EARNINGS / Elk Point Doubles Production and Reserves in 1997 and
Reports Success in the Powder River Basin of Wyoming
TSE SYMBOL: ELK
MARCH 26, 1998
CALGARY, ALBERTA--Elk Point Resources Inc. ("Elk Point") more than
doubled its production and reserve base in l997 providing a solid
foundation for continued aggressive exploration and development.
The Company grew its average daily production by over 130 percent
to 4,117 barrels of oil equivalent per day in 1997 from 1,784
barrels of oil equivalent per day during 1996. In the fourth
quarter of 1997, production averaged 5,192 barrels of oil
equivalent per day, a 145 percent increase from 1996 fourth
quarter production of 2,116 barrels of oil equivalent per day. The
Company's total reserve base grew by over 150 percent to 23.5
million barrels of oil equivalent at the end of 1997 from 9.2
million barrels of oil equivalent at the end of 1996.
Gross oil and natural gas revenues doubled to $30.4 million in
1997 from $15.3 million in 1996. Cash flow grew by 78 percent to
$16.0 million from $9.0 million in 1996.
The Company was also successful on its oil exploration initiative
in the Powder River Basin of Wyoming, USA. The Company cased its
first exploration well at Boley in December 1997 and followed up
this success with the first development well in March 1998. The
discovery well is producing approximately 120 barrels of oil per
day (50 percent working interest) and the development well
recently commenced production at 360 barrels of oil per day (41
percent working interest). The Company plans to drill a
development well at Boley and an exploration test at Federal
commencing next week.
FINANCIAL OVERVIEW
Elk Point recorded a 78 percent increase in cash flow to $16.0
million ($0.91 per share) in 1997 from $9.0 million ($0.96 per
share) in 1996. The increase was directly attributable to the
significant growth in Elk Point's natural gas and crude oil
production from its successful exploration, development and
acquisition programs. Earnings were $1.4 million ($0.08 per share)
in 1997 compared to 1996 earnings of $2.6 million ($0.27 per
share). As expected, these earnings reflect a higher depletion
rate in 1997 that stems from the purchase of considerable probable
reserves in the Truax acquisition. The Company expects earnings to
improve in the long term as the Truax properties are more fully
developed and probable reserves are converted into proven
reserves.
OPERATIONAL OVERVIEW
During 1997, Elk Point's natural gas production grew by over 230
percent averaging 24.6 million cubic feet per day compared to 7.4
million cubic feet per day in 1996. The Company averaged 32.2
million cubic feet per day during the fourth quarter of 1997, a
growth of over 350 percent from 1996 fourth quarter production of
7.1 million cubic feet per day. The Company's production gains
came from development projects at Saddle Hills, Pemburton Hill,
Pembina and Thunder Lake as well as natural gas production from
the Truax acquisition. At Pembina, the Company added 5.0 million
cubic feet per day of gas production in mid-November and placed an
additional 2.0 million cubic feet per day of gas on stream
subsequent to year-end.
Oil production averaged 1,654 barrels per day during 1997, a 58
percent increase over 1996 average production of 1,047 barrels per
day. The Company averaged 1,971 barrels per day in the fourth
quarter of 1997 as the Pembina project came on stream
mid-November. This is a 40 percent increase over 1996 fourth
quarter production of 1,404 barrels per day.
Elk Point drilled 100 gross (59.3 net) wells in 1997, more than
double the 43 gross (28.9 net) wells drilled in 1996. The Company
drilled 58 gross (32.0 net) development wells with an 83 percent
(88 percent net) success rate. Elk Point drilled 42 gross (27.3
net) exploration wells with a 55 percent (46 percent net) success
rate. The greater emphasis on exploration has led to several new
pool discoveries that will provide a larger component of
development drilling in the Company's program throughout 1998.
In total, Elk Point cased 48 gross (30.5 net) wells as oil wells
and 22 gross (9.1 net) wells as gas wells, while 29 gross (18.7
net) wells were dry and abandoned and one gross (1.0 net) well was
a service well for an overall success rate of 71 percent (69
percent net).
