Hawk Announces Second Quarter 2012 Results
CALGARY, Aug. 28, 2012 /CNW/ - Hawk Exploration Ltd. ("Hawk" or the "Corporation") announces its results for the three and six months ended June 30, 2012. Selected financial and operational information for the three and six months ended June 30, 2012 is provided as follows:
| Three months ended June 30, | Six months ended June 30, | |||||||||||
| 2012 | 2011 | % Change | 2012 | 2011 | % Change | |||||||
| Financial ($000's except per share amounts) | ||||||||||||
| Petroleum and natural gas sales | $ | 2,800 | $ | 2,519 | 11% | $ | 5,689 | $ | 4,760 | 20% | ||
| Funds flow from operations (1) | 1,277 | 1,180 | 8% | 2,739 | 2,044 | 34% | ||||||
| Per share | 0.04 | 0.05 | (20%) | 0.08 | 0.08 | 0% | ||||||
| Comprehensive income | 47 | 160 | (70%) | 557 | 27 | 1941% | ||||||
| Per share | 0.00 | 0.01 | (100%) | 0.01 | 0.00 | - | ||||||
| Capital expenditures (2) | 1,471 | 4,753 | (69%) | 3,449 | 5,396 | (36%) | ||||||
| Working capital deficit - excluding bank | ||||||||||||
| debt and commodity contracts, end of period (3) | $ | 2,051 | $ | 2,277 | (10%) | |||||||
| Bank debt, end of period | - | 5,850 | (100%) | |||||||||
| Total assets, end of period | $ | 28,746 | 32,625 | (12%) | ||||||||
| Common Shares outstanding end of period: | ||||||||||||
| Class A Shares | 34,481 | 21,981 | 57% | |||||||||
| Class B Shares | 1,080 | 1,080 | 0% | |||||||||
| Options to acquire Class A Shares | 3,540 | 2,110 | 68% | |||||||||
| Operations | ||||||||||||
| Production | ||||||||||||
| Crude oil and natural gas liquids (bbl/d) | 463 | 336 | 38% | 432 | 342 | 26% | ||||||
| Natural gas (mcf/d) | 139 | 227 | (39%) | 164 | 307 | (47%) | ||||||
| Total (boe/d) | 486 | 374 | 30% | 460 | 393 | 17% | ||||||
| Oil and liquids as percent of total | 95% | 90% | 5% | 94% | 87% | 7% | ||||||
| Average Selling Price | ||||||||||||
| Crude oil and ngls (per bbl) | $ | 65.87 | $ | 79.63 | (17%) | $ | 71.47 | $ | 73.32 | (3%) | ||
| Natural gas (per mcf) | 1.90 | 3.90 | (51%) | 2.07 | 3.94 | (47%) | ||||||
| Total (per boe) | $ | 63.27 | $ | 73.94 | (14%) | $ | 67.96 | $ | 66.85 | 2% | ||
| Operating netback (per boe at 6:1) (4) | ||||||||||||
| Price | $ | 63.27 | $ | 73.94 | (14%) | $ | 67.96 | $ | 66.85 | 2% | ||
| Royalties | (12.96) | (13.42) | (3%) | (14.14) | (12.10) | 17% | ||||||
| Production expense | (18.21) | (16.68) | 9% | (17.86) | (17.67) | 1% | ||||||
| Transportation expense | (1.68) | (1.96) | (14%) | (1.89) | (1.81) | 4% | ||||||
| Operating netback ($/boe) | $ | 30.42 | $ | 41.88 | (27%) | $ | 34.07 | $ | 35.27 | (3%) | ||
| (1) Management uses funds flow from operations and funds flow from operations per share to analyze operating performance, leverage and liquidity. Funds flow from operations and funds flow from operations per share as presented do not have any standardized meaning prescribed under Generally Accepted Accounting Principles ("GAAP") and therefore may not be comparable with the calculation of similar measures by other entities. |
| (2) Capital expenditures include cash exploration and evaluation expenditure plus cash property, plant and equipment net of dispositions and exclude asset retirement obligations and capitalized share-based payments. |
| (3) Working capital is a non-GAAP measure that includes trade and other accounts receivable, prepaid expenses, and trade and other accounts payables. |
| (4) Management considers operating netbacks as an important measure as it demonstrates profitability relative to current commodity prices. Operating netbacks do not have a standardized meaning prescribed by GAAP and therefore may not be comparable with the calculation of similar measures by other entities. |
HIGHLIGHTS
Highlights for the three months ended June 30, 2012 were as follows:
- Averaged 486 boe/d of production for the second quarter of 2012, a 30% increase over Q2 2011 with oil production increasing by 38%;
- Increased the oil weighting as a percent of total production to 95% in the second quarter of 2012 from 90% for the second quarter of 2011.
