Petro-Reef Resources Ltd. (TSX VENTURE:PER), ("Petro-Reef" or the "Company") is
pleased to release its March 31, 2012 financial and operating results and a
summary of its updated reserve report dated May 1, 2012. This press release
should be read in conjunction with the Company's March 31, 2012 filings on
Sedar.
Financial Summary
Three Months Ended March
31
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2012 2011 % Change
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Oil and gas revenue $ 2,855,893 $ 3,122,279 (9)
Cash flow from operations 1,227,765 1,634,148 (25)
Per share - basic and diluted 0.02 0.03 (32)
Net loss (111,382) (1,053,595) (89)
Per share - basic and diluted (0.00) (0.02) (90)
Net debt 12,451,000 12,833,000 (3)
Capital expenditures $ 846,000 $ 3,616,000 (77)
Shares outstanding - end of period 62,239,477 56,261,477 11
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Total oil and natural gas revenue decreased by 9% to $2,855,893 for the three
month period ended March 31, 2012 compared to $3,122,279 for the same period in
2011. For the three month period ended March 31, 2012, Petro-Reef generated cash
flow from operations of $1,227,765 ($0.02 per basic share), a decrease of 25%
compared to $1,634,148 ($0.03 per basic share) for the three month period ended
March 31, 2011.
Daily Production
Three months ended March 31 2012 2011 % Change
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Average Average
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Crude Oil and NGL (bbl/d) 330 296 11
Natural Gas (mcf/d) 2,631 3,064 (14)
Combined (boe/d) 769 807 (5)
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Daily production volumes decreased by 5% to 769 boe/d in the three months ended
March 31, 2012 as compared to 807 boe/d for the same period in 2011. Oil volumes
increased by 11% to 330 bbl/day quarter while gas production decreased by 14% to
2,631 mcf/day. In Q1 2012 oil and NGL production comprised 43% of total
production as compared to 37% in Q1 2011.
Earnings and Cash Flow Summary
Three months
ended March 2012 2011 % Change 2012 2011 % Change
31
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CDN $ ($ / boe) ($ / boe)
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Gross Revenue 2,855,893 3,122,279 (9) 41.29 42.99 (4)
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Royalties (275,524) (513,058) (46) (3.98) (7.06) (44)
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Revenue after
royalties 2,580,369 2,609,221 (1) 37.31 35.92 4
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Operating
expenses 912,445 846,074 8 13.19 11.65 13
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Operating
netback 1,667,924 1,763,147 (5) 24.11 24.28 -
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Realized gain
(loss) on
risk (97,938) 175,135 (156) (1.42) 2.41 -
management
contracts
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General &
administrativ 208,482 204,724 2 3.01 2.82 7
e expenses
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Interest
expense 133,739 99,410 35 1.93 1.37 41
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Cash flow from
operations 1,227,765 1,634,148 (25) 17.75 22.50 (21)
(1)
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Unrealized
gain (loss)
on risk (71,020) (903,673) (92) (1.03) (12.44) -
management
contracts
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Other income 230,252 250,919 (8) 3.33 3.45 (4)
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Stock based
compensation 87,371 140,536 (38) 1.26 1.93 (35)
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Accretion 10,964 16,943 (35) 0.16 0.23 (32)
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Depletion and
depreciation 1,400,044 1,637,618 (15) 20.24 22.55 (10)
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Income before
income taxes (111,382) (813,703) - (1.61) (11.20) -
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Deferred
income tax 0 239,892 (100) 0.00 3.30 (100)
expense
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Net Income
(loss) (111,382)(1,053,595) (89) (1.61) (14.51) (89)
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Per Share -
Basic (0.00) (0.02)
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Per Share -
Diluted (0.00) (0.02)
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Net Debt to Cash Flow from operations
Three months ended Year ended
March 31, 2012 December 31,2011
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Total funds flow from operations $ 1,227,765 $ 3,149,636
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Annualized funds flow from
operations 4,911,060 3,149,636
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Total net debt $ 12,450,960 $ 12,832,532
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Net debt to annualized funds flow
from operations 2.53 4.07
The net debt as a multiple of annualized cash flow decreased from 4.07 at
December 31, 2011 to 2.53 at March 31, 2012.
Netbacks
Three months ended March 31 2012 2011 % Change
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($ / boe) ($ / boe)
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Operating netback ($/boe)
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Revenue 41.29 42.99 (4)
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Royalties (3.98) (7.06) (44)
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Operating expenses (13.19) (11.65) 13
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Operating netback per boe 24.11 24.28 (1)
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Realized gain (loss) on risk management
contracts (1.42) 2.41 (159)
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General and administrative expenses (3.01) (2.82) 7
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Interest expense (1.93) (1.37) 41
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Cash flow from operations per boe 17.75 22.50 (21)
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Petro-Reef realized a combined price per boe for the three month period ended
March 31, 2012 of $41.29 representing a 4% decrease compared to the realized
price per unit of production of $42.99 for the same period in 2011. The price of
oil increased by 3% and the price of natural gas decreased by 42% over the same
period last year.
Realized losses on risk management contracts on a per unit of production basis
were $1.42 for the three month period ended March 31, 2012 compared to a gain of
$2.41 for the same period in 2011.
Royalties on a per unit of production basis decreased 44% to $3.98 for the three
month period ended March 31, 2012 compared to $7.06 for the same period in 2011.
