CALGARY, Aug. 7, 2012 /CNW/ - Insignia Energy Ltd. ("Insignia" or the "Company") (TSX: ISN) is pleased to announce its financial and operating results for the second quarter ended June 30, 2012.
FINANCIAL AND OPERATING HIGHLIGHTS
- Second quarter production averaged 3,204 boe/d; consisting of 14,149 mcf/d of natural gas and 846 bbls/d of crude oil and NGL's. On a boe basis, this is down six per cent from the same quarter in 2011 and three per cent from the previous quarter;
- Funds from operations for the second quarter were $3.3 million, down 50% from the same quarter a year ago. The decrease in funds from operations is largely due to a 50% drop in realized natural gas prices in the second quarter of 2012 compared to the second quarter of 2011; and,
- During the second quarter of 2012, the Company's focus was on the completion and equipping of two (2.0 net) Cardium horizontal wells on its Pembina property, the equipping of two (1.0 net) Lower Doig horizontal wells, and one (0.5 net) Montney horizontal well on its Pouce Coupe property. All of the second quarter activity carried into the third quarter was due to weather related delays and all of the Pouce Coupe wells and the Pembina wells are expected to be on production prior to the end of August 2012.
Below are the financial and operating statistics for the second quarter of 2012:
|Three months ended||Six months ended|
| June 30,
| Mar 31,
| June 30,
| June 30,
| June 30,
|($ thousands, except per share amounts)|
|Oil and natural gas sales||8,599||9,936||13,216||18,535||24,859|
| Funds from operations(1)
|Per share - Basic and diluted(1)||0.06||0.07||0.22||0.13||0.39|
|Net earnings (loss)||(15,795)||1,048||(598)||(14,747)||(2,090)|
||Per share - Basic and diluted||(0.27)||0.02||(0.02)||(0.25)||(0.07)|
|Net debt (1)||9,396||10,243||32,711||9,396||32,711|
| Total assets
| Weighted average common shares
| Basic and diluted
(boe conversion - 6:1 basis)
|Average daily production|
||Natural gas (mcf/d)||14,149||14,685||14,851||14,417||15,678|
|Oil and NGL (bbls/d)||846||868||937||857||881|
| Product prices(2)
| Natural gas ($/mcf)
|Oil and NGL ($/bbl)||77.77||84.07||90.64||80.99||84.12|
|Operating netback ($/boe)(1)||15.61||17.70||25.86||16.66||23.00|
|(1)|| Funds from operations, funds from operations per share and operating netback are not defined by IFRS in Canada and are referred to
as non-IFRS 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. Net debt is the sum of bank indebtedness and working capital but excludes
financial derivative contracts.
|(2)||The average selling prices reported are before transportation charges.|
Additional Second Quarter 2012 Results
- Insignia exited the quarter with net debt of $9.4 million on its current credit facility with a borrowing base of $45 million. The Company had projected the net debt at the end of the second quarter to be approximately $12 million. The actual net debt is lower than forecast largely due to lower capital expenditures in the first six months of 2012. The facility was renewed during the quarter with our next review expected in the fourth quarter of 2012;
- Net capital expenditures for the quarter were $2.6 million. The majority of this capital, $2.1 million, was related to completion and equipping expenditures;
- Net capital expenditures for the first six months of 2012 were $13.0 million. The Board of Directors of Insignia had previously approved a first half 2012 capital budget of $16.5 million. The majority of the difference, or approximately $2.5 million in expenditures, will be spent early in the third quarter and was delayed due to wet weather conditions on the Insignia wells that were expected to be producing prior to the end of the second quarter. This delay in expenditures also affected the Company's second quarter exit production which was forecasted to be 3,600 to 3,800 boe/d. We now anticipate that Insignia will meet this guidance at the end of August with the tie-in of the recently drilled horizontal wells in both Pembina (2.0 net) and Pouce Coupe (1.5 net);
- Subsequent to the Quarter:
- At Pembina, the Company successfully completed one (1 net) horizontal wells in the Cardium formation. This well, 13-20-048-05W5, along with the 12-20-048-05W5 well completed in the second quarter is anticipated to be placed on production by the end of August, weather permitting; and
- At Pouce Coupe, the Company completed the equipping of two (1.0 net) horizontal wells that will be producing from the Lower Doig formation and one (0.5 net) horizontal well that will be producing from the Montney formation. The wells are anticipated to be on production by the end of August.
Second Half 2012 ("H2/12") Capital Budget
Contingent on commodity prices, the Board of Directors has approved an additional capital expenditure budget for 2012 of $8.5 million which, when combined with the previously approved first half capital budget, would result in a $25 million capital budget for 2012. For the second half, the Company plans to allocate in excess of 90% of this capital toward drilling, completions and facilities which are anticipated to include the drilling of approximately four (2.4 net) wells and when combined with the first half program would total seven (4.9 net) wells drilled or planned to be drilled in 2012. Given today's low natural gas prices, the Company plans to continue its focus toward oil and liquids rich natural gas opportunities on its current asset base.
Natural gas continues to experience a supply/demand imbalance and, coupled with the high storage levels has resulted in the price of this commodity hitting 15 years lows. Although there are many positive signs for future price improvement, natural gas prices will likely continue to be soft for the next few quarters.
During this period, Insignia will continue to reduce its natural gas drilling in favor of oil opportunities. In addition, the Company will continue to manage a conservative balance sheet and keep a close eye on its cost structure. In short, Insignia is well positioned to weather a prolonged downturn in natural gas prices and it is not our intention to accelerate the production of our quality, long life natural gas assets at the expense of eroding our balance sheet. Over the coming quarters our focus will continue to shift to oil opportunities and on opportunistic natural gas acquisitions in this natural gas cycle low.
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 addition, as the value ratio between natural gas and crude oil based on the current prices of natural gas and crude oil is significantly different from the energy equivalency of 6:1, utilizing a conversion on a 6:1 basis may be misleading as an indication of value. 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; mboe means thousand boe's and NGLs means natural gas liquids.
Any reference to production tests or final production test rates included in this press release are not necessarily indicative of long-term performance or ultimate recovery.
Investors are further cautioned that the preparation of financial statements in accordance with International Financial Reporting Standards as adopted by Canadian generally accepted accounting principles ("Canadian 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. Operating netback per boe 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. Net debt is the sum of bank indebtedness and working capital but excludes financial derivative contracts.
Forward Looking Statements
Statements throughout this Press 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, anticipated commodity prices and their impact, anticipated demand for commodity prices, 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 and the timing of the next review of the credit facility, 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 Press Release are made as at the date of this Press 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 June 30, 2012 will be filed with Canadian securities regulators and on SEDAR on August 7, 2012 and accessible at www.sedar.com or by visiting Insignia's website at www.insigniaenergy.ca.
SOURCE: Insignia Energy Ltd.
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