EARNINGS / Rigel Energy Corp. reports 1997 Results
CALGARY, Feb. 18 /CNW/ - Rigel Energy Corporation announces results for
the twelve months and quarter ended December 31, 1997. The Corporation
recorded substantial gains of 43 percent in cash flow and 18 percent in
production during the fourth quarter over the previous three-month period. The
Corporation successfully replaced in excess of 250 percent of its 1997
production, adding 29.4 million barrels of oil equivalent on a proved plus
half-probable basis. Cash flow for the twelve months ended December 31, 1997
decreased by one percent compared to the previous year, primarily as a result
of lower production, which was affected by asset sales late in 1996 and higher
operating costs. A net loss of $23.9 million was reported for the year, due
to a loss provision associated with an asset sale that will be closed
subsequent to the 1997 year-end.
Commenting on the results, Don West, President and CEO of Rigel said,
''the past year resulted in major changes in the direction of the Corporation.
We successfully established a production base in the UK with the asset
acquisition at MacCulloch and have drilled the first of at least two appraisal
wells as a follow-up to the potentially significant discovery in the Moray
Firth (Blake) area made earlier in 1997. We also consolidated our position in
our core area, the Peace River Arch, with an acquisition of producing
properties at Sinclair. The Moose Mountain project is moving forward with the
granting of the approval to build a 25-kilometre pipeline that will allow for
an extended production test to determine development plans for the area.
However, operating activities and short-term production objectives have not
met expectations, and as a result, an extensive reorganization of the
exploration and development function into business units was undertaken late
in 1997. We believe that these independent units can better respond to the
challenges and opportunities facing our Corporation and industry.''
FINANCIAL REVIEW
Revenue, net of royalties, for the twelve months ended December 31, 1997
increased to $215.3 million from $211.9 recorded in 1996. Increased revenue
from natural gas prices more than offset lower oil and natural gas production.
Funds generated from operations decreased marginally to $133.0 million, or
$2.36 per share, from $134.7 million, or $2.40 per share, reported the
previous year. Strong demand for industry services during 1997 contributed to
an increase of $7.2 million in operating costs over the twelve-month period in
1996 and represented a significant portion of the decline in cash flow. In
the UK, costs associated with leasing production facilities for the MacCulloch
field will continue to be reflected in higher average operating costs during
1998, but will decline over the production life of the field. The effect of
these costs on the netbacks for UK oil production is mitigated by the absence
of royalties on new production. Primarily as a result of asset sales in
southwest Saskatchewan to be completed subsequent to year-end 1997, the
Corporation recorded a net loss of $23.9 million, or $0.43 per share, compared
to net income of $2.4 million, or $0.04 per share in 1996. The sale resulted
in a one time pre-tax write down of $37.8 million. Proceeds of approximately
$35 million will be applied to debt reduction in 1998.
Revenue, net of royalties, in the fourth quarter increased by 38 percent
compared to the third quarter as a result of both oil and natural gas
production gains and higher natural gas prices. Cash flow rose to $40.1
million versus $28.1 million during the third quarter -- a 43 percent
improvement.
OPERATIONS REVIEW
Exploration and Development
Capital expenditures, including acquisitions net of dispositions, during
1997 totaled $309.2 million compared to $349.5 million in 1996 including the
Inverness corporate acquisition of $256.9 million. Exploration in the UK and
the MacCulloch acquisition resulted in expenditures of $151.7 million, or
nearly half of total 1997 expenditures.
During the period, the Corporation participated in the drilling of 167
wells (excluding nine service wells and seven stratigraphic tests), resulting
in 49 oil wells and 52 gas wells. This total for 1997 compares to 188 wells
drilled in 1996, of which 55 were cased for oil production and 54 wells for
natural gas. Drilling in the fourth quarter totaled 46, which resulted in the
casing of 34 wells for production. Based on proved and half-probable
reserves, additions (net of revisions and dispositions) totaled 29.4 million
barrels of oil equivalent, or 252 percent of 1997 production, at a finding and
on-stream cost of $10.48 per barrel of oil equivalent.
