CALGARY, April 23, 2015 /CNW/ - ArPetrol Ltd. ("ArPetrol"
or the "Company") (TSXV: RPT) is pleased to announce its financial
and operating results for the three months and year ended
December 31, 2014 and to provide an
operational update on activities this year to date as well as an
outlook for the remainder of 2015. The consolidated financial
statements and management's discussion and analysis, have been
filed on SEDAR at www.sedar.com and posted on the Company's website
at www.arpetrol.com.
Fourth Quarter and Fiscal 2014 Summary
Operating and Financial
The Company's processing revenues, production sales, and funds
flow from operations were all up significantly year-over-year (see
Highlights table, below).
ArPetrol had working capital of $1.5
million at December 31, 2014,
an improvement of almost $2.3 million
from December 31, 2013.
The Company had drawn $1.0 million
on its short-term loan at the end of the third quarter of
2014. The short-term loan was fully repaid at December 31, 2014. The Company had no
long-tem debt at year-end.
The Company's midstreaming activities continue to provide strong
revenues and operating netbacks (as defined below). During
the fourth quarter of 2014 the Company's processed an average of 75
million cubic feet per day (Mmcf/d) of third-party natural gas
compared to 76 Mmcf/d in the third quarter of 2014 and 77 Mmcf/d
during the fouth quarter of 2013. Total year 2014 processing
volumes were up by 2.5% versus total year 2013 but operating
netbacks had improved by almost $800,000, or 25%, year over year.
The Company's fourth quarter production averaged 186 barrels of
oil equivalent per day (boe) per day, a decrease of 58 boe per day
from the third quarter of 2014. The lower production volumes
were the result of the December maintenance shut-down. The
fourth quarter 2014 average realized natural gas price was
$4.43 per thousand cubic feet (Mcf),
$0.40 per Mcf lower than the average
price realized in the third quarter of 2014. The average
price realized for natural gas liquids (NGL) in the fourth quarter
of 2014 was $89.03 per barrel (bbl),
an increase of $4.74 per bbl over the
third quarter of
2014.
The Company made $114,282 in
capital expenditures during the quarter and expended $325,000 on maintenance projects during a
planned December shut-down. The maintenance project costs
were charged to operating expenses during the quarter.
Summary of
Results
|
|
Three Months Ended
Dec 31,
|
Year ended Dec
31,
|
|
(Unaudited)
|
|
|
|
2014
|
2013
|
2014
|
2013
|
Financial
|
|
|
|
|
(Cdn$ except shares
outstanding)
|
|
|
|
|
Processing
revenues
|
2,047,011
|
2,220,761
|
8,583,910
|
6,602,270
|
Production
sales
|
543,366
|
432,047
|
2,594,807
|
1,995,079
|
Funds flow from
operations (1)
|
59,073
|
(2,905,037)
|
1,037,039
|
(4,262,655)
|
Cash generated from
(used in) operating activities
|
800,361
|
(2,135,525)
|
1,303,018
|
(3,929,268)
|
Net income
(loss)
|
(73,804)
|
(290,350)
|
1,340,222
|
(3,726,040)
|
Capital
expenditures
|
114,282
|
6,886
|
262,437
|
175,310
|
Weighted average
shares outstanding (millions)
|
|
|
|
|
|
– basic and diluted
(2)(3)
|
22,901,468
|
22,901,468
|
22,901,468
|
22,901,468
|
Per Share Funds flow
from operations (2)
|
0.00
|
(0.13)
|
0.05
|
(0.19)
|
Per Share Net income
(loss)(2)
|
0.00
|
(0.01)
|
0.06
|
(0.16)
|
|
|
|
|
|
Operations
|
|
|
|
|
|
|
|
|
|
Processing
|
|
|
|
|
|
Processing Volumes –
Mcf per day
|
73,518
|
77,713
|
75,604
|
73,745
|
|
Processing
Revenue
|
2,047,011
|
2,220,761
|
8,593,910
|
6,602,270
|
|
Operating Netback
(1)
|
339,450
|
1,274,291
|
3,935,021
|
3,158,186
|
|
Average Operating
Netback - $ per Mcf processed (1)
|
0.04
|
0.18
|
0.15
|
0.12
|
|
|
|
|
|
Production
|
|
|
|
|
|
Natural gas – Mcf per
day
|
1,031
|
878
|
1,216
|
1,094
|
|
NGL – bbls per
day
|
15
|
18
|
20
|
23
|
|
Total – boe per day
(1)
|
186
|
164
|
223
|
205
|
Average sales
price
|
|
|
|
|
|
Natural gas – $ per
Mcf
|
4.43
|
3.65
|
4.47
|
3.46
|
|
NGL – $ per
bbl
|
89.03
|
82.77
|
83.85
|
73.30
|
Average operating
netback - $ per boe(1)
|
(4.58)
|
(1.99)
|
3.03
|
0.64
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes:
|
(1)
|
See advisories at the
end of this news release with respect to non-IFRS measures and boe
presentation.
