Mountainview Energy Ltd. Announces 2014 Year End Financials, Reserves and Provides Corporate Update

CUTBANK, MT, April 30, 2015 /CNW/ - Mountainview Energy Ltd. ("Mountainview" or the "Corporation") (TSX-V: MVW) announces its 2014 operating and financial results for the year ended December 31, 2014. The Corporation also announces that its audited financial statements and management's discussion and analysis for the year ended December 31, 2014, is available on SEDAR at www.sedar.com, and on Mountainview's website at www.mountainviewenergy.com.  

Year End Financials

During 2014, Mountainview continued to replace its production and increased its reserve base through the drill bit, which resulted in an increase in annual revenue. 

Highlights of Mountainview's performance in 2014 are as follows:

  • Completed capital program of $23.6 million, including the drilling of 3 gross (1.3 net) wells at a 100% success rate.
  • Increased average annual production by 14% to 853 boe/d, while increasing the oil and liquids weighting to 96% from 86% in the prior year.

Certain selected financial and operational information for the three and twelve months ended December 31, 2014 and 2013 is outlined below and should be read in conjunction with Mountainview's audited financial statements for the years ended December 31, 2013 and 2012 and the accompanying management discussion and analysis filed with the Canadian securities regulatory authorities which may be accessed through the SEDAR website (www.sedar.com) and also on the Company's website: www.mountainviewenergy.com.


Three months ended December 31

Twelve months ended December 31


2014

2013

% Change

2014

2013

% Change

Financial (US $ 000's, except per share amounts)






Petroleum and natural gas sales

5,108

7,418

-31%

24,108

20,527

17%

Funds flow from operations (1)

(1,922)

2,085

-192%

(1,973)

3,359

-159%

Per share basic

(0.02)

0.02

-192%

(0.02)

0.07

-131%

Per share diluted

(0.02)

0.02

-192%

(0.02)

0.06

-131%

Expiries and Impairment (2)

(41,110)

(2,795)

-1371%

(46,474)

(2,795)

-1563%

Net loss

(44,899)

(3,141)

-1329%

(54,347)

(5,974)

-810%

Per share basic

(0.51)

(0.04)

-1175%

(0.62)

(0.07)

-786%

Per share diluted (3)

(0.51)

(0.04)

-1175%

(0.62)

(0.07)

-786%

Capital expenditures (4)

3,669

16,584

-78%

23,553

48,707

-52%

Net debt (5)

84,658

59,244

43%

84,658

59,244

43%

Operating







Average daily production







Light crude oil (bbl per day)

880

1,039

-15%

802

644

25%

Natural gas (Mcf per day)

182

864

-79%

219

632

-65%

Natural Gas Liquids (bbl per day)

17

-

N/A

14

-

N/A

Barrels of oil equivalent (boe per day, 6:1)

927

1,183

-22%

853

749

14%

% Oil and NGLs

95%

88%

8%

94%

86%

9%

Average sales price







Light crude oil ($ per bbl)

63.15

77.02

-18%

80.81

86.20

-6%

Natural gas ($ per Mcf)

3.07

2.94

4%

3.53

2.98

19%

Natural Gas Liquids ($ per bbl)

36.01

-

N/A

41.89

-

N/A

Barrels of oil equivalent ($ per boe, 6:1)

61.16

68.16

-10%

77.78

75.08

4%

Operating netback ($ per boe) (6)







Petroleum and natural gas sales

61.16

68.16

-10%

77.78

75.08

4%

Royalties

(10.58)

(13.49)

22%

(14.24)

(12.18)

-17%

Operating expenses

(41.41)

(20.08)

-106%

(35.60)

(24.06)

-48%

Operating netback

9.17

34.59

-73%

27.94

38.84

-28%

Wells drilled







Gross

3.0

2.0

-

3.0

8.0

-63%

Net

1.3

1.4

-

1.3

4.8

-73%

Success (%)

100

100

-

100

100

0%

Common Shares







Shares outstanding, end of period

87,820,443

87,820,443

0%

87,820,443

87,820,443

0%

Weighted average shares outstanding – diluted

107,040,443

107,040,443

0%

107,040,443

107,040,443

0%

(1)

Funds flow from operations should not be considered an alternative to, or more meaningful than, cash flow from operating activities as determined in accordance with International Financial Reporting Standards as an indicator of Mountainview's performance. Funds flow from operations represents cash flow from operating activities prior to changes in non-cash working capital, transaction costs and decommissioning provision expenditures incurred. Mountainview also presents funds flow from operations per share whereby per share amounts are calculated using weighted average shares outstanding consistent with the calculation of earnings per share.

