CALGARY, Aug. 13, 2012 /CNW/ - Winstar Resources Ltd. ("Winstar" or the "Company") (TSX: WIX) reports its operating and financial results for the second quarter of 2012. All values are expressed in US dollars unless otherwise stated.
Highlights for the three months ended June, 2012
- Tunisian sales: 1,512 barrels of oil equivalent per day ("boepd"), a 4% decrease compared to Q2 2011
- Tunisian production: 1,155 boepd, a 26% decrease over Q2 2011
- Funds from continuing operations: $8.0 million ($5.3 million net of crude inventory)
- Tunisian after tax field operating netback: US $72.21 per boe
- Net income from continuing operations: $2.4 million, a 2% increase compared to Q2 2011
Sales volumes during the quarter were 1,512 barrels of oil equivalent per day ("boepd") compared to production of 1,155 boepd. Sales volumes include approximately 33,000 barrels ("bbls") of crude oil held as inventory at March 31, 2012. The addition of inventoried crude volumes and the associated funds from operations of approximately $2.7 million result in Q2 2012 reported funds from continuing operations of $8.0 million and net earnings from continuing operations of $2.4 million which are comparable to Q2 2011. Funds from continuing operations for the six months ended June 30, 2012 was $19.3 million, an increase of 7% from the comparable period of 2011. The Company maintained a strong after tax field operating netback of $72.21 per boe and ended the quarter with $8.5 million in working capital and no debt, despite experiencing operational and social difficulties during the quarter.
Investor Conference Call
A conference call to discuss the results will be held on Tuesday August 14, 2012,
|Time:||8:00 a.m. Mountain daylight time (10:00 a.m. Eastern daylight time)|
|Dial-in:||North American participants (toll free)||1-866-544-4631|
|Participants outside North America||1-416-849-5571|
Shortly after the conclusion of the call, a replay will be available by dialing 1-866-245-6755 or 1-416-915-1035. The pass code is 74457. The replay will be available until September 20, 2012. Thereafter, a copy of the call can be accessed through a link on Winstar's website at www.winstar.ca
Mechanical difficulties and a challenging labour market during the second quarter of 2012 have resulted in Winstar generating lower than expected results. During the second quarter of 2012, reported production of 1,155 boepd represents a 47% decrease compared to the first quarter of 2012 and a 26% decrease compared to Q2 2011.
Production was negatively affected by the significant reduction of natural gas sales at Chouech Essaida due to third party scheduled maintenance of facilities, mechanical issues and the temporary suspension of wells at Chouech Essaida, Ech Chouech and Sanhrar on three occasions totaling 11 days due to labour strikes.
Lower quarter over quarter gas sales,of approximately 516 boepd account for 73% of the decrease in production as compared to Q1 2012. Gas sales during the quarter averaged 1.1 million cubic feet per day ("MMcfd") or 186 boepd as compared to 4.2 MMcfd or 703 boepd during Q1 2012. Gas sales ranged from nil for 18 days to greater than 3.0 MMcfd for three days. During the first five weeks of Q3 2012, gas sales have averaged 2.0 MMcfd or 333 boepd. A critical third party compressor is currently being overhauled, which will be used to augment existing equipment. Once this compressor is operational in late Q3 2012, Winstar anticipates gas takes will significantly improve.
Winstar's Chouech Essaida concession (operated, 100% working interest) is the Company's largest producing field. During Q2 2012, this concession produced about 761 barrels of oil per day ("bopd") plus natural gas as compared to 1,276 bopd plus natural gas during Q1 2012. During Q2 this concession produced zero to 200 bopd for a total of 27 days or 30% of the period as facility and wells were affected by mechanical issues, equipment maintenance and labour unrest. These incidents temporary ,but abruptly shut-in production in southern Tunisia from April 29 to May 1, 2012, May 13 to May 17, 2012 and June 11 to 13, 2012. Abrupt shut-ins of oil wells with electrical submersible pumps cause both mechanical problems and temporary reservoir issues. Winstar has or will need to service or replace down-hole pumping equipment at six oil wells to reestablish pre-strike production levels in southern Tunisia. Oil wells take days or weeks to recover their original water to oil production ratio. As reported on July 3, 2012 the company, its regional staff and relevant unions have come to a definitive agreement and no further labour disputes or production disruptions are expected.