|
(2)
|
All outstanding
warrants, stock options and convertible debentures were excluded in
calculating the weighted-average number of dilutive
common share outstanding, as they were determined to be
anti-dilutive.
|
(3)
|
On June 2, 2014, the
Company completed a consolidation of its issued and outstanding
common shares on the basis of 25 pre -
consolidation common shares for each 1 post-consolidation common
share. All share and per share numbers have been adjusted
to
reflect this consolidation.
|
|
|
All values in this
news release are in Canadian dollars unless otherwise
indicated.
|
Restatement of 2014 Prior Quarters
In the fourth quarter of 2014 the Company reclassified
$2.6 million of non-cash foreign
exchange gains from the Consolidated Statement of Net Income
to the Consolidated Statement of Comprehensive Income. These
gains had been initially recorded in the Consolidated Statement of
Net Income in the second quarter of 2014.
As a result the changes to the revised quarter numbers are as
follows:
$Cdn
|
Three
Months
Ended June
30, 2014
|
Six Months
Ended June
30, 2014
|
Nine Months
Ended
September
30, 2014
|
|
Net Income (Loss)
as previously reported
|
2,445,603
|
4,089,184
|
4,020,424
|
|
Reclassification
of non-cash foreign exchange gains
|
(2,606,398)
|
(2,606,398)
|
(2,606,398)
|
|
Adjusted Net
Income (Loss)
|
(160,795)
|
1,482,786
|
1,414,026
|
|
Other
Comprehensive Income (Loss) as previously reported
|
(5,111,449)
|
(4,290,089)
|
(4,153,893)
|
|
Adjusted Other
Comprehensive Income (Loss)
|
(2,505,052)
|
(1,683,691)
|
(1,547,495)
|
|
Per Share Net
income (Loss) previously reported
|
0.11
|
0.18
|
0.18
|
|
Adjusted Per Share
Net income (Loss)
|
(0.01)
|
0.06
|
0.06
|
|
|
|
|
|
|
|
|
This reclassification did not change the previously reported
statement of financial position, cash flow from operating
activities or funds flow from operations. The Company will restate
2014 comparative information with the reclassifications stated
above in future 2015 quarterly filings.
Reserves
The Company has obtained an independent audit of the natural gas
and natural gas liquid (NGL) reserves attributable to ArPetrol's
interest in the Faro Virgenes concession as prepared by Gaffney,
Cline & Associates Inc. effective December 31, 2014 (the "GCA Report").
The GCA Report was prepared using assumptions and methodology
guidelines consistent with the Canadian Oil and Gas Evaluation
Handbook and in accordance with National Instrument 51-101,
Standards of Disclosure for Oil and Gas Activities. The
Company's natural gas and NGL reserves are located in the Province
of Santa Cruz, Argentina.
