EARNINGS / Newquest Releases June 30, 1998 Second Quarter
Results and Plans for Gas Processing Expansion
TSE, ASE SYMBOL: NQE.A
ASE SYMBOL: NQE.B
AUGUST 27, 1998
CALGARY, ALBERTA--Newquest Energy Inc. announced today financial
results for the six months ending June 30, 1998.
Newquest participated in the drilling of 16 wells during the first
two quarters with an average working interest of 99.6 percent.
This drilling program resulted in 11 (11 net) gas wells, one (1
net) oil well and four (3.94 net) dry and abandoned wells for an
overall drilling success rate of 75 percent. All wells were
drilled as operator on prospects internally generated by the
Company.
Production increased 308 percent to an average 1,526 BOE/D for the
six months ending June 30, 1998 compared to 373 BOE/D for the same
period 1997. All production gains were as a result of internally
generated prospects drilled by the Company as operator, as opposed
to production acquisitions. Production during the second quarter
of 1998 averaged 1,562 BOE/D of which 91 percent was comprised of
natural gas, with the balance medium and light quality crude oil.
In addition to the average 1,562 BOE/D produced during the second
quarter of 1998, the Company also had 1,400 BOE/D of tied-in
natural gas which was not produced as a result of processing
facility restrictions. These restrictions were caused in part by
normal gas plant maintenance programs scheduled for the spring and
were also due to forest fires in northern Alberta affecting the
supply of electricity to facilities. Gas plant restrictions will
require an expansion of processing facilities in the Company's
Seal area to accommodate Newquest's large natural gas discoveries.
Petroleum and natural gas revenues increased 268 percent to $5.1
million for the six months ending June 30, 1998, compared to $1.4
million for the same period 1997. Cash Flow from operations
increased 249 percent to $2.2 million compared to $0.6 million for
the previous year. This translates to $0.21 per share cash flow
($0.19 per fully diluted share) for the first two quarters of 1998
compared to $0.11 per share ($0.09 per fully diluted share) for
the first two quarters of 1997. The cash flow per share for
second quarter 1998 was $0.10 per share ($0.09 per fully diluted
share) compared to $0.11 per share ($0.10 per fully diluted share)
for the first quarter of 1998. Natural gas prices increased to
$1.84/mcf at the plant gate for the first two quarters compared to
$1.53/mcf for the same period 1997, while crude oil prices dropped
to $17.53/BBL compared to $26.17/BBL for the same period 1997.
Operating costs during the first two quarters averaged $5.45/BOE
compared to $4.96/BOE for 1997. Operating costs are expected to
decrease as the Company's tied in reserves are brought on stream.
Netbacks for natural gas strengthened to $11.09/BOE from $9.25/BOE
year over year, while netbacks for oil dropped to $7.92/BBL from
$16.46/BBL in comparing the two years.
Net earnings improved to $166,000 for the six months ending June
30, 1998 compared to $152,000 for the same period last year. G&A
costs on a BOE basis improved to $1.82/BOE during the first two
quarters compared to $3.67/BOE for the same period 1997.
Capital expenditures during the first six months of 1998 totalled
$15.3 million and were comprised of $8.5 million for drilling $4.9
million for facilities, $1.0 million for seismic and $0.9 million
for land.
Despite original assurances from gas plant operators, Newquest's
exploration efforts have far exceeded plant capacity at Seal in
the Company's North Central Core Area, and as a result an average
of 1,400 BOEPD of tied in natural gas was shut-in during the
second quarter. Newquest is working diligently with plant
operators to increase capacity in the area to accommodate the
Company's large gas reserves. To ensure adequate processing
capacity is achieved, Newquest has filed an application with the
Alberta Energy and Utilities Board to build a 20,000 mcf/d gas
plant at Seal. Attractive funding opportunities have been
presented to Newquest to finance the gas plant without the need to
issue additional shares to bring these new large natural gas
reserves on stream.
Newquest will continue to explore its large land base of 116,731
net undeveloped acres concentrated in the Company's three core
areas in Alberta. Since the end of the second quarter, Newquest
has drilled three (2.10 net) exploratory gas wells, one (0.81 net)
cased oil well and two (2 net) dry and abandoned wells. In light
of present market conditions the Company has reset its drilling
program at 40 high working interest wells for 1998, which can be
funded through cash flow and available Bank lines of credit.
Newquest has contracted 3 mmcf/d of its natural gas for the period
May 1, 1998 to Oct. 31, 1998 at $2.20/mcf, 5 mmcf/d at floating
rates with PanAlberta gas aggregator and the balance of its
natural gas is being sold on the spot market. The Company
received an average price of $1.96/mcf at the plant gate for its
natural gas during the second quarter of 1998 and is well
positioned to take advantage of anticipated continued
strengthening in natural gas prices.
Newquest will look to capitalize on its weighting to natural gas
production and strengthening natural gas prices, while expanding
its production base through the Company's ongoing drilling program
and increasing gas plant capacity at Seal to exploit existing
tied-in non-producing reserves.
/T/
Year Profit Profit/Share Cash Flow C.F./Share Revenue
Second
Quarter
1998 $ 46,792 $ 0.01 $1,045,373 $ 0.10 $2,708,404
1997 $ 60,352 $ 0.01 $ 335,051 $ 0.06 $ 848,656
1996 $ 69,122 $ 0.02 $ 185,861 $ 0.03 $ 347,485
Fiscal Y.T.D.
1998 $165,763 $ 0.02 $2,247,440 $ 0.21 $5,060,483
1997 $150,138 $ 0.03 $ 643,608 $ 0.11 $1,375,220
1996 $142,023 $ 0.04 $ 327,552 $ 0.09 $ 519,405
/T/
Newquest is a Calgary based junior oil and gas exploration company
with properties located in three core areas in the Province of
Alberta. Newquest's securities are traded on The Toronto Stock
Exchange under the trading symbol "NQE.A" and on The Alberta Stock
Exchange under the trading symbols "NQE.A" and "NQE.B".
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