BIG BEAR EXPLORATION LTD.
NEWS RELEASE
# 99 - 12 May 3, 1999
BIG BEAR ANNOUNCES 1998 FINANCIAL AND OPERATING RESULTS
Big Bear Exploration Ltd. ("Big Bear") announced today the following
financial and operational results for the fourth quarter and year ended
December 31, 1998.
Production and cash flow from operations increased significantly in 1998 as
compared to the same period in 1997. The majority of the production
increase occurred almost exclusively in the Company's core property located
at Rainbow Lake in north-western Alberta and was the result of both
acquisitions and horizontal drilling. Cash flow resulting from this
production increase was significantly impacted by lower oil prices realized
in 1998 as compared to those realized in the same period in 1997. However,
Big Bear was still able to realize increased cash flow in 1998.
3 Months Ended Dec. 31 12 Months Ended Dec.31
1998 1997 1998 1997
Financial
($ 000's except per share amounts)
Total revenues, net of royalties 2,334 1,827[PARA]2,519 11,596 4,468
Cash flow from operations 88 479 2,792 1,809
Basic per common share (1) $0.01 $0.22 $0.57 $0.92
Fully diluted per common share (1) $0.01 $0.22 $0.49 $0.70
Income (loss) for the period (168,848) (565) (188,362) (168)
Basic per common share (1)[PARA] $(17.15) $(0.26) $(38.89) $(0.09)
Fully diluted per common share
(1)[PARA] $(17.15) $(0.26) $(38.89) $(0.09)
Long-term debt 14,842 11,830 14,842 11,830
Working capital (deficiency) (2,891) (82) (2,891) (82)
Shareholders' equity 16,293 16,635 16,293 16,635[PARA][PARA]
Investment in Blue Range Resource Corp 152,187 - [PARA] 152,187 -
Capital expenditures, net 1,710 14,665 46,221 28,570
Common shares outstanding (ending)
Basic (1)[PARA][PARA] 40,209 2,682 40,209 2,682[PARA]
Fully diluted (1)[PARA][PARA] 42,397 2,859 42,397 2,859
(1) All stated shares and per share amounts reflect the 11 for 1 share
consolidation approved by the Shareholders in January 1999. In addition the
entire number of common shares issued for the Blue Range Resource
Corporation acquisition are reflected in the December 31, 1998 share totals
although some of these shares were issued in early 1999.
The Number of common shares outstanding at April 30, 1999 is 42,254,207.
3 Months Ended Dec. 31, 12 Months Ended Dec. 31,
1998 1997 1998 1997
Operational
Average daily production(boe) 1,848 1,106 2,114 713
Oil and NGLs (bbls) 1,463 604 1,661 340
Natural gas (mcf) 3,847 5,023 4,533 3,726
Average sales price (before hedging)
Oil and NGLs (per bbl) 17.37 24.67 17.54 24.41
Natural gas (per mcf) 2.07 1.79 1.83 1.56
Wells drilled (gross (net)) 2 (1.1) 3 (1.2) 18 (13.4) 21 (13.9)[PARA]
Cash flow in the fourth quarter of 1998 declined significantly in
comparison to cash flow for the fourth quarter of 1997 notwithstanding
increased production volumes as a result of reduced oil prices, increased
operating costs, interest costs, general and administration expenses and
foreign exchange losses associated with currency hedge positions.
On a quarter over quarter basis, cash flow decreased in the fourth quarter
of 1998 as compared to the third quarter due to lower production and a
slight decrease in crude oil price. The production decrease was due to
natural production declines, lower investment levels, increased operating
costs and to restrictions from the winter-access-only nature of the Rainbow
Lake area which limited Big Bear's ability to service certain wells.
Capital expenditures in the fourth quarter amounted to $1,710,000 as
compared to the third quarter amount of $2,299,000. The company
participated in 2 gross (1.1 net) wells during the quarter. The reduced
activity was largely the result of poor economic returns given the oil
prices and the lower amount of capital available to the company. As
mentioned in the previous two quarterly reports Big Bear has deferred the
majority of the re-entry well activity in Rainbow Lake. This deferral has
had a negative impact on both production and reserve levels. Production
decreased throughout the year given that very little capital was invested
after the first quarter to offset overall decline rates.
The reserves of the Corporation as at January 1, 1999 determined by
independent consultants using escalated prices and costs are:
Remaining Reserves Future Cash Flow (with ARTC)
Natural Undiscounted Discounted
Oil NGLs Gas 0% at 10% at 15% at 20%
as at January 1, 1999 (mbbls) (mbbls) (bcf) M$ M$ M$ M$
Proved Developed
Producing 1,904 96 14.4 47,710 29,285 25,360 22,600
Non Producing 93 0 0.8 1,205 810 680 575
Proved Undeveloped 1,074 21 1.8 13,665 9,500 8,025 6,880
Total Proved 3,071 117 17.0 62,580 39,595 34,065 30,055
Probable Additional (risked @ 50%) 923 1 1.6 12,770 8,535 7,185 6,150
Total 3,994 118 18.6 75,350 48,130
41,260 36,205
as at January 1, 1998 4,240 94 27.3
102,052 68,199 59,324 52,680
% Change (6%) 26% (32%) (26%) (29%) (30%) (31%)
The value of the Corporation's reserves as of January 1, 1999 are
substantially reduced as compared to January 1, 1998 largely due to lower
oil price projections and a reduction in the number of planned future
horizontal re-entry wells included in the current reserve report. The
number of future re-entries was reduced given the pessimistic outlook for
oil prices that prevailed when the January 1, 1999 reserve report was being
prepared and the lower investment levels anticipated by Big Bear.
