2 Per unit measures
are not presented for Total amounts and analysis is considered more
meaningful presented separately for natural gas and condensate.
The operating netback on natural gas sales
increased to $0.1 million or an average of $6.69 per Mcf for the
three months ended March 31, 2023 from $0.05 million or an average
of $3.01 per Mcf in the same period in 2022 due mainly to higher
natural gas prices, partially offset by higher production costs
which includes $0.1 million related to the workovers conducted in
the first quarter of 2023.
NON-GAAP FINANCIAL MEASURES
The Company refers to “operating netback” in
this news release, a term with no standardized meaning as
prescribed by GAAP and which may not be comparable with similar
measures presented by other issuers. This additional information
should not be considered in isolation or as a substitute for
measures prepared in accordance with GAAP. Operating netback is
calculated as sales less royalties, production costs and
transportation and selling on a dollar basis and divided by the
sales volume for the period on a per Mcf basis for natural gas and
on a per barrel basis for condensate. The reconciliation of this
non-GAAP measure is presented in the “Operating netback” section of
this news release. This non-GAAP measure is commonly used in the
oil and gas industry to assist in measuring operating performance
against prior periods on a comparable basis and has been presented
to provide an additional measure to analyze the Company’s sales on
a per unit basis and the Company’s ability to generate funds.
FORWARD-LOOKING STATEMENTS
Certain statements in this news release
constitute forward-looking statements under applicable securities
legislation. Such statements are generally identifiable by the
terminology used, such as “anticipate”, “intend”, “expect”, “plan”,
“estimate”, “budget”, “schedule”, “may”, “will”, “could”, “would”,
“continue”, “pursue”, “prepare”, “envision”, “project”, “potential”
or other similar wording. Forward-looking information in this news
release includes, but is not limited to, information concerning:
the timing and ability to execute the Company’s growth and
sustainability strategies; the timing and ability to obtain the
approvals required from the Government of Kazakhstan and complete
the Lithium License title transfer; the potential for the Lithium
License area to contain commercials deposits; future lithium
testing results; the timing and ability to fund, permit and
complete the planned drilling activities including drilling up to
two additional wells and conduct preliminary engineering for the
production facilities; the timing and ability to optimize the
planned method for direct lithium extraction; the timing and
ability of the untested Devonian and Carboniferous sand intervals
to provide additional lithium brine potential; the timing and
ability to generate a NI 43-101 compliant report; the Company’s
ability to procure and contract long-lead equipment; the timing and
ability to produce the lithium by utilizing closed-looped DLE
production technologies; the timing and ability to have a much
smaller environmental footprint than existing lithium production
operations; the timing and ability to evaluate the construction of
a solar power generation project to support the long-term expansion
of the project to achieve net-zero emissions; the timing and
ability to conduct future drilling, workover and optimization
activities the timing and ability to perform additional well
workovers including installing artificial lift equipment in
existing wells; the timing and ability of the well workovers to
help mitigate water production and natural pressure declines; the
timing and ability to resume production at Destan; the Company’s
ability to secure a partner to fund development at the Yakamoz
field; the timing and ability to re-enter, case and fully evaluate
the Yakamoz structure; the timing of and ability to drill new wells
and the ability of the new wells to become producing wells; the
ability of the surface casing pressure build up at Yak 1-ST well to
indicate a gas presence; the timing and ability to tie the Yakamoz
field into the Company’s existing gas plant; the timing and result
of the Turkiye elections on May 14, 2023; the result and timing of
negotiation with the Government of Kazakhstan regarding the
construction and operation of modular LNG facilities; the timing
and ability to secure long-term LNG feedstock gas supply contracts
under favourable terms, or at all; the potential to profitably
generate LNG at feed gas site locations; the impact of declining
gas production and increased demand for natural gas in Uzbekistan;
the timing and ability to operate gas fields, optimize production,
increase domestic gas supply, and utilize modern western production
techniques and methods in Uzbekistan; the timing and ability to
increase gas production, use a portion of the incremental gas for
LNG feedstock, provide LNG to mining operators and other users to
displace diesel fuel usage; the timing and ability to create a
vertically integrated business with self-sufficient gas supply and
replace diesel fuel with LNG; the timing and ability to decrease
the mines operating costs, reduce Uzbekistan’s dependency on diesel
imports, and positively impact the country’s carbon reduction
efforts by reducing overall carbon emissions; the timing and
ability to utilize western technologies and improve operational
practices to increase production and profitability in Uzbekistan;
the timing and ability to execute a production contract with the
Government of Uzbekistan under favourable terms, or at all, the
areas to be included and the terms and conditions including but not
limited to royalty rates, cost recovery, profit allocation, gas
marketing and pricing, government participation, governance,
baseline production levels and reimbursement methodology; the
timing and ability to pursue other initiatives and commercial
opportunities; projections and timing with respect to natural gas
and condensate production; expected markets, prices, costs and
operating netbacks for future oil, gas and condensate sales; the
timing and ability to obtain various approvals and conduct the
Company’s planned exploration and development activities; the
timing and ability to access oil and gas pipelines; the timing and
ability to access domestic and export sales markets; anticipated
capital expenditures; forecasted capital and operating budgets and
cash flows; anticipated working capital; sources and availability
of financing for potential budgeting shortfalls; the timing and
ability to obtain future funding on favourable terms, if at all;
general business strategies and objectives; the timing and ability
to obtain exploration contract, production contract and operating
license extensions; the potential for additional contractual work
commitments; the ability to meet and fund the contractual work
commitments; the satisfaction of the work commitments; the results
of non-fulfilment of work commitments; projections relating to the
adequacy of the Company’s provision for taxes; and treatment under
governmental regulatory regimes and tax laws.
