Yangarra Announces Year End 2012 Financial, Operating Results and Reserves

CALGARY, March 27, 2013 /CNW/ - Yangarra Resources Ltd. ("Yangarra" or the "Company") (TSXV:YGR) releases its financial, operating results and reserves for the year ended December 31, 2012.

2012 Financial and Operating Highlights

  • Average daily production was 1,914 boe/d a 59% increase from 2011.
  • Oil and gas sales for the year were $21 million a 6% increase from 2011, with cash flow from operations of $15 million ($0.12 per share - basic).
  • Operating costs, including $0.84/boe of transportation costs, were $7.65/boe.
  • Operating netback of $25.48 per boe, was a 38% decrease from the $41.05 per boe reported in 2011.
  • Net Capital expenditures were $20 million for 2012.
  • As at December 31, 2012, the Company had a bank debt and working capital deficit of $36 million ($33 million including mark to market on commodity contracts) compared to $34 million at December 31, 2011.

2012 Reserve Report Highlights

  • Increased proved plus probable reserves by 44% to 12.5 million barrels of oil equivalent (11.6 million barrels of working interest and 0.9 million barrels for the royalty interest) and proved reserves by 30% to 7.2 million barrels of oil equivalent (6.6 million barrels of working interest and 0.6 million barrels for the royalty interest).
  • Proved plus probable reserves, net present value discounted at 10% ("NPV 10") at December 31, 2012 was $167 million, an increase of 7% compared to December 31 2011.
  • Replaced 2012 production by 237% on a proved basis and 546% on a proved plus probable basis.
  • Achieved finding and development costs of $12.45/boe on proved plus probable reserves including changes in future capital ($4.44/boe excluding changes in future capital) $18.09/boe on proved reserves including changes in future capital ($8.22/boe excluding changes in future capital).
  • Generated a finding and development recycle ratio of 2.05 times on proved plus probable reserves including changes in future capital (5.74 times excluding changes in future capital) based on the Company's estimated 2012 operating netback of $25.48 per barrel of oil equivalent.
  • Reserve life index of 15.7 years on a total proved plus probable basis based on the Company's December, 2012 production rate of 2,180 boe/d.
  • Net Asset Value of $131 million as at December 31, 2012, calculated to be $1.08 per common share (excluding the value of undeveloped land).

Message to Shareholders

In 2012, Yangarra has continued to focus on value creation, while constraining capital expenditures to maintain a strong balance sheet.  Significant improvements in capital efficiencies have been achieved by lowering drilling and completion costs. The Company has an inventory of 5 years of Cardium and Glauconite drilling; offering a 50% internal rate of return; its Duvernay land position is one of the most levered in the industry on a per share basis.

Value Creation

Yangarra has focused on creating value for our shareholders this is evidenced by the following metrics:

  • 60% production growth (52% on a per share basis)
  • 44% increase in reserves (38% on a per share basis)
  • F&D costs, excluding future capital, of $8.22/boe total proved and $4.44/boe proved and probable
  • Net Asset Value (not including land) of $1.08/share

Maximizing Netbacks

Yangarra continues to deliver top decile netbacks after adjusting for product split when compared to our peer group:

  • Operating costs of $7.65/boe
  • G&A of $2.52/boe
  • Royalty income higher than royalty expense

Maintaining a Strong Balance Sheet

We remained disciplined in capital spending to ensure the balance sheet remains strong in these challenging economic times:

  • $20 million of net capital spending in 2012
  • A $2 million increase in net debt from 2011

Improved Capital Efficiency and Lower Capital Costs

During the summer months of 2012 we focused on methods to reduce drilling, completion and operating costs.  Mono-bore drilling techniques introduced by new drilling and completions manager have reduced drilling times by half while better logistics and a more competitive fracture environment resulted in much lower completion costs. Commencing in September, Yangarra has used mono-bore drilling and samples of wells in three different producing horizons show the improvements in drilling efficiency:

     
Zone Spud to rig
release
Yangarra's previous
best spud to rig release
Cardium 12.3 days 25 days
Second White Specks 11.1 days 29 days
Glauconite 9.8 days 20 days

We have announced a $25 million capital spending program for 2013.  This program includes the drilling of 16 gross (12 net) wells focused in Central Alberta.  The budget will focus on oil targets which will allow us to increase our oil weighting and ultimately our cash flow.  The cash flow is forecasted at $24 million or $0.20/share, which is only slightly below our current trading price.

