EARNINGS / Part 2 of 2 - Renaissance Energy Third Quarter Report
CALGARY, ALBERTA--We view our business environment as very
positive and expect that future commodity prices should allow for
the generation of satisfactory returns for our shareholders. While
the future remains uncertain, it may well be that the investment
community will have positive, but more tempered expectations, of
the oil and gas industry. While Renaissance's capital expenditures
will be significant, available cash flows will determine overall
levels. The internal scrutiny of the capital expenditure budget
will result in more value for each dollar spent, thus improving
our long term profitability.
Clayton H. Woitas Sheldon B. Steeves
President & Executive Vice President &
Chief Executive Officer Chief Operating Officer
Calgary, Alberta October 29, 1998
FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEET
September 30 December 31
(Thousands of dollars) 1998 1997
-------------------------------------------------------------
ASSETS
Current Assets
Cash $ 2,483 $ 261
Accounts receivable 66,703 80,666
-----------------------------
69,186 80,927
Property, Plant and Equipment,
at cost 6,275,724 4,748,638
Accumulated Depletion and
Depreciation (1,644,178) (1,384,278)
-----------------------------
4,631,546 3,364,360
-----------------------------
$4,700,732 $3,445,287
-----------------------------
LIABILITIES
Current Liabilities
Accounts payable $ 20,691 $ 38,321
Accrued liabilities 69,194 126,831
---------------------------
89,885 165,152
Site Restoration Accrual 53,641 25,277
Long-Term Debt 1,422,349 781,785
Deferred Income Taxes 426,650 372,108
SHAREHOLDERS' EQUITY
Share Capital 2,130,409 1,524,510
Retained Earnings 577,798 576,455
----------------------------
2,708,207 2,100,965
----------------------------
$4,700,732 $3,445,287
----------------------------
Common Shares Outstanding (thousands)
Basic 143,593 116,222
Fully diluted 154,391 125,476
---------------------------
Proceeds Due Upon the Exercise
of Stock Options (thousands) $ 295,213 $ 285,405
-------------------------------------------------------------
CONSOLIDATED STATEMENT OF EARNINGS AND RETAINED EARNINGS
Three Months Ended Nine Months Ended
September 30 September 30
(Thousands of dollars) 1998 1997 1998 1997
-----------------------------------------------------------
Operating Income
Petroleum and natural
gas revenues $ 230,211 $ 219,427 $ 585,313 $ 697,223
Royalties (29,986) (34,315) (74,524) (118,784)
Royalty abatement 463 322 4,012 867
Production
expenses (65,362) (49,471) (163,522) (142,076)
-------------------------------------------
135,326 135,963 351,279 437,230
Expenses
General and
administrative 8,716 6,296 23,502 19,149
Interest on
long-term debt 20,256 8,314 44,950 23,597
Capital taxes 3,934 2,550 9,784 7,425
Depletion, depreciation
and site
restoration 107,000 83,300 271,900 245,900
-------------------------------------------
Income (Loss) Before
Income Taxes (4,580) 35,503 1,143 141,159
Deferred income taxes
(recovery) (1,400) 14,700 (200) 58,500
-------------------------------------------
Net Income (Loss) (3,180) 20,803 1,343 82,659
Retained Earnings -
beginning of
period 580,978 522,948 576,455 461,092
-------------------------------------------
Retained Earnings -
end of period $ 577,798 $ 543,751 $ 577,798 $ 543,751
-------------------------------------------
Net Income per Common Share
Basic $ (0.02) $ 0.18 $ 0.01 $ 0.71
Fully diluted $ (0.02) $ 0.18 $ 0.01 $ 0.70
-------------------------------------------
Weighted Average Number of
Common Shares Outstanding (thousands)
Basic 143,576 115,992 125,591 115,807
Fully Diluted 154,374 125,291 135,314 125,135
-------------------------------------------
Imputed Interest on the Deemed Exercise
of Stock Options
(thousands) $ 3,607 $ 3,229 $ 9,920 $ 9,406
-------------------------------------------------------------
Consolidated Statement of Cash Flow
Three Months Ended Nine Months Ended
September 30 September 30
(Thousands of dollars) 1998 1997 1998 1997
-------------------------------------------------------------
Operating Activities
Net Income
(Loss) $ (3,180) $ 20,803 $ 1,343 $82,659
Add charges not
affecting cash
Depletion, depreciation
