CORP / Renaissance Replaces Production Three-Fold in 1997:
Boosts Oil Output 15 Percent
TSE, ME SYMBOL: RES
FEBRUARY 27, 1998
CALGARY, ALBERTA--Renaissance Energy is pleased to report
significant increases in both production and reserves in 1997
arising from its exploration and development program.
"The most important measure of Renaissance's success in 1997 was
our growth in reserves at low finding and development costs," said
President Clayton Woitas. Total proven reserve additions of 144
million barrels of oil equivalent replaced oil and natural gas
production threefold.
Finding and development costs to add these proven reserves
decreased by 22 percent to average $6.57 per barrel of oil
equivalent, well within industry standards.
The recycle ratio - the annual cash flow per barrel of oil
equivalent production compared to that year's proven and probable
finding and development costs - remained strong at 1.8 times.
Renaissance continued to maintain an active exploration,
exploitation and acquisition program in 1997, increasing oil
production 15 percent to average 82,375 barrels per day and
natural gas output 11 percent to average 420 million cubic feet
per day. This was achieved without the benefit of major corporate
or reserve acquisitions.
Despite Renaissance's success in adding production volumes and
reserves, cash flow dropped 8 percent to $530 million and net
income decreased 36 percent to $115 million. This drop was caused
by falling world crude oil prices and a widening of the
differential between Renaissance's blend of crudes and benchmark
light oil prices.
By virtue of Renaissance's access to premium priced United States
markets, its 1997 average natural gas price of $2.21 per thousand
cubic feet was amongst the highest in industry. Netbacks were
down 8 percent to $1.56 per thousand cubic feet due to higher
royalty and operating costs.
Capital expenditures were up 4 percent in 1997 to $949 million,
including $448 million for drilling and completing wells and
another $231 million for equipping, pipelining and facilities.
Another $125 million was spent on property acquisitions, while
lease acquisitions and retentions cost $66 million and seismic
evaluations were $65 million.
Renaissance drilled a total of 1,645 net wells in 1997, of which
906 were exploratory, on par with 1996 activity. Of the total, 788
were cased as oil wells and 385 as natural gas finds for a 71
percent success ratio.
A focus on developing its extensive land base resulted in
Renaissance's land holdings increasing only marginally in 1997 to
10.8 million acres. Renaissance controls seven million acres in
Alberta and 3.6 million acres in Saskatchewan.
Renaissance maintained its solid financial ratios. Equity
comprised 73 percent of total capitalization while the ratio of
debt to trailing cash flow was 1.5 times. Renaissance has locked
in, for periods extending beyond two years, approximately 50
percent of its outstanding debt at an average interest rate of 6
percent.
Renaissance's 1998 capital expenditure program has been budgeted
at $600 million. "We have made a very strong commitment this year
to natural gas exploration activities," Mr. Woitas said. "Our
first quarter exploration and well count is focused on our
northern winter access regions. A very active natural gas drilling
program is planned for the third and fourth quarters in advance of
the 1998/99 winter demand season".
"Oil drilling activities will be focused on increased development
of selected oilfields", Mr. Woitas added. "This drilling program
will not be accelerated until there is clear signal of improving
crude oil netbacks".
