Stream Announces 2013 Annual Results
CALGARY, March 31, 2014 /CNW/ - Stream Oil & Gas Ltd. (TSX-V: SKO) (the "Company") is pleased to report its financial and operating results for the year ended November 30, 2013.
2013 Summary of Results
Three Months Ended
|(US$000s, except as noted)||2013||2012*||2013||2012*|
|Revenue, net of mineral tax royalty||8,364||7,781||32,292||28,677|
|Net operating income (loss)||6,453||2,586||22,984||20,366|
|Funds from (used in) operations||(2,849)||4,566||14,309||13,339|
|Net income (loss)||(7,393)||(2,229)||(5,495)||1,975|
|Per share - basic & diluted||(0.12)||(0.03)||(0.08)||0.03|
|Additions to property & equipment||(6,645)||5,974||15,399||29,953|
|Average production (boed)|
|Net production (Stream's share)||880||1,043||1,009||1,019|
|Gross average price ($/boed)||74.63||76.40||73.68||74.81|
|As at||Nov. 30, 2013||Nov. 30, 2012|
|Cash and cash equivalents||1,962||1,147|
|Weighted average shares outstanding - basic (#)||66,686,431||66,503,921|
|* Restated to reflect deferred income tax|
The Company had to deal with a challenging business environment in 2013 related to the newly elected government in Albania. As part of this change, the newly elected government, including Albpetrol Sh.A. ("Albpetrol") and the Albanian National Agency for Natural Resources ("AKBN"), had a transition period that resulted in delays in resolving key matters related to tax neutralization and the transfer of the Ballsh-Hekal oilfield to Stream. In late 2013, the new Albanian government confirmed its support for the Company and has agreed to resolve the outstanding matters in an expeditious manner, including commencing immediate procedures for the transfer of the balance of the Ballsh-Hekal oilfield to Stream.
During the transition period to the newly elected Government, Stream continued its production operations in the Cakran-Mollaj, Gorisht-Kocul and Ballsh-Hekal fields. Concurrently, Stream finalized its preparations for the Delvina gas field development horizontal drilling, which commenced drilling activities in March 2014. In anticipation of the takeover of the remainder of Ballsh-Hekal field, Stream optimized its detailed plans for takeover and outstanding matters related to infrastructure assets, leveraging lessons learnt from prior field takeovers. Stream also completed upgrades of the export facilities at Petrolifera in Vlore, enabling it to handle larger cargos. This will allow the Company to realize higher net revenues in the mid-future.
In March 2013, Stream and Albpetrol finalized the amending agreements for the neutralization of the mineral royalty tax, which was imposed and payable by Stream since 2008. Neutralization is expected to be achieved by a combination of reducing Stream's future pre-existing production payments to Albpetrol, providing Albpetrol's share of pre-existing production volumes to the Company (valued at approximately $11.4 million) and the turnover of infrastructure assets. Neutralization is mandated by the stabilization provisions within the original concession agreements for Stream's fields. Submitted to the Ministry of Environment, Technology and Energy ("METE"), the amended agreements did not receive final ratification since the government suspended significant decision making in support of the effective governance framework imposed on Albania by the European Union ("EU") in light of Albania's imminent entry into EU.
Subsequent to November 30, 2013, the government engaged with Stream to negotiate obligations between Stream and Albpetrol regarding outstanding oil royalties and oil delivered in excess. The final agreement resulted in Stream recording a net liability of $11.4 million at November 30, 2013. To significantly offset this obligation, Stream had negotiated a settlement with Albpetrol in March 2013 to reduce this liability by royalty mineral tax paid, which at November 30, 2013 was $9.4 million. This agreement is awaiting amendments and final ratification.
They have committed to finalize all amendments within 2014, including timely adjustments to the temporary reversal of the implementation of the March 2013 amending agreements as agreed upon previously by Albpetrol (see 'Operational Update', 'Liquidity and Capital Resources' and 'Outlook' sections in the Company's 2013 Management's Discussion and Analysis).