(2)

The low commodity price environment at year end led the Company to assess for indicators for impairment.  The indicators for impairment noted include no future capital allocated for undeveloped land in the Stateline area, low market value for acreage in Divide County, North Dakota, and fair value less cost to dispose of existing oil and gas assets that was below the carrying value.  The resulting $16.9 million impairment charge on undeveloped acreage reduced the carrying value of undeveloped land in the Stateline area, which straddles the border between Montana and North Dakota, and in Divide County, North Dakota.  In addition, undeveloped leases on 7,511 net acres of land expired in 2014, which had a carrying value of $6.7 million.  An impairment charge on the Company's developed oil and gas properties reduced the value by $22.9 million. For additional information on the indicators of impairment and resulting impairment charges, please see Notes 9 & 10 of the Company's audited annual financial statements.

(3)

Due to the anti-dilutive effect of Mountainview's net loss for the three months and year ended December 31, 2014 and 2013, the diluted number of shares is equal to the basic number of shares. Therefore, diluted per share amounts of the net loss are equivalent to basic per share amounts.

(4)

Capital expenditures are a non-GAAP measure, calculated as the purchase or sale price of an asset, plus development capital expenditures added to PP&E. Corporate acquisitions are excluded from this measure.

(5)

Net debt is a non-GAAP measure representing the total of bank indebtedness, accounts payables and accrued liabilities and long term debt, less accounts receivables, deposits and prepaid expenses.

(6)

Operating netback is a non-GAAP measure calculated as the average per boe of the Company's oil and gas sales plus realized gains on derivatives, less royalties, production taxes, operating and transportation expenses.

 

Reserves

Selected reserve information is outlined below and should be read in conjunction with Mountainview's annual information form, audited financial statements and related management discussion and analysis as at and for the year ended December 31, 2014, are available under Mountainview's SEDAR profile at www.sedar.com.

Mountainview's reserves were evaluated in a report (the "CG&A Report") prepared by Cawley, Gillespie & Associates, Inc. ("CG&A") effective December 31, 2014, in accordance with National Instrument 51-101 – Standards for Disclosure for Oil and Gas Activities ("NI 51-101") of the Canadian Securities Administrators. All of the Company reserves were evaluated in the CG&A Report. All dollar figures are in USD unless otherwise specified.

Due to falling commodity prices, limited available capital to develop our lands and certain technical revisions, the details of which are outlined in the CG&A report, Mountainview's reserve volumes generally increased, while reserve values generally decreased from those stated in the reserves report prepared by CG&A for the year ended December 31, 2013. However, on a volumetric basis, Mountainview's reserve base increased when compared to those reported for the year ended December 31, 2013.

  • total proved plus probable reserves ("2P") increased from 11,466 Mboe (88% liquids) in 2013 to 13,197 Mboe (88% liquids) in 2014;

  • total proved reserves increased from 6,776.2 Mboe (88% liquids) in 2013 to 7,526.0 Mboe in 2014 (88% liquids);

  • 2P finding, development cost ("F&D") in 2014 of $15.20/boe, including changes in future development capital;

  • 2P recycle ratio of 1.8 times, based on F&D of $15.20/boe and a 2014 field netback of $27.94/boe;

  • Total proved reserve life index ("RLI") for 2014 of 22.2 years compared to total proved RLI for 2013 of 15.7 years and 2P RLI for 2014 of 39.0 compared to 2P RLI for 2014 of 26.6 years, based on Q4 2014 production of 927 boe/day; and

  • The 2014 drilling program was completed successfully with three wells drilled in zone and reaching the targeted depth on time and on budget.  Of those three wells, one was completed with two additional wells awaiting completion.

