CALGARY, May 25, 2012 /CNW/ - Hawk Exploration Ltd. ("Hawk" or the "Corporation") announces its results for the three months ended March 31, 2012. Selected financial and operational information for the three months ended March 31, 2012 are provided as follows:
|Three months ended March 31,|
|Financial ($000's except per share amounts)|
|Petroleum and natural gas sales||$||2,889||$||2,242||29%|
|Funds flow from operations (1)||1,461||863||69%|
|Comprehensive income (loss)||509||(133)||483%|
|Capital expenditures (2)||2,278||643||254%|
|Working capital deficit - excluding bank|
|debt and commodity contracts, end of period (3)||$||1,857||$||1,218||52%|
|Bank debt, end of period||-||2,550||(100%)|
|Total assets, end of period||$||29,588||25,803||15%|
|Common Shares outstanding end of period:|
|Class A Shares||34,481||21,981||57%|
|Class B Shares||1,080||1,080||0%|
|Options to acquire Class A Shares||2,110||2,110||0%|
|Crude oil and natural gas liquids (bbl/d)||402||348||16%|
|Natural gas (mcf/d)||188||388||(52%)|
|Oil and liquids as percent of total||93%||84%||9%|
|Average Selling Price|
|Crude oil and ngls (per bbl)||$||77.91||$||67.15||16%|
|Natural gas (per mcf)||2.19||3.96||(45%)|
|Total (per boe)||$||73.23||$||60.35||21%|
|Operating netback (per boe at 6:1) (4)|
|Operating netback ($/boe)||$||38.14||$||29.27||30%|
(1) Management uses funds flow from operations and funds flow from operations per share to analyze operating performance, leverage and liquidity. Funds flow from operations and funds flow from operations per share as presented do not have any standardized meaning prescribed under Generally Accepted Accounting Principles ("GAAP") and therefore may not be comparable with the calculation of similar measures by other entities.
(2) Capital expenditures include cash exploration and evaluation expenditure plus cash property, plant and equipment net of dispositions and exclude asset retirement obligations and capitalized share-based payments.
(3) Working capital is a non-GAAP measure that includes trade and other accounts receivable, prepaid expenses, and trade and other accounts payables.
(4) Management considers operating netbacks as an important measure as it demonstrates profitability relative to current commodity prices. Operating netbacks do not have a standardized meaning prescribed by GAAP and therefore may not be comparable with the calculation of similar measures by other entities.
Highlights for the three months ended March 31, 2012 were as follows:
- Achieved record quarterly funds flow from operations of $1.5 million in the first quarter of 2012, a 69% increase from the $0.9 million in the first quarter of 2011;
- Recorded net income of $0.5 million in the first quarter of 2012 compared to a net loss of $0.1 million in Q1 2011;
- Improved operating netbacks by 30% to $38.14 in Q1 2012 from $29.27 per boe in the first quarter of 2011 and by 12% compared to the fourth quarter of 2012 netback of $34.09 per boe;
- Averaged 434 boe/d of production for the first quarter of 2012, a 5% increase over Q1 2011 with oil production increasing by 16%;
- Increased the oil weighting as a percent of total production to 93% for the first quarter of 2012 from 84% in Q1 2011;
- Drilled, completed and commenced production on seven (2.4 net) oil wells in the first quarter of 2012 in western Saskatchewan;
- Completed three seismic programs in western Saskatchewan in the first quarter of 2012 to delineate drilling locations for later in 2012; and
- Subsequent to March 31, 2012, increased the revolving credit demand facility from $8.5 million to $12 million.
In the first quarter of 2012, Hawk drilled seven (2.4 net) wells resulting in seven (2.4 net) producing oil wells in its core area of western Saskatchewan. At Silverdale, the Corporation drilled six (1.4 net) wells targeting the Sparky formation, with all six (1.4 net) being completed and on production prior to end of the first quarter. These six (1.4 net) wells are currently producing approximately 275 (63 net) bbl/d of oil. To date in the second quarter of 2012, Hawk has drilled an additional two (1.0 net) wells on this play at Silverdale and expects to have these completed and on production by the end of the second quarter. Two (0.5 net) additional wells at Silverdale are expected to be drilled in the second quarter once weather conditions permit. Hawk also drilled one (1.0 net) successful well at Edam in the first quarter of 2012 targeting the Waseca formation. This well was completed and is currently producing approximately 35 (35 net) bbl/d of oil.
The Corporation was also active in the first quarter 2012, conducting three separate seismic programs at Dankin, Carruthers, and Prairiedale, all in western Saskatchewan. These seismic programs have all been processed and interpreted and were used to delineate horizontal drilling locations at Dankin and Carruthers which are expected to be drilled later in 2012.
Hawk achieved record quarterly funds flow from operations in the first quarter of 2012 of approximately $1.5 million compared to $0.9 million for the first quarter of 2011. The Corporation continues to generate strong operating netbacks which averaged $38.14 per boe in the first quarter of 2012, 30 percent higher than the operating netback for the first quarter of 2011 of $29.27 per boe. This increase in operating netbacks is attributable to higher realized oil prices offset slightly by higher royalty costs.