Summary of Oil and
Gas Reserves Based on Forecast Prices and
Costs
|
|
Natural
Gas
|
NGL
|
Reserves Category
|
Gross(1) (MMcf)(2)
|
Net(1) (MMcf)
|
Gross(1) (Mbbls)(2)
|
Net(1) (Mbbls)
|
Proved Developed
Producing(3)(6)
|
-
|
-
|
-
|
-
|
Proved Developed
Non-Producing(3)(7)
|
-
|
-
|
-
|
-
|
Proved
Undeveloped(3)(8)
|
24,893
|
21,159
|
422
|
359
|
Total
Proved(3)
|
24,893
|
21,159
|
422
|
359
|
Total
Probable(4)
|
17,422
|
14,809
|
293
|
249
|
Total Proved Plus
Probable(3)(4)
|
42,315
|
35,968
|
715
|
608
|
Total
Possible(5)
|
14,807
|
12,586
|
248
|
211
|
Total Proved Plus
Probable Plus
Possible(3)(4)(5)
|
57,122
|
48,554
|
964
|
819
|
|
|
|
|
|
|
Net Present Values
of Oil and Gas Future Net Revenue Based on Forecast Prices and
Costs
|
Reserves Category
|
Before Deducting
Income Tax
Discounted at 10%
(US$MM)
|
After Deducting
Income Tax
Discounted at 10%
(US$MM)
|
Proved Developed
Producing(3)(6)
|
-
|
-
|
Proved Developed
Non-Producing(3)(7)
|
-
|
-
|
Proved
Undeveloped(3)(8)
|
7
|
5
|
Total
Proved(3)
|
7
|
5
|
Total
Probable(4)
|
52
|
35
|
Total Proved Plus
Probable(3)(4)
|
59
|
40
|
Total
Possible(5)
|
50
|
32
|
Total Proved Plus
Probable Plus Possible(3)(4)(5)
|
109
|
72
|
|
Notes:
|
(1)
|
"Gross Reserves" are
ArPetrol's working interest (operating or non-operating) share
before deduction of royalties and without including any
royalty interests of ArPetrol. "Net Reserves" are ArPetrol's
working interest (operating or non-operating) share after deduction
of royalty
obligations plus ArPetrol's royalty interests in
reserves.
|
(2)
|
"MMcf" means million
cubic feet and "Mbbl" means thousand barrels.
|
(3)
|
"Proved" reserves are
those reserves that can be estimated with a high degree of
certainty to be recoverable. It is likely that the actual
remaining quantities recovered will exceed the estimated proved
reserves.
|
(4)
|
"Probable" reserves
are those additional reserves that are less certain to be recovered
than proved reserves. It is equally likely that the actual
remaining quantities recovered will be greater or less than the sum
of the estimated proved plus probable reserves.
|
(5)
|
"Possible" reserves
are those additional reserves that are less certain to be recovered
than probable reserves. There is a 10% probability that
the quantities actually recovered will equal or exceed the sum of
the estimated proved plus probable plus possible
reserves.
|
(6)
|
"Developed Producing"
reserves are those reserves that are expected to be recovered from
completion intervals open at the time of the
estimate. These reserves may be currently producing or, if shut in,
they must previously have been on production, and the date of
resumption
of production must be known with reasonable certainty.
|
(7)
|
"Developed
Non-Producing" reserves are those reserves that either have not
been on production, or previously have been on production but
are shut in and the date of resumption of production is
unknown.
|
(8)
|
"Undeveloped"
reserves are those reserves expected to be recovered from known
accumulations where a significant expenditure (for
example, comparable to the cost of drilling a well) is required to
render them capable of production. They must fully meet the
requirements
of the reserves classification (proved, probable, possible) to
which they are assigned.
|
(9)
|
The reserve estimates
provided herein are estimates only and there is no guarantee that
the estimated reserves will be recovered.
|
(10)
|
Actual natural gas
and NGL reserves may be greater than or less than the estimates
provided herein.
|
(11)
|
The future net
revenue estimates provided herein do not represent fair market
value.
|
(12)
|
The pricing
assumptions used in the GCA Report with respect to net present
values of future net revenue (forecast) are based on ArPetrol's
future scenario of gas and NGL. The forecast gas prices start with
US$3.65/MMBtu equivalent according to an existing contract,
increasing
to US$4.00/MMBtu in 2016, escalated at 4% per year thereafter.
Future capital costs were derived from development program
forecasts
prepared by ArPetrol for the field. Recent historical operating
expense data were utilized as the basis for operating cost
projections. Capital
and operating expenses were indexed at 4% per year since 2014 to
account for inflation.
|
(13)
|
See advisories at the
end of this news release with respect to non-IFRS measures and boe
presentation
|
Processing Assets
In the 2014 GCA Report the treatment of third party processing
fees was revised from prior years. In prior years fees
collected from third party gas processing at the Company owned
plant were included in the reserves calculation. Third party
fees were removed from the calculation in 2014 in accordance with
the Canadian Oil and Gas Evaluation Handbook. This change
reduced both reserve volumes and corresponding reserve cash
flows.