The following table is a summary of Mountainview's petroleum and natural gas reserves, as evaluated by CG&A, effective December 31, 2014, using CG&A's forecast prices and costs.  It should not be assumed that the below represent the fair market value of the reserves. There is no assurance that the forecast prices and cost assumptions will be attained and variances could be material. The recovery and reserve estimates of our crude oil, natural gas liquids and natural gas reserves provided herein are estimates only and there is no guarantee that the estimated reserves will be recovered.  It is important to note that the recovery and reserves estimates provided herein are estimates only.  Actual reserves may be greater or less than the estimates provided herein.  Reserves information may not add due to rounding.

Reserve Category

(Gross)

Before tax Net Present
Value Discounted at 10%
(US$)

Light Oil
(Mbbl)

Gas
(MMcf)

Boe
(MBoe)

Proved





Developed Producing

1,697.4

1,554.0

1,956.4

26,657

Developed Non-Producing

207.9

155.9

233.9

2,623

Undeveloped

4,739.5

3,577.1

5,335.7

14,888

Total Proved

6,644.8

5,287.0

7,526.0

44,168

Probable

5,032.5

3,833.8

5,671.5

25,220

Total Proved plus Probable

11,677.3

9,120.8

13,197.4

69,388

The following table outlines forecasted commodity prices used in Mountainview's reserve evaluation by Cawley, Gillespie and Associates at December 31, 2014.


2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

WTI (US$/bbl)

65.00

80.00

90.00

91.35

92.72

94.11

95.52

96.96

98.41

99.89

101.35

Henry Hub (US$/mmbtu)

3.25

3.75

4.00

4.50

5.00

5.08

5.15

5.23

5.31

5.39

5.47

Oil and gas prices were escalated thereafter 2025 at 1.5%.

Corporate Update

A sharp decline in oil prices in the latter half of 2014 and continued low prices during the first four months of 2015 has materially reduced the operating cash flow.  In response, the Company has taken steps to reduce G&A including layoffs, salary reductions, field operating expenses and plans no new capital drilling and/or completions in efforts to maximize available cash flow during these difficult times. These austerity measures aside, the Company is faced with liquidity and debt challenges. As at December 31, 2014 Mountainview has a working capital deficit of $71.4 million consisting of current assets of $6.9 million ($ 0.6 million cash) and current liabilities of $78.3 million. The Company owes $50.5 million under its credit facility with Wells Fargo, $8.7 million to First Interstate Bank and trade payables and other of $18.9 million. With respect to the credit facility, the US subsidiary was in breach of its current ratio covenant at December 31, 2014 and remains so. In addition the Company is in breach of covenants around timely payments of trade payables and requirements that oil and gas assets remain free of liens. Liens have been filed totaling $7.2 million; however, agreements with certain lienholders have allowed for continued receipt of production revenues to fund interest payments and critical ongoing operations and administration. The creditor is aware of these issues and has not taken any formal action to exercise rights and/or remedies under the credit agreement. Under the bank line of credit the Company was in default due to non- payment of principal and interest in December and has not made payments for February and March of 2015. At this time, the bank has not taken any formal action to exercise its rights and/or remedies under the credit agreement. The Company is involved in active discussions with its banks and trade creditors to negotiate a comprehensive solution to resolve its financial challenges. In addition the Company has longer term debts consisting of $10.7 million pursuant to outstanding promissory notes with an officer/director and two major shareholders and $2.3 million in convertible debenture a portion with an officer and director. These debts mature July 1, 2016 and are in good standing. The Company is looking to include them in any comprehensive debt solution plan and is currently engaged in discussions to this end.  

The Company plans to continue negotiations and discussions with creditors to resolve our liquidity and debt challenges. In parallel the Company is actively considering debt and equity financing solutions, assets sales and corporate transactions among other available alternatives in the best interest of the Company.

About Mountainview

Mountainview Energy Ltd. is a public oil and gas company listed on the TSX Venture Exchange, with a primary focus on the exploration, production and development of the Bakken and Three Forks Shale in the Williston Basin and the South Alberta Bakken.

