Why don't I just give them to you. I'd like to point the $1.00 anualized cashflow in the fourth quarter given $19.00 oil prices. We are at $21.71 for oil right now. is 4X cashflow unreasonable? I don't think so!
08/19/1999 13:32:00 / UPTON RESOURCES INC
UPTON RESOURCES INC ("URC-T;UPTRF-L")
- Second Quarter Financial Results
Upton Resources Inc. released results for the second quarter and six months ended June 30, 1999. During the second quarter a number of accomplishments helped drive production levels upward but the results came too late to impact the second quarter. Lower volumes, higher than normal expenditures on previously deferred well repairs and work-overs and oil price hedging, all lowered quarterly results. Basic cash flow was $1 million and $0.06 per share in the quarter. The positive impact of current production of 3500 barrels per day combined with a vastly improved crude oil price will be reflected in upcoming quarters.
Operational Review
Upton completed a number of initiatives in the quarter adding production volumes with well repairs, work-overs and development drilling. Extremely wet weather followed spring break-up delaying planned programs until late June. Despite the delay, the results were very successful with 700 barrels per day added to reach current production levels of 3500 barrels per day.
Two 100% horizontal development wells were completed and placed on production in June. At Browning, Upton drilled 600 metres of productive reservoir. The well is continuing to flow clean oil at a restricted rate of 250 barrels per day. At Midale, a horizontal well also exceeded expectations producing at over 150 barrels per day. A horizontal well offsetting this location is currently being drilled.
Subsequent to the quarter Upton drilled and completed two wells. At Midale, a new vertical development well is currently flowing at 120 barrels of oil per day, and a second well is being completed this week. In addition, salt water disposal wells were drilled at Weyburn and Browning which will contribute to lower operating costs by eliminating water hauling in both areas.
One exploration well (0.63 net) was dry and abandoned and a second (0.70 net) was brought on production in July and is currently being evaluated.
Operating costs rose to $5.43 per barrel in the quarter and $4.44 per barrel year to date. Upton takes pride as a low cost operator and expects operating costs to return to the sub $4.00 per barrel range by year end. Most of the major well repairs and work-overs, previously deferred due to low oil prices, were completed in May and June bringing on 250 barrels per day production. This work will continue and at current oil prices these projects have excellent economics and payback.
Capital expenditures were $1.9 million in the quarter and $2.5 million year to date. Having drilled just three of 20 planned wells, Upton still has 80% of its $15 million 1999 capital budget to spend in the second half.
Financial Review
Production volumes for the second quarter averaged 2871 barrels per day and 3148 barrels per day for the six months, lower than levels produced in 1998. In the second quarter Upton's average wellhead price was $20.00 per barrel an improvement over the second quarter 1998 price of $17.68 per barrel. The 1999 wellhead price is net of a loss on 1500 barrels per day hedged at a fixed price of U.S.$14.20 per barrel. Royalty rates increased from an historical range of 20 to 22% to over 28% in the second quarter. This is attributable to lower drilling activity in the first six months resulting in Upton having a lower level of royalty free production from horizontal wells in its average royalty rate. This is anticipated to correct itself with additional drilling in the third and fourth quarters. Resulting cash flow of $1.0 million and $0.06 per share was significantly lower than 1998 and marginally lower than the first quarter. The company incurred a loss of $401 thousand for the second quarter. Year to date depletion and depreciation charges in 1999 were $4.74 per barrel compared to $8.81 per barrel in 1998.
Year 2000 Update
Upton's Year 2000 compliance project has proceeded on schedule. In the second quarter the company converted its financial and production accounting systems to a Year 2000 compliant product. An additional review of other internal systems was also completed and the company believes all necessary computer hardware and software upgrades have now been accomplished. Upton has contacted and continues to follow up with suppliers, purchasers, transporters and joint venture partners to monitor their Year 2000 compliance programs.
Outlook
In the first quarter we reported that for Upton, 1999 would begin June 1st. With weather delays it clearly began July 1st. Entering the second half of the year with the majority of our budget to spend we are on target to meet our 4000 barrel per day exit rate. In August cash flow for the month will exceed that generated in the entire second quarter. Our 1999 target of averaging 3500 barrels per day is also achievable and with current strong prices, Upton is now set to exceed our 1999 target of $0.51 per share cash flow and $0.09 per share earnings. Upton has hedged oil at 1500 barrels per day at U.S.$16.20 per barrel in the third quarter and 1000 barrels per day at U.S.$20.31 per barrel in the fourth quarter of 1999. The balance sheet is improving as forecasted fourth quarter debt to annualized cash flow ratio is expected to be under two times.
An active third quarter horizontal drilling program utilizing two rigs will include two wells at Gainsborough (89.5%), two wells at Queensdale (80%) and one at Alida (43%), all in southeast Saskatchewan. An additional vertical well at Midale (100%) is currently being completed for production. Current crude prices are making Upton's Tracey Mountain North Dakota area look very attractive again. Upton has a 23.5 - 47.5% interest split between two target zones and future drilling plans are currently being evaluated. Exploration drilling will kick into gear within the next month with over $1 million in drilling costs targeting four to five vertical tests.
Excellent increases in both production volumes and prices are leading to dramatic month by month gains in cash flow. Based on what now looks to be a conservative, US$19 WTI price, Upton's forecasted annualized fourth quarter cash flow should exceed $17 million and $1.00 basic cash flow per share. As volumes are added they will attract stronger oil prices; Upton's patience during weak oil prices is set to pay off.
HIGHLIGHTS Three Months Ended June 30 Six Months Ended June 30 % 1999 1998 1999 1998 ChangeProduction-barrels per day 2,871 4,740 3,148 5,013 -37-total barrels 261,285 431,346 569,785 907,312 -37Drilling activity-gross wells 3.0 5.0 3.0 19.0 -84-net wells 2.6 5.0 2.6 13.7 -81Petroleum revenues(000's) $5,225 $7,626 $10,443 $16,927 -38Cash flow (000's) $1,012 $2,913 $2,262 $7,798 -71Basic cashflow/share $0.06 $0.17 $0.13 $0.47 -72Fully dilutedcash flow/share $0.06 $0.17 $0.13 $0.45 -71Net earnings (loss)(000's) $(401) $(1,376) $(813) $(931) +13Basic net earnings(loss)/share $(0.02) $(0.08) $(0.05) $(0.06) +17Fully dilutednet earnings(loss)/share Anti-dilutive Anti-dilutive Anti-dilutive Anti-dilutive -Capital expenditures(000's) $1,867 $7,191 $2,481 $14,697 -83Average sharesoutstanding(000's) 17,617 16,790 17,624 16,712 +5Fully dilutedshares outstanding(000's) 19,021 17,440 18,952 17,440 +9Average oil priceper barrel $20.00 $17.68 $18.33 $18.66 -2Operating costsper barrel $5.43 $3.94 $4.44 $3.57 -24Operating netbackper barrel $8.87 $10.28 $9.17 $11.44 -20Cash netbackper barrel $3.87 $6.75 $3.97 $8.60 -54Trading Summary High Low Close Volume (000's)1QTR 1999 $2.25 $1.20 $2.00 8562QTR 1999 $2.85 $1.81 $2.45 1,012
The common shares of Upton are listed on the Toronto Stock Exchange under the symbol "URC".
TEL: (403) 218-6080 Upton Resources Inc.
Scott Dutton, President & C.E.O.
TEL: (403) 218-8978 Phil Grubbe, V.P. Finance & C.F.O.
TEL: (403) 218-6092 Andre St. Onge, Vice President, Exploration
Internet: www.uptonres.ca
E-mail: uptonres.ca
|
