Beau Canada Exploration Ltd. : 1999 Results
APRIL 18, 2000
CALGARY, ALBERTA--
SUMMARY
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* Major gas discovery
* Established reserve replacement of 150 percent in 1999
* Cost of established reserve addition $9.75/boe
* Cash flow is up 22 percent to $56 million
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Beau Canada continued to pursue its strategy of exploring for and
developing gas reserves in western Canada. In late 1999 the
Company participated in major gas discoveries in the
Ladyfern/South Hamburg prospect. The three successful wells
drilled are forecasted to produce over 60 mmcf/d with Beau's share
being approximately 20 mmcf/d. Beau has already identified six
locations for the 2000 winter drilling season with more being
developed. Beau, with its partners, has extensive 3D seismic
coverage over the entire geological area.
Finding and onstream costs for 1999 were $9.75/boe. The gas finds
in 1999 leave Beau Canada poised for reductions in finding and
onstream costs as the reserves are proved up. These gas
discoveries will also have considerable impact on the Company's
2000 production and cash flow, commencing in the middle of April
2000.
Corporate Results
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Year Ended Three Months Ended
December 31 December 31
% %
1999 1998 Change 1999 1998 Change
Financial ($000's):
Oil and gas revenue 126,804 108,870 16 36,576 30,150 21
Cash Flow 55,511 5,451 22 15,812 14,186 11
per share (basic) 0.61 0.50 22 0.17 0.16 6
Net Income (loss) (4,800)* 12,474 (138) (8,943) 893 (1,101)
per share (basic) (0.07) 0.13 (154) (0.10) 0.01 (1,100)
Production:
Gas (mmcf/d) 89.1 91.1 (2) 83.4 94.9 (12)
Oil & NGLs (bbls/d) 7,038 8,303 (15) 7,763 6,675 16
Barrels of oil
equivalent/d 15,948 17,409 (8) 16,099 16,164 -
Average Prices:
Gas per mcf 2.34 1.89 24 2.47 2.24 10
Oil & NGLs per barrel 19.76 15.20 30 24.67 17.21 43
Shares Outstanding
(average) 91.8 90.8 1 91.9 91.5 -
(millions) (yearend) 91.9 91.5 - 91.9 91.5 -
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* Net income would have been $4.9 million without the inclusion of
the subsidiary Genoil Inc., and the associated write-down of the
Cuban operations and technology services operating losses.
Financial
Cash flow for the year ended December 31, 1999 increased 22
percent to $55.5 million ($.61/share) in 1999 from $45.5 million
($.50 per share in 1998) due in large part to higher oil and gas
prices. A loss of $4.8 million ($.07 per share) was recorded due
to the write-off of costs accumulated in the Cuban cost centre
($7.2 million after taxes and minority interest). 1998 earnings
of $12.5 million ($0.13 per share) reflected one-time gains on the
sale of Beau Canada's interest in the Fort Chicago partnership and
the sale of offshore Cuban interests.
Operating costs at $25.5 million (1998 $26.4 million) were held to
$4.38/ boe in 1999 (1998 $4.16/boe) despite bringing on 1,000
bbls/d of relatively high operating cost heavy oil in the latter
half of 1999. General and administrative costs of $13.2 million
(1998 $13.9 million) at $1.15/boe (1998 $.97/boe) are comparable
to 1998 levels.
Yearend debt was $202.3 million on available bank lines of $220
million. First quarter capital expenditures will exceed one half
of the 2000 capital budget. Bank lines will be fully utilized and
the working capital deficiency will increase significantly as a
result. Bank lines and the working capital deficiency will be
reduced through the second and third quarters as cash flow is
received. At yearend 2000 it is anticipated that debt levels will
be below yearend 1999 with significantly greater production
levels.
Production
Beau Canada's production averaged 15,948 boe/d in 1999, down 8
percent from 1998. A portion of the variance is related to the
disposition of assets in late 1998, impacting 1999 production.
The disposition proceeds were used to fund part of a strategic
acquisition made in early 1998.
During 1999, Beau Canada's gas production averaged 89 mmcf/d, down
2 percent from 1998. Production additions made throughout 1999
were not enough to offset the impact of the dispositions and
normal production declines. Significant increases in gas
production did occur in the second quarter of 1999 with the
completion and tying in of gas wells drilled in the winter
programs from the Peggo and the Chinchaga areas of northeast
British Columbia and the Shiningbank area of west central Alberta.
Additional gas and NGLs production was added late in the third
quarter from successful drilling in the Cranberry property in
northwest Alberta. In the fourth quarter, gas production was
brought on from drilling in the Gilby area of west central
Alberta.
