EARNINGS / Amber Energy reports 1st 3 months Results
CALGARY, April 20 /CNW/ - Amber Energy Inc. (''Amber'') announces its
first quarter financial and operating results for the three-month period ended
February 28, 1998.
<<
HIGHLIGHTS
For the three months ended February 28 (unaudited)
-------------------------------------------------------------------------
1998 1997 % Change
-------------------------------------------------------------------------
Operations
Production
Heavy oil 12,518 2,724 360
Light oil and NGLs 3,336 2,420 39
-------------------------------
Total crude oil and NGLs (Bbl/d) 15,854 5,144 208
Natural gas (Mmcf/d) 95.3 88.7 7
Barrels of oil equivalent (Boe/d) 25,384 14,014 81
Average product prices
Heavy oil 6.57 18.26 (64)
Light oil and NGLs 20.33 31.07 (35)
-------------------------------
Total crude oil and NGLs ($/Bbl) 9.47 24.28 (61)
Natural gas ($/Mcf) 1.66 2.10 (21)
Average production expenses
Heavy oil 1.91 2.88 (34)
Light oil and NGLs 4.82 7.81 (38)
-------------------------------
Total crude oil and NGLs ($/Bbl) 2.52 5.20 (52)
Natural gas ($/Mcf) 0.23 0.23 -
Total production expenses ($/Boe) 2.44 3.36 (27)
Wells drilled
Gross 115 90 28
Net 101.6 65.8 54
Success rate 93% 86% -
Financial ($000's)
Revenues (before royalties) 27,893 27,989 -
Funds from operations 13,301 16,633 (20)
Net income 512 5,759 (91)
Capital expenditures 155,008 100,631 54
Issue of common shares 81,501 63,124 -
As at February 28
Working capital deficit 50,068 21,324 135
Long-term debt 229,584 67,494 240
Shareholders' equity 244,744 152,940 60
Total assets 580,677 274,429 112
Common shares outstanding (000's) 57,689 52,238 10
Weighted average common shares (000's) 53,689 48,764 10
Per share data ($/share)
Funds from operations: basic 0.25 0.34 (26)
fully diluted 0.24 0.32 (25)
Earnings: basic 0.01 0.12 (92)
fully diluted 0.01 0.12 (92)
>>
OPERATIONS
The first quarter of 1998 was the most active period in Amber's history,
resulting in many significant achievements. We have successfully completed
our 1998 heavy oil development program at Pelican Lake, our light oil
exploration program at Springburn, a natural gas development program at
Wabasca, and encountered initial success on new exploratory gas projects at
East Prairie and Ekwan. Our 93% drilling success rate has resulted in dramatic
growth in oil and gas reserves and an 81% increase in total Boe production
volumes. Our independent engineering consultants are currently evaluating
these reserve additions and we plan to release a mid-year reserve report in
June 1998.
At Pelican Lake, we completed our drilling program, which started last
September, of 101 horizontal producing oil wells with a 100% success rate.
These wells averaged 50% longer than last year's 36 horizontal wells, which
will result in a corresponding increase in proved producing reserves per well.
We believe the successful horizontal wells combined with 23 vertical test
wells drilled by Amber this past winter have added substantial proved oil
reserves. We also added 102 sections (65,280 acres) of undeveloped land at
Pelican Lake in December 1997 at 100% working interest taking our total land
base at Pelican Lake to 313.5 (305.7 net) sections. We are currently
completing our field infrastructure construction program consisting of a road
network, a gathering system, a central production battery and the 110
kilometre Pelican Lake sales pipeline, which is still on track for a June 1
startup. Completing this development on schedule is a tremendous achievement
for Amber, costing $200 million (net) and requiring up to 1,800 people working
on site.
With the sales pipeline on stream Amber's field netbacks will increase by
$4.00/Bbl. At today's oil prices of $16.00 WTI this would result in field
netbacks of approximately $8.00/Bbl due to the extremely low operating costs
of $2.25/Bbl and the 1% royalty structure. These low costs ensure that the
Pelican Lake project will continue to generate high rates of return even at
low commodity prices. Due to the extremely low world oil prices experienced
in the winter, we delayed the completion and production on-stream date of a
number of wells in the winter drilling program while we constructed the
permanent facilities to produce the oil. This decision allowed the facilities
construction to continue unimpeded, reduced operating expenses, and delayed
significant oil production to this summer when it will be delivered to markets
through the sales pipeline and receive an additional $4.00/Bbl netback.
