Sea Dragon Energy announces its 2011 annual and fourth quarter results
CALGARY, April 5, 2012 /CNW/ - Sea Dragon Energy Inc. ("Sea Dragon" or the "Company") (TSXV: SDX) is pleased to announce its financial and operating results for the three months and year ended December 31, 2011. All dollar values are expressed in United States dollars unless otherwise stated.
2011 Highlights:
- Increased 2011 operating netback by 92% to $17.5 million from $9.1 million in 2010;
- Funds flow from operations increased to $5.6 million from $1.6 million in 2010;
- Reduced operating costs by 12% in 2011 to $3.0 million ($7.62/bbl) from $3.4 million ($9.37/bbl) in 2010;
- Exited the year with cash and cash equivalents of $14.8 million and working capital of $15.7 million and $3.0 million of debt;
- Closed a 5-year senior secured borrowing base credit facility of US $50 million, with $20 million initially available;
- Increased 2P reserves in NW Gemsa by 450 bmoe;
- Realized a net loss for 2011 of $12.8 million, due to a $13.7 million impairment loss on the Company's Kom Ombo asset;
- Achieved a drilling success rate of 88% in both of the Company's concessions;
- Response to water flooding operations starting in Al Amir SE field.
- Subsequent to year-end:
- Collected $4.0 million in outstanding accounts receivable;
- West Al Baraka#2 exploratory well was spud on March 30, 2012, marking the beginning of a five well drilling program in the Kom Ombo Concession ;
- Al Amir SE#11 St-1 production well is being completed and should be place on stream soon. The well is expected to add significantly to the NW Gemsa Concession production.
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Three months ended |
Twelve months ended |
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December 31 |
December 31 |
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$000's except per unit amounts |
2011 |
2010 |
2011 |
2010 |
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Financial Oil sales Royalties Operating costs Netback (1) Net loss Cash and cash equivalents Cash and cash equivalents plus working capital Total assets Debt Shareholders' equity Capital expenditures Weighted average outstanding shares |
9,527 (4,713) (1,100) 3,714 (14,389) 6,125 11,939 75,663 3,000 68,877 1,892 376,459 |
7,535 (3,683) (1,267) 2,585 (1,294) 14,751 15,670 83,687 - 78,412 5,545 375,867 |
41,901 (21,407) (3,007) 17,487 (12,838) 6,125 11,939 75,663 3,000 68,877 8,024 376,459 |
27,400 (14,871) (3,423) 9,106 (6,152) 14,751 15,670 83,687 - 78,412 56,633 326,252 |
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Operational |
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Oil Sales (bbl/d) Brent Oil Price (US$/bbl) Realized oil price (US$/bbl) Royalties (US$/bbl) Operating costs (US$/bbl) Netback (US$/bbl) |
991 109.38 104.54 51.72 12.07 40.75 |
995 87.34 82.34 40.23 13.85 28.26 |
1,082 111.28 106.15 54.23 7.62 44.30 |
1,001 80.33 75.02 40.70 9.37 24.95 |
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Drilling |
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Gross wells (number of wells) Success rate (%) Net wells (number of wells) Success rate (%) |
2 100 0.2 100 |
- - - - |
9 89 2.1 76 |
10 100 3.8 100 |
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Company Gross Reserves (2) |
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|
|
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Proved Natural gas (mmcf) Oil and liquids (mbbl) |
2,664 3,815 |
2,575 3,804 |
2,664 3,815 |
2,575 3,804 |
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Total oil equivalent (mboe) |
4,259 |
4,233 |
4,259 |
4,233 |
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Proved plus probable |
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Natural gas (mmcf) Oil and liquids (mbbl) |
3,839 6,608 |
3,828 7,553 |
3,839 6,608 |
3,828 7,553 |
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Total oil equivalent (mboe) |
7,248 |
8,191 |
7,248 |
8,191 |
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Proved plus probable plus possible Natural gas (mmcf) Oil and liquids (mbbl) |
3,940 8,829 |
3,828 9,960 |
3,940 8,829 |
3,828 9,960 |
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Total oil equivalent (mboe) |
9,486 |
10,598 |
9,486 |
10,598 |
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Net present value of future cash flows after tax ($000's) (3) | |
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Proved |
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5% discount rate |
56,630 |
51,360 |
56,630 |
51,360 |
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10% discount rate |
46,856 |
41,822 |
46,856 |
41,822 |
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15% discount rate |
39,883 |
34,866 |
39,883 |
34,866 |
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Proved plus probable |
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5% discount rate |
