ArPetrol Ltd. Announces Third-Quarter 2013 Financial and Operating Results

CALGARY, Nov. 28, 2013 /CNW/ - ArPetrol Ltd. ("ArPetrol" or the "Company") (TSXV: RPT) announces its financial and operating results for the three and nine months ended September 30, 2013 and provides an operational update on activities to date this year as well as an outlook for the remainder of 2013. 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 Third Quarter 2013

Operating and Financial

As at September 30, 2013, ArPetrol had a working capital deficit of $4.5 million and has no long-term debt.

ArPetrol's third quarter production averaged 186 barrels of oil equivalent per day (boe/d).  This is a decrease of 55 boe per day from the second quarter of 2013 and a decrease of 41 boe/d from the third quarter of 2012.  These decreases are due to natural production declines and some yet unresolved well performance issues in the third quarter of 2013.

The average realized natural gas price was $3.95 per thousand cubic feet (Mcf), $0.40 per Mcf higher than the price realized in the second quarter of 2013 and $1.20 per Mcf higher than in the third quarter of 2012. This increase is due to a new natural gas sales contract ArPetrol entered into during the second quarter. For natural gas liquids (NGLs), average third quarter 2013 prices were $81.79 per barrel, $14.07 per barrel higher than in the second quarter of 2013, and $9.80 per barrel higher than in the same period in 2012. The changes in NGLs pricing reflect commodity fluctuations in the Argentine market.

Processing revenues from third-party customers increased significantly during the third quarter of 2013 with revenues totalling $2,211,991.  This is more than double the $1,042,011 of processing revenue in the second quarter of 2013 and well over double the $959,639 earned in the third quarter of 2012.  The biggest contributors to the revenue increase are the two new processing contracts which have been negotiated with an effective date of July 1, 2013.  Under these new contracts, the price increased from $0.15 per Mcf processed, under the old contract, to $0.30 per Mcf processed in the third quarter. Increased processing volumes also contributed to the revenue increase with third quarter throughput averaging 80.0 million cubic feet (MMcf) per day compared to 65.1 MMcf per day processed during the second quarter of 2013 and 70.5 MMcf per day for the third quarter of 2012.  The increase in volumes was due to resolution of third-party operational problems. The new contracts are expected to continue delivering future fees in the same range as realized in the third quarter, assuming there are no maintenance issues at the plant or interruptions to processing volumes.

Capital expenditures for the quarter were $34,106. Net loss for the quarter was $3,759,048 compared to a net loss of $10,453,864 for the third quarter of 2012.

Summary of Results

                 
(Cdn$ except shares outstanding
and per boe1 amounts)
  Three Months Ended
Sept 30,
  Nine Months Ended
Sept 30,
    2013   2012   2013   2012
Financial                
Production sales   513,717   441,083   1,563,031   1,472,069
Processing sales   2,211,991   959,639   4,381,509   3,101,593
Funds flow from (used in) operations1   144,025   (982,464)   (689,245)   (2,615,899)
Cash from (used in) operating activities   (3,541,000)   (3,922,854)   (1,793,743)   (7,180,188)
Comprehensive loss   4,245,285   11,089,049   3,236,478   13,225,077
Fixed asset expenditures   34,898   15,498,061   2,015,258   26,701,417
Weighted average shares outstanding                
  - basic and diluted 2   572,536,704   572,536,704   572,536,704   572,536,704
                 
Operations                
Production                
  Natural gas - Mcf per day   999   1,245   1,166   1,344
  Natural gas liquids - bbls per day   20   19   24   22
Total - boe per day1   186   227   219   246
Average sales price                
  Natural gas - $ per Mcf   3.95   2.75   3.41   2.83
  Natural gas liquids - $ per bbl   81.79   71.99   73.00   71.49
Operating netback                
  Production - $ per boe1   3.21   1.99   1.30   1.35
  Processing - $ per Mcf processed1   0.18   0.06   0.10   0.06

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.

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

Operational Update and Outlook

The Company recently concluded settlements agreements with roughly half of its third-party contractors representing settlement on $4.2 million of outstanding payables at September 30, 2013.  Payments under the settlement agreements will be made in November and December 2013.

ArPetrol continues its discussions with its remaining third party contractors on past due amounts, and the goal is to find mutually acceptable arrangements and payment schedules. One contractor has initiated an arbitration proceeding in Argentina to resolve its outstanding payables, and the Company is evaluating that action and its response. There is no certainty whether or not any other contractors will pursue legal proceedings relating to outstanding payables. There is continued 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).

The Company has undergone a series of cost savings measures since the beginning of August 2013 which is expected to reduce general and administrative expenses going forward.

The Company elected not to extend the engagement of its strategic advisor, however, management is continuing to investigate several strategic opportunities that can impact future growth of the Company. There is no certainty whether or not any of these opportunities will be completed.

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-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 and nine months ended September 30, 2013, 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 and nine months ended September 30, 2013.

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 third quarter, the ability to negotiate settlement agreements with the remaining service providers and extend payment schedules until a long-term solution for the Company can be achieved, the ability to reach final agreement with one third party on one of the new gas processing contracts under which the company has received payment based on the new terms, the ability to reduce future expenses, 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 remaining creditors to settle outstanding amounts or extend payment schedules, future operations and transactions, the pursuit of strategic alternatives, 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, 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 third parties to negotiate alternative contractual arrangements and payment schedules, uncertainty regarding the outcome of the arbitration proceeding initiated by the creditor in Argentina and the cost of same, uncertainty whether any other creditors will commence legal proceedings and the costs of same, the risk that a new gas processing agreement will not be executed by the second counterparty, 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 inability to access funding and 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, 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 currently experienced), currency controls and a change in the manner and rates at which the Company is exchanging currency, the risk that the Corporation will not be able to effectively reduce expenses, 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:

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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