Significant Unrecognized Upside

We believe the upside potential in the Yangarra story is better than it has ever been.  The company has identified 5 years of drilling inventory in the Cardium and Glauconite alone and a significant amount of additional locations in the Second White Specks, Viking and Rock Creek which leaves Yangarra well positioned with multiple years of drilling inventory.  The Duvernay resource is turning into a world-class play and Yangarra has assembled a high quality land position.  We are leading edge in unlocking the significant value in the Second White Specks shale oil play.

 Financial Summary

       
  2012 2011 2010
Statements of Comprehensive Income (Loss)      
Petroleum & natural gas sales - Gross $   21,327,157 $   20,742,259 $      6,534,377
Net income (loss) for the year (before tax) $          21,174 $     4,872,697 $    (2,599,497)
       
Net income (loss) for the year $     (217,712) $    1,385,698 $    (1,745,150)
Net income (loss) per share - basic and diluted $           (0.00) $             0.01 $             (0.03)
       
Statements of Cash Flow      
Funds flow from (used in) operating activities $   14,588,405 $   16,341,180 $      2,959,286
Funds flow from (used in) operating activities per share - basic and diluted $              0.12 $              0.15 $               0.05
Cash from (used in) operating activities $   17,016,431 $     6,664,849 $           95,378
       
Statements of Financial Position      
Property and equipment $ 121,842,378 $ 119,374,219 $    63,263,452
Total assets $ 138,894,114 $ 141,291,043 $    68,373,813
Working Capital (deficit), excluding MTM on commodity contracts and flow-through share obligation $ (36,301,842) $ (34,028,162) $  (11,472,461)
Non-Current Financial Liabilities $ (12,274,710) $   (9,752,766) $    (3,501,805)
Shareholders equity $ (79,689,765) $ (76,627,244) $  (47,835,896)
       
Weighted average number of shares - basic    120,663,095     105,960,324        57,581,832
Weighted average number of shares diluted    120,663,095     113,781,122        57,581,832
       

Operations Summary

     
  2012 2011
     
Daily production volumes    
   Natural gas (mcf/d)              5,586              3,874
   Oil (bbl/d)                 350                 361
   NGL's (bbl/d)                 341                 145
   Royalty income    
      Natural gas (mcf/d)              1,273                 202
      Oil (bbl/d)                     3                     5
      NGL's (bbl/d)                   77                   14
   Combined (boe/d 6:1)              1,914              1,205
     
Product pricing (includes royalty income & realized gains/losses on commodity contracts) 
   Oil ($/bbl) $           84.09 $           92.79
   NGL  ($/bbl)              46.78              58.60
   Gas ($/mcf)                2.49                3.92
   Combined ($/boe) $           34.63 $           48.55
     
Revenue      
Petroleum & natural gas sales - Gross $   21,327,157 $   20,742,259
Royalty income        2,024,819           613,139
Commodity contract settlement           907,863        1,269,687
Total sales      24,259,839      22,625,085
Royalty expense       (1,057,597)         (972,706)
Petroleum & natural gas sales - Net $   23,202,242 $   21,652,379
Change in fair value of contracts $     3,889,986 $   (1,491,875)
Total Revenue $   27,092,228 $   20,160,504
       
       

