Third quarter results
Ocelot Energy Inc OCE.B
Shares issued 27,731,860 Nov 19 close $2.95
Fri 20 Nov 98 News Release
Mr. W. David Lyons reports
OPERATING HIGHLIGHTS
Three months ended Sept. 30
1998 1997
Oil equivalent
production (boe/d) 6,523 6,062
Crude oil and NGL
production (bbl/d) 4,726 4,576
Natural gas production
(mmcf/d) 18.0 14.4
Crude oil and NGL price
($/bbl) 15.98 22.13
Natural gas price
($/mcf) 2.00 1.68
Operating netback, gas
(at) 10:1 ($/boe) 11.89 13.59
OPERATING HIGHLIGHTS
Nine months ended Sept. 30
1998 1997
Oil equivalent
production (boe/d) 6,414 5,650
Crude oil and NGL
production (bbl/d) 4,604 4,168
Natural gas production
(mmcf/d) 18.1 14.8
Crude oil and NGL price
($/bbl) 16.24 24.17
Natural gas price
($/mcf) 1.87 1.98
Operating netback, gas
(at) 10:1 ($/boe) 10.96 14.46
The sale of O.J. Pipelines realized $51-million, added over $1.00 per share
in asset value and provided the financial flexibility to further advance
Ocelot's high impact portfolio of international projects.
Financial
In the nine months ended Sept. 30, the company achieved increases in
financial and operating results in comparison to the prior year.
In the third quarter, the company sold its O.J. Pipelines division to H.C.
Price Co. for a total cash consideration of $51.2-million (including
retained working capital). A gain of $15.5-million net of deferred income
taxes was realized on the sale. Proceeds from the sale have been used to
supplement working capital and reduce bank debt. The results of O.J.
Pipelines are presented in the financial statements as income from
discontinued operations.
Funds generated from operations totalled $37.0-million or $1.32 per share
in the nine month period, a 39 per cent increase in comparison to the same
period in 1997. Net earnings increased to $26.3-million or 94 cents per
share compared to $4.6-million or 16 cents per share in 1997. These
improved results were due largely to the gain on the sale of O.J. Pipelines
and the onetime settlement payment on the termination of long-term gas
contract in the second quarter.
Depressed crude oil prices continued to impact financial results in the
third quarter. The company's average liquids price declined 33 per cent to
$16.24 per barrel in the nine month period compared to an average price of
$24.17 per barrel for the same period in 1997. The company's average
natural gas price in the nine month period declined marginally by 11 cents
per mcf to average $1.87 per mcf.
Oil and Gas Operations
Crude oil and natural gas production in the nine months increased by 14 per
cent to average 6,414 boe per day in comparison to 5,650 boe per day for
the same period in 1997.
Domestic
At Sylvan Lake, crude oil and NGL production averaged 3,293 barrels per day
for the first nine months of 1998, a decrease of 5 per cent in comparison
to 3,449 barrels per day realized in the same period in 1997. In the third
quarter, crude oil production was fully restored to the level achieved
prior to the fire at the oil production battery at Sylvan Lake in April.
Gas production at Sylvan Lake average 16.1 million cubic feet per day in
the first nine months of 1998, an increase of 12 per cent from 14.4 million
cubic feet per day during the comparable period in 1997.
At Sturgeon Lake, crude oil and NGL production increased by 71 per cent to
average 835 barrels per day in the first nine months of 1998 compared to
489 barrels per day in the same period of 1997. Gas production at Sturgeon
Lake increased to 2.0 million cubic feet per day in the first nine months
of 1998.
The company commenced work on a 12-well drilling program in the third
quarter which is scheduled for completion in early 1999. Prospects include
both exploration and development locations with multizone potential.
Gabon
The Obangue field continues to represent the best source of near term
production growth for the company. Current Obangue crude oil production
averaged 808 barrels per day in the third quarter. A development plan has
been established for the Obangue reservoir to increase deliverability
beyond 5,000 barrels per day and the company is currently reviewing
drilling options to be undertaken in the near future. With a price of WTI
$14.00 per barrel and a production volume of 1,800 barrels per day, the
Obangue reservoir will generate positive cash flow.
The transportation of crude oil by barge continues to operate effectively.
>From start-up in March 1998 to Sept. 30, 49 barge loads carrying a total of
130,000 barrels of crude oil have been transported from the Obangue field
to tidewater. Transportation of crude oil by pipeline, however will
accommodate larger volumes and be more cost effective. In this regard, the
company is in discussion with pipeline owners in Gabon regarding various
pipeline connections to the Obangue field. Potential pipeline connections
range from 10 to 70 kilometres.