The winter program in northern Alberta is targeting natural gas from a
number of potentially significant Slave Point prospects and is expected to add
to production during the second quarter. At Burmis, located in the Alberta
foothills, a well targeting high deliverability natural gas is expected to
reach total depth in March. Additional drilling is under consideration
pending results from the initial well.
Approval has been received to build a pipeline connecting Moose Mountain
to Jumping Pound that will allow extended production testing of two oil wells
beginning in September. Construction will begin on critical crossings prior
to breakup with completion of the 25-kilometre line in the summer. Initial
test rates are expected to be approximately 1,900 barrels of total liquids per
day.
Operations in the Acme area of south central Alberta continue to expand
with first quarter production expected to reach approximately 1,300 barrels
per day following the completion of recently drilled wells. At least eight
new prospects generated from newly completed three-dimensional seismic are
proposed for 1998. Construction of a central oil battery with initial
capacity of 1,600 barrels per day will be completed in June.
In the UK, evaluation of the first appraisal well offsetting the
discovery well 13/24b drilled last year in the Moray Firth has been completed.
Information regarding the well will not be released at this time due to
competitive reasons. Further appraisal drilling is expected during the first
half of 1998. Approximately 90 kilometres east, Rigel is also participating
in an additional prospect located in block 21/6b that began drilling in
mid-February. The Corporation will earn a 30 percent interest in the
prospect, which is estimated to take approximately 35 days to drill and
evaluate. Three additional prospects will be drilled through the remainder of
the year.
<<
CAPITAL EXPENDITURES
YEAR ENDED DECEMBER 31 1997 1996
($ THOUSANDS)
------------------------------------------------------------------------
Finding, acquisitions & on-stream costs
Lease acquisitions and retention 14,523 17,883
Seismic evaluation 9,584 11,549
Drilling & completions 74,133 56,829
Gas plants & facilities 24,546 24,446
Exploration related overhead 8,450 7,538
Miscible flood 1,418 1,487
Reserve acquisitions 188,313 2,103
Proceeds on dispositions (13,139) (32,372)
------------------------------------------------------------------------
Net finding & on-stream costs 307,788 89,463
Administrative assets 1,351 3,127
------------------------------------------------------------------------
Net capital expenditures 309,179 92,590(1)
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------------------------------------------------------------------------
Funds generated from operations 133,049 134,695
------------------------------------------------------------------------
------------------------------------------------------------------------
Re-investment ratio (%) 232 69
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>>
(1) Excludes Inverness corporate acquisition of $256.9 million
Production and Pricing
Crude oil and condensate production during 1997 totaled 15,463 barrels
per day compared to 16,352 barrels per day during the previous year.
Approximately 1,100 barrels per day of this decline is attributable to sales
completed late in 1996. Prices received for crude oil and condensate averaged
$25.27 per barrel for the period compared to $26.07 per barrel recorded in
1996. Crude oil hedging contributed approximately $0.14 per barrel to the
price received during the twelve-month period. Production for the fourth
quarter averaged 18,479 barrels per day, with the addition of sales from
MacCulloch, at a price of $24.81 per barrel.
Natural gas sales to December 31, 1997 averaged 148.0 million cubic feet
per day compared to 156.2 million cubic feet per day recorded for 1996.
Production was adversely affected by the sale of 12 million cubic feet per day
late in 1996. As a result of a 25 percent improvement in average natural gas
prices to $2.03 per thousand cubic feet from $1.62 per thousand cubic feet the
previous year, revenue from natural gas sales increased by 19 percent. The
addition of Sinclair production in November helped boost fourth quarter over
third quarter production by approximately 10 percent to average 157.5 million
cubic feet per day at a price of $2.18 per thousand cubic feet.