/T/
SUMMARY
Three Months Ended Twelve Months Ended
December 31 December 31
Percent
1997 1996 1997 1996 Change
------------------------------------------
FINANCIAL (millions
except per share)
Gross revenues $ 251 $ 283 $ 948 $ 953 - 1
Cash flow from
operations $ 143 $ 164 $ 530 $ 573 - 8
Per share - basic $ 1.23 $ 1.43 $ 4.57 $ 5.27 -13
- fully diluted $ 1.16 $ 1.37 $ 4.33 $ 5.01 -14
Net income $ 33 $ 54 $ 115 $ 180 -36
Per share - basic $ 0.28 $ 0.47 $ 1.00 $ 1.66 -40
- fully diluted $ 0.28 $ 0.45 $ 0.98 $ 1.61 -39
------------------------------------------
PRODUCTION
Oil (thousands
of barrels) 7,913 7,676 30,067 26,323 +15
Daily average
(barrels) 86,011 83,435 82,375 71,921
Sales price $ 18.65 $ 26.43 $ 20.28 $ 24.69 -18
Royalties (3.00) (5.09) (3.56) (4.47) -20
Operating costs (4.85) (4.45) (4.84) (4.50) + 8
------------------------------------------
Netback per barrel $ 10.80 $ 16.89 $ 11.88 $ 15.72 -24
------------------------------------------
Natural Gas (million
cubic feet) 38,276 32,886 153,322 139,218 +11
Daily average
(million cubic feet) 416 358 420 380
Sales price $ 2.70 $ 2.45 $ 2.21 $ 2.18 + 1
Royalties (0.41) (0.26) (0.34) (0.24) +42
Operating costs (0.33) (0.25) (0.31) (0.24) +29
------------------------------------------
Netback per thousand
cubic feet $ 1.96 $ 1.94 $ 1.56 $ 1.70 - 8
------------------------------------------
Combined (mboe) (x) 11,741 10,965 45,399 40,245 +13
Daily average(boe) 127,620 119,185 124,381 109,959
Sales price $ 21.37 $ 25.85 $ 20.88 $ 23.67 -12
Royalties (3.35) (4.30) (3.46) (3.72) - 7
Operating costs (4.33) (3.87) (4.25) (3.77) +13
------------------------------------------
Netback per boe 13.69 17.68 13.17 16.18 -19
General and
administrative (0.51) (0.62) (0.55) (0.57) - 4
Financial expenses (0.79) (1.89) (0.73) (1.20) -39
Capital taxes (0.24) (0.20) (0.22) (0.20) +10
------------------------------------------
Cash flow per boe 12.15 14.97 11.67 14.21 -18
Non-cash items (9.36) (10.08) (9.13) (9.73) - 6
------------------------------------------
Net income per boe $ 2.79 $ 4.89 $ 2.54 $ 4.48 -43
------------------------------------------
(x) (10 mcf of natural gas = 1 barrel of oil)
FINANCIAL STATEMENTS
BALANCE SHEET
December 31 December 31
(Thousands of Dollars) 1997 1996
----------------------------
ASSETS
Current Assets
Cash $ 261 $ -
Accounts receivable 80,666 99,731
----------------------------
80,927 99,731
Property, Plant and Equipment,
at cost 4,748,638 3,806,616
Accumulated Depletion
and Depreciation (1,384,278) (1,066,978)
----------------------------
3,364,360 2,739,638
----------------------------
$ 3,445,287 $ 2,839,369
----------------------------
LIABILITIES
Current Liabilities
Accounts payable $ 38,321 $ 9,993
Accrued liabilities 126,831 138,753
----------------------------
165,152 148,746
Site Restoration Accrual 25,277 17,412
Long-Term Debt 781,785 414,001
Deferred Income Taxes 372,108 290,408
SHAREHOLDERS' EQUITY
Share Capital 1,524,510 1,507,710
Retained Earnings 576,455 461,092
----------------------------
2,100,965 1,968,802
----------------------------
$ 3,445,287 $ 2,839,369
----------------------------
STATEMENT OF INCOME AND RETAINED EARNINGS
Three Months Ended Year Ended
December 31 December 31
(Thousands of Dollars) 1997 1996 1997 1996
------------------------------------
OPERATING INCOME
Petroleum and natural
gas revenues $ 250,933 $ 283,425 $ 948,156 $ 952,762
Royalties (39,345) (47,170) (157,262) (149,705)
Production expenses (50,892) (42,465) (192,968) (151,737)
-------------------------------------
160,696 193,790 597,926 651,320
Expenses
General and
Administrative 6,005 6,803 25,154 22,722
Interest on
long-term debt 9,312 20,685 32,909 48,135
