Connacher Announces Q4 2015 and Year-End 2015 Results

CALGARY, March 29, 2016 /CNW/ - Connacher Oil and Gas Limited (CLC - TSX; "Connacher" or the "Company") announces its financial and operating results for the quarter- and the year-ended December 31, 2015 (all amounts are in Canadian dollars unless otherwise noted).

The Company's annual financial statements and related management's discussion and analysis ("MD&A") for the quarter- and the year-ended December 31, 2015 can be accessed on Connacher's website at www.connacheroil.com and on SEDAR at www.sedar.com. The Company's annual general meeting of shareholders will be held in June in compliance with securities laws.

Q4 2015 Highlights

Financial

  • Q4 2015 revenue, net of royalties, decreased 58% to $41.1 million (Q4 2014 - $96.6 million), substantially due to the decline in crude oil prices and lower sales volumes

  • Q4 2015 adjusted EBITDA decreased to a deficit of $20.5 million (Q4 2014 - $6.7 million), substantially due to lower revenue, net of royalties, partially offset by lower blending costs

  • Q4 2015 funds used was $27.8 million (Q4 2014 - funds used of $16.8 million). The decrease in funds flow in Q4 2015 was primarily due to lower adjusted EBITDA, partially offset by lower interest on long-term debt as the 2018 and 2019 senior secured second lien notes (the "Notes") were exchanged for common shares as part of the recapitalization transaction which closed on May 8, 2015 (the "Recapitalization") and a reduction in non-cash working capital

  • In Q4 2015, the Company generated a net loss of $56.0 million (Q4 2014 - net loss of $99.4 million). The decrease is primarily due to lower finance charges and lower foreign exchange losses, partially offset by a decrease in revenue, net of royalties

  • In Q4 2015, capital expenditures totaled $9.1 million (Q4 2014 - $10.9 million)

Operational

  • Q4 2015 production decreased 9% to 13,919 barrels per day ("bbl/d") (Q4 2014 – 15,249 bbl/d), primarily due to natural declines

  • In Q4 2015, blending costs decreased 49% to $14.9 million (Q4 2014 - $29.2 million), primarily due to lower diluent pricing and lower total diluent volumes associated with decreased bitumen production

2015 Highlights

Financial

  • Revenue, net of royalties decreased 49% to $224.3 million in 2015 (2014 - $437.5 million), substantially due to the decline in crude oil prices, partially offset by higher sales volumes

  • Adjusted EBITDA decreased to a deficit of $50.8 million (2014 - $69.7 million), substantially due to lower revenue, net of royalties, partially offset by lower blending and operating costs and lower realized risk management contract losses as all contracts were terminated in the first half of 2015

  • For 2015, funds used was $101.8 million (2014 - funds used of $20.5 million). The decrease in funds flow for 2015 was primarily due to lower adjusted EBITDA, partially offset by lower interest on long-term debt as the Notes were exchanged for common shares as part of the Recapitalization and a reduction in non-cash working capital

  • In 2015, the Company generated a net loss of $42.3 million (2014 - net loss of $211.8 million). The decrease is primarily due to the net gain on the Recapitalization transaction; recognition of an unrealized gain on the US$35 million aggregate principal amount of new second lien convertible notes due August 31, 2018 (the "Convertible Notes"); lower blending and operating costs; and lower finance charges; offset by the recognition of impairment on PP&E assets and a decrease in revenue, net of royalties

  • In 2015, capital expenditures totaled $21.1 million (2014 - $80.2 million). The reduction in capital expenditures was due to the deferral of all discretionary capital in light of the 48% decrease in crude oil benchmark pricing

  • Connacher closed Q4 2015 with a cash balance of $47.2 million (Q4 2014 - $94.2 million)

Operational

  • 2015 production increased 3% to 14,547 bbl/d (2014 - 14,139 bbl/d), primarily due to the Company's eight infill wells at Pod One that were brought on production since Q3 2014 and improved field and plant optimization at Algar

