Shona Energy Company, Inc. Announces 2011 Year End Results
CALGARY, April 27, 2012 /CNW/ - Shona Energy Company, Inc. (SHO-TSX.V) ("Shona" or the "Company"), today announced its financial results and operational highlights for the year ended 2011.
"Our most significant accomplishment last year was the commercialization of our Nelson gas asset, which at current delivery rates and prices, is expected to generate approximately US$25 million in revenues in 2012," said James L. Payne, CEO of Shona Energy. "In 2012, we will be focused on gas marketing activities to obtain maximum value from our producing Colombian assets, and on business development initiatives to identify additional regional and international opportunities for growth."
Operational Highlights
Since January 2011, the Company has:
- Drilled two successful wells in the Nelson field and upgraded the production facilities to deliver the increased volumes;
- Successfully negotiated gas sales contracts to sell 14 million cubic feet per day (Mmcf/d) from the Esperanza Block;
- Initiated sales of increased volumes under the new contracts on December 1, 2011, and delivered 11.7 Mmcf/d in December;
- Raised $44.8 million in equity through brokered private placements;
- Successfully completed a reverse-takeover transaction with Rodeo Capital II Corp resulting in a listing on the TSX Venture Exchange under the symbol "SHO" and
- Ended the year with 2P Reserves of 95 billion cubic feet (Bcf) and possible reserves(1) of 78 Bcf as estimated by independent third party, Collarini Associates.
(1) Possible reserves are those additional reserves that are less certain to be recovered than probable reserves. There is a 10% probability that the quantities actually recovered will equal or exceed the sum of proved plus probable reserves.
Natural Gas Reserves as at January 1, 2012*
| Natural Gas Reserves (MMcf) | ||||
| Gross | Net | |||
| Proved | ||||
| Developed Producing | 40,599 | 37,189 | ||
| Developed Non-Producing | 463 | 424 | ||
| Undeveloped | 29,206 | 26,753 | ||
| Total Proved | 70,268 | 64,366 | ||
| Probable | ||||
| Developed Producing | 17,256 | 15,807 | ||
| Developed Non-Producing | 1,125 | 1,031 | ||
| Undeveloped | 15,420 | 14,125 | ||
| Total Probable | 33,801 | 30,963 | ||
| Proved Plus Probable | 104,069 | 95,329 | ||
*Breakdown on reserves as per Collarini Associates NI 51-101 compliant reserves report effective January 1, 2012
Outlook
Shona anticipates the following activities to occur in the remainder of 2012:
- Advancing an ongoing 100 km2 3D seismic survey on the Esperanza Block to help determine potential for additional supply capacity;
- Initiating long-term production testing of the Boa Prospect, located in Block 102 in Peru, in May 2012;
- Continuing evaluation of options to the sell and market additional gas capacity;
- Evaluating new ventures in South America and internationally;
- Evaluating potential for mergers and acquisitions; and
- Possible drilling at the Serrania Block in late 2012.
| Selected Financial and Operating Information | |||||||||
| 2011 | 2010 | 2009 (2) | |||||||
| FINANCIAL | |||||||||
| Natural gas revenues | $ | 4,009,054 | $ | 1,852,265 | $ | 1,570,320 | |||
| Income (loss) from operations | (29,244,601) | (9,416,285) | (3,514,318) | ||||||
| Net income (loss) | (29,860,517) | (10,832,403) | (3,368,819) | ||||||
| Per share (basic and diluted) | (0.15) | (0.07) | - | ||||||
| Total assets | 87,071,316 | 65,966,624 | 27,603,545 | ||||||
| Long-Term Debt | 16,410,851 | 15,876,407 | - | ||||||
| Share Capital | |||||||||
| Common - voting | 180,594,389 | 163,834,448 | 108,874,042 | ||||||
| Common - non-voting | 54,173,451 | - | - | ||||||
| Series A 10% Convertible Preferred | 175,939 | 159,971 | - | ||||||
| Warrants | 40,145,993 | 40,145,993 | 8,949,473 | ||||||
| OPERATING | |||||||||
| Production | |||||||||
| Natural Gas - Mcf | 891,780 | 503,045 | 519,686 | ||||||
| Natural Gas - Mcf/d | 2,443 | 1,378 | 1,424 | ||||||
| Realized prices - $/Mcf | $ | 4.50 | $ | 3.68 | $ | 3.02 | |||
| Operating Netback ($/Mcf) | |||||||||
| Natural Gas Revenue | 4.50 | 3.68 | 3.02 | ||||||
| Royalties | (0.55) | (0.58) | (0.26) | ||||||
| Production Expense | (2.14) | (1.74) | (1.04) | ||||||
| Operating Netback | $ | 1.81 | $ | 1.36 | $ | 1.72 | |||
(2) All 2009 amounts are reported under U.S. GAAP and are not adjusted to IFRS
Financial Review
The increase in revenues in 2011 compared with 2010 is largely attributable to higher sales volumes from the Nelson field which commenced on December 1, 2011, resulting in additional revenue of $1.4 million. Higher gas sales price due to the redetermination of the La Guajira price to $4.26 per Mcf on February 1, 2011 and $5.81 on August 1, 2011 accounted for $0.7 million of incremental natural gas revenue for the year ended 2011.
