Iteration Energy (ITX) announces December 31, 2009 year end results
(All amounts are in Canadian dollars, unless stated otherwise)
CALGARY, March 19 /CNW/ - Iteration Energy Ltd. (TSX-ITX) ("Iteration" or the "Company") announced today its audited financial and operating results as at and for the year ended December 31, 2009. The audited financial statements, together with Management's Discussion and Analysis (MD&A) and the Annual Information Form (AIF), have been filed on the Company's SEDAR profile at www.sedar.com and are available on the Company's website at www.iterationenergy.com.
Iteration is pleased to report that the Company was slightly ahead of production and funds flow guidance at year end as shown in the following table:
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$million, except as noted) 2009 Actuals 2009 Guidance
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Average Production 16,153 15,600 - 16,100
Capital Program
- Expenditures 66.2 67.0
- Dispositions (41.9) (41.9)
- Total 24.3 25.1
Funds from Operations
- Total 49.3 47
- Per Share ($) 0.25 0.24
Year End Net Debt 196.8 200.0
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FINANCIAL AND OPERATIONAL HIGHLIGHTS
The highlights for the year ended December 31, 2009 include:
- Average production for the year was 16,153 boed. This 1% decrease
from the average production for the year ended December 31, 2008 was
largely due to reduced capital spending in response to lower
commodity prices and reflects the ownership of Cyries from March 7,
2008.
- Drilled 23.7 net wells with an 89% success record.
- Funds from operations for the year of $49.3 million, representing a
71% decrease from the year ended December 31, 2008. This decrease was
primarily due to lower commodity prices.
- Disposed of $41,895,000 of oil and gas properties representing
2.3 mmboe proved, and 3.2 mmboe proved plus probable reserves.
- Total proved reserves decreased by 15% to 33.3 mmboe and total proved
plus probable reserves decreased 11% to 50.9 mmboe at December 31,
2009 in comparison to December 31, 2008. Proved plus probable future
development capital decreased 20% to $102 million.
- On May 6, 2009 the Company issued 44,965,000 common shares for gross
proceeds of $57,555,000 pursuant to a bought deal prospectus
offering.
- A new credit facility was secured on May 14, 2009 with a syndicate of
lenders, consisting of Canadian Imperial Bank of Commerce, Bank of
Nova Scotia, Bank of Montreal and Alberta Treasury Branch which
matures April 10, 2010. The borrowing base on this facility is
$225 million and consists of a $12.5 million operating facility and a
$212.5 million extendible revolving term facility. At December 31,
2009 $190 million was drawn on this facility
- Year end net debt was $196.8 million.
The highlights of the three months ended December 31, 2009 include:
- Drilled 13 net wells with a 93% success record in the fourth quarter
of 2009.
- Average fourth quarter 2009 production of 14,160 boed which is 21%
lower than the fourth quarter of 2008 due to lower drilling activity
in the year, property dispositions, shut-in production in response to
low commodity prices and natural production declines.
- Exit production rate (December 2009 average) of 13,200 boed, despite
approximately 1,200 boed being temporarily down for a week before
Christmas due to extreme cold weather.
The following is a summary of Iteration's reserves as at December 31, 2009 and 2008, as set forth in the reserves evaluations of McDaniel and Associates Consultants Ltd. and GLJ Petroleum Consultants Ltd. effective December 31, 2009 and December 31, 2008. These reports are summarized in Iteration's Annual Information Form (AIF) for the year ended December 31, 2009. The January 1, 2010 McDaniels price forecast was used to evaluate net asset values (NAV) from both reports.
Dec 31, Dec 31, %
2009 2008 Change
---- ---- ------
Total Proved Reserves (mboe) 33,328 39,318 (15)
Proved plus Probable Reserves (mboe) 50,896 57,447 (11)
Pre-tax NAV PV(10) Proved plus
Probable Reserves ($million) 947 1,113 (15)
The pre-tax NAV PV(10) Proved plus Probable Reserves value of $947 million is equivalent to $4.49/per share. After adding the net debt of $196.8 million and Iteration's assigned value of $84 million for undeveloped land and $13 million for proprietary seismic, the year end pre-tax NAV PV(10) of the Company equates to $4.01 per share. NPV(10) means the net present value discounted at 10%. Calculations are before tax and based on forecast prices and costs as at January 1, 2010 by McDaniel and Associates Consultants Ltd. The price forecast can be viewed on their website at www.mcdan.com. This price forecast was applied both to the McDaniel and to the GLJ evaluations. Before tax NPV(10) is the net present value of the reserves only and does not include any consideration for debt or for the value of the company's 794,000 acres of undeveloped land.
