INSIGNIA ENERGY LTD. ANNOUNCES ITS 2010 THIRD QUARTER FINANCIAL AND OPERATING
RESULTS
CALGARY, Nov. 10 /CNW/ - Insignia Energy Ltd. ("Insignia" or the "Company") (TSX: ISN) is pleased to announce its financial and operating results for the third quarter ended September 30, 2010.
FINANCIAL AND OPERATING HIGHLIGHTS
- Third quarter production averaged 2,717 boe/d; consisting of
673 bbls/d of crude oil and NGL's and 12,264 mcf/d of natural gas.
This is up 28% from the same quarter in 2009 and down 5% from the
previous quarter reflecting the restricted production at Caroline for
July and August 2010. The Company is currently producing
approximately 3,100 boe/d.
- During the quarter the Company's average oil and liquids percentage
increased to 25% which is up from 19% in the same quarter in 2009 and
24% in the second quarter of 2010.
- The Company drilled and partially completed four (1.92 net) wells on
its Pembina Cardium property with 100% success. No production from
these wells was recorded in the third quarter and three (0.92 net)
wells are expected to be on production prior to the end of the fourth
quarter of 2010, while the fourth (1.0 net) is expected to be tied in
during the first quarter of 2011. Subsequent to the quarter, the
Company's 50% working interest Cardium well at 06-03-049-06W5 ("06-03
well") was placed on production and, as of the date of this news
release, has been on production for 28 days averaging gross
production of approximately 250 bbls/d of light sweet oil.
- The Company successfully completed a 100% horizontal well on its
Pouce Coupe property at 01-20-077-11 W6M ("01-20 well") in the Lower
Doig formation. The 01-20 well was tied-in and placed on production
on September 1, 2010 and, over the course of the first 60 days, has
averaged 2.6 mmcf/d and is currently producing 2.8 mmcf/d.
- The Company successfully drilled one (0.5 net) horizontal well on its
Pouce Coupe property at 01-22-077-10W6M ("01-22 well") targeting the
Lower Doig formation. Subsequent to the quarter, this confidential
01-22 well was successfully completed and is expected to be brought
on production late in the fourth quarter of 2010.
- Late in the third quarter, the Company commenced drilling an
additional one (0.5 net) horizontal well on its Pouce Coupe property
at 13-20-077-10W6M ("13-20 well") targeting the Lower Doig formation.
The 13-20 well will be completed in the fourth quarter of 2010.
- Funds from operations for the third quarter were $2.8 million,
$0.09 per basic and fully diluted share, up 45% (29% per share) from
the same quarter a year ago.
Below are the Financial and Operating Statistics for the third quarter of
2010:
Three months ended Nine months ended
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Sept June Sept Sept Sept
30, 2010 30, 2010 30, 2009 30, 2010 30, 2009
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Financial
($ thousands, except per
share amounts)
Oil and natural gas sales 8,247 9,126 5,057 27,161 9,144
Funds from operations(1) 2,795 2,514 1,928 8,800 2,210
Per share - Basic and
diluted(1) 0.09 0.08 0.07 0.29 0.13
Net loss (4,088) (4,588) (4,335) (11,307) (9,102)
Per share - Basic and
diluted (0.13) (0.15) (0.17) (0.37) (0.53)
Working capital
deficiency(2) (33,914) (25,882) (15,193) (33,914) (15,193)
Property and equipment 145,961 141,431 139,509 145,961 139,509
Total assets 157,489 153,510 150,281 157,489 150,281
Weighted average common
shares outstanding
(thousands):
Basic and diluted 30,660 30,660 26,105 30,660 17,145
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Operating
(boe conversion - 6:1 basis)
Average daily production
Natural gas (mcf/d) 12,264 13,055 10,315 12,822 5,841
Oil and NGL (bbls/d) 673 695 411 637 233
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Total (boe/d) 2,717 2,871 2,130 2,774 1,206
Product prices(3)
Natural gas ($/mcf) 3.79 4.17 3.16 4.43 3.60
Oil and NGL ($/bbl) 64.13 66.00 54.60 67.00 53.40
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Total ($/boe) 32.99 34.93 25.80 35.87 27.76
Operating netback ($/boe)(1) 15.31 14.08 8.06 15.72 9.52
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(1) Funds from operations, funds from operations per share and operating
netback are not defined by GAAP in Canada and are referred to as
non-GAAP measures. Funds from operations is cash provided by
operating activities before changes in non-cash working capital and
before abandonment and reclamation costs. Funds from operations per
share is calculated by dividing funds from operations by the weighted
average number of shares outstanding, consistent with the calculation
of net loss per share. Operating netback per boe is calculated as
total oil and natural gas revenue less royalties, operating costs,
transportation costs and net of any realized income on financial
derivative contracts, calculated on a boe basis.
