Connacher Announces Second Quarter 2013 Results

CALGARY, Aug. 14, 2013 /CNW/ - Connacher Oil and Gas Limited (CLL - TSX; "Connacher" or the "Company") is pleased to announce the release of its financial and operating results for the second quarter ending June 30, 2013 ("Q2 2013"), a summary of which is set out below.

Q2 2013 Highlights:

  • EBITDA of $24 million, a 125% increase from Q1 2013
  • Bitumen production averaged 11,572 bbl/d
  • Bitumen netback of $31.79/bbl, a 93% increase from Q1 2013
  • Funds flow from continuing operations of $6 million
  • Reduced diluent blend ratio ("DBR") to 20% from 22% in Q1 2013
  • Dilbit sales by rail increased to 80% of total sales versus 55% in Q1 2013
  • Completed drilling four new infill wells and four new well pairs at Pod One
  • All four infill wells are now on steam injection
  • Replacement well pair at Pad 202 placed on production in July
  • Received regulatory approval for SAGD+ commercial project at Algar
  • Received regulatory approval to divert steam from Pad 101 North to Pad 104 wells at Pod One
  • Capital expenditures of $28 million

Q2 2013 Financial and Operational Summary

The following summarizes the operating and financial results for the three and six month periods ended June 30, 2013. To properly reflect the disposition of Montana Refining Company, Inc. (the "Refinery") and the Company's conventional assets in the financial statements, the results attributable to the Refinery and conventional assets have been segregated from ongoing operations and separately disclosed as "Discontinued Operations".

  Three months ended June 30 Six months ended June 30
FINANCIAL ($000 except per share amounts) 2013 2012 2013 2012
Revenue, net of royalties (continuing operations) 110,613 81,411 211,933 189,158
EBITDA (continuing operations) (1) 24,403 6,956 35,085 19,375
Funds flow (continuing operations) (1) 5,678 (14,166) (3,833) (22,647)
Net earnings (loss) (continuing operations) (32,117) (20,264) (78,683) (43,266)
Net earnings (loss) (discontinued operations) - (24,798) - (22,354)
Net earnings (loss) (32,117) (45,062) (78,683) (65,620)
Per share, basic and diluted  (0.07) (0.10) (0.18) (0.15)
Capital expenditures - continuing operations 28,153 8,882 48,404 20,738
Cash on hand     76,724 41,499
Working Capital     55,702 110,555
Long-term debt     881,396 939,623
Shareholders' equity     265,064 357,742
OPERATIONAL Three months ended June 30 Six months ended June 30
2013 2012 2013 2012
Average benchmark prices        
  WTI (US$/bbl) 94.27 93.50 94.96 98.20
  Heavy oil differential ($/bbl) (17.13) (23.00) (22.12) (22.21)
  Western Canada Select ($/bbl) 79.04 71.31 74.18 76.48
Daily production volumes - continuing operations        
  Bitumen (bbl/d) 11,572 11,674 11,986 12,052
Selected Highlights ($/bbl)        
  Dilbit sales 85.06 62.01 77.78 68.39
  Diluent costs (7.03) (15.22) (9.75) (14.51)
  Realized bitumen sales 78.03 46.79 68.03 53.88
  Transportation and handling costs (21.65) (12.48) (20.99) (11.01)
  56.38 34.31 47.04 42.87
  Royalties (3.06) (2.43) (2.67) (2.66)
  Net bitumen revenue 53.32 31.88 44.37 40.21
  Production and operating expenses (21.53) (17.21) (20.53) (17.33)
Bitumen netback - per barrel(1) $31.79 $14.67 $23.84 $22.88

(1)  A non-GAAP measure, which is defined in the Advisory section of the Company's Management's Discussion and Analysis for the periods ended June 30, 2013 and June 30, 2012 ("MD&A"). Bitumen netback is reconciled to net loss in the MD&A. EBITDA from continuing operations is reconciled to net loss in the MD&A and funds flow from continuing operations is reconciled to cash flow from operating activities in the MD&A

At June 30, 2013, the Company's working capital surplus was $56 million, including $77 million of cash on hand. Based on current covenant calculations the Company is able to fully utilize the $95 million under the facility. The maximum available bank credit line at the end of Q2 2013 is $82 million, net of existing letters of credit.

Long term debt, consisting solely of the Company's outstanding Second Lien Senior Notes due in 2018 and 2019 (the "Notes"), totaled $881 million. Under the note indenture for the Company's Notes, the Company has a first lien debt basket that permits the Company to incur first lien debt of up to $170 million (inclusive of commitments under the bank facility).