Oil and NGLs production average of 7,038 bbls/d, down 1,265 bbls/d
or 15 percent from the 1998 average production. This variance was
a result of property dispositions in late 1998, curtailing oil
production and deferring oil projects in response to weak oil
prices in the first half of 1999. Oil and NGLs production
averaged only 6,529 bbls/d in the first half of 1999. The Company
responded to low oil prices during that period by shutting in
approximately 800 - 1,000 bbls/d of heavy oil production and
deferring its oil exploration and development programs. With
improving oil prices in the third quarter, the Company brought on
production from shut-in heavy oil wells and commenced low risk
development drilling. By the fourth quarter, the Company had
increased its oil and NGLs production to an average of 7,770
bbls/d. This drilling activity continues into the year 2000.
Activity
Beau Canada drilled 74 (54.7 net) wells in 1999, resulting in 26
(18.8 net) gas wells, 31 (22.0 net) oil wells and 17 (13.9 net) D
& A wells. Consistent with its strategy to grow natural gas
reserves and production, the Company spent $62 million or 73
percent of its 1999 capital budget expanding its land position,
exploring for and developing natural gas reserves in western
Alberta and northeast British Columbia. There were major drilling
programs in the Peggo and Ladyfern areas of northeast British
Columbia, in the Cranberry and South Hamburg areas of northwest
Alberta and in the Shiningbank, Gilby and Wilson Creek areas of
west central Alberta. The Ladyfern/South Hamburg exploration
program resulted in major Slave Point gas discoveries, which will
significantly impact the Company's 2000 production and cash flow
and lead to additional follow-up activity.
The Company also drilled 40 (29.7 net) wells in west central
Saskatchewan and southern Alberta in the second half of the year
in response to improved oil pricing.
Drilling Results
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Year Ended Three Months Ended
December 31 December 31
1999 1998 1999 1998
Gross Net Gross Net Gross Net Gross Net
Gas Wells 26 18.8 43 32.0 9 7.1 18 13.0
Oil Wells 31 22.0 7 3.1 11 8.4 1 1.0
Dry and Abandoned 17 13.9 5 5.0 5 3.4 3 3.0
74 54.7 55 40.1 25 18.9 22 17
Success Rate 77% 75% 91% 88% 80% 82% 86% 82%
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In early 1999, the Company acquired its partner's interest in the
Chinchaga area of northeast British Columbia. While the
acquisition included some Slave Point gas production and reserves,
additional significant value included the partner's interest in
prospective undeveloped land and a cross border pipeline. A 3-D
seismic program was shot over much of the subject lands in early
2000 to identify Slave Point locations with interpretation of the
seismic to be completed in preparation for the 2000/2001 winter
drilling season. The cross border pipeline is a key component in
getting gas onstream in early 2000 from Beau Canada's Ladyfern
Slave Point discovery, benefiting Beau Canada with both production
and third party pipeline revenues.
In the Ladyfern/South Hamburg area the Company participated with
partners in the acquisition of undeveloped land, a 3-D seismic
program and the drilling of two Slave Point exploration wells.
This activity resulted in significant gas discoveries, which will
impact the Company's 2000 production and cash flow, as well as
provide growth potential for future years. Production from this
area is expected to come onstream before the end of April at
approximately 20 mmcf/d net to Beau Canada.
Beau Canada's undeveloped land holdings were 551,750 net acres at
year end 1999, with 62 percent being in the gas prone fairway from
west central Alberta to northeast British Columbia. The most
significant addition to Beau Canada's undeveloped land base was
the acquisition of 7,500 net acres associated with the
Ladyfern/South Hamburg prospect.
Reserves
The Company replaced its production by over 150 percent in 1999
and increased its established (proven plus risked probable)
reserves by 5 percent to 64.1 million barrels of oil equivalent.
Proven reserves increased by 4 percent to 53.8 million barrels of
oil equivalent. Established gas reserves are 346 billion cubic
feet, down 3 percent from 1998. Gas reserves should increase as
the northern gas properties are further developed. Oil and NGLs
established reserves were up 15 percent to 29.5 million barrels.
The cost of reserves added in Canada for 1999 was $9.75/boe for
established reserves and $10.96/boe for proven reserves. On a
three-year average basis, the costs of reserves are $8.50/boe for
established reserves and $10.75/boe for proven reserves.
Outlined below are Beau Canada's estimated reserves at January 1,
2000.
Natural Gas, Crude Oil and NGL Reserves
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Natural Gas Crude Oil NGLs
(bcf) (mmbbls) (mmbbls)
Proven Producing Reserves 197.5 10.5 5.6
Proven Non-producing Reserves 88.3 7.8 1.3
Total Proven Reserves 285.8 18.3 6.9
Probable Reserves 121.1 6.1 2.4
Total Proven and Probable 406.9 24.4 9.3
Total Proven and Risked
Probable Reserves 346.3 21.4 8.1
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Outlook
The outlook for Beau Canada's growth in production, reserves and
cash flow is strong for 2000, keying off of the drilling successes
at Ladyfern/South Hamburg and Cranberry. The Company's recent
success in these areas will add 18-22 mmcf/d to the Company's
production in April 2000. The Company's significant land
positions in and extensive 3-D seismic coverage of these prospects
ensures continued exploration and development activity in 2000 and
2001. With continued favourable oil prices, the Company will also
continue drilling its inventory of oil prospects in west central
Saskatchewan.
