EARNINGS / Saxon Announces Results for the First Quarter 1998
TSE SYMBOL: SXN
MAY 28, 1998
CALGARY, ALBERTA--
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HIGHLIGHTS
Three Months Ended March 31
Percent
1998 1997 Change
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Operating
Daily sales
Oil and NGL's (Bbls) 1,816 1,689 8
Gas (Mcf) 11,913 7,074 68
Average prices
Oil and NGL's ($/Bbl) $ 23.98 $ 27.43 (13)
Gas ($/Mcf) $ 1.79 $ 2.11 (15)
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Financial ($000's except per share)
Production revenue $ 5,840 $ 5,512 6
Cash flow 2,470 2,229 11
Per fully diluted share 0.016 0.015 7
Net income 196 426 (54)
Per fully diluted share 0.001 0.003 (67)
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Operating
The oil and NGLs production on a daily basis increased 8 percent
over the first quarter of 1997. Natural gas production increased
by 68 percent from 7 MMcf/d to almost 12 MMcf/d as a result of
drilling activity at the Bigoray and Kaybob properties.
Product prices in the first quarter of 1998 were down by a
significant amount from pricing in the first quarter of 1997. The
oil price reduction was partially offset by hedges that Saxon had
in place for the first quarter of 1998 for approximately
two-thirds of the oil production.
Royalties were reduced by $0.3 million during the first quarter of
1998 to reflect amendments received on Crown gas royalties
relating to prior years.
Capital expenditures were $3.3 million in the first quarter of
1998 compared to $23.5 million in the first quarter of 1997. The
1997 capital included extraordinary expenditures on facilities at
Bigoray. The capital activity for 1998 will remain low relative to
1997 as a result of a decision to minimize capital commitments in
view of the program to assess strategic alternatives for the
Company.
Financial
Cash flow during the first quarter of 1998 increased by 11 percent
compared to the first quarter of 1997. While production increased,
prices declined in offsetting amounts. Crown royalties were
reduced by prior period amendments.
There were incremental corporate costs of approximately $414,000
in the first quarter of 1998 related to retention pay for
employees during the ongoing sales process. Interest and financing
charges of $572,000 increased from $112,000 in 1997 due to the
increased debt levels.
Corporate Update
Saxon has announced that its major shareholder, Forest Oil
Corporation, has put forward a proposal to acquire all of the
issued and outstanding shares of Saxon on the basis of one share
of Forest common stock for every 48.07 shares of Saxon.
Saxon further announced that it has constituted a special
committee comprised of the independent members of the Board of
Directors to consider the proposal. Forest's proposal is subject
to the completion of a formal valuation; the consideration being
offered by Forest being at or above mid-point of the valuation
range determined in the formal valuation; approval of the proposed
transaction by the special committee and the recommendation of the
transaction by Saxon's Board to the shareholders; and the entering
into of agreements between Forest and each of the directors and
officers of Saxon wherein such directors and officers will agree
to dispose of their Saxon shares or vote such shares in favour of
the transaction.
This proposal does not preclude Saxon from soliciting superior
competing offers for the Company. In this regard Saxon has
initiated a process to seek a superior competing proposal to the
Forest proposal.
Forest Oil Corporation is, as of the time of writing this
document, proceeding to prepare and distribute their offer to all
shareholders. Management anticipates that the Company will have a
special meeting of shareholders on July 2, 1998 prior to the
scheduled Annual General Meeting.
Outlook
Effective May 1, 1998, the Company received good production
practises status on its Bigoray Ostracod Pool as a result of
reactivating a waterflood project. Net production at the
Company's 10-22 Ostracod battery has increased to 800 BOE/d from
500 BOE/d. In addition, Saxon is custom processing 2.0 MMcf/d of
third party gas at the 10-22 gas plant.
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BALANCE SHEETS
(unaudited)
March 31, December 31,
1998 1997
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ASSETS
Current
Accounts receivable $ 3,523,694 $ 4,368,049
Prepaid expenses 166,432 193,034
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3,690,126 4,561,083
Property, plant and equipment 94,842,544 93,656,297
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TOTAL ASSETS $ 98,532,670 $ 98,217,380
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LIABILITIES
Current
Accounts payable and
accrued liabilities $ 4,225,082 $ 6,419,855
Long term debt 39,133,638 36,948,192
Provision for future site restoration 1,120,250 1,030,250
Deferred income taxes 1,783,612 1,744,865
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46,262,582 46,143,162
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SHAREHOLDERS' EQUITY
Share capital 51,090,517 51,090,517
Retained earnings 1,179,571 983,701
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52,270,088 52,074,218
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TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 98,532,670 $ 98,217,380
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STATEMENTS OF INCOME AND RETAINED EARNINGS
(unaudited)
Three Months Ended March 31
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1998 1997
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Revenue
Petroleum and natural gas sales $ 5,839,785 $ 5,512,007
Royalties (776,750) (1,347,667)
Alberta royalty tax credit 133,229 397,950
Other income 63,638 81,124
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5,259,902 4,643,414
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Expenses
Operating 1,257,212 1,754,911
General and administrative 501,082 437,374
Corporate costs 414,000 -
Depletion and depreciation 2,235,161 1,447,180
Interest and financing 571,928 112,043
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4,979,383 3,751,508
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Income before income taxes 280,519 891,906
Income taxes 84,649 466,073
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Net Income 195,870 425,833
Retained Earnings, beginning of period 983,701 966,112
Dividends - (43,953)
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Retained Earnings, end of period $1,179,571 $ 1,347,992
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Earnings Per Share
Basic $ 0.001 $ 0.003
Fully diluted $ 0.001 $ 0.003
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STATEMENTS OF CASH FLOWS
(unaudited)
Three Months Ended March 31
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1998 1997
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Cash provided by (used in)
Operating
Net income $ 195,870 $ 425,833
Items not involving a
current cash flow 2,273,909 1,803,153
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Cash flow 2,469,779 2,228,986
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Financing
Dividends - (43,953)
Issue of shares - 5,450,067
Proceeds of long-term debt 2,185,446 16,343,519
Changes in non-cash working capital (1,323,818) (965,154)
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861,628 20,784,479
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Investing
Capital expenditures
Exploration, development
and corporate (3,331,407) (19,863,798)
Acquisitions - (3,609,146)
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(3,331,407) (23,472,944)
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Net Decrease In Cash - (459,479)
Cash and deposits, beginning of period - 500,927
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Cash And Deposits, end of period $ - $ 41,448
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Cash Flow
Basic $ 0.018 $ 0.016
Fully diluted $ 0.016 $ 0.015
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Saxon is an oil and gas exploration and production company based
in Calgary, Alberta and listed on The Toronto Stock Exchange,
symbol SXN.
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