(2) Working capital surplus (deficiency) includes bank indebtedness and
working capital but excludes the financial derivative contracts.
(3) The average selling prices reported are before realized derivatives
and transportation charges.
ADDITIONAL THIRD QUARTER 2010 RESULTS
- Insignia exited the quarter with net debt of $33.9 million and a
credit facility of $55 million with a Canadian chartered bank. The
facility was renewed subsequent to the quarter with the next review
date expected in April 2011.
- Capital expenditures for the quarter were $10.9 million. The majority
of this capital, $10.0 million, was related to the drilling of eight
(3.6 net) wells, including four (1.92 net) Pembina Cardium wells and
one (0.5 net) Pouce Coupe wells and the completion of
three (0.92 net) Pembina Cardium wells and one (1.0 net) Pouce Coupe
wells. Insignia had previously announced a revised second half 2010
capital expenditure estimate of $22 million, excluding any potential
acquisitions. Insignia has spent $10.9 million in the third quarter
and expects to spend $8.5 million in the fourth quarter.
- Subsequent to the third quarter:
- At Pembina, the Company successfully completed four (1.92 net)
horizontal wells targeting the oil potential in the Cardium
formation. The 06-03 well has been producing for 28 days and over
this period has averaged approximately 250 boe/d. While two other
wells (0.42 net) are currently producing, they have too limited
production history to report meaningful data. The fourth well
(1.0 net) is currently being equipped to produce and is expected
to be on production in the first quarter of 2011. The Company has
approximately 8.5 gross (6.1 net) sections of land in the
immediate area that is prospective for the Cardium and Insignia
has identified up to 22.6 net drilling locations. The Company has
no reserves attributed in its 2009 year end independent reserves
report to the Cardium formation on its Pembina lands.
- The Company successfully completed the confidential 01-22 well,
in the Lower Doig formation with 10 separate fracture treatments.
The 13-20 well will be completed in the fourth quarter of 2010.
It is anticipated that both wells will be tied in and on stream
late in the fourth quarter or early next year.
- The Company's average production in the month of October 2010, as
per the field reports, was in excess of 3,100 boe/d.
Update of the Company's Second Half 2010 ("H2/10") Capital Budget and
Guidance
As indicated above, the Company currently anticipates that capital expenditures for the second half of 2010 will amount to approximately $19.4 million which is $2.6 million lower than the previously approved $22 million H2/10 capital budget by the Company's Board of Directors. This anticipated reduction is a result of deferring certain planned gas levered drilling expenditures on its Caroline property due to low natural gas prices.
The Company expects to meet its previously disclosed guidance of a 2010 exit rate of approximately 3,300 boe/d.
Outlook
As the year 2010 draws to an end, we are pleased with the operational results we have achieved throughout the year but, at the same time, we are concerned with the continued low natural gas price which has had the effect of decreasing our operating cash flows and marginalizing the economics of our natural gas, resource based projects. Although we are confident that natural gas prices will rebound, it may take a longer period of time than originally thought. In the meantime, we will protect our long life, resource based natural gas reserves in the ground until prices justify the economics and the returns to our shareholders are maximized.
The Company has identified an extensive and diversified inventory of drilling locations on the Company's lands in excess of 150 locations. Many of these locations are targeting liquids rich natural gas potential and, as indicated above, we have approximately 22 locations targeting light, sweet oil potential at Pembina. So, while natural gas prices are low, we will continue to switch our focus to oil and liquids rich natural gas opportunities. We see this strategy continuing on into 2011 and plan to more formally introduce our 2011 capital budget and production guidance to the market early in the New Year.
Our team remains committed and focused to the goals and objectives of the Company.
Advisories
The discussion of our oil and natural gas production and related performance measures is presented on a working-interest, before royalties basis. For the purpose of calculating unit information, natural gas is converted to a barrel of oil equivalent ("boe") using six thousand cubic feet of natural gas equal to one barrel of oil. Readers are cautioned that boe's may be misleading, particularly if used in isolation. A conversion ratio of six thousand cubic feet of natural gas to one barrel of oil is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. In this press release: boe/d means boe per day; mcf/d means thousand cubic feet per day, bbl means barrel, mbbl means thousand barrels, mmcf means million cubic feet and mboe means thousand boe's.