The Company's production for 2000 is expected to average 97 mmcf/d
of gas and 8,300 bbls/d of oil and NGLs. Production in the first
quarter of 2000 is forecasted to average 77 - 79 mmcf/d and 7,700
- 7,900 bbls/d. Significant gas production will be added in April
as wells from the Peggo, Ladyfern/South Hamburg and Cranberry
winter drilling programs are brought on stream. Production in the
second quarter is expected to average 97 - 100 mmcf/d. Gas
production is forecasted to grow slightly in the third and fourth
quarters with production being added from activity in west central
Alberta.
Oil and NGLs production is forecasted to average 7,900 - 8,100
bbls/d in the second quarter. Oil production increases are
expected in the second half of 2000 from continued development
drilling in west central Saskatchewan and activity in southern
Alberta.
With forecasted production of 97 mmcf/d and 8,300 bbls/d, gas
prices of $3.43/mcf at AECO (realized price of $2.57/mcf) and oil
prices of $24.00 U.S. WTI/bbl (realized price of $26.93/bbl), the
Company is forecasting a cash flow of $85 million with net capital
expenditures of $70 million.
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BEAU CANADA EXPLORATION LTD.
Consolidated Balance Sheets
December 31, 1999 and 1998
(in thousands)
1999 1998
Assets
Current assets:
Cash $ 25 $ 3,952
Accounts receivable 27,434 15,884
Inventory 1,183 1,672
Prepaid expenses 2,510 913
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31,152 22,421
Property and equipment 446,725 410,930
Other assets 6,127 -
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$ 484,004 $ 433,351
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Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable and accrued liabilities $ 46,664 $ 33,213
Royalties and taxes payable 8,409 3,069
Notes payable, unsecured 1,144 -
Current portion of long-term debt 1,626 -
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57,843 36,282
Long-term debt 202,744 162,521
Site restoration provision 5,588 4,777
Future income taxes 51,510 17,952
Minority interest - 5,346
Shareholders' equity:
Capital stock and term equity 159,383 155,159
Retained earnings (note) 6,936 51,314
166,319 206,473
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$ 484,004 $ 433,351
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NOTE: Includes the effect of the adoption in the second quarter of
1999 of the liability method of accounting for income taxes.
BEAU CANADA EXPLORATION LTD.
Consolidated Statements of Income (Loss)
Years ended December 31, 1999 and 1998
(in thousands)
1999 1998
Revenue:
Oil and gas $ 126,804 $ 108,870
Royalties (23,590) (16,963)
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103,214 91,907
Technology services 583 -
Other 567 16,809
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104,364 108,716
Expenses:
Oil and gas 25,481 26,444
Technology services 2,189 -
General and administrative 6,367 6,150
Interest 13,244 13,887
Capital and resource taxes 1,572 1,381
Site restoration 1,970 1,302
Depletion and depreciation 47,456 42,560
Write-down of Cuban costs 19,129 -
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117,408 91,724
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Income (loss) before income taxes
and minority interest (13,044) 16,992
Future income taxes (recovery) (2,476) 1,943
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Income (loss) before minority interest (10,568) 15,049
Minority interest 5,768 (2,575)
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Net income (loss) $ (4,800) $ 12,474
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Earnings (loss) per share:
Basic $ (0.07) $ 0.13
Fully diluted (0.06) 0.12
Fully diluted, supplemental (0.05) 0.12
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Caution To The Reader
Corporate information provided herein contains forward looking
(forecast) information. The reader is cautioned that assumptions
used in the preparation of such information, although considered
reasonable by Beau Canada at the time of preparation, may be
proved to be incorrect. Actual results achieved during the
forecast period will vary from the information provided herein and
the variations may be material. There is no representation by
Beau Canada that actual results achieved during the forecast
period will be the same in whole or in part as those forecast.
Beau Canada Exploration Ltd. is a Canadian oil and gas exploration
and development company based in Calgary. Beau Canada's common
shares are listed on The Toronto Stock Exchange and the Montreal
Exchange under the symbol "BAU". For further information, please
contact Thomas F. Bugg, President & CEO, or Robert N. Waldner,
Senior Vice President & COO, at 403-750-3400.
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Corporate Office
47th Floor, Petro-Canada Centre
West Tower, 150 - 6th Avenue S.W.
Calgary, Alberta
T2P 3Y7
Telephone: (403) 750-3400
Fax: (403) 233-2565 |
