pretty good results, should be good for a double if Oil stays
over $20 for 6 months, Scott
Maxx Petroleum six-month results
Maxx Petroleum Ltd MXP
Shares issued 14,859,382 1999-08-13 close $5.65
Monday Aug 16 1999
Mr. Bob Rosine reports
OPERATING HIGHLIGHTS
Three months ended June 30
1999 1998
Production
Crude oil and
natural gas
liquids (bbl/d) 4,672 6,242
Natural gas (mmcf/d) 13.2 13.1
Boe/d 5,990 7,552
Average sales price
Crude oil ($/bbl) 18.47 14.61
Natural gas ($/mcf) 2.65 2.05
Drilling activity
Gross wells 18.0 8.0
Net wells 15.1 4.7
OPERATING HIGHLIGHTS
Six months ended June 30
1999 1998
Production
Crude oil and
natural gas
liquids (bbl/d) 4,917 6,647
Natural gas (mmcf/d) 13.9 12.8
Boe/d 6,305 7,927
Average sales price
Crude oil ($/bbl) 16.91 14.98
Natural gas ($/mcf) 2.59 1.92
Drilling activity
Gross wells 23.0 16.0
Net wells 17.8 9.1
Maxx Petroleum had a 193-per-cent increase in earnings and a 22-
percent increase in cash flow for the first six months of 1999. The
combination of improved commodity prices, lower cash costs and
reduced depletion, depreciation and amortization expenses
contributed to the improved results.
Financial
For the six months ended June 30, 1999, net income increased to $1.5
-million or 10 cents per share on gross production revenues of $21.5
-million. Funds generated from operations for the period rose to $9.8-
million or 66 cents per share. As a result of increased heavy oil
production and improved efficiencies in the field, operating
expenses dropped to $4.82/barrel of oil equivalent produced in the
1999 six-month period from $5.19 a year ago. During the first six
months of 1999, combined general and administrative, interest and
DD&A expenses were $9.62/boe, down from $9.80/boe in 1998. The DD&A
charges alone during the 1999 period were $6.85/boe, compared with
$7.32/boe a year ago. Royalties before Alberta royalty tax credits
increased to 16 per cent of revenue in the first half of 1999 and 17
per cent in the second quarter, compared with 16 and 15 per cent
respectively in 1998, due to improved commodity prices. Exploration
and development capital spending during the first half of 1999 was
$13.1-million, representing almost 35 per cent of the total 1999 E&D
budget of $38-million. Over 65 per cent of the expenditures were
directed toward drilling and completions, with the balance expended
on land, seismic and surface facilities.
Operations
During the second quarter, Maxx drilled 18 gross wells (15.1 net)
with a 100-per-cent success rate, bringing the first half total to
23 gross wells (17.8 net) or an 83-per-cent success rate. Maxx plans
on drilling a total of 45 gross wells for the year. The company's
production averaged 6,305 boe/d in the 1999 six-month period, a 20
-per-cent decrease from the same period in 1998, reflecting normal
declines, scheduled first quarter dispositions and unanticipated
weather-related drilling delays. The company expects usual
production declines during the third quarter, however anticipates a
strong increase in the final quarter as new discoveries announced
earlier in the year are developed and brought on production, and the
full impact of its development drilling program is realized. During
the first six months of 1999, the company realized an average crude
oil price of $16.91/barrel, a 13-per-cent increase over 1998 first
half results. During the 1999 second quarter, however, crude oil
prices increased 19 per cent to average $18.47/barrel, demonstrating
the significant improvement in wellhead prices since the first
quarter. Crude oil and natural gas liquids prices are expected to
continue to strengthen throughout the balance of the year. Maxx's
average natural gas prices were $2.59/mcf and $2.65/mcf for the six
-month and second quarter periods, respectively, or up 35 and 29 per
cent, respectively from 1998.
West central Alberta
Drilling and production operations were hampered by severe wet
weather conditions in May and June. During the second quarter, two
Ostracod light oil wells drilled earlier in the year at Willesden
Green were placed on production and are currently producing at 150
barrels of oil equivalent a day on restricted allowable. An
additional six wells are scheduled to be drilled during the balance
of the year, and pending success in the main pool, a waterflood
project will be initiated in late 1999. To date, Maxx has drilled
three successful Ostracod oil wells and maintains a 100-per-cent
working interest in the development block.
At Burnt Timber, an exploration re-entry of 4-21-30-7 W5M was
initiated to test the gas potential in the highly faulted Viking
formation. The 4-21 re-entry was to test a portion of the company's
60-section exploration farm-in block. Significant mechanical
difficulties were encountered while drilling, which have resulted in
the premature abandonment of the well bore without evaluating the
Viking target. Maxx is meeting with its partner to schedule a
replacement grassroots exploration well in order to evaluate the
sweet natural gas potential across the acreage. Maxx has a 50-per-
cent participation right in 38,400 gross undeveloped acres.