Netback Summary

     
  2012 2011
     
Sales Price $           31.74 $           50.03
   Royalty income 2.89 1.39
   Royalty expense (1.51) (2.21)
   Production costs (6.81) (7.38)
   Transportation costs (0.84) (0.79)
Operating netback $           25.48 $           41.05

Capital Summary

     
  2012 2011
     
Land and lease rentals $       734,910 $    3,782,231
Drilling and completion      19,727,708      49,808,464
Geological and geophysical        1,002,064           947,870
Equipment        2,812,328        9,487,625
Other Asset Additions           171,521                   -  
Gross Capital Additions $   24,448,531 $   64,026,190
Disposition of Property and Equipment       (4,650,000)                   -  
Net Capital Additions $   19,798,531 $   64,026,190
     

Oil and Gas Reserves

The results of its independent reserves evaluation are effective December 31, 2012 as prepared by AJM Deloitte in accordance with the requirements prescribed by National Instrument 51-101, Standards of Disclosure for Oil and Gas Activities.

The following tables summarize certain information contained in the independent reserves report prepared by AJM Deloitte as of December 31, 2012. The report was prepared in accordance with definitions, standards and procedures contained in the Canadian Oil and Gas Evaluation Handbook ("COGE Handbook") and National Instrument 51-101, Standards of Disclosure for Oil and Gas Activities ("NI 51-101").

Summary of Oil and Gas Reserves

   (based on forecast price and costs)

Reserves Category   Light and
Medium Oil
(Mbbl)
  Natural Gas
   Liquids
   (Mbbl)
  Natural
Gas
(MMcf)
  W.I.
Gross
Co.Share
Gross
Net W.I.
Gross
Co.Share
Gross
Net W.I.
Gross
Co.Share
Gross
Net
Proved Developed Producing 585 597 541 388 467 358 6,617 7,907 6,859
Proved Developed Non-Producing 69 69 56 45 47 38 1,920 1,963 1,755
Proved Undeveloped 1,306 1,315 1,127 671 748 597 12,370 13,651 12,243
Total Proved 1,960 1,981 1,725 1,103 1,261 992 20,907 23,521 20,856
Probable 1,463 1,474 1,220 790 866 640 16,839 18,095 15,684
Total Proved Plus Probable 3,423 3,455 2,945 1,893 2,127 1,632 37,746 41,616 36,540

         
Reserves Category   Total BOE
as at December 31, 2012
(Mboe)
    Total BOE
as at December 31, 2011
(Mboe)
  W.I.
Gross
Co.Share
Gross
Net   W.I.
Gross
Co.Share
Gross
Net
Proved Developed Producing 2,076 2,381 2,042   2,159 2,542 2,164
Proved Developed Non-Producing 433 443 386   298 355 299
Proved Undeveloped 4,039 4,338 3,765   2,381 2,610 2,266
Total Proved 6,548 7,163 6,193   4,838 5,507 4,728
Probable 5,058 5,356 4,473   3,008 3,200 2,699
Total Proved Plus Probable 11,606 12,518 10,667   7,846 8,706 7,427

Notes to table:

(1)      Total values may not add due to rounding.
(2)      In the case of BOEs, using BOEs derived by converting gas to oil equivalent in the ratio of six thousand cubic feet of gas to one barrel of oil (6 Mcf:1 bbl).
(3)      "Working Interest Gross" reserves are the Company's working interest (operating or non-operating) share before deducting royalty obligations and without including any royalty interests of the Company.
(4)      "Company Share Gross" reserves are the Company's working interest (operating or non-operating) share and before deducting royalty obligations but including any royalty interests of the Company.
(5)      "Net" Reserves are the Company's working interest (operating or non-operating) share after deduction of royalty obligations plus any royalty interests of the Company.

