Tappit Announces First Quarter Results
OUTSTANDING RESULTS
REGINA, SASKATCHEWAN--
/T/
Corporate Highlights
FIRST QUARTER
(unaudited) THREE MONTHS ENDED MARCH 31
FINANCIAL (Cdn$) 1ST QTR 2002 1ST QTR 2001 CHANGE
Petroleum Sales $ 3,826,885 $ 4,882,073 -22%
Cash flow from operations $ 1,942,709 $ 2,217,794 -12%
Cash flow per share -
weighted average $ 0.11 $ 0.12 -8%
Net earnings $ 462,709 $ 465,313 -1%
Net earnings per share -
weighted average $ 0.03 $ 0.02
Shares outstanding at
period end 17,792,621 18,314,421 -3%
Weighted average shares 17,778,732 18,803,817 -5%
PRODUCTION
Avg daily production (Boepd) 6:1 1,872 1,764 6%
Oil barrels/day 1,104 781 41%
Gas sales mmcf/day 4,610 5,900 -22%
Crude Oil ($/bbl) 26.42 35.43 -25%
Natural Gas ($/Mcf) 2.77 4.50 -38%
Avg sales price per boe $ 22.69 $ 30.75 -26%
Avg royalties per boe $ 3.73 $ 9.44 -61%
Avg operating costs per boe $ 4.91 $ 4.36 13%
Netback per boe $ 14.05 $ 16.95 -17%
G & A cost per boe $ 1.35 $ 1.00 35%
Interest cost per boe $ 1.21 $ 1.99 -39%
Investment (income) expense ($0.07) -
Cash flow netback per boe $ 11.56 $ 13.96 -18%
/T/
Financial Review: Quarter 1 - 2002
* Revenue decreased 22% to $3,826,885 from $4,882,073 in 2001
despite a 6% increase in production due to weaker prices in both
natural gas and oil. Petroleum sales per barrel averaged $22.69
down 26% from $30.75 per barrel last year.
* Cash flow in the quarter decreased 12% to $1,942,709 and $0.11
per share ($0.12 per share in 2001) from $2,217,794. Operating
expenses were up 14% to $828,780 ($4.91 per boe) from $691,747
($4.36 per boe) due to higher production and higher operating
costs due to inflationary pressure in the oil service sector.
* Royalties costs, net of ARTC, were down considerablely to
$628,485 in the first quarter 2002 versus $1,497,914 in 2001 as a
result of lower revenues and gas hedges held in Quarter 1 last
year that expired in Quarter 3 2001.
Further, gas royalty rates are charged as a percentage of the
Alberta Reference Price (an average of several gas sales point
prices in Alberta). The Reference Price for Quarter 1 - 2001
averaged approximately $9.00 per mcf while Tappit's average gas
sales price was $4.50 per mcf. This had the effect of
substantially raising Tappit's royalty costs last year.
* Net general and administrative costs were higher at $227,918 in
the quarter as compared to $158,248 in 2001. This was due to
higher engineering and promotional costs.
* Interest expenses were lower at $203,334 versus $316,370 in the
first quarter 2001 due to lower interest rates year over year as
well as the repayment of the high interest debenture at the end of
2001.
* Depletion, depreciation and amortization expenses increased to
$1,070,000 ($6.34 per boe) in the quarter from $1,015,000 ($6.39
per boe) in 2001. Tappit's net earnings were $462,709 versus
$465,313 in 2001.
/T/
STATEMENT OF OPERATIONS AND DEFICIT
First Quarter March 31, 2002 (unaudited) 3 months ended March 31
Production Revenue 2002 2001
Petroleum sales $ 3,826,885 $ 4,882,073
Less: Royalties 564,426 1,424,871
Saskatchewan Resource Surcharge 64,059 73,043
-----------------------------
3,198,401 3,384,159
-----------------------------
Expenses
Production and operating 828,780 691,747
General and administrative 227,918 158,248
Interest on long-term debt 203,334 316,370
Depletion and depreciation 1,070,000 1,015,000
Provision for site restoration 10,000 10,000
Unrealized foreign exchange loss 0 310,000
Investment income (12,180) 0
-----------------------------
2,327,852 2,501,365
-----------------------------
Earnings before income taxes 870,548 882,794
Provision for income taxes (407,839) (417,481)
-----------------------------
Net earnings for the period 462,709 465,313
-----------------------------
Deficit beginning of year (3,092,028) (2,820,730)
Share repurchase (note 3) (90) (674,393)
-----------------------------
Deficit, end of period ($2,629,409) ($3,029,810)
-----------------------------
Basic and diluted earnings
per share (note 3) $ 0.03 $ 0.02
-----------------------------
BALANCE SHEET
As at March 31, 2002 (unaudited) March 31/2002 Dec 31/2001
ASSETS
Current assets
Accounts receivable $ 3,337,179 $ 2,772,427
Temporary Investments 613,000 613,000
-----------------------------
3,950,179 3,385,427
Property and equipment 33,562,393 32,388,452
-----------------------------
37,512,572 35,773,879
-----------------------------
LIABILITIES
Current liabilities
Accounts payable and accrued liabilities 5,763,344 4,487,754
Bank indebtness (note 2) 19,820,082 20,240,178
-----------------------------
25,583,426 24,727,932
Future income taxes 5,974,315 5,574,315
Future site restoration costs 458,722 448,722
-----------------------------
6,433,037 6,023,037
-----------------------------
SHAREHOLDERS' EQUITY
Share capital (note 3) 8,125,518 8,114,938
Deficit (2,629,409) (3,092,028)
-----------------------------
5,496,109 5,022,910
-----------------------------
$ 37,512,572 $ 35,773,879
-----------------------------
STATEMENT OF CASH FLOWS
First Quarter ended March 31, 2002 (unaudited)
3 months Ended March 31
