CALGARY, April 23, 2012 /CNW/ - ArPetrol Ltd. ("ArPetrol" or the "Company") (TSXV: RPT) is pleased to announce its financial and operating results for the three months and year ended December 31, 2011 and to provide an operational update on activities this year to date as well as an outlook for 2012. The consolidated financial statements and management's discussion and analysis, have been filed on SEDAR at www.sedar.com and posted on the Company's website at www.arpetrol.com.
Fourth Quarter and Fiscal 2011 Summary
Operating and Financial
ArPetrol remains well-financed with $33.7 million of working capital as at December 31, 2011 and no long-term debt. This working capital will fund our 2012 drilling program. We also continue to look to expand our asset base in the Austral and Neuquén basins.
Fourth quarter production averaged 301 boe per day with an average production for the year of 317 boe per day. Operational impacts from labour disputes in the second and third quarters of 2011, compressor problems at the Company gas plant in late June and early July and natural decline rates, all contributed to a reduction in total year production versus the prior year.
ArPetrol continues to realize higher selling prices for natural gas and natural gas liquids over prior periods. The August 2010 receipt of gas plus incentive plan approval and a general increase in the domestic price of oil have led to a year-over-year increase in prices.
Processing revenue was $576,830 in the fourth quarter of 2011, a significant increase of $226,118 from the third quarter of 2011. Third party processing volumes are returning to normal rates after the disruption at third party facilities in September, 2010.
Capital expenditures for the fourth-quarter and year-ended 2011 were $2,199,168 and $3,022,004 respectively. Major expenditures were made to drill two exploration wells on our Blanco de Los Olivos Oriental ("BOO") concession in the Rio Negro province and to prepare for our extended reach drilling program on our Faro Virgenes block.
Net loss for the year was $7,489,387 compared to a net loss of $7,472,841 for the prior year.
Summary of Results
|Three Months Ended Dec 31,||Year ended Dec 31,|
|(Cdn$ except shares outstanding and per boe1 amounts)|
|Funds flow from operations 1||(1,036,908)||(900,840)||(4,279,524)||(2,047,559)|
|Cash generated from operating activities||(1,341,416)||(1,169,098)||(6,376,378)||(2,573,141)|
|Net loss and comprehensive loss||2,671,973||3,064,344||7,227,889||8,379,018|
|Weighted average shares outstanding (millions) - basic and diluted||572.5||206.4||496.7||199.9|
|Natural gas - Mcf per day||1,647||2,322||1,746||2,214|
|Natural gas liquids - bbls per day||26||15||26||24|
|Total - boe per day 1||301||402||317||394|
|Average sales price|
|Natural gas - $ per Mcf||2.86||2.56||2.55||1.82|
|Natural gas liquids - $ per bbl||76.51||42.28||64.98||32.71|
|Average operating netback|
|Production - $ per boe 1||6.16||7.45||5.37||3.45|
|Processing - $ per Mcf processed 1||(0.00)||(1.94)||(0.05)||0.04|
Note 1: See advisories at the end of this news release with respect to non-IFRS measures and BOE presentations.
Note 2: The audited consolidated results for the Company for the year ended December 31, 2010 and the unaudited consolidated results for the Company for the three months ended December 31, 2010 reflect the results of ArPetrol Inc. only.
Note 3: The unaudited consolidated results for the Company for the year ended December 31, 2011 reflect the results of the combined operations of ArPetrol Inc. and RPT Resources Ltd. (now ArPetrol Ltd.) from March 18, 2011 until December 31, 2011 and the results from ArPetrol Inc. only from January 1, 2011 to March 17, 2011.
Operational Update and Outlook
ArPetrol continues to monitor the evolving business climate in Argentina. The Company has no reason to believe the respective governments plan to revoke any of ArPetrol's licenses or concessions. ArPetrol has been an active investor on its assets and was recently granted an extension for the Faro Virgenes concession. ArPetrol plans to continue with its investment programs and meet its commitments in Argentina in order to progress its business plan to deliver value growth for shareholders in a market where we see an increasing commodity price environment. Other oil and gas companies have also announced their continued commitment to invest in their properties in Argentina.
