GEX.T one of my RRSP favorites, LOL of course I was in years ago at .50.
Genesis Exploration Ltd. - Third Quarter Report and News Release
CALGARY, Oct. 26 /CNW/ - Complementing the dramatic increase in revenue
and cash flow for the first nine months of 2000 compared to the same period in
1999 is the record drilling rate and continued high success rate. Each element
contributes to positive momentum for production growth and increased
investment opportunities in the Company's business.
- Gross revenue increased 108% to $154.5 million
- Cash flow from operations increased 126% to $85.5 million ($2.26 per
share)
- Net income increased 171% to $28.5 million ($0.75 per share)
- On a combined basis daily production increased 22% to 14,169 barrels of
oil equivalent per day (14,753 in the third quarter)
- Natural gas production increased 15% to 79 million cubic feet per day
- Oil & liquids production increased 33% to 6,313 barrels per day
- Natural gas price increased 66% to $4.04 per thousand cubic feet ($4.93
in the third quarter)
- Oil and liquids price increased 81% to $40.10 per barrel before put
option ($41.70 in the third quarter)
- Capital expenditures increased 156% to $117 million
- Net undeveloped land inventory increased to 568,000 acres
- Drilled 97 wells (78.8 net) of which 25 (21.7 net) were exploratory. Of
the total, 46 (39.5 net) were cased as natural gas wells and 39 (30.8
net) as oil wells for a success rate of 88%
SUMMARY
(Thousands of dollars)
Three Months Ended Nine Months Ended
September 30 September 30
2000 1999 2000 1999 Change
-------------------------------------------------------------------------
Financial (thousands except
per share)
Gross revenues $ 61,161 $ 31,564 $154,528 $ 74,417 +108%
Cash flow from operations $ 33,624 $ 16,491 $ 85,461 $ 37,871 +126%
Per share
- basic $ 0.88 $ 0.44 $ 2.26 $ 1.03 +119%
- fully diluted $ 0.83 $ 0.43 $ 2.11 $ 0.98 +115%
Net income $ 11,682 $ 5,108 $ 28,474 $ 10,495 +171%
Per share
- basic $ 0.30 $ 0.14 $ 0.75 $ 0.29 +159%
- fully diluted $ 0.29 $ 0.14 $ 0.71 $ 0.28 +154%
Production
Natural Gas (mmcf) 7,122 7,195 21,527 18,741 +15%
Daily average (mmcf) 77 78 79 69
Sales price (per mcf) $ 4.93 $ 2.60 $ 4.04 $ 2.43 +66%
----------------------------------------------
Oil and Liquids (mbls) 645 480 1,730 1,299 +33%
Daily average (bbls) 7,011 5,224 6,313 4,759
Sales price (per bbl) $ 40.38 $ 26.74 $ 39.11 $ 22.21 +76%
----------------------------------------------
Combined (mboe(x) ) 1,357 1,200 3,882 3,173 +22%
Daily average (boe) 14,753 13,044 14,169 11,624
Sales price (per boe) $ 45.68 $ 26.30 $ 40.24 $ 23.45 +72%
Hedging (0.62) - (0.44) -
Royalties (11.26) (5.01) (9.22) (3.87) +138%
Production expenses (5.87) (5.05) (5.65) (5.07) +11%
----------------------------------------------
Field netback 27.93 16.24 24.93 14.51 +72%
General & administrative (1.04) (0.97) (0.97) (0.88) +10%
Financial expenses (1.88) (1.33) (1.70) (1.51) +13%
Capital taxes (0.24) (0.20) (0.24) (0.19) +26%
----------------------------------------------
Cash Flow 24.77 13.74 22.02 11.93 +85%
Depletion & site
restoration (6.48) (6.00) (6.49) (5.94) +9%
Future income taxes (9.58) (3.54) (7.82) (2.74) +185%
----------------------------------------------
Net income $8.71 $4.20 $7.71 $3.25 +137%
(x) Natural gas volumes are calculated on the basis of 1 mcf equals 1.05
gigajoule and equated to oil on the basis of 10 mcf per barrel of
oil.
OPERATIONAL REVIEW
A company record of 41 wells were drilled during the third quarter
bringing the year to date total to 97 gross (78.8 net) wells. During the first
nine months, Genesis invested $117 million, including $13 million in property
acquisitions, into expansion of its business. The success rate for drilling in
the nine months was 88%.
WEST CENTRAL
Deep Devonian drilling continued during the third quarter with two
additional wells bringing the total number drilled this year to eight, with
seven confirmed successful wells. Two wells are currently drilling with two
more planned by the end of the year, for a total of 12.
Genesis has established a successful track record in pursuing deep
natural gas bearing structures where the payback is substantial. Average
productive capacity from the wells tested to date is 3 to 5 million cubic feet
equivalent per day with 7 to 10 billion cubic feet of reserves attributed to
each well. Genesis maintains an average working interest in excess of 90% in
all these wells.