Natural gas liquids production declined to 1,635 barrels per day compared
to 1,877 barrels per day recorded in 1996. The average price increased
marginally to $16.33 per barrel from $16.10 per barrel received in the
previous year.
OUTLOOK
World events, including the recent financial upheaval in Asia, continue
to impact commodity prices, which emphasizes the need to establish long-term
objectives able to withstand the volatility of unpredictable revenues. Two
years ago, Rigel began initiatives to reallocate corporate resources to manage
the changes shaping our business. To this end, Rigel achieved significant
progress over the past year in establishing an operating base in the UK. That
effort will continue in 1998 with expectations of a drilling program
consisting of six to eight wells.
However, the necessity of maintaining a strong Canadian based operation
is paramount in our efforts towards international expansion. With this
resolve, Rigel has reenergized its focus on the Western Canadian Basin, and
with an aggressive program planned for 1998, expects to deliver significant
growth in the coming year.
<<
HIGHLIGHTS
THREE MONTHS TWELVE MONTHS
ENDED DECEMBER 31 ENDED DECEMBER 31
1997 1996 1997 1996
------------------------------------------------------------------------
(MILLIONS OF DOLLARS) (UNAUDITED)
FINANCIAL
Revenue, net of royalties 65.9 56.1 215.3 211.9
Net income (loss) (26.1) 2.5 (23.9) 2.4
Per share (0.46) 0.04 (0.43) 0.04
Funds generated from 40.1 35.3 133.0 134.7
operations
Per share 0.71 0.63 2.36 2.40
Net capital expenditures 206.8 7.3 309.2 349.5
Weighted average shares 56.3 56.2 56.3 56.1
Outstanding (millions)
OPERATIONAL
Sales
Oil (bbls/d) 16,911 14,019 13,903 14,824
Condensate (bbls/d) 1,568 1,245 1,560 1,528
NGLs (bbls/d) 1,668 1,589 1,635 1,877
Natural gas (mmcf/d) 157.5 139.5 148.0 156.2
PRICE
Oil ($/bbl) 24.41 28.66 24.98 25.87
Condensate ($/bbl) 29.12 35.77 27.89 28.08
NGLs ($/bbl) 15.61 22.01 16.33 16.10
Natural gas ($/mcf) 2.18 1.78 2.03 1.62
(FOR THE TWELVE MONTHS ENDED DECEMBER 31) 1997 1996
DRILLING STATISTICS
Gross wells (x)167 (x)188
Gross oil wells 49 55
Gross gas wells 52 54
Net wells 101.9 108.9
------------------------------------------------------------------------
(x) Does not include nine service wells (three in 1996) nor seven
additional wells (one in 1996) drilled for information to evaluate
horizontal drilling potential and subsequently abandoned as planned.
CONSOLIDATED BALANCE SHEET
DECEMBER DECEMBER
(THOUSANDS OF DOLLARS) 31, 1997 31, 1996
------------------------------------------------------------------------
ASSETS
Current assets
Cash $ 2,823 $ 3,955
Accounts receivable 41,119 37,567
Income taxes recoverable 850 1,129
Inventories & other 3,415 4,101
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Total current assets 48,207 46,752
Property, plant & equipment, net 841,612 695,405
Deferred charges & other 5,258 700
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895,077 742,857
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LIABILITIES AND
SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable & accrued liabilities 46,568 35,497
Income taxes payable - 449
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Total current liabilities 46,568 35,946
Deferred pension liability 1,387 1,060
Long term debt 325,906 156,418
Future site restoration 20,463 21,306
Deferred income taxes 105,019 110,449
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499,343 325,179
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Common shares 293,476 291,486
Retained earnings 102,258 126,192
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Total shareholders' equity 395,734 417,678
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$ 895,077 $ 742,857
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CONSOLIDATED STATEMENT OF INCOME (LOSS)
AND RETAINED EARNINGS
FOR THE PERIODS ENDED DECEMBER 31
(THOUSANDS OF DOLLARS)
THREE MONTHS TWELVE MONTHS
1997 1996 1997 1996