Mid-2013 also saw the ownership change of the local ARMO refining corporation to an international conglomerate, where METE continues to be a 15% shareholder. As part of the amending agreements noted above, Stream is released from the mandatory supply of Delvina gas to ARMO. This enables the Company to monetize its gas through thermal power generation. With the expected unplugging of the Delvina 12 well combined with discharge of the ARMO provision by Albpetrol/METE, Stream's consumer, Thermo Energy, will be able to commence sustained generation operations, and thus, monetization of the Company's gas. The installed power generation facility was commissioned and tested using the Delvina 4 well gas supply.
- Despite the challenging environment, net production remained stable averaging 1,009 boed compared to 1,019 boed in 2012.
- Gross revenue increased by 13% to $35.9 million compared to $31.9 million for the corresponding period in 2012 (net $32.3 million in 2013 compared to $28.7 million).
- Net operating income increased by 13% to $23.0 million from $20.4 million.
- The Company realized a net loss of $5.5 million compared to net income of $2.0 million in 2012 due in a large part to the increase in estimate at year-end for the liability to Albpetrol for oil production. (see 'Albpetrol Sh.A. Oil Production Share' in the Company's 2013 Management's Discussion and Analysis).
- Commissioned and started-up upgraded oil export facilities, which will allow the Company to capture higher revenues from export sales.
- Executed a gas sales contract for the sale of up to 6.5 MMcf/d natural gas from Delvina.
- Supported Thermo Energy in finalizing the installation of their power generation equipment.
- Installed Stream's gas re-injection facilities in the Delvina gas field in preparation for gas production from the Delvina D12 vertical and the D34H1 horizontal wells.
- Completed preparatory work for the drilling of the Delvina D34H1 well.
- Finalized detailed drilling program and procurement requirements for the Delvina Block exploration well, forecast to spud after the completion of the D34H1 well.
- Executed a $20.0 million prepayment agreement for crude oil sales with Trafigura Pte Ltd. ("Trafigura"), utilizing $7.0 million within the fiscal year.
- Committed key equipment as required for the oilfields' development activities.
- Completed audits by Albanian regulators as a result of the new Government's plan to understand the hydrocarbon activity in the country.
Consistent with International Financial Reporting Standards, the Company booked a deferred income tax expense of $3,878,000 related to its Albanian operations during the fiscal year ended November 30, 2013. This expense is a result of the Company's utilization of its cost recovery pools due to increased production and an increase in net income before tax in Albania. The amount does not represent actual income taxes owed, but is derived by the resulting difference between the carrying values of property and equipment in comparison to available tax cost pools.
Fourth Quarter Highlights:
- Average net production decreased to 880 boed compared to 1,043 boed in the fourth quarter of 2012.
- Realized average gross crude price of $74.63 per barrel, a 2% increase over $76.40 per barrel in the same period of 2012 due to lower average Brent crude pricing.
- Revenue increased by 7% to $8.4 million compared to $7.8 million for the corresponding period in 2012.
- Net operating income increased to $6.5 million from $2.6 million for the same period in 2012.
- Received newly elected Albanian Government's confirmation for takeover of the inter-field pipelines as well as the Ballsh-Hekal oilfield.
- Re-engaged with newly appointed Albpetrol and related Ministry officials in finalizing amendments for neutralization of impacts from modified legislations.
Subsequent to Year-End
- Oil production peaked at over 1,270 net bbls/d, while Management focused on delivering the prior demonstrated oil production levels exceeding 1,770 gross bbls/d on a sustained basis.
- The rig, ancillary services and goods for drilling the D34H1 well arrived at Delvina, commencing drilling activities in March 2014.
- Supported Thermo Energy with commissioning their 2 megawatt ("MW") generation unit using Delvina 4 gas.
- Completed annual reserves update, delivering materially unchanged valuation despite a lower commodity price deck and the inclusion of recently legislated VAT costs in Albania.
- Arranged a bridge loan of Cdn $5.0 million.
- Received confirmation for takeover of the Ballsh-Hekal oilfield; Stream commenced procedures for the immediate transfer of remaining assets.
