Exall Energy Corporation announces results for the three months and year ended December 31, 2013

CALGARY, March 19, 2014 /CNW Telbec/ - Exall Energy Corporation ("Exall" or the "Company") (TSX:EE and TSX:EE.DB) is pleased to announce its financial and operating results for the three months and fiscal year ended December 31, 2013, and that it has filed its Annual Information Form which contains reserves data and other oil and gas information required by Section 2.1 of NI 51-101.  Exall's annual filings can all be found at www.exall.com or www.sedar.com.

Exall's fiscal 2013 production averaged 1,138 boe per day, representing a 5 percent increase from the fiscal 2012 production average of 1,082 boe per day. Exall's fourth quarter 2013 well optimization operations resulted in downtime which contributed to the 12 percent decrease in the fourth quarter 2013 production average to 978 boe per day from the third quarter 2013 production average of 1,116 boe per day. Post optimization was restored to 1,056 boe per day in December with ongoing well optimization efforts scheduled for 2014.

Highlights of Fiscal 2013 include:

  • A 5 percent increase in the fiscal 2013 production average to 1,138 boe per day from the fiscal 2012 production average of 1,082 boe per day.
  • A December 2013 production average of 1,056 boe per day.
  • A December 31, 2013 proved plus probable net present value per share of $0.48 (Before Tax, discounted at 10%) based on 66.6 million fully diluted shares
  • A December 31, 2013 company working interest reserves are 2,146.6 Mboe total proved, a 16% decrease from December 31, 2012, and 3,574.0 Mboe proved plus probable, a 23% decrease from December 31, 2012, a direct result of Exall's curtailed drilling activities during fiscal 2013.
  • The December 31, 2013 net present value of the proved plus probable reserves decreased 19% from December 31, 2012 to $91.3 million, discounted at 10 percent, forecast prices, before tax.
  • Reserve life index of 5.2 years total proved and 8.6 years proved plus probable based on the 2013 annual average production rate and year-end reserves, this represents an decrease of 20% in the total proved reserve life index and a 26% decrease in the proved plus probable reserve life index from December 31, 2012
  • During fiscal 2013 the Company spud 3.0 gross oil wells (2.39 net) in the Marten Mountain / Mitsue area.
  • Completed upgrades at the Marten Mountain pipeline and battery facility alleviating certain constraints and eliminating certain operational expenses, as a result operating expenses were reduced by 8 percent or $1.06 per boe to $11.81 per boe in 2013 from $12.88 in 2012.
  • The average price received per boe in the calendar year ended December 31, 2013 increased 10 percent over the same period in 2012 to $87.27.

HIGHLIGHTS 3 months ended December 31 Year ended December 31
In thousands of dollars 2013 2012 %
change
2013 2012 %
change
Financial ($)            
Gross revenue 7,307 8,027 (9) 36,262 30,699 15
Funds from operations 1,521 3,918 (61) 12,896 15,625 (17)
       Basic per share 0.02 0.06 (67) 0.19 0.25 (24)
       Diluted per share 0.01 0.04 (75) 0.12 0.15 (20)
Net income (loss) (17,301) 751 (2,404) (16,428) 3,633 (552)
       Basic per share (0.26) 0.01 (2,700) (0.25) 0.06 (517)
       Diluted per share (0.26) 0.01 (2,700) (0.25) 0.05 (600)
Capital expenditures, net 4,055 8,180 (50) 12,154 44,697 (73)
             
Operations            
Daily production            
        Crude oil (bbl) 908 1,042 (13) 1,059 988 7
        Natural gas liquids (bbl) 17 14 21 18 18 -
        Natural gas (mmcf) 319 297 7 368 457 (19)
Total daily production (boe @ 6:1) 978 1,106 (12) 1,138 1,082 5
Netback per boe (6:1) ($) 38.07 51.22 (26) 47.21 52.65 (10)

Outlook

Exall is a light oil-weighted company with high operating margins. Starting from a modest production base of light oil and gas, the Company has historically, excluding the 2013 Reservoir conformance challenges in the south waterflood, shown itself capable of setting and achieving ambitious production and cash flow targets (as can be seen in the chart below reflecting production), with production growth that currently translates to 31.4 percent compounded annually from 2007. Exall will continue to focus on organic growth through exploitation and expansion of its existing oil producing properties.

