CALGARY, Nov. 26, 2012 /CNW/ - Hawk Exploration Ltd. ("Hawk" or the "Corporation") announces its results for the three and nine months ended September 30, 2012. Selected financial and operational information for the three and nine months ended September 30, 2012 is provided as follows:
|Three months ended Sept. 30,||Nine months ended Sept. 30,|
|2012||2011||% Change||2012||2011||% Change|
|Financial ($000's except per share amounts)|
|Petroleum and natural gas sales||$ 3,046||$ 2,617||16%||$ 8,736||$ 7,378||18%|
|Funds flow from operations (1)||1,432||1,090||31%||4,170||3,134||33%|
|Comprehensive income (loss)||69||(301)||123%||626||(274)||328%|
|Capital expenditures (2)||2,852||3,930||(27%)||6,301||9,326||(32%)|
|Working capital deficit - excluding bank debt and commodity contracts, end of period (3)||$ 3,371||$ 953||254%|
|Bank debt, end of period||100||-||-|
|Total assets, end of period||$ 29,226||34,936||(16%)|
|Common Shares outstanding end of period:|
|Class A Shares||34,481||34,481||0%|
|Class B Shares||1,080||1,080||0%|
|Options to acquire Class A Shares||3,540||2,110||68%|
|Crude oil and natural gas liquids (bbl/d)||505||403||25%||457||362||26%|
|Natural gas (mcf/d)||126||333||(62%)||151||316||(52%)|
|Oil and liquids as percent of total||96%||88%||8%||95%||87%||8%|
|Average Selling Price|
|Crude oil and ngls (per bbl)||$ 64.91||$ 67.56||(4%)||$ 69.03||$ 71.17||(3%)|
|Natural gas (per mcf)||2.37||3.74||(37%)||2.15||3.87||(44%)|
|Total (per boe)||$ 62.89||$ 62.10||1%||$ 66.10||$ 65.09||2%|
|Operating netback (per boe at 6:1) (4)|
|Price||$ 62.89||$ 62.10||1%||$ 66.10||$ 65.09||2%|
|Operating netback ($/boe)||$ 32.39||$ 28.55||13%||$ 33.45||$ 32.77||2%|
|(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 September 30, 2012 were as follows:
- Achieved quarterly funds flow from operations of $1.4 million in the third quarter of 2012, a 31% increase from the $1.1 million in the third quarter of 2011;
- Averaged 526 boe/d of production for the third quarter of 2012, a 15% increase over Q3 2011 with oil production increasing by 25%;
- Increased the oil weighting as a percent of total production to 96% in the third quarter of 2012 from 88% for the third quarter of 2011.
- Generated strong operating netbacks of $32.39 per boe in the third quarter of 2012, a 13% increase compared to the $28.55 per boe operating netback in Q3 2011;
- Drilled three (3.0 net) wells in the third quarter in western Saskatchewan, which included one horizontal well in the Carruthers area;
In the fourth quarter of 2012, Hawk has drilled two (1.5 net) horizontal wells in western Saskatchewan. At Carruthers, the Corporation drilled its second 100% working interest horizontal well at 192/09-10-46-23W3 directly offsetting the horizontal well drilled at 191/09-10-46-23W3 in August 2012. The 192/09-10-46-23W3 well is currently being completed and is expected to be placed on production in early December 2012.
At Seagram Lake, Hawk participated in the drilling of one (0.5 net) horizontal well in October 2012 targeting the Leduc (Duperow) Formation. This horizontal well was recently placed on production and is currently in its post completion clean up phase. Initial production rates have averaged 30 bopd (15 - net) with a 20 percent water cut.
Hawk expects to drill one (0.9 net) vertical well targeting the Sparky Formation at Baldwinton, in western Saskatchewan, in early December 2012. Also, the Corporation has recently completed the shooting of a three dimensional ("3D") seismic program in the Silverdale are of western Saskatchewan. This 3D program is currently being interpreted to evaluate potential future drilling locations on Hawk's land at Silverdale.
Hawk's current production, based on field estimates, is approximately 565 boe/d, comprised 95 percent of crude oil. Additional production is expected to be brought on stream prior to December 31, 2012 from the recently drilled horizontal well at Carruthers.
Hawk achieved quarterly funds flow from operations in the third quarter of 2012 of approximately $1.4 million compared to $1.1 million for the third quarter of 2011. The Corporation continued to generate strong operating netbacks which averaged $32.39 per boe in the third quarter of 2012 compared to $28.55 per boe for the third quarter of 2011 despite lower commodity prices for both crude oil and natural gas. Hawk's average realized sales price increased one percent to $62.89 in the third quarter compared to $62.10 in the third quarter of 2011. Production expenses in the third quarter of 2012 decreased by 11 percent to $17.58 per boe compared to $19.69 per boe in the third quarter of 2011 due to the addition of lower operating cost production from its 2012 drilling program at Silverdale.
At September 30, 2012, Hawk had drawn $0.1 million on an existing revolving credit facility of $12 million. The Corporation continues to maintain a solid balance sheet with net debt and working capital deficit of approximately $3.5 million at September 30, 2012 which equates to a net debt to annual funds flow from operations of 0.6:1.
The Corporation set an $8.5 million capital budget for 2012 which has led to steady growth in production through the first three quarters of 2012 and Hawk intends to build upon this success in 2013. Hawk's board of directors has approved a capital budget for 2013 of $10 million which will focus on oil development drilling mainly in Western Saskatchewan. The 2013 budget is expected to facilitate the drilling of three (3.0 net) horizontal wells at Carruthers and Dankin and six (5.9 net) vertical wells all of which are targeting heavy oil in Western Saskatchewan.
The 2013 capital budget also anticipates the drilling of two (2.0 net) vertical wells targeting light oil in central Alberta and one (0.5 net) horizontal well targeting light oil in the Viking Formation, also in Central Alberta, where Hawk has accumulated approximately 4,000 acres of land at a 100% working interest adjacent to an existing Viking light oil pool.
Based on the approved capital budget, Hawk anticipates average annual production of approximately 700 boe/d with an exit rate of 850 boe/d and net debt and working capital at the end of 2013 of $8 million. The 2013 capital budget is expected to be funded by way of cash flow from operations and the Corporation's existing credit facility of $12 million.
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.
SOURCE: Hawk Exploration Ltd.
For further information:
President, CEO and Chairman
Tel: (403) 264-0191 Ext 225
Email: [email protected]
Chief Financial Officer
Tel: (403) 264-0191 Ext 234
Email: [email protected]