CALGARY, April 26 /CNW/ - Hawk Exploration Ltd. ("Hawk" or the "Corporation") announces that it has filed on SEDAR its audited annual financial statements, and related management's discussion and analysis. The Corporation also filed its Annual Information Form for the period ended December 31, 2010 containing the Corporation's Statement of Reserves Data and Other Oil and Gas Information as of December 31, 2010 as mandated by National Instrument 51-101 - Standards of Disclosure for Oil and Gas Activities of the Canadian Securities Administrators. Copies of these filings can be found at www.sedar.com or on the Corporation's website at www.hawkexploration.ca under Investor Info - Financial Reports.
Selected financial and operational information for the year and three months ended December 31, 2010 are provided as follows:
Three months Year Ended
ended December 31, December 31,
2010 2009 % Change 2010 2009 % Change
except per share
revenue $ 1,993 2,016 (1%) $ 7,248 2,059 252%
Funds flow from
operations(1) 835 1,041 (18%) 3,195 858 272%
Per share(1) 0.03 0.04 (25%) 0.10 0.06 67%
Net income (loss) (242) 82 (395%) (429) (78) (450%)
Per share (0.01) 0.00 - (0.01) (0.01) -
Capital expenditures 5,068 2,061 146% 15,349 4,263 260%
Property acquisition - 99 - - 12,621 -
end of period $(3,739) 8,165 (146%)
Bank debt, end of
period 250 - -
Total assets, end
of period $29,787 26,625 12%
outstanding, end of
Class A Shares 21,981 21,981 0%
Class B Shares 1,080 1,080 0%
Options to acquire
Class A Shares 2,110 1,010 109%
on combined basis,
basic and diluted(2) 32,781 14,633 124%
Crude oil and
liquids (bbl/d) 313 301 4% 285 85 235%
Natural gas (mcf/d) 259 425 (39%) 281 117 140%
Total (boe/d) 356 372 (4%) 332 105 216%
Crude oil and ngls
(per bbl) $ 66.18 66.22 0% $ 65.60 66.12 (1%)
(per mcf) 3.81 4.66 (18%) 4.14 4.66 (11%)
Total (per boe) 60.93 58.93 3% 59.84 59.00 1%
at 6:1)(3) $ 29.32 35.79 (18%) $ 31.17 35.41 (12%)
(1) Management uses funds flow from operations to analyze operating
performance, leverage and liquidity. Funds flow from operations as
presented does not have any standardized meaning prescribed by Canadian
GAAP and, therefore, may not be comparable with the calculation of
similar measures by other entities.
(2) Class B Shares were converted to Class A Shares based on the
December 31, 2010 closing price for the Class A Shares of $1.00 per
(3) Management considers operating netbacks as an important measure as it
demonstrates profitability relative to current commodity prices.
Operating netbacks do not have a standardized meaning prescribed by
Canadian GAAP and, therefore, may not be comparable with the calculation
similar measures by other entities.
During the year ended December 31, 2010, the Corporation accomplished the following:
- Increased annual sales revenue 252 percent from $2.1 million in 2009
to $7.2 million.
- Generated cash flow of $3.2 million, a 272 percent increase from
- Added a significant core area at Seagram Lake in west central
Saskatchewan through crown land sales and a farm-in agreement
encompassing 12 (6 net) sections of land.
- Commenced the first commercial production from the Duperow formation
(Leduc formation equivalent) in western Saskatchewan.
- Identified 50 (25 net) additional dual leg horizontal locations on
its existing land base at Seagram Lake based on geological mapping.
- Drilled twenty one (18.9 net) wells in 2010, of which seventeen
(14.9 net) were exploratory locations, resulting in eleven (8.9 net)
oil wells, two (2.0 net) standing wells and eight (8.0 net) dry
- Expanded the Corporation's net undeveloped land holdings by
171 percent from 12,943 net undeveloped acres in 2009 to 35,143 net
undeveloped acres in 2010.
- Increased the Corporation credit facility to $7.5 million during the
- Averaged 332 boe/d per day in 2010, a 216 percent increase over 2009
average production of 105 boe/d.
- Continued to generate strong operating netbacks which averaged $31.17
per boe in 2010.
2010 Operations Review
In 2010, Hawk focused almost entirely on exploration activities in order to satisfy its $12 million flow-through spending commitment. Of the twenty one (18.9 net) wells drilled during 2010, seventeen (14.9 net) of these were exploratory wells with only four (4.0 net) development wells drilled in the year. The most significant exploration discovery for Hawk during the year occurred at Seagram Lake in western Saskatchewan where the Corporation participated in the drilling of an exploratory horizontal well in the Duperow formation. Additional exploration discoveries were also made by Hawk at Hoosier and Silverdale in western Saskatchewan.
At Seagram Lake, Hawk participated in the drilling of an exploratory horizontal oil well at a 50% working interest targeting heavy oil in the Duperow formation (Leduc formation equivalent). The well was drilled and completed in September 2010 and placed on production in October 2010. As a result of poor initial inflow rates, a foam acid stimulation was performed which dramatically improved the inflow into the wellbore. Subsequent to the stimulation, production from the single leg horizontal well averaged over 80 (40 net) bbl/d of heavy oil over the first month with an associated water cut of 45%. The well is currently producing at 45 (22.5 net) bbl/d of heavy oil with a 60% water cut. Based on Hawk's analysis, this discovery represents the first commercial production from the Duperow formation in western Saskatchewan.
To date, the Corporation has assembled twelve (6 net) sections of land in the area through crown land sales and by way of a farm-in agreement. Based on the Corporation's geological mapping and acquired seismic data, Hawk has identified 50 (25 net) additional dual leg horizontal locations on its existing land base. Hawk has received licenses to drill three (1.5 net) dual leg horizontal wells which are anticipated to be drilled in the second quarter following spring breakup.