CORPORATE SUMMARY
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Financial Highlights
($thousands, except Three months ended Dec 31, Year ended Dec 31,
as noted) 2009 2008 2009 2008
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Production revenue
before royalties $50,985 $70,656 $196,731 $361,840
Funds from operations(1) $18,966 $31,152 $49,342 $171,830
Per share ($) - basic &
diluted $0.09 $0.19 $0.25 $1.16
Net earnings (loss) ($9,131) ($244,894) ($62,871) ($215,834)
Per share ($) - basic &
diluted ($0.04) ($1.48) ($0.32) ($1.46)
Capital expenditures $17,471 $55,694 $66,185 $157,318
Acquisition/
(Dispositions) (294) 18,266 (41,895) 59,682
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Net capital
expenditures $17,177 $73,960 $24,290 $217,000
As at Dec 31,
2009 2008
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Total assets $897,637 $1,035.203
Bank debt and working capital deficiency(2) ($196,831) ($276,130)
Common shares outstanding 210,985,384 166,020,384
Stock options outstanding 10,107,434 9,782,445
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(1) "Funds from operations" and "funds from operations per share" are
financial measures that are not determined in accordance with GAAP.
See "Non-GAAP Measures" in the Company's MD&A.
(2) Working capital deficiency is the difference between current assets
and current liabilities.
OPERATING RESULTS
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Operating Highlights Three months ended Dec 31, Year ended Dec 31,
2009 2008 2009 2008
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Production
Natural gas (mcf/d) 59,362 75,486 69,289 68,909
Light oil (bbls/d) 2,746 3,873 3,056 3,323
Heavy oil (bbls/d) 105 187 140 209
Natural gas liquids
(bbls/d) 1,415 1,360 1,408 1,379
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Total production
(boe/d) 14,160 18,001 16,153 16,396
Prices
Natural gas ($/mcf) $4.81 $6.81 $4.20 $8.44
Light oil ($/bbl) $73.90 $50.63 $62.58 $95.67
Heavy oil ($/bbl) $65.16 $47.57 $54.74 $76.22
Natural gas liquids
($/bbl) $39.57 $46.36 $35.08 $57.96
----------- ----------- ----------- -----------
Average price ($/boe) $39.14 $43.08 $33.37 $60.63
Operating Netback ($/boe) $19.45 $23.75 $13.95 $35.86
Net Undeveloped Land
('000 acres as at Dec 31) 794 913 794 913
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2009 FINDING AND DEVELOPMENT COSTS
On February 2, 2009 Iteration announced finding and development costs of $14.42/boe on a total proved basis and $15.00/boe on a proved plus probable basis after revisions and change in future capital. These preliminary numbers were based on estimated annual average production and estimated total capital spending. These estimates have been revised as detailed below resulting in actual finding and development costs of $15.84/boe on a total proved basis and $16.20/boe on a proved plus probable basis after revisions and change in future capital.
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February 4, 2010 March 17,
Estimated 2010 Actual
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2009 Capital ($millions)
Expenditures 62.0 66.2
Dispositions (41.0) (41.9)
Net capital 21.0 24.3
2009 Production (boed)
Annual Average 15,950 16,153
Q4 Average 13,350 14,160
Based on the 2009 audited financial statements, the highlights of the 2009 reserve report which were disclosed on February 4, 2010 are revised as follows:
- Proved Finding & Development ("F&D") costs of $15.84/boe(1) (53%
light/medium oil) after revisions and including changes in future
capital.
- Proved plus probable F&D costs of $16.20/boe (81% light/medium
oil) after revisions and including changes in future capital.
- Year over year improvement in reserve life index(1) of the total
proved reserves to 6.4 years (from 6.0 years) and of the proved
plus probable reserves to 9.8 years (from 8.7 years).
