EARNINGS / Scarlet Exploration Announces First Quarter Results
ASE SYMBOL: SCO
JUNE 1, 1998
Calgary, Alberta--Scarlet Exploration Inc. (ASE: SCO) today
released its interim financial report for the three months ended
March 31, 1998. Due to a change in fiscal year-end, comparative
figures are for the three months ended April 30, 1997.
Operationally, the most rewarding highlight of the first quarter
was the achievement of Scarlet's 1998 production target of 1,000
boepd (net). This is a major milestone in Scarlet's growth and
effectively doubles 1997 production.
Despite the current decline in oil commodity prices Scarlet has
continued to add value by increasing production and reducing
operating costs. The Corporation earned a netback of $11.77 per
boe for the three months ended March 31, 1998 compared to $14.42
per boe for the three months ended April 30, 1997. The first
quarter results do not yet reflect Scarlet's successful winter
drilling program. During the second quarter of 1998, the
Corporation expects production, revenue and cash flow to increase
significantly.
During Q1/98, the Corporation experienced continued success in
Zama/Sousa. As well, it began evaluating gas prospects which have
been acquired to complement oil production.
Due to mild weather conditions experienced in the 1997-98 winter
drilling season at Zama/Sousa, Scarlet completed only five
horizontal wells of the six planned for the season. Of the five
wells drilled, two were drilled as farm-out locations (Scarlet has
a working interest position after payout) and three were drilled
by Scarlet. All five wells were completed as oil wells with the
operated three yielding initial rates in excess of 400 bopd
(gross).
In Scarlet's 42-section farm-in at Wildwood, two wells were
drilled in January and February. The first well flowed gas from
the Mississippian at an initial rate of 4.1 mmcf/day, stabilizing
at 1.0 mmcf/day with 110 bbls/mmcf of liquids. Additional reserves
were discovered in the overlying zone which will be completed at a
later date. The second well also encountered oil and gas pay in
the Mississippian; in a drillstem test, it flowed 1,300 m of clean
oil from the overlying Jurassic. This zone will be completed after
spring break-up.
In January, Scarlet drilled a horizontal well on its Lampman
prospect in southeast Saskatchewan. The well is currently on
production at 120 bopd (gross). A number of additional prospects
in this region will be pursued throughout the summer.
Financial highlights for the three months ended March 31, 1998
include revenues before royalties of $1,023,291 compared to
$1,279,297 for the three months ended April 30, 1997. The average
sales price for petroleum and natural gas during the three months
ended March 31, 1998 was $19.36 per boe compared to $25.81 per boe
during the three months ended April 30, 1997. Sales of petroleum
and natural gas increased to an average of 587 boepd during the
three months ended March 31, 1998 compared to 550 boepd for the
three months ended April 30, 1997.
Funds from operations were $410,041 ($0.03 per share) for the
three months ended March 31, 1998 compared to $622,468 ($0.05 per
share) for the three months ended April 30, 1997. Scarlet
recorded net income of $83,639 ($0.01 per share) for the three
months ended March 31, 1998 compared to $353,262 ($0.03 per share)
for the three months ended April 30, 1997.
Operating expenses were reduced significantly to $358,034 ($6.77
per boe) for the three months ended March 31, 1998 compared to
$500,619 ($10.10 per boe) for the three months ended April 30,
1997.
General and administrative expenses were $136,922 ($2.59 per boe)
for the three months ended March 31, 1998 compared to $64,129
($1.29 per boe) for the three months ended April 30, 1997. The
increase in general and administrative expenses reflects higher
costs for personnel, promotions and office rent.
Scarlet also announced the March appointment of Rick Ironside,
P.Eng., as Operations Manager, responsible for the company's
drilling, completions, facilities construction and production
operations. On May 13, Gerald Wendland, P.Geol., previously Vice
President of Exploration, was appointed Executive Vice President
of Scarlet.
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