EARNINGS / Merit Energy reports 1997 Results
1997 Highlights
Exploration
- Merit drilled 65.7 net (83 gross) wells resulting in 23.6 net oil
wells, 30 net gas wells and 1.5 net service wells for an overall
success rate of 84%.
- 1997 activity resulted in net proved and probable reserve additions of
4,069 Mbbls of oil and liquids and 96.8 Bcf of natural gas or 13.7
million barrels of oil equivalents representing replacement of 1997
production by 11.2 times.
- Finding costs inclusive of all additions and revisions on a cumulative
basis was $5.66 per Boe proven and $4.12 per Boe proven and probable at
December 31, 1997. Continuing with the Company's commitment to capital
infrastructure, Merit spent $7,095,733 on facilities in 1997 compared
to $6,691,591 in 1996. This spending represents 9.5 percent of the
capital expenditures for 1997 (34% in 1996).
- Finding and development costs inclusive of all additions and revisions
on a cumulative basis was $6.71 per Boe proven and $4.88 per Boe
proven and probable at December 31, 1997.
- Undeveloped land increased 136 percent during 1997 to 187,096 net acres
from 79,272 acres in 1996.
Financial
- 1997 revenue increased 446 percent to $18,893,424, compared to
$4,240,782 in 1996, while funds from operations increased 585 percent
to $11,358,248 ($0.52 per share) from $1,942,293 in 1996 ($0.17 per
share).
- Net earnings for the year ended December 31, 1997 were $4,426,587
($0.20 per share) compared to $410,925 ($0.04 per share) in 1996.
- Net capital expenditures amounted to $75,036,093 in 1997 compared to
$19,448,710 in 1996. The capital program was financed by cash flow,
bank debt and equity. At December 31, 1997 the Company's long term
debt was $24.9 million compared to $5.5 million at December 31, 1996.
Production
- The Company achieved a 1997 exit production rate of 5,200 Boe per day,
a 222 percent increase over the 1996 exit production rate of 1,614 Boe
per day.
- 1997 average natural gas production was 26.6 Mmcf per day up 269
percent from 7.2 Mmcf per day during 1996 and oil and liquids
production was 678 Bbls per day up 434 percent from 127 Bbls per day in
1996.
- Fourth quarter 1997 natural gas production averaged 44.9 Mmcf per day
up 441 percent over the fourth quarter 1996 results of 8.3 Mmcf per
day.
- Fourth quarter 1997 oil and liquids production averaged 854 Bbls per
day up 307 percent over the fourth quarter 1996 results of 210 Bbls per
day.
1998 Update
- Subsequent to December 31, 1997 Merit was successful in acquiring 2,000
barrels of oil equivalent per day and 275,000 net acres of land from
Rigel Oil and Gas Ltd. The assets are located in Southwest
Saskatchewan. An estimated 8.0 Mmcf per day of natural gas per day
from the properties should come onstream in the second quarter of 1998.
- Effective January 1, 1998, an alliance was formed with Gulf Canada
Resources Ltd. which covers 420,000 acres in the Company's core East
Central area of Alberta. As operator of the alliance, Merit will spend
$20 million in net capital drilling 50 wells during 1998. The
combination of Gulf's extensive seismic and land base and usage of
Merit's processing facilities will allow the Company to maximize
operating efficiencies in this key area.
- Merit has drilled another 100% working interest discovery well in the
Little Bow area of southern Alberta. Preliminary indications on this
new pool discovery suggest the well will produce at rates of 4 Mmcf
per day from the lower Mannville formation. Additional seismic data is
being assembled to define offsets to this location. Merit has
approximately 6,500 gross acres of undeveloped land in proximity to the
discovery. Production tests are currently underway to prepare the well
for tie-in.
- In the Manitou area of western Saskatchewan, Merit has drilled a
successful 100 percent step-out well in the McLaren formation. Tests
indicate the new well will produce at 2 Mmcf per day. This well
substantially increases Merit's gas reserves in the area. The Company
plans additional drilling in the area on 18,000 net acres of offset
lands.
<<
1997 Financial Results
Year Ended December 31
1997 1996 % change
------------------------------
Financial
Petroleum and natural gas
sales, net $ 18,893,424 $ 4,240,782 346
Average product prices
Natural gas ($/mcf) 1.72 1.39 24
Crude oil ($/bbl) 19.80 24.85 (20)
Funds from operations 11,358,248 1,942,293 485
Per common share 0.52 0.17 206
Net earnings 4,426,587 410,925 977
Per common share 0.20 0.04 400
Capital expenditures 75,036,093 19,448,710 286
Long term debt $ 24,874,500 $ 5,503,709 352
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Share Information 1997 1996
--------------------
Shares outstanding at December 31 27,375,053 14,501,604
Weighted average shares outstanding
for the year 21,801,873 11,245,460
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1997 Operating Results
Three Months ended Year ended
December 31 December 31
1997 1996 1997 1996
-------------------------------------------
Production
Natural gas (mcf/d) 44,875 8,263 26,632 7,169
Crude oil (bbls/d) 854 210 678 127
Total Boe/d 5,342 1,036 3,341 844
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1997 1996
---------------------
Reserves
Crude oil and NGL (mbbls)
Proven 2,832 899
Proven plus probable 5,262 1,440
Natural gas (bcf)
Proven 100.9 28.4
Proven plus probable 130.8 43.1
Present Worth of Future Cash Flow Before Income Taxes
Proven plus probable ($mm)
Discounted at 10% $123.0 $34.9
Discounted at 15% $105.2 $28.4
The corporate reserves are reported at December 31, 1997 and prepared by
McDaniels and Associates Ltd.
------------------------------------------------------------------------
1997 1996
Drilling Activity Gross Net Gross Net
--------------------------------------
Crude oil wells 37 23.6 4 3.2
Natural gas wells 31 30.0 3 2.2
Service wells 2 1.5 0 0
Dry holes 13 10.6 2 1.3
Total wells 83 65.7 9 6.7
Success rate 84% 84% 78% 81%
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Capital Expenditures
1997 1996 %change
Finding Expenditures
Land & lease $ 4,781,891 $ 500,300 856
Seismic 2,463,984 713,161 246
Drilling and completions 18,569,278 3,045,713 510
Property acquisitions 41,773,110 8,369,598 399
------------------------
Total Finding Expenditures 67,588,263 12,628,772 435
Development Expenditures
Facilities 7,095,733 6,691,591 6
Other 352,097 128,347 174
------------------------
Total Development Expenditures 7,447,830 6,819,938 9
Total Finding and Development $ 75,036,093 $ 19,448,710 286
------------------------------------------------------------------------
Cumulative 1997 1996
-----------------------------------
Reserve Additions and Finding Costs
Capital Expenditures $96,749,351 $75,036,093 $19,448,710
Proven
Net reserve additions (Mboe) 14,424 10,349 2,749
Finding costs ($/boe) $5.66 $6.53 $4.59
Finding & development costs
($/boe) $6.71 $7.25 $7.07
Proven plus probable
Net reserve additions (Mboe) 19,833 13,747 4,226
Finding costs ($/boe) $4.12 $4.92 $2.99
Finding & development costs
($/boe) $4.88 $5.46 $4.60
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