- 2009 net disposition metrics: total proved reserves sold for
$18.36 /boe (91% gas and NGLs), and proved plus probable reserves
sold for $13.03/boe (91% gas and NGLs).
Note:
(1) Based on the preceding year Q4 average production rate of
14,160 boed.
Finding, Development and Acquisition Costs
The reserves and capital used in the computation of Finding, Development and Acquisition costs are summarized in the following table.
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2009 Finding & Development Forecast Proved
Costs ("F&D") and Finding, Total reserve P+P Reserve
Development & Net Capital additions Additions
Acquisition ("FD&A") Costs ($ thousands) (mmboe) (mmboe)
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F&D exploration and development
program before revisions 66,185 1.998 3.649
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F&D exploration and development
program after revisions (a) 66,185 2.188 2.559
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Change in proved future
development capital (b) (31,529) - -
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Change in proved plus probable
future development capital (c) (24,720) - -
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Proved F&D including change in
future development capital
(d) equals (a+b) 34,657 2.188 -
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Proved plus probable F&D
including change in future
development capital
(e) equals (a+c) 41,466 - 2.559
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Net acquisition activity (f) (41,895) (2.282) (3.215)
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Total Proved 2009 FD&A costs
including future development
capital (d+f) (7,239) (0.094) -
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Total P+P 2009 FD&A costs
including future development
capital (e+f) (430) - (0.656)
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The total proved reserve additions after revisions of 2.188 million boe (53% light/medium oil) were made at a capital cost, after changes in future capital, of $34.657 million, or $15.84/boe. The proved plus probable reserve additions after revisions of 2.559 million boe (81% light/medium oil) were made at a capital cost, after changes in future capital, of $41.466 million, or $16.20/boe.
Net 2009 dispositions were comprised of total proved reserves of 2.282 million boe (91% gas and NGLs) and proved plus probable reserves of 3.215 million boe (91% gas and NGLs), which sold for $41.895 million. This equates to $18.41/boe total proved and $13.03/boe proved plus probable.
In summarizing overall Finding, Development and Acquisition costs to Iteration, the corporate additions did not exceed the dispositions in 2009, yielding an overall net reduction in total proved reserves of 0.094 million boe, for net proceeds of $7.239 million. This was equivalent to Iteration selling these total proved reserves at metrics of $77.01/boe. The net reduction in proved plus probable reserves was 0.656 million boe associated with net proceeds of $0.430 million, equivalent to Iteration selling these reserves for metrics of $0.65/boe.
Iteration Gross Reserves December 31, 2009 Reconciliation Table (mBOE)
Opening Infill
Balance Revisions Discovery Extensions Drilling
------- --------- --------- ---------- --------
PDP 29,950 967 0 896 0
PNP 3,383 (207) 0 445 0
PUD 5,984 (570) 152 38 219
TP 39,318 189 152 1,378 219
PA 18,130 (1,280) 121 826 392
P+P 57,447 (1,090) 273 2,204 611
Improved
Recovery Acquisition Disposition Production
-------- ----------- ----------- ----------
PDP 104 4 (1,862) (5,895)
PNP 0 0 (179) 0
PUD 144 0 (244) 0
TP 248 4 (2,286) (5,895)
PA 313 1 (935) 0
P+P 561 6 (3,221) (5,895)
The full 2009 reserve report is available in the Company's 2009 Annual Information return.
OUTLOOK FOR 2010
The following discussion is qualified in its entirety by the caution under the heading "Advisory - Forward-Looking Information" at the end of the press release.
On February 4, 2010, Iteration announced that its board of directors had initiated a process to identify, examine and consider a range of strategic alternatives available to it, with a view to maximizing shareholder value, and that it had retained FirstEnergy Capital Corp. and Scotia Waterous Inc. to assist with this process. This process could result in a sale of Iteration, a sale of a material portion of Iteration's assets, or a corporate reorganization, among other alternatives. Iteration does not intend to disclose developments with respect to the strategic review process unless and until the board of directors has approved a definitive transaction or strategic option, unless otherwise required by law or disclosure of which is deemed appropriate. Iteration cautions that there are no guarantees that the strategic review will result in a transaction or if a transaction is undertaken, as to its terms or timing. In the event that no attractive business alternative is found, Iteration intends to continue building an asset base in its main focus areas in northeast British Columbia, northwest and western Alberta, east central Alberta and southeast Alberta by means of acquisitions, farm-ins and land sale opportunities.