  • In 2015, blending costs decreased 39% to $72.4 million (2014 - $118.9 million), primarily due to lower diluent pricing and a reduction in the diluent blend ratio ("DBR")

  • For 2015, production and operating expenses decreased 24% to $87.3 million (2014 - $115.2 million), primarily as a result of lower natural gas costs and the realization of operating cost reduction initiatives

2015 Financial Highlights

FINANCIAL (1)

Q4 2015

Q4 2014

2015

2014

Revenue, net of royalties

$41,056

$96,647

$224,276

$437,477

Adjusted EBITDA (2)

(20,478)

6,688

(50,778)

69,689

Net loss

(56,032)

(99,371)

(42,295)

(211,786)


Basic per share (3)

(1.98)

(176.00)

(2.27)

(376.00)


Diluted per share (3)

(1.98)

(176.00)

(2.27)

(376.00)

Funds flow (used) (4)

(27,781)

(16,809)

(101,817)

(20,489)

Capital expenditures

9,055

10,871

21,059

80,196

Cash on hand

47,235

94,164



Working capital surplus

59,185

56,285



Long-term debt

255,228

1,089,520



Shareholders' equity

524,097

10,880









(1)

($ 000) except per share amounts


(2)

Adjusted EBITDA is a non-GAAP measure and is defined in the "Advisory Section" of the 2015 MD&A and is reconciled to net loss under "Reconciliations of Net (Loss) Gain to EBITDA, Adjusted EBITDA, and Bitumen Netback"


(3)

Basic and diluted EPS amounts reflect the 800:1 share consolidation for the three and twelve months ended December 31, 2015 and 2014


(4)

Funds flow (used) is a non-GAAP measure and is defined in the "Advisory Section" of the 2015 MD&A and is reconciled to cash flow from operating activities under "Reconciliation of Cash Flow from Operating Activities to Funds Flow (Used)"

2015 Operational Highlights

OPERATIONAL

Q4 2015

Q4 2014

2015

2014

Average benchmark prices





WTI (US$/bbl)

42.18

73.15

48.80

93.00

WTI ($/bbl)

56.60

83.64

62.98

103.08

Heavy oil differential (US$/bbl)

(14.49)

(14.24)

(13.57)

(19.40)

WCS ($/bbl)

37.16

67.20

45.47

81.32

$/US$ exchange rate

1.34

1.14

1.29

1.11

Production and sales volumes (1)





Daily bitumen production (bbl/d)

13,919

15,249

14,547

14,139

Daily bitumen sales (bbl/d)

13,675

15,503

14,280

13,916

Bitumen netback ($/bbl) (2)(3)





Dilbit sales

$27.48

$57.48

$35.81

$74.10

Diluent costs

(6.58)

(7.89)

(6.41)

(7.65)

Realized bitumen sales price   

20.90

49.59

29.40

66.45

Transportation and handling costs

(15.98)

(16.51)

(16.92)

(16.53)

Net realized bitumen sales price

4.92

33.08

12.48

49.92

Royalties

(0.09)

(2.33)

(0.25)

(3.73)

Net bitumen revenue price

4.83

30.75

12.23

46.19

Production and operating expenses

(17.09)

(18.28)

(16.74)

(22.68)

Bitumen netback

$(12.26)

$12.47

$(4.51)

$23.51







(1)

The Company's bitumen sales and production volumes differ due to changes in inventory and product losses


(2)

A non-GAAP measure which is defined in the "Advisory Section" of the 2015 MD&A. Bitumen netback is reconciled to net loss under "Reconciliations of Net (Loss) Gain to EBITDA, Adjusted EBITDA, and Bitumen Netback". Bitumen netbacks per barrel amounts are calculated by dividing the total amounts presented in the "Bitumen Netback" table on page 12 by bitumen sold volumes as presented in the "Production and Sales Volumes" table on page 10, with the exception of dilbit sales (presented as dilbit sales divided by dilbit sales volume) and diluent costs (presented as the cost of diluent in excess of the dilbit selling price)


(3)

Before risk management contract gains or losses

 

Operations

In light of exceptionally low commodity prices, the Company reduced its production at Great Divide for Q1 2016.

