97 Results
Search Energy Corp SGY
Shares issued 28,150,866 May 1 close $0.80
Mon 4 May 98 Company Review
Mr. William Davis reviews the company
Achievements in 1997 included record financial results, a corporate merger
and strategic asset acquisitions, all of which provide a solid foundation
for significant growth in the years ahead.
As part of the acquisitions, the company accumulated a sizeable undeveloped
land base and a mix of drilling targets. Search significantly expanded its
undeveloped land base and added production through two corporate
acquisitions: Westrex Energy and Lionheart Energy. Search spent
$19.2-million on capital expenditures during 1997, $16.5-million to acquire
Lionheart and the remainder drilling 14 (6.6 net wells), resulting in four
(2.2 net) oil wells, two (1.3 net) gas wells and one (0.3 net) service
wells.
The Westrex acquisition enhanced the company's land holdings and
opportunity base in southeastern Saskatchewan and established an enviable
core area near Wainwright in east-central Alberta. Lionheart offered Search
natural gas production and reserves that provide balance to its product mix
and increases the company's presence in Alberta.
Search now holds interests in over 130,000 gross acres (68,000 net) in this
province with proven plus one-half probable gas reserves of 15.1 bcf.
1997 Highlights
Search posted record and significantly higher financial and operating
results in 1997. Highlights included:
Search's 1997 production was 4.3 times higher than 1996 averaging 1,287
boed. Oil production grew 3.5 times to 922 bopd, compared to 1996's 258
bopd, while natural gas production was 10 times higher at 3,651 mcfd,
versus 373 mcfd in 1996. The company exited 1997 at 1,068 bopd and 5,592
mcfd, or 1,628 boed. At the time of writing this annual report, Search is
producing 1,815 boed, including 1,125 bopd and 6.9 mmcfd.
Revenue from the sale of oil and gas in 1997 was up four times at
$10,951,000, compared to $2,683,000 in 1996. The company's average selling
price of crude oil declined by eight per cent in 1997 to $24.87 from an
average price of $27.07 in 1996. The selling price of the company's natural
gas increased by 90 per cent to $1.99 in 1997 from 99 cents in 1996.
Despite the erosion in oil prices, Search improved its overall netback on a
boe basis by 11 per cent to $8.57 from $7.72.
Cash flow in 1997 was $4,028,000 compared to $832,000 in 1996, an
improvement of close to five times. However, a larger number of outstanding
shares resulted in cash flow per share remaining unchanged at 18 cents. The
number of Search shares issued and outstanding increased to 28,164,366 at
year end 1997, compared to 12,929,473 at Dec. 31, 1996.
Reserve additions on a proven plus one-half probable basis totalled
1,146,000 barrels of oil and 13.3 bcf of natural gas in 1997. This replaced
1997 production more than 5.25 times, at a cost of $7.77 per boe for proven
plus one-half probable reserves. At year end 1997, proven plus one-half
probable reserves totalled 4,552,000 boe, consisting of 2,958,000 barrels
of oil and 15.9 bcf of natural gas.
Wainwright Joint Venture
One of the most exciting developments in 1997 was the negotiation of a
highly significant seismic option agreement with a senior oil producer in
the Wainwright core area. The agreement provides Search with 90 square
miles of 3-dimensional seismic data valued at approximately $6.5-million,
This data is already helping identify excellent prospects on company land
for natural gas and oil targets, which are not subject to earning by the
senior oil producer, and are expected to result in significant production
and reserve increases for Search.
Outlook
Search has planned 17 wells for 1998, with an emphasis on natural gas on
the Wainwright property. It will also drill light oil wells in southeastern
Saskatchewan and Manitoba where Search is well established.
It is forecasting average production in 1998 of 2,200 boed, consisting of
1,400 b/d and 8 mmcf/d.
STATEMENT OF EARNINGS
Year ended Dec. 31
1997 1996
Revenue
Petroleum and
natural gas
sales $10,951,295 $ 2,683,077
Royalties, net
of Alberta
royalty tax
credit (1,569,037) (554,079)
----------- -----------
9,382,258 2,128,998
Interest and
other income 6,746 2,058
----------- -----------
9,389,004 2,131,056
----------- -----------
Expenses
Operating costs 3,927,464 943,749
General and
admin 706,243 291,470
Interest 557,176 64,160
Depletion,
depreciation
and site
restoration 3,303,107 639,824
----------- -----------
8,493,990 1,939,203
----------- -----------
Income before
taxes 895,014 191,853
Corporate
capital taxes 170,147 -
Deferred
income taxes - -
----------- -----------
Net earnings $ 724,867 $ 191,853
=========== ===========
Earnings per
share $0.03 $0.04
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