EARNINGS / Magin Energy reports 1997 Results
CALGARY, Feb. 27 /CNW/ -
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FOURTH QUARTERLY REPORT
FOR THE THREE MONTHS ENDED DECEMBER 31, 1997
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HIGHLIGHTS FOR THE YEAR ENDED DECEMBER 31, 1997
(thousands except per
share amounts) 1997 1996 % Change
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Financial
Revenue $ 36,709 $ 5,840 529
Cash flow (after G&A and interest) 15,743 3,412 361
Per share
Basic 0.41 0.29 41
Fully diluted 0.38 0.24 58
Net earnings (after tax) 1,876 2,023 (7)
Per Share
Basic 0.05 0.17 (71)
Fully diluted 0.05 0.14 (64)
Average shares outstanding (000s) 38,593 11,923 224
Capital expenditures
Exploration and development 43,246 7,232 498
Acquisitions net of dispositions 103,973 19,666 428
Operating
Average sales
Oil and NGL (Bbls/d) 2,998 465 545
Natural gas (Mcf/d) 19,060 2,188 771
Total oil equivalent (boe/d) 4,904 684 617
Average sales price
Oil price ($/Bbl) $ 21.48 $ 26.31 (18)
Gas Price ($/Mcf) $ 1.87 $ 1.89 (1)
Field Netback ($/boe) $ 11.30 $ 15.60 (28)
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HIGHLIGHTS FOR THE THREE MONTHS ENDED DECEMBER 31, 1997
(thousands except per
share amounts) 1997 1996 % Change
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Financial
Revenue $ 12,495 $ 3,717 236
Cash flow (after G&A and interest) 6,113 2,293 167
Per share
Basic 0.13 0.10 30
Fully diluted 0.12 0.09 33
Net earnings (after tax) 1,089 1,628 (33)
Per share
Basic 0.02 0.07 (71)
Fully diluted 0.02 0.06 (67)
Average shares outstanding (000s) 47,783 22,121 116
Capital expenditures
Exploration and development 17,130 4,069 321
Acquisitions net of dispositions 2,127 421 405
Operating
Average Sales
Oil and NGL (Bbls/d) 4,440 1,102 303
Natural gas (Mcf/d) 25,766 6,298 309
Total oil equivalent (boe/d) 7,017 1,732 305
Average sales price
Oil price ($/Bbl) $ 21.26 $ 26.74 (20)
Gas price ($/Mcf) $ 2.12 $ 2.01 5
Field Netback ($/boe) $ 11.83 $ 16.00 (26)
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REPORT TO SHAREHOLDERS
Magin produced record results for the quarter ended December 31, 1997.
Daily production averaged 7,017 barrels of oil equivalent (BOE) for the
quarter, rising to an average of 8,100 BOE in December. Average daily
production in January rose a further 600 BOE to 8,700.
Magin's free cash flow for the year rose in excess of three and one-half
times from 1996 and reached $15.7 million. On a per share basis, cash flow
increased over 40 percent to $0.41 for 1997 compared to $0.29 in 1996. Fourth
quarter cash flow per share was $0.13 in 1997, compared to $0.10 in 1996.
OPERATIONAL REVIEW
Magin's exploration and development capital expenditures for the year
were just over $43 million and included $26.8 million for drilling and
completions, $9.2 million for facilities, and $6.0 million for land,
geological and geophysical costs. Additionally, net acquisitions were made
for $104.0 million.
Annual results for 1997 drilling are as follows:
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Oil Gas Other Abandonment Total Net %
Gross Net Gross Net Gross Net Gross Net Gross Net Success
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Exploration 6 5.0 14 11.0 0 0.0 20 14.0 40 30.0 53
Development 43 32.1 13 13.0 4 4.0 7 7.0 67 56.1 87
Total Program 49 37.1 27 24.0 4 4.0 27 21.0 107 86.1 74
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The reserves at year-end are as follows:
Oil NGL Gas BOE
(Mstb) (Mbbls) (MMscf) (MBOE)
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Proven 8,900 765 75,500 17,215
Probable 3,200 531 36,400 7,371
Established(x) 10,500 1,031 93,700 20,901
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(x) proven plus one-half probable
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In 1997, 8.83 million BOE of proven and probable reserves were drilled
for and put on stream at a cost of $3.91 per barrel. The cost per proven BOE
and per established barrel was $5.85 and $4.69 respectively. Net acquisitions
added 7.93 million BOE of established reserves at a cost of $12.54 per
established barrel. The Discovery West acquisition completed earlier in 1997,
represented nearly 90 percent of the acquisition expenditures. This
acquisition was attractive to Magin due to the high level of cash flow
generated from the properties. Reinvestment of this cash flow has been highly
successful. Acquisition and drilling combine to give an overall cost of $8.76
per established barrel, $10.47 per proven BOE and $7.53 per proven and
probable BOE. The replacement ratio for Magin over the year has been over 10
BOEs for every BOE of production. The net asset value per share based on
proven plus probable reserves at a 10 percent pre-tax discount rate is $3.25
and $2.71 on an established reserve basis.
Based on fourth quarter 1997 production, Magin's proven reserve life
index is 6.7 years and its proven and probable index is 9.6 years.
FINANCIAL REVIEW
Petroleum and natural gas revenues have increased to $36.7 million in
1997 compared to $5.8 million in 1996. This 529 percent percent increase is
due entirely to higher production volumes as the price received on a barrel of
oil equivalent basis is 12 percent less than in 1996. Operating costs, while
increasing to $6.33 per BOE in 1997 from $5.60 per BOE in 1996, were reduced
to $4.68 per BOE in the fourth quarter. Unit general and administrative
expenses decreased from $1.20 per BOE in 1996 to $0.95 per BOE in 1997.