In the third quarter, Genesis acquired a new property consisting of 49
sections of land (at an average working interest of 65%) considered highly
prospective for liquids- rich Devonian gas at Groat. A three-dimensional
seismic program will be conducted in the fourth quarter prior to drilling in
the first quarter of 2001.
GROUARD
Late in the third quarter, Genesis completed the pipeline infrastructure
north of Lesser Slave Lake and tied-in three wells drilled earlier in the
year, adding approximately five million cubic feet of gas per day to
production. Three additional exploratory gas wells are planned in the fourth
quarter.
The Company completed its second drilling pad consisting of two
successful horizontal oil wells and initiated drilling on the third pad.
Production from the initial pad consisting of three wells, remained as
expected at approximately 300 barrels of oil per day throughout the quarter.
Additional pads are planned for the fourth quarter.
PEACE RIVER ARCH / STURGEON LAKE
The first phase of Genesis' horizontal re-entry drilling on the Leduc
Reef at Sturgeon Lake was completed in the third quarter bringing the total to
10 successful re-entries for light gravity oil. The second phase will be
initiated in the fourth quarter, during which time it is expected that three
out of a total of 10 new re-entries will be completed.
As well, four shallow Cretaceous natural gas wells were completed in the
third quarter (83% average working interest) as part of an on-going up-hole
gas exploitation program.
SOUTHERN
At Wymark in southwest Saskatchewan, Genesis followed up on its initial
drilling late last year by completing an aggressive development program. In
total, 20 successful Second White Specks natural gas wells (100% working
interest) have been drilled. This reservoir is typified by lower productivity
wells with a long reserve life. All wells are expected to be on-stream at a
combined rate of 5 million cubic feet of gas per day by the end of October, in
time to take advantage of strong winter gas prices.
In southeast Saskatchewan, Genesis initiated development drilling on its
Mississippian light oil pool discovery at Oakley with three successful wells.
Another four wells are planned in the fourth quarter.
NET UNDEVELOPED LAND HOLDINGS
(Thousands of acres)
September 30 December 31
2000 1999
-------------------------------------------------------------------------
Alberta 421 355
Saskatchewan 134 20
British Columbia 13 13
-------------------------------------------------------------------------
Total 568 388
WELLS DRILLED
(Nine Months Ended September 30)
Exploratory Development Total
Gross Net Gross Net Gross Net
-------------------------------------------------------------------------
Natural Gas 17 15.6 29 23.9 46 39.5
Oil 3 2.5 36 28.3 39 30.8
Dry 5 3.6 7 4.9 12 8.5
-------------------------------------------------------------------------
Total 25 21.7 72 57.1 97 78.8
-------------------------------------------------------------------------
Average working interest 87% 79% 81%
CAPITAL EXPENDITURES
(Thousands)
Three Months Ended Nine Months Ended
September 30 September 30
2000 1999 2000 1999
-------------------------------------------------------------------------
Property acquisitions
(dispositions) $ 10,049 $ 817 $ 13,045 $ (7,815)
Lease acquisitions and
retentions 1,697 498 6,982 2,835
Seismic evaluations 1,108 2,009 5,723 4,408
Drilling and completion
of wells 24,735 9,988 68,092 28,732
Equipping, pipelining
and facilities 7,912 3,757 22,193 16,836
Head office expenditures 233 230 603 549
-------------------------------------------------------------------------
Total expenditures $ 45,734 $ 17,299 $116,638 $ 45,545
PRODUCTION
Production of oil and liquids for the first nine months of 2000 averaged
6,313 barrels per day, an increase of 33% over the 4,759 barrels per day
produced in the same period of 1999.
While natural gas production increased 15% for the first nine months of
2000 to average 79 million cubic feet per day, Genesis experienced several
disruptions in the third quarter including a planned turnaround at the
Windfall plant and an outage on the Nova gas gathering system at Sturgeon Lake
resulting in gas being shut-in for a period of time. So, while production
capability increased, actual daily average gas production declined 7% from
second quarter levels.
Before year end, however, the effects of the natural gas drilling program
undertaken this year will kick in substantially. Natural gas production is
expected to average 97 million cubic feet per day in the fourth quarter
bringing the total estimated daily average production in excess of 17,000
barrels of oil equivalent for the quarter.
MARKETING
Natural gas prices reached record levels in the third quarter. With the
majority of the Company's gas exposed to the Alberta spot market, Genesis'
average price increased to $4.93 per thousand cubic feet, compared to $4.14
per thousand cubic feet in the second quarter. The average price for the first
nine months of 2000 was $4.04 per thousand cubic feet, compared to $2.43 per
thousand cubic feet in 1999.
Benchmark oil prices strengthened in the third quarter by US $2.92 to US
$31.55 per barrel bringing the average for the first nine months of 2000 to
US$29.64 per barrel, compared to US$17.52 per barrel in 1999. In addition,
there has been a narrowing of the basis differential between the benchmark
price and Edmonton par posting for the first nine months of 2000 to US$0.41
per barrel from US$0.89 in 1999. As a result, the Company's average price
(before put option) for the first nine months of 2000 was Cdn.$40.10 per
barrel, as compared to Cdn.$22.21 per barrel in 1999, an increase of 81% or
Cdn.$17.89.