Operating Activities 2002 2001
Net earnings for the period $ 462,709 $ 465,313
Items not affecting cash
Unrealized foreign exchange loss - 310,000
Provision for site restoration costs 10,000 10,000
Future income taxes 400,000 417,481
Depletion and depreciation 1,070,000 1,015,000
-----------------------------
Cash flow from Operations 1,942,709 2,217,794
Net Change in non-cash working capital (179,162) (576,151)
-----------------------------
1,763,547 1,641,643
-----------------------------
Financing activities
(Decrease) Increase in long-term debt (420,096) 1,708,077
Common shares issued 11,000 224,080
Repurchase of common shares (510) (1,088,723)
-----------------------------
(409,606) 843,434
-----------------------------
Investment activities
Investment in oil & gas properties (2,243,941) (2,485,077)
Net change in non-cash working capital 890,000 -
-----------------------------
(1,353,941) -
-----------------------------
Cash, beginning and end of period $ 0 $ 0
-----------------------------
Basic and diluted cash flow
per common share $ 0.11 $ 0.12
-----------------------------
Cash outlay for interest
during the period $ 203,334 $ 316,370
Capital tax and Provincial
resource surcharge $ 71,898 $ 75,336
/T/
Notes to the Financial Statements
1. Significant accounting principles
These interim financial statements are prepared in accordance with
Canadian generally accepted accounting principles. Except as
disclosed in note 2, these interim financial statements have been
prepared following the same accounting policies used in the
financial statements for the year ended December 31, 2001. The
disclosures provided below are incremental to those included with
the annual financial statements and these interim financial
statements should be read in conjunction with the financial
statements and the notes thereto in the Company's annual report
for the year ended December 31, 2001.
2. Changes in accounting policies
On January 1, 2002, the company adopted the new CICA Handbook
Section on "Stock-based Compensation and Other stock-Based
Payments" and will continue to account for common share options
granted to employees, officers and directors using the intrinsic
method. Accordingly, no compensation cost has been recognized in
the consolidated statements of operations (also see note 3).
Effective January 1, 2002, the company has classified its
revolving demand bank indebtedness as a current liability in both
its current and comparative balance sheets in compliance with the
conclusions of the Canadian Institute of Chartered Accountants'
Emerging Issues committee Abstract 122 "Balance Sheet
Classification of Callable Debt Obligations and Debt Obligations
Expected to be Refinanced". There have been no changes in the
terms of the company's bank indebtedness since year end.
In 2001, the Company retroactively adopted the new Canadian
Institute of Chartered Accountants earnings per share standard.
The new standard, which had no impact on reported per share
amounts, relates to the computation, presentation and disclosure
of per share amounts and requires the use of the treasury stock
method to determine the dilutive effect of stock options and other
dilutive instruments.
3. Common shares and options
The Company's share capital consists of an unlimited number of
common shares.
/T/
Issued and outstanding common shares: Number of Shares $
Balance at January 1, 2002 17,768,621 8,114,938
Stock options exercised 25,000 11,000
Shares repurchased (1,000) (420)
-------------------------
Balance at March 31, 2002 17,792,621 8,125,518
-------------------------
/T/
The weighted average number of common shares outstanding in the
period was 17,778,732 (2001 - 18,803,817). The Company has a
stock based compensation plan that allows certain employees and
directors the option to purchase common shares of the Company.
The weighted average remaining life of options outstanding at
March 31, 2002 was 2.79 years.
/T/
Continuity of stock options: Number of options Weighted Average
Exercise Price ($)
Outstanding at January 1, 2002 2,073,500 0.69
Granted 465,000 0.61
Exercised (25,000) 0.44
Forfeited (485,000) 0.44
-------------------------------
Outstanding and exercisable
at March 31, 2002 2,028,500 0.73
-------------------------------
/T/
As discussed in note 2, the company uses the intrinsic method to
account for stock-based compensation. Had compensation cost been
determined on the basis of fair values, net income for the quarter
would have been reduced by $52,000 to $410,709 ($0.02 per share).
The $52,000 reduction represents the fair value of options granted
in the quarter, all of which vested immediately upon grant. The
fair value of common share options granted is estimated as at the
grant date using the Black-Scholes option pricing model, using the
following assumptions:
/T/
Dividend yield nil
Risk-free interest rate 3.27%
Expected life 2 years
Expected volatility 28%
/T/
-30-
FOR FURTHER INFORMATION PLEASE CONTACT:
Tappit Resources Ltd.
Lawrence Bintner
President
(306) 525-3558
(306) 359-3442 (FAX)
Email: tappit@accesscomm.ca
Website: www.tappit.com |