Summary of Net Present Values of Future Net Revenue (Before Tax)

   (based on forecast price and costs)

  As At December 31, 2012(2)   As At
December 31,
2011 (3)
Reserves Category 0.0%
(M$)
5.0%
(M$)
10.0%
(M$)
  10%
(M$)
Proved Developed Producing 62,538 52,393 45,271   67,283
Proved Developed Non-Producing 7,849 6,129 4,992   5,198
Proved Undeveloped 93,186 66,771 49,387   34,782
Total Proved 163,573 125,293 99,650   107,263
Probable 154,173 97,738 67,357   48,882
Total Proved Plus Probable 317,696 223,425 167,381   156,145

Notes to table:

(1)      Total values may not add due to rounding.
(2)      Forecast pricing used is based on AJM Deloitte published price forecasts effective December 31, 2012.
(3)      Forecast pricing used is based on AJM Deloitte published price forecasts effective December 31, 2011.
(4)      Cash flows include the effects of the current Alberta Royalty Framework. The estimated future net reserves are stated before deducting future estimated site restoration costs and are reduced for future abandonment costs and estimated capital for future development associated with the reserves.
(5)      It should not be assumed that the net present values of future net revenues estimated by AJM Deloitte represent fair market value of the reserves. There is no assurance that the forecast price and cost assumptions will be attained and variances could be material.

Reserve Definitions:

(a)      "Proved" reserves are those reserves that can be estimated with a high degree of certainty to be recoverable. It is likely that the actual remaining quantities recovered will exceed the estimated proved reserves.
(b)      "Probable" reserves are those additional reserves that are less certain to be recovered than proved reserves. It is equally likely that the actual remaining quantities recovered will be greater or less than the sum of the estimated proved plus probable reserves.
(c)      "Developed" reserves are those reserves that are expected to be recovered from existing wells and installed facilities or, if facilities have not been installed, that would involve a low expenditure (e.g. when compared to the cost of drilling a well) to put the reserves on production.
(d)      "Developed Producing" reserves are those reserves that are expected to be recovered from completion intervals open at the time of the estimate. These reserves may be currently producing or, if shut-in, they must have previously been on production, and the date of resumption of production must be known with reasonable certainty.
(e)      "Developed Non-Producing" reserves are those reserves that either have not been on production, or have previously been on production, but are shut in, and the date of resumption of production is unknown.
(f)      "Undeveloped" reserves are those reserves expected to be recovered from know accumulations where a significant expenditure (for example, when compared to the cost of drilling a well) is required to render them capable of production. They must fully meet the requirements of the reserves classification (proved, probable, possible) to which they are assigned.
(g)      The Net Present Value (NPV) is based on AJM Deloitte Forecast Pricing and costs. The estimated NPV does not necessarily represent the fair market value of our reserves. There is no assurance that forecast prices and costs assumed in the AJM Deloitte evaluations will be attained, and variances could be material.

Finding and Development Costs ("F&D")

Yangarra's F&D costs for 2012, 2011 and the three year average are presented in the tables below. The costs used in the F&D calculation are the capital costs related to: land acquisition and retention; drilling; completions; tangible well site; tie-ins; and facilities, plus the change in estimated future development costs as per the independent reserve report. Acquisition costs are net of any proceeds from dispositions of properties.  Due to the timing of capital costs and the subjectivity in the estimation of future 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. The reserves used in this calculation are Company net reserve additions, including revisions.

Proved Finding & Development Costs ($ millions)

  2012 2011 2010 - 2012
Capital expenditures 19.8 64.0 107.3
Change in future capital 23.8 10.3 51.2
Total capital for F&D 43.6 74.3 158.5
       
Reserve additions, net 2012 production (Mboe) 2,409 2,514 6,078
       
Proved F&D costs - including future capital ($/boe) 18.09 29.56 26.07
Proved F&D costs - excluding future capital ($/boe) 8.22 25.45 17.65
       
Proved Recycle Ratio      
   Including future capital 1.41 1.33  
   Excluding future capital 3.10 1.55  
          

