Yangarra Announces Second Quarter 2012 Financial and Operating Results, Appoints New Director and Updates Reserve Report
CALGARY, Aug. 20, 2012 /CNW/ - Yangarra Resources Ltd. ("Yangarra" or the "Company") (TSXV:YGR) announces its financial and operating results for the three and six months ended June 30, 2012, appoints new director, updates reserve report and revises the Corporate guidance.
Highlights in the Second Quarter of 2012 include:
- Net income before taxes of $6.5 million ($0.05/share), including $8.2 million of hedging gains.
- Production was 2,022 boe/d which is a 107% increase from the second quarter 2011 and the Company estimates that 800 boe/d (not including the 200 boe/d of shut-in dry gas) was behind pipe or shut-in on average for the quarter.
- Reserves were re-evaluated as at April 30, 2012:
- Proved plus probable reserves, net present value discounted at 10% ("NPV 10") at April 30, 2012 was $177.4 million.
- Net Asset Value ("NAV") of $168.8 million ($1.39 per share) using an internally estimated undeveloped land value of $24.8 million and the June 30, 2012 working capital deficit.
- Oil and NGL production was 38% of total production in the second quarter compared with 38% in the second quarter of 2011 and 42% in the first quarter of 2012. The decrease in liquids production from the first quarter, 2012 was a result of lower than expected declines in several gas-weighted Glauconite wells and down time related to a turnaround at a third party deep cut plant.
- Oil and gas sales including royalty income was $5.9 million with cash flow from operations of $3.5 million ($0.03 per share basic) a 32% and 10% increase from the comparable period in 2011, respectively.
- Operating costs for the second quarter, including $0.85/boe of transportation costs, were $7.99/boe which represents an 11% decrease from the comparable period in 2011.
- The field netback was $23.81 per boe ($22.59 not including $1.22 per boe of realized hedging gains) a 42% decrease from the comparable period in 2011. Realized prices were negatively impacted by higher WTI/Edmonton par differentials, lower natural gas prices and lower liquids pricing.
- Capital expenditures of $3.0 million focused on completing carry over costs from wells spud during the first quarter and various infrastructure projects.
- As at June 30, 2012, the Company had a working capital deficit of $33 million (excluding mark to market on commodity contracts) compared to $34 million at December 31, 2011.
- The Company has utilized 80% of its $42 million credit facility.
- Due to significant decreases in natural gas prices and widening of the Edmonton par to WTI differential the company has managed capital expenditures to minimize the reliance on debt and will continue to employee this strategy until commodity prices improve.
Operations Update
Due to wet field conditions, the Company limited capital expenditures during the quarter. Drilling operations will resume when conditions improve. As previously reported (see press release dated May 24, 2012), the Company has significant shut-in volumes in four new wells that are tied into facilities which are expected to increase the liquids ratio back to 45-50% of total production. The installation of incremental compression has been delayed by landowner objections and Yangarra has elected to wait until those issues are dealt with rather than expend more capital to produce the wells with alternate options. One of the four new wells was placed on-stream in mid August as capacity in the existing compressor became available.
Current production is approximately 1,900 boe/d and third quarter production is expected to be 1,700 - 2,000 boe/d. The Company will execute a capital plan for the remainder of the 2012 that is focused on oil targets and funded with cash flow and existing bank debt.
The Company continues to advance its Second White Specks resource play with the existing horizontal well continuing to produce at better than expected rates. The Company has added additional land and currently has 41 gross (26 net) sections. The Company plans to drill the second horizontal well into the play in the fourth quarter of 2012. With potential for 4-6 wells per section, the Company is in the early stages of determining the optimal development strategy.
The Company has 60 net sections in the liquids rich fairway of the Duvernay resource play in two distinct blocks, 5 sections under license in the Ferrier area (the "South Block") and 55 sections under three licenses in the Pembina area (the "North Block"). Yangarra has to drill three wells into the 60 sections by June of 2015 to continue the land until June of 2020. This tenure gives the Company significant leeway to let industry de-risk the play and provides time for Yangarra to either find a Joint Venture ("JV") partner or internally finance development of its Duvernay land position. The Company has initiated discussions with potential joint venture partners and continues to build its operations team with the hiring of a new drilling and completions manager that has horizontal drilling experience in the Duvernay.
The Company has identified 35 future locations in the oil weighted Central Alberta Cardium play. Advances in slick water fracturing and mono-bore drilling will allow the Company to significantly reduce capital costs and Yangarra expects to drill 3.0 gross (1.4 net) Cardium wells over the balance of 2012.
One horizontal Viking well is currently on-stream and 12 future drilling locations have been identified. The well is producing 85% light oil and the Company expects future Viking locations will provide similar economics to the Cardium play. Additional drilling in the Viking play is planned for 2013.