http://files.newswire.ca/357/Outlook.pdf

While Exall continues to seek debt restructure alternatives, and will maintain this focus until completed, the Capital Expenditure Program for 2014 is slated to continue to explore and develop the North Waterflood Gilwood channel extension of the Central Waterflood channel. Successful drilling on the Central Waterflood / North Waterflood channel extension in 2014 is expected to add 500 boepd net (based on an average working interest of 71.5%) during the latter half of 2014. It is a tribute to the quality of the Gilwood reservoir that Exall has been able to maintain the level of production we have today utilizing a modest amount of maintenance capital.

Capital expenditures through Q1 2014 will continue to focus on the "low-hanging fruit" (LHF) opportunities. Short term focus of capital will be firstly waterflood implementation and secondly the lowest-risk, lowest-cost infill wells in the North Waterflood area. Two water injector conversions are to be implemented through the first and second quarters of 2014. Exall plans to drill up to 4 gross development wells in 2014 with a further 4 gross development wells and 1 gross exploration well in 2015, subject to cash flow from operations. These wells are all high-impact, low risk locations identified through previous drilling and could have a significant impact on the Company's production if successful. Continued drilling success on the North Waterflood channel extension will drive production growth on an annual basis through 2014 and 2015.

While reservoir conformance issues presented challenges in the South Waterflood during 2012 and 2013, optimization efforts aimed at improving well performance and oil recovery appear to have had a positive effect. With the stabilization of the South Waterflood production, Exall turned its focus to debt restructuring and spent a significant amount of time in discussions with various parties regarding debt restructuring. As a result, Exall's Capital Expenditure Program for 2013, was adjusted to concentrate on well optimization efforts with minimal capital being put towards higher risk drilling activities.

The Company's Marten Mountain oil production attracts a price based on the average of the daily settlement price of the NYMEX near month Light Sweet Crude Oil contract as it trades, excluding weekends / holidays, for the calendar month of production, plus the weighted average of the Net Energy Index and the NGX index for Light Sweet Crude Oil, plus the one month prior Enbridge Sweet WADF. The Company's oil price received averages approximately $1.63 less than the posted Edmonton Par price at the wellhead. Based on the $1.63 differential Exall expects its January 2014 price received was $88.21 per barrel, and its February 2014 price received was $104.60 per barrel. This pricing estimate is approximately $13.50 higher than the posted Western Canadian Select price being received by other entities during these periods.

Marten Mountain production is estimated to receive an average price of approximately $85.65, Exall is currently generating an operating netback of approximately $43.50 and a corporate netback of approximately $27.70 after general and administrative expenses and interest expenses. At an average of 1,200 boepd (based on an average working interest of 71.5%) over the entire year, the Company would generate a cash flow from operations of approximately $12.0 million for 2014.

Exall's current debt level is approximately $59.0 million which includes $26.0 million of revolving demand credit held under a facility with an alternate Canadian lender that bears interest at the lender's base prime rate plus 1.25 percent, $10.0 million of revolving demand credit held under a facility with an alternate Canadian lender that bears interest at the lender's base prime rate plus 3.00 percent, which are reviewed periodically by the lender. To date, these facilities have not been renewed for 2014. The balance of the debt is a $23.0 million Convertible Debenture with a maturity date of March 2017 that pays an annual interest rate of 7.75%.

Overview

Exall's average daily production for the fourth quarter of 2013 decreased 12 percent to 978 barrels of oil per day ("boe/d") from 1,106 boe/d in the fourth quarter of 2012.

http://files.newswire.ca/357/Overview.pdf

During the fourth quarter of 2013 Exall experienced significant downtime with two wells due to cleanout operations which were performed on the wells. Additionally, Exall had a casing gas compressor engine fail at the north waterflood which significantly reduced volumes for a period of time. The cleanout operations were completed by year end, and the casing gas compressor engine was replaced successfully during the quarter.

