Connacher Announces Q3 2014 Results
CALGARY, Nov. 13, 2014 /CNW/ - Connacher Oil and Gas Ltd. (CLL - TSX; "Connacher" or the "Company") announces its financial and operating results for the quarter ended September 30, 2014 ("Q3 2014") (all amounts are in Canadian dollars unless otherwise noted).
Q3 2014 Highlights
- Q3 2014 production increased 20% to a quarterly record of 14,163 bbl/d (Q3 2013 - 11,788 bbl/d). Production increases were attributable to the Company's four infill wells at Pod One which began production in Q4 2013; four new well pairs at Pad 104 which came online in Q1 2014; and five new infill wells at Pod One that started production in Q3 2014
- Pod One bitumen production for September averaged 9,240 bbl/d and fully utilized the facility's current inlet emulsion handling capacity
- Adjusted EBITDA decreased 22% to $28.8 million in Q3 2014 (Q3 2013 - $36.8 million), due to lower bitumen netbacks. Q3 2013 was an exceptional quarter for the Company's bitumen market pricing due to favourable sales contracts
- Operating costs increased 29% to $26.4 million in Q3 2014 (Q3 2013 - $20.5 million) due to higher natural gas prices and evaporator waste disposal costs
- Q3 2014 capital expenditures totaled $25.3 million (Q3 2013 - $35.3 million), which were focused primarily on the completion of the nine new infill wells, advancement of the mini-steam expansion project at Pod One, and the SAGD+® process commercial project implementation at Algar
- Connacher closed Q3 2014 with a cash balance of $83.1 million (Q4 2013 - $55.6 million) and available credit facilities of $7.9 million (Q4 2013 - $76.7 million), net of $22.1 million (Q4 2013 - $18.3 million) of outstanding letters of credit
Q3 2014 Financial and Operational Summary
| FINANCIAL (1) | Q3 2014 | Q3 2013 | % Change | YTD 2014 | YTD 2013 | % Change |
| Revenue, net of royalties | $119,432 | $122,719 | (3) | $340,830 | $334,652 | 2 |
| Adjusted EBITDA (2) | 28,786 | 36,775 | (22) | 63,001 | 71,861 | (12) |
| Net loss | (39,760) | (2,357) | 1,587 | (112,415) | (81,040) | 39 |
| Funds flow (used) (3) | 5,437 | 16,410 | (67) | (3,680) | 12,577 | (129) |
| Per share, basic and diluted (total) (4) | (0.09) | (0.00) | - | (0.25) | (0.18) | 39 |
| Capital expenditures | 25,303 | 35,305 | (28) | 69,325 | 83,992 | (17) |
| Cash on hand | 83,074 | 50,982 | 63 | |||
| Working capital surplus (5) | 84,975 | 32,927 | 158 | |||
| Shareholders' equity | 110,084 | 263,025 | (58) | |||
| Long-term debt | 1,062,617 | 871,254 | 22 |
| (1) | ($ 000) except per share amounts | ||||||
| (2) | Adjusted EBITDA is a non-GAAP measure and is defined in the "Advisory Section" of the Q3 2014 MD&A and is reconciled to net loss under "Reconciliations of Net Loss to EBITDA, Facility EBITDA, Adjusted EBITDA, and Bitumen Netback" | ||||||
| (3) | Funds flow (used) is a non-GAAP measure and is defined in the "Advisory Section" of the Q3 2014 MD&A and is reconciled to cash flow from operating activities under "Reconciliation of Cash Flow from Operating Activities to Funds Flow (Used)" | ||||||
| (4) | Basic and diluted amounts are the same due to the net loss position | ||||||
| (5) | Includes cash of $83.1 million | ||||||
| OPERATIONAL | Q3 2014 | Q3 2013 | % Change | YTD 2014 | YTD 2013 | % Change |
| Average benchmark prices
| ||||||
| WTI (US$/bbl) | 97.17 | 105.83 | (8) | 99.61 | 98.14 | 1 |
| Heavy oil differential (CA$/bbl) | (22.16) | (18.15) | 22 | (23.16) | (23.26) | - |
