Calvalley announces financial results for the second quarter ended June 30, 2014

Calvalley Petroleum Inc., (TSX: CVI.A)

CALGARY, Aug. 7, 2014 /CNW/ -

Highlights

  • The operating environment in Yemen continues to present challenges that result from unique in-country issues. As a result of blockades by locals on the truck route to Block 51, access to normal industry services for drilling operations is restricted and the preferred marketing outlet through the Ash Shihr terminal is not accessible. In early February 2014, the Company made arrangements with the Government and the Operator of Block 18 to market production from the Hiswah and Ras Nowmah fields through Block 18 facilities and the Ras Isa terminal on the Red Sea. Production from the Al Roidhat field does not meet the required specifications for this marketing outlet and the field has been shut down since early January. During the first quarter of 2014 the Company produced from the Hiswah and Ras Nowmah fields for an average of 31 days due to the local blockades. During the second quarter of 2014 the Company's production was interrupted by a rupture of the pipeline to the Ras Isa terminal and production from the Hiswah and Ras Nowmah fields was restricted to an average of 67 days in the second quarter. Since early June 2014 the Company has restored production at both the Hiswah and Ras Nowmah fields.

  • Despite these challenges, the Company had positive earnings and cash flow in the current quarter. Earnings in the second quarter of 2014 were $0.02 per share ($1.2 million) compared to $0.07 per share ($5.2 million) in the second quarter of 2013. For the six month period ended June 30, 2014 the Company incurred a loss of $0.01 per share (($0.4) million) down from $0.14 per share ($11.9 million) for the six month period in 2013. Inventory of crude oil at the end of June 30, 2014 was approximately 85,000 barrels and represents an increase of 56,000 barrels from June 30, 2013.

  • The Company's working interest share of production volumes before royalties and taxes averaged 1,180 barrels per day in the first half of 2014 versus 2,590 barrels per day for the first half of 2013 due to the shut-down of production from Al Roidhat and production restrictions for 83 of the 181 days in the first half. For the three month period ended June 30, 2014 production volumes were 1,590 barrels per day versus the 2,500 barrels per day in the prior period of 2013 due to the shut-down of production from Al Roidhat and production restrictions for 24 of the 91 days in the quarter.

  • During the second quarter of 2014 the Company sold an average of 1,170 barrels per day of crude oil compared to 2,350 barrels per day in the prior period of 2013. The reduction in volumes sold is attributable to a reduction in production volumes available for sale and increased volumes in inventory. For the six month period to June 30, 2014 crude oil exports have averaged 590 barrels per day compared to 2,340 barrels per day in the comparable period of 2013 for similar reasons. For the second quarter of 2014, the average sale price received was $107.10 per barrel which represents a discount of $2.56 to the Dated Brent Crude price of $109.66 for the quarter. The discount to Brent received in 2014 is attributable to the pricing differentials between the export terminal used. The product netback for the second quarter of 2014 and for the six month ended June 30, 2014, was $32.50 per barrel and represents a decrease of 23 per cent from $41.97 per barrel for the comparable six month period of 2013 reflecting lower realized prices for crude oil and higher per unit costs due to production restrictions and increased processing costs.

  • Funds flow from operations ("Cash Flow") for the quarter ended June 30, 2014 was $0.03 per share ($2.2 million) compared to $0.09 per share ($7.3 million) in the prior year period. For the six month period to June 30, 2014 Cash Flow was $0.01 per share ($0.7 million) compared to $0.19 per share ($16.1 million) in the prior year period.

  • Capital expenditures in the second quarter of $2.1 million include the costs of equipment and services for the capital program including the pressure maintenance project at Hiswah, up slightly from $2.0 million in the second quarter of 2013. Capital expenditures for the six months to June 30, 2014 of $4.3 million represent a slight increase from capital expenditures of $4.0 million for the six month period ending June 30, 2013. Work on facility projects including the water injection project at Hiswah is continuing, regardless of the current operating environment, due to the significant long term benefit anticipated from these projects. No facility project completion dates can be estimated at the present time.
  • Calvalley has a strong balance sheet with approximately $84 million in working capital at June 30, 2014. The working capital balance increases to $88 million with inventory of crude oil valued at current market value rather than cost.

Corporate Update

On August 6, 2014 the Company received a notice from the local labour union in the Republic of Yemen of its intention to initiate unilateral action that could lead to work stoppage at the production facilities at Block 9. In such event the Company's production from Block 9 will likely be impacted. The Company is planning to resolve this issue through meetings with the Government and the local labour union.

Financial information

Select financial information is included in the table below and is discussed further in the Company's Management Discussion and Analysis.

(in thousands of US dollars except per share amounts) Three months ended
June 30
Six months ended
June 30
2014 2013 2014 2013
Revenue (Gross) 11,408 22,061 11,408 45,752
Revenue from crude oil sales (net of royalties) 7,154 13,828 7,154 28,677
EBITDA(1) 2,768 8,556 1,124 18,685
Operating income(1) 1,725 6,641 71 14,944
Profit (loss) 1,189 5,168 (427) 11,877
      Per share 0.02 0.07 (0.01) 0.14
Capital expenditures 2,052 2,044 4,300 3,955
Funds flow from operations(1) 2,196 7,279 691 16,054
      Per share 0.03 0.09 0.01 0.19
Cash flow from operating activities 54 10,509 462 15,866

(1) See "Non-IFRS Measures" disclosure in June 30, 2014 MD&A filed on www.sedar.com

FILING OF REPORTS ON SEDAR

Calvalley's Management's Discussion and Analysis and Unaudited Condensed Consolidated Financial Statements for the three and six months ended June 30, 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 relating to the potential impact to the Company's production in the event of a work stoppage at its production facilities at Block 9 contain forward looking information. Forward-looking information can involve 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 capital expenditures, access to crude oil marketing facilities and changes in general economic and market conditions. Although the forward-looking information contained herein is 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 statements contained herein are expressly qualified in their 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.

For further information:

investorrelations@calvalleypetroleum.com

Edmund Shimoon, Chairman & CEO
Gerry Elms, CFO   +1 (403) 297-0490