- Achieved quarterly funds flow from operations of $1.3 million in the second quarter of 2012, an 8% increase from the $1.2 million in the second quarter of 2011;
- Generated strong operating netbacks of $30.42 per boe in Q2 2012, although lower than the $41.88 operating netback generated in Q2 2011, due to weak oil prices and high heavy oil differentials in Q2 2012;
- Drilled, completed and commenced production on four (1.5 net) oil wells in the second quarter of 2012 at Silverdale in western Saskatchewan;
- Added approximately 4,500 net acres of undeveloped land during the first half of 2012 in its core area of east central Alberta and western Saskatchewan.
Operational Update
In the second quarter of 2012, Hawk drilled four (1.5 net) wells resulting in four (1.5 net) producing oil wells in its core area of western Saskatchewan. All four (1.5 net) wells were drilled in the Silverdale area where the Corporation has drilled and completed twelve (3.3 net) wells in the past year. These twelve (3.3 net) wells are all on production and are currently producing 600 (139 net) barrels of oil per day. Hawk has recently acquired an additional 320 acres of 100% working interest land adjacent the Silverdale producing lands and plans to shoot three-dimensional seismic over this land in the fourth quarter of 2012.
In the third quarter of 2012, Hawk has drilled and cased a 100% working interest horizontal well at Carruthers, in western Saskatchewan, targeting the Cummings formation. The horizontal section of the well encountered 740 metres of excellent reservoir and 650 metres of poor to moderate reservoir. The Corporation encountered difficulty running the slotted liner the entire length of the horizontal section of the well, but plans to complete the well and produce it from the initial portion of the horizontal leg. The well is expected to be on production in September 2012. Hawk is very encouraged by the quality of the reservoir encountered and expects to drill additional horizontal wells in the Carruthers area next year.
Also in the third quarter of 2012, Hawk expects to drill a 100% working interest vertical test well at Dankin, in western Saskatchewan, targeting the Basal Mannville zone. Hawk plans to use the vertical well to test the reservoir characteristics and should the reservoir and well logs meet management's expectations, the Corporation immediately intends to follow up with a horizontal well targeting this formation. Hawk has assembled a large land base at both Dankin and Carruthers for future development drilling should either or both of these plays prove successful.
At Seagram Lake, the Corporation is expecting to participate in the drilling of a horizontal well (0.5 - net) in the fourth quarter of 2012.
Financial
Hawk achieved quarterly funds flow from operations in the second quarter of 2012 of approximately $1.3 million compared to $1.2 million for the second quarter of 2011, despite significantly lower oil prices in the second quarter of 2012 compared to Q2 2011. The Corporation continues to generate strong operating netbacks which averaged $30.42 per boe in the second quarter of 2012.
At June 30, 2012, Hawk had an existing revolving credit facility of $12 million, which was undrawn. The Corporation continues to maintain a solid balance sheet with net debt and working capital deficit of approximately $2.1 million at June 30, 2012 which equates to a net debt to annual funds flow from operations of 0.4:1.
Outlook
The Corporation has set an $8.5 million capital budget for 2012 that will focus on development opportunities in western Saskatchewan targeting heavy crude oil both through horizontal and vertical drilling. Hawk's capital program for the remainder of 2012 will focus on drilling at Dankin and Seagram Lake and other vertical drilling in western Saskatchewan targeting heavy oil. The capital budget is expected to be funded by way of cash flow from operations and the $12 million undrawn revolving line of credit.