Results of Operations

Oil and gas exploration and development expenditures were $4,055 for the fourth quarter of 2013 and $12,154 for the fiscal year ended December 31, 2013.  During the fourth quarter of 2013 the Company participated in the drilling of 1.0 gross oil well (0.80 net) in the Marten Mountain / Mitsue area.  During fiscal 2013 the Company spud 3.0 gross oil wells (2.39 net) in the Marten Mountain / Mitsue area.

The Company has acquired 480 gross (353 net) acres of undeveloped land in the Mitsue area, during the fiscal year ended December 31, 2013. As at December 31, 2013, the Company had 188,960 acres (140,728 acres net) of undeveloped land in Alberta, Canada.

Production for 2013 of 1,138 boe per day represents a 5% increase over 2012. Funds from operations for the year of $12.9 million or $0.19 per share were primarily the result of the relatively flat production, increased commodity prices received during the year (Exall's prices received were up 10% during 2013 averaging $87.27 per boe compared to $79.52 per boe in 2012), significantly increased royalty prices paid during the year (Exall's royalties paid were up 102% during 2013 averaging $28.24 per boe compared to $13.99 per boe in 2012), and decreased operating costs paid during the year (Exall's operating costs were down 8% during 2013 averaging $11.82 per boe compared to $12.88 per boe in 2012).

     
  Three months ended
December 31
Year ended
December 31
Netback per boe (6:1) $ 2013 2012 %
Change
2013 2012 %
Change
             
Production revenue 81.21 78.43 4 87.27 79.52 10
Royalties 29.30 15.26 92 28.24 13.99 102
Operating expenses 13.84 11.95 16 11.82 12.88 (8)
Operating netbacks ($/boe) 38.07 51.22 (26) 47.21 52.65 (10)

Reserves Evaluation

The MD&A presents plans and expectations of the Company shaped by Management's view of how future events may unfold.  See Risk Factors - Reserve Estimates located at the end of the MD&A.

Exall retained AJM / Deloitte Petroleum Consultants ("Deloitte") to conduct an independent evaluation of Exall's oil and gas reserves effective December 31, 2013, which was provided to Exall in an Evaluation Report dated February 15, 2014 (herein referred to as the "Deloitte Evaluation"). The oil and gas reserves and income projections were estimated by Deloitte in accordance with the Canadian Oil and Gas Handbook ("COGEH") and National Instrument 51-101 ("NI 51-101").

Summary of Reserve Value - Forecast Pricing

The following tables, extracted from the Deloitte Evaluation, summarize the Corporation's total reserves and net present values of future net reserves based on forecast pricing and costs as at December 31, 2013.  It should not be assumed that the estimated future net cash flow shown below is representative of the fair market value of the Company's properties. There is no assurance that such price and cost assumptions will be attained and variances, both positive and negative, could be material.

         
 
Company Gross Reserves(1)
as at December 31, 2013
Light &
medium oil
(Mbbl)
Natural
gas
(MMcf)
 
NGL
(Mbbl)
 
Total
(Mboe)
         
Proved developed producing 1,198.8 827.0 40.0 1,376.7
Proved developed non-producing 179.7 50.8 2.5 190.7
Proved undeveloped 512.4 310.8 15.0 579.2
Total proved 1,890.9 1,188.6 57.5 2,146.6
Probable 1,232.3 907.3 43.9 1,427.4
Total proved plus probable 3,123.2 2,095.9 101.4 3,574.0

(1) Columns and rows may not add due to rounding

   
  Before Income Tax
Forecast Net Revenue(1) $000s, discounted at
as at December 31, 2013 0% 5% 10% 15%
         
Proved developed producing 54,829.7 48,211.4 43,159.7 39,200.4
Proved developed non-producing 6,972.3 5,982.6 5,221.9 4,621.9
Proved undeveloped 18,025.6 15,338.7 13,199.9 11,465.6
Total proved 79,827.5 69,532.6 61,581.5 55,287.9
Probable 50,030.8 37,794.0 29,719.4 24,034.9
Total proved plus probable 129,858.4 107,326.6 91,300.9 79,322.8

(1) Columns and rows may not add due to rounding

   
  After Income Tax
Forecast Net Revenue(1) $000s, discounted at
as at December 31, 2013 0% 5% 10% 15%
         