In total, however, future cash flows from the Company's assets
in Argentina will still include
cash flows from third party processing. The Company's
mid-stream processing activities would be expected to add an
estimated US$25 million to the total
net present value of future net revenues (after deducting income
tax, discounted at 10%). This is based on the estimated
production profile for the third-party fields and resultant
processing volumes multiplied by the standard processing fee under
the current gas processing contract with the fee escalating at 2%
per year.
Based on these assumptions the estimated net present value of
future net revenue of proved plus probable reserves and third party
processing fees was US$63 million at
December 31, 2014 versus US$77 million at December
31, 2013 (all after deducting income tax, discounted at
10%).
Subsequent to December 31,
2014
In January 2015 the Company
received approval to commence a normal course issuer bid
permitting it to repurchase, for cancellation, up to
1,822,521 of its common shares. The normal course issuer bid
commenced on January 6, 2015 and is
approved for one year. To date the Company has purchased
122,000 of its common shares for $39,275 at an average price of $0.32 per share.
Outlook
ArPetrol has made significant progress towards a stable revenue
generating company with a balance sheet that supports its
operations and is expected to provide funds to pursue new
initiatives.
ArPetrol continues to repatriate significant funds from
Argentina to Canada through the repayment of intercompany
loans. During the first three months of 2015, repayment of
loan principal and interest to Canada totaled $700,000.
The Company's 2015 outlook includes estimated processing volumes
of 70 to 80 MMcf/d and production of 190 to 240 boe/d.
The Company continues to look for farm-in partners to allow us
to accelerate the development of the defined reserves at Faro
Virgenes.
Finally, ArPetrol continues to evaluate at all strategic
opportunities available to the Company. YPF S.A. and Enap
SiPetrol Argentina S.A., the third-party providers of natural gas
processed at the Company's Faro Virgenes plant, recently announced
a significant multi-year expansion to their Magallanes field.
We see this increase in activity in southern Santa Cruz as a positive sign for our business
development activities in the region. Additionaly, we are
actively pursuing new mid-stream opportunities through-out the
region.
About ArPetrol Ltd.
ArPetrol is a Calgary-based
publicly traded company engaged in oil and natural gas exploration,
development and production and third-party natural gas processing
in Argentina, where it owns and
operates a gas processing facility with capacity of 85 MMcf per
day. The Company's common shares are listed on the TSXV under the
symbol "RPT".
Forward-Looking Information
This news release contains certain forwardlooking information
relating, but not limited, to the Company's reserves and related
future net revenue, continued positive cash flow in 2015,
processing revenue and cash flow, estimated production volumes and
processing volumes, the pursuit of farm-in and growth
opportunities, and the Company's ability to repatriate funds from
Argentina to Canada.
Forwardlooking information typically contains statements with words
such as "anticipate", "believe", "forecast", expect", "plan",
"intend", "estimate", "propose", "project", or similar words
suggesting future outcomes. The Company cautions readers and
prospective investors in the Company's securities not to place
undue reliance on forwardlooking information as, by its nature, it
is based on current expectations regarding future events that
involve a number of assumptions, inherent risks and uncertainties,
which could cause actual results to differ materially from those
anticipated by the Company. Forward-looking information is based on
management's current expectations and assumptions regarding, among
other things, the ability to sustain consistent processing and
production volumes, future production and processing revenue,
future economic conditions, future currency and exchange rates, the
ability to repatriate funds from Argentina, future pricing, continued political
stability in the areas in which the Company is operating, the
reduction of G&A and expenses, and the Company's continued
ability to obtain and retain qualified management and staff and
equipment in a timely and cost-efficient manner. A number of
factors could cause actual results to differ materially from those
anticipated by the Company, including but not limited to risks
associated with the oil and natural gas industry (e.g., operational
risks; the ability to retain staff and equipment; and health,
safety and environmental risks), weather delays and natural
disasters, union activities, change in government policies,
currency fluctuations and controls, a change in the manner and
rates at which the Company is exchanging its currency, the risk of
disruptions at the gas plant, increased maintenance costs or other
expenditures at the gas plant, interruptions to production and
processing revenue, production declines, changes in commodity
prices and revenues, increased costs, unavailability of funding,
and other risks associated with international activity and
Argentina. ArPetrol operates
outside of Canada and as such, is
subject to a number of political risks over which it has no
control. The forwardlooking information included herein is
expressly qualified in its entirety by this cautionary statement.