97,327 |
98,058 |
97,327 |
98,058 |
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10% discount rate |
73,336 |
75,650 |
73,336 |
75,650 |
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15% discount rate |
57,194 |
60,299 |
57,194 |
60,299 |
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Proved plus probable plus possible |
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5% discount rate |
148,252 |
144,468 |
148,252 |
144,468 |
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10% discount rate |
109,300 |
105,270 |
109,300 |
105,270 |
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15% discount rate |
83,389 |
80,139 |
83,389 |
80,139 |
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Reserve life index (years) (4 ) |
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Proved |
11.8 |
11.7 |
11.8 |
11.7 |
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Proved plus probable |
20.0 |
22.6 |
20.0 |
22.6 |
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Production replacement (%) |
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Proved |
107% |
986 |
107% |
986 |
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Proved plus probable |
- |
1,885 |
- |
1,885 |
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Reserves per thousand shares outstanding |
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Proved |
11 |
11 |
11 |
11 |
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Proved plus probable |
19 |
22 |
19 |
22 |
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(1) Netback is a non-GAAP measure that represents sales net of all operating expenses and government royalties. Management believes that netback is a useful supplemental measure to analyze operating performance and provide an indication of the results generated by the Company's principal business activities prior to the consideration of other income and expenses. Management considers netbacks an important measure as it demonstrates the Company's profitability relative to current commodity prices. Netback may not be comparable to similar measures used by other companies. |
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(2) Company gross reserves are gross working interest reserves before the deduction of royalties as determined by the Company's independent reserves evaluators. |
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(3) As determined by the Company's independent reserves evaluators. Estimated values of future net revenue disclosed do not represent fair market values. |
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(4) Calculated by dividing the Company's gross reserves by the 2011 fourth quarter production rate |
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(5) Disclosure provided herein in respect of BOEs 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. |
CEO's Message:
The year 2011 was a challenging year for the Company. Although peaceful and of short duration, the revolution in Egypt has resulted in the resignation of President Mubarak, the establishment of a new Parliament and a change in Government.
Despite this political upheaval, the company's drilling and production operations in both of its existing concessions continued without interruption. Our Strategy of exploiting the assets acquired in 2010 and the search of new opportunities remains unchanged.
This strategy has begun to show results:
- Increased 2011 operating netback by 92% to $17.5 million from $9.1 million;
- Impressive drilling results in both of the Company's concessions with an 88% overall success rate.
- Closed a 5-year senior secured borrowing base of US $50 million, which provides the Company with access to additional capital, if and when required, as well as for future acquisitions.
In 2011, the Company laid the foundation for an exciting 2012 and intends on growing the Company into a preeminent intermediate oil and gas company with operations in several countries. This year we have an aggressive and fully funded work program to ramp up production in NW Gemsa and further explore the already identified resources in Kom Ombo and exploit the full potential of our concessions in Egypt.
We are also pursuing a transformational acquisition, as recently disclosed, to add materiality and upside to the portfolio which should significantly transform our growth potential.
Year in Review:
North West Gemsa
In 2011, activities were directed towards implementing the water injection project in both Al Amir SE and Geyad fields as well as continued development, appraisal and step out drilling. This program was successful with three injectors and three producers being completed. The Company is very pleased with the progress made on drilling the water injection wells in our NW Gemsa Concession and the commencement of the water flood project. We should begin to see a substantial increase in our production in 2012.