Based on field estimates, average production for Q1 2016 is anticipated to be 5,900 bbl/d.

The Company is expected to complete a previously scheduled turnaround at Pod One by the end of Q1 2016. Following the turnaround, the Company is expected to increase production at Great Divide to approximately 8,000 bbl/d.

Liquidity

The deterioration of crude oil pricing has constrained the Company's ability to generate positive cash flow from operations. Coupled with the low-price commodity environment, the restrictive provisions of the Company's long-term debt arrangements have severely constrained the Company's access to additional financing. Without the injection of new sources of financing or positive cash flow from operations, the Company will be challenged to deploy the capital required to maintain existing reserve and production bases, fund maintenance capital, fund working capital requirements, and may be unable to discharge future obligations as they come due.

Overall, the current economic outlook on global crude oil prices and limited access to available capital may cast significant doubt about the Company's ability to continue as a going concern.

At February 29, 2016, the Company's cash balance was $38.2 million.

About Connacher

Connacher is a Calgary-based in situ oil sands developer, producer, and marketer of bitumen. The Company holds a 100 per cent interest in approximately 435 million barrels of proved and probable bitumen reserves and operates two steam-assisted gravity drainage facilities located on the Company's Great Divide oil sands leases near Fort McMurray, Alberta.

Forward Looking Information

This press release contains forward looking information, including anticipated production rates and the Company's liquidity outlook. Forward looking information is based on management's expectations regarding the Company's future financial position; the Company's future growth, results of operations and production, future commodity prices and foreign exchange rates; future capital and other expenditures (including the amount, nature, and sources of funding thereof); environmental matters; business prospects and opportunities; and future economic conditions. Forward looking information involves significant known and unknown risks and uncertainties, which could cause actual results to differ materially from those anticipated. These risks include, but are not limited to: that cash flows from operations and current working capital may not provide adequate funds to fund the Company's operating losses and capital plan; the risks associated with the oil and gas industry (e.g., operational risks in development, exploration and production; delays or changes in plans with respect to exploration or development projects or capital expenditures; the uncertainty of reserve and resource estimates; the uncertainty of geological interpretations; the uncertainty of estimates and projections relating to production, costs and expenses; and health, safety and environmental risks), risk of commodity price and foreign exchange rate fluctuations, risks associated with the impact of general economic conditions, risks and uncertainties associated with maintaining the necessary regulatory approvals and securing the financing to continue operations and increase production to levels previously achieved.  

Reported average production levels may not be reflective of sustainable production rates and future production rates may differ materially from the production rates reflected in this press release due to, among other factors, difficulties or interruptions encountered during the production of bitumen.

Additional risks and uncertainties affecting Connacher and its business and affairs are described in further detail in Connacher's AIF for the year ended December 31, 2015. Although Connacher believes that the expectations in such forward looking information are reasonable, there can be no assurance that such expectations shall prove to be correct. Any forward looking information included in this press release is expressly qualified in its entirety by this cautionary statement. Any forward looking information included herein is made as of the date of this press release and Connacher assumes no obligation to update or revise any forward looking information to reflect new events or circumstances, except as required by law.

SOURCE Connacher Oil and Gas Limited

For further information: Merle Johnson, Chief Executive Officer; Jeff Beeston, Vice President of Finance and Interim Chief Financial Officer; Connacher Oil and Gas Limited, Phone: (403) 538-6201, Fax: (403) 538-6225, Suite 900, 332 - 6th Avenue SW, Calgary, Alberta T2P 0B2, inquiries@connacheroil.com, www.connacheroil.com

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http://www.connacheroil.com

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