Insignia Energy Ltd. announces its 2010 second quarter financial and
operating results
CALGARY, Aug. 11 /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, 2010.
FINANCIAL AND OPERATING HIGHLIGHTS
- Second quarter production averaged 2,871 boe/d; consisting of
13,055 mcf/d of natural gas and 695 bbls/d of crude oil and NGL's.
This is up 271% from the same quarter in 2009 and up 5% from the
previous quarter. Based on quarterly average production per fully
diluted share, Insignia grew by over 52% compared to the same quarter
in 2009 and is up 5% from the first quarter of 2010.
- During the quarter the Company's average oil and liquids percentage
increased from 20% in the first quarter of 2010 to 24% in the second
quarter of 2010
- The Company met its production target of 3,000 boe/d at the end of
the second quarter of 2010 and expects to exit the fourth quarter of
2010 at 3,300 boe/d.
- The Company completed and tied-in two 100% wells on its Caroline
property. These wells were brought on production late in June at a
combined rate of approximately 3 mmcf/d of natural gas and
approximately 75 bbls/d of natural gas liquids.
- Funds from operations for the second quarter were $2.5 million, $0.08
per basic and fully diluted share, up significantly from the same
quarter a year ago.
- Subsequent to the quarter, the Company successfully completed a 100%
horizontal well on its Pouce Coupe property at 01-20-077-11W6M
("01-20 well") that targeted the Lower Doig formation. The final flow
rate, after an 80 hour test, was approximately 5.7 mmcf/d at a
flowing wellhead pressure of approximately 925 pounds per square
inch.
- Below are the Financial and Operating Statistics for the second
quarter of 2010:
Three months ended Six months ended
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Jun 30, Mar 31, Jun 30, Jun 30, Jun 30,
2010 2010 2009 2010 2009
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Financial
($ thousands, except
per share amounts)
Oil and natural gas
sales 9,126 9,788 1,983 18,914 4,087
Funds from
operations(1) 2,514 3,491 273 6,005 282
Per share - Basic
and diluted(1) 0.08 0.11 0.02 0.20 0.02
Net loss (4,588) (2,631) (2,245) (7,219) (4,767)
Per share - Basic
and diluted (0.15) (0.09) (0.18) (0.24) (0.38)
Working capital
surplus
(deficiency)(5) (25,882) (22,124) 26,675 (25,882) 26,675
Future proceeds from
equity line(2) - - 25,000 - 25,000
Total capital
resources
available(3) 28,768 32,576 51,675 28,768 51,675
Property and
equipment 141,431 142,038 28,177 141,431 28,177
Total assets
Weighted average
common shares
outstanding
(thousands): 153,510 153,296 58,875 153,510 58,875
Basic and diluted 30,660 30,660 12,588(4) 30,660 12,590(4)
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Three months ended Six months ended
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Jun 30, Mar 31, Jun 30, Jun 30, Jun 30,
2010 2010 2009 2010 2009
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Operating
(boe conversion -
6:1 basis)
Average daily
production
Natural gas
(mcf/d) 13,055 13,155 3,777 13,105 3,567
Oil and NGL
(bbls/d) 695 541 144 618 143
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Total (boe/d) 2,871 2,733 773 2,802 737
Product prices(6)
Natural gas ($/mcf) 4.17 5.31 3.61 4.74 4.26
Oil and NGL ($/bbl) 66.00 71.93 56.63 68.58 51.59
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Total ($/boe) 34.93 39.79 28.18 37.29 30.64
Operating netback
($/boe)(1) 14.08 17.88 12.60 15.93 11.69
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(1) Funds from operations, funds from operations per share and operating
netback are not defined by GAAP in Canada and are referred to as
non-GAAP 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.
(2) Insignia had a $25 million equity line whereby Brookfield Special
Situations II Limited ("BSS"), formerly Tricap Partners Ltd.
committed, prior to July 31, 2009, to subscribe for an additional
3,676,470 common shares of the Company at a price of $6.80 per share,
which shares were issued on July 20, 2009.
