EARNINGS / Stellarton Energy reports 1997 Results
CALGARY, March 16 /CNW/ -
Year ended December 31, Three months ended December 31,
1997 1996 1997 1996
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Revenue $16,371,631 $3,154,626 $5,152,183 $2,222,664
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Cash flow $ 2,536,555 $ 952,791 $ 384,205 $ 638,103
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Cash flow
per share $ 0.16 $ 0.18 $ 0.02 $ 0.04
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Earnings $ 13,758 $ 257,685 ($ 405,520) $ 196,096
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Production
(BOE/day) 1,062 240 1,340 532
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Proved reserves
(mBOE's) 4,478 2,006
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Common shares
outstanding 18,527,564 14,512,202
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Stellarton Energy Corporation's first full year under the strategy of
combining oil field tools and technology with resource operations witnessed a
419 percent increase in revenues and 166 percent growth in cash flows compared
to 1996.
Corporate Financial Results
Revenue and cash flow growth reflects higher production in Resources
($7.2 million) and the inclusion of Secure for the full 1997 calendar year
combined with increases sales by Secure ($7.3 million). Offsetting the above
noted positive factors were lower commodity prices ($1.4 million), higher
royalties and operating costs in Resources and lower margins in Secure due to
significant product development costs incurred during 1997.
Secure Oil Tools
Oil tool revenues for 1997 were $8.4 million up from $1.0 million
recorded by Stellarton for the period from the acquisition of Secure on
September 26, 1996 to December 31, 1996. When compared to the full year 1996
Secure's sales increased 88% in 1997 over 1996. Fourth quarter 1997 revenues
for Secure were $2.5 million compared to $1.0 million in the same period last
year.
Secure's cash flow from operations was $148,791 in 1997 versus $21,680
recorded for the partial year 1996. The 1997 cash flow represents 1.8% of
revenue, a figure below management's long term expectations. Both
manufacturing costs (67% of sales) and general and administrative expenses
(31 % of sales) were high in 1997 due to the cost of product development and
the creation of infrastructure to transform Secure from a single product,
domestically-focused division to a multi-product entity with a growing
international focus. Secure experienced a net loss in 1997 of $66,614
compared to a loss in 1996 of $11,525.
Resources Division
Resources revenue in 1997 was $8.0 million up 277 percent from 1997
revenue of $2.1 million. Production volumes, averaging 1062 barrel of oil
equivalent per day in 1997, were 343 percent higher than in 1996. Offsetting
the production increase was a decline in commodity prices with the average
price per barrel of oil equivalent at Cdn $20.68 in 1997 compared to Cdn
$24.30 in 1996 which decreased revenue by $1.4 million. Fourth quarter
volumes were up 152 percent over 1996 to average 1,340 barrels of oil
equivalent per day increasing revenue for the quarter to $2.6 million compared
to $1.3 million in the last quarter of 1996. Resources exited the year with
production volumes of approximately 1,600 barrels of oil equivalent per day.
Royalty costs were up as a percent of sales revenue in 1997 averaging 18
percent compared to 10 percent on average in 1996 when activities were focused
on tying in non-producing or shut-in oil wells, many of which were subject to
royalty holidays when brought on production. The increased royalty rates
lowered net revenues by $0.5 million compared to 1996 while increased
production resulted in the balance ($0.8 million) of the higher royalties.
Operating costs were $2.8 million in 1997 up from $0.6 million in 1996.
On a per barrel of oil equivalent basis costs were $7.26, up from $6.50 in
1996. The increase in production accounted for $1.9 million of the increase
while the higher per unit cost had a $0.3 million impact. Costs were
negatively impacted by the large block of properties acquired with the
start-up of SGS Partnership effective April 1, 1997. These propertles tended
to have higher initial operating costs that were lowered to $6.66 per barrel
of oil equivalent on average by the last quarter of 1997.
Resources replaced 1997 production by 740 percent at an average proved
finding and development cost of $6.38 per barrel of oil equivalent. Our F&D
cost performance since start-up of the SGS Partnership have been $3.13 per
barrel of oil equivalent of proved reserves added. Finding and development
costs for established (proved plus one half probable) reserves added were
$5.02 in 1997. The 1997 performance, when combined with 1996 F&D costs of
just over $2.00 per barrel of oil equivalent, results in a two year proved
only average F&D cost of $5.85 per barrel of oil equivalent.
Outlook
Stellarton has completed a remarkable year of growth in its operations
and opportunities. Product development in Secure and the establishment of the
SGS Partnership in the Resource Division are two major accomplishments that
have positioned the company for continued growth. Our December 31, 1997
closing share price of $4.60 provided an 80 percent return for our
shareholders during 1997 and a return of 360 percent to shareholders who
participated in our September, 1996 financing.
The Company has balanced cash flows provided by its two divisions and can
deliver financial results that are not entirely dependent on oil and gas
commodity prices. A focus on continuing the momentum of the existing line of
products in Secure and the ongoing growth of the SGS Partnership is being
supplemented with the search for new opportunities in both divisions.
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