Gross production averaged 7,700 bopd in 2011 (770 bopd net to Sea Dragon) with current rates averaging 8,250 bopd (825 bopd net to Sea Dragon). Cumulative oil production from the Concession has now reached 7.6 million barrels of light oil. Water injection began in October 2011 and positive pressure response has been observed in several wells within the Rahmi and Shagar reservoirs. The netback for NW Gemsa for 2011 is $24.17 per barrel.
The Al Ola development lease was approved by the government on February 19, 2012 allowing the discovered southern field extension to come on stream and the two Al Ola wells to resume production at a combined rate of 1,200 barrels bopd.
A year-end independent reserves report supports Company Gross share of Proved and Proved plus Probable reserves of 4.01 and 5.73 million barrels of oil equivalent, respectively. The Company replaced 188% of last year's production through reserve additions.
The Company's $5.0 million capital expenditure program for 2012 includes, but is not limited to, the drilling of four development wells, three additional water injector wells, two workovers, and expanding the production facilities.
Kom Ombo
In 2011 two development wells AB14 and AB15 were drilled and placed on production, adding two more pay zones. The Kom Ombo Concession is a resource play, and in 2011 there was a pause in the drilling program to re-evaluate the resources. The studies and analysis conducted during 2011 have resulted in significant improvement in the interpretation, mapping of the distribution and understanding the behaviour of various reservoirs, countered by a reserves revision. The Company drilled a dry exploration well in the North of the concession and is now focusing its exploration efforts in the South/West closer to the Al Baraka kitchen. The Company has resumed the drilling campaign for both reserves and resources.
The Company's $7.2 million capital expenditure program for 2012 is focused on several high impact prospects and leads. The program includes, but is not limited to, the drilling of two exploration wells, three development wells, several workovers and a fracturing program.
Production averaged 684 bopd in 2011 (342 bopd net to Sea Dragon) with current rates averaging 540 bopd (270 bopd net to Sea Dragon). The Kom Ombo concession generated netbacks greater than $50 per barrel.
The Kom Ombo year-end reserves report estimates Company Gross share of Proved and Proved plus Probable reserves of 0.25 and 1.52 million barrels of oil, respectively. A re-evaluation by Gaffney, Cline & Associates resulted in reserve reductions of 80 Mbbl (Proved) and 1,000 Mbbl (Proved plus Probable). The Company is hopeful that the 2012 drilling program will allow to appraise the Komombo sands and result in a resurgence of its Kom Ombo reserves and resources.
Reserves:
Reserve estimates have been calculated in compliance with the National Instrument 51-101 Standards of Disclosure ("NI 51-101"). Under NI 51-101, proved reserves are defined as reserves that can be estimated with a high degree of certainty to be recoverable with a target of a 90 percent probability that the actual reserves recovered over time will equal or exceed proved reserve estimates, while probable reserves are defined as having an equal (50%) probability that the actual reserves recovered will equal or exceed the proved and probable reserve estimates. In accordance with NI 51-101, proved undeveloped reserves have been recognized in cases where plans are in place to bring the reserves on production within a short, well defined time frame. Proved undeveloped reserves often involve infill drilling into existing pools. Of the net present value of the Company's reserves, 100 percent were evaluated by independent third party engineers, Gaffney, Cline & Associates Ltd ("GCA") and Ryder Scott Company Canada ("Ryder Scott") in their reports dated March 14, 2012 and March 7, 2012, respectively.
