EARNINGS / Numac Energy Announces Financial and Operating Results
TSE, ASE, AMEX SYMBOL: NMC
FEBRUARY 27, 1998
CALGARY, ALBERTA--Numac Energy Inc. today announced its
consolidated financial and operating results for the year ended
December 31, 1997.
The acquisition of the Canadian oil and gas assets of Wainoco Oil
Corporation and the success of a major non-core asset divestiture
program substantially strengthened Numac's asset base in 1997 and
has positioned the Company for continued growth. In addition, the
combination of the Wainoco acquisition and Numac's success with
the drill bit added significant volumes to reserves in 1997, at a
much reduced replacement cost compared with previous years.
Funds from operations in 1997 amounted to $128.2 million ($1.33
per share), compared with $122.1 million ($1.30 per share) in
1996. The improvement mainly reflects production gains and higher
prices for natural gas, partially offset by lower crude oil
prices. Net income amounted to $12.6 million ($0.13 per share),
compared with $16.9 million ($0.18 per share) in 1996. Higher
cash flow was more than offset by non-cash charges, principally
increased depreciation and depletion expense.
Natural gas revenue (net of royalties) was $80.2 million, up 21
percent from $66.2 million in 1996, reflecting gains in both
production volumes and selling prices. Natural gas production
averaged 140.8 million cubic feet per day, up nine percent from
1996, primarily as the result of the Wainoco acquisition and new
volumes from northeast British Columbia. The production exit rate
for 1997 was 155 million cubic feet per day. The average price
realized from natural gas production was $1.80 per thousand cubic
feet, up 10 percent from $1.64 per thousand cubic feet a year
earlier.
Crude oil and natural gas liquids revenue (net of royalties)
increased by five percent to $132.6 million, compared with $126.2
million in the prior year. Production averaged 20,537 barrels per
day, nine percent higher than the previous year, mainly resulting
from increased volumes at Manatokan and Suffield in Alberta and
Elswick and Hastings in Saskatchewan. Notwithstanding the sale of
producing properties late in the year Numac's production exit rate
for 1997 was 21,100 barrels per day. The average price realized
from crude oil and natural gas liquids in 1997 was $21.96 per
barrel, a seven percent decrease from $23.59 per barrel in the
previous year.
Capital spending on exploration and development activity in 1997
amounted to $173.4 million, 63 percent higher than in 1996. The
increased spending primarily reflected the expansion of natural
gas programs in the Tommy Lakes/Martin Creek corridor of northeast
British Columbia and heavy oil development programs at Manatokan
and Suffield in Alberta. Including the $131.9 million cost of the
Wainoco acquisition and other smaller property purchases, oil and
gas investments in 1997 amounted to $314.4 million. As part of
the process of further upgrading the Company's asset base, a
significant number of non-core properties were sold in 1997 for
proceeds totalling $85.5 million. These proceeds, of which $25.4
million was not received until January 1998, enabled Numac to
reduce net debt to $276.4 million, which is just over two times
1997 cash flow.
At year-end 1997, proved oil and gas liquids reserves were 57.7
million barrels and proved natural gas reserves were 455 billion
cubic feet, increases of 12 percent and 17 percent, respectively,
compared to a year earlier. On a barrel of oil equivalent basis,
25.5 million equivalent barrels were added to proved reserves in
1997, representing a 202 percent replacement of reserves produced,
at a cost of $9.97 per barrel of oil equivalent. Proved plus
probable additions to reserves totalled 31.8 million barrels of
oil equivalent. This represents a replacement rate of 251 percent
and a reserve replacement cost of $8.01 per barrel of oil
equivalent, an 18 percent reduction from $9.73 per barrel of oil
equivalent in 1996. Proved plus probable reserves at year-end
1997 totalled 145.7 million barrels of oil equivalent, a
year-over-year increase of 15 percent.
Over the past two years, through a combination of acquisition and
drilling success, Numac has significantly expanded its core area
interests. With 2.2 million net acres of undeveloped land in
western Canada and a growing reserve and production base, the
Company is positioned for future growth. Furthermore, the
Company's strong financial position enables it to continue to
pursue its growth strategy.
Given currently depressed oil prices, however, Numac's near term
plans will focus on maintaining expenditures for exploration and
development activities substantially within cash flow
expectations. The Company's capital budget for 1998, established
in the fourth quarter of last year, has been adjusted to respond
to the lower crude oil price environment. Based on industry
forecasts of an average WTI crude oil price of U.S.$18 per barrel,
Numac has reduced its 1998 capital spending program to
approximately $124 million. Expenditures will be directed,
primarily, towards natural gas and light gravity crude oil
exploration and development opportunities in core growth areas.