Foreign exchange loss - 101 - 993
Capital taxes 2,775 2,211 10,200 7,921
Depletion and
depreciation 83,000 74,600 317,300 267,800
Current site restoration
provision 3,700 3,700 15,300 12,100
------------------------------------
Income Before Income
Taxes 55,904 85,690 197,063 291,649
Deferred income taxes 23,200 32,100 81,700 111,200
------------------------------------
Net Income 32,704 53,590 115,363 180,449
Retained Earnings
- beginning of period 543,751 407,502 461,092 280,643
-------------------------------------
Retained Earnings
- end of period $ 576,455 $461,092 $ 576,455 $ 461,092
-------------------------------------
Net Income per Common Share
Basic $ 0.28 $ 0.47 $ 1.00 $ 1.66
Fully diluted $ 0.28 $ 0.45 $ 0.98 $ 1.61
-------------------------------------
Weighted Average Number of Common
Shares Outstanding (thousands)
Basic 116,152 115,289 115,894 108,651
Fully diluted 125,476 123,298 125,031 117,040
-------------------------------------
Imputed Interest on the
Deemed Exercise of Stock
Options (thousands) $ 2,922 $ 3,275 $ 12,328 $ 13,431
-------------------------------------
STATEMENT OF CASH FLOW
Three Months Ended Year Ended
December 31 December 31
(Thousands of Dollars) 1997 1996 1997 1996
---------------------------------------
Operating Activities
Net income $ 32,704 $ 53,590 $ 115,363 $ 180,449
Add charges not
affecting cash
Depletion and
depreciation 83,000 74,600 317,300 267,800
Current site
restoration provision 3,700 3,700 15,300 12,100
Foreign exchange loss - 101 - 993
Deferred income taxes 23,200 32,100 81,700 111,200
--------------------------------------
Cash flow from
operations 142,604 164,091 529,663 572,542
Financing Activities
Increase (decrease)
in long-term debt 134,359 (218,746) 367,784 (16,036)
Decrease in deferred
foreign exchange - 3,981 - 4,637
Issue of shares 2,958 312,578 16,800 333,541
Decrease in deferred
revenue - (693) - (6,966)
Change in non-cash
working capital (6,706) (7,094) 35,471 25,256
--------------------------------------
130,611 90,026 420,055 340,432
--------------------------------------
Cash Available for
Investing Activities 273,215 254,117 949,718 912,974
Investing Activities
Additions to property,
plant and equipment (273,250) (252,855) (942,022) (905,451)
Site restoration
expenditures (472) (1,580) (7,435) (7,561)
--------------------------------------
(273,722) (254,435) (949,457) (913,012)
--------------------------------------
Increase (Decrease)
in Cash (507) (318) 261 (38)
Cash, beginning of period 768 318 - 38
--------------------------------------
Cash, end of period $ 261 $ - $ 261 $ -
Cash Flow per Common Share
Basic $ 1.23 $ 1.43 $ 4.57 $ 5.27
Fully diluted $ 1.16 $ 1.37 $ 4.33 $ 5.01
--------------------------------------
RESERVES
December 31 Percent
1997 1996 Change
----------------------------
Oil Reserves (before royalties)
(millions of barrels)
Proven producing 206 160 + 29
Proven non-producing 166 143 + 16
----------------------------
Total proven 372 303 + 23
Probable 114 102 + 12
----------------------------
Total proven and probable 486 405 + 20
----------------------------
Natural Gas Reserves (before royalties)
(billions of cubic feet)
Proven producing 725 629 + 15
Proven non-producing 1,071 875 + 22
-----------------------------
Total proven 1,796 1,504 + 19
Probable 245 347 - 29
-----------------------------
Total proven and probable 2,041 1,851 + 10
-----------------------------
Discounted Value of Estimated
Future Net Revenue (millions)
0 percent discount $ 9,125 $ 8,862 + 3
10 percent discount $ 4,928 $ 5,052 - 2
15 percent discount $ 3,969 $ 4,124 - 4
-------------------------------
Reserve Reconciliation
Oil (mmbls) Natural Gas (bcf)