Total capital expenditures during the quarter were approximately $28 million ($49 million YTD 2013). Capital expenditures of $21 million were incurred in Q2 2013 to increase production and decrease operating costs with the remaining $7 million for maintenance expenditures.

Bitumen production at Great Divide averaged 11,572 bbl/day in Q2 2013, down 7% from Q1 2013 due to planned maintenance. Pod One averaged 5,660 bbl/day and Algar averaged 5,912 bbl/day.

Cash flow from operating activities (continuing operations) was $21 million in Q2 2013 compared to $9 million in Q1 2013. The increase was primarily driven by higher realized pricing and decreased diluent use.

Connacher incurred a net loss of $32 million or $0.07 per share for Q2 2013, compared with a net loss in Q1 2013 of $47 million or $0.10 per share. The net loss in Q2 2013 includes $40 million of non-cash charges.

Operations Update and Outlook

Based upon field estimates, Great Divide production in the month of July 2013 was 11,643 bbl/day. Production was impacted in July by tie-ins for Pad 102 infills and rod pump conversions at Algar. We expect to begin realizing increasing production from our 2013 capital spending in Q4 2013.

Surface facility construction at Pad 104 is continuing and expected to be completed in September. The four new well pairs at Pad 104 are scheduled to begin steaming in late September for approximately 90 days before being converted to SAGD production in late Q4 2013 to early Q1 2014.

The re-drilled well pair at Algar has been converted to SAGD production after 89 days of steaming and is currently producing 350 bbl/d, based on field estimates. Three of the four infill wells began steaming in late July and are expected to be on production by October 2013. The remaining infill well began steaming in August.

SAGD+ trials will continue at Algar until the end of the year. Well 203-1 has been on down-hole pump since May and has seen a positive SOR response with no operational issues. Well 203-4 solvent injection began in July.

Q2 2013 Conference Call Details

Connacher will host its quarterly conference call on August 15, 2013 at 8AM MDT. Interested participants can call in to (888) 231-8191 or locally at (403) 451-9838. Please use the Conference ID# 98592661. Participants are encouraged to call in 5 minutes prior to commencement. For those wishing to access the call online, the webcast URL is: 

About Connacher

Connacher Oil and Gas Limited is a focused in situ oil sands developer, producer and marketer of bitumen. The Company's principal assets are holdings in the Great Divide oil sands project in northern Alberta, south of Fort McMurray.

Forward Looking Information

This press release contains forward looking information including the expected timing of realizing the production impacts of 2013 capital spending, future production and the timing thereof, future exploration and development activities, future SAGD+ trials, the Company's ability to rely on the debt basket provided for under the Note Indenture related to the Company's existing second lien senior notes and general operational and financial performance in future periods.

Forward looking information is based on management's expectations regarding the Company's future financial position, the Company's future growth, results of operations and production, future commodity prices and foreign exchange rates, future capital and other expenditures (including the amount, nature and sources of funding thereof), plans for and results of drilling activity, environmental matters, business prospects and opportunities and future economic conditions.  Forward looking information involves significant known and unknown risks and uncertainties, which could cause actual results to differ materially from those anticipated. These risks include, but are not limited to:  the risks associated with the oil and gas industry (e.g., operational risks in development, exploration and production; delays or changes in plans with respect to exploration or development projects or capital expenditures; the uncertainty of reserve and resource estimates, the uncertainty of geological interpretations, the uncertainty of estimates and projections relating to production, costs and expenses, and health, safety and environmental risks), risk of commodity price and foreign exchange rate fluctuations, risks associated with the impact of general economic conditions, risks and uncertainties associated with maintaining the necessary regulatory approvals and securing the financing to proceed with the operation and continued expansion of the Great Divide oil sands project.

In addition, reported average production levels may not be reflective of sustainable production rates and future production rates may differ materially from the production rates reflected in this press release due to, among other factors, difficulties or interruptions encountered during the production of bitumen.

Additional risks and uncertainties affecting Connacher and its business and affairs are described in further detail in Connacher's Annual Information Form for the year ended December 31, 2012. Although Connacher believes that the expectations in such forward looking information are reasonable, there can be no assurance that such expectations shall prove to be correct. The forward looking information included in this press release is expressly qualified in its entirety by this cautionary statement. The forward looking information included herein is made as of the date of this press release and Connacher assumes no obligation to update or revise any forward looking information to reflect new events or circumstances, except as required by law.



SOURCE: Connacher Oil and Gas Limited

For further information:

Chris Bloomer        
Chief Executive Officer

Greg Pollard
Chief Financial Officer

Connacher Oil and Gas Limited
Phone:  (403) 538-6201
Fax:  (403) 538-6225
Suite 900 - 332 6th Avenue SW
Calgary, Alberta T2P 0B2

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