During the first five weeks of Q3 2012, Tunisian oil production has averaged 1,070 bopd and total production including natural gas has averaged 1,403 boepd. Winstar is hopeful that during Q3 2012 all residual oil and gas production issues will be resolved without further disruptions and, the Company can reach its theoretical productive capacity of 2,400 to 2,700 boepd.
|Three months ended June 30,||Six months ended June 30,|
|2012||2011||% change||2012||2011||% change|
|Sales and prices|
|Oil and liquid sales (boepd)||1,325||1,109||19||1,238||1,166||6|
|Natural gas sales (mcf/d)||1,118||2,750||(59)||2,667||2,918||(9)|
|Average daily boe sales 6:1 (boepd)||1,512||1,567||(4)||1,682||1,652||2|
|Average oil and liquid price ($/bbl)||112.27||120.38||(7)||117.23||111.55||5|
|Average natural gas price ($/mcf)||15.09||12.62||20||14.60||11.74||24|
|Financial (US $ thousands except for unit amounts)|
|Oil and gas revenue||15,075||15,306||(2)||33,497||29,727||13|
|Funds from continuing operations||7,980||8,791||(9)||19,318||18,019||7|
|Per share- basic & diluted||0.22||0.25||(12)||0.54||0.51||6|
|Net earnings from continuing operations||2,381||2,335||2||3,126||4,574||(32)|
|Per share- basic & diluted||0.07||0.07||-||0.09||0.13||(31)|
|Field operating netback after tax ($/boe)||72.21||74.95||(4)||74.55||71.29||5|
|Working capital at period end||8,504||9,601||(11)||8,504||9,601||(11)|
|Common shares (thousands)|
|Weighted average during period||- basic||35,794||35,652||-||35,788||35,478||1|
|Outstanding at period end||35,816||35,726||-||35,816||35,726||-|
Operations, capital expenditures and outlook
Operations in Tunisia during Q2 2012 were focused on maintaining existing producing facilities and wells. No new projects were started and only minimal capital was expended.
The Company is currently attempting to recomplete Chouech Essaida Silurian #10 (100% working interest) in the Triassic and possibly Silurian. The remaining capital program, which is currently being evaluated, is expected to occur in late 2012 or 2013, includes the possible recompletion and frac of Ech Chouech #4 (100% working interest) in the Devonian, and the drilling of a new Ordovician oil well at Sabria #12 (45% working interest). This capital program is subject to equipment availability, stable commodity prices and general stability. The total cost of the capital program in Tunisia is estimated at $15.5 million net to Winstar, with the potential of adding 650-1,400 boepd of production by the end of Q1 2013.
In Romania, the Company commenced the licensing, surveying and acquisition of an 80 square kilometer 3D seismic program over its new gas discovery at Moftinu. The $3.5 million project is expected to be completed in September 2012. The acquired data will then be processed and interpreted which is expected to be completed in the fourth quarter of 2012. In addition to a better definition of the size and structure of the discovery, the Company is hopeful that this new 3D program will generate direct hydrocarbon indicators in the form of amplitude anomalies which should help to accurately define the gas pool and its limits.
Strategic alternatives process
On July 3, 2012 Winstar announced the retention of FirstEnergy Capital LLP to initiate a process to explore and evaluate potential strategic alternatives with a view to enhancing shareholder value. The Company has not set a timetable for the completion of the review process and does not intend to comment further regarding the review process unless a specific transaction is approved by the Board of Directors, the review process is concluded or it is otherwise determined that further disclosure is necessary.
References herein to boe mean barrels of oil equivalent derived by converting gas to oil in the ratio of 6,000 cubic feet (mcf) of gas to one barrel (bbl) of oil. Boe may be misleading, particularly if used in isolation. A boe conversion ratio of 6 mcf: 1 bbl is based upon an energy conversion method primarily applicable at the burner tip and does not necessarily represent a value equivalency at the wellhead.
