EARNINGS / Summit Resources - First Quarter 1998 Results
TSE SYMBOL: SUI
MAY 14, 1998
CALGARY, ALBERTA--Summit is pleased to report its operating and
financial results for the first quarter 1998 compared to the same
period last year.
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For the three months ended March 31 Percent
1998 1997 Change
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($ thousands except per share amounts)
Petroleum and Natural
Gas Revenue 20,621 25,998 (21)
Cash Flow from Operations 8,216 14,976 (45)
Per Share 0.25 0.44 (43)
Net Earnings (Loss) (1,842) 2,789 (166)
Per Share (0.06) 0.08 (175)
Long-term Debt 136,469 65,164 109
Capital Expenditures
(net of dispositions) 24,432 16,391 49
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Common Shares Outstanding
(thousands)
Weighted Average 33,392 34,308 (3)
At March 31 33,414 34,029 (2)
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Crude Oil and Natural Gas Liquids
Production - bbls/d 6,052 5,430 11
Price - $/bbl 17.53 27.02 (35)
Natural Gas
Production - MMcf/d 60.1 61.8 (3)
Price - $/Mcf 2.02 2.28 (11)
Barrels of Oil Equivalent (10
Mcf = 1 Barrel)
Production - BOE/d 12,059 11,606 4
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The first quarter of 1998 was a very active one for Summit, with a
focused program of development drilling yielding 10 oil wells and
six gas wells. The drilling targets, selected in advance of the
recent oil price decline, included a mix of light and heavy oil as
well as natural gas prospects, reflecting the diversity of
Summit's reserve and production base. Moving into the second
quarter, our capital program has been refocused on natural gas and
light oil prospects in our core areas, which include northeastern
British Columbia, west-central Alberta, southern Alberta/Montana
and the Williston Basin. We will continue to apply operational
efficiencies to mitigate the drop in commodity values and maximize
available netbacks. Our inventory of development opportunities,
combined with a broad exposure to oil and gas prospects in our
core areas, will support Summit's program of increased natural gas
exploitation through 1998.
FINANCIAL
Summit's results for the first quarter of 1998 were considerably
impacted by softening crude oil prices. In the first three months
of 1998, West Texas Intermediate (WTI) oil prices declined 23 per
cent from their 12-month average in 1997 and were 30 per cent
below averages for the first quarter of 1997. The effect was
compounded for heavy oil due to widening differentials between
light and heavy quality crude. As a result, Summit realized a
first quarter oil price of $17.53 per barrel, down 35 per cent
from $27.02 per barrel in 1997.
Natural gas prices were also down compared to the first three
months of 1997. Summit's gas price decreased 11 per cent from the
first quarter of 1997 to average $2.02 per thousand cubic feet in
the first quarter of 1998.
The net effect of market conditions in the first quarter was a 21
per cent decline in crude oil and natural gas revenue to $20.6
million compared to the first three months of 1997. First quarter
cash flow from operations for 1998 dropped to $8.2 million or
$0.25 per share as a result of reduced oil and gas revenues,
increased interest costs associated with higher debt levels and
increased operating costs. Increased depreciation and depletion
charges associated with higher production levels compounded the
effect of these items and contributed to a net loss for the first
quarter of $1.8 million or $0.06 per share.
Capital expenditures totalling $24.4 million in the first quarter
included $14.8 million for drilling, $5.5 million for production
facilities and equipment, $2.5 million for seismic and $1.6
million for undeveloped land.
OPERATIONS
Summit's first quarter drilling included 20 participation wells
and one well farmed out to an industry partner. Development
drilling remains Summit's focus with 76 per cent of wells drilled
for exploitation. Summit added 10 oil wells (7.1 net) and six
natural gas wells (4.7 net) through first quarter drilling for an
overall success rate of 89 per cent on a net basis. Four wells
(1.5 net) were abandoned.
Natural gas drilling in the first quarter was focused in
northeastern B.C. where Summit drilled two 100 per cent working
interest horizontal gas wells in the Jean Marie formation at
Gunnel. Both of these wells were completed and will be tied-in
during the second quarter. Summit's natural gas processing and
compression facilities at Gunnel are presently being expanded to
provide an additional 10 million cubic feet per day of
compression. This will accommodate volumes from the two new wells
and the tie-in of two vertical wells drilled in 1995. Seismic
acquired during the quarter increased the number of natural gas
drilling prospects defined on Summit 100 per cent lands. In
addition to six further development locations identified in Gunnel
North, Summit controls 100 per cent of 14 locations for
development of Jean Marie natural gas on other prospects in this
area.
At Mirage, Alberta, Summit drilled a 100 per cent working interest
natural gas discovery well which tested at rates in excess of 3.0
MMcf/d. Tie-in of this well to Summit's expanded natural gas
production facilities is planned for June 1998. Additional
development drilling on this discovery is scheduled following a
60-day production test. In addition, Summit drilled and cased
three Halfway oil wells (41 degree API) as part of the development
of light oil reserves with an additional 17 locations identified
on 3-D seismic. Completion and tie-in of these wells will
commence in mid-May following the removal of road bans. Summit
has also encountered a new pool discovery in the Worsley zone (38
degree API) at Mirage which is currently on production at 60
barrels per day. Further development of this discovery, including
up to six offset locations, will be included in the Company's plan
to expand production from this multi-zone area where Summit holds
41,920 gross acres (38,350 net).
Four 100 per cent working interest oil wells were drilled, cased
and completed at Rabbit Hills, Montana in the first quarter of
1998. These wells are located on a new prospect with production
rates averaging 30 to 50 barrels per day per well for three of the
wells. Based on this drilling success and 3-D seismic
interpretations, additional drilling will be required to delineate
the size of the reserves controlled by Summit. An additional 15
to 20 locations have been identified for drilling, but do to the
heavier quality of crude (20 degree API) and the current soft oil
prices, Summit will defer further drilling in this area until oil
prices improve. However, unitization of the main Rabbit Hills
field is proceeding following very encouraging results from a
pilot polymer flood. Unitization will result in improved
recoveries from the reservoir and reduced operating costs.
Summit's production volumes increased modestly in the first
quarter to 12,059 barrels of oil equivalent per day, a four per
cent increase over the first three months of 1997. Production
gains from first quarter drilling were offset by the impact of
non-core asset dispositions completed late in 1997. Oil
production increased 11 per cent over 1997 first quarter volumes
of 5,430 barrels per day to 6,052 barrels per day in 1998.
Natural gas production of 60.1 million cubic feet per day for the
first quarter was impacted by a facility shut down at Clarke Lake,
in our northeast B.C. area. The expanded facilities, to be
completed in the second quarter, provide Summit with a total of 24
million cubic feet per day of compression and dehydration. The
increased capacity will allow for previously restricted gas from
wells drilled in 1997 to be processed and will facilitate
production from additional wells planned in 1998.
SUBSEQUENT EVENT
Subsequent to the end of the first quarter, the Company monetized
its investment in Fort Chicago Energy Partnership L.P., realizing
proceeds of $20.5 million. These funds were applied against
outstanding bank debt.
Summit Resources Limited is a Canadian corporation engaged in oil
and gas exploration, development, acquisition, production and
marketing in western Canada and selected basins in the United
States. Summit's shares are listed on the Toronto Stock Exchange
(trading symbol "SUI"). |
