Toscana Energy Announces Fiscal Year 2013 Financial and Operating Results and 2013 Reserves

CALGARY, March 17, 2014 /CNW/ - Toscana Energy Income Corporation ("TEI" or the "Corporation") (TSX: TEI) announces financial and operating results for the year ended December 31, 2013, and the Corporation's 2013 year-end reserves.

Financial and operating results:

The following summarizes information contained in the Consolidated Financial Statements and Management's Discussion and Analysis ("MD&A") for the year ended December 31, 2013. This news release should not be considered a substitute for reading the full disclosure documents, which are available on SEDAR at www.sedar.com and on the Corporation's website at www.sprott-toscana.com

  Three months ended December 31, Year ended December 31,
  2013 2012 Change 2013 2012 Change
Average daily production (boe/d) 2,564 1,663 54% 2,496 1,336 87%
             
Petroleum and natural gas revenue, net of royalties ($) 8,687,742 4,921,240 77% 31,799,217 16,309,318 95%
             
Production costs per boe ($) 11.95 16.18 (26%) 13.70 14.85 (8%)
             
Netback ($) 5,655,279 2,819,757 101% 18,891,536 10,510,050 80%
Netback  per boe ($) 23.97 18.43 30% 20.73 21.31 (3%)
             
Funds flow from operations ($) 3,490,597 (222,391) 1670% 12,648,221 5,255,276 141%
             
Capital expenditures ($) 2,166,039 29,175,692 (93%) 41,210,177 36,747,901 12%
             
Dividends paid per common share ($) 0.405 0.405 0% 1.620 1.620 0%
             
Total assets ($)       108,556,655 90,672,218 20%
             
Unused portion of credit facility ($)       27,380,552 11,000,000 149%
             
Shareholder's equity ($)       52,947,274 47,369,463 12%
Common shares outstanding at period end       5,329,963 3,198,697 67%

Corporate Reserves:

The reserves data set forth below is based upon an independent reserve assessment and evaluation prepared by:

  • Sproule Associates Limited ("Sproule") dated February 7, 2014 with an effective date of December 31, 2013 and
  • McDaniel and Associates Consultants Ltd. ("McDaniel") dated March 13, 2014 with an effective date of December 31, 2013
    (together referred to as the "Reserve Reports").

The following summarizes the Corporation's crude oil, natural gas liquids and natural gas reserves and the net present values before income taxes of future net revenue for the Corporation's reserves using forecast prices and costs based on the Reserve Reports. The Reserve Reports have been prepared in accordance with the standards contained in the Canadian Oil and Gas Evaluation Handbook (the "COGE Handbook") and the reserve definitions contained in NI 51-101.

All evaluations and reviews of future net cash flows are stated prior to any provisions for interest costs or general and administrative costs and after the deduction of estimated future capital expenditures for wells to which reserves have been assigned. It should not be assumed that the estimates of future net revenues presented in the tables below represent the fair market value of the reserves. There is no assurance that the forecast prices and cost assumptions will be attained and variances could be material. The recovery and reserve estimates of our crude oil, natural gas liquids and natural gas reserves provided herein are estimates only and there is no guarantee that the estimated reserves will be recovered. Actual crude oil, natural gas and natural gas liquids reserves may be greater than or less than the estimates provided herein for the fiscal year ended 2013.

Reserves Summary

The Corporation's total proved plus probable reserves (excluding royalty interests) increased by 9% in fiscal 2013 to 8,564 Mboe. Proved reserves increased by 4 % to 5,943 Mboe and comprised 70 % of the Corporation's total proved plus probable reserves. The Corporation did not have any proved undeveloped reserves (excluding royalty interests) at December 31, 2013.

The future capital in the Reserve Report (undiscounted) is $2.8 million for the proved and probable reserves and is $0.4 million for total proved reserves.

The following table provides summary reserve information based upon the Reserve Reports and using published price forecasts used by the reserve evaluators (Sproule and McDaniel).

    Oil   Natural Gas   Natural Gas Liquids   Total BOEs
    Company
Interest
Net   Company
Interest
Net   Company
Interest
Net   Company
Interest
Net
    (Mbbl) (Mbbl)   (Mmcf) (Mmcf)   (Mbbl) (Mbbl)   (Mboe) (Mboe)
Proved Producing   1,311.0 1,242.5   23,470.8 22,010.7   627.8 444.6   5,850.5 5,355.7
Non-producing   11.9 11.0   398.5 370.9   14.0 9.9   92.2 82.7
Undeveloped   0.0 1.5   0.0 263.0   0.0 13.8   0.0 59.0
Total Proved   1,322.9 1,255.0   23,869.3 22,644.6   641.8 468.3   5,942.7 5,497.4
Probable   559.3 511.9   10,998.7 10,209.9   228.6 168.1   2,621.2 2,381.6
Total Proved and Probable 1,882.2 1,766.9   34,868.0 32,854.5   870.4 636.4   8,563.9 7,879.0
Notes:
(1) "Company Interest" reserves means the Corporation's working interest (operating and non-operating) share before deduction of royalties and including any royalty interest of the Corporation.
(2) "Net" reserves means the Corporation's working interest (operated and non-operated) share after deduction of royalty obligations, plus the Corporation's royalty interest in reserves.