Investors are further cautioned that the preparation of financial statements in accordance with Canadian Generally Accepted Accounting Principles ("GAAP") requires management to make estimates and assumptions that affect the reported amounts of our assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and our revenues and expenses during the reporting period. Our management reviews these estimates, including those related to accruals, environmental and asset retirement obligations, income taxes, and the determination of proved reserves on an ongoing basis. Changes in facts and circumstances may result in revised estimates and actual results may differ from these estimates.
Certain financial measures referenced to in this news release are not prescribed by Canadian GAAP. These non-GAAP financial measures do not have any standardized meaning and therefore are unlikely to be comparable to similar measures presented by other companies. We include these measures because management utilizes them to analyze operating and financial performance. The additional information should not be considered in isolation or as a substitute for measures of performance prepared in accordance with the Canadian GAAP. We use funds from operations which is cash provided by operating activities before changes in non-cash working capital and before abandonment and reclamation costs. Funds from operations per share is calculated by dividing funds from operations by the weighted average number of shares outstanding, consistent with the calculation of net loss per share. Funds from operations netback per boe is calculated as funds from operations divided by our total boe produced. We also use operating netback per boe. This is calculated as total oil and natural gas revenue less royalties, operating costs, transportation costs and net of any realized financial instrument income calculated on a boe basis.
Forward Looking Statements
Statements throughout this news release that are not historical facts may be considered to be "forward looking statements". These forward looking statements sometimes include words to the effect that management believes or expects a stated condition or result. All estimates and statements that describe the Company's objectives, goals, or future plans, including, without limitation, management's assessment of future plans and operations, budgeted capital expenditures and the nature of those expenditures, drilling plans and the timing of drilling and wells to be brought on production, completion and tie-in of wells and the timing thereof, expected levels of production, including year-end exit production rates, anticipated benefits to be derived from project areas and future natural gas prices, may constitute forward-looking statements under applicable securities laws and necessarily involve risks including, without limitation, risks associated with oil and gas exploration, development, exploitation, production, marketing and transportation, volatility of commodity prices, imprecision of reserve estimates, environmental risks, competition from other producers, incorrect assessment of the value of acquisitions, failure to complete and/or realize the anticipated benefits of acquisitions, delays resulting from or inability to obtain required regulatory approvals and ability to access sufficient capital from internal and external sources and changes in the regulatory and taxation environment. As a consequence, the Company's actual results may differ materially from those expressed in, or implied by, the forward-looking statements. Forward-looking statements or information are based on a number of factors and assumptions which have been used to develop such statements and information but which may prove to be incorrect. Although the Company believes that the expectations reflected in such forward-looking statements or information are reasonable, undue reliance should not be placed on forward-looking statements because the Company can give no assurance that such expectations will prove to be correct. In addition to other factors and assumptions which may be identified in this document, assumptions have been made regarding, among other things: the ability of the Company to obtain equipment and services in a timely and cost efficient manner; drilling results; the ability of the operator of the projects which the Company has an interest in to operate the field in a safe, efficient and effective manor; field production rates and decline rates; the ability to replace and expand oil and natural gas reserves through development of exploration; future oil and natural gas prices; interest rates; the regulatory framework regarding royalties, and the ability of the Company to successfully market its oil and natural gas products. Readers are cautioned that the foregoing list of factors is not exhaustive. Additional information on these and other factors that could affect the Company's operations and financial results are included elsewhere herein and in reports on file with Canadian securities regulatory authorities and may be accessed through the SEDAR website (www.sedar.com), or at the Company's website (www.insigniaenergy.ca). Furthermore, the forward-looking statements contained in this news release are made as at the date of this news release and the Company does not undertake any obligation to update publicly or to revise any of the included forward-looking statements, whether as a result of new information, future events or otherwise, except as may be expressly required by applicable securities laws.
Insignia is a publicly listed junior oil and gas exploration and development company based in Calgary, Alberta. Insignia's shares trade on the TSX under the symbol "ISN".
Copies of the Financial Statements and Management's Discussion and Analysis for the period ended September 30, 2010 will be filed with Canadian securities regulators and once filed will be accessible at www.sedar.com on November 11, 2010 or by visiting Insignia's website at www.insigniaenergy.ca.
For further information: Jeff Newcommon, President & CEO, (403) 536-8138, [email protected]
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