Sunshine Oilsands Ltd. Announcement of Results for the Fourth Quarter and the Year Ended December 31, 2014 and Update of the West Ells Startup Schedule

HONG KONG and CALGARY, Canada, March 26, 2015 /CNW/ -- Sunshine Oilsands Ltd. (the "Corporation" or "Sunshine") (HKEX:  2012; TSX: SUO) today announced its financial results for the fourth quarter and the year ended December 31, 2014. The Corporation's consolidated financial statements, notes to the consolidated financial statements, Management's Discussion and Analysis and Annual Information Form have been filed on SEDAR (www.sedar.com) and with The Stock Exchange of Hong Kong Limited (the "Hong Kong Stock Exchange") (www.hkexnews.hk) and are available on the Corporation's website (www.sunshineoilsands.com). The Annual Information Form includes the Corporation's reserves and resource data as at an effective date of December 31, 2014 as evaluated by GLJ Petroleum Consultants Ltd. and DeGolyer and MacNaughton Canada Limited and was prepared in accordance with National Instrument 51-101 Standards of Disclosure for Oil and Gas Activities. Sunshine's annual general meeting of shareholders will be held on June 24, 2015 in Hong Kong. All figures are in Canadian dollars unless otherwise stated.

Message to Shareholders

In 2014, Sunshine successfully focused on two key initiatives:

  • securing capital to support re-commencement of construction of the first phase of the West Ells steam assisted gravity drainage ("SAGD") project; and
  • detailed preparations for managing the construction, schedule and costs at West Ells.

The restart of construction at West Ells was achieved in October 2014 after key capital raising initiatives were completed. These initiatives secured $144.0 million of equity proceeds between December 2013 and June 2014 and achieved closing of a US$200 million senior secured notes offering in August 2014.

For the year ended December 31, 2014, the Corporation achieved progress in the following areas: 

  • Expanded the Project Management Team, the most important new hire being a new Senior Project Manager for Facilities Engineering with extensive SAGD operations and engineering procurement and construction experience;
  • Substantially completed investigational analysis of work done and formalized plans to complete Phase 1 construction of the West Ells SAGD project;
  • Conducted quality assurance and quality control inspections;
  • Completed preparations for construction recommencement;
  • Reopened our 250 man construction camp at West Ells to support full operational capability;
  • Engaged major contractors (mechanical, electrical and civil) to support West Ells project execution;
  • Resumed full construction of Phase 1 of West Ells in October 2014;
  • Received 52 of 65 major modules at the West Ells site during 2014; and
  • Achieved planned progress in construction activities.

As at the date of this announcement, construction of the West Ells facilities is proceeding in line with budgets and is approximately 92% complete, with only one large module remaining to be shipped.

Sunshine's Capital Raising Activities

  • From December 2013 to February 2014 Sunshine closed private placement offerings of Units totaling 288,042,193 Units at a price of HK$1.70 per Unit (approximately $0.24/Unit) for total gross proceeds of HK$489.7 million (approximately $68.7 million). Each Unit consisted of one Class "A" common share and one-third of one Class "A" common share purchase warrant. This resulted in an issuance of 288,042,193 Class "A" common shares and 211,230,941 share purchase warrants.
  • In June 2014, Sunshine closed a private placement offering of Class "A" common shares, for a total of 640,000,000 Class "A" common shares at a price of HK$0.85 per share (approximately $0.12 per share) for total gross proceeds of HK$544.0 million or approximately $75.4 million.
  • On July 17, 2014, the Corporation entered into a petroleum, natural gas and general conveyance agreement for the sale of certain non-core oilsands assets which related to, among other things, lands and petroleum and natural gas rights to a third party for total consideration of $20.0 million. The disposal was conducted between the parties on an arm's length basis. The sale was completed on July 21, 2014.
  • On August 8, 2014, the Corporation completed an offering of US$200 million senior secured notes (the "Notes") at an offering price of US$938.01 per US$1,000 principal amount. The Notes bear interest at a rate of 10% per annum and have a final maturity date of August 1, 2017. The Notes are senior secured obligations over the Corporation's assets.

Summary of Financial Figures

For the fourth quarter of 2014, the Corporation had a net loss of $12.3 million compared to $7.5 million for the same period in 2013, representing a net loss per share of $0.00 for both periods. For the year ended December 31, 2014, the Corporation had a net loss of $26.8 million compared to $32.8 million for the year ended December 31, 2013, representing a net loss per share for each respective year of $0.01 and $0.01.

As at December 31, the Corporation notes the following selected balance sheet figures:


2014
($000s)


2013
($000s)


Cash and cash equivalents

136,097


15,854


Current restricted cash and cash equivalents

23,467


-


Non-current restricted cash and cash equivalents

11,601


-


Exploration and evaluation assets

379,403


376,912


Property and equipment

701,736


634,672


Total liabilities

288,044


148,415


Shareholders' equity

972,016


880,973


Reserves and Resources

On March 10, 2015, the Corporation announced the results of its reserves and resources evaluations, effective as at December 31, 2014. For a full discussion of the Corporation's reserves and resources data and other oil and gas information, see the "Statement of Reserves Data and Other Oil and Gas information" in the Corporation's Annual Information Form for the year ended December 31, 2014, a copy of which is available on the Hong Kong Stock Exchange's website at www.hkexnews.hk, on the SEDAR website at www.sedar.com and on the Corporation's website at www.sunshineoilsands.com.

