Toro Oil & Gas Ltd Reports Third Quarter 2016 Financial and Operating Results

CALGARY, Nov. 28, 2016 /CNW/ - Toro Oil & Gas Ltd. (TSXV: TOO) ("Toro" or the "Company") announces its financial and operating results for the three and nine month period ended September 30, 2016.  Selected financial and operational information is set out below and should be read in conjunction with Toro's September 30, 2016 interim financial statements and the related management's discussion and analysis, which are available for review at www.sedar.com or the Company's website at www.torooil.com.

Third Quarter Financial and Operational Highlights

  • Averaged 748 boe/d in production during Q3 2016, of which 56% represents oil and liquids compared to 710 boe/d of production in Q3 2015 and 766 boe/d in Q2 2016. Q3 2016 production decreased only 2% from the prior quarter, despite no drilling activity or other significant fieldwork in Q3 2016, evidencing the low decline characteristic of the Hamilton Lake Viking pool. Toro's Alberta Viking production continues to correlate highly with well type curves forecasted in the Company's independent reserve report;

  • Raised approximately $13 million in gross proceeds via a bought deal offering. Net proceeds were used to eliminate bank debt outstanding, enhance cash reserves and improve overall liquidity to partially fund future drilling programs;

  • Based primarily on a 70% increase in realized gas sales prices over the second quarter of 2016, on an activity basis, Toro generated a positive operating income of $632 thousand for Q3 2016. This compares $593 thousand in Q2 2016 and a loss of $26 thousand in Q1 2016. Toro continues to hold absolute production costs at low levels and with production increases, should result in better economies of scale. Per unit operating costs slightly increased to $19.03 per boe for Q3 2016 as compared to $17.50 per boe in Q2 2016, however current quarter operating costs per unit were significantly lower than reported Q3 2015 production costs of $25.92 per boe. Per unit operating costs were higher in Q3 2016 primarily due to lower production levels and higher gas processing charges;

  • Subsequent to the quarter, Toro successfully closed three separate divestitures of non-core properties netting proceeds of approximately $2.3 million for a gain of approximately $0.5 million. These proceeds combined with cash reserves at the end of quarter, results in a pro-forma debt-free working capital position of approximately $6 million.

Financial Results

(CAD$  thousands unless otherwise specified)



Three months ended September 30

Nine months ended September 30


2016

2015

% Change

2016

2015

% Change

Operational Performance







Production Volumes








Oil and NGLs (bbls/d)

419

414

1

483

319

52


Natural gas (mcf/d)

1,970

1,775

11

1,875

1,781

5


Oil equivalent (boe/d)

748

710

6

796

615

29








Financial Performance








Production revenue (1)

2,352

2,458

(4)

6,832

6,056

13


Net comprehensive loss

(1,763)

(569)

210

(12,608)

(7,505)

68



Per share - basic and diluted

(0.02)

(0.01)

56

(0.17)

(0.13)

23


Cash deficiency from operations (2)

(520)

(601)

(13)

(1,094)

(1,188)

(8)



Per share - basic and diluted

(0.005)

(0.01)

(57)

(0.01)

(0.08)

(81)








Realized Sale Prices








Oil and NGL's ($/bbl)

50.03

51.80

(3)

44.33

53.72

(17)


Natural Gas ($/mcf)

2.33

2.98

(22)

1.87

2.83

(34)

Oil Equivalent ($/boe)

34.19

37.65

(9)

31.34

36.07

(13)








Netback ($/boe)







Realized sales price

34.19

37.65

(9)

31.34

36.07

(13)


Royalties

(7.40)

(6.43)

15

(5.73)

(4.43)

29


Production expenses

(19.03)

(25.92)

(27)

(18.17)

(22.82)

(20)


Transportation expenses

(1.27)

(3.92)

(68)

(2.37)

(3.05)

(22)

Operating netback ($/boe) (2)

6.49

1.38

370

5.07

5.77

(12)

General and administrative (3)

(13.91)

(12.81)

9

(10.99)

(18.08)

(39)

Interest expense

(0.43)

(0.47)

(9)

(0.87)

(0.44)

97

Other income

-

1.38

nmf (6)

-

4.82

nmf (6)

Income on assets held for sale

0.14

0.88

(85)

0.09

0.42

(79)

Cash netback ($/boe)

(7.71)

(9.64)

(20)

(6.70)

(7.51)

(11)








Capital expenditures







Capital expenditures (4)

(142)

11,002

nmf (6)

563

14,245

(96)

Net acquisitions (dispositions) (5)

(21)

(11,850)

(100)

(155)

(9,391)

(98)

Total capital expenditures

(163)

(848)

(81)

408

4,854

(92)








Liquidity







Net debt (surplus) (2)

(4,014)

(1,936)

107

(4,014)

(1,936)

107

Bank facility - undrawn portion

-

25,000

nmf (6)

-

25,000

nmf (6)








Weighted average shares outstanding








Basic

113,193,357

56,853,281

99

76,045,453

55,840,702

36


Diluted

113,193,357

56,853,281

99

76,045,453

55,840,702

36















(1) Production revenue is presented gross of royalties and inclusive of realized hedging gains (losses).

(2) Cash deficiency in operations, operating netback and net surplus are non-IFRS measures.  See "Non-IFRS Measures".

(3) General and administrative expenses for the three and nine months ended September 30, 2016 include one-time restructuring costs of $454.

