Magin earns $1.5-million in first quarter
Magin Energy Inc MGY
Shares issued 33,978,962 2000-05-04 close $3.27
Friday May 5 2000
Mr. Glenn Carley reports
Financial and operating results for the first quarter ended March 31, 2000, were as follows:
First quarter 2000 highlights
After-tax earnings were $1.5-million or five cents per basic and fully diluted common share.
Revenue, net of hedges, increased to $26.1-million, a 45-per-cent increase year-over-year.
Cash flow reached $12.3-million or 36 cents per basic share (32 cents per fully diluted share).
Daily production averaged 9,243 barrels of oil equivalent (boe) in the first quarter of 2000.
Capital investment of $14.0-million resulted in proven reserve additions of 1.6 million boe plus 1.4 million boe reclassified to proven producing from proven undeveloped and proven non-producing.
The company drilled 19 gross (18.3 net) wells resulting in seven cased oil wells and 11 cased natural gas wells for a 95-per-cent success rate.
The company drilled and cased two additional gas wells at Copton in 2000.
Operations review
The Copton exploration project is proceeding toward production in 2000. Drilling success on core properties resulted in important reserve and production additions and reserve reclassifications to proven producing.
In the first quarter of 2000, exploration and development expenditures were $14.0-million and property dispositions net of acquisitions totalled $3.6-million. Capital investments resulted in the addition of 1.6 million boe of proven reserves. In addition, 1.4 million boe of reserves, representing a value of $14.7-million, moved category from proven non-producing and proven undeveloped to proven producing.
Magin drilled 19 (18.3 net) wells in the first quarter of 2000 resulting in seven (7.0 net) oil wells, 11 (10.3 net) natural gas wells and one (1.0 net) abandoned well for a success rate of 95 per cent. Nine wells were drilled at Haro, Alta., resulting in gas deliverability tests of two to three million cubic feet a day (mmcf). Tie-in of these wells has been deferred until the winter of 2000-2001. One well at Copton 15-17-59-8W6M was drilled and cased while another well at 10-10-59-8W6M reached total depth in the first week of May, 2000.
Magin had continued success with its exploitation and development drilling program in the first quarter of 2000. Two wells were drilled at Hastings, Sask. The first was a successful horizontal well and the second was an exploitation well, which encountered virgin reservoir and initially flowed at rates exceeding 200 boe a day. Two successful horizontal wells were drilled at Alliance, Alta., while a heavy oil discovery was made at Eyehill, Alta.
Financial review
Record earnings, revenues, netbacks and cash flow were achieved in the first quarter of 2000. Magin recorded after tax earnings of $1.5-million (five cents per basic and fully diluted common share) for the three months ended March 31, 2000. Strong commodity prices and growth in oil production during first quarter 2000 have resulted in a year-over-year increase in revenues net of hedges of 45 per cent. Operating netbacks increased by 92 per cent during the same period. Cash flow of $12.3-million (36 cents and 32 cents per basic and fully diluted common share) was recorded in first quarter 2000, an increase of 80 per cent year-over-year. Oil hedging costs reduced unhedged cash flow and pretax earnings by $3.5-million in the first quarter of 2000.
Petroleum and natural gas revenues net of hedging costs reached $26.1-million in the three months ended March 31, 2000, compared with $18.1-million in 1999. While natural gas volumes have decreased by 39 per cent year-over-year due to asset sales, crude oil and liquids production has increased by 1 per cent, crude oil prices have increased by 92 per cent and natural gas prices have increased by 34 per cent.
Daily production during the three months ended March 31, 2000, averaged 9,243 boe, a decrease of 14 per cent from 1999 due to asset sales. An increase of 6 per cent over fourth quarter average production of 8,714 boe a day was realized. Crude oil and natural gas liquid volumes averaged 6,726 barrels a day during first quarter 2000, a 1-per-cent increase year-over-year and a 9-per-cent increase from fourth quarter 1999. Natural gas production averaged 25.2 million cubic feet a day during first quarter 2000 compared with 41.4 mmcf/d during first quarter 1999 and 25.7 mmcf/d during fourth quarter 1999. The year-over-year decrease in gas production is primarily due to the sale of shallow gas properties in July, 1999.
Wellhead crude oil prices, including hedges, averaged $30.25 per barrel in the three months ended March 31, 2000, an increase of 92 per cent from first quarter 1999. Natural gas prices increased 34 per cent year-over-year to average $3.27 per thousand cubic feet during the first quarter of 2000.
Operating costs during first quarter 2000 averaged $5.67 per boe compared with $4.69 per boe in 1999. Mainly due to commodity prices, operating netbacks have averaged $18.23 per boe in first quarter 2000, a 92-per-cent year-over-year increase. General and administrative costs of $1.6-million, net of operating recoveries, were recorded to March 31, 2000. Net general and administrative costs were $0.9-million or $1.11 per boe.
Effective Jan. 1, 2000, existing processing agreements have been accounted for as capital leases. At March 31, 2000, obligations under capital leases totalled $28.4-million including the current portion of $4.9-million.
At March 31, 2000, bank debt net of working capital was $68.3-million. On Jan. 26, 2000, Magin negotiated a 30-month revolving senior secured credit facility in the amount of $70-million. The banking syndicate includes Chase Manhattan Bank of Canada, Paribas Bank of Canada and National Bank of Canada.
On Jan. 31, 2000, Magin repurchased the outstanding gross overriding royalty option on certain of Magin's lands for cash consideration of $5.2-million.
Effective Jan. 1, 2000, retroactively adopted the new Canadian Institute of Chartered Accountants (CICA) accounting recommendations for future income taxes, which changes from the deferral method of tax allocation accounting to the liability method of tax allocation accounting. This change in accounting policy was applied retroactively without restatement of prior periods and is a one-time, non-cash event. The retroactive adjustment resulted in a charge of approximately $21.2-million against retained earnings, a decrease in share capital of $1.7-million, an increase of $9.8-million in the net book value of petroleum and natural gas properties, and an increase of $32.7-million in the balance sheet liability for future income taxes.
HIGHLIGHTS
Three months ended March 31
2000 1999
Operating
Average sales
Oil production
(bbl/d) 6,196 6,092
Natural gas
liquids production
(bbl/d) 530 565
Natural gas
production
(mcf/d) 25,169 41,436
Total oil
equivalent
(boe/d) 10:1 9,243 10,801
Average sales
prices
Oil price
($/bbl) 30.25 15.74
Natural gas
liquids price
($/bbl) 32.20 13.10
Gas price ($/mcf) 3.27 2.44
Netback ($/boe)
10:1 18.23 9.51
CONSOLIDATED STATEMENT OF OPERATIONS
Three months ended March 31
(thousands of dollars)
2000 1999
Revenue
Petroleum and
natural gas $ 26,128 $ 18,052
Royalties, net
of ARTC (6,022) (3,074)
-------- --------
20,106 14,978
-------- --------
Expenses
Operating 4,772 5,732
General and
administrative 935 882
Interest on
long-term debt 1,227 1,308
Interest on
obligation under
capital leases 530 -
Depletion,
depreciation, and
site restoration 9,362 8,853
-------- --------
16,826 16,775
-------- --------
Earnings (loss)
before taxes 3,280 (1,797)
Capital taxes 295 186
Future income
taxes 1,478 181
-------- --------
Net earnings
(loss) for
the period $ 1,507 $ (2,164)
======== ========
Earnings (loss)
per share 0.05 (0.07)
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