| WCS (CA$/bbl) | 84.58 | 91.65 | (8) | 86.09 | 77.59 | 11 |
| Production and sales volumes (1) | ||||||
| Daily bitumen production (bbl/d) | 14,163 | 11,788 | 20 | 13,765 | 11,920 | 15 |
| Daily bitumen sales (bbl/d) | 13,976 | 11,318 | 23 | 13,380 | 11,909 | 12 |
| Bitumen netback (CA$/bbl) (2) | ||||||
| Dilbit sales | $79.27 | $101.16 | (22) | $80.64 | $85.08 | (5) |
| Diluent costs | (6.73) | (4.48) | 50 | (7.61) | (7.87) | (3) |
| Realized bitumen sales price (3) | 72.54 | 96.68 | (25) | 73.03 | 77.21 | (5) |
| Transportation and handling costs | (16.49) | (24.79) | (33) | (16.54) | (22.21) | (26) |
| Net realized bitumen sales price | 56.05 | 71.89 | (22) | 56.49 | 55.00 | 3 |
| Royalties | (4.21) | (5.65) | (25) | (4.28) | (3.62) | 18 |
| Net bitumen revenue price | 51.84 | 66.24 | (22) | 52.21 | 51.38 | 2 |
| Production and operating expenses | (20.55) | (19.67) | 4 | (24.39) | (20.25) | 20 |
| Bitumen netback | $31.29 | $46.57 | (33) | $27.82 | $31.13 | (11) |
| (1) | The Company's bitumen sales and production volumes differ due to changes in inventory and product losses | ||
| (2) | A non-GAAP measure which is defined in the "Advisory Section" of the Q3 2014 MD&A. Bitumen netback is reconciled to net loss under "Reconciliations of Net Loss to EBITDA, Facility EBITDA, Adjusted EBITDA, and Bitumen Netback". Bitumen netbacks per barrel amounts are calculated by dividing the total amounts presented in the "Bitumen Netback" table on page 9 by bitumen sold volumes as presented in the "Production and Sales Volumes" table on page 6, with the exception of dilbit sales (presented as dilbit sales divided by dilbit sales volume) and diluent costs (presented as the cost of diluent in excess of the dilbit selling price) | ||
| (3) | Before risk management contract gains or losses | ||
Operations and Marketing
In Q3 2014, production increased 20% to a quarterly record of 14,163 bbl/d (Q3 2013 - 11,788). This production level reflects the success of the growth capital program executed over the past 18 months.
Five of the nine 2014 infill wells were brought on production in Q3 2014. In Q2 2015, a planned turnaround at the Pod One central processing facility will increase the inlet emulsion capacity and the mini-steam expansion project tie-ins will be completed. Once the Q2 2015 turnaround at Pod One is completed, the remaining four infill wells will be brought online. A turnaround at Algar is planned for Q2 2015, which will include the tie-ins for the SAGD+® process commercial project.
In Q3 2014, operating costs increased 29% to $26.4 million (Q3 2013 - $20.5 million), due to higher natural gas prices as AECO 5A prices increased 66% to $3.81/GJ in Q3 2014 (Q3 2013 - $2.30/GJ) and increased evaporator waste disposal costs.
Connacher utilizes rail as an effective strategy for navigating market volatility and optimizing realized bitumen prices. In Q3 2014, the volume of dilbit sales outside of Alberta averaged approximately 56% (Q3 2013 - 90%) of total sales. In Q3 2013, the Company maximized its sales to a specific rail contract with exceptional pricing metrics, resulting in significantly higher bitumen netbacks than any previous or subsequent quarters.
Connacher utilized six unit trains to transport dilbit to markets during Q3 2014. Unit trains allow the Company to move large amounts of dilbit to additional markets more efficiently. In Q4 2014, it is anticipated that the Company will continue to utilize unit train logistics as part of its marketing strategy.
