CALGARY, Aug. 22, 2012 /CNW/ - TriOil Resources Ltd. ("TriOil" or the "Company" -TSXV:TOL) is pleased to announce that it has filed its interim financial statements and related Management's Discussion and Analysis ("MD&A") for the three and six months ended June 30, 2012. Selected financial and operational information is outlined below and should be read in conjunction with TriOil's unaudited interim financial statements and related MD&A which are available for review at www.trioilresources.com and www.sedar.com.
Financial and Operational Highlights
- Increased average production volumes by 31% to 2,091 boe/d from 1,602 boe/d in the first quarter of 2012 and 72% from 1,212 boe/d in the second quarter of 2011.
- Increased oil and NGL weighting to 76% in the second quarter of 2012 from 50% in the same period of 2011 and from 70% in the first quarter of 2012.
- Funds from operations increased 58% to $6.7 million in the second quarter of 2012 compared to $4.2 million in the first quarter of 2012 and 202% from $2.2 million in the same period in 2011. On a diluted per share basis, funds from operations increased 33% to $0.13 per share in the second quarter of 2012 from $0.09 per share in the first quarter of 2012 and 79% from $0.07 in the second quarter of 2011.
- Field netback (before hedging) increased by 34% to $39.55 per boe in the second quarter of 2012 from $29.44 in the second quarter of 2011 and by 2% from $38.55 per boe from the prior quarter, despite a decrease in oil and natural gas commodity prices. Field netbacks (before hedging) averaged $45.93 per boe at Kaybob and $50.98 per boe at Lochend in the second quarter of 2012.
- Reduced operating costs by 30% to $13.35 per boe from $19.09 per boe in the second quarter of 2011 and 10% from $14.91 per boe in the first quarter of 2012.
- Continued to execute a very successful capital program, drilling 7 (3.8 net) horizontal light oil wells with a 100% success rate.
- Exited the quarter with a strong balance sheet with positive working capital of $6.9 million and undrawn bank lines of $50 million.
- Closed $2.6 million of non core asset dispositions in the second quarter of 2012 and a further $4.5 million closed in July 2012.
|Financial and Operating Results|
|Three months ended June 30,||Six months ended June 30,|
|2012||2011||% Change||2012||2011||% Change|
|($000s, except per share numbers)|
|Total petroleum and natural gas sales||12,295||6,527||88||21,882||12,367||77|
|Funds from operations (1)||6,659||2,206||202||10,878||3,746||190|
|Per share - diluted||0.13||0.07||79||0.22||0.12||84|
|Net income (loss)||7,020||376||1,767||6,677||(2,330)||-|
|Per share - basic and diluted||0.13||0.01||1,219||0.14||(0.07)||-|
|Working capital (2)||6,855||2,750||149||6,855||2,750||149|
|Weighted average shares outstanding|
|Average daily production|
|Crude oil and NGLs (bbls/d)||1,594||601||165||1,355||601||125|
|Natural gas (mcf/d)||2,981||3,666||(19)||2,953||3,889||(24)|
|Average sales prices|
|Crude oil and NGLs ($/bbl)||80.99||93.79||(14)||84.06||86.84||(3)|
|Natural gas ($/mcf)||2.00||4.18||(52)||2.16||4.16||(48)|
|Wells drilled - gross (net)||7(3.8)||1(0.3)||-||16(9.4)||6(2.9)||-|
|Drilling success rate (%)||100||100||-||100||83||-|
|Operating netback ($/boe)|
|Oil and natural gas sales||64.60||59.16||9||65.11||54.71||19|
|Operating netback before hedging||39.55||29.44||34||39.27||25.20||56|
|Realized gain on financial derivative contracts||(0.18)||(0.67)||(73)||(1.78)||(0.26)||585|
|(1)||Funds from (used in) operations is a non-GAAP measure and is calculated as cash flow from operating activities before the change in non-cash working capital, abandonment expenditures and transaction costs.|
|(2)||Working capital excludes financial derivative contracts, flow through share liability and assets and liabilities held for sale.|
|(3)||Capital expenditures include property acquisitions and are presented net of proceeds of disposals.|
Message to Shareholders
TriOil is pleased to report record operational and financial results in the second quarter of 2012. Corporate production exceeded the 2,000 boe per day milestone for the first time in the Company's history. Production has grown steadily from 426 boe per day in TriOil's initial quarter of operations in 2010 to 2,091 boe per day in the second quarter of 2012, with non core property dispositions exceeding 425 boe per day. During this same period we have increased the Company's oil and NGL weighting to 76% from an initial 48%, improved operating netbacks to $39.55 per boe from $14.34 per boe and reduced operating costs to $13.35 per boe from $31.53 per boe.
