Beau Canada Exploration Ltd. 1998 Results
MARCH 17, 1999
CALGARY, ALBERTA--1998 was a transition year for Beau Canada. The
Company continued its strategy of pursuing longer life gas
reserves which was complemented by the acquisition of APL Oil and
Gas Ltd. and partners midway through the year. As might be
expected, the steep decline in oil prices had an impact on
production and cash flow. All oil development was deferred and
approximately 1,500 barrels per day of heavy oil was shut-in on
average throughout the year. As a result, in 1998 for the first
time in the Company's history gas production exceeded oil and NGL
production on a boe basis. We expect this trend to continue in
1999 and beyond. SUMMARY (x) Gas production increased 29 percent to 91.1 mmcf/d
(x) Established gas reserves increased 24 percent over 1997 levels
(x) Production of oil and NGLs decreased 21 percent in 1998
(x) Established oil and NGL reserves remain unchanged from 1997
(x) Net income of $12.5 million is comparable to 1997 level of $12.8 million
(x) Cash flow is down 19 percent to $45.4 million
(x) Established reserve replacement of 206 percent in 1998 /T/Corporate Results
Year Ended Three Months Ended
December 31 December 31
Percent Percent
1998 1997 Change 1998 1997 Change
---- ---- ------ ---- ---- ------
Financial ($000's): Revenue 108,716 95,678 14 25,483 24,400 4
Cash Flow 45,451 56,169 (19) 14,186 13,397 6
per share (basic) 0.50 0.64 (22) 0.16 0.15 7
------ ------ -- ------ ------ --
Net Income 12,474 12,753 (02) 893 3,143 (72)
per share (basic) 0.13 0.15 (13) 0.01 0.04 (75)
------ ------ -- ------ ------ --Production:
Gas (mmcf/d) 91.1 70.7 29 94.9 70.1 35 Oil & NGLs
(bbls/d) 8,303 10,454 (21) 6,675 10,599 (37) Barrels of oil
equivalent/d 17,409 17,520 (01) 16,164 17,606 (8)Average Prices:
Gas per mcf 1.89 1.76 7 2.24 1.89 19 Oil & NGLs
per barrel $ 15.20 $17.13 (11) $ 17.21 $ 15.53 11
------- ------ -- ------- ------- --
Shares Outstanding(average)
(millions) 90.8 87.9 3 91.5 88.7 3/T/Financial
Lower oil prices and production more than offset increased gas
prices and production to reduce cash flow to $45.5 million (0.50
per basic share) from $56.2 million ($0.64 per basic share) in
1997. Net income of $12.5 million ($0.13 per basic share) in 1998
was comparable to 1997's level of $12.8 million ($0.15 per basic
share) as the gains from the Alliance/Fort Chicago divestment and
the sale of offshore Cuban acreage compensated for lower operational earnings.
Production Beau Canada's gas production averaged 91 mmcf/d in 1998, up 29
percent from 1997. Increases in gas production were a result of
drilling and well tie-ins in the Peggo and Foxglove areas in
northeast British Columbia, the Cranberry and Karr areas in
northwest Alberta, as well as, through a strategic acquisition
made in mid 1998. Oil and NGLs production average 8,303 bbls/d,
down 21 percent from the average for 1997. This reduction
reflects the Company's response to the steep decline in oil prices
in 1998. During 1998 the Company shut-in approximately 1,500
bbls/d of heavy oil production and delayed all oil exploration and
development programs until prices improve. Activity and Reserves
Beau Canada drilled 55 (40.1 net) wells in 1998 with an 88 percent
success rate. Virtually all of the Company's 1998 drilling
activity was directed towards natural gas and natural gas liquids.
The Company's major drilling programs were in the Peggo and
Foxglove areas of northeast British Columbia, the Cranberry and
Gold Creek areas of northwest Alberta, the Shiningbank, Open Creek
and Gilby areas of west central Alberta and the Alderson area of
southeast Alberta. /T/Drilling Results
Year Ended Three Months Ended
December 31 December 31
1998 1997 1998 1997
---- ---- ---- ----
Gross Net Gross Net Gross Net Gross Net
Gas Wells 43 32.0 39 30.4 18 13.0 12 11.3
Oil Wells 7 3.1 70 50.1 1 1.0 21 14.0Dry and
Abandoned 5 5.0 22 20.6 3 3.0 3 3.0
-- ---- -- ---- -- ---- -- ----
55 40.1 131 101.1 22 17.0 36 28.3 Success Rate
(percent) 91 88 83 80 86 82 92 89 /T/
In mid 1998 Beau Canada acquired APL and its working interest
partners. The acquisition added production of 29 mmcf/d of gas
and 1,600 bbls/d of light oil and NGLs, as well as, significant
undeveloped land and facility infrastructure in west central
Alberta, complementing Beau Canada's planned growth in these
areas. Subsequent to the acquisition the Company has been
actively drilling and exploiting the acquired assets resulting in
a production increase of 8 mmcf/d of gas and 250 bbls/d of NGLs
with additional production to be brought on in the second quarter of 1999.
