ArPetrol Ltd. announces fourth-quarter and year-end 2012 financial and operating results

CALGARY, March 21, 2013 /CNW/ - ArPetrol Ltd. ("ArPetrol" or the "Company") (TSXV: RPT) announces its financial and operating results for the three months and year ended December 31, 2012 and provides an operational update on activities to date this year as well as an outlook for the remainder of 2013. The Company's consolidated financial statements and management's discussion and analysis (MD&A) for the reporting periods have been filed on SEDAR at www.sedar.com and posted on the Company's website at www.arpetrol.com.

Summary for the Three Months and Year Ended December 31, 2012

Operating and Financial

ArPetrol had a working capital deficit of $2.5 million as at December 31, 2012 and no long-term debt.

Fourth-quarter production averaged 252 barrels of oil equivalent per day (boe/d). This is an increase of 25 boe/d from the third quarter of 2012 and a decrease of 49 boe/d from the fourth quarter of 2011. The increase from the third quarter of 2012 resulted from the correction of generator issues experienced in the third quarter of 2012, and the decline from the fourth quarter of 2011 was due to natural production declines.

Partly offsetting the volume declines, the Company realized higher prices for its natural gas production. For the fourth quarter of 2012 the average sales price was $2.80 per thousand cubic feet (Mcf), $0.05 per Mcf higher than in the third quarter of 2012. The average realized price for natural gas liquids decreased to $65.49 per barrel for the fourth quarter of 2012, 10 percent lower than the $71.99 per barrel realized in the third quarter of 2012.

Third-party processing volumes and revenues continued to increase during the fourth quarter of 2012. Processing sales for the fourth quarter were $1,101,797, an increase of $142,158 over the third quarter of 2012 and $524,967 over the same period of the prior year. During the fourth quarter of 2012, daily third-party processing volumes increased by 5 percent over the third quarter of 2012, and were more than double the volumes processed in the same period in 2011.

Capital expenditures for the fourth-quarter and year-ended December 31, 2012 were $2,174,298 and $28,875,715, respectively. Major expenditures were incurred for mobilization, drilling and suspension work for the first well of the Company's extended-reach drilling program on its Faro Virgenes block.

Net loss for the year was $25,772,561, compared to a net loss of $7,489,387 for the prior year.

Summary of Results

(Cdn$ except shares outstanding and per
boe1 amounts)
Three months ended
December 31,
Year Ended
December 31,
2012 2011 2012 20112
  (Unaudited)  
Financial        
Production sales 519,332 593,491 1,991,401 2,218,229
Processing sales 1,101,797 576,830 4,203,390 1,747,517
Funds flow from operations1 (366,380) (1,043,214) (2,982,279) (4,294,440)
Cash generated from operating activities (2,120,160) (1,438,456) (9,055,438) (6,376,378)
Comprehensive loss (12,805,846) (2,671,973) (26,030,923) (7,227,889)
Fixed asset expenditures 2,174,298 2,199,168 28,875,715 3,022,004
Weighted average shares outstanding        
- basic and diluted 572,536,704 572,536,704 572,536,704 496,666,117
         
Operations        
Production        
    Natural gas - Mcf per day 1,339 1,647 1,343 1,746
    Natural gas liquids - bbls per day 29 26 24 26
    Total - boe per day1 252 301 247 317
Average sales price        
   Natural gas - $ per Mcf 2.80 2.76 2.82 2.52
   Natural gas liquids - $ per bbl 65.49 73.59 68.95 64.30
Average operating netback        
    Production - $ per boe1 (1.59) 5.31 0.61 5.17
    Processing - $ per Mcf processed1 0.04 (0.00) 0.06 (0.05)

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

Note 2: The unaudited consolidated results for the Company for the year ended December 31, 2011 reflect the results of the combined operations of ArPetrol Inc. and RPT Resources Ltd. (now ArPetrol Ltd.) from March 18, 2011 until December 31, 2011 and the results from ArPetrol Inc. only from January 1, 2011 to March 17, 2011.

Note 3: 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.

Operational Update and Outlook

The Company is continuing to pursue and evaluate a broad range of strategic alternatives through its previously announced strategic review process with the assistance of its financial advisor, Raymond James. Management is also focused on re-negotiating its existing natural gas processing contract to achieve current market rates in advance of the expiry of those contracts in July 2013. For the existing producing and processing assets the Company will continue to focus on consistent, safe and efficient operations.

We have commenced the rig down and demobilization from the Faro Virgenes drilling location. This represents the last major operational component of the drilling program commenced in 2012. Based on its current cost estimates, ArPetrol expects to face a further negative working capital position following final demobilization of the rig. The Company estimates its demobilization commitment at $2.5 million. ArPetrol has continued discussions with contractors to manage payment schedules on past due amounts to allow sufficient time to provide a long-term solution for the Company. However, there is no certainty whether or not any contractors will pursue legal remedies relating to outstanding payables. There is uncertainty regarding the Company's ability to continue to operate as a going concern (see the financial statements and MD&A filed on SEDAR for complete disclosure).

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

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 (MMcf) per day. The Company's common shares are listed on the TSXV under the symbol "RPT".

Non-GAAP 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 three months and year ended December 31, 2012, 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 three months and year ended December 31, 2012.

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 expected working capital deficiency, the ability to negotiate with service providers and extend payment schedules until a long term solution for the Company can be achieved, the pursuit of strategic alternatives and future financing, the possibility to improve and extend the contractual terms for the gas processing business, 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, plans for and results of the strategic review process, the willingness for creditors to extend payment schedules until a long term solution is achieved, the ability to improve and extend the gas processing contracts, future operations and transactions, future capital and other expenditures (including the amount, nature, timing, availability and sources of funding thereof), future production and processing revenue, future economic conditions, future currency and exchange rates, future pricing, continued political stability in the areas in which the Company is operating, and the Company's continued ability to obtain and retain qualified 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 risks associated with uncertainty regarding the availability of a strategic alternative and the outcome of the strategic review process, uncertainty regarding the willingness of third parties to negotiate alternative contractual arrangements and payment schedules, uncertainty whether any creditors will commence legal proceedings, the risk of expiry of the existing gas processing contracts without having new contracts in place, risks associated with the oil and natural gas industry (e.g., operational risks in demobilization of the rig or future drilling programs, and health, safety and environmental risks), the ability to retain staff, the inability to access funding and continue as a going concern, 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, change in government policies, the risk of commodity price changes, the risk of foreign exchange rate fluctuations (which may not be as favourable as those being achieved today), 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, 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.

ArPetrol'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:

Tim Thomas, President and Chief Executive Officer
t.thomas@arpetrol.com

Or

Ian Habke, Chief Financial Officer
i.habke@arpetrol.com

ArPetrol Ltd.
Main Telephone: 403-263-6738

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