2015 Outlook

Sunshine remains committed to completing and producing the West Ells project and continues to look for opportunities for joint ventures to reduce capital commitments and to accelerate activities aimed at increasing production. In addition, the Corporation's ongoing plan for 2015 is to continue to look for opportunities to secure additional financing to expand construction, operations and development activities in the West Ells project area and in other areas.

The schedule for West Ells startup has been modified as of March 26, 2015. The Board of Directors has endorsed a management recommendation to extend the commissioning and start up period for the West Ells project. Under the revised schedule, extended commissioning activities are anticipated to result in full first steam commencing in late June 2015, with first oil in September 2015. The Board of Directors believes that Sunshine's operational priority is to ensure a smooth start up of the Phase 1 West Ells facilities and achievement of nameplate capacity of 5,000 bbls/d, since this initial project phase is central to validating the commercial potential of the Wabiskaw formation in the West Ells, Thickwood and Legend project areas. Key considerations noted in the schedule revision include the following:

1)     Electrical installation, instrumentation and programming were being fast tracked to achieve first steam for Phase 1 of the West Ells project. This fast tracking introduced a risk that costly delays could result from sub-optimal electrical and control systems performance. It is management's opinion that this risk can be avoided if a thorough extended installation and testing protocol is followed.

2)     Management has noted that productivity and cost efficiency on the West Ells site can be better managed through commissioning on an extended schedule. Current daily on-site contract personnel is averaging between 180 and 200, plus 40 operations personnel on shift rotations. Peak on-site personnel exceeded 425 plus operations personnel, during January and February 2015.

3)     There is currently a concern that there is potential for delay in receipt of licences and municipal permits required for start up in mid-April 2015. This is not viewed as a risk with an extended commissioning and start up schedule.

4)     There is a potential to take advantage of lower contract and labour costs by spreading West Ells completion and commissioning activities over a longer time period in the softening labour and contracting environment.

5)     If additional financing is secured to fund Phase 2 expansion at West Ells, significant cost efficiencies can be secured through contracting at lower costs and through avoidance of demobilization and remobilization costs through an extended schedule.

As at the date of this announcement, construction of the West Ells facilities is proceeding in line with budgets and is approximately 92% complete, with only one large module remaining to be shipped.

Acknowledgements

We would like to thank our Board of Directors, our staff and our stakeholders for their continuing support for advancing our corporate initiatives during a challenging commodity price cycle.  We intend to ensure that our West Ells initiatives are completed to ensure a smooth start up of the Phase 1 West Ells facilities and achievement of nameplate capacity.

Michael J. Hibberd


         Dr. Qi Jiang

Executive Vice Chairman


         President & COO

About Sunshine Oilsands Ltd.

The Corporation is a Calgary based public corporation, listed on the Hong Kong Stock Exchange since March 1, 2012 and the Toronto Stock Exchange since November 16, 2012. The Corporation is focused on the development of its significant holdings of oil sands leases in the Athabasca oil sands region. The Corporation owns interests in oil sands and petroleum and natural gas leases in the Athabasca region of Alberta. The Corporation is currently focused on executing milestone undertakings in the West Ells project area. West Ells has an initial production target rate of 5,000 barrels per day.

FORWARD LOOKING INFORMATION

This announcement contains forward-looking information relating to, among other things, (a) the future financial performance and objectives of Sunshine; and (b) the plans and expectations of the Corporation. Such forward-looking information is subject to various risks, uncertainties and other factors. All statements other than statements and information of historical fact are forward-looking statements. The use of words such as "estimate", "forecast", "expect", "project", "plan", "target", "vision", "goal", "outlook", "may", "will", "should", "believe", "intend", "anticipate", "potential", and similar expressions are intended to identify forward-looking statements. Forward-looking statements are based on Sunshine's experience, current beliefs, assumptions, information and perception of historical trends available to Sunshine, and are subject to a variety of risks and uncertainties including, but not limited to, those associated with resource definition and expected reserves and contingent and prospective resources estimates, unanticipated costs and expenses, regulatory approval, fluctuating oil and gas prices, expected future production, the ability to access sufficient capital to finance future development and credit risks, changes in Alberta's regulatory framework, including changes to regulatory approval process and land-use designations, royalty, tax, environmental, greenhouse gas, carbon and other laws or regulations and the impact thereof and the costs associated with compliance. Although Sunshine believes that the expectations represented by such forward-looking statements are reasonable, there can be no assurance that such expectations will prove to be correct. Readers are cautioned that the assumptions and factors discussed in this announcement are not exhaustive and readers are not to place undue reliance on forward-looking statements as the Corporation's actual results may differ materially from those expressed or implied. Sunshine disclaims any intention or obligation to update or revise any forward-looking statements as a result of new information, future events or otherwise, subsequent to the date of this announcement, except as required under applicable securities legislation. The forward-looking statements speak only as at the date of this announcement and are expressly qualified by these cautionary statements. Readers are cautioned that the foregoing lists are not exhaustive and are made as at the date hereof. For a full discussion of the Corporation's material risk factors, see the Corporation's annual information form for the year ended December 31, 2014 (the "AIF") and risk factors described in other documents we file from time to time with securities regulatory authorities, all of which are available on the Hong Kong Stock Exchange at www.hkexnews.hk, on the SEDAR website at www.sedar.com or the Corporation's website at www.sunshineoilsands.com.

SOURCE Sunshine Oilsands Ltd.

For further information: Dr. Qi Jiang, President & COO, (1) (587) 390-0606, investorrelations@sunshineoilsands.com, www.sunshineoilsands.com, http://www.sunshineoilsands.com

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