EARNINGS / Elk Point Continues Production Growth in the First
Quarter
TSE SYMBOL: ELK
MAY 25, 1998
CALGARY, ALBERTA--During the first quarter of 1998, Elk Point
continued its production growth and high level of drilling and
project development activity. Natural gas sales averaged 36.3
million cubic feet per day, a 112 percent increase from 17.1
million cubic feet per day for the same period in 1997. Crude oil
and natural gas liquids production averaged 2,368 barrels per day,
up 74 percent from 1997 production of 1,362 barrels per day for
the same period. On a per share basis production grew by 26
percent in the first quarter of 1998 to 24,974 barrels of oil
equivalent per million average shares outstanding from 19,762
barrels of oil equivalent per million average shares outstanding
in the same period of 1997. This per share production growth is
attributable to Elk Point's successful exploration and development
projects enhanced by the acquisition of Truax Resources
Corporation.
OPERATIONAL OVERVIEW
The Company focussed on several significant natural gas
development projects in the first quarter of 1998. Gas well
tie-ins were completed at Amisk and Sugden adding approximately
5.3 million cubic feet per day of net production. At Pemburton
Hill, gas processing facilities were debottlenecked to increase
production by 2.0 million cubic feet per day in late March. At
Pembina, additional compression was added and interruptible
processing capacity was obtained to boost net solution gas sales
by 2.0 million cubic feet per day. At Newton, two successful gas
wells were drilled and these wells were subsequently tied-in to
our existing infrastructure in May. In the Newton, Corbett Creek
and Thunder North areas of west central Alberta, the Company
currently owns over 45,000 net acres of undeveloped land. This
area is highly prospective for natural gas and will be a focus for
both development and exploration drilling over the balance of the
year.
In the Powder River Basin of Wyoming, Elk Point has three
successful oil wells at Boley. Two of the wells are currently on
production and the third well is currently being equipped for
production. At Lobstick in west central Alberta, a horizontal oil
well was equipped and placed on stream in January with solution
gas tied-in to an existing third party gas facility at Bigoray. Up
to four horizontal wells will be drilled in 1998 to delineate this
property. At Elcott in southeastern Saskatchewan, an aggressive
drilling program is planned for the second and third quarters to
delineate this existing oil pool. The first of up to six
horizontal and three vertical wells has been drilled and is being
equipped for production.
Elk Point drilled 29 gross (15.9 net) wells during the first
quarter of 1998 of which 12 gross (4.6 net) were cased as oil
wells, 8 gross (5.9 net) were cased as gas wells and 9 gross (5.4
net) wells were dry and abandoned for an overall success rate of
69 percent (66 percent net).
Elk Point acquired 15,000 net acres of prospective lands through
Crown land sales in the first quarter of 1998 boosting current
undeveloped land holdings to 241,000 net acres.
On May 15, 1998, a high impact exploration test was spudded at
East Lost Hills in the San Joaquin Basin of California targeting
the Temblor formation for light oil. The well will be drilled to a
depth of 18,500 feet. Elk Point, through its wholly owned U.S.
subsidiary Bellevue Resources, Inc., will operate the well and is
participating with a 10 percent working interest.
FINANCIAL OVERVIEW
During the first quarter of 1998, the Company's gross revenue grew
by 42 percent to $9.6 million from $6.8 million in the first
quarter of 1997 reflecting the growth in the Company's production.
However, notwithstanding the 95 percent production growth in the
first quarter, cash flow from operations remained flat for the
period at $4.1 million due to significantly lower crude oil and
natural gas prices. Cash flow per share declined by 34 percent to
$0.19 per share in the first quarter of 1998 from $0.29 per share
in the first quarter of 1997. A 31 percent decline in the
Company's average oil price combined with a 21 percent decline in
the Company's average gas price effectively reduced cash flow
from operations by $0.12 per share. The decreases in commodity
prices also negatively impacted earnings resulting in a net loss
in the first quarter of 1998 of $0.4 million (loss of $0.02 per
share) compared to earnings of $1.0 million ($0.07 per share) in
the first quarter of 1997.
Capital expenditures totaled $16.1 million during the first
quarter of 1998 compared to $9.0 million for the same period in
1997. Exploration expenditures amounted to $5.0 million,
development expenditures amounted to $5.5 million, investments in
production facilities amounted to $3.5 million, land and seismic
additions amounted to $2.0 million and administrative asset
additions amounted to $0.1 million.
At March 31, 1998, Elk Point had drawn $54.5 million on its
revolving production loan facility. The Company recently
negotiated an increase in its revolving production loan facility
to $75 million. This increase will provide Elk Point with
additional flexibility to fund its ongoing capital investment
program.
OUTLOOK
Elk Point is planning to drill an additional 90 gross (44 net)
wells over the remainder of the year with an increased focus on
natural gas. A number of development projects which will lead to
further production growth are underway at Corbett Creek, Thunder
North, Newton and Lobstick in west central Alberta, Elcott in
southeastern Saskatchewan and Boley in the Powder River Basin. The
pricing outlook for natural gas in Alberta remains positive and
Elk Point has considerable leverage to natural gas in its
significant undeveloped land base and current exploration and
development programs.
/T/
SUMMARY RESULTS
--------------------------------------------------------------
Three months ended March 31 (unaudited)
1998 1997 Percent
Change
--------------------------------------------------------------
Financial ($000s, except share
and per share amounts)
Gross petroleum and natural
gas revenue $ 9,641 $ 6,775 +42
Cash flow from operations $ 4,105 $ 4,054 +1
Basic per share $ 0.19 $ 0.29 -34
Earnings $ (361) $ 1,021 -135
Basic and fully diluted per share $ (0.02) $ 0.07 -129
Common shares (weighted average
for period) 21,638 14,013 +54
Total assets $196,104 $66,608 +194
Capital expenditures, net $16,093 $ 9,201 +75
Shareholders' equity $106,256 $46,343 +129
--------------------------------------------------------------
Operating
Oil and NGLs (barrels per day) 2,368 1,362 +74
Average price ($Cdn per barrel) $ 18.06 $ 26.19 -31
Natural gas (thousand cubic
feet per day) 36,335 17,148 +112
Average price ($Cdn per thousand
cubic feet) $ 1.77 $ 2.25 -21
Barrels of oil equivalent (per day) 6,002 3,077 +95
--------------------------------------------------------------
|
