EARNINGS / Ulster Continues Exploratory Success and Achieves Solid
First Quarter Results
TSE SYMBOL: ULP
MAY 7, 1998
CALGARY, ALBERTA--During the first quarter of 1998, Ulster
Petroleums Ltd. continued to enjoy significant success from its
high impact gas drilling program in the Peace River Arch area.
This resulted in reserve additions that pushed the Company through
the 100 million boe reserve level. The Company's production
growth and focus on reducing operating costs, produced solid
operating and financial results, despite the ongoing weakness in
commodity prices.
Exploration and Exploitation Activities
As mentioned in its 1997 Annual Report, Ulster's large inventory
of prospects enabled us to react quickly to falling oil prices.
In the first quarter, we redistributed our capital budget to
include more high impact, gas-oriented drilling prospects. As a
result, over 60 percent of the wells drilled during the first
quarter were exploratory and averaged 2,300 metres in depth.
Ulster drilled a total of 25 gross (16.1 net) wells resulting in
14 gross (7.0 net) gas wells, 4 gross (4.0 net) oil wells and 2
gross (2.0 net) injector wells, for an 80 percent success rate.
Peace River Arch
In this liquids-rich natural gas area, a total of 19 gross (10.1
net) wells were drilled during the first quarter, achieving a 79
percent success rate.
At Wapiti, Ulster commenced an aggressive exploration program and
has already achieved exceptional results. During the first
quarter, 11 wells were drilled resulting in 10 successful wells
and included the discovery of two significant new pools.
Production from these new pools was placed on-stream in April,
adding over 15 MMcf per day net to Ulster. These discoveries will
be followed-up in the 1998-99 winter drilling season. Ulster has
contracted three drilling rigs to work in the Wapiti area over the
next two years on its scheduled 50 well drilling program.
At Gold Creek, the discovery drilled in late 1997 is on-stream at
rates in excess of 1,000 boe per day. During the first quarter,
Ulster drilled two horizontal development wells in the Wabamun
formation. These wells were follow-up locations to earlier
liquids-rich pool discoveries made by Ulster. Both wells will be
brought on-stream late in the second quarter. Four additional
Wabamun wells are planned in this area for the balance of the
year.
Ulster's second quarter drilling activity will be limited to
approximately 10 wells on the Peace River Arch, due to spring
breakup and related surface access restrictions.
Central Alberta
In response to lower oil prices, Ulster delayed a major portion of
its oil exploration and development program in the first quarter.
As a result, the Company drilled only six 100 percent wells,
resulting in 3 oil wells and 2 injector wells. During the
quarter, the main focus was to implement a water flood on the
Alix pool. This program will increase production by 400 boe per
day by year end.
During the second quarter, activity will return to budgeted levels
as Ulster will conduct a 12 well drilling program on its Clive and
Wimborne oil properties.
Operating and Financial Results
For the first quarter of 1998, natural gas production increased to
97.7 MMcf per day compared to 91.3 MMcf per day during the same
period in 1997. Due to weather and equipment delays, production
from Ulster's Gold Creek and Wapiti discoveries was not placed
on-stream until April. Current natural gas production is 115 MMcf
per day and will continue to rise as additional volumes are
tied-in from our first quarter wells. Natural gas prices remained
strong for the first quarter of 1998, averaging $1.94 per Mcf.
Crude oil and NGL production increased to 10,200 barrels per day
from 9,100 barrels per day in 1997. The increase in production is
attributable to additional NGL volumes from our new Peace River
Arch wells. These additions more than offset the normal depletion
in existing oil pools and the curtailment of first quarter oil
drilling activity. Ulster's crude oil and NGL price averaged
$17.51 per barrel during the first quarter compared to $28.27 per
barrel in 1997. This decrease is attributable to commodity price
weakness and the addition of lower valued liquids extracted at
Ulster's Wapiti Deep Cut gas facility.
First quarter 1998 natural gas operating costs were reduced by 27
percent to $0.32 per Mcf, while oil and NGL operating costs
declined 16 percent to $4.48 per barrel. On a combined basis,
operating costs averaged $3.87 per boe during the first quarter of
1998, down 21 percent from the same period in 1997. These
reductions reflect the positive impact of Ulster's large
investment in facilities during 1997, combined with the continued
focus on controlling operating costs.
As anticipated, first quarter 1998 cash flow was $17.5 million
($0.41 per fully diluted share) and net earnings $1.9 million
($0.04 per share).
Outlook
In the second quarter, Ulster will continue to accelerate its
natural gas exploration activities on the Peace River Arch. In
addition, oil drilling activities will return to budgeted levels
at Clive, Wimborne and Chigwell.
Fred Woods, President and Chief Operating Officer stated "Ulster's
strategy of balanced production of light oil and liquids-rich
natural gas, combined with a large play inventory has produced
consistently high netbacks and enables us to maintain an
aggressive $125 million capital program".
Ulster Petroleums Ltd. is an intermediate-sized oil and natural
gas company, committed to the exploration for and production of
the highest quality liquids-rich natural gas and light gravity
crude oil. Adhering to its proven business strategy has allowed
Ulster to continue to produce solid growth and excellent potential
for its shareholders. For the past 30 years, Ulster's common
shares have been listed for trading on The Toronto Stock Exchange,
under the trading symbol "ULP".
/T/
Highlights
Three Months Ended March 31,
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Percent
1998 1997 Change
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Operations
Production
Natural gas (Mcf/d) 97,700 91,300 7
Crude oil and NGL (bbls/d) 10,200 9,100 12
Barrels of oil equivalent
(boe/d) 19,970 18,230 10
Pricing
Natural gas ($/Mcf) $ 1.94 $ 2.12 (8)
Crude oil and NGL ($/bbl) $17.51 $28.27 (38)
Wells drilled
Gross 25 14 79
Net 16.1 10.9 48
Success rate (in percent) 80 79 1
Financial (thousands,
except per share amounts)
Revenue $28,278 $33,927 (17)
Cash flow from operations 17,473 22,458 (22)
per common share - basic 0.42 0.72 (42)
per common share
- fully diluted 0.41 0.62 (34)
Net earnings 1,852 5,359 (65)
per common share - basic 0.04 0.16 (75)
per common share
- fully diluted 0.04 0.15 (73)
Capital expenditures 38,571 35,993 7
Long-term debt 190,726 145,301 31
Shareholders' equity $365,684 $257,164 42
Common shares outstanding
- basic 41,499 31,456 32
- fully diluted 43,972 37,423 17
Unit of Production Data
Three Months Ended March 31,
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1998 1997
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Mcf of Natural Gas
Selling price $ 1.94 $ 2.12
Royalties, net of ARTC (0.31) (0.35)
Production expenses (0.32) (0.44)
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Net production revenue $ 1.31 $ 1.33
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Barrel of Crude Oil and NGL
Selling price $ 17.51 $ 28.27
Royalties, net of ARTC (2.75) (5.16)
Production expenses (4.48) (5.33)
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Net production revenue $ 10.28 $ 17.78
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/T/
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