Reserves Values

The estimated before tax net present value of future net revenues associated with the Corporation's reserves effective December 31, 2013 and based on the published future price forecasts are summarized in the following table:

Reserve Values (M$)            
    Undiscounted 5% 10% 15% 20%
Proved Producing   160,473 123,605 101,927 87,302 76,645
Non-producing   1,393 1,155 977 839 728
Undeveloped   2,072 1,542 1,212 988 827
Total Proved   163,938 126,302 104,116 89,129 78,200
Probable   75,296 44,229 30,111 22,030 16,895
Total Proved and Probable   239,234 170,531 134,227 111,159 95,095
Notes:
(1) The estimated future net revenues are stated before deducting future estimated site restoration costs and are reduced for estimated future abandonment costs and estimated capital for future development associated with the reserves.
(2) The net present value of future revenues does not represent fair market value.

The following table sets forth development costs deducted in the estimation of the future net revenue attributable to the reserve categories noted below.

Year   Forecast Prices and Costs
    Proved
Reserves
Proved plus
Probable Reserves
    (M$) (M$)
2014   170 377
2015   26 1,357
2016   0 309
2017   0 551
2018   0 0
Remainder (FY 2022 and beyond)   231 231
Total Undiscounted (all years)   427 2,825
Total Discounted (10%)   279 2,328

Special Note Regarding Disclosure of Reserves and Resources

Contingent resources is defined in the COGE Handbook as those quantities of petroleum estimated, as of a given date, to be potentially recoverable from known accumulations using established technology or technology under development, but which are not currently considered to be commercially recoverable due to one or more contingencies. Contingencies may include factors such as economic, legal, environmental, political, and regulatory matters, or a lack of markets. It is also appropriate to classify as contingent resources the estimated discovered recoverable quantities associated with a project in the early evaluation stage. Contingent resources are further classified in accordance with the level of certainty associated with the estimates and may be sub classified based on project maturity and/or characterized by their economic status.The contingent resources estimates herein, including the corresponding estimates of before tax present value estimates, are estimates only and the actual results may be greater than or less than the estimates provided herein. There is no certainty that it will be commercially viable or technically feasible to produce any portion of the resources.

Probability

"Low Estimate" is a classification of estimated resources described in the COGE Handbook as being considered to be a conservative estimate of the quantity that will actually be recovered. It is likely that the actual remaining quantities recovered will exceed the Low Estimate. If probabilistic methods are used, there should be a 90% probability (P90) that the quantities actually recovered will equal or exceed the Low Estimate. "Best Estimate" is a classification of estimated resources described in the COGE Handbook as being considered to be the best estimate of the quantity that will actually be recovered. It is equally likely that the actual remaining quantities recovered will be greater or less than the Best Estimate. If probabilistic methods are used, there should be a 50% probability (P50) that the quantities actually recovered will equal or exceed the Best Estimate. "High Estimate" is a classification of estimated resources described in the COGE Handbook as being considered to be an optimistic estimate of the quantity that will actually be recovered. It is unlikely that the actual remaining quantities recovered will exceed the High Estimate. If probabilistic methods are used, there should be a 10% probability (P10) that the quantities actually recovered will equal or exceed the High Estimate.

BOE Equivalency

Barrel of oil equivalents or BOEs may be misleading, particularly if used in isolation. A BOE conversion ratio of 6 Mcf: 1 bbl is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. Given the value ratio based on the current price of crude oil as compared to natural gas is significantly different from the energy equivalency of 6 Mcf: 1 bbl, utilizing a conversion ratio of 6 Mcf: 1 bbl may be a misleading indication of value.

Oil and Gas Advisory

The reserves information contained in this press release has been prepared in accordance with NI 51-101. Complete NI 51- 101 reserves disclosure will be included in our Annual Information Form for the year ended December 31, 2013. Listed below are cautionary statements applicable to our reserves information that are specifically required by NI 51-101:

Individual properties may not reflect the same confidence level as estimates of reserves for all properties due to the effects of aggregation.

With respect to finding and development costs, the aggregate of the exploration and development costs incurred in the most recent financial year and the change during that year in estimated future development costs generally will not reflect total finding and development costs related to reserve additions for that year.

