CALGARY,
Feb. 27, 2015
/CNW/ -
Highlights
- During 2014 the Company was unable to carry out many elements
of its development plan for the Yemen assets due to restrictions on the
availability of services. Yemen
has been subject to significant political uncertainty during the
year and the situation has yet to stabilize. The safety and
security of staff in the region is of critical importance to the
Company. The uncertain security situation in the country has made
it very difficult to mobilize the necessary equipment and personnel
into Yemen and, as a result,
development projects are being deferred indefinitely.
- Due in part to the decline in world oil prices, the Company's
results for both the quarter and the year have been significantly
impacted by a non-cash impairment provision. The calculation for
the impairment provision has been based on the Company's production
profile under its proved plus probable reserve development case, a
price forecast based on prices indicated by the forward pricing
curve as at January 7, 2015, and a
discount rate of 30%. If the Company had used as a basis the proved
developed producing reserve volume forecast, the price forecast
adopted by the independent engineering firm for the Company's
reserve evaluation, and a discount rate of 20%, the non-cash
impairment amount would not be significantly different.
- Excluding the impairment provision of $88.1 million, the Company incurred a loss of
$0.00 per share ($0.3 million) in the fourth quarter of 2014
compared to earnings of $0.08 per
share ($6.0 million) in the fourth
quarter of 2013. For the year ended December
31, 2014, excluding the impairment provision, earnings were
$0.00 per share ($0.2 million) compared to $0.28 per share ($23.2
million) in 2013. Inventory of crude oil at the end of
December 31, 2014 was approximately
46,200 barrels and represents an increase of 16,600 barrels from
December 31, 2013.
- The Company's working interest share of production
volumes before royalties and taxes averaged 1,430 barrels per day
for the year representing a 43 per cent decline from 2,520 barrels
per day for 2013. For the fourth quarter of 2014 production volumes
were 1,760 barrels per day compared to 2,390 barrels per day in the
comparable period of 2013. The decline in production year over year
is due to a combination of the shut-in of the Al Roidhat field, due
to marketing restrictions, and production curtailments experienced
during the year. During the fourth quarter of 2014, production
operations were curtailed for ten days due to a labour dispute.
- In the fourth quarter of 2014 the Company sold an average
of 2,920 barrels per day of crude oil compared to 2,460 barrels per
day in the comparable period of 2013. For the year ended
December 31, 2014 crude oil exports
have averaged 1,260 barrels per day compared to 2,330 barrels per
day in the comparable period of 2013. For the fourth quarter of
2014, the average sale price received was $74.23 per barrel which represents a discount of
$2.35 to the Dated Brent Crude price
of $76.58 for the quarter. The
product netback for the last quarter of 2014 was $16.82 per barrel, and for the year ended
December 31, 2014, the netback of
$22.49 per barrel represents a
decrease of 47 per cent from $42.13
per barrel for 2013 reflecting both lower realized prices for crude
oil and higher operating costs.
- Funds flow from operations ("Cash Flow") for the fourth
quarter was $0.03 per share
($2.6 million) compared to
$0.10 per share ($8.0 million) in the prior year period. For the
year ended December 31, 2014 Cash
Flow was $0.07 per share
($5.2 million) down 82 per cent from
$0.38 per share ($31.2 million) in the prior year period.
- Capital expenditures in the fourth quarter of
$2.3 million include the costs of
equipment ordered earlier in 2014 for the planned capital program
and received in Yemen in the
quarter and project services and are down from $2.8 million in the fourth quarter of 2013.
Capital expenditures for the year of $6.8
million are down 29 per cent from capital expenditures of
$9.6 million for 2013.
- During the fourth quarter the Company purchased for
cancellation 3,403,837 shares at an average price of $1.12 (CAD$1.27)
per share under the Company's normal course issuer bid ("NCIB").
For the year ended December 31, 2014
the Company has purchased for cancellation a total of 3,655,006
shares at an average price of $1.14
(CAD$1.29) per share under the
NCIB.