Iteration published guidance for 2010 on November 12, 2009 which disclosed a capital program approximately equal to funds from operations which forecasted production growth from approximately 13,000 boed in December 2009 to approximately 16,000 boed in December 2010. Current production is averaging just over 14,000 boed.
Iteration is currently revising its guidance for 2010, which will take into account the results of the winter drilling program and the effects of the new royalty regulations announced by the Alberta government on March 11, 2010, along with other developments. Iteration expects to provide such revised guidance in April. This guidance will be predicated on the Company carrying forward in its current form.
Iteration
Iteration is an Alberta based corporation engaged in the business of exploring for and developing oil and natural gas reserves in Western Canada and acquiring natural resource properties. Iteration's common shares are listed on the Toronto stock Exchange under the symbol "ITX".
Advisory
Natural gas is converted to crude oil equivalent at a ratio of six thousand cubic feet to one barrel of energy equivalent ("boe"). Boe's may be misleading, particularly if used in isolation. A boe conversion ratio 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.
Forward-Looking Caution
This press release contains forward-looking statements and forward-looking information (collectively referred to herein as "forward-looking statements") within the meaning of Canadian securities laws. All statements other than statements of historical fact are forward-looking statements. Forward-looking information typically contains statements with words such as "anticipate", "believe", "plan", "continuous", "estimate", "expect", "may", "will", "project", "should", or similar words suggesting future outcomes. In particular, this press release contains forward-looking statements pertaining to the following: the strategic review process, timing of a revised guidance for 2010, business plans and strategies; the quantity of natural gas, oil, and natural gas liquids reserves; net present value of future net revenues from reserves; the strategic review process; future commodity prices; capital expenditures; funds from operations; and production. Statements relating to "reserves" are forward-looking statements, as they involve the implied assessment, based on certain estimates and assumptions that the reserves described exist in the quantities predicted or estimated and can profitably be produced in the future.
Undue reliance should not be placed on forward-looking statements, which are inherently uncertain, are based on estimates and assumptions, and are subject to known and unknown risks and uncertainties (both general and specific) that contribute to the possibility that the future events or circumstances contemplated by the forward-looking statements will not occur. There can be no assurance that the plans, intentions or expectations upon which forward-looking statements are based will in fact be realized. Actual results will differ, and the difference may be material and adverse to the Company and its shareholders. Forward-looking statements and information are based on the Company's current beliefs as well as assumptions made by, and information currently available to, the Company concerning the strategic review process, anticipated financial performance, business prospects, strategies, regulatory developments, future commodity prices, future production levels, the ability to obtain financing on acceptable terms. Although management considers these assumptions to be reasonable based on information currently available to it, they may prove to be incorrect.
By their very nature, forward-looking statements involve inherent risks and uncertainties (both general and specific) and risks that forward-looking statements will not be achieved. These factors include, but are not limited to, risks associated with oil and gas exploration, development and production, insurance, prices, financial risks, bank financing, substantial capital requirements, third party risk, competition, environment, reserves replacement, reliance on operators and key employees, changes to accounting policies (including the implementation of IFRS), corporate matters, permits and licenses, incorrect assessments of value, fluctuations in exchange rates, aboriginal claims, issuance of debt, availability of drilling equipment, title defects, uncertainty of reserve information and government regulation and taxation. Further information regarding these factors may be found under the heading "Risk Factors" in the AIF, and in the Company's most recent financial statements, management's discussion and analysis, management information circular, material change reports and news releases. Readers are cautioned that the foregoing list of factors that may affect future results is not exhaustive.
The forward-looking statements contained this press release are made as of the date hereof and Iteration does not undertake any obligation to update publicly or to revise any of the included forward-looking statements, except as required by applicable law. The forward-looking statements contained herein are expressly qualified by this cautionary statement.
%SEDAR: 00002576E
For further information: Mr. Brian Illing, President and CEO, or Mr. Willie Dawidowski, Vice President & Controller at (403) 261-6883
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