Subsequent to the deferral of development activities while awaiting the outcome of the transition of the Albania Government, Stream is focused on re-engaging in production growth in 2014, as demonstrated by its continuing reserves value despite lower commodities forecast. Stream's plans for 2014 include the following activities:
- Cakran-Mollaj: Repair jet pump systems and install procured hydraulic RRP lift systems; pilot ASP to reduce water production while commencing alternate water disposal, thus eliminating infield re-injection;
- Gorisht-Kocul: Continue waterflood expansion along with recompletions with PCPs and hydraulic RRP lift systems;
- Ballsh-Hekal: Takeover the remainder of the field, re-validate primary targets and recomplete with PCPs; and
- Delvina: Finalize drilling, completion and testing of the horizontal well, while commencing drilling of the exploration well in step out structures.
Stream is also evaluating the extension of the services of the drilling rig active in Delvina, in order to commence infill drilling in the Cakran-Mollaj and Ballsh-Hekal fields.
With the positive collaboration from the Albanian Government, including Albpetrol and AKBN, Management anticipates to conclude, ratify and execute the Stream/Albpetrol amending agreements within 2014.
Management is of the opinion that the Company will be able to focus its primary efforts on development activities going forward. Stream expects that periphery items previously consuming Management's attention will no longer inhibit its efforts, specifically: finalizing its long outstanding amending agreements; confirming positive collaboration with the newly elected Albanian Government; stability of Albania's business environment realized from the full confirmation of the elected party (in prior dispute for nearly four years); and Albania's adherence to the increased governance framework imposed by EU as part of its recommendation for Albania's candidate status.
Stream has filed its audited Consolidated Financial Statements for the year ended November 30, 2013, and its related Management's Discussion and Analysis with Canadian securities regulatory authorities. Copies of these documents may be obtained via www.sedar.com or the Company's website, www.streamoilandgas.com.
Information in this news release respecting matters such as plans of development or exploration, reserves estimates, production estimates and targets, development costs, work programs and budgets constitute forward-looking information (collectively, "forward-looking statements") under the meaning of applicable securities laws, including Canadian Securities Administrators' National Instrument 51-102 Continuous Disclosure Obligations. Such forward-looking information is based on certain assumptions, including the availability of funds for capital expenditures necessary to construct the infrastructure required for future development, a favorable political and economic operating environment, a consistent rate of well re-completions and costs, success rates, production performance and build-up periods for well re-completions that are consistent with or an improvement over historical levels.
The forward-looking statements contained herein are made as of the date of this release solely for the purpose of generally disclosing Stream's 2013 annual results and outlook for 2014. Investors are cautioned that these forward-looking statements are neither promises nor guarantees, and are subject to risks and uncertainties that may cause future results to differ materially from those expected. Such forward-looking information reflect management's current beliefs and are based on assumptions made by and information currently available to the Company, and involves known and unknown risks, uncertainties and other factors which may cause the actual costs and results of the Company and its operations to be materially different from estimated costs or results expressed or implied by such forward-looking statements. Such factors include, among others political and economic risks associated with foreign operations, general risks inherent in petroleum operations, risks associated with equipment procurement and equipment failure, availability of qualified personnel, risks associated with transportation, currency and exchange rate fluctuations and other general risks inherent in oil and gas operations.
Although the Company has attempted to take into account important factors that could cause actual costs or results to differ materially, there may be other factors that cause costs and timing of the Company's program or results not to be as anticipated, estimated or intended. There can be no assurance that such statements will prove to be accurate as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking information. These forward-looking statements are made as of the date hereof and the Company does not assume any obligation to update or revise them to reflect new events or circumstances except as required under applicable securities legislation.
Use of Boe Equivalents
The oil and gas industry commonly expresses production and reserve volumes on a barrel of oil equivalent (Boe) basis whereby natural gas volumes are converted at the ratio of six thousand cubic feet of natural gas to one barrel of oil. Boe 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.
About Stream Oil & Gas Ltd.
Stream Oil & Gas Ltd. is a Canadian-based emerging oil and gas production, development and exploration company focused on the re-activation and re-development of three oilfields and a gas/condensate field in Albania. The Company's strategy is to use proven technology, incremental and enhanced oil recovery techniques to significantly increase production and reserves.
Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
SOURCE Stream Oil & Gas Ltd.For further information:
Dr. Sotirios Kapotas President & Chief Executive Officer P: (403) 531-2358
Susan J. Soprovich, Interim Corporate Secretary P: (403) 874-2903