- The annual "per share" calculations included in this
release are based on 77,217,884 weighted average number of shares
outstanding. The fourth quarter "per share" amounts are based on
75,126,232 weighted average number of shares outstanding. The
Company had 74,386,820 shares outstanding at December 31, 2014.
- On August 18, 2014 the
Board of directors declared a special dividend of C$0.07 per common share payable to shareholders
of record on August 29, 2014. The
dividend was paid in cash on September 15,
2014.
- Calvalley has a strong balance sheet with approximately
$75 million in working capital at
December 31, 2014. The value of the
volumes of crude oil held in inventory at December 31, 2014 reflect market
value.
Operations Update
In early February, 2015 members of the cabinet of the Government
of Yemen resigned and, more
recently, several foreign embassies have closed their offices and
suspended diplomatic services. Amidst the significant concerns for
the safety and security of all Yemen staff, contractors and foreign workers
and the uncertain political environment the Company is maintaining
production operations, however, all activity on capital projects is
being deferred until the business and operating environment
improves.
The Company has recently closed its technical office in
London and is reducing working
hours and salaries for all management and staff in the Calgary office to reduce its fixed costs of
operation.
The Company's agreement in Yemen is a production sharing agreement. The
agreement effectively defines each party's interest in each barrel
of oil sold. Management uses this production sharing entitlement as
an indicator for decision making to ensure profitability under the
agreement is optimized both in the short term and the long
term.
To optimize profitability, it is advantageous to ensure
that the total cost incurred to produce a barrel of oil is less
than the effective cost of the pro-rata entitlement under the
production sharing agreement allocated for the recovery of costs,
which is referred to as "Cost Oil". The agreement effectively
allows 45 percent of each barrel sold as Cost Oil to cover
allowable operating costs, G&A costs and current and historical
capital costs incurred. As noted in the highlight section,
operating costs of $26.45 per barrel
in Yemen were up significantly in
2014 due mainly to the lower volume of crude oil produced.
Incorporating estimated G&A costs to establish an estimate for
total allowable costs incurred (excluding capital costs), total
estimated allowable costs incurred in 2014 exceeded $33 on a per barrel basis.
To ensure the Company is capable of recovering current and
historical operating, G&A and capital costs under the
agreement, using the referenced estimated allowable cost per barrel
of $33 per barrel (operating and
G&A costs only), and grossing this per barrel cost using a
denominator of 45%, the calculated required sales price for a
barrel of crude oil is approximately $73 per barrel.
Using an estimated allowable cost per barrel to cover
operating and G&A costs (excluding capital costs) of
$25 per barrel, the calculated
required sales price for a barrel of crude oil, which ensures the
Company is effectively recovering its costs incurred, is
approximately $55 per
barrel.
To ensure the Company manages through an extended period
of anticipated low crude oil prices, the Company is making every
effort to work with all stakeholders in Block 9 to manage costs
effectively in order that the impact of reduced revenues is shared
fairly by all stakeholders.
Corporate Update
The Company has reviewed several diversification
opportunities outside Yemen. No
potential transactions have been identified to date.
Calvalley has a healthy balance of cash and working
capital for investment purposes and will continue to review
investment, diversification and other opportunities that can
optimize shareholder value.
The Company welcomes Nabil
Nassef, P. Eng. to the Board of Directors of Calvalley.
Nabil is a graduate in Civil Engineering from the University of Alberta. Nabil has over 35 years of
experience in the oil and gas industry in both Western Canada and more recently in
Yemen. Nabil
represented Calvalley as General Manager in Yemen during the years 2000 to 2009. Nabil is
fluent in speaking, writing and translating the Arabic
language. Nabil currently provides consulting
services to Calvalley in an advisory capacity.