Forward Looking Statements

Statements in this press release contain forward-looking information and forward-looking statements within the meaning of applicable securities laws (collectively, "forward-looking information"). Forward-looking information is frequently characterized by words such as "plan", "expect", "project", "intend", "believe", "anticipate", "estimate" and other similar words, or statements that certain events or conditions "may" or "will" occur. In particular, forward-looking information in this press release includes, without limitation, statements with respect to the challenges facing the Corporation and its subsidiaries and the various alternatives available.  Statements relating to "reserves" are also deemed to be forward looking statements, as they involve the implied assessment, based on certain estimates and assumptions, that the reserves described exist in the quantities predicted or estimated and that the reserves can be profitably produced in the future.

Although we believe that the expectations and assumptions reflected in the forward-looking information are reasonable, there can be no assurance that such expectations or assumptions will prove to be correct. Forward-looking information is based on the opinions and estimates of management at the date the statements are made, and is subject to a variety of risks and uncertainties and other factors (many of which are beyond the control of Mountainview) that could cause actual events or results to differ materially from those anticipated in the forward-looking information. Some of the risks and other factors could cause results to differ materially from those expressed in the forward-looking information include, but are not limited to: operational risks in exploration, development and production; delays or changes in plans; competition for and/or inability to retain drilling rigs and other services; competition for, among other things, capital, acquisitions of reserves, skilled personnel and supplies; risks associated to the uncertainty of reserve and resource estimates; governmental regulation of the oil and gas industry, including environmental regulation; geological, technical, drilling and processing problems and other difficulties in producing reserves; the uncertainty of estimates and projections of production, costs and expenses; unanticipated operating events or performance which can reduce production or cause production to be shut in or delayed; incorrect assessments of the value of acquisitions; the need to obtain required approvals from regulatory authorities; stock market volatility; volatility in market prices for oil and natural gas; liabilities inherent in oil and natural gas operations; access to capital; the outcome and impact of litigation to which the Corporation or its subsidiaries may become party; turnover in management; uncertainty with respect to the various alternatives available to the Corporation and its subsidiaries and other factors. Readers are cautioned that this list of risk factors should not be construed as exhaustive.

The forward-looking information contained in this news release is expressly qualified by this cautionary statement. Mountainview does not undertake any obligation to update or revise any forward-looking statements to conform such information to actual results or to changes in our expectations except as otherwise required by applicable securities legislation. Readers are cautioned not to place undue reliance on forward-looking information.

Meaning of Boe

The term "BOE" or barrels of oil equivalent may be misleading, particularly if used in isolation. A BOE conversion ratio of six thousand cubic feet of natural gas to one barrel of oil equivalent (6 Mcf: 1 bbl) is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. Additionally, given that the value ratio based on the current price of crude oil, as compared to natural gas, is significantly different from the energy equivalency of 6:1; utilizing a conversion ratio of 6:1 may be misleading as an indication of value.

Finding and Development Costs

NI 51101 specifies how finding and development costs ("F&D costs") should be calculated if they are reported. Essentially NI 51101 requires that the exploration and development costs incurred in the year along with the change in estimated F&D costs be aggregated and then divided by the applicable reserve additions. The calculation specifically excludes the effects of acquisitions and dispositions on both reserves and costs. By excluding the effects of acquisitions and dispositions Mountainview believes that the provisions of the NI 51101 do not fully reflect Mountainview's ongoing reserve replacement costs. Since acquisitions can have a significant impact on Mountainview's annual reserve replacement costs, excluding these amounts could result in an inaccurate portrayal of Mountainview's cost structure. Accordingly, Mountainview also provides FD&A costs that incorporate all acquisitions and dispositions during the year. F&D costs disclosed herein are based on working interest gross reserves.

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 F&D costs related to reserve additions for that year.

The net present value of future net revenue of reserves do not represent fair market value.

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

SOURCE Mountainview Energy Ltd.

For further information: Patrick M. Montalban, President & Chief Executive Officer, E-Mail: mvw@bresnan.net; Brent Osmond, Vice President Finance & Chief Financial Officer, E-Mail: brento@mountainviewenergy.com

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