Calvalley Petroleum - 2010 Second Quarter Results
CALGARY, Aug. 12 /CNW/ - Calvalley Petroleum Inc., (TSX: CVI.A)
Calvalley Petroleum Inc. (the "Company" or "Calvalley"), an international junior oil and gas company based in Calgary, Alberta, announces its financial and operating results for the second quarter ended June 30, 2010.
HIGHLIGHTS
Financial
These key financial indicators are discussed in more detail in the following sections.
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Three months ended Six months ended
June 30 June 30
(in thousands of US dollars ----------------------------------------
except per share amounts) 2010 2009 2010 2009
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Revenue (Gross) 7,499 17,252 21,948 24,112
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Revenue from crude oil sales
(net of royalties) 4,564 10,686 13,485 14,846
EBITDA(1) 2,295 5,548 8,366 5,504
Operating income (loss)(1) 1,117 1,904 4,854 110
Net income (loss) 485 765 3,210 (1,280)
Per share (basic and diluted) $0.00 $0.01 $0.03 ($0.01)
Capital expenditures 2,842 2,812 6,041 5,211
Funds flow from operations(1) 1,926 4,644 7,195 4,495
Per share (basic and diluted) $0.02 $0.05 $0.07 $0.05
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Cash flow (deficiency) from
operating activities 3,457 3,325 8,579 2,363
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(1) See "Non-GAAP Measures"
Calvalley's revenue, royalties, depletion and operating expenses were all impacted by the timing of lifts during the second quarter which caused a build-up of inventory and reduced each of these components of income due to lower revenue and the inclusion of the related costs in inventory at quarter end. Management expects this trend to be reversed in the third quarter when the crude oil in inventory is scheduled to be lifted.
- Calvalley's revenue from crude oil sales was $7.5 million (gross) and
$4.6 million (net of royalties) for the quarter ended June 30, 2010
(2009 - $17.2 million (gross) and $10.7 million (net of royalties)).
The significant decrease in revenue is primarily attributable to a
74% decrease in sales volume which was caused by the timing of lifts
and is not directly correlated with production for the quarter, which
was 209,588 bbls in 2010 versus 189,478 bbls in 2009.
- Net income was $485,000 ($0.01 per share) for the three months ended
June 30, 2010, as compared to $765,000 ($0.01 per share) for the same
period of 2009. Net income for the six month period was $3.2 million
versus a net loss of $1.3 million during the corresponding period of
2009.
- Funds flow from operations was $1.9 million ($0.02/share) for the
three months ended June 30, 2010, as compared to $4.6 million
($0.05/share) for the same period of 2009.
- Operating costs associated with oil sold during the second quarter of
2010, including transportation and facilities usage fees, were
$1.2 million as compared to $3.7 million for the three months ended
June 30, 2009. Operating costs per barrel produced during the six
months ended 2010 amounted to $10.17/bbl compared to 11.10/bbl during
the first six months of 2009.
- Calvalley continues to be well financed and capitalized with no
outstanding debt and working capital of $72.7 million.
Operating
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Three months ended Six months ended
June 30 June 30
Production ----------------------------------------
(barrels of oil per day) 2010 2009 2010 2009
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Total Block 9 production 4,606 4,164 4,602 4,347
Calvalley working interest (50.0%) 2,303 2,082 2,301 2,174
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- Average daily production from Block 9 for the three months ended
June 30, 2010 was 4,606 gross barrels per day (Calvalley working
interest 2,303 bopd), an increase from the previous quarter's average
of 4,597 bopd (2,299 bopd working interest share) and an increase
from 2009 second quarter average production of 4,164 bopd (2,082 bopd
working interest share).
- In July, the Company successfully drilled the Ras Nowmah-2 appraisal
well in record time with a total gross Hydrocarbon column of 57
meters including 41 meters in the Qishn and 16 meters in the Saar
formations. The well is currently undergoing completions and
production testing which is expected to be completed in August.
- The Company commenced re-injection of produced water from the Hiswah
field back into the Saar Naifa formation for pressure maintenance
purposes. The injectivity of the Hiswah-26 injection well has
improved dramatically as a result of an acidization program which was
conducted during the quarter.
- The last component of the gas injection facilities (Booster
Compressor) is expected to be installed in late August. The first gas
injection into the Hiswah-4 well which was converted from a high
gas/oil producer into an injection well is expected to be
commissioned in September.
- The second rig has commenced drilling of the Hiswah-34 development
well. After completion of this well, the rig will be mobilized to
Qarn Qaymah-3 which is expected to spud in mid-September.
Truck Offloading Facility ("TOF")
- Calvalley has commenced the construction of the TOF which is expected
to be completed by the end of 2010. The TOF is located at Block 51.
Upon completion of the TOF, Calvalley will transport blended crude of
26 degrees API or better to market through the Masila facility.
Calvalley will blend heavier crude oil from the currently shut-in Al
Roidhat field with lighter oil produced from other fields within
Block 9 to achieve the 26 degrees API blend for shipment to Masila.
The Masila Blend consists of different quality crude oils produced by
various Third Party Users ("TPU") with an average gravity of
32 degrees API. All TPU's who ship crude oil through the Masila
facility receive the Masila Blend price for their crude.
Consequently, Calvalley expects to receive the Masila Blend price for
its crude oil shipped through the facility. The Official Selling
Price for Masila crude oil is based on Dated Brent and is currently
approximately at par with Dated Brent. The key aspect of the
agreement is that Malik Block 9 Blend will be treated in the same
manner as all other TPUs of the Masila System with respect to crude
price and Facility Usage Fees.