Our second quarter operations were hampered by seasonal weather conditions and a prolonged spring break-up, which resulted in reduced field activity and lower capital spending. Nonetheless, TriOil still achieved record quarterly production of 2,091 boe per day, up 30% from 1,602 boe per day in the first quarter of 2012 and up 49% from 1,408 boe per day in the fourth quarter of 2011. TriOil posted a new benchmark operating netback (before hedging) of $39.55 per boe during the second quarter of 2012, representing a 2% increase from $38.85 in the prior quarter, despite the lower commodity pricing environment experienced by the energy industry during the second quarter of the year. Funds from operations rose to new highs of $6.7 million and $0.13 per share, up 58% and 33%, respectively from the prior quarter. These positive results can all be attributed to our successful Cardium and Dunvegan drilling programs at Lochend and Kaybob.
TriOil's capital program in the second quarter included drilling 7 (3.8 net) wells, completing 7 (3.8 net) wells and bringing 5 (3.3 net) wells on production. For the first half of the year we have now drilled 16 (9.4 net) wells, completed 15 (8.9 net) wells and brought 12 (6.9 net) wells on production. At the end of the second quarter TriOil had 3 (1.1 net) wells waiting on completion and/or tie-in. Subsequent to the end of the second quarter TriOil has drilled 8 (5.3 net) wells, with 7 (4.5 net) wells waiting to be completed or brought on production.
At Lochend our activity levels during the second quarter were lower than anticipated due to an early spring breakup. We drilled 2 (0.68 net) horizontal Cardium wells, completed 2 (0.7 net) wells and brought 2 (0.8 net) wells on production during the quarter. To date in the third quarter, we have drilled another 4 (2.3 net) wells and brought 1 (0.34 net) wells on production, resulting in an inventory of 4 (2.4 net) wells waiting to be completed or brought on production. Test results from Cardium oil wells completed in the second and third quarters, including the recently completed long-reach Cardium horizontal well drilled near Cochrane, have all met or exceeded expectations. We look forward to reporting IP 30 production rates on these new wells.
Our Lochend Cardium light oil project continues to provide strong production and reserve growth along with top quartile second quarter 2012 netbacks of $50.98 per boe. TriOil has now participated in 13 slick water multi stage completions in the higher impact Central and Western Lochend trends, and we are pleased to report the most recent well (TOL 50%) achieved an IP30 rate of 370 boe per day (81% oil). TriOil's initial 8 wells achieved an average 30 day production rate of 380 boe per day (82% oil) and 5 wells are drilled and or completed waiting to reach 30 day production rates. TriOil owns a significant land position of 80 (55 net) sections on the Lochend Cardium trend. Our current derisked Cardium horizontal drilling inventory is approximately 117 (66 net) locations and we continue to derisk additional acreage on the play and add to our drilling inventory.
At Kaybob we were fortunate to be able to conduct an active drilling and completion program prior to breakup, however, heavy spring and summer rains have hampered drilling, completion and production operations. Despite the wet weather and difficult surface conditions at Kaybob, TriOil has been able to execute an active capital program. We drilled 4 (2.9 net) horizontal Dunvegan wells, completed 4 (2.9 net) wells and brought 5 (3.3 net) wells on production during the quarter. To date in the third quarter, we have drilled another 3 (2.0 net) wells and brought 2 (0.5 net) wells on production, resulting in an inventory of 4 (2.6 net) wells waiting to be completed or brought on production.