The Corporation's focus on oil production allowed Hawk to generate strong operating netbacks for 2010 of $31.17 per boe and funds flow from operations for 2010 of $3.2 million, a significant increase from the $0.9 million of funds flow in 2009. Hawk's net loss for 2010 widened to $0.4 million from $0.1 million in 2009 mainly as a result of higher depletion charges per boe and higher operating costs per boe in 2010.
Hawk exited 2010 with bank debt and working capital deficit of approximately $4.0 million on our existing line of credit of $7.5 million and a debt to annualized quarterly funds flow from operations of 1.2:1. The next review of the existing line of credit is to be conducted on or before May 31, 2011.
Commodity Risk Management
The Corporation has established a commodity risk management policy approved by the Board of Directors. The purpose of the commodity risk management policy is to protect planned capital budgets, safeguard the economics of acquisitions, and provide downside cash flow protection. In April 2011, the Corporation entered into a costless collar contract on a notional 75 bbl/d of crude oil with a floor price of Cdn $95.00 per bbl and a ceiling price of Cdn $110.80 per bbl with a term from May to December 2011.
For 2011, the Corporation plans to focus on the development of its most successful oil exploration discoveries and current oil development opportunities. Hawk believes this focus on development activity will lead to a more steady and consistent growth of its production base. Hawk's Board of Directors has approved a capital budget of approximately $9.0 million for 2011 which will facilitate the drilling of six (3 net) dual leg horizontal oil wells at Seagram Lake and five (4.2 net) vertical development oil wells in the Edam, Hoosier and Silverdale areas of western Saskatchewan. Hawk's 2011 capital budget is expected to be funded by way of funds flow generated from operations and its existing line of credit.
Hawk is an emerging exploration company engaged in the exploration, development and production of conventional crude oil and natural gas in western Canada and is based in Calgary, Alberta. The Class A Shares and Class B Shares of Hawk trade on the TSX Venture Exchange under the trading symbols of HWK.A and HWK.B, respectively.
Neither the TSX Venture Exchange nor its Regulation Services Provider (as the term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
Certain statements contained in this press release constitute forward-looking statements. All forward-looking statements are based on the Corporation's beliefs and assumptions based on information available at the time the assumption was made. The use of any of the words "anticipate", "continue", "estimate", "expect", "may", "will", "project", "should", "believe" and similar expressions are intended to identify forward-looking statements. These statements involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking statements. Hawk believes the expectations reflected in those forward-looking statements are reasonable, but no assurance can be given that these expectations will prove to be correct. Such forward-looking statements included in this press release should not be unduly relied upon. These statements speak only as of the date of this press release
In particular, but without limiting the forgoing, this press release contains forward-looking statements pertaining to the following: the performance characteristics of Hawk's oil and natural gas properties; business strategies and plans; projections of market prices and cost; supply and demand for oil and natural gas; planned development of the Corporation's oil and natural gas properties; capital expenditure programs; and the expected sources of funding for the capital expenditure program.
The material factors and assumptions used to develop these forward looking statements include, but are not limited to: the ability of the Corporation to engage drilling contractors, to obtain and transport equipment, services, supplies and personnel in a timely manner and at an acceptable cost to carry out its activities and plans; the ability of the Corporation to market its oil and natural gas and to transport its oil and natural gas to market; the timely receipt of regulatory approvals and the terms and conditions of such approval; the ability of the Corporation to obtain drilling success consistent with expectations; and the ability of the Corporation to obtain capital to finance its exploration, development and operations.
Actual results could differ materially from those anticipated in these forward-looking statements as a result of the risk factors including, without limitation: volatility in market prices for oil and natural gas; liabilities inherent in oil and natural gas operations; uncertainties associated with estimating oil and natural gas reserves; competition for, among other things, capital, acquisitions of reserves, undeveloped lands and skilled personnel; incorrect assessments of the value of acquisitions and exploration and development programs; geological, technical, drilling and processing problems; changes in tax laws and incentive programs relating to the oil and natural gas industry; failure to realize the anticipated benefits of acquisitions; general business and market conditions; and certain other risks detailed from time to time in Hawk's public disclosure documents (including, without limitation, the other factors discussed under "Risk Factors" in the Corporation's most recently filed Annual Information Form).
Statements relating to "reserves" or "resources" are deemed to be forward-looking statements, as they involve the implied assessment, based on certain estimates and assumptions that the resources and reserves described can be profitably produced in the future. Readers are cautioned that the foregoing lists of factors are not exhaustive. The forward-looking statements contained in this press release are expressly qualified by this cautionary statement. Except as required under applicable securities laws, Hawk does not undertake any obligation to publicly update or revise any forward-looking statements.
Barrels of oil equivalent (boe) may be misleading, particularly if used in isolation. A boe conversion ratio of six thousand cubic feet (mcf) of natural gas to one barrel (bbl) of oil is based on an energy conversion method primarily applicable at the burner tip and is not intended to represent a value equivalency at the wellhead. All boe conversions in this press release are derived by converting natural gas to oil in the ratio of six thousand cubic feet of natural gas to one barrel of oil. Certain financial amounts are presented on a per boe basis, such measurements may not be consistent with those used by other companies.
SOURCE Hawk Exploration Ltd.
For further information: Steve Fitzmaurice, President, CEO and Chairman, Tel: (403) 264-0191 Ext 225, Email: email@example.com; Dennis Jamieson, Chief Financial Officer, Tel: (403) 264-0191 Ext 234, Email: firstname.lastname@example.org