Late in 1998, Beau Canada sold $56 million of assets, primarily
located in southeast Alberta. The properties sold were considered
mature and did not fit with our long-term growth strategy. Over
half the assets sold were heavy oil.
While Beau Canada's undeveloped land holdings remained relatively
unchanged from 1997 at 495,000 net acres, the Company did increase
significantly its undeveloped land holdings in its strategic core
areas of western Alberta, while divesting of non-core land
holdings in southern and eastern Alberta.
The Company replaced its production by over 200 percent in 1998,
while increasing its established (proven and risked probable)
reserves by 12 percent to 61.1 million barrels of oil equivalent
and its proven reserves by 3 percent to 51.8 million barrels of
oil equivalent. Established gas reserves increased significantly
to 355 billion cubic feet from 286 billion cubic feet. The growth
in gas reserves reflects Beau Canada's continued commitment
towards the addition of longer life gas reserves through drilling
and acquisitions.
Oil and NGLs established reserves remained near 1997 levels at
25.6 million barrels, while the proven oil and NGLs reserves
decreased by 9 percent to 22.0 million barrels. The lack of
growth of oil and NGLs reserves is a result of the Company's focus
on the growth of gas reserves in its 1998 capital program combined
with the sale of significant heavy oil reserves at Medicine Hat
and the downward revision of various heavy oil properties in west
central Saskatchewan. Although there was no growth in liquid
reserves, the overall quality of Company's reserve base improved
in 1998 with only 15 percent of the total reserves being heavy oil
as compared to 29 percent in 1997.
The cost of reserves added in Canada for 1998 was $7.06/boe for
proven plus probable reserves, $9.86/boe for proven plus risked
probable reserves and $16.37/boe for proven reserves. On a three
year average basis, the cost of reserves are; $6.48/boe for
proven plus probable, $7.52/boe for proven plus risked probable
and $8.96/boe for proven. The cost of reserve additions was
significantly above the Company's historical average due to the
downward revision of various heavy properties in west central
Saskatchewan, the sale of heavy oil assets at Medicine Hat and
high service costs relating to the winter drilling program in
northeast British Columbia and northwest Alberta, combined with
reserve additions that were below expectations. Outlined below
are Beau Canada's estimated reserves at January 1, 1999. /T/
Natural Gas, Crude Oil and NGLs Reserves
Natural Gas Crude Oil NGLs
----------- --------- ----
(bcf) (mbbls) (mbbls)
----- ------- -------
Proven Producing Reserves 220 10,105 6,648
Proven Non-producing Reserves 78 4,071 1,156
Total Proven Reserves 298 14,176 7,804
Probable Reserves 114 4,636 2,637
Total Proven and Probable 412 18,812 10,441
Total Proven and Risked Probable 355 16,494 9,123/T/Outlook
Beau Canada will continue to direct the majority of its capital
budget to the exploration and development of gas reserves in
western Alberta and northeast British Columbia. Favorable service
costs and the allocation of a greater portion of the Company's
capital budget to medium risk gas targets in western Alberta are
expected to lower the cost of reserve additions in 1999. Beau
Canada currently has 1,500 bbls/d of heavy oil production shut-in
and an inventory of oil prospects waiting for oil prices to
improve. Given a favorable outlook in oil pricing the Company
will bring on some of the shut-in production and commence drilling
the oil prospects.
For 1999, Beau Canada is projecting gas production to average 120
mmcf/d and oil and NGLs production to average 6,600 bbls/d. With
forecasted prices of $2.35/mcf for gas and U.S. $13.00 for WTI,
the Company is expecting cash flow of $63 million. Year end bank
debt of $163 million implies a debt to forward cash flow ratio of
2.6 to 1. In addition, the Company had over $50 million in
available credit lines at year end to pursue opportunities.
Given the current industry environment, Beau Canada believes there
will be acquisition opportunities in the near term. The Company
will be reviewing these opportunities and will pursue them only if
we believe they contribute positively to shareholder value.
Beau Canada Exploration Ltd. is a Canadian oil and gas exploration
and development company based in Calgary. Beau Canada's common
shares are listed on The Toronto Stock Exchange and the Montreal
Exchange under the symbol "BAU". |