This news release also includes forward-looking
information regarding health risk management including, but not
limited to: travel restrictions including shelter in place orders,
curfews and lockdowns which may impact the timing and ability of
Company personnel, suppliers and contractors to travel
internationally, travel domestically and to access or deliver
services, goods and equipment to the fields of operation; the risk
of shutting in or reducing production due to travel restrictions,
Government orders, crew illness, and the availability of goods,
works and essential services for the fields of operations;
decreases in the demand for oil and gas; decreases in natural gas,
condensate and crude oil prices; potential for gas pipeline or
sales market interruptions; the risk of changes to foreign currency
controls, availability of foreign currencies, availability of hard
currency, and currency controls or banking restrictions which
restrict or prevent the repatriation of funds from or to foreign
jurisdiction in which the Company operates; the timing and ability
to execute a production contract with the Government of Uzbekistan;
the Company’s financial condition, results of operations and cash
flows; access to capital and borrowings to fund operations and new
business projects; the timing and ability to meet financial and
other reporting deadlines; and the inherent increased risk of
information technology failures and cyber-attacks.
By its very nature, such forward-looking
information requires Condor to make assumptions that may not
materialize or that may not be accurate. Forward-looking
information is subject to known and unknown risks and uncertainties
and other factors, which may cause actual results, levels of
activity and achievements to differ materially from those expressed
or implied by such information. Such risks and uncertainties
include, but are not limited to: regulatory changes; the timing of
regulatory approvals; the risk that actual minimum work programs
will exceed the initially estimated amounts; the results of
exploration and development drilling and related activities;
factors affecting the Lithium License Seller’s ability to transfer
the title of the Lithium License to Condor; prior lithium testing
results may not be indicative of future testing results or actual
results; imprecision of reserves estimates and ultimate recovery of
reserves; the effectiveness of lithium mining and production
methods including DLE technology; historical production and testing
rates may not be indicative of future production rates,
capabilities or ultimate recovery; the historical composition and
quality of oil and gas may not be indicative of future composition
and quality; general economic, market and business conditions;
industry capacity; uncertainty related to marketing and
transportation; competitive action by other companies; fluctuations
in oil and natural gas prices; the effects of weather and climate
conditions; fluctuation in interest rates and foreign currency
exchange rates; the ability of suppliers to meet commitments;
actions by governmental authorities, including increases in taxes;
decisions or approvals of administrative tribunals and the
possibility that government policies or laws may change or
government approvals may be delayed or withheld; changes in
environmental and other regulations; risks associated with oil and
gas operations, both domestic and international; international
political events; and other factors, many of which are beyond the
control of Condor. Capital expenditures may be affected by cost
pressures associated with new capital projects, including labour
and material supply, project management, drilling rig rates and
availability, and seismic costs.
These risk factors are discussed in greater
detail in filings made by Condor with Canadian securities
regulatory authorities including the Company’s Annual Information
Form, which may be accessed through the SEDAR website
(www.sedar.com).
Readers are cautioned that the foregoing list of
important factors affecting forward-looking information is not
exhaustive. The forward-looking information contained in this news
release are made as of the date of this news release and, except as
required by applicable law, Condor does not undertake any
obligation to update publicly or to revise any of the included
forward-looking information, whether as a result of new
information, future events or otherwise. The forward-looking
information contained in this news release is expressly qualified
by this cautionary statement.
ABBREVIATIONS
The following is a summary of abbreviations used in this news
release:
| M |
|
Thousands |
| MM |
|
Millions |
| Mcf |
|
Thousands of standard cubic feet |
| Mcf/d |
|
Thousands of standard cubic feet per day |
| bbl |
|
Barrels |
| CAD |
|
Canadian dollars |
| KZT |
|
Kazakhstan tenge |
| TRL |
|
Turkish lira |
| USD |
|
United States dollars |
| Q |
|
Quarter |
| LNG |
|
Liquefied natural gas |
| |
|
|
The TSX does not accept responsibility
for the adequacy or accuracy of this news release.
For further information, please contact Don
Streu, President and CEO or Sandy Quilty, Vice President of Finance
and CFO at 403-201-9694.
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