EARNINGS / Place Resources reports 1st 3 months Results
CALGARY, May 13 /CNW/ -
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1st Quarter % Increase
Highlights 1998 1997 (decrease)
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Oil Production (bbl/day) 1,233 1,034 19
Gas Production (mmcf/day) 6.2 4.8 28
Total Production (BOE/day) 1,849 1,515 22
Average Oil Price ($/bbl) 18.29 24.22 (24)
Average Gas Price ($/mcf) 2.23 2.16 3
Revenues ($000's) 3,317 3,331 0
Cash Flow from Operations ($000's) 1,255 1,565 (20)
Per Share (cents) 10.0 12.5 (20)
Net Earnings ($000's) 144 347 (59)
Per Share (cents) 1.2 2.8 (58)
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TO THE SHAREHOLDERS
We are pleased to report continued growth in oil and gas production to
record levels in the first quarter of 1998.
Revenue at $3.3 million for the first quarter of 1998 was essentially
unchanged from last year.
Natural gas revenue for the first quarter increased by 32% to $1.2
million from $0.9 million in 1997 due to increased production rates, which
averaged 6.2 million cubic feet per day in 1998. Natural gas prices for the
quarter increased to average $2.23 per thousand cubic feet, up from $2.16 per
thousand cubic feet for the same period last year.
Oil and natural gas liquids revenues decreased by 10% for the quarter to
$2.0 million from $2.3 million in the same period of 1997. Oil production of
1,233 barrels per day increased by 19% from 1,034 barrels per day in 1997.
Place posted oil production increases at Elmworth, Mulligan and Queensdale as
the result of the 1997 capital program to install waterfloods at Elmworth and
Mulligan and increase facility capacity at Queensdale. Improved oil and
liquids production was more than offset by decreased oil and liquids prices
which averaged $18.29 per barrel, down by 24% from $24.22 per barrel in the
first quarter of 1997.
Cash Flow in the first quarter 1998 decreased to $1.3 million (10.0 cents
per share) from $1.6 million (12.8 cents per share) in the first quarter of
1997. This was the result of increased expenses for the quarter.
Production expenses were $835,000 ($5.02 per barrel of oil equivalent)
for the quarter, up from $521,000 ($3.83 per barrel) in the same period of
1997. Some of the increased costs can be attributed to higher production
levels. Higher per unit costs were the result of costs at Elmworth and
Mulligan associated with the installation and start-up of the two waterfloods.
Royalties were reduced in the quarter from $781,000 ($5.73 per barrel of
oil equivalent) in 1997, to $640,000 ($3.85 per barrel of oil equivalent) in
1998. The decrease was the result of the lower royalty rates which are
associated with lower oil prices, plus higher Alberta Royalty Tax Credits
associated with wells drilled by Place in 1997.
Current taxes were reduced by 42% due to lower Saskatchewan surcharges.
These surcharges are based on Saskatchewan revenues, which were lower than
1997 due to the low oil price paid for medium grade crude at Battrum.
Net Earnings were $144,000 (1.2 cents per share) for the first quarter of
1998 versus $347,000 (2.8 cents per share) in the same period of 1997.
During the quarter Place continued to purchase and cancel shares under a
Normal Course Issuer Bid, buying 34,400 shares at an average price of $2.03
per share. This equates to buying our year-end proven plus half probable
reserves for $4.79 per barrel of oil equivalent.
OPERATIONS
At Elmworth and Mulligan, both in west central Alberta, the waterflood
installations are complete, and water injection commenced in the first
quarter. As water is injected into the Charlie Lake formation, it will
increase reservoir pressure and displace the light oil and natural gas moving
it toward the producing wells in the area. We anticipate that it will take
two years to fill up the reservoir and reach peak oil production rates.
OUTLOOK
Place's capital budget through the winter drilling season of 1998/1999
has been increased to $13.5 million as the result of a significant opportunity
to develop and extend a liquid-rich natural gas trend at Minehead. Minehead is
in the Alberta foothills, 135 miles west of Edmonton and 20 miles south of
Edson. Place has acquired 3,400 net acres in the field over the last three
years by swapping mature gas properties with other producers and acquiring
partners' interests in the field. We now have an average working interest of
31.5% in 17 sections, and Place operates 6 undeveloped sections.
Place's Minehead acreage lies along a Cardium gas trend. The Cardium
sandstone contains liquid-rich gas, carrying between 60 and 80 barrels of
liquids per million cubic feet of gas. Large natural gas reserves in the
Cardium sandstone have been recognized for many years. Place has an interest
in 5 wells on the property which have produced liquid-rich gas since 1986.
These wells were drilled on 640 acre spacing (1 well per section) and the
production decline rates are only 5%, typical of production from tight, low
permeability rocks. We believe that to effectively drain the gas, the
reservoir will need at least 2 wells per section (320 acre spacing).
Minehead has a gas and liquids marketing infrastructure already in place,
with a Conoco processing plant to the east and Talisman's Edson plant to the
north. In response to additional drilling and increasing production in the
area, ANG has laid a 10'' line from our field compressor directly north to the
under-utilized Talisman Edson facility.
In the first quarter, Place participated in a three dimensional seismic
program covering 26 square miles designed to highlight additional drilling
lotions. The application of three dimensional seismic to pinpoint the
location of a thrust fault combined with horizontal drilling and other
productivity enhancement techniques should significantly enhance recoverable
reserves and production rates.
Depending upon the interpretation of the seismic data, accessibility
during the summer months, and the availability of drilling rigs, Place plans
to drill 4 wells (1.3 net) this summer, which should be on production for the
fourth quarter. Using what we learn this summer, we plan to drill 12 more
wells (5 net) in the winter of 1998/1999 and should have these wells on
production in the second quarter of 1999.
We anticipate that this area has the potential to significantly impact
1999 gas and liquids production and cash flow.
On behalf of the Board,
Keith W. Hern
President and Chief Executive Officer
May 11, 1998
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Consolidated Statement of Earnings
For the Three Months Ended March 31
(in thousands of dollars) (Unaudited) 1998 1997
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Revenue
Crude Oil & Liquids $ 2,029 $ 2,253
Natural Gas 1,234 936
Royalty Income and Other 54 142
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3,317 3,331
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Expenses
Production 835 521
Royalties 640 781
General & Administrative 356 247
Interest 184 138
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2,015 1,687
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Funds from Operations 1,302 1,644
Depletion and Depreciation 882 882
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Earnings before Income Taxes 420 762
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Income Taxes 276 415
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Net Earnings $ 144 $ 347
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Net Earnings per Share $ .012 $ .028
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Trading Summary
(TSE - PLG) High Low Close Volume
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1997 $2.42 $1.75 $2.12 3,640,751
1998 - 1st Quarter $2.20 $2.00 $2.15 356,812
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