(3) Total capital resources available includes working capital plus, for
the three months ended June 30, 2009, future proceeds from the equity
line with BSS, which was drawn on in the third quarter of 2009, plus
the unused portion of Insignia's line of credit but excludes the
Company's outstanding letters of credit of $0.35 million.
(4) Excludes special voting shares issued pursuant to the BSS equity
line.
(5) Working capital surplus (deficiency) includes bank indebtedness and
working capital but excludes the financial derivative contracts.
(6) The average selling prices reported are before realized derivatives
and transportation charges.
Second Quarter 2010 Results
- Second quarter production averaged 2,871 boe/d; consisting of
13,055 mcf/d of natural gas and 695 bbls/d of crude oil and NGL's.
This is up 5% from the first quarter of 2010 and 271% from the same
quarter in 2009.
- Funds from operations for the second quarter were $2.5 million, down
28% from the previous quarter and up significantly from the same
quarter a year ago. Funds from operations quarter over quarter
decreased as a result of decreased commodity prices.
- Insignia exited the quarter with a strong balance sheet with net debt
of $25.9 million and a credit facility of $55 million with a Canadian
chartered bank. The facility was renewed in the quarter with our next
review date expected in September 2010.
- Capital expenditures for the quarter were $6.0 million. The majority
of this capital, $3.5 million, was related to a successful land sale
and $2.5 million was related to the completion and tie-in of its two
previously announced Caroline wells at 16-12-034-07W5M (the "16-12
well") and at 08-14-034-07W5M (the "08-14 well"). Insignia had
previously announced a revised first half 2010 capital expenditure
estimate of $16 million, excluding any potential acquisitions. Based
on expenditures to date in 2010, Insignia has spent $14.1 million in
the first half. The drilling of 2 (0.42 net) Pembina Cardium
horizontal wells that were slated for June 2010 will be drilled in
the third quarter of 2010. Further the Company confirms that it met
its previously announced production guidance of an exit rate of 3,000
boe/d at the end of the second quarter of 2010.
- The Company completed and tied-in two 100% wells on its Caroline
property; the 16-12 well and the 08-14 well. These were drilled in
the first quarter of 2010. Both wells were brought on production late
in June at a combined rate of approximately 3 mmcf/d of natural gas
and approximately 75 bbls/d of natural gas liquids.
- During the quarter, the Company increased its undeveloped land
position at Caroline through crown acquisitions and currently holds
16 undeveloped net sections in this area. Caroline is an emerging
play area for Insignia and we have identified 23 gross (16.5 net)
drilling locations on existing lands targeting several formations
including the Cardium, Viking, Glauconitic, Ostracod, Ellerslie and
Rock Creek.
- Subsequent to the second quarter:
- The Company successfully completed a 100% horizontal well on its
Pouce Coupe property at 01-20 well which was drilled in the first
quarter of 2010 and targeted the Lower Doig formation. The well
was successfully completed through a cemented liner with
9 separate multi stage fracture completions. Following completion,
the well produced up 4 1/2" casing for a clean-up and test period
of 80 hours. The final flow rate was approximately 5.7 mmcf/d at a
flowing wellhead pressure of approximately 925 pounds per square
inch. The 01-20 well is currently shut in pending the recovery of
downhole pressure recorders and, once retrieved, it is anticipated
that the well will be tied in and placed on production prior to
the end of September 2010. The Company has approximately 29 net
sections of land in the immediate area. This land is prospective
for both the Montney and Doig formations and Insignia has
identified in excess of 80 net drilling locations on its lands.
- The Company has successfully drilled 2 (0.42 net) horizontal
Cardium wells, in the Pembina area, that are awaiting completion
in the coming weeks. The Company has approximately 5.25 gross
(4.5 net) sections of land in the immediate area that is
prospective for the Cardium and Insignia has identified up to
18 net drilling locations. The Company currently has no reserves
attributed in its 2009 year end independent reserve report to the
Cardium zone on its Pembina lands.