Funds from operations are a non-GAAP measure, defined by the Company as cash flow from operating activities excluding:
- The change in non-cash working capital related to continuing and discontinued operations, which is eliminated to show the net cash effect on income;
- Geological and geophysical expenses which are costs incurred for the purpose of generating future investment opportunities and are therefore not indicative of operational performance; and
The Company also presents:
- Funds from operations per share, whereby amounts per share are calculated using weighted average common shares outstanding.
Management uses funds from operations to analyze performance and considers it to be a key measure as they demonstrate the Company's ability to generate the cash necessary to fund future capital investments. Winstar's determination of funds from operations may not be comparable to that reported by other companies nor should it be viewed as an alternative to cash flow from operating activities, net earnings or other measures of financial performance calculated in accordance with IFRS.
After tax field operating netback is a non-GAAP measure defined by the Company as revenue, less royalty, operating expense and current income tax. Management considers after tax field operating netbacks an important measure as they demonstrate the Company's profitability from field operations, before general and administrative costs, relative to current commodity prices.
This press release contains certain forward-looking statements. These statements relate to future events or future performance of the Company. When used in this press release, the words "may", "would", "could", "will", "intend", "plan", "anticipate", "believe", "estimate", "predict", "seek", "propose", "expect", "potential", "continue", 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. Such statements reflect the Company's current views with respect to certain events, and are subject to a number of risks, uncertainties and assumptions. Many factors could cause Winstar's actual results, performance, or achievements to materially differ from those described in this press release. Should one or more of these risks or uncertainties materialize, or should assumptions underlying forward-looking statements prove incorrect, actual results may vary materially from those described in other public disclosures made by the Company or this press release as intended, planned, anticipated, believed, estimated, or expected. Specific forward-looking statements in this press release include, among others, statements pertaining to the following: factors upon which Winstar will decide whether or not to undertake a specific course of action; and estimated volumes and timing of future production; business plans for drilling, exploration and development; and other expectations, beliefs, plans, goals, objectives, assumptions, information and statements about possible future events, conditions, results of operations or performance. The risks to which the Company is subject include those of the oil and gas industry in general, including operational risks in exploring for, developing and producing crude oil and natural gas; risks and uncertainties involving geology of oil and gas fields and deposits; volatility in global market prices for oil and natural gas; general economic conditions; competition; liabilities and risks, including environmental liability and risks inherent in oil and gas operations; uncertainties as to the availability and cost of financing and changes in capital markets; alternatives to and changing demand for petroleum products; and changes in legislation and the regulatory environment, including uncertainties with respect to the Kyoto Protocol.
Furthermore, 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 produced profitably in the future. The forward-looking statements contained in this press release are expressly qualified in their entirety by this cautionary declaration. These statements speak only as of the date of this press release. The Company does not intend and does not assume any obligation, to update these forward-looking statements to reflect new information, subsequent events or otherwise, except as required by law.
Winstar Resources Ltd. is a Calgary-based junior oil and gas Company, which explores for, develops, produces and sells crude oil, natural gas liquids and natural gas in Tunisia and conducts exploration activities in Romania. Winstar's common shares trade on The Toronto Stock Exchange under the symbol WIX.
Winstar's consolidated Interim Financial Statements and Management Discussion and Analysis for the three and six month period ended June 30, 2012 can be obtained at www.winstar.ca.
Effective June 1, 2012 Winstar's Calgary headquarters are locations at 3130, 520 - 3rd Avenue SW, Calgary Alberta T2P 0R3.
SOURCE: Winstar Resources Ltd.
For further information:
Mr. Charles de Mestral
Chief Executive Officer
Phone: +41 22 361 14 45
E-mail: [email protected]
(Note: Mr. de Mestral is based in Europe, in a time zone which is eight hours ahead of Calgary time)
Mr. David Monachello
Phone: +1 403 513 4200
E-mail : [email protected]
Mr. Jerrad Blanchard
Chief Financial Officer
Phone : +1 403 513 4204
E-mail : [email protected]