At the Company's gas plant, third-party deliveries of natural gas increased to approximately three-quarters of the plant's production capacity in December 2011. Full delivery volumes are expected to resume in the second quarter of 2012.
The Company commenced its exploration program on its operated lands on BOO and Catriel Viejo Sur ("CVS") permits in the Rio Negro province of the Neuquén Basin in Argentina.
At BOO, two wells were drilled during 2011 to test shallow Cretaceous targets. Although hydrocarbons were encountered, they were deemed to be sub-commercial in size, and both wells were abandoned.
At CVS, ArPetrol elected to increase from a 20 percent to a 50 percent operated working-interest. Subsequent to year-end, a well was drilled to test a shallow Cretaceous target as well as evaluate the unconventional potential in the Vaca Muerta shales. The Centenario was found to be wet at this location and, although oil was found in the Jurassic Tordillo formation, the reservoir was deemed to be too tight to be commercial. Core samples and a full log evaluation of the lower Vaca Muerta zone are still being evaluated. The 55km2 CVS permit is located approximately 60km northeast of the Yacimientos Petrolíferos Fiscales (YPF) shale oil well drilled in the Loma La Lata field.
The Company's BOO exploration permit is set to expire on April 24, 2012, and the Company and its partner do not intend to apply for an extension. The Company's CVS permit expired on February 22, 2012; however, the Company has applied for an extension. The Rio Negro provincial government is not expected to provide feedback on the extension application for approximately six months.
Subsequent to year-end, ArPetrol initiated mobilization for a June 2012 spud of the first long reach well in the Faro Virgenes field. The first well is expected to take 45-50 days to drill. Plans are for a two well program, with the second well dependant on the results of the first well. Production from the wells would be immediately tied into ArPetrol's 100 percent owned gas plant, which is in close proximity. The Company is targeting an exit rate for 2012 production in the range of 2,500 to 3,000 boe per day, depending on the results of the drilling program.
Capital expenditures for 2012 have been approved by the Board at $25 million for this development program.
The Company believes that Argentina offers a wide range of growth opportunities. A number of alternatives are under evaluation which would be complementary to the current portfolio of assets. While Argentina is its prime area of interest, the Company is pursuing acquisitions in other Latin American regions on an opportunistic basis.
Independent reserves audits as at December 31, 2011 were conducted by Gaffney, Cline & Associates ("GCA"). The audits were prepared using guidelines outlined in the Canadian Oil and Gas Evaluation Handbook and in accordance with National Instrument 51-101 National Standards of Disclosure for Oil and Gas Activities.
The following tables summarize ArPetrol's reserves and estimated cash flows at December 31, 2011, The forecast prices used in the calculation of the present value of future net revenue are based on the GCA price forecasts which are included in the Company's Annual Information Form ("AIF") for the year ended December 31, 2011.
Gross Reserves based on forecast price and cost assumptions:
|Category||Gas - MMcf(1)||NGL - Mbbls(1)||Total - Mboe(1)|
|Proved Plus Probable(2)(3)||43,369||701||7,929|
|Proved Plus Probable Plus Possible (2)(3)(4)||57,889||942||10,590|
Net Present value of cash flows before income taxes, based on forecast price and cost assumptions ($ millions):
|Category||PV 0%||PV 5%||PV 10%||PV 15%||PV 20%|
|Proved Plus Probable(2)(3)||142||116||96||81||69|
|Proved Plus Probable Plus Possible(2)(3)(4)||227||181||148||123||105|
ArPetrol's proven reserves have increased by 18%, after production, primarily due to the effect of receiving a 10 year extension on the Faro Virgenes concession.
ArPetrol's reserve information and reports pursuant to National Instrument 51-101 are available in ArPetrol's AIF filed on SEDAR at www.sedar.com.