At March 31, 2012, Hawk had existing credit facilities of $11 million consisting of an $8.5 million revolving line of credit and a $2.5 million acquisition and development line of credit, which was undrawn. Subsequent to March 31, 2012, the revolving line of credit was increased from $8.5 million to $12 million with the next review to occur prior to October 1, 2012. The Corporation continues to maintain a solid balance sheet with net debt and working capital deficit of approximately $1.9 million at March 31, 2012 which equates to a net debt to annual funds flow from operations of 0.3:1.
The Corporation has set an $8.5 million capital budget for 2012 that will focus on development opportunities in western Saskatchewan targeting heavy crude oil both through horizontal and vertical drilling. Hawk has an active summer planned as it expects to drill three (2.5 net) horizontal wells at Seagram Lake, Carruthers and Dankin in Western Saskatchewan targeting heavy oil during the second and third quarters of 2012. The capital budget is expected to be funded by way of cash flow from operations and from the recently expanded revolving line of credit. As previously disclosed, Hawk expects second quarter 2012 production to average approximately 500 boe/d weighted 94 percent to crude oil.
Annual General Meeting
Hawk's annual general meeting of shareholders will be held on Tuesday, June 12, 2011 at 3:00 pm in the R.G. Black Boardroom at the offices of McCarthy Tetrault LLP, Suite 3300, 421-7th Avenue SW, Calgary, AB.
Hawk is an emerging exploration company engaged in the exploration, development and production of conventional crude oil and natural gas in western Canada and is based in Calgary, Alberta. The Class A Shares and Class B Shares of Hawk trade on the TSX Venture Exchange under the trading symbols of HWK.A and HWK.B, respectively.
Neither the TSX Venture Exchange nor its Regulation Services Provider (as the term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
Certain statements contained in this press release constitute forward-looking statements. All forward-looking statements are based on the Corporation's beliefs and assumptions based on information available at the time the assumption was made. The use of any of the words "anticipate", "continue", "estimate", "expect", "may", "will", "project", "should", "believe" and similar expressions are intended to identify forward-looking statements. These statements involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking statements. Hawk believes the expectations reflected in those forward-looking statements are reasonable, but no assurance can be given that these expectations will prove to be correct. Such forward-looking statements included in this press release should not be unduly relied upon. These statements speak only as of the date of this press release.
In particular, but without limiting the forgoing, this press release contains forward-looking statements pertaining to the following: the performance characteristics of Hawk's oil and natural gas properties; business strategies and plans; projections of market prices and cost; supply and demand for oil and natural gas; planned development of the Corporation's oil and natural gas properties; capital expenditure programs for the remainder of 2012; the timing of and nature of capital expenditure program for 2012;expected second quarter 2012 production rates; and the expected sources of funding for the 2012 capital expenditure program.
The material factors and assumptions used to develop these forward looking statements include, but are not limited to: the ability of the Corporation to engage drilling contractors, to obtain and transport equipment, services, supplies and personnel in a timely manner and at an acceptable cost to carry out its activities and plans; the ability of the Corporation to market its oil and natural gas and to transport its oil and natural gas to market; the timely receipt of regulatory approvals and the terms and conditions of such approval; the ability of the Corporation to obtain drilling success consistent with expectations; and the ability of the Corporation to obtain capital to finance its exploration, development and operations.
Actual results could differ materially from those anticipated in these forward-looking statements as a result of the risk factors including, without limitation: volatility in market prices for oil and natural gas; liabilities inherent in oil and natural gas operations; uncertainties associated with estimating oil and natural gas reserves; competition for, among other things, capital, acquisitions of reserves, undeveloped lands and skilled personnel; incorrect assessments of the value of acquisitions and exploration and development programs; geological, technical, drilling and processing problems; changes in tax laws and incentive programs relating to the oil and natural gas industry; failure to realize the anticipated benefits of acquisitions; general business and market conditions; and certain other risks detailed from time to time in Hawk's public disclosure documents (including, without limitation, the other factors discussed under "Risk Factors" in the Corporation's most recently filed Annual Information Form).
Statements relating to "reserves" or "resources" are deemed to be forward-looking statements, as they involve the implied assessment, based on certain estimates and assumptions that the resources and reserves described can be profitably produced in the future. Readers are cautioned that the foregoing lists of factors are not exhaustive. The forward-looking statements contained in this press release are expressly qualified by this cautionary statement. Except as required under applicable securities laws, Hawk does not undertake any obligation to publicly update or revise any forward-looking statements.
Barrels of oil equivalent (boe) may be misleading, particularly if used in isolation. A boe conversion ratio of six thousand cubic feet (mcf) of natural gas to one barrel (bbl) of oil is based on an energy conversion method primarily applicable at the burner tip and is not intended to represent a value equivalency at the wellhead. All boe conversions in this press release are derived by converting natural gas to oil in the ratio of six thousand cubic feet of natural gas to one barrel of oil. Certain financial amounts are presented on a per boe basis, such measurements may not be consistent with those used by other companies.
For further information:
President, CEO and Chairman
Tel: (403) 264-0191 Ext 225
Chief Financial Officer
Tel: (403) 264-0191 Ext 234