Company gross reserve reconciliation (mboe) |
Total Proved |
Proved Plus Probable |
December 31, 2010 Reserves (mboe) |
4,233 |
8,191 |
2011 Production (mbbl) |
(400) |
(400) |
Net Additions (mboe) |
426 |
(543) |
December 31, 2011 Reserves (mboe) |
4,259 |
7,248 |
Year over year increase (decrease) in reserves |
1% |
-12% |
Production replacement |
107% |
-136% |
Company gross reserves Reserves Category |
Natural Gas (mmcf) |
Liquids (mbbls) |
Oil (mbbls) |
Total (mboe) |
Proved: |
|
|
|
|
Proved Producing |
755 |
51 |
1,286 |
1,463 |
Undeveloped |
1,909 |
129 |
2,349 |
2,796 |
Total Proved |
2,664 |
180 |
3,635 |
4,259 |
Probable |
1,175 |
79 |
2,713 |
2,988 |
Total Proved Plus Probable |
3,839 |
260 |
6,348 |
7,248 |
Possible |
101 |
7 |
2,214 |
2,238 |
Total Proved Plus Probable Plus Possible |
3,940 |
267 |
8,562 |
9,486 |
Net present value after income tax |
($000's) |
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Discount Factor |
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Reserves Category |
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0% |
5% |
10% | 15% |
Proved: |
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|
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Proved Producing |
|
31,858 |
28,324 |
25,563 | 23,366 |
Undeveloped |
|
39,091 |
28,307 |
21,294 | 16,516 |
Total Proved |
|
70,949 |
56,630 |
46,856 | 39,883 |
Probable |
|
63,923 |
40,697 |
26,480 | 17,312 |
Total Proved Plus Probable |
|
134,872 |
97,327 |
73,336 | 57,194 |
Possible |
|
74,891 |
50,925 |
35,964 | 26,195 |
Total Proved Plus Probable Plus Possible |
209,763 |
148,252 |
109,300 | 83,389 |
Net Asset Value |
|
2011 |
|
2010 |
Net present value of oil and gas reserves, discounted at 10%, after income tax |
$ |
73,336 |
$ |
79,110 |
Working capital |
$ |
11,939 |
$ |
15,670 |
Net asset value |
$ |
85,275 |
$ |
94,780 |
The disclosures required in accordance with National Instrument 51‐101 of the Canadian Securities Administrators will be available in the Company's Annual Information Form to be filed on the SEDAR website at www.sedar.com.
Certain statements contained in this press release constitute "forward-looking statements" as such term is used in applicable Canadian and US securities laws. These statements relate to analyses and other information that are based upon forecasts of future results, estimates of amounts not yet determinable and assumptions of management. In particular, statements concerning the 2011 drilling and capital expenditure programs of the NW Gemsa and Kom Ombo Concessions and the results referenced or implied herein should be viewed as forward-looking statements.
Any statements that express or involve discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, assumptions or future events or are not statements of historical fact and should be viewed as "forward-looking statements". All reserves information contained herein as well as the net present value of such reserves should be considered as forward looking statements. Such forward looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such risks and other factors include, among others, costs and timing of exploration and production development, availability of capital to fund exploration and development and political, social and other risks inherent in carrying on business in Egypt. There can be no assurance that such statements will prove to be accurate as actual results and future events could vary or differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements contained in this news release.
Forward-looking statements are made based on management's beliefs, estimates and opinions on the date the statements are made and the Corporation undertakes no obligation to update forward-looking statements and if these beliefs, estimates and opinions or other circumstances should change, except as required by applicable law. Although Sea Dragon has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward-looking statements, there may be other factors that cause actions, events or results not to be as anticipated, estimated or intended. Investors are cautioned that such forward-looking statements involve risks and uncertainties. Actual results may differ materially from those currently anticipated. See Sea Dragon's Annual Information Form for the year ended December 31, 2011 for a description of the risks and uncertainties associated with the Company's business, including its exploration activities. The forward-looking statements contained herein are expressly qualified by this cautionary statement.
A "boe" conversion ratio of 6 Mcf of natural gas = 1 barrel of oil has been used and is based on the standard energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.
NEITHER THE TSX VENTURE EXCHANGE NOR ITS REGULATION SERVICES PROVIDER (AS THAT TERM IS DEFINED IN THE POLICIES OF THE TSX VENTURE EXCHANGE) ACCEPTS RESPONSIBILITY FOR THE ADEQUACY OR ACCURACY OF THE RELEASE.
Said Arrata
Chairman, CEO and Director
(403) 457-5035
Tony Anton
President, COO and Director
(403) 457-5035
Olivier Serra
Chief Financial Officer and Director
+331 5343 9442
Brisco Capital Partners Corp.
Investor Relations
(403) 262-9888
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