All values in this news release are in Canadian dollars unless otherwise indicated.
About ArPetrol Ltd.
ArPetrol is a Calgary-based publicly traded company currently engaged in oil and natural gas exploration, development and production and third-party natural gas processing in Argentina where it also owns and operates a gas processing facility with capacity of 85 million cubic feet (MMcf) per day.
The Company is the resulting entity from the business combination of the Company (formerly RPT Resources Ltd. ("RPT") and ArPetrol Inc. (now ArPetrol Holdings Inc., a wholly owned subsidiary of the Company) completed in the first quarter of 2011. This business combination is described further in the Company's consolidated financial statements as at and for the year ended December 31, 2011. The Company's common shares are listed on the TSXV under the symbol "RPT".
This news release includes references to financial measures commonly used in the oil and natural gas industry. The terms "operating netback" (production and processing revenue less royalties, turnover taxes and operating expenses) and "funds flow from operations" (cash generated from operating activities before changes in non-cash working capital, and translation adjustment on operating items) do not have any standardized meaning under International Financial Reporting Standards ("IFRS") and may not be comparable with similar measures presented by other companies. Funds flow from operations should not be considered an alternative to, or more meaningful than, cash generated from operating activities, net income (loss) or other measures determined in accordance with IFRS, as an indicator of the Company's performance.
See the management's discussion and analysis for the year ended December 31, 2011, filed on SEDAR at www.sedar.com and on the Company's website, for further discussion, including a reconciliation of funds flow from operations to cash generated from operating activities which is the most directly comparable measure calculated in accordance with IFRS. There is no IFRS measure that is reasonably comparable to operating netbacks and a detailed calculation of such netbacks is presented in the management's discussion and analysis for the year ended December 31, 2011, which is filed on SEDAR (accessible at www.sedar.com).
Production information is commonly reported in units of barrels of oil equivalent (boe). For purposes of computing such units, natural gas is converted to equivalent barrels of oil using a conversion factor of six thousand cubic feet (mcf) to one barrel (bbl). This conversion ratio of 6:1 represents energy equivalency, which is primarily applicable at the burner tip, and does not represent a value equivalency at the wellhead. Such disclosure of boe may be misleading, particularly if used in isolation.
There are numerous uncertainties inherent in estimating quantities of crude oil, natural gas and NGL reserves and the future cash flows attributed to such reserves. The reserve and associated cash flow information set forth above are estimates only. In general, estimates of economically recoverable crude oil, natural gas and NGL reserves and the future net cash flows therefrom are based upon a number of variable factors and assumptions, such as historical production from the properties, production rates, ultimate reserve recovery, timing and amount of capital expenditures, marketability of oil and natural gas, royalty rates, the assumed effects of regulation by governmental agencies and future operating costs, all of which may vary materially. For these reasons, estimates of the economically recoverable crude oil, NGL and natural gas reserves attributable to any particular group of properties, classification of such reserves based on risk of recovery and estimates of future net revenues associated with reserves prepared by different engineers, or by the same engineers at different times, may vary. The Company's actual production, revenues, taxes and development and operating expenditures with respect to its reserves will vary from estimates thereof and such variations could be material.
The reserve data provided in this news release presents only a portion of the disclosure required under National Instrument 51- 101. All of the required information will be contained in the Company's AIF for the year ended December 31, 2011, which is filed on SEDAR at www.sedar.com and dated April 19, 2012. The AIF contains detail with respect to the Company's reserve estimates and the independent report prepared by GCA dated March 21, 2012 and effective December 31, 2011, auditing the reserves attributable to the principal properties of the Company in Argentina. Terms related to reserve classifications referred to herein are based on the definitions and guidelines in the Canadian Oil and Gas Evaluation Handbook.
(1) "Gross Reserves" are the Company's working interest (operating or non-operating) share before deducting of royalties and without including any royalty interests of the Company. "Net Reserves" are the Company's working interest (operating or non-operating) share after deduction of royalty obligations, plus the Company's royalty interests in reserves.
