Ocelot Energy Inc
OCE.B
Shares issued 27,731,860
1999-03-03 close $2.25
Thursday Mar 4 1999
Mr. W. David Lyons reports
Despite the dramatic reduction in world oil prices during the year, Ocelot was able
to increase its revenues, generate positive earnings, reduce its debt position and
improve its overall financial condition during 1998. The company continued to
have a ceiling test surplus on its domestic assets in 1998. As announced in
mid-December 1998, Ocelot intends to place increasing emphasis on its
international energy projects. The company is considering a possible disposition of
some or all of its domestic assets, with the proceeds to be used to develop its high
quality international projects.
During 1998, Ocelot completed two transactions to strengthen its financial
position. In the second quarter, Ocelot settled a long-term gas contract for
proceeds of $23.2-million and in the third quarter, Ocelot disposed of its large
diameter pipeline construction business, O.J. Pipelines, for cash proceeds of
$48.2-million plus working capital. During the fourth quarter 1998 and early
stages of the first quarter 1999, Ocelot undertook a successful $8.0-million
development drilling program on its Canadian assets, adding 3.9 million barrels oil
equivalent proven reserves and 6.5 million barrels oil equivalent proven plus
probable reserves.
Revenue from petroleum and natural gas operations was $56.- million in 1998
compared with $43.6-million in 1997, an increase of 30 per cent. Net earnings in
the year climbed to $16.9-million or 61 cents per share compared with
$7.9-million or 28 cents per share in 1997. During the year, Ocelot recognized a
permanent impairment in certain international assets related to undeveloped
ventures of $13.5-million. Funds generated from operations were $43.6-million or
$1.56 per share compared with $34.1-million or $1.22 per share in 1997. The
company's financial position improved significantly in the year with bank debt
including working capital declining by 51 per cent to $36.1-million compared with
$74.4-million at year end in 1997.
Production of crude oil and natural gas liquids averaged 4,595 barrels per day, an
8 per cent increase over last year. Natural gas production averaged 16.9 million
cubic feet per day compared with 14.8 million cubic feet per day in 1997.
PRODUCTION HIGHLIGHTS
Year ended Dec. 31
1998 1997
Natural gas
(millions of cubic
feet per day) 16.9 14.8
Crude oil (barrels
per day) 3,795 3,540
Natural gas
liquids (barrels
per day) 800 731
------ ------
Total liquids
(barrels per day) 4,595 4,271
------ ------
Pricing
Natural gas
($ per million
cubic feet) 1.95 1.99
Crude oil ($ per
barrel) 17.48 24.33
Natural gas
liquids ($ per
barrel) 13.98 21.42
Netbacks
Natural gas ($ per
thousand cubic
feet) 1.25 0.96
Crude oil ($ per
barrel) 11.94 15.52
Natural gas
liquids ($ per
barrel) 10.54 16.45
Gross capital expenditures were $56.9-million in 1998 compared with
$83.0-million in 1997. The company financed its capital program in 1998 from
internally generated cash flow and funds received from the sale of O.J. Pipelines
and the gas contract settlement. Finding and development costs in 1998 were
$5.88 per barrel of oil equivalent for proven reserves additions (exclusive of
Kazakhstan). In Canada, finding and development costs for 1998 were $7.00 per
barrel of oil equivalent for proven reserves additions and $5.01 per barrel of oil
equivalent for proven plus one-half probable reserves additions.
Of the international expenditures of $35.6-million, approximately $24.8-million
was incurred for its onshore pilot production project in Gabon. In December
1998, the company produced an average of 859 barrels of oil per day from the
Gabonese project. For this startup operation, revenue and operating costs were
capitalized in 1998.
Domestic capital expenditures of $21.3-million relate to the drilling and completion
of eight (5.1 net) development wells at Sylvan Lake and Sturgeon Lake in 1998.
Proven reserves of domestic natural gas, net of production, at year end 1998
were 10 per cent greater than at year end 1997. Proven reserves of domestic
crude oil and natural gas liquids, net of production, at year end 1998 remained at
the same level as year end, 1997.
Effective Sept. 23, 1998, Ocelot disposed of its large diameter pipeline
construction business, O.J. Pipelines. Cash flow and net earnings attributable to
discontinued operations in 1998 were $4.4-million and $1.6-million respectively.
CONSOLIDATED STATEMENT OF EARNINGS
Year ended Dec. 31
(thousands of dollars)
1998 1997
Revenue
Operating $ 56,584 $ 43,642
--------- ---------
Expenses
Operating and
administrative 11,752 11,131
Depletion and
depreciation 32,404 18,784
Financial charges 5,195 109
--------- ---------
49,351 30,024
--------- ---------
Earnings from
continuing
operations
before taxes 7,233 13,618
Provision for taxes
Large corporations
and capital taxes 414 291
Deferred income
taxes 5,957 4,974
--------- ---------
6,371 5,265
--------- ---------
Earnings from
continuing
operations 862 8,353
Earnings (loss)
from discontinued
operations 1,591 (445)
Gain on sale of
assets from
discontinued
operations (net
of deferred
income taxes) 14,461 -
--------- ---------
Net earnings $ 16,914 $ 7,908
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