EARNINGS / Poco Petroleum reports 1st 3 months Results
CALGARY, May 7 /CNW/ -
- A 17 per cent increase in average daily production to a record high of
90,676 barrels of oil equivalent, including a 19 per cent increase in
natural gas to 490 million cubic feet, a 21 per cent rise in natural
gas liquids to 19,474 barrels and an eight per cent crude oil increase
to 22,182 barrels.
- Exploration, development and acquisition expenditures of $227.4 million
added proven and probable reserves of 28.2 million barrels of oil
equivalent which is 81 per cent of forecast 1998 annual production of
34.9 million barrels of oil equivalent. The expenditures included
acquiring over 271,000 net acres of undeveloped land.
- The acquisition of interests in the Monkman Pass area of British
Columbia has established a significant operating position with
tremendous exploration potential in one of the largest natural gas
areas in North America.
- Poco continues to be heavily weighted to natural gas-related production
with over 76 per cent of first quarter production volumes comprised of
natural gas and natural gas liquids.
<<
Three months ended March 31
% Increase
FINANCIAL HIGHLIGHTS 1998 1997 (decrease)
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Oil and gas revenue ($ thousands) 183,270 173,432 6
Funds from operations ($ thousands) 100,733 96,590 4
Per share ($) 0.78 0.76 3
Net earnings ($ thousands) 25,685 28,848(x) (11)
Per share ($) 0.20 0.23(x) (13)
Capital expenditures ($ thousands) 234,599 256,579 (9)
Weighted average shares outstanding
(thousands) 129,661 127,308 2
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OPERATIONAL HIGHLIGHTS
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Natural Gas
Daily production (mmcf) 490.2 410.3 19
Sales price ($/mcf) 2.64 2.47 7
Royalties ($/mcf) (0.41) (0.46) (11)
Production expenses ($/mcf) (0.44) (0.41) 7
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Netback ($/mcf) 1.79 1.60 12
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Natural Gas Liquids
Daily production (bbls) 19,474 16,046 21
Sales price ($/bbl) 16.24 20.89 (22)
Royalties ($/bbl) (2.81) (4.46) (37)
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Netback ($/bbl) 13.43 16.43 (18)
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Crude Oil
Daily production (bbls) 22,182 20,619 8
Sales price ($/bbl) 18.56 28.28 (34)
Royalties ($/bbl) (3.44) (6.70) (49)
Production expenses ($/bbl) (6.77) (6.61) 2
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Netback ($/bbl) 8.35 14.97 (44)
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(x) restated
>>
Message to Shareholders
With 17 per cent growth in production, Poco once again achieved record
first quarter cash flow which totaled $100.7 million. Excellent drilling
results in the first quarter and the prospect for higher natural gas prices
later in the year are strong indicators for year-over-year financial and
operational growth despite weak crude oil prices.
OPERATIONAL HIGHLIGHTS
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Daily natural gas production increased 19 per cent to 490 million cubic
feet from 410 million cubic feet in first quarter 1997. The production
increase reflects the acquisition of Monkman Pass properties and the expansion
of processing capacity at O'Chiese in west-central Alberta to handle volumes
generated by exploration and development activities. The liquids-rich
composition of O'Chiese natural gas is reflected in the 21 per cent increase
in natural gas liquids volumes to 19,474 barrels per day from 16,046 barrels
in 1997. Poco's crude oil production increased eight per cent to 22,182
barrels per day from 20,619 barrels in 1997.
Poco spent $227.4 million in the first quarter, including $63.2 million
for net acquisitions. These amounts included $36.3 million for facilities and
$70.1 million for land and geophysical costs. Drilling costs were $107.8
million for 82 gross wells (69.9 net), of which 63 (56.3 net) were gas wells
and 15 (9.7 net) were oil wells. Total reserve additions were 28.2 million
barrels of oil equivalent, comprised of 221.3 billion cubic feet of natural
gas and 6.1 million barrels of liquids. During the first quarter, Poco
increased its undeveloped land base by 15 per cent by acquiring 271,142 acres
bringing the total undeveloped land base to 2.1 million net acres.
FINANCIAL HIGHLIGHTS
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Poco's first quarter natural gas price increased to $2.64 per thousand
cubic feet from $2.47 in the first quarter of 1997. The price rise reflects a
fixed price of $3.00 per thousand cubic feet on 300 million cubic feet of
daily production for the full quarter. The crude oil price decreased 34 per
cent to $18.56 per barrel from $28.28 per barrel in first quarter 1997. The
lower crude oil price and, to a lesser extent a lower natural gas liquids
price, reflected a deterioration in the average price of West Texas
Intermediate crude oil to U.S.$15.93 from U.S.$22.77 in the first quarter of
1997. The significant decrease in heavy crude oil prices due to a widening
price differential between light and heavy crude oil did not materially impact
Poco.