This press release contains estimates of the net present value of our future net revenue from our reserves. Such amounts do not represent the fair market value of our reserves.

Reserves included herein are stated on a company interest basis (before royalty burdens and including royalty interests) unless noted otherwise as well as on a gross and net basis as defined in NI 51-101. "Company interest" is not a term defined by NI 51-101 and as such the estimates of Company interest reserves herein may not be comparable to estimates of "gross" reserves prepared in accordance with NI 51-101 or to other issuers' estimates of company interest reserves.

Non-IFRS measures:

Management uses "netback" and "funds flow from operations" to analyze operating performance.  These terms, as presented, do not have any standardized meaning prescribed by International Financial Reporting Standards ("IFRS") and therefore may not be comparable with the calculation of similar measures for other entities.

Forward-Looking Statements:

This news release contains forward‐looking statements and forward‐looking information within the meaning of applicable securities laws. These statements relate to future events or future performance.  All statements other than statements of historical fact may be forward‐looking statements or information.  Forward‐looking statements and information are often, but not always, identified by the use of words such as "appear", "seek", "anticipate", "plan", "continue", "estimate", "approximate", "expect", "may", "will", "project", "predict", "potential", "targeting", "intend", "could", "might", "should", "believe", "would" and similar expressions.

More particularly and without limitation, this news release contains forward‐looking statements and information concerning the Corporation's petroleum and natural gas production and reserves with respect to the assets to be acquired. The forward‐looking statements and information are based on certain key expectations and assumptions made by management of the Corporation, including expectations and assumptions concerning well production rates and reserve volumes in respect of the assets to be acquired; Project development and overall business strategy. Although management of the Corporation believes that the expectations and assumptions on which such forward looking statements and information are based are reasonable, undue reliance should not be placed on the forward‐looking statements and information since no assurance can be given that they will prove to be correct.

Forward-looking statements and information are provided for the purpose of providing information about the current expectations and plans of management of the Corporation relating to the future. Readers are cautioned that reliance on such statements and information may not be appropriate for other purposes, such as making investment decisions. Since forward‐looking statements and information address future events and conditions, by their very nature they involve inherent risks and uncertainties. Actual results could differ materially from those currently anticipated due to a number of factors and risks. These include, but are not limited to, the risks associated with the oil and gas industry in general such as operational risks in development, exploration and production delays or changes in plans with respect to exploration or development projects or capital expenditures; the uncertainty of reserve estimates; the uncertainty of estimates and projections relating to reserves, production, costs and expenses; health, safety and environmental risks; commodity price and exchange rate fluctuations; marketing and transportation; loss of markets; environmental risks; competition; incorrect assessment of the value of acquisitions and failure to realize the anticipated benefits of acquisitions; ability to access sufficient capital from internal and external sources; failure to obtain required regulatory and other approvals and changes in legislation, including but not limited to tax laws, royalties and environmental regulations. Accordingly, readers should not place undue reliance on the forward‐looking statements, timelines and information contained in this news release. Readers are cautioned that the foregoing list of factors is not exhaustive.

The forward‐looking statements and information contained in this news release are made as of the date hereof and no undertaking is given to update publicly or revise any forward‐looking statements or information, whether as a result of new information, future events or otherwise, unless so required by applicable securities laws or the Toronto Stock Exchange ("TSX").  The forward-looking statements or information contained in this news release are expressly qualified by this cautionary statement.

About Toscana Energy Income Corporation

Toscana Energy Income Corporation is a conventional oil and gas producer with the mandate to acquire high quality, long life oil and gas assets including royalties, non-operated working interests and unitized production for yield and capital appreciation. Toscana Energy Income Corporation is managed by Sprott Toscana through Toscana Energy Corporation. Sprott Toscana is a member of the Sprott Group of Companies.

About Sprott Toscana

Sprott Toscana (formerly Toscana Merchant Group) is a team of Calgary-based energy specialists that manage three separate businesses: Toscana Energy Income Corporation (through Toscana Energy Corporation), Toscana Financial Income Trust and Maple Leaf Energy Income LPs. In July 2012, Toscana Merchant Group joined the Sprott Group of Companies when it was acquired by Sprott Inc. (TSX: SII), Canada's leading alternative asset manager and a global leader in resource investing.

Neither the TSX nor its Regulation Services Provider (as that term is defined in the policies of the TSX) accepts responsibility for the adequacy or accuracy of this release.

SOURCE Toscana Energy Income Corporation

For further information:

For further information, please visit our website at www.sprott-toscana.com or contact:

Joseph S. Durante, Chief Executive Officer
Tel: (403) 410-6793
Fax: (403) 444-0090
E-Mail: jdurante@toscanacapital.com