The Corporation has assembled a large undeveloped land position totaling approximately 49,000 acres (43,300 net) to support future drilling activity. Hawk's current production, based on field estimates, is approximately 535 boe/d weighted 96 percent to crude oil.
Hawk is an emerging exploration company engaged in the exploration, development and production of conventional crude oil and natural gas in western Canada and is based in Calgary, Alberta. The Class A Shares and Class B Shares of Hawk trade on the TSX Venture Exchange under the trading symbols of HWK.A and HWK.B, respectively.
Neither the TSX Venture Exchange nor its Regulation Services Provider (as the term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
Certain statements contained in this press release constitute forward-looking statements. All forward-looking statements are based on the Corporation's beliefs and assumptions based on information available at the time the assumption was made. The use of any of the words "anticipate", "continue", "estimate", "expect", "may", "will", "project", "should", "believe" 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. Hawk believes the expectations reflected in those forward-looking statements are reasonable, but no assurance can be given that these expectations will prove to be correct. Such forward-looking statements included in this press release should not be unduly relied upon. These statements speak only as of the date of this press release.
In particular, but without limiting the forgoing, this press release contains forward-looking statements pertaining to the following: the performance characteristics of Hawk's oil and natural gas properties; business strategies and plans; projections of market prices and cost; supply and demand for oil and natural gas; planned development of the Corporation's oil and natural gas properties; capital expenditure programs for the remainder of 2012; the timing of and nature of capital expenditure program for 2012;expected second quarter 2012 production rates; and the expected sources of funding for the 2012 capital expenditure program.
The material factors and assumptions used to develop these forward looking statements include, but are not limited to: the ability of the Corporation to engage drilling contractors, to obtain and transport equipment, services, supplies and personnel in a timely manner and at an acceptable cost to carry out its activities and plans; the ability of the Corporation to market its oil and natural gas and to transport its oil and natural gas to market; the timely receipt of regulatory approvals and the terms and conditions of such approval; the ability of the Corporation to obtain drilling success consistent with expectations; and the ability of the Corporation to obtain capital to finance its exploration, development and operations.
Actual results could differ materially from those anticipated in these forward-looking statements as a result of the risk factors including, without limitation: volatility in market prices for oil and natural gas; liabilities inherent in oil and natural gas operations; uncertainties associated with estimating oil and natural gas reserves; competition for, among other things, capital, acquisitions of reserves, undeveloped lands and skilled personnel; incorrect assessments of the value of acquisitions and exploration and development programs; geological, technical, drilling and processing problems; changes in tax laws and incentive programs relating to the oil and natural gas industry; failure to realize the anticipated benefits of acquisitions; general business and market conditions; and certain other risks detailed from time to time in Hawk's public disclosure documents (including, without limitation, the other factors discussed under "Risk Factors" in the Corporation's most recently filed Annual Information Form).
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 profitably produced in the future. Readers are cautioned that the foregoing lists of factors are not exhaustive. The forward-looking statements contained in this press release are expressly qualified by this cautionary statement. Except as required under applicable securities laws, Hawk does not undertake any obligation to publicly update or revise any forward-looking statements.
Barrels of oil equivalent (boe) may be misleading, particularly if used in isolation. A boe conversion ratio of six thousand cubic feet (mcf) of natural gas to one barrel (bbl) of oil is based on an energy conversion method primarily applicable at the burner tip and is not intended to represent a value equivalency at the wellhead. All boe conversions in this press release are derived by converting natural gas to oil in the ratio of six thousand cubic feet of natural gas to one barrel of oil. Certain financial amounts are presented on a per boe basis, such measurements may not be consistent with those used by other companies.
SOURCE: Hawk Exploration Ltd.
Steve Fitzmaurice
President, CEO and Chairman
Tel: (403) 264-0191 Ext 225
Email: [email protected]
Dennis Jamieson
Chief Financial Officer
Tel: (403) 264-0191 Ext 234
Email: [email protected]
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