Insignia Energy Ltd. announces its 2012 third quarter financial and operating results

CALGARY, Nov. 14, 2012 /CNW/ - Insignia Energy Ltd. ("Insignia" or the "Company") (TSX: ISN) is pleased to announce its financial and operating results for the third quarter ended September 30, 2012.

FINANCIAL AND OPERATING HIGHLIGHTS 

  • Third quarter production averaged 3,073 boe/d; consisting of 13,960 mcf/d of natural gas and 746 bbls/d of crude oil and NGL's.  On a bbls/d, mcf/d or boe basis, production has been relatively flat year over year and quarter over quarter or specifically, on a boe/d basis, up four per cent from the same quarter in 2011 and down four per cent from the previous quarter;
  • Funds from operations for the third quarter were $3.1 million, which is relatively flat from the previous quarter but down 39% from the same quarter a year ago.  The decrease in funds from operations is largely due to a 40% drop in realized natural gas prices in the third quarter of 2012 compared to the third quarter of 2011; and,
  • During the third quarter of 2012, the Company's focus was on the drilling and completion of one (1.0 net) successful Cardium horizontal well and the successful completion of two (2.0 net) Cardium horizontal wells on its Pembina property.  The activity also included the equipping of two (1.0 net) Lower Doig horizontal wells and one (0.5 net) Montney horizontal well on its Pouce Coupe property.  A majority of the activity was carried over from the second quarter due to weather related delays and two (1.0 net) Lower Doig horizontal wells were placed on production late in the third quarter.  The Cardium horizontal wells on its Pembina property were equipped subsequent to the quarter and two (2.0 net) were placed on production as of November 14, 2012. The Company's current production is approximately 3,300 boe/d which does not include the one (0.5 net) Montney horizontal well on its Pouce Coupe property and one (1.0) net Cardium horizontal on its Pembina property. Both of these wells are anticipated to be place on production in the fourth quarter.

Below are the financial and operating statistics for the third quarter of 2012:

  Three months ended Nine months ended
  Sept 30,
2012
June 30,
2012
Sept 30,
2011
Sept 30,
2012
Sept 30,
2011
Financial          
($ thousands, except $ per share amounts)          
Oil and natural gas sales 8,382 8,599 10,507 26,917 35,366
Funds from operations(1) 3,123 3,334 5,085 10,816 16,897
      Per share - Basic and diluted(1) 0.05 0.06 0.17 0.18 0.55
Net earnings (loss) (1,672) (15,795) (146) (16,419) (2,236)
      Per share - Basic and diluted (0.03) (0.27) (0.00) (0.28) (0.07)
Net debt (1) 12,442 9,396 36,316 12,442 36,316
           
Total assets 143,072 141,515 164,810 143,072 164,810
Weighted average common shares outstanding (thousands):
      Basic and diluted
58,641
58,860
30,660
58,820
30,660
Operating
(boe conversion - 6:1 basis)
         
Average daily production
      Natural gas (mcf/d)
      Oil and NGL (bbls/d)
13,960
746
14,149
846
13,258
747
14,264
819
14,862
836
      Total (boe/d) 3,073 3,204 2,957 3,196 3,313
Product prices(2)
      Natural gas ($/mcf)
      Oil and NGL ($/bbl)
2.41
76.93
2.03
77.77
4.02
81.52
2.30
79.77
4.03
83.35
      Total ($/boe) 29.65 29.49 38.62 30.74 39.10
Operating netback ($/boe)(1) 14.24 15.61 22.52 15.90 22.85

(1)  Funds from operations, funds from operations per share, operating netback and net debt are not defined by IFRS in Canada and are referred to as non-IFRS measures.  Funds from operations is cash provided by operating activities before changes in non-cash working capital and before abandonment and reclamation costs.  Funds from operations per share is calculated by dividing funds from operations by the weighted average number of shares outstanding, consistent with the calculation of net loss per share.  Operating netback per boe is calculated as total oil and natural gas revenue less royalties, operating costs, transportation costs and net of any realized income on financial derivative contracts, calculated on a boe basis.  Net debt is the sum of bank indebtedness and working capital but excludes financial derivative contracts.
(2)  The average selling prices reported are before transportation charges.