During Q3 2014, the Company closed out the majority of its WTI crude oil swaps, resulting in a termination gain of $1.2 million.
Capital Projects
The majority of the remaining 2014 Capital Plan budget will be spent on the completion of the SAGD+® process commercial project at Algar and the mini-steam expansion at Pod One.
Going Concern
The Company's current debt structure and limited access to additional financing due to restrictions associated with the terms of its long-term debt arrangements create material uncertainties that may cast significant doubt about the Company's ability to continue as a going concern. Projected cash flows from operations may not be sufficient to cover the semi-annual senior notes interest payments or quarterly term loan facility interest and principal payments.
The Company will continue to monitor its working capital balances and commitments as changing economic and risk conditions emerge. Based on current projections, the Company anticipates that it will need additional funds in 2015 in order to meet its obligations as they come due.
Q3 2014 Conference Call Details
Connacher will host its quarterly conference call on November 14, 2014 at 8 AM MST. Interested participants can call in to (888) 231-8191. Please use the Conference ID#17099863. An audio webcast of the conference call will also be available through the Company's website, or through the following link:
http://event.on24.com/r.htm?e=863468&s=1&k=64B659930786AA231623D0CEBB49FE02
Participants are encouraged to call in 5 minutes prior to commencement of the call.
About Connacher
Connacher is a Calgary-based in situ oil sands developer, producer, and marketer of bitumen. The Company holds a 100 per cent interest in approximately 450 million barrels of proved and probable bitumen reserves and operates two steam assisted gravity drainage facilities located on the Company's Great Divide oil sands leases near Fort McMurray, Alberta.
Forward Looking Information
This press release contains forward looking information, including but not limited to, the expectations relating to the timing for bringing the infill wells on production and the planned future capital expenditures and the funding and timing thereof.
Forward looking information is based on management's expectations regarding the Company's future financial position, the Company's future growth, results of operations and production, future commodity prices and foreign exchange rates, future capital and other expenditures (including the amount, nature and sources of funding thereof), plans for and results of drilling activity, environmental matters, business prospects and opportunities and future economic conditions. Forward looking information involves significant known and unknown risks and uncertainties, which could cause actual results to differ materially from those anticipated. These risks include, but are not limited to: that cashflow and the Term Loan Facility may not provide adequate funds to fund the Company's 2014 growth capital plan, the risks associated with the oil and gas industry (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 and resource estimates, the uncertainty of geological interpretations, the uncertainty of estimates and projections relating to production, costs and expenses, and health, safety and environmental risks), risk of commodity price and foreign exchange rate fluctuations, risks associated with the impact of general economic conditions, risks and uncertainties associated with maintaining the necessary regulatory approvals and securing the financing to proceed with the operation and continued expansion of the Great Divide oil sands project.
In addition, reported average production levels may not be reflective of sustainable production rates and future production rates may differ materially from the production rates reflected in this press release due to, among other factors, difficulties or interruptions encountered during the production of bitumen.
Additional risks and uncertainties affecting Connacher and its business and affairs are described in further detail in Connacher's Annual Information Form for the year ended December 31, 2013. Although Connacher believes that the expectations in such forward looking information are reasonable, there can be no assurance that such expectations shall prove to be correct. The forward looking information included in this press release is expressly qualified in its entirety by this cautionary statement. The forward looking information included herein is made as of the date of this press release and Connacher assumes no obligation to update or revise any forward looking information to reflect new events or circumstances, except as required by law.
SOURCE Connacher Oil and Gas Ltd.
Contact
Chris Bloomer, Chief Executive Officer; Greg Pollard, Chief Financial Officer; Connacher Oil and Gas Ltd., Phone: (403) 538-6201, Fax: (403) 538-6225, Suite 900, 332 - 6th Avenue SW, Calgary, Alberta, T2P 0B2, inquiries@connacheroil.com, www.connacheroil.com