Cirrus Energy Corporation announces May 31, 2010 financial results
CALGARY, July 28 /CNW/ - Cirrus Energy Corporation (TSXV: CYR) ("Cirrus") announces its results for the third quarter ended May 31, 2010.
Production volumes of 1,678 boe/d (net to the Company's working interest) were reported in the third fiscal quarter of 2010. Funds from operations of $2.3 million were recorded during the same quarter.
Financial Highlights
Three months ended Nine months ended
May 31, May 31,
($000s unless noted) 2010 2009 2010 2009
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Production revenue 6,809 487 23,065 1,745
Funds from operations (1) 2,323 (833) 9,636 (1,435)
Per share (basic) 0.03 (0.01) 0.11 (0.02)
Per share (diluted) 0.03 (0.01) 0.11 (0.02)
Net loss (10,460) (1,628) (19,432) (3,386)
Per share basic and diluted (0.12) (0.02) (0.23) (0.04)
Working capital (excluding
restricted cash and borrowing
base facility) 48,350 36,844 48,350 36,844
Restricted cash 10,254 8,000 10,254 8,000
Borrowing base facility
(excluding deferred financing
charges and including current
portion) 19,743 - 19,743 -
Net working capital 38,861 44,844 38,861 44,844
Total assets 175,530 131,867 175,530 131,867
Shareholders' equity 110,389 93,963 110,389 93,963
Capital expenditures 10,403 6,259 37,946 41,478
Average common shares
outstanding (thousands) 88,228 72,527 88,228 72,527
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(1) Funds from operations is a non-GAAP measure that represents net
earnings adjusted for non-cash items and is equal to positive
operating cash flow of $4.7 million ($5.0 million for nine months)
less the net decrease in non-cash operating working capital
items of $2.4 million (plus the net increase of $4.6 million for nine
months). The Company evaluates its performance based on net earnings
and funds from operations. The Company considers funds from
operations a key measure as it demonstrates the Company's ability to
generate cash flow necessary to fund future growth though capital
investment and to repay debt.
Operating Highlights
Three months ended Nine months ended
May 31, May 31,
% %
2010 2009 change 2010 2009 change
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Working interest
production
Natural gas (mcf/d)(1) 8,991 - - 10,083 - -
NGL's (bbls/d)(2) 59 - - 20 - -
Crude oil (bbls/d) 120 95 26 107 102 5
Total oil equivalent
(boe/d) 1,678 95 1,666 1,807 102 1,671
Average prices
Natural gas ($/mcf) 6.79 - - 7.47 - -
NGL's ($/bbl) 70.36 - - 70.36 - -
Oil ($/bbl) 73.51 54.98 34 72.53 62.21 17
Operating costs ($/mcf)
- The Netherlands 2.36 - - 1.92 - -
Operating costs ($/bbl)
- Trinidad 23.76 29.23 (19) 24.42 29.95 (18)
General and
administrative ($/boe) 6.96 66.34 (90) 6.78 66.63 (90)
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(1) Based on total natural gas production from properties in The
Netherlands averaged over the entire three and nine months,
irrespective of production start date.
(2) Based on total cumulative liquids volumes since the start of natural
gas production, the first measured lift occurring in the current
quarter.
Summary of Key Events
M07-A Field Production (Cirrus working interest - 42.75%)
Production performance from the M07-A01 well on the M07-A field continued as expected during the quarter. There was a planned shutdown of the third party L09-FF processing platform for general platform maintenance turn-around and to allow for a critical vessel to be repaired, which commenced during the fourth week of May, 2010. Production restarted on July 21, 2010 at increased gross rates of approximately 31.0 MMscf/d reflecting revised contractual off-take terms that were negotiated with the operators of the processing platform and the export trunk pipeline. Including the impact of the extended shutdown period, average working interest production sales from the M07-A field for the third fiscal quarter of 2010 was reported at 7.5 MMscf/d.
L08-D Field Production (Cirrus working interest - 25.479%)
Current average gross production rates of 6.8 MMscf/d from the L11b-A06 well in the L08-D field are reflective of the current pulsed, intermittent production regime. Average working interest sales of 1.5 MMscf/d were reported for the third fiscal quarter of 2010. Work on the overhaul of compression facilities on the L11b-A platform has been started although re-instatement of compression has been postponed pending future field development decisions. At current average rates production revenues are approximately equivalent to the operating costs of the production platform and the platform operator is reviewing ways to cut operating costs to maintain positive cash flow from the field for as long as possible.
M01-04 Drilling operations (Cirrus working interest - 47.5%)
The M01-04 exploration well on the M01-Delta prospect was spud on April 24, 2010 and drilled to a total depth of 3,880 meters. The primary Triassic reservoir target was encountered and, although interpreted as gas-bearing on logs, was of significantly poorer quality than expected with low porosity and no measurable permeability. The well was then plugged and abandoned. Total cost of the well is approximately (euro)5.7 million (approximately $7.7 million), net to Cirrus's working interest.
M07-07 Drilling operations (Cirrus working interest - 42.75%)
Following the drilling of M01-04, the Noble Lynda Bossler jackup rig was moved to the M07-A production platform to drill the M07-07 well. The deviated M07-07 appraisal well was successfully drilled from the M07-A production platform to a total measured depth of 4,215 meters (true vertical depth 2,931 meters sub-sea). The well was spud on June 8, 2010 and reached total depth on July 21, 2010 on schedule and budget. As prognosed, the well encountered thickened Jurassic sandstones in a down dip location from their prior penetration in well M07-05ST drilled in 1996. Gas shows were encountered during coring and subsequent log interpretation indicates the reservoir target appears to be gas bearing.