The effective royalty rate decreased to 9.6% of gross revenue for the three
month period ended March 31, 2012 from 16.4% for the same period in 2011.
Production and operating expenses on a per unit of production basis increased
13% to $13.19 for the three months ended March 31, 2012 compared to $11.65 for
the same period in 2011.
Operating netbacks were $24.11/boe in Q1 2012 versus $24.28 in Q1 2011.
On a per unit of production basis general and administrative expenses increased
by 7% to $3.01 and interest expense increased by 41% to $1.93 year over year.
For the three months ended March 31, 2012 cash flow netbacks per boe decreased
by 21% over the same period in 2011.
Financial
At March 31, 2012 the Corporation had two operating facilities with a Canadian
Chartered Bank. Facility A is a revolving operating demand loan with a maximum
limit of $13,000,000. Facility B is a non-revolving acquisition/development
demand loan that provides an additional $6,000,000 of financing. Interest is at
prime plus 1.0% per annum for Facility A and prime plus 1.5% per annum for
Facility B. Petro-Reef has the ability to borrow by way of Bankers Acceptances.
At March 31, 2012 the balance owing on Facility A was $12,064,000 (December 31,
2011 - $12,511,000) and the amount owing on Facility B was nil (December 31,
2011 - nil).
The facilities are secured by a combined $60,000,000 floating charge debenture
over all the Corporation's assets with a negative pledge and undertaking to
provide fixed charges on the Corporation's major producing properties at the
request of the bank. The facilities are repayable on demand. The facilities have
a working capital covenant whereby the total current assets (including undrawn
amounts under facility A) must be greater than 1.0x total current liabilities
(excluding financial instruments and certain debt instruments). Petro-Reef's
working capital ratio as calculated using its Canadian Chartered Bank formula as
at March 31, 2012 was 1.36 (1.86 as at December 31, 2011). Petro-Reef is in
compliance with its working capital covenant.
Reserves
A new independent reserves evaluation effective May 1, 2012 has increased the
Company's proven plus probable reserve base by 10.6 percent, and the value
(discounted at 10 percent) by 23.5 percent. The main reason for the material
increase was the inclusion of the results of the 11-12 well drilled in Q1 2012.
The Company believes that further successful development drilling will continue
to significantly improve our reserve base.
The independent evaluation of gross proved plus probable reserves dated May 1,
2012 based on April 1, 2012 forecast prices and costs indicated a net increase
to 1,851,800 BOE from 1,674,900 BOE at December 31, 2011 after extensions,
technical revisions, discoveries, acquisitions, economic factors, and
production. After considering the production for the period January 1 to March
31, 2012 of 69,200 BOE, the 2012 reserve additions totalled 246,100 BOE which
represents an increase of 14.7% over the 2011 year end reserves.
Using a 10% net present value ("NPV"), the value of proved plus probable
reserves at forecast prices and costs (before income taxes) was $40,496,000 as
compared with proved plus probable reserves of $32,792,300 as at December 31,
2011 an increase of $7,703,700.
Petro-Reef's gross proved, probable plus possible reserves at May 1, 2012
totaled 2,527,300 BOE. Using a 10% NPV, the value of proved, probable plus
possible reserves at forecast prices and costs (before income taxes) totaled
$55,993,100.
Proved plus probable reserves were comprised of 61% crude oil and natural gas
liquids and 39% natural gas (December 31, 2011 - 53% crude oil and natural gas
liquids and 47% natural gas).
Of the total proved plus probable reserves reported (using forecast prices)
Petro-Reef's reserves are 57% proved and 43% probable.
Based on proved plus probable reserves and 2012 average production volume,
Petro-Reef's reserve life index was 5.3 years (38.7 years remaining life) on a
proved plus probable basis at May 1, 2012 compared with 5.1 years (38.7 years
remaining life) at the end of 2011. Petro-Reef's reserve life index (RLI) is an
indication of the number of years it would take to deplete the Company's
reserves.
Forward-Looking Statements: All statements, other than statements of historical
fact, set forth in this news release, including without limitation, assumptions
and statements regarding reservoirs, resources and reserves, future production
rates, exploration and development results, financial results, and future plans,
operations and objectives of the Corporation are forward-looking statements that
involve substantial known and unknown risks and uncertainties. Some of these
risks and uncertainties are beyond management's control, including but not
limited to, the impact of general economic conditions, industry conditions,
fluctuation of commodity prices, fluctuation of foreign exchange rates,
environmental risks, industry competition, availability of qualified personnel
and management, availability of materials, equipment and third party services,
stock market volatility, timely and cost effective access to sufficient capital
from internal and external sources. The reader is cautioned that assumptions
used in the preparation of such information, although considered reasonable by
the Corporation at the time of preparation, may prove to be incorrect. There can
be no assurance that such statements will prove to be accurate and actual
results and future events could differ materially from those anticipated in such
statements.
Reference is made to barrels of oil equivalent (BOE). Barrels of oil equivalent
may be misleading, particularly if used in isolation. In accordance with
National Instrument 51-101, a BOE conversion ratio for natural gas of 6 Mcf: 1
bbl has been used, which is based on an energy equivalency conversion method
primarily applicable at the burner tip and does not represent a value
equivalency at the wellhead.
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