Additional Third Quarter 2012 Results

  • Insignia exited the quarter with net debt of $12.4 million on its current credit facility with a borrowing base of $45 million.  The facility was renewed subsequent to the quarter with our next review expected in the second quarter of 2013;
  • Net capital expenditures for the quarter were $5.4 million with the majority of this capital, $5.2 million, related to drilling, completion and equipping expenditures.  Net capital expenditures for the first nine months of 2012 were $18.4 million and this generally equals the Company's first nine months cash flow of $10.8 million and property dispositions of $5.8 million; and,
  • The Board of Directors of Insignia had previously approved a 2012 capital budget of $25 million.  While the Company expects that its total 2012 expenditures will be within this guidance, the timing of these expenditures has shifted primarily due to wet weather in both the second and third quarters.  This has also had the effect of pushing out our production expectations from the third quarter into the fourth quarter of 2012.

Change in Directors

Insignia has accepted the appointment of Mr. Dean Schultz as a member of the board of directors effective November 14, 2012. Mr. Schultz is currently the Vice President, Energy at Brookfield Asset Management ("BAM") and was formally the Chief Financial Officer at Waldron Energy Corp. before joining BAM in September 2012.  Mr. Schultz replaces Mr. Brian Baker, also of BAM who has resigned as director of the Company effective November 14, 2012. The Company appreciates Mr. Baker's contributions to the development of the Company and its operations over the past four years and would like to thank him for his service.

Outlook

While natural gas prices modestly strengthened from the second quarter to the third quarter of 2012, they are still well below the levels that the Company feels justify ramping up its natural gas drilling activity.  In the interim, and notwithstanding our healthy balance sheet, the Company will continue to strive to live within cash flow, net of dispositions, while attempting to keep production flat.  In 2012, we have also focused a material amount of our drilling activities on oil weighted expenditures.

On a positive note, natural gas prices have strengthened subsequent to the end of the third quarter and the overall natural gas supply/demand fundamentals appear to be improving as we approach 2013.  Again, although we are generally encouraged by this, we will continue to take a conservative fiscal approach to our spending.

In short, it is not our intention to accelerate the production of our quality, long life natural gas assets at the expense of either participating in marginal economic projects or eroding our balance sheet.  We continue to be optimistic, yet patient, that natural gas prices will recover and the intrinsic value of our resource assets will be realized, including the over 150 net drilling locations that have already been identified on such assets.

Advisories
The discussion of our oil and natural gas production and related performance measures is presented on a working-interest, before royalties basis.  For the purpose of calculating unit information, natural gas is converted to a barrel of oil equivalent ("boe") using six thousand cubic feet of natural gas equal to one barrel of oil.  Readers are cautioned that boe's may be misleading, particularly if used in isolation.  A conversion ratio of six thousand cubic feet of natural gas to one barrel of oil is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.  In addition, as the value ratio between natural gas and crude oil based on the current prices of natural gas and crude oil is significantly different from the energy equivalency of 6:1, utilizing a conversion on a 6:1 basis may be misleading as an indication of value.  In this press release: boe/d means boe per day; mcf/d means thousand cubic feet per day, bbl means barrel, mbbl means thousand barrels, mmcf means million cubic feet; mboe means thousand boe's and NGLs means natural gas liquids.

Any reference to production tests or final production test rates included in this press release are not necessarily indicative of long-term performance or ultimate recovery.

Investors are further cautioned that the preparation of financial statements in accordance with International Financial Reporting Standards as adopted by Canadian generally accepted accounting principles ("Canadian GAAP") requires management to make estimates and assumptions that affect the reported amounts of our assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and our revenues and expenses during the reporting period.  Our management reviews these estimates, including those related to accruals, environmental and asset retirement obligations, income taxes, and the determination of proved reserves on an ongoing basis.  Changes in facts and circumstances may result in revised estimates and actual results may differ from these estimates.