Second Half 2010 ("H2/10") Capital Budget and Guidance
Contingent on commodity prices, the Board of Directors has confirmed a H2/10 capital budget of $22 million, which includes a $2 million carry over from the first half of 2010. The Company plans to allocate approximately 85% of this capital toward drilling, completions and facilities which are anticipated to include the drilling of approximately 10 (5.8 net) wells. Given today's low natural gas prices, the Company plans to shift its focus toward oil opportunities at Pembina where it has identified up to 18 net Cardium oil locations on its 4.5 net sections, of which 0.4 net wells have been drilled subsequent to the second quarter. Specifically, the Company plans to drill 6 (2.3 net) Cardium horizontal wells which will equate to approximately 50% of the drilling, completion and facility expenditures planned for the second half of 2010. The balance of the second half budget will also include 2 (1.5 net) wells at Caroline targeting liquid rich natural gas in the Mannville formation and the completion of the previously drilled 01-20 well at Pouce Coupe.
Assuming reasonable success from the Company's H2/10 drilling program, the Company anticipates achieving a 2010 exit rate of approximately 3,300 boe/d.
Outlook
As we close off the second quarter of 2010, we are pleased with the financial and operating results achieved in the first half of the year, as well as the initial results from our second half drilling program. We are also cautiously optimistic that more robust natural gas prices are just around the corner.
With the recent success of our second 100% multi staged fracture stimulated horizontal well at Pouce Coupe in the past six months, we continue to confirm the significant resource potential that exists over our 29 net sections of land in this area and the legitimacy of the scalability of this play. This is further reflected in the over 80 drilling locations that we have identified on our lands. As exciting as that is, we will remain disciplined to extract this resource when the natural gas price cycle is more robust and the economic returns are maximized for our shareholders.
In the shadow of these low natural gas prices, Insignia has the benefit of shifting its drilling focus to both liquids rich natural gas opportunities at Caroline and oil opportunities at Pembina. At Caroline, we are very pleased with the success of our first half drilling program and plan to continue to expand on this success with additional Crown acquisitions and strategic farm-in opportunities as well as continued drilling in the second half. At Pembina, we are also off to a positive start with the initial success of two (0.42 net) horizontal Cardium wells that are awaiting completion in the coming weeks. Further, and commencing in August, we anticipate drilling an additional four (1.92 net) horizontal Cardium wells at Pembina and these wells, along with reasonable success from Caroline, should allow us to meet our market guidance 2010 exit rate of approximately 3,300 boe/d.
Although Insignia is in its early stages of growth, we have positioned the Company with large scale, high impact, repeatable, resource rich project areas in the heart of the Alberta Deep Basin at Pouce Coupe, Caroline and Pembina. We will continue to exercise financial discipline as we advance the Company and deploy both a multi disciplined approach and a counter cyclical approach to our decision making.
Lastly, we continue to monitor the natural gas fundamentals across North America and remain optimistic that the supply/demand situation will become more balanced. We anticipate moderate levels of natural gas injection over the next few quarters due to forecasted, above normal temperatures, offset by modestly increasing industrial demand which should result in improved natural gas prices toward the end of 2010 and into 2011.
Our team remains committed and focused to the goals and objectives of the Company.
Advisories
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 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 and mboe means thousand boe's.
Investors are further cautioned that the preparation of financial statements in accordance with Canadian Generally Accepted Accounting Principles ("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. Funds from operations netback per boe is calculated as funds from operations divided by our total boe produced. We also use operating netback per boe. This 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.
Forward Looking Statements
Statements throughout this news 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, 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, expected levels of production, anticipated benefits to be derived from project areas and future natural gas prices, 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 news release are made as at the date of this news 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, 2010 will be filed with Canadian securities regulators and will be available on SEDAR on August 12, 2010 and once filed will be accessible at www.sedar.com or by visiting Insignia's website at www.insigniaenergy.ca.
For further information: Jeff Newcommon, President & CEO, (403) 536-8138, [email protected]
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