(UNAUDITED)
------------------------------------------------------------------------
REVENUES
Sales of crude oil & $76,146 $67,045 $261,937 $259,575
natural gas
Less royalties 11,687 12,447 50,305 51,922
---------------------------------------------------------------------
64,459 54,598 211,632 207,653
Other income 1,467 1,529 3,652 4,229
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65,926 56,127 215,284 211,882
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------------------------------------------------------------------------
EXPENSES
Operating 19,136 15,340 60,112 52,878
General & administrative 2,308 2,111 10,276 9,847
Exploration, including dry 10,997 11,408 33,317 36,458
holes
Depreciation & depletion 32,834 16,529 89,867 84,249
Loss provision 37,766 - 37,766 -
Future site restoration 436 349 1,474 1,526
Interest 3,733 2,636 10,589 11,662
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107,210 48,373 243,401 196,620
------------------------------------------------------------------------
INCOME (LOSS) BEFORE INCOME (41,284) 7,754 (28,117) 15,262
TAXES
------------------------------------------------------------------------
INCOME TAXES
Current 575 295 1,247 2,164
Deferred (15,742) 4,934 (5,430) 10,701
------------------------------------------------------------------------
(15,167) 5,229 (4,183) 12,865
------------------------------------------------------------------------
NET INCOME (LOSS) FOR THE (26,117) 2,525 (23,934) 2,397
PERIOD
RETAINED EARNINGS AT 128,375 123,667 126,192 123,795
BEGINNING OF PERIOD
------------------------------------------------------------------------
RETAINED EARNINGS AT END $102,258 $126,192 $102,258 $126,192
OF PERIOD
------------------------------------------------------------------------
------------------------------------------------------------------------
EARNINGS (LOSS) PER COMMON ($0.46) $0.04 ($0.43) $0.04
SHARE
------------------------------------------------------------------------
------------------------------------------------------------------------
CONSOLIDATED STATEMENT OF CHANGES IN FINANCIAL POSITION
THREE MONTHS TWELVE MONTHS
FOR THE PERIODS ENDED 1997 1996 1997 1996
DECEMBER 31
(THOUSANDS OF DOLLARS)
(UNAUDITED)
------------------------------------------------------------------------
CASH PROVIDED BY (USED FOR):
OPERATING ACTIVITIES
Net income (loss) ($26,553) $2,525 ($23,934) $2,397
Add items not involving
cash:
Depreciation & depletion 33,270 16,529 89,867 84,249
Loss provision 37,766 - 37,766 -
Exploration, including dry 10,997 11,408 33,317 36,458
holes
Deferred tax provision (15,742) 4,934 (5,430) 10,701
(recovery)
Site restoration 436 349 1,474 1,526
Other (90) (412) (11) (636)
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Funds generated from 40,084 35,333 133,049 134,695
operations
Net change in non-cash
working capital 3,009 28 8,035 (2,108)
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43,093 35,361 141,084 132,587
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INVESTING ACTIVITIES
Proceeds from sale of 10,140 28,302 13,179 32,372
capital assets
Capital expenditures, (216,894) (35,527) (322,358) (124,962)
including exploration
costs
Corporate acquisitions - (100) - (256,868)
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(206,754) (7,325) (309,179) (349,458)
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FINANCING ACTIVITIES
Change in deferred (4,032) (290) (4,515) 879
charges & other
Increase in (repayment of) 167,442 (29,210) 169,488 (24,783)
long term debt
Issue of common shares 420 221 1,990 241,235
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163,830 (29,279) 166,963 217,331
------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH 169 (1,243) (1,132) 460
CASH AT BEGINNING OF PERIOD 2,654 5,198 3,955 3,495
------------------------------------------------------------------------
CASH AT END OF PERIOD $2,823 $3,955 $2,823 $3,955
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