Proved developed producing 54,829.7 48,211.4 43,159.7 39,200.4
Proved developed non-producing 6,972.3 5,982.6 5,221.9 4,621.9
Proved undeveloped 18,025.6 15,338.7 13,199.9 11,465.6
Total proved 79,827.5 69,532.6 61,581.5 55,287.9
Probable 41,139.8 31,062.3 24,442.3 19,786.4
Total proved plus probable 120,967.4 100,594.9 86,023.8 75,074.3

(1) Columns and rows may not add due to rounding

Summary of Forecast Pricing

Future prices used in the forecast of net revenue are based on those estimated by Deloitte as at December 31, 2013. The following table sets forth the relevant portions of Deloitte's forecast of commodity prices and costs used in the Deloitte Evaluation:

Year WTI
Crude Oil
($US/BBL)
Edmonton
City Gate
($CDN/BBL)
Natural Gas
at AECO
($CDN/MCF)
Natural Gas Liquids Currency
Exchange
Rate
($US/CDN)
Price
Inflation
Rate
(%)
Cost
Inflation
Rate
(%)
Edm.
Propane
($CDN/BBL)
Edm.
Butane
($CDN/BBL)
Edm. C5+
($CDN/BBL)
2014 $95.00 $95.75 $3.70 $33.50 $76.60 $105.35 0.94 0.0 0.0
2015 $91.80 $92.30 $3.95 $32.30 $73.85 $101.55 0.94 2.0 2.0
2016 $91.55 $95.20 $4.10 $52.35 $76.15 $104.70 0.94 2.0 2.0
2017 $91.25 $94.80 $4.30 $52.15 $75.85 $104.30 0.94 2.0 2.0
2018 $92.00 $95.60 $4.55 $52.60 $76.50 $105.15 0.94 2.0 2.0
2019 $93.85 $97.50 $4.85 $53.65 $78.00 $107.25 0.94 2.0 2.0
2020 $95.70 $99.45 $5.25 $54.70 $79.55 $109.40 0.94 2.0 2.0
2021 $97.65 $101.45 $5.70 $55.80 $81.15 $111.60 0.94 2.0 2.0
2022 $99.60 $103.45 $6.10 $56.90 $82.75 $113.80 0.94 2.0 2.0
2023 $101.60 $105.55 $6.45 $58.05 $84.45 $116.10 0.94 2.0 2.0
2024 $103.60 $107.65 $6.95 $59.20 $86.10 $118.40 0.94 2.0 2.0
2025 $105.70 $109.80 $7.10 $60.40 $87.85 $120.80 0.94 2.0 2.0
2026 $107.80 $112.00 $7.25 $61.60 $89.60 $123.20 0.94 2.0 2.0
2027 $109.95 $114.25 $7.35 $62.85 $91.40 $125.70 0.94 2.0 2.0
2028 $112.15 $116.50 $7.50 $64.10 $93.20 $128.15 0.94 2.0 2.0
2029 $114.40 $118.85 $7.65 $65.35 $95.10 $130.75 0.94 2.0 2.0
2030 $116.70 $121.20 $7.80 $66.65 $96.95 $133.30 0.94 2.0 2.0
2031 $119.00 $123.65 $8.00 $68.00 $98.90 $136.00 0.94 2.0 2.0
2032 $121.40 $126.10 $8.15 $69.35 $100.90 $138.70 0.94 2.0 2.0
2033 $123.85 $128.65 $8.30 $70.75 $102.90 $141.50 0.94 2.0 2.0
2034
+
2.0 %
Escalated
2.0 %
Escalated
2.0 %
Escalated
2.0 %
Escalated
2.0 %
Escalated
2.0%
Escalated
0.94 2.0 2.0


Reserve Reconciliation        
 
Reserve Reconciliation(1)
(Company Working Interest)
Light &
medium oil
(Mstb)
Natural
gas
(MMcf)
 
NGL
(Mstb)
 
Total
(Mboe)
         