On the Maghena exploration permit, reprocessing and interpretation of 2-D
and 3-D seismic has been completed. This data has been supplemented with
the results of an aeromagnetic survey undertaken in the third quarter. A
number of exploration opportunities have been identified in close proximity
to the Obangue field.
A successful operating beachhead has now been established in Gabon from
which sustained growth can now be expected.
Kazakhstan
In the third quarter, Ocelot evaluated a high-quality crude oil, condensate
and natural gas development project in Kazakhstan. Acquisition of the
project which comprises over 100 million barrels equivalent of proven
undeveloped reserves was announced Oct. 27, 1998.
The project is in the prolific Peri-Caspian Basin and is comprised of eight
individual previously discovered pools trending over 85 kilometres in
northwestern Kazakhstan. Drilling and production in Kazakhstan will
commence in 1999.
The Kazakhstan project meets all of Ocelot's strict project acquisition
parameters, including existing reserves with upside potential, a motivated
government, financeability, and access to markets. The decision to proceed
with this project is part of Ocelot's commitment to develop and operate a
portfolio of approximately five high quality, high impact international
energy projects.
Tanzania
In the third quarter 1998, progress was made toward resolving the issues
surrounding the ability of TANESCO, the state-owned electric company, to
meet payment obligations to independent power projects. Ocelot remains
optimistic that these issues will be resolved by year end and that the
Songo Songo gas to electricity project can them move swiftly to financial
and commercial closure.
Cameroon
During the third quarter, Ocelot made good progress on a proposed gas to
electricity project in Cameroon. The project would include the drilling of
one or more offshore development gas wells, a pipeline to shore, a gas
processing plant and a power plant. A power transmission line would also be
constructed to connect to the main power grid. On a preliminary basis,
Ocelot has confirmed that private and multilateral project financing is
readily available for this project.
Ocelot has proposed a timeline to the government whereby commercial terms
are concluded by the end of 1998, full commercial and financial closure
would be achieved by the end of 1999, power would be available in the year
2000 and the project fully operational by the year 2001.
STATEMENT OF EARNINGS
Three months ended Sept. 30
(thousands of dollars)
1998 1997
REVENUE
Operating $8,150 $10,965
EXPENSES
Operating and admin 2,628 2,578
Depletion and
depreciation 4,847 4,714
Financial charges 1,031 408
------- -------
8,506 7,700
------- -------
Earnings (loss) from
continuing operations
before taxes (356) 3,265
Provision for taxes
Large Corporation &
capital taxes 96 56
Deferred income
taxes (290) 1,229
------- -------
(194) 1,285
------- -------
Earnings (loss) from
continuing operations (162) 1,980
Income (loss) from
discontinued
operations (133) (445)
Gain on sale of
assets (net of
deferred taxes) 15,531 -
------- -------
Net earnings $15,236 $1,535
======= =======
Normal course issuer
bid purchases - (115)
Net earnings (loss)
per Class A
and Class B share:
>From continuing
operations (1 cent) 7 cents
>From discontinued
operations (1 cent) (2 cents)
>From gain on
sale of assets 56 cents -
------- -------
54 cents 5 cents
------- -------
Funds generated
from operations
per Class A and
Class B shares:
>From continuing
operations 16 cents 28 cents
>From discontinued
operations - (1 cent)
------- -------
16 cents 27 cents
STATEMENT OF EARNINGS
Nine months ended Sept. 30
(thousands of dollars)
1998 1997
REVENUE
Operating $45,269 $32,679
EXPENSES
Operating and admin 8,581 8,251
Depletion and
depreciation 14,885 15,644
Financial charges 3,620 16
------- -------
27,086 23,911
------- -------
Earnings (loss) from
continuing operations
before taxes 18,183 8,768
Provision for taxes
Large Corporation &
capital taxes 315 249
Deferred income
taxes 8,497 4,328
------- -------
8,812 4,577
------- -------
Earnings (loss) from
continuing operations 9,371 4,191
Income (loss) from
discontinued
operations 1,436 426
Gain on sale of
assets (net of
deferred taxes) 15,531 -
------- -------
Net earnings $26,338 $4,617
======= =======
Normal course issuer
bid purchases - (1,270)
Net earnings (loss)
per Class A
and Class B share:
>From continuing
operations 33 cents 15 cents
>From discontinued
operations 5 cents 1 cent
>From gain on
sale of assets 56 cents -
------- -------
94 cents 16 cents
------- -------
Funds generated
from operations
per Class A and
Class B shares:
>From continuing
operations $1.17 86 cents
>From discontinued
operations 15 cents 9 cents
------- -------
$1.32 95 cents |