Ethiopia
- Based on the surface geological work, Calvalley has selected a key
prospective region for acquisition of an aeromagnetic survey. The
contractor for the acquisition of the aeromagnetic survey has been
selected and the work is expected to commence before yearend.
OPERATIONS REPORT
Production Overview
Average daily production from Block 9 for the three months ended June 30, 2010 was 4,606 gross barrels per day (Calvalley working interest 2,303 bopd), an increase from the previous quarter's average of 4,597 bopd (2,299 bopd working interest share) and an increase from 2009 second quarter average production of 4,164 bopd (2,082 bopd working interest share). All production came from the partially developed Hiswah oil field, which produces high-quality, lighter sweet crude oil that is sold at a price comparable to Dated Brent Crude.
Gross field production at Hiswah continues to fluctuate between 4,200 to 5,200 (2,100 to 2,600 net) bopd. While producing wells are performing as expected, production continues to be constrained due to the limitation of the volume that is accepted by the Safer Facilities at Block 18 ("Safer"). Production from the Hiswah field is restricted to an average of twenty horizontal wells due to this limitation. In addition, production at the Hiswah field is choked back to minimize solution gas flaring. Upon full implementation of the field pressure maintenance program through water and gas injection, we expect to see a meaningful increase in well productivity as indicated by the simulation study.
Calvalley has commenced the construction of offloading facilities at Block 51 to leverage the transportation agreements for blended crude oil from all discoveries at Block 9. This will allow the Company to activate wells that are currently shut-in. The facility will enable Calvalley to increase production to 10,000 bopd (5,000 bopd net working interest share). Calvalley expects to complete the facilities by the end of 2010.
Drilling, Completion, and Testing
Development wells at Hiswah:
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Calvalley successfully completed the drilling of the Hiswah 32 and Hiswah 33 horizontal producers at Hiswah. Both wells have been placed on production. Drilling operations on the Hiswah 34 producer are currently underway.
Qarn Qaymah:
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Calvalley has started the deeper exploratory drilling campaign in Block 9. Site preparation for Qarn Qaymah-3 ("QQ-3") has commenced. We expect to spud QQ-3 in mid-September. The well is designed to target a number of fracture sets within the oil leg which was identified during the drilling of the QQ-2 well. A number of key challenges faced at QQ-2 have been addressed in the drilling program for QQ-3. The well has been designed with larger production casing size to enable installation of a larger downhole pump (ESP). In addition, the production casing will be further extended below the gas/oil contact to eliminate gas influx into the wellbore.
Ras Nowmah:
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Calvalley completed the drilling of the Ras Nowmah-2 ("RN-2") appraisal well which offsets the existing Ras Nowmah-1 well in July. The well encountered 57 meters of gross oil pay in high quality reservoir rock including 41 meters in the Qishn and 16 meters in the Saar formation. The well is expected to be completed and tested in August. All completion and production test equipment are on-site.
Ethiopia:
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Based on the surface geological work, Calvalley has selected a key prospective region for acquisition of an aeromagnetic survey. The contractor for the acquisition of the aeromagnetic survey has been selected and the work is expected to commence before the yearend.
Filing of Reports on SEDAR
Calvalley's Management's Discussion and Analysis and Unaudited Financial Statements for the quarter ended June 30, 2010 can be found for viewing by electronic means on The System for Electronic Document Analysis and Retrieval at www.sedar.com. They can also be found on the Company's website at www.calvalleypetroleum.com.
Calvalley is listed on the Toronto Stock Exchange, trading under the symbol "CVI.A".
THE TORONTO STOCK EXCHANGE HAS NOT REVIEWED AND DOES NOT ACCEPT RESPONSIBILITY FOR THE ADEQUACY OR ACCURACY OF THIS RELEASE.
This press release may contain forward-looking statements including, without limitation, financial and business prospects and financial outlooks, and such statements may be forward-looking statements which reflect management's expectations regarding future plans and intentions, growth, results of operations, performance and business prospects and opportunities. Words such as "may", "will", "should", "could", "anticipate", "believe", "expect", "intend", "plan", "potential", "continue", and similar expressions have been used to identify these forward-looking statements. These statements reflect management's current beliefs and are based on information currently available to management. Forward-looking statements involve significant risk and uncertainties. A number of factors could cause actual results to differ materially from the results discussed in the forward-looking statements including, but not limited to, changes in general economic and market conditions and other risk factors. Although the forward-looking statements contained herein are based upon what management believes to be reasonable assumptions, management cannot assure that actual results will be consistent with these forward-looking statements. Investors should not place undue reliance on forward-looking statements. These forward-looking statements are made as of the date hereof.
Forward-looking statements and other information contained herein concerning the oil and gas industry and Calvalley's general expectations concerning this industry are based on estimates prepared by management using data from publicly available industry sources as well as from reserve reports, market research and industry analysis and on assumptions based on data and knowledge of this industry which Calvalley believes to be reasonable. However, this data is inherently imprecise, although generally indicative of relative market positions, market shares and performance characteristics. While Calvalley is not aware of any misstatements regarding any industry data presented herein, the industry involves risks and uncertainties and is subject to change based on various factors.
For further information: [email protected]; Edmund Shimoon, Chairman & CEO, Memet Kont, President & COO, Zacharie Magnan, Acting CFO, (403) 297-0490
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