(2) "Proved" reserves are those reserves that can be estimated with a high degree of certainty to be recoverable. It is likely that the actual remaining quantities recovered will exceed the estimated proved reserves.
(3) "Probable" reserves are those additional reserves that are less certain to be recovered than proved reserves. It is equally likely that the actual remaining quantities recovered will be greater or less than the sum of the estimated proved plus probable reserves.
(4) "Possible" reserves are those additional reserves that are less certain to be recovered than probable reserves. It is unlikely that the actual remaining quantities recovered will exceed the sum of the estimated proved plus probable plus possible reserves.
This news release contains certain forward‐looking statements relating, but not limited, to operational information, targeted production and exit rates, anticipated third-party deliveries and processing volumes, expected capital expenditures, drilling plans and the timing associated therewith, future pricing, the ability to realize growth for our shareholders and expectations regarding the business and political climate in Argentina. Forward‐looking information typically contains statements with words such as "anticipate", "target", "estimate", "expect", "potential", "could", "should", or similar words suggesting future outcomes. The Company cautions readers and prospective investors in the Company's securities not to place undue reliance on forward‐looking information as, by its nature, it is based on current expectations regarding future events that involve a number of assumptions, inherent risks and uncertainties, which could cause actual results to differ materially from those anticipated by the Company.
Forward-looking information is based on management's current expectations and assumptions regarding, among other things, plans for and results of future operations and transactions, the resolution of disruptions at the third party facility that ships gas to the Company's plant and the expected increase in throughput and processing revenues, future drilling activity and production rates, future capital and other expenditures (including the amount, nature, timing and sources of funding thereof), future production and processing revenue, future economic conditions, future currency and exchange rates, future pricing, future funding, continued political stability in the areas in which the Company is operating, receipt of necessary government approvals in a timely fashion and the Company's continued ability to obtain and retain qualified staff and equipment in a timely and cost-efficient manner. Although the Company believes the expectations and assumptions reflected in such forward‐looking information are reasonable, they may prove to be incorrect.
Forward‐looking information involves significant known and unknown risks and uncertainties. A number of factors could cause actual results to differ materially from those anticipated by the Company, including but not limited to risks associated with the oil and natural gas industry (e.g., operational risks in exploration and drilling; inherent uncertainties in interpreting geological data; changes in plans with respect to exploration or capital expenditures; the uncertainty of estimates and projections in relation to costs and expenses; and health, safety and environmental risks), access to funding, weather delays and natural disasters, processing interruptions and natural declines, disruptions at third party facilities, union activities, change in government policies, the risk of commodity price and foreign exchange rate fluctuations, and risks associated with international activity.
ArPetrol operates outside of Canada and as such, ArPetrol is subject to a number of political risks over which it has no control. These risks may include risks related to economic, social or political instability or change, the uncertainty of negotiating with foreign governments, expropriation and/or nationalization, changes in export or exchange policies, adverse determinations or rulings by governmental authorities, changes in energy policies or in the personnel administering them and currency and inflation risks. See the "Risk Factors" section of the Company's AIF for a further description of these risks and uncertainties facing ArPetrol.
In addition, statements relating to "reserves" contained from time to time in the Company's continuous disclosure documents including some of its press releases are deemed to be forward-looking statements, as they involve the implied assessment, based on certain estimates and assumptions which are subject to change, that the reserves described can be economically produced in the future.
The forward‐looking information included herein is expressly qualified in its entirety by this cautionary statement. The forward‐looking information included herein is made as of the date hereof and the Company assumes no obligation to update or revise any forward‐looking information to reflect new events or circumstances, except as required by law.
Additional information relating to the Company is also available on SEDAR at www.sedar.com.
Neither the TSXV nor its Regulation Services Provider (as defined in the policies of the TSXV) accepts responsibility for the adequacy or accuracy of this release.
For further information:
Tim Thomas, President and Chief Executive Officer
Ian Habke, Chief Financial Officer
Main Phone: 403-263-6738