(4) Three and nine months ended September 30, 2016 include SR&ED credit received of $287. 

(5) Represents the cash expenditures (proceeds) from the acquisition (sale) of assets, as applicable.

(6) No meaningful figure.

 

Operational and Corporate Update

While crude oil prices were neutral to slightly negative in Q3 2016 compared to Q2 2016, natural gas prices rose significantly which served to strengthen the Company's operational profitability.  Corporately, primarily due to one-time staff restructuring costs, Toro incurred a corporate cash deficiency of approximately $520 thousand during the third quarter.  These reorganization costs were considered necessary to right-size the business and achieve further efficiencies in the midst of continued commodity price uncertainty.  However, with an expectation of further appreciation in commodity prices due to macro-economic factors, the Company forecasts positive cash flow from operations, inclusive of corporate costs.  As press released on October 11, 2016, Toro also has begun certain steps to prepare for an up to ten well drill program.  Final financial and operational commitments to this program however will not occur until the Company believes a sustained recovery in oil commodity prices exists which generate appropriate rates of return to grow the business.  Notionally, the Company targets a minimum of US$50 West Texas Intermediate as the threshold oil price. 

About Toro Oil & Gas Ltd.

Toro is a junior oil and gas energy company listed on the TSX Venture Exchange.  Toro is focused on acquiring, developing and exploiting large oil in place pools within the Alberta-Saskatchewan Viking light oil fairway. Toro intends to grow by way of organic development and strategic acquisitions while maintaining strict financial discipline to maximize shareholder return.

Abbreviations

bbls               

barrels

bbls/d

barrels per day

boe

barrels of oil equivalent

boe/d

barrels of oil equivalent per day

mcf

thousand cubic feet

mcf/d

thousand cubic feet per day

 

Forward-Looking Information

The reader is advised that some of the information contained herein may constitute forward-looking information within the meaning of National Instrument 51-102 and other relevant securities legislation. Forward-looking information contained herein includes, but is not limited to, statements with respect to timing of any future drilling programs, anticipated future capital efficiencies and operating cost economies of scale, forecasted future operating costs per unit, Toro's ability to take advantage of better commodity prices and Toro's future liquidity and funding sources.  Such forward-looking information is based on the Company's current expectations regarding its future business and reflects management's current beliefs and assumptions based on information currently available to them. 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. Actual results may vary from forward-looking information and readers are cautioned not to place undue reliance on forward-looking information. The forward-looking information contained in this press release is presented as of the date hereof and the Company does not undertake any obligation to release publicly any revisions to forward-looking information contained herein to reflect events or circumstances that occur after the date hereof or to reflect the occurrence of unanticipated events, except as may be required under applicable securities laws.

Forward-looking information involves significant known and unknown risks and uncertainties. A number of factors could cause actual results to differ materially from the results discussed in the forward-looking information including risks associated with the impact of general economic conditions, industry conditions, governmental regulation, volatility of commodity prices, currency fluctuations, imprecision of reserve and resource estimates, environmental risks, competition from other industry participants, the lack of availability of qualified personnel or management, stock market volatility and the Company's ability to access sufficient capital from internal and external sources. Additional risks and uncertainties are described in the Company's Annual Information Form dated March 31, 2016 which is filed under the Company's SEDAR profile at www.sedar.com.

Non-IFRS Measures

This press release provides certain financial measures that do not have a standardized meaning prescribed by IFRS. These non-IFRS financial measures may not be comparable to similar measures presented by other issuers. Cash flow from (used in) operations, operating netback and net debt (surplus) are not recognized measures under IFRS. Management believes that in addition to net income (loss), cash flow from operations, operating netback and net debt (surplus) are useful supplemental measures that demonstrate the Company's ability to generate the cash necessary to repay debt or fund future capital investment. Investors are cautioned, however, that these measures should not be construed as an alternative to net income (loss) determined in accordance with IFRS as an indication of Toro's performance. Toro's method of calculating these measures may differ from other companies and accordingly, they may not be comparable to measures used by other companies. Cash flow from (used in) operations is calculated by adjusting net income (loss) for other income, unrealized gains or losses on financial derivative instruments, transaction costs, accretion, share based compensation, impairment and depletion and depreciation. Operating netback is calculated based on oil and gas revenue less royalties, production expenses and transportation expenses. Net debt (surplus) is the total of cash plus accounts receivable, prepaids and deposits, less accounts payable plus bank debt.

51-101 Advisory

In conformity with 51-101, natural gas volumes have been converted to barrels of oil equivalent ("boe") using a conversion rate of six thousand cubic feet of natural gas to one barrel of oil. In certain circumstances, natural gas liquid volumes have been converted to a thousand cubic feet equivalent ("mcfe") on the basis of one barrel of natural gas liquids to six thousand cubic feet of gas. Boes and mcfes may be misleading, particularly if used in isolation. A conversion ratio of one barrel to six thousand cubic feet of natural gas is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. 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 on a 6:1 basis may be misleading as an indication of value.

Estimates of reserves and future net revenue for individual properties may not reflect the same confidence level as estimates of reserves and future net revenue for all properties, due to the effects of aggregation.  Estimated values of reserves may or may not represent the fair market value of the reserve estimates.  

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 Toro Oil & Gas Ltd

For further information: Barry Olson, President and Chief Executive Officer; Greg Phaneuf, Vice President, Finance and Chief Financial Officer; Telephone: (403) 237-9996

RELATED LINKS
http://www.torooil.com/

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