TriOil now has 8 wells with at least 30 days of production history at Kaybob, and we are pleased to report IP30 rates for the most recent wells; TOL (100%) 391 boe/d (91% oil), TOL (61.5%) 305 boe/d (87% oil). The early results on the play have been very encouraging, with the average IP30 rate for the initial 8 wells coming in at 343 boe per day (83% oil). As expected, we will see a range of well results due to variable reservoir quality and thickness along the trend, but we believe that the average IP30 rates achieved with our initial wells on the play are indicative of future average results. Six of our initial 8 Kaybob Dunvegan wells have achieved IP30 rates ranging from 260 boe per day to 795 boe per day, with an average IP30 for these 6 wells of 420 boe per day (86% oil).
Two of our initial 8 wells experienced mechanical issues during completion operations that impacted test rates and early production. Both wells are drilled in good quality reservoir, with one well drilled in a thick, 10 meter sand and the other drilled in a thinner 2 meter sand. Both wells have performed very well considering their limited stimulations and we are moving ahead with offsetting drilling operations in both cases. One of our initial 8 wells tested is drilled in fair quality reservoir with average sand thickness of 5 meters and has performed below expectations but with steady production, with an IP30 of 107 boe per day, IP60 of 105 boe per day and IP90 of 97 boe per day (averaging 56% oil).
The Dunvegan play is still in its early development stages and we are excited about the potential high rates, high recoveries, high netbacks, lower declines and water flood potential afforded by this resource play. Notwithstanding the lower commodity prices realized during the second quarter, our Kaybob property still achieved operating netbacks of $45.93 per boe. We have established a solid position at Kaybob with a current drilling inventory in excess of 35 net locations and plan to be active on the play for the balance of the year.
Field activity is well underway for the second half of the year and our results to date have been in line with expectations. Current production, based on field estimates is level with the second quarter 2012 average. With 7 (4.0 net) wells waiting to be completed or brought on production and an active drilling program underway, TriOil is on track to execute a successful capital program and meet guidance.
The Company's balance sheet remains very healthy, with $6.8 million positive working capital at the end of the second quarter and $50 million in undrawn bank lines. Oil prices have firmed up again in the WTI $95 per bbl range and the differential has narrowed closer to historic norms. TriOil has a strong commodity hedge program with 900 bbl per day hedged to December 2012 at a weighted average price of WTI CND $94.97 per bbl and 800 bbls per day hedged for calendar 2013 at a weighted average price of WTI CND $101.93 per bbl. The Company will continue to monitor commodity prices in order to retain the flexibility to adjust our capital program as necessary to ensure that acceptable debt levels are maintained.
Shareholder Rights Plan
TriOil is pleased to announce that its Board of Directors has approved the adoption of a Shareholder Rights Plan, effective immediately.
The Rights Plan is designed to provide shareholders and the Board with adequate time to consider and evaluate any unsolicited bid made for the Corporation, to provide the Board with adequate time to identify, develop and negotiate value-enhancing alternatives, if considered appropriate, to any such unsolicited bid, to encourage the fair treatment of shareholders in connection with any take-over bid for the Corporation and to ensure that any proposed transaction is in the best interests of the shareholders of the Corporation.
The Rights Plan was not proposed in response to, or in anticipation of, any pending, threatened or proposed acquisition or take-over bid. The Board did not adopt the Rights Plan to prevent a take-over of the Corporation, to secure the continuance of management, the directors of the Board in their respective offices or to defer offers for the shares of the Corporation. The issuance of the rights will not change the manner in which shareholders trade their shares.
The Rights Plan is similar to other rights plans adopted by many Canadian corporations. The Rights Plan is not triggered if an offer to acquire Corporation shares is made as a "permitted bid" and thereby allows sufficient time for the Board and shareholders to consider and react to the offer. The plan will be available for viewing at www.SEDAR.com.
The Rights Plan has been conditionally accepted by the TSX Venture Exchange and is effective immediately. The Rights Plan must be confirmed by Shareholders at a meeting to be held within six months.
