ArPetrol Ltd. announces second-quarter 2014 financial and operating results and reports positive working capital of $1.4 million

CALGARY, Aug. 27, 2014 /CNW/ - ArPetrol Ltd. ("ArPetrol" or the "Company") (TSXV: RPT) announces its financial and operating results for the six months ended June 30, 2014 and provides an operational update on activities to date this year as well as an outlook for the remainder of 2014. The Company's interim condensed consolidated financial statements and management's discussion and analysis (MD&A) for the reporting period have been filed on SEDAR at www.sedar.com and posted on the Company's website at www.arpetrol.com.

Summary for the Second Quarter 2014

Operating and Financial

ArPetrol's working capital position is $1.4 million at the end of the second quarter of 2014, unchanged from the first quarter of the year.  This is a significant improvement compared to a deficit of $0.8 million at the end of 2013. 

The Company had drawn $1.7 million on its short-term loan at the end of the second quarter 2014.  Subsequent to the quarter end the Company made a $300,000 loan repayment reducing the balance of the short-term loan to $1.4 million.

During the second quarter of 2014 the Company processed 77 million cubic feet (Mmcf) of third-party gas generating $2.1 million of revenue.  This revenue is consistent with the first-quarter of 2014 and double the $1.0 million earned in the second-quarter of 2013.  Increased revenues are a result of higher processing volumes compared to the second quarter of 2013 and high prices from its new gas processing contracts negotiated in 2013.

ArPetrol's second quarter production averaged 218 barrels of oil equivalent per day (boe/d).  This is a decrease of 24 boe/d from the first quarter of 2014.  First quarter 2014 production was affected by equipment issues early in the quarter and natural declines.  Third-quarter 2014 production to date is averaging over 240 boe/d.  

The second-quarter 2014 average realized natural gas price was $4.37 per thousand cubic feet (Mcf), $0.16 per Mcf higher than the price realized in the first-quarter of 2014 and $0.82 per Mcf higher than the second-quarter of 2013.  This higher price during 2014 reflects the Company's new gas sales contract and changing exchange rates. 

The average price realized for natural gas liquids (NGLs) in the quarter was $82.18 per barrel (bbl), an increase of $0.81 per bbl over the first-quarter of 2014. 

There were $141,914 in capital expenditures during the quarter. 

Net income for the quarter was $2,445,603 million compared to $1,643,581 for the first quarter of 2014.

On June 2, 2014 the Company completed a consolidation of its issued and outstanding common shares on the basis of twenty-five pre-consolidation common shares for each one post-consolidation common share.  Since the consolidation the Company has maintained a relatively consistent share price and market capital. 

Summary of Results
(Cdn$ except shares outstanding and per boe1 amounts)


Three Months Ended

June 30,

Six Months Ended

June 30,


2014

2013

2014

2013

Financial





Production sales

632,204

571,770

1,282,355

1,049,314

Processing sales

2,055,225

1,042,011

4,302,135

2,169,518

Funds flow from operations1

599,774

(506,803)

1,126,494

1,287,194

Cash from (used in) operating activities

(1,111,452)

(573,644)

(208,240)

1,747,257

Comprehensive (loss) income

(2,665,846)

(1,196,228)

(200,906)

1,008,807

Fixed asset expenditures

141,914

1,745,554

141,914

1,980,360

Weighted average shares outstanding





– basic and diluted 2,3

22,901,468

22,901,468

22,901,468

22,901,468






Operations





Third Party Processing –MMcf per day

77.3

65.1

76.3

68.5

Production





Natural gas – Mcf per day

1,176

1,294

1,252

1,251

Natural gas liquids – bbls per day

22

25

21

27

Total – boe per day1

218

241

230

235

Average sales price





Natural gas – $ per Mcf

4.37

3.55

4.29

3.19

Natural gas liquids – $ per bbl

82.18

67.72

81.78

67.08






Operating netback





Production – $ per boe1

8.73

4.30

6.08

0.53

Processing – $ per Mcf processed1

0.16

0.05

0.18

0.05






Note 1: See advisories at the end of this news release with respect to non-IFRS measures and boe presentation.


Note 2: All outstanding warrants, stock options and convertible debentures were excluded in calculating the weighted-average number of dilutive common share outstanding, as they were determined to be anti-dilutive.


Note 3: On June 2, 2014 the Company completed a consolidation of its issued and outstanding common shares on the basis of twenty-five (25) pre-consolidation common shares for each one (1) post-consolidation common share. All share and per share numbers have been adjusted to reflect this consolidation.


All values in this news release are in Canadian dollars unless otherwise indicated.

Operational Update and Outlook 

During the second quarter of 2014, ArPetrol continued its progress towards a stable revenue generating company with a balance sheet that supports its operations.   The new gas processing contracts have provided ArPetrol with a significant increase in processing revenue and this is expected to continue during 2014. 

In April 2014 the Company concluded a deposit transfer agreement with its final remaining third-party contractor from its 2012 drilling program.  Under the terms of the agreement the Company agreed to transfer USD$3 million of deposits currently held by the contractor in the United States to Argentina to pay the contractor for services performed during the drilling program.    This process was completed in July 2014.  There is still an an outstanding balance to be settled with this remaining vendor.  

The Company's 2014 outlook includes estimated production of 200 to 240 boe/d, estimated processing volumes of 70 to 80 MMcf/d and estimated capital expenditures for maintenance and improvements of $0.8 million to $1.2 million.  In 2014, the Company is forecast to be self-funding through projected cash flows, covering its capital expenditures and, barring any unforeseen circumstances, the repayment of its short-term loan by the year-end. 