The Company has identified 25 drilling locations in the Glauconite liquids rich natural gas play with the two best wells to date producing at IP 180's greater than 800 boe/d (approximately 32% NGL's). An oil weighted Hoadley Glauconite well is planned for the fourth quarter of 2012 with the gassier targets postponed until natural gas prices improve.
Medicine Hat and Jaslan dry gas wells with volumes of 200 boe/d remain shut in until natural gas prices improve and furthermore, the Company recognized a $936,000 write down of those assets in the second quarter.
Guidance Update
The Company is reducing the previous cash flow guidance for 2012 from $25 - $30 million to $20 - $25 million and is reducing the expected exit production rate to 2,500 boe/d. The average production guidance remains at 2,000 - 2,500 boe/d which is an 88% increase from the 2011 production average.
The Company plans to drill 5 gross (3.4 net) wells for the balance of 2012.
Interim Reserve Report
The Company engaged AJM Deloitte to prepare an interim independent reserve evaluation effective April 30, 2012.
- The success of the Company's first quarter drilling program has more than offset the significant reductions in natural gas prices since year end.
- Proved plus probable reserves, before tax, net present value discounted at 10% ("NPV 10") at April 30, 2012 was $177.5 million compared to $156.1 million as at December 31, 2011.
- Proved plus probable reserves were 10.4 million barrels of oil equivalent (9.3 million barrels of working interest and 1.1 million barrels for the royalty interest) and proved reserves were 6.1 million barrels of oil equivalent (5.4 million barrels of working interest and 0.7 million barrels for the royalty interest).
- Natural gas represents 32% of the proved plus probable NPV 10 as at April 30, 2012 compared to 39% as at December 31, 2011.
- The NPV 10 of $177.4 million less the June 30, 2012 working capital deficit of $33.4 million plus an internally estimated undeveloped land value of $24.8 million results in a Net Asset Value ("NAV") of $168.8 million ($1.39 per share).
Yangarra will complete an interim oil and gas filing with the Alberta Securities Commission on or before September 15, 2012, at which time these filings can be accessed electronically on the SEDAR website.
Appointment of New Director
The Company is pleased to announce the appointment of W.W. (Chuck) Charlton to its Board of Directors.
Mr. Charlton currently is the President of Charlton Capital. He has over 35 years of investment banking experience focused on the oil and natural gas industry. Mr. Charlton has extensive experience in mergers and acquisitions, financing of junior oil and gas companies, company valuations and commodity pricing studies. Mr. Charlton's experience is complemented by his direct industry involvement with operations in the U.S. and Canada.
Stock Option Grant
Yangarra also announces it has granted options to purchase 1,570,000 common shares at an exercise price of $0.35 per share, pursuant to its stock option plan. All the options vest immediately and will expire on August 19, 2017. Officers and directors were granted options on 865,000 shares and the balance of the options were issued to employees and consultants.
Operations Summary
Net petroleum and natural gas production, pricing and revenue are summarized below:
| 2012 | 2011 | 6 Months ended | ||||||||||||
| Q2 | Q1 | Q2 | 2012 | 2011 | ||||||||||
| Daily production volumes | ||||||||||||||
| Natural gas (mcf/d) | 6,115 | 6,018 | 3,594 | 6,066 | 3,288 | |||||||||
| Oil (bbl/d) | 269 | 438 | 265 | 354 | 262 | |||||||||
| NGL's (bbl/d) | 397 | 347 | 103 | 372 | 94 | |||||||||
| Royalty income | ||||||||||||||
| Natural gas (mcf/d) | 1,432 | 1,481 | 26 | 1,456 | 43 | |||||||||
| Oil (bbl/d) | 3 | 12 | 3 | 8 | 6 | |||||||||
| NGL's (bbl/d) | 94 | 91 | 1 | 93 | 2 | |||||||||
| Combined (boe/d 6:1) | 2,022 | 2,139 | 975 | 2,080 | 919 | |||||||||
| Product pricing (includes royalty income) | ||||||||||||||
| Oil ($/bbl) | $ | 81.97 | $ | 90.95 | $ | 100.30 | $ | 87.56 | $ | 93.49 | ||||
| NGL ($/bbl) | 55.22 | 64.96 | 64.69 | 59.81 | 63.57 | |||||||||
| Gas ($/mcf) | 2.05 | 2.09 | 3.99 | 2.07 | 3.88 | |||||||||