Record production levels and a strong natural gas price mitigated the
lower liquids prices and allowed Poco to generate record first quarter cash
flow of $100.7 million, or $0.78 per share. This compares to cash flow of
$96.6 million, or $0.76 per share in 1997.
Starting in 1998, Poco adopted the new Canadian Institute of Chartered
Accountants standard for corporate income tax accounting. The immediate impact
of this change was to accrue all quantifiable future income tax liabilities
associated with assets which do not have an equivalent tax basis. The offset
to this accrual was a reduction in retained earnings and an increase to
property, plant and equipment. Poco has restated the financial statements for
1997 to record the change retroactively for comparative purposes.
EXPLORATION, DEVELOPMENT AND NET ACQUISITIONS
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The acquisition of the Monkman Pass assets has given Poco a dominant
operating position in an area with tremendous deliverability potential and
where the company has identified over 20 drilling locations. Current activity
consists of a re-entry of an existing well, tying-in another well and plans to
drill one well in the third quarter and another well in the fourth quarter.
Drilling activity should increase in this area in 1999 with plans to add a
second drilling rig.
To finance the acquisitions made in the first quarter, Poco disposed of
mature and non-strategic assets for proceeds of $75.0 million with the balance
financed by debt. Additional dispositions are being finalized and will be
recorded in the second quarter.
The most active exploration area during the first quarter was O'Chiese
with 29 wells drilled of which 24 were gas wells and one was an oil well for a
success rate of 86 per cent. Approximately $30 million was spent in this area
including $4.5 million for expansion of two gas plants and $6.1 million for
land and seismic. First quarter drilling results exceeded expectations and
identified numerous drilling locations to be pursued over the next two years.
The current plan for O'Chiese is to drill 24 wells during the remaining three
quarters of 1998.
1998 PROJECTIONS
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Poco is currently projecting an average natural gas price of $2.15 per
thousand cubic feet in 1998. This should be conservative given the very strong
natural gas prices realized to date and higher prices seen in the futures
market for the last quarter of 1998. This strong pricing environment
reinforces Poco's business plan which continues to concentrate on natural gas
exploration and acquisitions of large reserves in the deeper portion of the
western Canadian sedimentary basin. Given the strong cash flow expected in
1998, Poco will retain its previously announced capital budget of $425
million. Approximately 80 per cent of this capital budget is devoted to
natural gas activities.
Assuming a West Texas Intermediate crude oil price of U.S.$17.00 per
barrel for 1998, Poco's crude oil price should decrease to $20.20 per barrel
from $25.38 per barrel in 1997. The price for natural gas liquids is also
expected to decrease to $17.10 per barrel from $19.31 per barrel in 1997. Poco
believes crude oil prices will strengthen in the last quarter of 1998.
In 1998, Poco expects average daily natural gas production to increase 21
per cent to 525 million cubic feet from 432 million cubic feet. Natural gas
liquids should rise 18 per cent to 20,000 barrels per day from 17,014 barrels
per day. Crude oil is expected to increase seven per cent to 23,000 barrels
per day from 21,454 barrels per day.
As a result of these assumptions, Poco is currently projecting cash flow
of $355 million, or $2.70 per share. Net earnings are expected to be
approximately $60 million, or $0.46 per share. These results are expected to
be among the best of the senior producers given the extremely weak crude oil
price environment anticipated for 1998 and Poco's high ratio of natural gas
production.
CLOSING COMMENTS
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Poco is very well positioned to profit from stronger natural gas prices
expected in the last quarter of 1998 and continuing into the foreseeable
future. When combined with any resurgence in oil prices, Poco will not only
generate strong results in 1998 but will be poised for tremendous growth in
cash flow in 1999.