Amber's productive capability is, as forecast, 25,000 barrels per day at
Pelican Lake, and we expect to produce at those levels in June when the
pipeline is fully operational.
At Springburn, Amber continued to develop last year's light oil
discoveries and expand our exploration program. We were successful in 10 (5.5
net) out of 11 oil wells with 5 new pool discoveries. These wells averaged
initial production rates of 300-400 Bopd, taking Amber's current net
production at Springburn to 2,800 Bopd. Low operating costs and low royalties
in this project generated high netbacks of $16.44/Bbl in the first quarter of
1998. Amber also acquired 17.8 (13.3 net) sections of undeveloped land and
approximately 40 square miles of 3-D seismic data, which maintains our
drilling inventory of over 100 locations in this growing light oil project.
In the Wabasca area, Amber was very successful in drilling 17 gas wells
out of 20 wells drilled, all at 100% working interest, including several new
pool discoveries. These wells added significant new gas reserves, but the
early spring breakup prevented the tie-in of approximately 15 Mmcf/d of new
productive capacity in this area. This gas production will be brought
on-stream later in 1998 when field conditions allow.
Amber also enjoyed drilling success in the 2 new gas exploration areas of
East Prairie in north central Alberta and Ekwan in northeastern British
Columbia. At East Prairie, we drilled 5 exploratory wells resulting in 3 gas
discoveries with average productive capability of 2-3 Mmcf/d per well. A
detailed seismic program was recorded late in the winter with follow-up
drilling and production tie-ins to occur late in 1998. At Ekwan, Amber
successfully drilled and production tested 2 (1.0 net) horizontal
underbalanced gas wells at rates of 2-5 Mmcf/d per well. An early spring
breakup delayed further drilling until winter 1999, at which time we plan to
drill approximately 20 (10 net) additional horizontal underbalanced gas wells
with production commencing in mid-1999. We expect Ekwan to provide drilling
opportunities for several years, with 5 gas bearing formations on our 189 (95
net) sections of land.
We are pleased to welcome Jim Esposito to Amber's management team as Vice
President, Operations. Jim brings 20 years of experience in all facets of oil
field operations and will help us manage the tremendous growth in our field
activities.
<<
Drilling Activity
For the three months ended February 28, 1998
Success
Oil Gas Dry Total Rate (%)
-------------------------------------------------------------------------
Gross Net Gross Net Gross Net Gross Net Gross Net
-------------------------------------------------------------------------
Exploratory 6 3.9 4 3.5 4 4.0 14 11.4 71 65
Development 50 48.8 26 17.2 2 1.2 78 67.2 97 98
-------------------------------------------------------------------------
Total 56 52.7 30 20.7 6 5.2 92 78.6 93 93
-------------------------------------------------------------------------
Stratigraphic test wells 23 23.0
-------------------------------------------------------------------------
Total wells drilled 115 101.6
-------------------------------------------------------------------------
Capital Expenditures ($ millions)
For the three months ended February 28
1998 1997
-------------------------------------------------------------------------
Land 21.0 26.1
Seismic 3.8 4.4
Drilling and completion 69.4 28.4
Well equipment and facilities 59.8 10.9
Property acquisitions (net of dispositions) 0.8 30.7
Other 0.1 0.1
-------------------------------------------------------------------------
Total 154.9 100.6
-------------------------------------------------------------------------
>>
FINANCIAL
First quarter oil production volumes averaged 15,854 Bopd, up 208% from
the first quarter of 1997. The large increase in oil volumes was the result of
successful development at Pelican Lake and Springburn. Natural gas volumes
increased by 7% to 95.3 Mmcf/d but were impacted by compressor failures at
Hoole and Marten Creek during the first quarter. These problems have been
repaired and current volumes are approximately 105 Mmcf/d.