| Combined ($/boe) | $ | 32.13 | $ | 39.80 | $ | 48.71 | $ | 36.07 | $ | 47.77 | ||||
| Revenue | ||||||||||||||
| Petroleum & natural gas sales - Gross | $ | 5,265,664 | $ | 6,907,412 | $ | 4,283,356 | $ | 12,173,076 | $ | 7,807,900 | ||||
| Royalty income | 645,002 | 839,177 | 35,848 | 1,484,179 | 140,278 | |||||||||
| Total sales | 5,910,666 | 7,746,589 | 4,319,204 | 13,657,255 | 7,948,178 | |||||||||
| Royalty expense | (283,131) | (446,817) | (56,547) | (729,948) | (199,915) | |||||||||
| Petroleum & natural gas sales - Net | $ | 5,627,535 | $ | 7,299,772 | $ | 4,262,657 | $ | 12,927,307 | $ | 7,748,263 | ||||
Financial Summary
Summary Financial Information is summarized below:
| 2012 | 2011 | 6 Months ended | ||||||||||
| Q2 | Q1 | Q2 | 2012 | 2011 | ||||||||
| Statements of Comprehensive Income (Loss) | ||||||||||||
| Net income (loss) for the period (before tax) | $ | 6,451,923 | $ | (983,334) | $ | 3,473,637 | $ | 5,468,589 | $ | 2,590,971 | ||
| Net income (loss) for the period | $ | 3,305,628 | $ | (1,790,789) | $ | 1,665,821 | $ | 1,514,839 | $ | (564,810) | ||
| Net income (loss) per share - basic | $ | 0.03 | $ | (0.02) | $ | 0.02 | $ | 0.01 | $ | (0.01) | ||
| Net income (loss) per share - fully diluted | $ | 0.03 | $ | (0.02) | $ | 0.01 | $ | 0.01 | $ | (0.01) | ||
| Statements of Cash Flow | ||||||||||||
| Funds flow from (used in) operating activities | $ | 3,493,003 | $ | 5,146,554 | $ | 3,151,665 | $ | 8,639,557 | $ | 5,686,916 | ||
| Funds flow from (used in) operating activities per share - basic | $ | 0.03 | $ | 0.04 | $ | 0.03 | $ | 0.07 | $ | 0.06 | ||
| Funds flow from (used in) operating activities per share - fully diluted | $ | 0.03 | $ | 0.04 | $ | 0.03 | $ | 0.07 | $ | 0.05 | ||
| Statements of Financial Position | ||||||||||||
| Property and equipment | $ | 121,329,749 | $ | 122,891,333 | $ | 86,947,461 | $ | 122,891,333 | $ | 86,947,461 | ||
| Total assets | $ | 142,907,001 | $ | 147,718,686 | $ | 94,455,249 | $ | 147,718,686 | $ | 94,455,249 | ||
| Working Capital (deficit), excluding MTM on commodity contracts and flow-through share obligation | $ | (33,456,912) | $ | (33,920,294) | $ | (5,463,023) | $ | (33,456,912) | $ | (5,463,023) | ||
| Shareholders equity | $ | 81,125,416 | $ | 77,613,288 | $ | 73,665,560 | $ | 81,125,416 | $ | 73,665,560 | ||
| Weighted average number of shares - basic | 121,711,152 | 117,494,735 | 104,762,826 | 119,602,943 | 95,427,181 | |||||||
| Weighted average number of shares - fully diluted | 121,711,152 | 118,962,415 | 113,332,471 | 119,602,943 | 103,996,826 | |||||||
Operating Netbacks (boe/d)
The Company's operating, cash flow and net income netbacks are summarized below:
| 2012 | 2011 | 6 Months ended | |||||||||||
| Q2 | Q1 | Q2 | 2012 | 2011 | |||||||||
| Sales Price | $ | 28.62 | $ | 35.49 | $ | 48.31 | $ | 32.15 | $ | 46.93 | |||
| Royalty income | 3.51 | 4.31 | 0.40 | 3.92 | 0.84 | ||||||||
| Royalty expense | (1.55) | (2.30) | (0.64) | (1.93) | (1.20) | ||||||||
| Production costs | (7.14) | (4.89) | (7.92) | (5.99) | (7.66) | ||||||||
| Transportation costs | (0.85) | (0.76) | (1.03) | (0.80) | (0.97) | ||||||||
| Operating netback | 22.59 | 31.85 | 39.12 | 27.35 | 37.94 | ||||||||
| G&A and other (excludes non-cash items) | (3.04) | (1.90) | (5.24) | (2.46) | (4.45) | ||||||||
| Realized gain (loss) on financial instruments | 1.22 | (2.19) | 2.75 | (0.53) | 1.64 | ||||||||
| Finance expenses | (1.78) | (1.32) | (1.09) | (1.54) | (0.96) | ||||||||
| Cash flow netback | 18.99 | 26.44 | 35.54 | 22.82 | 34.18 | ||||||||
| Depletion and depreciation | (26.53) | (20.84) | (17.00) | (23.61) | (16.66) | ||||||||
| Accretion | (0.14) | (0.12) | (0.24) | (0.13) | (0.32) | ||||||||
| Stock-based compensation | (0.68) | (1.19) | - | (0.94) | (7.66) | ||||||||
| Unrealized gain (loss) on financial instruments | 43.43 | (9.35) | 20.88 | 16.30 | 6.04 | ||||||||
| Deferred income tax | (17.10) | (4.15) | (20.39) | (10.44) | (18.97) | ||||||||
| Net Income (loss) netback | $ | 17.97 | $ | (9.20) | $ | 18.79 | $ | 4.00 | $ | (3.39) | |||
Working Capital Summary
The following table summarizes the change in working capital during the three months ended June 30, 2012, March 31, 2012 and the year ended December 31, 2011:
| Three Months Ended June 30, 2012 |
Three Months Ended March 31, 2012 |
Year Ended December 31, 2011 |
||||
| Working capital (deficit) - beginning of period (1) | $ | (33,920,294) | $ | (34,028,162) | $ | (11,472,461) |
| Cash flow from (used in) operating activities | 3,493,003 | 5,146,554 | 16,341,180 | |||
| Capital expenditures | (3,007,918) | (7,584,519) | (64,608,688) | |||
| Issuance of shares | 6,500 | 2,545,833 | 25,711,807 | |||
| Working capital (deficit) - end of period (1) | $ | (33,428,709) | $ | (33,920,294) | $ | (34,028,162) |
| Credit facility limit | $ | 42,000,000 | $ | 42,000,000 | $ | 40,000,000 |
| (1)Excludes non-cash change in fair value of commodity contracts | ||||||
Capital Spending
Capital spending is summarized as follows:
| 2012 | 2011 | 6 Months ended | ||||||||||
| Q2 | Q1 | Q2 | 2012 | 2011 | ||||||||
| Land and lease rentals | $ | (15,366) | $ | 147,489 | $ | 748,282 | $ | 132,123 | $ | 2,087,717 | ||
| Drilling and completion | 2,383,800 | 6,621,898 | 4,901,729 | 9,005,698 | 19,188,463 | |||||||
| Geological and geophysical | 327,646 | 154,180 | 255,136 | 481,826 | 425,768 | |||||||
| Equipment | 309,944 | 651,953 | 1,255,508 | 961,897 | 3,583,370 | |||||||
| $ | 3,006,024 | $ | 7,575,520 | $ | 7,160,655 | $ | 10,581,544 | $ | 25,285,318 | |||
Disclosure Items
The Company's financial statements, notes to the financial statements and management's discussion and analysis have been filed on SEDAR (www.sedar.com) and are available on the Company's website (www.yangarra.ca).
Natural gas has been converted to a barrel of oil equivalent (Boe) using 6,000 cubic feet (6 Mcf) of natural gas equal to one barrel of oil (6:1), unless otherwise stated. The Boe conversion ratio of 6 Mcf to 1 Bbl is based on an energy equivalency conversion method and does not represent a value equivalency; therefore Boe's may be misleading if used in isolation. References to natural gas liquids ("NGLs") in this news release include condensate, propane, butane and ethane and one barrel of NGLs is considered to be equivalent to one barrel of crude oil equivalent (Boe). One ("BCF") equals one billion cubic feet of natural gas. One ("Mmcf") equals one million cubic feet of natural gas. Operating netbacks are calculated as revenue from all products less operating costs.
Reserve Definitions:
| (a) | "Proved" reserves are those reserves that can be estimated with a high degree of certainty to be recoverable. It is likely that the actual remaining quantities recovered will exceed the estimated proved reserves. |
| (b) | "Probable" reserves are those additional reserves that are less certain to be recovered than proved reserves. It is equally likely that the actual remaining quantities recovered will be greater or less than the sum of the estimated proved plus probable reserves. |
Forward looking information
Certain information regarding Yangarra set forth in this news release, including management's assessment of future plans, operations and operational results may constitute forward-looking statements under applicable securities law and necessarily involve risks associated with oil and gas exploration, production, marketing and transportation such as loss of market, volatility of prices, currency fluctuations, imprecision of reserves estimates, environmental risks, competition from other producers and ability to access sufficient capital from internal and external sources. As a consequence, actual results may differ materially from those anticipated in the forward-looking statements.
See Management's Discussion and Analysis for the three and six months ended June 30, 2012 for a special note regarding Non-IRFS measures.
All reference to $ (funds) are in Canadian dollars.
Neither the TSX Venture Exchange nor its Regulation Service Provider (as that term is defined in the Policies of the TSX Venture Exchange) accepts responsibility for the adequacy and accuracy of this release.
SOURCE: Yangarra Resources Ltd.
For further information, please contact Jim Evaskevich, President & CEO or James Glessing, Chief Financial Officer, at (403) 262-9558.
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