Depletion, depreciation and site restoration expense increased in 1997 to
$7.75 on a per BOE basis from $5.56 per BOE in 1996.
Debt, net of working capital, was $54.7 million at year end. This
provides a debt to 1998 cash flow ratio of approximately 1.8 times based on
$17.50 WTI oil and $1.75 Mcf gas prices.
Magin reported a profit of $1.88 million for the year, of which $1.09
million was earned in the fourth quarter. The after tax return on average book
equity in the fourth quarter was an annualized 5.5 percent.
OUTLOOK
Daily production for the first quarter is projected to average 9,000 boe.
While gas prices are strong, oil prices are lower than anticipated. Magin's
hedge of 2,000 Bbls/d at $28.23 (Cdn.) represents over a third of total
liquids production. A strong cash flow combined with available debt capacity
and over 245,000 net acres of undeveloped land has placed Magin in a healthy
position to execute the 1998 capital program.
At the May meeting, the shareholders will be asked to consider a three to
one consolidation of shares. The purpose of the consolidation is to
facilitate future acquisitions, make Magin's performance more easily
comparable to similarly sized corporations, and improve the marketability of
the common shares.
Submitted on behalf of the Board of Directors
GLENN R. CARLEY
Chairman and Chief Executive Officer
February 27, 1998
CONSOLIDATED BALANCE SHEETS
AS AT DECEMBER 31 (UNAUDITED)
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1997 1996
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Assets
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Current assets $ 10,552,155 $ 3,092,699
Investments and advances 3,430,777 -
158,099,467 25,274,886
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$ 172,082,399 $ 28,367,585
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Liabilities and Shareholders' Equity
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Current liabilities $ 13,468,256 $ 1,811,304
Provision for site restoration 2,807,016 176,571
Long-term debt 51,740,274 10,563.261
Deferred income taxes 14,186,982 -
Shareholders' equity 89,879,871 15,796,449
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$ 172,082,399 $ 28,367,585
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Price Risk Management - Updated Positions
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Crude Oil and Natural Gas Interest Rate Swaps
1998 2,000 Bbl/d - $28.23 CAD $42 million at 5.9%
14.2 Mmcf/d - $1.48/Mcf April - October
18.9 Mmcf/d - $2.04/Mcf November - December
1999 18.9 Mmcf/d - $2.04/Mcf January - October $36 million at 6.0%
CONSOLIDATED STATEMENTS OF
OPERATIONS AND RETAINED EARNINGS
FOR THE THREE MONTHS ENDED DECEMBER 31 (UNAUDITED)
1997 1996
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Revenue
Oil and gas revenue $ 12,495,031 $ 3,716,589
Royalty expense, net of ARTC (1,835,502) (292,458)
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$ 10,659,529 $ 3,424,131
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Expenses
Operating $ 3,021,696 $ 874,527
General and administrative 757,159 135,846
Interest 745,244 120,763
Depletion, depreciation, and
provision for site restoration 5,023,386 664,698
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$ 9,547,485 $ 1,795,834
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Earnings for the period before tax $ 1,112,044 $ 1,628,297
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Capital taxes $ (22,459) $ -
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Net earnings for the period after tax $ 1,089,585 $ 1,628,297
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Retained earnings, beginning of period $ 2,484,251 $ 69,510
Excess of redemption price over
carrying value of common shares $ (432,264) $ -
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Retained earnings, end of period $ 3,141,572 $ 1,697,807
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Earnings per share
Basic $ 0.02 $ 0.07
Fully diluted $ 0.02 $ 0.06
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED DECEMBER 31 (UNAUDITED)
1997 1996
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Cash provided by (used in):
Operations
Earnings $ 1,089,585 $ 1,628,297
Depletion, depreciation,
and site restoration 5,023,386 664,698
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Funds from operations $ 6,112,971 $ 2,292,995
Change in non-cash working capital 372,602 (1,201,589)
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$ 6,485,573 $ 1,091,406
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Financing
Long-term debt $ (2,607,960) $ 3,406,365
Increase in share capital 16,605,011 (7,560)
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$ 13,997,051 $ 3,398,805
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Investments
Purchase of petroleum and
natural gas interests $ (4,812,062) $ (421,587)
Exploration and development expenditures $(17,130,331) $ (4,068,624)
Proceeds on disposition of properties 2,684,769 -
Promissory notes (1,225,000) -
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$(20,482,624) $ (4,490,211)
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Change in cash $ - $ -
Cash position, beginning of period $ - $ -
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Cash position, end of period $ - $ -
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Funds from oporations per share
Basic $ 0.13 $ 0.10
Fully diluted $ 0.12 $ 0.09
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CORPORATE INFORMATION
DIRECTORS STOCK EXCHANGE LISTING
The Toronto Stock Exchange
Glenn R. Carley Trading Symbol ''MGY''
Chairman and CEO
Magin Energy Inc. TOTAL SHARES ISSUED
50,386,694 Common shares (basic)
John A. Brussa 54,328,546 Common shares (fully diluted)
Partner
Burnet, Duckworth & Palmer TRANSFER AGENT AND REGISTRAR
Montreal Trust
Fred C. Coles 6th Floor, 530 - 8th Avenue S.W.
Executive Chairman and CFO Calgary, Alberta T2P 3S8
Applied Terravision Systems
Inc.
CORPORATE OFFICE
William L. Cooke Suite 900, 355 - 4th Avenue S.W.
Vice-President Calgary, Alberta T2P 0J1
Royal Trust Phone: (403) 265-1899
Fax: (403) 234-9963
David R. Crombie
Chairman, President and CEO www.magin.com
Rayrock Yellowknife
Resources Inc.
Glen A. Yeryk
President and COO
Magin Energy Inc. |