The well will now be cased and tested prior to being completed and tied-in as a potential production well on the M07-A platform. This process is expected to take approximately 14 days at which time the rig will be released.
Borrowing base facility
As of July 28, 2010 RBS has indicated that, as a result of their preliminary work on the scheduled redetermination of the Amended Facility, there will be no further draws under the Amended Facility as it is now structured and the outstanding balance is repayable as follows:
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(000's) Amount (euro) Amount ($)
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July 31, 2010 3,484 4,512
December 31, 2010 4,277 5,540
June 30, 2011 5,217 6,757
December 31, 2011 2,265 2,934
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15,243 19,743
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RBS expects to complete their review and formalize the redetermination before July 31, 2010.
Working Capital
The Company is reporting May 31, 2010 working capital (including restricted cash, net of debt and before deferred financing charges) of $38.9 million. Included in this working capital is approximately $0.9 million of amounts payable related to the final billings on the subsurface production systems for the M1a development project (including variation orders) that had been previously scheduled for payment later in fiscal 2010 and reported as outstanding commitments at February 28, 2010. Working capital at July 28, 2010 is estimated to be approximately $30 million. Estimated costs of approximately $3.0 million (net to Cirrus's working interest) ((euro)5.0 million gross) are remaining on the M07-07 well to run production casing, complete and tie-in, which are expected to be incurred shortly. Once this well is complete, financial resources are expected to strengthen with the resumption of production in the M7-A field and the curtailment of the near term capital program.
Financial and operating highlights
The Company reported funds from operations of $2.3 million ($3.7 million in the immediately preceding quarter). Net loss for the quarter was reported at $10.5 million as compared to the net loss of $6.7 million in the immediately preceding quarter. The operating profit in both quarters has been offset by high depletion charges.
The Netherlands
Production sales in The Netherlands of 7.5 MMscf/d and 1.5 MMscf/d (net to the Company's working interest), were reported during the third quarter from M07-A field and L08-D field respectively (8.2 MMscf/d and 3.2 MMscf/d, respectively, in the previous quarter).
An average price of $6.79/mcf was recorded during the third quarter, compared to $7.63/mcf in the immediately preceding quarter. Operating expenses for the current quarter were recorded at $2.36 ($1.74 in the immediately preceding quarter). Operating expenses for the third quarter included a 2009 throughput adjustment of $0.4 million ($0.54/mcf) related to the M07-A field, specifically at the third party operated L09-FF platform. Royalty rates have remained constant during the first three quarters of fiscal 2010 and were reported at 10% during the third fiscal quarter. Operating netbacks of $3.77/mcf were recorded in the third quarter ($5.20/mcf in the immediately preceding quarter).
Trinidad
Operations in Trinidad remained relatively constant when compared to the preceding quarter with production sales in the current quarter reported at 120 bopd. This operation provided positive funds from operations during the current quarter with operating netbacks of $11.17/bbl. There has been relatively little change in recent quarters in the Trinidad operation due to the absence of an active capital program.
Outlook
With respect to the MSG-03 exploration well to be drilled on the Q16c-Bravo prospect, activities have continued with respect to permitting an onshore surface location near to the Port of Rotterdam. On current progress, this well is expected to be drilled during the first half of 2011. Agreement has been reached with Taqa Offshore B.V. whereby they will take a 10% interest in the Q16c-Bravo prospect and Cirrus will retain a working interest of 47.5%. Other partners in the prospect are Energy-06 at 2.5% and EBN at 40%.
Further information can be obtained from the Company's Interim Consolidated Financial Statements and Management Discussion and Analysis for the third quarter ended May 31, 2010 which have been filed with securities regulatory authorities in Canada. These documents are available on the System for Electronic Document Analysis and Retrieval at www.sedar.com.
Cirrus Energy Corporation is an international oil and gas Company headquartered in Calgary and currently has approximately 93.4 million fully diluted common shares outstanding.
Forward-Looking Statements
This press release may include forward-looking statements including opinions, assumptions, estimates and expectations of future production, cash flow and earnings. When used in this document, the words "anticipate", "believe", "estimate", "expect", "intent", "may", "project", "plan", "should" and similar expressions are intended to be among the statements that identify forward-looking statements. Forward-looking statements are subject to a wide range of risks and uncertainties, and although the Company believes that the expectations represented by such forward-looking statements are reasonable there can be no assurance that such expectations will be realized. Any number of important factors could cause actual results to differ materially from those in the forward-looking statements including, but not limited to, the volatility of oil and gas prices, the ability to implement corporate strategies, the state of domestic capital markets, the ability to obtain financing, changes in oil and gas acquisition and drilling programs, operating risks, production rates, reserve estimates, changes in general economic conditions and other factors more fully described from time to time in the reports and filings made by Cirrus with securities regulatory authorities.
The TSX Venture Exchange does not accept responsibility for the adequacy or accuracy of this release.
%SEDAR: 00021839E
For further information: David Taylor, President and Chief Executive Officer; Pamela Orr, Vice President, Finance and Chief Financial Officer, Cirrus Energy Corporation, Suite 208, 5 Richard Way SW, Calgary, Alberta, T3E 7M8, Canada, Website: www.cirrusenergy.ca, Telephone: (403) 216-5030, Facsimile: (403) 265-9530
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