Stock Option Grants
TriOil also announces that, in accordance with its annual compensation process, has granted options to purchase Class A common shares of the Corporation ("Options") to certain executive officers, employees, directors and consultants of the Corporation. Of the 1,061,500 Options granted, a total of 780,000 Options were granted to the executive officers and directors of the Corporation. Each Option is exercisable for a period of 4 years from the date of grant and the exercise price of the Options will be priced at the closing price of the Class A shares on the TSX Venture Exchange two trading days following the issuance of this press release.
TriOil trades on the TSX Venture Exchange under the symbol "TOL". As of August 22, 2012, there were approximately 53.2 million shares issued and outstanding (58.3 million diluted). TriOil executes a well-defined resource capture growth strategy focused on large light oil accumulations with high netback production, long-term growth potential and the ability to increase recoveries by utilizing horizontal drilling and multi-stage fracture stimulations.
Forward Looking Statements
This news release contains forward-looking information and forward-looking statements within the meaning of applicable securities laws. The use of any of the words "expect", "anticipate", "continue", "estimate", "believe", "plans", "intends", "confident", "may", "objective", "ongoing", "will", "should", "project", and similar expressions are intended to identify forward-looking information. More particularly, this document contains forward looking statements which include, but are not limited to, expected future drilling and completion plans, expected economics of future projects, expected future operating costs, expected future commodity prices, expected production and reserves growth, expected year end debt/working capital levels and the future operations of TriOil.
The forward-looking statements contained in this document are based on certain key expectations and assumptions made by TriOil, including with respect to the anticipated exploration and development opportunities and the outlook for the fiscal year ending December 31, 2012, expectations and assumptions concerning the success of future exploration and development activities, production guidance, the performance of new wells, prevailing commodity prices and the availability of additional capital if and when required by the Corporation.
Any references in this news release to test rates, initial and/or final test or production rates and/or "flush" production rates or 30, 60 and 90 day production rates are useful in confirming the presence of hydrocarbons, however, such rates are not determinative of the rates at which such wells will continue production and decline thereafter and such rates are not necessarily indicative of long-term performance or ultimate recovery. Additionally, such rates may also include recovered "load oil" fluids used in well completion stimulation. While encouraging, readers are cautioned not to place reliance on such rates in calculating the aggregate production for the Company.
Although TriOil believes that the expectations and assumptions on which the forward-looking statements are based are reasonable, undue reliance should not be placed on the forward-looking statements because TriOil can give no assurance that they will prove to be correct. Since forward-looking statements address future events and conditions, by their very nature they involve inherent risks and uncertainties. Actual results could differ materially from those currently anticipated due to a number of factors and risks. These include, but are not limited to, the failure to satisfy the conditions to closing the transaction, risks associated with the oil and gas industry in general (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 estimates; the uncertainty of estimates and projections relating to production, costs and expenses, and health, safety and environmental risks), commodity price and exchange rate fluctuations and uncertainties resulting from potential delays or changes in plans with respect to exploration or development projects or capital expenditures. Certain of these risks are set out in more detail in TriOil's Annual Information Form which has been filed on SEDAR and can be accessed at www.sedar.com and TriOil's other public disclosure documents which have been filed on SEDAR and can be accessed at www.sedar.com.
The forward-looking statements contained in this press release are made as of the date hereof and TriOil undertakes no obligation to update publicly or revise any forward-looking statements or information, whether as a result of new information, future events or otherwise, unless so required by applicable securities laws.
Meaning of BOE
The term "boe" may be misleading, particularly if used in isolation. A boe conversion of 6 Mcf:1 bbl is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.
NEITHER THE TSX VENTURE EXCHANGE NOR ITS REGULATION SERVICES PROVIDER (AS THAT TERM IS DEFINED IN THE POLICIES OF THE TSX VENTURE EXCHANGE) ACCEPTS RESPONSIBILITY FOR THE ADEQUACY OR ACCURACY OF THIS RELEASE.
SOURCE: TriOil Resources Ltd.
For further information:
Russell J. Tripp, President & CEO, TriOil Resources Ltd.; Cheryne Lowe, VP Finance & CFO, TriOil Resources Ltd.; Andrew Wiacek, VP Exploration, TriOil Resources Ltd.; Corporate Phone: (403) 265-4115