On February 23, 2015 the
Alberta Securities Commission (the "ASC"), released its decision
and dismissed all allegations against the Company and former
employees. A copy of the decision is available on the ASC
website. The ASC alleged that in early 2009 the Company
purchased shares pursuant to a normal course issuer bid while in
possession of material information relating to its reserves which
had not been disclosed to the public. The Commission found
that the information in question was not material. With
respect to allegations against the Chairman and CEO of the Company,
the ASC found that his conduct breached section 221.1(2) of the
Securities Act (Alberta) and was
contrary to the public interest by making a misleading or untrue
statement to ASC Staff during a formal investigative
interview. The Commission's conclusion is set out at page 85
of the ASC decision. The matter will now move to a second
phase to determine whether (and, if so, what) orders for sanctions
and costs ought to be made. The ASC decision also commented
on various practices followed by the Company at the material
time. The Company is currently reviewing the decision to
determine whether additional modifications to current practices are
advisable. The Board of Directors fully supports this
initiative.
Financial information
Significant financial information is included in the table below
and is discussed further in the Company's Management Discussion and
Analysis.
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Three months ended
December 31
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Year ended
December 31
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(in thousands of US dollars except per share
amounts)
|
2014
|
2013
|
|
2014
|
2013
|
Revenue (Gross)
|
19,964
|
25,065
|
|
39,851
|
92,960
|
Revenue from crude oil sales (net of
royalties)
|
12,511
|
15,707
|
|
24,984
|
58,264
|
Adjusted
EBITDA(1)
|
3,739
|
9,451
|
|
7,133
|
36,477
|
Operating income
(loss)(1)
|
(87,207)
|
7,524
|
|
(85,720)
|
29,063
|
Earnings
(loss)
|
(88,444)
|
5,999
|
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(87,911)
|
23,176
|
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Per share
|
(1.18)
|
0.08
|
|
(1.14)
|
0.28
|
Capital
expenditures
|
2,332
|
2,815
|
|
6,784
|
9,588
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Funds flow from
operations(1)
|
2,598
|
8,042
|
|
5,163
|
31,179
|
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Per share
|
0.03
|
0.10
|
|
0.07
|
0.38
|
Cash flow from
operating activities
|
5,056
|
6,267
|
|
5,564
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30,360
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(1)
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See "Non-IFRS Measures" disclosure in December 31,
2014 MD&A filed on www.sedar.com which is incorporated
herein by reference
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FILING OF REPORTS ON SEDAR
Calvalley's Management's Discussion and Analysis and
Audited Condensed Consolidated Financial Statements for the year
ended December 31, 2014 can be found
for viewing by electronic means on The System for Electronic
Document Analysis and Retrieval at
www.sedar.com. They can also be found on the
Company's website at
www.calvalleypetroleum.com.
Calvalley is an international oil and gas company, with
offices in Calgary, Alberta,
Canada, that operates its 50% working interest in Block 9 of
the Masila Basin, in The Republic of Yemen.
Forward-looking
Information
This press release may
contain forward-looking information. Words such as "may", "will",
"should", "could", "anticipate", "believe", "expect", "intend",
"plan", "potential", "continue", and similar expressions may have
been used to identify this forward-looking information. These
statements reflect management's current beliefs and are based on
information currently available to management. In particular,
statements in respect to deferring development projects in
Yemen, and reviewing investment,
diversification and other opportunities to optimize shareholder
value contain forward looking information. Forward-looking
information involves significant risk and uncertainties. A number
of factors could cause actual results to differ materially from the
results discussed in the forward-looking information including, but
not limited to, operational risks, availability of supplies and
services, potential delays or changes in plans with respect to
exploration or development projects or capital expenditures, delays
and interruptions in drilling and completion activities for
undetermined periods, success in drilling activities, changes in
general economic and market conditions and other risk factors.
Although the forward-looking information contained herein are based
upon what management believes to be reasonable assumptions,
management cannot assure that actual results will be consistent
with this forward-looking information. Investors should not place
undue reliance on forward-looking information.
The forward-looking information contained herein is expressly
qualified in its entirety by this cautionary statement. The
forward-looking information included in this press release is made
as of the date of this press release and Calvalley assumes no
obligation to update or revise it to reflect new events or
circumstances except as expressly required by applicable securities
law.
SOURCE Calvalley Petroleum Inc.