The increase in production expense in 2011 compared with 2010 is due to the upgrade of the Esperanza production facility and the addition of personnel needed to deliver higher volumes from the Nelson field, which commenced sales in December 2011. The increased royalty expense in 2011 was due to higher sales revenues.
The average depletion, depreciation and amortization (DD&A) expense rate per Mcf decreased from $1.97 per Mcf in 2010 to $1.84 per Mcf in 2011 due to the commencement of sales from the Nelson field on December 1, 2011, which has larger natural gas reserves and consequently a lower amortization expense rate per Mcf than the older fields. Total DD&A increased $0.7 million in 2011 due to the increased sales which was partially offset by $0.2 million reduction due to the lower DD&A rate.
In 2011, impairment of the investment in the Ramshorn International B shares was $9.0 million and direct investment in Block 102 was $3.0 million due to the limited results from the tests on the Boa Oeste-1X well which was drilled in the last half of 2011. Shona is currently in the process of conducting a long-term production test on the Boa prospect in an effort to understand its potential. The test is expected to commence in May and once the Company has the data from that test, management expects to be able to make a decision with respect to next steps with the asset. A decision is expected in the third quarter of 2012. In 2011, Shona also fully impaired the $6.3 million costs of its 2010 Esperanza Block seismic program due to the small size of prospects identified. In 2010, the cost incurred to drill the Norman #1 well on the Esperanza Block in Colombia, which was plugged and abandoned, was $3.2 million.
In 2011, G&A expenses included $2.5 million related to legal, accounting and consulting fees to complete the RTO and expensing a portion of the equity issued to the former shareholders of Rodeo Capital II Corp. The increase in G&A expenses from 2010 to 2011 is also attributed to an increase in Colombian overhead cost of $0.6 million and higher costs incurred in the U.S. associated with the ongoing requirements for a public company.
In 2011, there was a $1.2 million expense related to an equity tax in Colombia. The tax was based on the equity of Shona's Colombian subsidiaries as of January 1, 2011, which will be paid over a four year period in equal payments each year.
At December 31, 2011, Shona had unrestricted cash of $21.4 million and current working capital of $16.9 million. Concurrent with the closing of the reverse takeover, a private placement raised $30.6 million and 45,961,731 common shares were issued.
About Shona
Shona is an international oil and natural gas exploration, development and production company focusing on South America, specifically Colombia and Peru. The Company's assets currently include interests in the Company-operated Esperanza block located in Colombia's Lower Magdalena Basin, the non-operated Serrania, Los Picachos and Macaya Blocks in Colombia's Caguan Basin, and the non-operated Block 102 in Peru's Maranon Basin. The common shares of the Company trade on the TSX Venture Exchange under the stock symbol "SHO". More information on the Company is available at www.shonaenergy.com.
Cautionary Statements
Certain information included in this press release constitutes forward-looking information under applicable securities legislation. Such forward-looking information is provided for the purpose of providing information about management's current expectations and plans relating to the future. Readers are cautioned that reliance on such information may not be appropriate for other purposes, such as making investment decisions. Forward-looking information typically contains statements with words such as "anticipate", "believe", "expect", "plan", "intend", "estimate", "propose", "project" or similar words suggesting future outcomes or statements regarding an outlook. Forward-looking information in this press release may include, but is not limited to, expectations regarding future oil and gas production from the Company's properties, the production capacity of the Company's properties, the anticipated use of seismic data and exploration and development plans on properties in which the Company holds an interest. Forward-looking information is based on a number of factors and assumptions which have been used to develop such information but which may prove to be incorrect. Although Shona believes that the expectations reflected in such forward-looking information is reasonable, undue reliance should not be placed on forward-looking information because Shona 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 press release, assumptions have been made regarding and are implicit in, among other things: the ability of Shona to complete transactions described in this press release, the timely receipt of any required regulatory approvals, the performance of existing wells and success obtained in drilling new wells, anticipated expenses, cash flow and capital expenditures, the application of regulatory and royalty regimes and prevailing commodity prices and economic conditions. Readers are cautioned that the foregoing list is not exhaustive of all factors and assumptions which have been used. Shona undertakes no obligation to update forward-looking statements if circumstances or management's estimates or opinions should change, unless required by law. Actual results could differ materially from those currently anticipated due to a number of factors and risks. These include, but are not limited to, risks associated with the oil and gas industry in general (e.g., operational risks in development, exploration and production; delays or changes in plans with respect to exploration or development projects or capital expenditures; the uncertainty of reserve estimates; the uncertainty of estimates and projections relating to production, costs and expenses, and health, safety and environmental risks), commodity price and exchange rate fluctuations and uncertainties resulting from potential delays or changes in plans with respect to exploration or development projects or capital expenditures.
All dollar references in this press release are to U.S. Dollars.
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 this press release.
please contact either of the following individuals:
David Gian, Treasurer & Investor Relations
Shona Energy Company, Inc.
Houston, Texas
713-622-8809
Shetal Mentlewski, VP Admin & Legal
Shona Energy Company, Inc.
Houston, Texas
713-622-8809
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