RESERVES AND FINDING AND DEVELOPMENT COSTS
Elk Point replaced its production in 1997 by a factor of 10.5
times based on total reserves. Total proven and probable natural
gas reserves were doubled to 118.2 billion cubic feet of gas at
the end of 1997 from 56.3 billion cubic feet of gas at the end of
1996. Crude oil and natural gas liquid reserves increased by 226
percent to 11.6 million barrels of oil from 3.6 million barrels of
oil at the end of 1996. On capital expenditures of $112.9 million
in 1997, finding and development costs were $7.16 per barrel of
oil equivalent of proven plus probable reserves and $8.69 per
barrel of oil equivalent of proven plus half probable reserves
("established reserves"). Land and seismic expenditures were a
significant component of capital expenditures and comprised $0.62
and $0.20, respectively, per barrel of oil equivalent of proven
plus probable reserves and $0.75 and $0.24, respectively, per
barrel of oil equivalent of established reserves. Development
costs for facilities and equipping totalled $1.55 per barrel of
oil equivalent of proven plus probable reserves and $1.87 per
barrel of oil equivalent of established reserves. Finding costs
net of land, seismic and facilities were $4.79 per barrel of oil
equivalent of proven plus probable reserves and $5.83 per barrel
of oil equivalent of established reserves.
OUTLOOK
Elk Point has boosted its current productive capability to over
7,000 barrels of oil equivalent per day of which 63 percent is
natural gas. The Company is planning to drill 120 gross (60 net)
wells this coming year with an increased focus on natural gas. A
number of development projects which will lead to further
production growth are underway at Pembina, Lobstick, Corbett Creek
and Newton in west central Alberta and Elcott in southeastern
Saskatchewan. While directing 65 percent of its drilling towards
development, the Company plans to evaluate 43 exploration
prospects in 1998. Exploration efforts will be directed mainly
towards multi-zone natural gas in west central and northeastern
Alberta, light oil in southeastern Saskatchewan and medium oil in
the Powder River Basin, Wyoming. Elk Point will operate and
participate with a 10 percent working interest in a high impact,
deep exploration test at Lost Hills in the San Joaquin Basin in
California targeting long life, light oil reserves.
/T/
SUMMARY RESULTS
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Percent
1997 1996 Change
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FINANCE
(thousands of dollars, except
share and per share amounts)
Gross oil and gas revenue $ 30,418 $ 15,324 99
Cash flow from operations $ 15,965 $ 8,971 78
Basic per share $ 0.91 $ 0.96 (5)
Earnings $ 1,350 $ 2,554 (47)
Basic per share $ 0.08 $ 0.27 (70)
Fully diluted per share $ 0.08 $ 0.26 (69)
Common shares
(1997 weighted average) 17,481,351 9,333,343 87
Common shares
(outstanding 12/31/97) 21,628,872 14,009,480 54
Shareholders' Equity $ 106,594 $ 45,307 135
Capital expenditures, net $ 112,903 $ 44,838 152
Total assets $ 182,889 $ 67,266 172
Working capital deficiency $ 13,854 $ 3,924 253
Long-term debt $ 33,586 $ 5,750 484
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AVERAGE PRODUCTION
Natural gas (thousand cubic
feet per day) 24,632 7,373 234
Oil and natural gas liquids
(barrels per day) 1,654 1,047 58
AVERAGE SALES PRICES
Natural gas ($Cdn per
thousand cubic feet) $ 1.80 $ 1.77 2
Oil and natural gas liquids
($Cdn per barrel) $ 23.57 $ 26.76 (12)
--------------------------------------------------------------
RESERVES
Total proven plus probable reserves
Natural gas (billion cubic feet) 118.2 56.3 110
Oil and natural gas liquids
(thousand barrels) 11,635 3,569 226
Barrel of oil equivalent
(thousand barrels) 23,452 9,167 156 |