At Berland River, the company has licensed 4-15-59-24 W5M to a depth
of 3,700 metres to test the natural gas potential in the Wabamun
formation. Maxx has a 100-per-cent interest in 4-15. This well will
evaluate a portion of a recently negotiated 12,000 acre farm-in.
In addition to the exploration at Burnt Timber and Berland River,
Maxx plans to drill three exploration wells in North Willesden
Green, Carrot Creek and Ferrier prior to year-end.
Heavy oil
As a result of improved heavy oil economics, the company commenced a
27-well drilling program in conjunction with its 1999 well
reactivation program. During the second quarter, heavy oil production averaged 1,348 barrels a day of 13 degree API crude. The
first phase of the drilling program began by drilling 13 wells with
initial production of 685 b/d. Capital costs for the 13-well program
were $2.7-million or $210,000 per well, a 25-per-cent decrease from
1997 costs of $280,000 per well. The remaining 14-well drilling
program will commence in August, with production adding an
incremental 525 b/d. The company estimates heavy oil production to
peak at 2,300 b/d in October. The company has a further 35 wells
scheduled to be drilled during calendar 2000, which should add an
additional 1,500 b/d to production. Maxx has a 100-per-cent working
interest in its heavy oil operations.
Maxx has actively pursued a heavy oil hedging program in concert with
half cycle development so as to ensure positive project economics.
To date during 1999, the company has hedged 1,500 b/d at prices
ranging from $15.80/bbl at the wellhead to $17.25/bbl until Dec. 31,
2000.
Property dispositions
Maxx completed $3-million worth of planned reserves property
dispositions during the first half of 1999. Non-core production and
reserves sold totalled 182 b/d and 419,500 barrels of oil equivalent, respectively. The company plans to divest a further $6.8
-million of non-core assets by year-end in order to supplement the
financing of its E&D program. The divestitures will reduce
administrative expenses and high operating cost non-strategic
properties, while focusing the company on strategic west central
Alberta gas E&D, along with heavy oil development.
Y2K update
Maxx's Year 2000 compliance project is proceeding on schedule. During
the third quarter, the company will have completed computer hardware
and software upgrades, as well as the majority of field remediation
work. The company has contacted, and continues to follow up with
suppliers, purchasers, transporters and joint venture partners to
monitor their Year 2000 compliance programs.
Corporate
Maxx continued its normal course issuer bid to purchase shares for
cancellation of up to 5 per cent of its outstanding common shares.
During the first half of 1999, the company acquired and cancelled
90,900 shares pursuant to its issuer bid at an average price of
$3.17 per share.
Outlook
The company remains positive on the industry fundamentals and is well
positioned to grow shareholder value through a focused program of
exploration, development, acquisitions and exploitation. Maxx
expects to maintain a $38-million E&D capital investment program in
1999, which will be expended primarily on its existing focus areas,
west central Alberta gas and heavy oil.
CONSOLIDATED STATEMENT OF OPERATIONS
Three months ended June 30
(thousands of dollars)
1999 1998
Revenue
Production $10,981 $10,763
Less:
Crown royalties 1,361 1,015
Other royalties 525 614
------- -------
9,095 9,134
Alberta royalty
tax credit 446 309
------- -------
9,541 9,443
------- -------
Expenses
Production 2,553 3,614
General and
administrative 877 1,053
Interest, net 725 964
Depletion and
depreciation 3,861 5,077
------- -------
8,016 10,708
------- -------
Income before
provision for
income taxes 1,525 (1,265)
------- -------
Income taxes
Current corporation
taxes 156 236
Deferred 363 (565)
------- -------
519 (329)
------- -------
Net income (loss) $1,006 $(936)
======= =======
Earnings (loss) per
share 7 cents (6 cents)
CONSOLIDATED STATEMENT OF OPERATIONS
Six months ended June 30
(thousands of dollars)
1999 1998
Revenue
Production $21,458 $22,493
Less:
Crown royalties 2,512 2,108
Other royalties 1,002 1,488
------- -------
17,944 18,897
Alberta royalty
tax credit 822 634
------- -------
18,766 19,531
------- -------
Expenses
Production 5,499 7,448
General and
administrative 1,666 1,818
Interest, net 1,489 1,747
Depletion and
depreciation 7,822 10,499
------- -------
16,476 21,512
------- -------
Income before
provision for
income taxes 2,290 (1,981)
------- -------
Income taxes
Current corporation
taxes 346 512
Deferred 460 (899)
------- -------
806 (387)
------- -------
Net income (loss) $1,484 $(1,594)
======= =======
Earnings (loss) per
share 10 cents (11 cents)
|
