EARNINGS / Stellarton Energy Corporation (SRT.A - TSE) Announces
September 30, 1998 Quarter End
CALGARY, Nov. 5 /CNW/ -
Consolidated Financial Results
Highlights Nine months ended Three months ended
September 30, September 30,
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Corporate 1998 1997 1998 1997
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Revenue $13,977,191 $11,219,449 $4,366,074 $4,426,864
Funds from
Operations $1,853,562 $2,211,486 $(152,292) $1,074,056
Funds from Opns
per share $0.09 $0.15 $(0.01) $0.07
Earnings $(863,059) $419,278 $(1,134,278) $335,542
Average shares
outstanding 19,847,541 14,883,225 21,272,831 15,342,810
Total shares
outstanding 21,272,831 18,458,239 21,272,831 18,458,239
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Resources Division
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Production
-natural gas (mcf) 9,500 5,780 9,910 7,010
-oil & NGL's (bbls) 575 392 605 499
Total boe per day 1,525 970 1,596 1,200
Prices
-natural gas (mcf) $1.99 $1.85 $2.01 $1.77
-oil & NGL's (bbls) $16.75 $23.36 $15.01 $22.54
Revenues $7,920,895 $5,413,755 $2,675,015 $2,177,637
Funds from
Operations $2,660,225 $1,883,516 $623,337 $895,389
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Secure Oil Tools
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Revenues $6,056,296 $5,805,694 $1,691,059 $2,249,227
Funds from
Operations $(578,136) $530,467 $(770,707) $334,693
Stellarton Energy Corporation revenues for the first nine months of 1998
were up 25% over the same period in 1997. Third quarter revenues showed a
slight decline compared to the third quarter of 1997 as increased revenue in
the Resources Division were more than offset by reduced Secure Oil Tools sales
as industry capital activities for field optimization and development remained
constrained due to commodity price uncertainty.
Year to date Resources Division funds flow increased 41 percent over 1997
as production increases and reduced costs have more than offset commodity
price weakness. Secure Oil Tools experienced a funds flow deficit the first
nine months of 1998 compared to positive finds flow in the same period of
1997 due to flat revenues year over year combined with higher costs for
significant infrastructure and international market development.
Third quarter 1998 funds from operations for Stellarton were down
significantly compared to the third quarter of 1997. The Resources Division
experienced lower commodity prices in the third quarter. Operating costs were
higher in the third quarter compared to the first six months of the year and
volumes were reduced in the third quarter of 1998 due to unexpected
non-operated plant downtime. General and administrative expenses due to fees
and related activities for the company's listing on the Toronto Stock Exchange
in August also had a negative impact in the quarter. Secure's funds from
operations in the third quarter were hurt by low sales combined with higher
costs as outlined above.
Resources Division
Steady volume growth continues to be delivered by the Resources Division
with average production for the first nine months of 1998 increasing 57
percent over the same period last year. Oil and NGL volumes were up 47
percent for the first nine months of 1998 compared to the same period in 1997
while natural gas volumes were up 64 percent.
In the quarter ended September 30, 1998 production volumes were up 35
percent over the same period last year. This volume increase was delivered
despite unexpected plant and facilities downtime and weather related
production delays that reduced third quarter 1998 volumes by approximately 300
boe per day. Offsetting the production increase was the weakness in oil and
NGL prices that more than offset stronger natural gas prices.
Operating costs in first nine months of 1998 were $6.83 per barrel of oil
equivalent down from $7.60 in the first nine months of 1997. General and
administrative costs were lower in the first nine months of 1998 at $2.19 per
boe compared to $2.30 last year, despite costs in the third quarter related to
Stellarton's Toronto Stock Exchange listing. Royalties as a percent of sales
have increase in the first nine months of 1998 to 19% compared to 17.2% due to
the increased percentage of gas and NGL production relative to oil. Natural
gas and NGL's carry higher royalty rates than crude oil.
Stellarton announced that it completed the acquisition of all of the
petroleum and natural gas assets of the SGS Limited Partnership on October 9,
1998. All of Stellarton's resource assets were held in the partnership that
was owned 45% and operated by Stellarton. This transaction increases
Stellarton's interest in the partnership assets to 100% resulting in more than
a doubling of production without any increase in either field operations or
administration. The cost of the transaction was $41.5 million and was
financed entirely by bank debt.
In line with our focus on properties that meet our specific production
optimization expertise and our desire to retain financial flexibility
Stellarton has engaged Waterous Securities to assist the company in marketing
three production areas and will undertake smaller efforts in house. The
transactions are expected to be completed before year-end.
Secure Oil Tools
Secure increased sales 4 percent for the first nine months 1998 compared
to the same period in 1997 despite significant capital program cutbacks or
delays by many Canadian and international customers. Offsetting the domestic
slowdown were Secure's first significant international sales totaling $1.2
million in the first six months of 1998. The international sales to date have
been test shipments of MeshRite(TM) or trial installations of our multi
lateral production (MLPS) technologies to seven countries around the world.
Costs in Secure remain high as the company has invested significant
amounts on manufacturing and engineering capability, and international
marketing and business set up. Secure has retained skilled personnel and
infrastructure that are able to support sales much higher than has been
experienced year to date. This strategy has hurt 1998 funds flow in Secure.
The third quarter was characterized by lower sales domestically and
limited international sales to offset the domestic weakness. Combined with
lower sales in the quarter Secure was ramping up operations particularly in
Oman where the first well of a two well test of our MLPS was being installed.
A base inventory of MeshRite(TM) was also shipped to Venezuela to meet short
lead times required for our customers there.
We remain convinced that our patience and investment will soon begin to
pay off for Secure Oil Tools. Sales opportunities that have been expected
over the last six months are now coming as firm orders. Since the end of the
third quarter of 1998 we have received orders or have succeeded on quotes
totaling approximately $2.0 million for international customers. The orders
originate in three countries and include five different customers. The orders
include purchases of MeshRite(TM), Multi Lateral Production Systems and
thermal tools. Most of these orders are repeat orders after successfully
testing our products and working closely with our customers to add value to
their business. Delivery of these orders will take place over the final
quarter of 1998 and the first quarter of 1999. Secure is laying plans to
establish permanent offices in the Middle East and South America in the first
quarter of 1999 to best capitalize on our momentum. |