Proved        
     December 31, 2012 2,465.4 492.1 21.9 2,569.4
     Extensions & improved recovery 152.1 58.2 2.8 164.6
     Technical revisions (350.5) 780.8 39.7 (180.7)
     Economic Factors 6.5 1.7 0.1 6.8
     Acquisitions 0.0 0.0 0.0 0.0
     Dispositions 0.0 0.0 0.0 0.0
     Production (382.5) (144.2) (7.0) (413.5)
     December 31, 2013 1,890.9 1,188.6 57.5 2,146.6
         
Probable        
     December 31, 2012 1,999.1 286.7 12.8 2,059.7
     Extensions & improved recovery 66.2 25.3 1.2 71.7
     Technical revisions (831.4) 596.3 29.9 (702.1)
     Economic Factors (1.7) (1.1) (0.1) (1.9)
     Acquisitions 0.0 0.0 0.0 0.0
     Dispositions 0.0 0.0 0.0 0.0
     Production 0.0 0.0 0.0 0.0
     December 31, 2013 1,232.3 907.3 43.9 1,427.4
         
Proved plus Probable        
     December 31, 2012 4,464.5 778.8 34.7 4,629.1
     Extensions & improved recovery 218.3 83.5 4.0 236.2
     Technical revisions (1,181.9) 1,377.1 69.6 (882.7)
     Economic Factors 4.8 0.6 0.0 4.9
     Acquisitions 0.0 0.0 0.0 0.0
     Dispositions 0.0 0.0 0.0 0.0
     Production (382.5) (144.2) (7.0) (413.5)
     December 31, 2013 3,123.2 2,095.9 101.3 3,574.0

(1) Columns and rows may not add due to rounding

About Exall

Exall is a junior oil and gas company active in its business of oil and gas exploration, development and production from its properties in Alberta. Exall Energy is currently developing the new Mitsue area "Marten Mountain" discovery in north-central Alberta.

Exall Energy currently has 66,634,854 common shares outstanding. The Company's common shares are listed on the Toronto Stock Exchange under the trading symbol EE. The Company's convertible debentures are listed on the Toronto Stock Exchange under the trading symbol EE.DB.

Reader Advisory

This news release contains forward-looking statements, which are subject to certain risks, uncertainties and assumptions, including those relating to results of operations and financial condition, capital spending, financing sources, commodity prices and costs of production. By their nature, forward-looking statements are subject to numerous risks and uncertainties that could significantly affect anticipated results in the future and, accordingly, actual results may differ materially from those predicted. A number of factors could cause actual results to differ materially from the results discussed in such statements, and there is no assurance that actual results will be consistent with them. Such factors include fluctuating commodity prices, capital spending and costs of production, and other factors described in the Company's most recent Annual Information Form under the heading "Risk Factors" which has been filed electronically by means of the System for Electronic Document Analysis and Retrieval ("SEDAR") located at www.sedar.com. Such forward-looking statements are made as at the date of this news release, and the Company assumes no obligation to update or revise them, either publicly or otherwise, to reflect new events, information or circumstances, except as may be required under applicable securities law.

For the purposes of calculating unit costs, natural gas has been converted to a barrel of oil equivalent (boe) using 6,000 cubic feet equal to one barrel (6:1), unless otherwise stated. The boe conversion ratio of 6 mcf: 1 bbl is based on an energy equivalency conversion method and does not represent a value equivalency; therefore boe may be misleading if used in isolation. This conversion conforms to the Canadian Securities Regulators' National Instrument 51-101 - Standards of Disclosure for Oil and Gas Activities.

 

SOURCE Exall Energy Corporation

PDF available at: http://stream1.newswire.ca/media/2014/03/19/20140319_C6013_DOC_EN_38137.pdf

PDF available at: http://stream1.newswire.ca/media/2014/03/19/20140319_C6013_DOC_EN_38138.pdf

For further information:

please contact:

Exall Energy Corporation
Frank S. Rebeyka
Vice Chairman
Tel: 403-815-6637

Roger N. Dueck
President & CEO
Tel: 403-237-7820 x 223
info@exall.com

Please visit Exall Energy's website at: www.exall.com

Renmark Financial Communications Inc.
Bettina Filippone : bfilippone@renmarkfinancial.com
Preeti Athwal : nmarks@renmarkfinancial.com
Tel.: (416) 644-2020 or (514) 939-3989
www.renmarkfinancial.com