Certain financial measures referenced to in this news release are not prescribed by Canadian GAAP.  These non-GAAP financial measures do not have any standardized meaning and therefore are unlikely to be comparable to similar measures presented by other companies.  We include these measures because management utilizes them to analyze operating and financial performance.  The additional information should not be considered in isolation or as a substitute for measures of performance prepared in accordance with the Canadian GAAP. We use funds from operations which is cash provided by operating activities before changes in non-cash working capital and before abandonment and reclamation costs.  Funds from operations per share is calculated by dividing funds from operations by the weighted average number of shares outstanding, consistent with the calculation of net loss per share.  Operating netback per boe is calculated as total oil and natural gas revenue less royalties, operating costs, transportation costs and net of any realized financial instrument income calculated on a boe basis.  Net debt is the sum of bank indebtedness and working capital but excludes financial derivative contracts. 

Forward Looking Statements

Statements throughout this Press Release that are not historical facts may be considered to be "forward looking statements". These forward looking statements sometimes include words to the effect that management believes or expects a stated condition or result. All estimates and statements that describe the Company's objectives, goals, or future plans, including, without limitation, management's assessment of future plans and operations, anticipated commodity prices and their impact, anticipated demand for commodity prices, budgeted capital expenditures and the nature of those expenditures drilling plans and the timing of drilling and wells to be brought on production, completion and tie-in of wells and the timing thereof and the timing of the next review of the credit facility, may constitute forward-looking statements under applicable securities laws and necessarily involve risks including, without limitation, risks associated with oil and gas exploration, development, exploitation, production, marketing and transportation, volatility of commodity prices, imprecision of reserve estimates, environmental risks, competition from other producers, incorrect assessment of the value of acquisitions, failure to complete and/or realize the anticipated benefits of acquisitions, delays resulting from or inability to obtain required regulatory approvals and ability to access sufficient capital from internal and external sources and changes in the regulatory and taxation environment. As a consequence, the Company's actual results may differ materially from those expressed in, or implied by, the forward-looking statements. Forward-looking statements or information are based on a number of factors and assumptions which have been used to develop such statements and information but which may prove to be incorrect.  Although the Company believes that the expectations reflected in such forward-looking statements or information are reasonable, undue reliance should not be placed on forward-looking statements because the Company can give no assurance that such expectations will prove to be correct. In addition to other factors and assumptions which may be identified in this document, assumptions have been made regarding, among other things: the ability of the Company to obtain equipment and services in a timely and cost efficient manner; drilling results; the ability of the operator of the projects which the Company has an interest in to operate the field in a safe, efficient and effective manor; field production rates and decline rates; the ability to replace and expand oil and natural gas reserves through development of exploration; future oil and natural gas prices; interest rates; the regulatory framework regarding royalties, and the ability of the Company to successfully market its oil and natural gas products. Readers are cautioned that the foregoing list of factors is not exhaustive. Additional information on these and other factors that could affect the Company's operations and financial results are included elsewhere herein and in reports on file with Canadian securities regulatory authorities and may be accessed through the SEDAR website (www.sedar.com, or at the Company's website www.insigniaenergy.ca). Furthermore, the forward-looking statements contained in this Press Release are made as at the date of this Press Release and the Company does not undertake any obligation to update publicly or to revise any of the included forward-looking statements, whether as a result of new information, future events or otherwise, except as may be expressly required by applicable securities laws.

Insignia is a publicly listed junior oil and gas exploration and development company based in Calgary, Alberta. Insignia's shares trade on the TSX under the symbol "ISN".

Copies of the Financial Statements and Management's Discussion and Analysis for the period ended September 30, 2012 will be filed with Canadian securities regulators and on SEDAR on November 14, 2012 and accessible at www.sedar.com or by visiting Insignia's website at www.insigniaenergy.ca.

 

 

SOURCE: Insignia Energy Ltd.

For further information:

Jeff Newcommon
President & CEO
(403) 536-8138
info@insigniaenergy.ca