Production during 1999 at Rainbow Lake indicates that water cuts are
increasing faster than was projected in the January 1, 1999 reserve
evaluation which results in decreased oil production and will likely result
in a reduction of proven producing reserves in future reserve evaluations.
During the first quarter of 1999 the company participated in three gross
(0.95 net) wells resulting in one (0.25 net) gas well and one (0.40 net)
oil wells. The third location (0.50 net) has been cased as a gas well but
requires further testing in order to determine if the well is capable of
producing at economic rates.
On December 12, 1998 Big Bear assumed control of Blue Range Resource
Corporation ("Blue Range") after a hostile take-over bid. (Blue Range is
now a wholly owned subsidiary of Big Bear). For a number of reasons,
including too much debt and the excessive burden of financing and other
obligations, discovery of various accounting issues, a write-down of
reserves, lack of financial capacity, and Blue Range banking issues, the
acquisition has turned into a complete disaster for Big Bear and its
Shareholders. As a result of the Blue Range acquisition, Big Bear's income
in the fourth quarter of 1998 was adversely impacted by a write-down of
$152,187,000 on the Corporation's investment in Blue Range.
On March 2, 1999, Blue Range obtained a Court Order under the Companies'
Creditors Arrangement Act temporarily protecting it from its creditors. Big
Bear continues to pursue potential alternatives whereby Blue Range can be
recapitalized. In addition, all of the significant assets of Blue Range
have been marketed for sale and Blue Range has received offers on all the
Blue Range property packages marketed. Blue Range has, subject to
obtaining the approval of the Court, agreed to sell a majority of the
properties. However it appears that the realizable value of the Blue Range
assets is insufficient to satisfy in full all of its liabilities. It is
management's belief that the total liabilities of Blue Range exceed the
value of its assets.
The purchase of Blue Range has put Big Bear in a very difficult position in
terms of Big Bear's future growth. Currently, our credit lines continue to
be reduced as we complete the previously announced sale of Big Bear
properties. It will be difficult to raise equity investment because of
uncertainty with respect to the status of Blue Range and its effect on Big
Bear. In addition the Management of Big Bear has had to devote virtually
all of its time and efforts to sorting out the Blue Range issues in order
to ensure that, amongst other matters, Big Bear is repaid approximately $13
million it advanced on a secured basis to Blue Range. Accordingly, Big
Bear has not actively enhanced its own value and must now take steps to
reorganize itself in order to survive.
Big Bear does not expect to be able to raise additional debt financing in
the near future and its cash flow from operations will be materially
reduced as a result of the property sales referred to above and natural
production declines. Big Bear intends to fund its working capital
deficiency out of a combination of the proceeds of the sale of properties
referred to above and the application over time of its remaining cash flow
from operations.
The advances to Blue Range were funded by loans under an acquisition credit
facility with a Canadian Charted Bank of which $15.3 million is drawn and
is repayable in full on June 30, 1999. Big Bear's ability to repay the
acquisition credit facility as scheduled on June 30, 1999 is dependent upon
its recovery from Blue Range prior to that time of the Blue Range
receivable. To the extent that the Blue Range receivable is not recovered
prior to June 30, 1999, Big Bear does not have other resources to repay the
acquisition credit facility and therefore it has recently requested an
extension of the maturity date so that the repayment obligation coincides
with its recovery of the Blue Range receivable. If the Blue Range
receivable proves to be uncollectable it will have a material adverse
impact on the liquidity and continued operations of Big Bear. Management
currently believes that the amount will be fully collectible. However,
Blue Range is subject to the protection of a Court order under the
Companies' Creditors Arrangement Act and therefore the timing and extent of
Big Bear's recovery of the Blue Range receivable is subject to a number of
factors which are beyond the control of both Blue Range and Big Bear.
The Corporation is likely to incur additional obligations relating to the
reduction of the scale of its operations and the Corporation may not have
the financial resources to immediately meet those obligations. The
Corporation intends to mitigate and postpone these obligations to the
extent possible and to fund them out of its operating cash flows over time.
As a result of the short-term liquidity issues facing Big Bear, it is not
in a position to continue to pursue a growth strategy without obtaining
additional equity investment. Management believes that in present
circumstances it will be difficult to raise new equity investment because
of uncertainty in the equity markets as to how the Blue Range circumstances
will affect Big Bear.
Big Bear is continuing to pursue natural gas exploration opportunities in
the "W5" region of west central Alberta. Although the company has several
opportunities in this area, activity for the remainder of 1999 will be at a
restricted level based on the availability of capital to fund any proposed
projects.
As previously announced, effective March 1, 1999 Big Bear has sold its
interest in the Bashaw / Endiang area and has committed to sell a portion
of its Rainbow Lake assets that combined were producing 2.5 mmcf/d of
natural gas and 500 bbls/d of light oil for gross proceeds of approximately
$11 million. Proceeds from these disposition will be used to reduce
indebtedness.
Big Bear's current production (month of April) for the properties not owned
by its wholly-owned subsidiary Blue Range is approximately 800 boe/d
consisting of 35% natural gas and 65% light oil. Big Bear's production base
is expected to continue to decline through the remainder of 1999 unless
additional capital is invested.
This press release is not for distribution to United States Newswire
Services or for dissemination in the United States.
The Toronto Stock Exchange has not approved or disapproved the contents of
this news release. Big Bear Exploration Ltd. is a Calgary based oil and
gas company listed on The Toronto Stock Exchange under the symbol "BDX".
Blue Range Resource Corporation is a wholly owned subsidiary of Big Bear.
For further information, please contact:
A. Jeffery Tonken Rod J. Lebbert James W. Surbey
President & Sr. Vice President & Sr. Vice President,
Chief Executive Officer Chief Operating Officer Corporate Development
(403) 231-6361 (403) 231-2494 (403) 231-6434
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