On behalf of the Board of Directors,
Craig W. Stewart
President and Chief Executive Officer
May 6, 1998
<<
CONSOLIDATED BALANCE SHEETS
As at March 31 As at December 31
(thousands) 1998 1997
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(unaudited) (unaudited)
ASSETS (restated)
Current Assets
Accounts receivable $ 166,298 $ 86,407
Inventory 24,070 22,844
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190,368 109,251
Property, Plant and Equipment note 2,120,408 1,943,921
Other Assets 20,110 31,870
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$ 2,330,886 $ 2,085,042
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LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts Payable and Accrued
Liabilities $ 126,250 $ 73,923
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Long Term Debt 953,449 812,896
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Future Site Restoration 13,873 12,417
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Future Income Taxes note 354,242 340,268
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Shareholders' Equity
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Common shares note 918,226 906,377
Deficit note (35,154) (60,839)
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883,072 845,538
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$ 2,330,886 $ 2,085,042
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NOTE TO THE CONSOLIDATED FINANCIAL STATEMENTS
(thousands, except per share amounts)
FUTURE INCOME TAXES
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Poco has adopted the new income tax standard issued by the Canadian
Institute of Chartered Accountants. The income tax standard has been adopted
retroactively resulting in the restatement of 1997 results. The impact of this
restatement on the December 31, 1997 financial statements is as follows:
<<
As Reported Adjustment Restated
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As at December 31, 1997
Property, plant and equipment 1,911,668 32,253 1,943,921
Future income taxes 133,503 206,765 340,268
Common shares 904,982 1,395 906,377
Retained earnings (deficit) 115,068 (175,907) (60,839)
For the year ended December 31, 1997
Depletion and depreciation 209,795 3,592 213,387
Income taxes 69,576 (18,173) 51,403
Net earnings 58,293 14,581 72,874
Net earnings per common share
Basic 0.46 0.11 0.57
Fully diluted 0.45 0.11 0.56
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Restated net income for the quarter ended March 31, 1997 increased by
$5.5 million ($0.05 per share) to $28.8 million ($0.23 per share) from the
amounts originally reported. Income tax expense declined by $6.4 million and
depletion expense increased by $0.9 million as a result of the restatement.
CONSOLIDATED STATEMENTS OF EARNINGS
For the three months
ended March 31
(thousands, except per share amounts) 1998 1997
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(unaudited) (unaudited)
(restated)
Revenue
Oil and gas revenue $ 183,270 $ 173,432
Royalty expense 29,562 35,842
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153,708 137,590
Expenses
Depletion and depreciation note 59,764 50,160
Production 32,924 27,103
Financial charges 16,426 10,230
General and administrative 3,200 2,984
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112,314 90,477
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Earnings Before Income Taxes 41,394 47,113
Income taxes note 15,709 18,265
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Net Earnings $ 25,685 $ 28,848
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Net Earnings Per Common Share
Basic $ 0.20 $ 0.23
Fully diluted $ 0.19 $ 0.22
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the three months
ended March 31
(thousands, except per share amounts) 1998 1997
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(unaudited) (unaudited)
(restated)
OPERATING ACTIVITIES
Net earnings $ 25,685 $ 28,848
Depletion, depreciation and
amortization note 61,074 50,850
Future income tax expense note 13,974 16,892
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Funds from operations 100,733 96,590
Change in non-cash working capital (72,364) (2,558)
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Funds provided by operating activities 28,369 94,032
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FINANCING ACTIVITIES
Increase in long term debt 143,678 138,429
Issue of common shares 11,849 4,696
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Funds provided by financing activities 155,527 143,125
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Total funds available for investing
activities $ 183,896 $ 237,157
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INVESTING ACTIVITIES
Additions to property, plant and
equipment $ 164,169 $ 154,415
Property acquisitions 138,195 110,839
Proceeds on dispositions of property (74,956) (8,675)
Site restoration costs incurred 211 160
Other (149) (300)
Change in non-cash working capital (43,574) (19,282)
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Funds used for investing activities $ 183,896 $ 237,157
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FUNDS FROM OPERATIONS PER COMMON SHARE
Basic $ 0.78 $ 0.76
Fully diluted $ 0.74 $ 0.72
COMMON SHARE INFORMATION
1997 1998
Q1 Q2 Q3 Q4 Q1
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Outstanding at quarter end
(millions) 127.5 128.0 128.7 128.8 130.4
High ($/share) 15.40 15.50 14.35 15.00 16.25
Low ($/share) 12.55 12.70 12.45 10.50 10.00
Close ($/share) 12.80 14.15 13.60 12.75 15.35
Shares traded (millions) 37.7 27.2 40.0 39.5 40.4
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>>
CORPORATE INFORMATION
COMMON SHARES LISTED UNDER
SYMBOL ''POC'' FOR TRADING ON:
Montreal Exchange
Toronto Stock Exchange
HEAD OFFICE
Poco Petroleums Ltd.
3700, 250 - 6th Avenue S.W.
Calgary, Alberta, Canada T2P 3H7
TELEPHONE (403) 260-8000
FACSIMILE (403) 263-2708
MAILING ADDRESS
P.O. Box 4365, Postal Station C
Calgary, Alberta, Canada T2T 5N2
WEBSITE
www.pocopete.ca
REGISTRAR AND TRANSFER AGENT
CIBC Mellon Trust Company
600 The Dome Tower
333 - 7th Avenue S.W.
Calgary, Alberta T2P 2Z1
TELEPHONE 1-800-387-0825
(Canada & U.S.)
(416) 643-5500
(Outside Canada & the U.S. call collect)
FACSIMILE (416) 643-5501
E-MAIL inquiries@cibcmellon.ca |