These include: the Tommy Lakes/Martin Creek corridor in northeast
British Columbia, largely to expand Numac's natural gas reserves
and production base in the region; Red Creek, in the vicinity of
Fort St. John, also in northeast British Columbia, where the
Company has plans for a significant exploration and development
program on the Doig light gravity crude oil play; and projects in
Alberta and Saskatchewan, principally light gravity crude oil
exploitation and development opportunities at Ferrier and Crystal
in central Alberta and Elswick in southeast Saskatchewan. The
exploration component of the capital program includes further
evaluation of high impact natural gas prospects in the
Walrus/Ekwan area of northern British Columbia, and oil and gas
prospects at Ante Creek in west central Alberta. Spending on
heavy oil activities, particularly our Manatokan project, is being
severely curtailed due to the impact that the deterioration in
crude oil prices and differentials has had on heavy oil economics.
In addition, in response to these economics, approximately 1,000
barrels per day of higher cost Manatokan oil production has been
shut-in. It is possible, based upon continued close scrutiny of
production costs and the outlook for heavy oil prices, that the
Manatokan project will be suspended pending an improvement in
prices or technological advances that justify further investment.
As the result of the de-emphasis of heavy oil initiatives,
approximately 3,000 barrels per day will be eliminated from
Numac's earlier crude oil production expectations. The Company's
revised forecast is for 1998 oil and gas liquids production to
average approximately 21,000 barrels per day and natural gas
production to average 160 million cubic feet per day. While the
heavy oil cutbacks adversely impact Numac's volume statistics,
they do, in fact, have a positive effect on cash flow.
Anticipated netbacks in 1998 will reflect improvements in both the
average price realized and operating expense per barrel of oil
produced due to the lower component of heavy oil production.
Commenting on Numac's outlook, Stewart D. McGregor, Chairman and
Chief Executive Officer of the Company said, "1998 will be a
difficult and challenging year for our industry. In this
environment, Numac's focus will be on capital spending efficiency,
reserve and production growth, and the pursuit of opportunities
that might not otherwise present themselves but for the
challenging environment."
/T/
Consolidated Financial and Operating Summary
(thousands of dollars, except per share and per unit amounts)
Three Months Ended Years Ended
December 31 December 31
1997 1996 1997 1996
---- ---- ---- ----
Revenue $ 71,318 $68,242 $257,137 $239,997
Funds from operations $ 33,466 $36,234 $128,196 $122,058
Per common share
- basic $ 0.35 $ 0.38 $ 1.33 $ 1.30
- fully diluted $ 0.33 $ 0.35 $ 1.28 $ 1.21
Net income $ 1,846 $ 6,698 $ 12,602 $ 16,933
Per common share
- basic and fully
diluted $ 0.02 $ 0.07 $ 0.13 $ 0.18
Capital expenditures
-exploration and
development $ 48,750 $42,402 $173,371 $106,327
- acquisitions, net
of disposition $(41,878)$50,839 $ 80,972 $ 62,015
Production (before
deduction of royalties)
Crude oil and natural
gas liquids
- barrels per day 22,269 19,533 20,537 18,860
Natural gas - millions
of cubic feet per day 156.3 118.4 140.8 128.7
Average prices received
by the Company
Crude oil and natural
gas liquids
- $ per barrel $ 20.22 $ 25.38 $ 21.96 $ 23.59
Natural gas - $ per
thousand cubic feet $ 2.08 $ 2.08 $ 1.80 $ 1.64
Estimated present worth
of net pre-tax cash
flows (proved plus
one-half probable)
Discounted at 10 percent $859,600 $740,600
Discounted at 15 percent $696,600 $602,600
Western Canadian
undeveloped land
Thousands of net acres 2,228 2,248
Market value, per
Seaton-Jordan &
Associates Ltd. $156,565 $147,121
Years Ended December 31
1997 1996
---------------- -----------------
Proved Proved
Plus Plus
Proved Probable Proved Probable
------ -------- ------ --------
Reserves - crude oil and
liquids (thousands of
barrels) 57,729 80,443 51,459 70,432
Reserves - natural gas
(billions of cubic feet) 455 653 389 562
Reserve replacement
cost ($/BOE) $ 9.97 $ 8.01 $ 10.30 $ 9.73
Reserve replacement rate
(in percent) 202 251 141 149
/T/
Corporate reserves and reserve values are based on a report by
Gilbert Laustsen Jung Associates Ltd. |