Proven Probable Total Proven Probable Total
-------------------------------------------
December 31, 1995 252 70 322 1,340 257 1,597
Discoveries and
extensions 56 18 74 390 116 506
Purchases 21 13 34 9 5 14
Production (26) - (26) (139) - (139)
Revisions of prior
estimates - 1 1 (96) (31) (127)
-------------------------------------------
December 31, 1996 303 102 405 1,504 347 1,851
Discoveries 66 8 74 311 93 404
Purchases 12 4 16 30 5 35
Production (30) - (30) (153) - (153)
Revision of prior
estimates 21 - 21 104 (200) (96)
-------------------------------------------
December 31, 1997 372 114 486 1,796 245 2,041
-------------------------------------------
FINDING AND DEVELOPMENT COSTS
Year Ended December 31
1997 1996
----------------------
Capital Expenditures (millions)
Property acquisitions $ 125 $ 109
Lease acquisitions and retentions 66 107
Seismic evaluations 65 86
Drilling and completion of wells 448 372
Equipping, pipelining and facilities 231 222
Site restoration expenditures 7 8
----------------------
Total finding and development costs 942 904
Head office expenditures 7 9
----------------------
Total expenditures $ 949 $ 913
----------------------
Annual Finding and Development Costs
Total finding and development
costs (millions) $ 942 $ 904
----------------------
Proven reserve additions, including
purchases and revisions (mmboe) 144 108
Average cost per BOE $ 6.57 $ 8.40
----------------------
Proven and probable reserve additions,
including purchases and
revisions (mmboe) 146 149
Average cost per BOE $ 6.48 $ 6.09
Cumulative Finding and Development Costs
1995 - 1997 1993 - 1997
------------------------
Total finding and development
costs (millions) $ 2,568 $ 3,709
------------------------
Proven reserve additions (mmboe) 363 561
Average cost per BOE $ 7.08 $ 6.61
------------------------
Proven and probable reserve
additions (mmboe) 430 647
Average cost per BOE $ 5.97 $ 5.74
------------------------
(10 mcf of natural gas = 1 barrel of oil)
NET WELLS DRILLED (Year ended December 31)
1997
Exploratory Development Total
---------------------------------
Oil 167 621 788
Natural gas 356 29 385
Dry 383 89 472
---------------------------------
Total 906 739 1,645
---------------------------------
1996
Exploratory Development Total
---------------------------------
Oil 134 556 690
Natural gas 321 78 399
Dry 440 111 551
---------------------------------
Total 895 745 1,640
---------------------------------
NET UNDEVELOPED LAND HOLDINGS (thousands of acres)
December 31
1997 1996
--------------
Alberta 6,966 6,963
Saskatchewan 3,630 3,539
Manitoba 163 61
--------------
Total 10,759 10,563
--------------
SENSITIVITIES (millions except per share amounts)
Cash Per Net Per
Flow Share Income Share
-----------------------------
Operational risks
Change of 1,000 barrels in
average daily production $ 3 $ 0.02 $ 1 $ 0.01
Change of 10 million cubic
feet in average daily natural
gas production $ 5 $ 0.04 $ 1 $ 0.01
-----------------------------
Financial risks
Change of US $1.00 per barrel
in the average price of
crude oil $ 37 $ 0.30 $ 22 $ 0.17
Change of US $0.10 per thousand
cubic feet in the average price
of natural gas $ 18 $ 0.15 $ 11 $ 0.08
Change of $0.01 in the
Canadian/United States
foreign exchange rate $ 12 $ 0.09 $ 7 $ 0.06
Change of 1 percent (100 bps)
in interest rate $ 3 $ 0.02 $ 2 $ 0.01
-----------------------------
/T/
These sensitivities are calculated based upon 1997 fourth quarter
production volumes of 86,000 barrels of oil per day and 416
million cubic feet of natural gas per day. They are based upon
current and widely published benchmarks. However, they do not
factor in all market pricing elements and accordingly are
approximations only. |