Average oil prices in the first quarter of 1998 plunged to $9.47 from
$24.28 in 1997, down 61%, and natural gas prices dropped to $1.66/Mcf, down
21% from $2.10/Mcf in 1997. However, oil operating costs were reduced by 52%
to $2.52/Bbl, while natural gas operating costs remained at $0.23/Mcf. The
dramatic drop in oil operating costs is due to the low cost operating
environment in both of Amber's oil growth areas of Pelican Lake and
Springburn. Total Boe operating expenses decreased by 27% to $2.44/Boe in the
first quarter of 1998.
The tremendous drop in commodity prices resulted in a decrease of 20% in
cash flow to $13.3 million while our earnings fell to $0.5 million from $5.7
million in 1997. Our low operating costs and low finding and on-stream costs,
particularly at Pelican Lake, have allowed us to maintain positive earnings
through this period of low commodity prices. By the third quarter of 1998,
when the Pelican Lake sales pipeline is fully operational, we will add
approximately $4.00/Bbl to our cash flow and earnings at Pelican Lake due to
reduced transportation charges. This will return Amber to a position of
strong cash flow and earnings.
Amber's capital expenditures in the first quarter were $155 million, up
from $100 million in the first quarter of 1997, due primarily to our intense
development program at Pelican Lake. Amber raised $85 million (before
expenses) through an equity financing completed in February 1998 to help
finance this aggressive capital program.
OUTLOOK
The precipitous drop in world oil prices during the first quarter of 1998
and our expectations of rising gas prices in the second half of 1998 led us to
re-evaluate and then reconfirm our current oil projects. Our extremely low
cost structure (i.e., low finding costs, low operating costs and low
royalties) in our light oil development at Springburn and our heavy oil
development at Pelican Lake will generate high rates of return even in a low
oil price environment. We therefore chose to continue the aggressive
development of these oil projects. Our decision to delay the onset of full
production at Pelican Lake until the sales pipeline is fully operational in
June will result in currently anticipated average oil production for 1998 of
23,000 barrels per day (from 27,000 barrels per day previously forecast), but
we expect our production in the second half of 1998 to be on target with
year-end exit rates of approximately 32,000 barrels per day. Due to the low
oil prices at Pelican Lake in the first half, these reduced volumes will have
minimal impact on 1998 cash flow.
Our successful gas drilling program at Wabasca, East Prairie and Ekwan
has added significant reserves and new production capability and has
established new multi-year drilling programs. The delays in tying in this new
gas deliverability will reduce our average gas production in 1998 to a
currently anticipated 105 Mmcf/d (from 120 Mmcf/d). Upon favourable field
conditions we expect to tie in these wells later in 1998 and meet our year-end
exit rate forecast of 120 Mmcf/d. Due to the current strength of natural gas
prices in Alberta, we have increased our 1998 average price forecast to
$1.75/Mcf, which will largely offset the cash flow impact of these lower
volumes.
In the second half of 1998 Amber will begin the next 100 well drilling
program at Pelican Lake and another 25 well drilling program at Springburn.
We expect to tie in about 20 Mmcf/d of new natural gas production in the
Wabasca and East Prairie areas and begin drilling in new gas exploration
areas. This will lead to strong growth in production volumes in 1999. We
expect natural gas prices to rise strongly in 1999 with the large increase in
export pipeline capacity beginning in November 1998. We also believe that
heavy oil differentials will shrink as the industry continues to postpone or
cancel high-cost heavy oil development. A modest rise in world oil prices
combined with lower differentials will generate higher Pelican Lake selling
prices, further increasing our profitability in 1999. All of our existing
major development projects (Pelican Lake, Springburn, Wabasca, Ekwan and East
Prairie) will continue to provide long-term, profitable growth by drilling and
developing our land base. We have also been acquiring undeveloped lands in
several new exploration areas that we believe can provide additional long-term
growth.
Amber is an independent Canadian oil and gas exploration, development and
production company with common shares trading on both The Toronto Stock
Exchange and The Alberta Stock Exchange under the symbol AMB. |
