Scorpion Energy Corp -
Scorpion six-month results; recapitalization due diligence complete
Scorpion Energy Corp SEN
Shares issued 8,250,690 1999-08-10 close $1
Wednesday Aug 11 1999
Mr. Ernie Toews reports
HIGHLIGHTS
Three months ended June 30
1999 1998
FINANCIAL
Petroleum and
natural gas
sales $ 2,975,000 $ 882,000
Cash flow from
operations 1,299,000 301,000
Per share 16 cents 5 cents
Net earnings
(loss) (118,000) (20,700)
Net earnings
(loss) per share (1 cent) 0 cents
Capital
expenditures 909,000 3,249,000
Total bank
debt (including
working capital) 8,044,000 1,015,000
Shareholders'
equity 10,982,000 8,620,000
Total assets 20,962,000 10,739,000
OPERATING
Production
Natural Gas
Mcf 923,698 150,488
Mcf/day 10,150 1,654
Oil and NGL
Bbl 34,696 30,953
Bbl/day 381 340
Barrels of oil
equivalent (10 to 1)
Boe 127,065 46,003
Boe/day 1,396 506
Average selling prices
Natural gas per mcf $ 2.55 $ 1.97
Oil and NGL per bbl $20.51 $18.87
HIGHLIGHTS
Six months ended June 30
1999 1998
FINANCIAL
Petroleum and
natural gas
sales $ 4,655,000 $ 1,676,000
Cash flow from
operations 1,815,000 397,000
Per share 22 cents 7 cents
Net earnings
(loss) (598,000) (180,000)
Net earnings
(loss) per share (7 cents) (3 cents)
Capital
expenditures 2,205,000 4,336,000
OPERATING
Production
Natural Gas
Mcf 1,508,715 331,065
Mcf/day 8,335 1,830
Oil and NGL
Bbl 62,372 58,826
Bbl/day 345 325
Barrels of oil
equivalent (10 to 1)
Boe 213,243 91,933
Boe/day 1,178 508
Average selling prices
Natural gas per mcf $ 2.41 $ 1.81
Oil and NGL per bbl $17.74 $18.28
Scorpion's production averaged 10,150 thousand cubic feet per day of natural gas and 381 barrels a day of oil and natural gas liquids for the three months ended June 30, 1999. This equates to 1,396 barrels of oil equivalent (boe) per day calculated at a 10 to 1 ratio. Comparative daily average volumes for the second quarter of 1998 were 1,654 mcf of natural gas and 340 bbl of oil and natural gas liquids or 506 boe.
First quarter 1999 production averaged 958 boe per day. The 46-per-cent increase in production rates from the first to the second quarter, 1999, was primarily as a result of reduced shut-in production, interruptible processing capacity becoming available at the Brazeau River gas plant for Scorpion's Shunda gas production and the Brazeau Nisku I pool being placed back on production in mid-May.
Petroleum and natural gas sales revenue increased to $2,975,000 for the second quarter of 1999 from $882,000 for the second quarter of 1998. Sales revenue from natural gas and natural gas liquids accounted for 82 per cent of total sales. Second quarter sales revenue increased 77 per cent compared with the 1999 first quarter sales of $1,680,000. Cash flow from operations for the second quarter totalled $1,299,000 (16 cents per share) compared with $301,000 (five cents per share) for the second quarter of 1998. The increase in sales revenue and cash flow was due mainly to the increased natural gas production and higher natural gas prices. Second quarter cash flow increased by 152 per cent compared with the first quarter cash flow of $516,000. The net loss for the quarter was $118,000 (one cent per share) compared with a net loss of $20,700 for the comparative period.
Scorpion's natural gas price averaged $2.55 per mcf for the second quarter compared with $2.19 per mcf for the first quarter 1999. The crude oil and natural gas liquid price also increased from $14.27 per barrel to $20.51 per barrel in the second quarter.
During the second quarter, Scorpion entered into two significant farm-ins in two core natural gas areas. In the Gadsby-Hackett area, the company committed to drill three wells by the end of September to test the Belly River and Edmonton gas sands. The first well is scheduled to spud this month. This farm-in provides Scorpion the opportunity to earn a 100-per-cent working interest, subject to a non-convertible royalty, on 20.25 sections by continuing to drill wells on a rolling option basis.
In the Brazeau area, the company committed to drill a farm-in well that is targeting an extension of the 280 billion cubic foot Nisku P pool. The well is scheduled to spud before the end of September. Scorpion will be acquiring partners to share its 60-per-cent working interest in the well.
At Brazeau, Scorpion is continuing its efforts to resolve a dispute with a joint venture partner. Simultaneously, discovery hearings are continuing in preparation for trial, if necessary. For the six months ended June 30, 1999, Scorpion received net operating income of $816,000 and as at June 30, had incurred capital costs of $1,138,000 relating to the interests under dispute.
Mr. Toews also reports
On Aug. 6, 1999 the due diligence was completed on the previously announced $5.7-million recapitalization with Laurie Sibbald, ARC Canadian Energy Venture Fund and other investors. The recapitalization will involve the purchase of 5.7 million common shares (of which 350,000 are flow-through common shares) and 1,904,100 common share purchase warrants. The warrants are exercisable at a price of $1 per warrant subject to the price of the common shares reaching certain thresholds. Scorpion has agreed to pay a break fee in the amount of $650,000 in certain circumstances.
Mailing of the information circular is scheduled for Aug. 23, 1999, with a special meeting of the shareholders of Scorpion called for 10 a.m., Sept. 24, 1999, to approve the transaction. Griffiths McBurney has acted as financial adviser to Scorpion in this transaction.
The board of Scorpion believes this transaction significantly enhances the corporation's management, technical and financial resources. With these changes, Scorpion will be well-positioned to establish itself as one of the leading growth companies in Canada's junior oil and gas sector.
(c) Copyright 1999 Canjex Publishing Ltd. canada-stockwatch.com
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