ArPetrol continues to look at all strategic opportunities available to the Company.  These include growing its production and processing asset base in Argentina,  considering merger opportunities to grow the Company in new basins or considering the possible sale of assets for a value which delivers significant returns for shareholders.

About ArPetrol Ltd.

ArPetrol is a Calgary-based publicly traded company engaged in oil and natural gas exploration, development and production and third-party natural gas processing in Argentina, where it owns and operates a gas processing facility with capacity of 85 million cubic feet per day. The Company's common shares are listed on the TSXV under the symbol "RPT".

Non-IFRS Measures

This news release includes references to financial measures commonly used in the oil and natural gas industry. The terms "operating netback" (production sales and processing sales less royalties, turnover taxes and operating expenses) and "funds flow from operations" (cash generated from operating activities before changes in refundable Argentinean taxes, foreign exchange on non-cash working capital, non-cash working capital, and translation adjustment on operating items) do not have any standardized meaning under International Financial Reporting Standards (IFRS), which have been incorporated into GAAP, and may not be comparable with similar measures presented by other companies. Funds flow from operations should not be considered an alternative to, or more meaningful than, cash generated from operating activities, net loss or other measures determined in accordance with IFRS, as an indicator of the Company's performance.

See the MD&A for the six months ended June 30, 2014, filed on SEDAR at www.sedar.com and on the Company's website, for further discussion, including a reconciliation of funds flow from operations to cash generated from operating activities which is the most directly comparable measure calculated in accordance with IFRS. There is no IFRS measure that is reasonably comparable to operating netback and a detailed calculation of such netbacks is presented in the MD&A for the six months ended June 30, 2014.

Boe Presentation

Production information is commonly reported in units of barrels of oil equivalent (boe). For purposes of computing such units, natural gas is converted to equivalent barrels of oil using a conversion factor of six thousand cubic feet (Mcf) to one barrel (bbl). This conversion ratio of 6:1 represents energy equivalency, which is primarily applicable at the burner tip, and does not represent a value equivalency at the wellhead. Such disclosure of boe may be misleading, particularly if used in isolation.

Forward-Looking Information

This news release contains certain forward‐looking statements relating, but not limited, to operational information, the ability to maintain processing rates and revenue in the same range as realized in the second quarter, the ability to negotiate a settlement agreement with the remaining service provider, the ability to reduce future expenses, the ability to be self-funding and maintain positive cash flow in 2014, estimated production volumes, processing volumes and capital expenditures, the repayment of the Company's short term loan and timing thereof, the development of a go forward strategic plan and the pursuit of strategic and growth opportunities, the possible sale of assets to deliver value, and the ability or inability to continue as a going concern. Forward‐looking information typically contains statements with words such as "anticipate", "believe", "expect", "plan", "intend", "estimate", "propose", "project", or similar words suggesting future outcomes. The Company cautions readers and prospective investors in the Company's securities not to place undue reliance on forward‐looking information as, by its nature, it is based on current expectations regarding future events that involve a number of assumptions, inherent risks and uncertainties, which could cause actual results to differ materially from those anticipated by the Company.

Forward-looking information is based on management's current expectations and assumptions regarding, among other things, the willingness of the remaining creditor to settle outstanding amounts, future operations and transactions, future capital and other expenditures (including the amount, nature, timing, availability and sources of funding thereof), stable processing volumes, future production and processing revenue, future economic conditions, future currency and exchange rates, future pricing, the ability to repatriate funds from Argentina, continued political stability in the areas in which the Company is operating, the reduction of G&A and expenses, and the Company's continued ability to obtain and retain qualified management and staff and equipment in a timely and cost-efficient manner. Although the Company believes the expectations and assumptions reflected in such forward‐looking information are reasonable, they may prove to be incorrect.

Forward‐looking information involves significant known and unknown risks and uncertainties. A number of factors could cause actual results to differ materially from those anticipated by the Company, including but not limited to uncertainty regarding the willingness of the remaining creditor to negotiate a settlement or whether it will commence legal proceedings , risks associated with the oil and natural gas industry (e.g., operational risks for its producing assets risks inherent in future drilling programs and the operation of the gas plant, and health, safety and environmental risks), the ability to retain management and staff, the ability to continue as a going concern, difficulties that may be encountered to repatriate funds, weather-induced delays and natural disasters, interruptions to production and processing revenue, production declines, the uncertainty regarding future revenues, union activities and labour issues in Argentina, uncertainty regarding the ability to pursue strategic opportunities or a sale of assets, the risk of commodity price changes, the risk of foreign exchange rate fluctuations (which may not be as favourable as those currently experienced), currency controls and a change in the manner and rates at which the Company is exchanging currency, and risks associated with international activity and political risks over which it has no control (including risks related to the general economic and business conditions in Argentina, economic, social or political instability or change, the uncertainty of negotiating with foreign governments, expropriation and/or nationalization, changes in export or exchange policies, adverse determinations or rulings by governmental authorities, and changes in energy policies or in the personnel administering them).

The forward‐looking information included herein is expressly qualified in its entirety by this cautionary statement. The forward‐looking information included herein is made as of the date hereof and the Company assumes no obligation to update or revise any forward‐looking information to reflect new events or circumstances, except as required by law.

Additional information relating to the Company is also available on SEDAR at www.sedar.com.

AR Petrol's head office address is 700, 815 8 Avenue S.W., Calgary, AB T2P 3P2

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

SOURCE ArPetrol Ltd.

For further information: Ian Habke, President and Chief Financial Officer, i.habke@arpetrol.com, ArPetrol Ltd., Main Telephone: 403-263-6738