Proved plus Probable Finding & Development Costs ($ millions)

  2012 2011 2010 - 2012
Capital expenditures 19.8 64.0 107.3
Change in future capital  35.7 8.7 75.3
Total capital for F&D 55.5 72.7 182.6
       
Reserve additions, net (Mboe) 4,459 2,932 9,310
       
Proved plus Probable F&D costs ($/boe) 12.45 24.79 19.25
Proved plus Probable F&D costs - excluding future capital ($/boe) 4.44 21.83 11.95
       
Proved plus Probable Recycle Ratio      
   Including future capital 2.05 1.59  
   Excluding future capital 5.74 1.80  
       

Net Asset Value ("NAV"), excluding undeveloped land

As at December 31, 2012   ($ millions)  
   
Present Value of Proved plus Probable Reserves, before tax (discounted at 10%) $167.4
Working capital deficiency (36.0)
   
Net Asset Value $131.0
   
Common shares outstanding 121.7
   
Net asset value per share  (not including undeveloped land) $1.08

Notes to tables:

(1)      The preceding table shows what is customarily referred to as a "produce out" net asset value calculation under which the current value of Yangarra's reserves would be produced at the AJM Deloitte forecast future prices and costs.  The value is a snapshot in time as at December 31, 2012 and is based on various assumptions including commodity prices and foreign exchange rates that vary over time.  In this analysis, the present value of the proved and probable reserves is calculated at a before tax 10 percent discount rate.
(2)      The 2012 working capital deficiency, excludes non-cash items (MTM on commodity contracts) is unaudited as the financial results are in the process of being finalized; and, is subject to change upon completion of the audited financial statements.

Year End Disclosure

The Company's Annual Report (financial statements, notes to the financial statements and management's discussion and analysis) will be filed on SEDAR (www.sedar.com and be available on the Company's website www.yangarra.ca) by April 5, 2013.

Additional reserve information as required under NI 51-101 will be included in the Company's Annual Information Form which will be filed on SEDAR by April 30, 2013.

Annual General Meeting of Shareholders

The Company's Annual General Meeting of Shareholders is scheduled for 10:00 AM on Wednesday May 22, 2013 in the Tillyard Management Conference Centre, Main Floor, 715 5th Avenue SW, Calgary, AB.

Natural gas has been converted to a barrel of oil equivalent (Boe) using 6,000 cubic feet (6 Mcf) of natural gas equal to one barrel of oil (6:1), unless otherwise stated.  The Boe conversion ratio of 6 Mcf to 1 Bbl is based on an energy equivalency conversion method and does not represent a value equivalency; therefore Boe's may be misleading if used in isolation. References to natural gas liquids ("NGLs") in this news release include condensate, propane, butane and ethane and one barrel of NGLs is considered to be equivalent to one barrel of crude oil equivalent (Boe).  One ("BCF") equals one billion cubic feet of natural gas.  One ("Mmcf") equals one million cubic feet of natural gas.

Certain information regarding Yangarra set forth in this news release, including management's assessment of future plans, operations and operational results may constitute forward-looking statements under applicable securities law and necessarily involve risks associated with oil and gas exploration, production, marketing and transportation such as loss of market, volatility of prices, currency fluctuations, imprecision of reserves estimates, environmental risks, competition from other producers and ability to access sufficient capital from internal and external sources.  As a consequence, actual results may differ materially from those anticipated in the forward-looking statements.

The initial production rates discussed in this press release are not necessarily indicative of long-term performance or of ultimate recovery due to high initial decline rates.

All reference to $ (funds) are in Canadian dollars.

Neither the TSX Venture Exchange nor its Regulation Service Provider (as that term is defined in the Policies of the TSX Venture Exchange) accepts responsibility for the adequacy and accuracy of this release.  

 

 

SOURCE: Yangarra Resources Ltd.

For further information:

James Evaskevich, President and CEO, at (403) 262-9558.


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