and site
restoration 107,000 83,300 271,900 245,900
Deferred income
taxes (recovery) (1,400) 14,700 (200) 58,500
------------------------------------------
Cash flow from
operations 102,420 118,803 273,043 387,059
Financing Activities
Increase in long-term
debt 382,701 67,554 640,564 233,425
Issue of shares 2,037 2,915 6,976 13,842
Issue of shares on
acquisition of
Pinnacle Resources
Ltd. 598,923 - 598,923 -
Change in non-cash
working capital 16,697 42,962 (61,304) 42,177
--------------------------------------------
1,000,358 113,431 1,185,159 289,444
Cash Available for
Investing
Activities 1,102,778 232,234 1,458,202 676,503
Investing Activities
Acquisition of
Pinnacle
Resources Ltd.(1,049,314) - (1,049,314) -
Additions to property,
plant and
equipment (54,796) (230,665) (403,237) (668,772)
Site restoration
expenditures (814) (2,346) (3,429) (6,963)
---------------------------------------------
(1,104,924) (233,011) (1,455,980) (675,735)
---------------------------------------------
Increase (Decrease)
in Cash (2,146) (777) 2,222 768
Cash, beginning of
period 4,629 1,545 261 -
----------------------------------------------
Cash, end of
period $ 2,483 $ 768 $ 2,483 $ 768
----------------------------------------------
Cash flow per
common share
Basic $ 0.71 $ 1.02 $ 2.17 $3.34
Fully diluted $ 0.69 $ 0.98 $ 2.09 $3.17
-------------------------------------------------------------
Note 1:
Effective July 3, 1998 the Company issued 26,954,210 common shares
(with an assigned value of $598,922,544) to acquire all the issued
and outstanding shares of Pinnacle Resources Ltd. (Pinnacle), a
public company engaged in the exploration and development of
petroleum and natural gas in Western Canada. The acquisition was
accounted for by the purchase method. The Company's Consolidated
Statements of Earnings and Cash Flow include operating results of
Pinnacle since the effective date. The purchase price was
allocated to net assets acquired based on their estimated fair
values.
Net assets acquired ($000's)
Property, plant and equipment $ 1,123,849
Less working capital deficiency (75,561)
Less long-term debt (374,830)
Less deferred income taxes (54,742)
Less site restoration accrual (19,793)
-----------
$ 598,923
-----------
Consideration ($000's):
Shares issued $ 598,923
-----------
Note 2:
The provision for deferred income taxes differs from the result
which would be obtained by applying the combined Canadian Federal
and Provincial statutory income tax rates to income before income
taxes. The difference results from the following:
Three Months Ended Nine Months Ended
September 30 September 30
(Thousands of dollars) 1998 1997 1998 1997
--------------------------------------------------------------
Net income before tax $(4,580) $35,503 $ 1,143 $141,159
Permanent differences
Non-deductible Crown
royalties 22,368 24,551 50,947 88,380
Resource allowance (30,094) (33,068) (76,399) (110,673)
Non-deductible
depletion 8,900 700 10,400 2,300
Non-deductible capital
taxes 3,934 2,550 9,784 7,425
Other (3,710) 2,670 3,710 2,481
-------------------------------------
Taxable income $(3,182) $32,906 $ (415) $131,072
--------------------------------------------------------------
As at September 30, 1998 the following deductions were available
to claim against future taxable income:
Maximum
Annual Rate
(Thousands of dollars) Amount of Claim
(percent)
----------------------------------------------------------
Canadian exploration expense $629,000 100
Canadian development expense 513,000 30
Canadian oil and gas property expense 824,000 10
Undepreciated capital cost 1,189,000 20 - 30
----------
$3,155,000
----------------------------------------------------------
Renaissance's effective tax rate is expected to increase
significantly in 1998 as a result of the anticipated $19.4 million
charge against earnings on the $540.0 million of non-tax based
assets. This $540.0 million of assets with no tax basis is the
difference between the $1,049.3 million paid for Pinnacle and the
tax pools that Renaissance acquired. The effect of the lack of
full tax pool coverage on the acquisition will diminish over time
as the balance of the non-tax based assets will be reduced by
depletion. |