The forwardlooking information included herein is made as of the
date hereof and the Company assumes no obligation to update or
revise any forwardlooking information to reflect new events or
circumstances, except as required by law.
Non-IFRS Measures
This news release includes references to financial measures
commonly used in the oil and natural gas industry. The terms
"operating netback" (production and processing revenue less
royalties, turnover taxes and operating expenses) and "funds
flow from operations" (cash generated from operating activities
before changes in non-cash working capital) do not have any
standardized meaning under International Financial Reporting
Standards ("IFRS") and may not be comparable with similar measures
presented by other companies. Funds flow from operations should not
be considered an alternative to, or more meaningful than, cash
generated from operating activities, net income (loss) or other
measures determined in accordance with IFRS, as an indicator of the
Company's performance.
See the management's discussion and analysis for the year ended
December 31, 2014, filed on SEDAR at
www.sedar.com and on the Company's website, for further discussion,
including a reconciliation of funds flow from operations to cash
generated from operating activities which is the most directly
comparable measure calculated in accordance with IFRS. There is no
IFRS measure that is reasonably comparable to operating netbacks
and a detailed calculation of such netbacks is presented in the
"Results of Operations" section.
Reserves and Oil and Gas Advisories
BOE Presentation. Production information is
commonly reported in units of barrels of oil equivalent. For
purposes of computing such units, natural gas is converted to
equivalent barrels of oil using a conversion factor of six thousand
cubic feet to one barrel. The 6:1 conversion ratio represents
energy equivalency, which is primarily applicable at the burner
tip, and does not represent a value equivalency at the wellhead.
Such disclosure of boe may be misleading, particularly if used in
isolation.
Price Deck Assumptions
|
Natural
Gas
|
NGL
|
Year
|
(US$/MMBtu)
|
(US$/bbl)
|
2015
|
3.65
|
71.00
|
2016
|
4.00
|
73.15
|
2017
|
4.16
|
75.37
|
2018
|
4.33
|
77.65
|
2019
|
4.50
|
80.00
|
2020
|
4.68
|
83.20
|
2021
|
4.87
|
86.53
|
2022
|
5.06
|
89.99
|
2023
|
5.26
|
93.59
|
2024
|
5.47
|
97.34
|
2025
|
5.69
|
101.23
|
2026
|
5.92
|
105.28
|
|
|
|
There are numerous uncertainties inherent in estimating
quantities of reserves and related future net revenue. The reserves
and related future net revenue set forth above are estimates only.
In general, estimates of economically recoverable natural gas and
NGL reserves and the related future net revenue are based upon a
number of variable factors and assumptions, such as historical
production from the properties, production rates, ultimate reserve
recovery, timing and amount of capital expenditures, the scope and
timing of the development program, expected pricing and gas
processing revenue, marketability of oil and natural
gas, royalty rates, the assumed effects of regulation by
governmental agencies and future operating costs, all of which may
vary materially. For these reasons, estimates of the economically
recoverable natural gas and NGL reserves attributable to any
particular group of properties, classification of such reserves
based on risk of recovery and estimates of future net revenues
associated with reserves prepared by different engineers, or by the
same engineers at different times, may vary. The Company's actual
production, revenues, taxes and development and operating
expenditures with respect to its reserves will vary from estimates
thereof and such variations could be material.
The reserve data provided in this news release presents only a
portion of the disclosure required under National Instrument
51-101, Standards of Disclosure for Oil and Gas Activities.
All of the required information including additional information on
the risks and level of uncertainty associated therewith, will be
contained in the Company's statement of reserves data and other oil
and gas information for the year ended December 31, 2014 which is available on SEDAR at
www.sedar.com.
Additional information relating to the Company is also available
on SEDAR at www.sedar.com.
Neither the TSXV nor its Regulation Services Provider (as
defined in the policies of the TSXV) accepts responsibility for the
adequacy or accuracy of this release.
SOURCE ArPetrol Ltd.