In October, Genesis purchased a put option establishing a floor price of
US$26 on 2,000 barrels of oil per day for 2001. All natural gas volumes remain
open to spot market pricing.
FINANCIAL REVIEW
The combination of higher production volumes and higher commodity prices
resulted in Genesis more than doubling gross revenues for the first nine
months of 2000 to $154.5 million from $74.4 million for the same period in
1999.
Royalties averaged 23% of selling price for the first nine months of 2000
compared to 17% of selling price for the same period in 1999, reflecting the
higher commodity prices.
Production expenses for the first nine months of 2000 increased to $5.65
per barrel of oil equivalent from $5.11 for the same period in 1999. Operating
costs have gone up as Genesis continues to add longer life, sour gas reserves
in the West Central region. Production from this region has grown from 2,000
to 6,000 barrels of oil equivalent per day since 1997. As well, several new
oil pools which do not yet have processing facilities and infrastructure
built, temporarily increase the Company's overall production expense.
In the fourth quarter, Genesis anticipates finalizing non-operated plant
equalization formulas in the West Central region. This is expected to result
in a one-time adjustment for the current and prior years, which would increase
production expense for the year by $0.40 to $0.60 per barrel of oil
equivalent. Cash flow from operations increased 126% for the first nine months
of 2000 to $85.4 million from $37.9 million for the comparable period in 1999
due to the increase in production volumes and prices. Net income increased
171% to $28.5 million from $10.5 million.
Cash flow and net income per share results increased 119% and 159%
respectively for the first nine months of 2000 over the same period in 1999.
These changes were different than those for the absolute results as the
weighted average number of common shares outstanding was 3% higher in 2000
than the comparable period in 1999, reflecting additional share issues
pursuant to the Company's stock option plan.
OUTLOOK
Genesis is well positioned to benefit from the healthy industry
environment. The Company enjoys a large, prospective, undeveloped land base,
exploration experience in the deep natural gas fields of west central Alberta,
new oil and gas discoveries at Grouard and growing oil and gas production from
Sturgeon Lake.
With the outlook for increased field activity through the remainder of
this year and into 2001, Genesis has already secured the necessary rigs and
equipment to continue its full and aggressive drilling program. It is expected
that production will average 19,000 barrels of oil equivalent per day in 2001.
Note: This report contains forward-looking information. Actual results
may differ. The risks, uncertainties and other factors which could influence
actual results are described in other documents previously filed with
regulatory authorities.
BALANCE SHEET
(Unaudited)
(Thousands of dollars)
September 30 December 31
2000 1999
(Note 1)
-------------------------------------------------------------------------
ASSETS
Current Assets
Accounts receivable $ 31,233 $ 23,235
Property, Plant and Equipment,
at cost 502,501 385,862
Accumulated Depletion & Depreciation (78,291) (52,098)
----------------------------------
424,210 333,764
----------------------------------
$ 455,443 $ 356,999
LIABILITIES
Current Liabilities
Accounts payable $ 51,579 $ 33,466
Site Restoration Accrual 1,134 932
Long-term Debt 131,556 115,862
Future Income Taxes 82,119 51,754
SHAREHOLDERS' EQUITY
Share Capital 133,552 127,956
Retained Earnings 55,503 27,029
----------------------------------
189,055 154,985
----------------------------------
$ 455,443 $ 356,999
COMMON SHARES OUTSTANDING
(thousands)
Basic 38,215 36,416
Fully diluted 41,935 39,756
PROCEEDS DUE UPON THE EXERCISE
OF STOCK OPTIONS (thousands) $ 30,561 $ 19,385
STATEMENT OF INCOME & RETAINED EARNINGS
(Unaudited)
(Thousands of dollars)
Three Months Ended Nine Months Ended
September 30 September 30
2000 1999 2000 1999
(Note 1)
-------------------------------------------------------------------------
OPERATING INCOME
Petroleum and natural gas
revenues $ 61,161 $ 31,564 $154,528 $ 74,417
Royalties (15,288) (6,007) (35,807) (12,276)
Production expenses (7,969) (6,064) (21,949) (16,094)
---------------------------------------
37,904 19,493 96,772 46,047
EXPENSES
General and administrative 1,408 1,158 3,771 2,779
Interest on long-term debt 2,547 1,602 6,595 4,794
Depletion and depreciation 8,800 7,495 26,193 19,933
Site restoration provision 144 149 429 396
---------------------------------------
INCOME BEFORE INCOME TAXES 25,005 9,089 59,784 18,145
Capital taxes 325 242 945 603
Future income taxes 12,998 3,739 30,365 7,047
---------------------------------------
NET INCOME 11,682 5,108 28,474 10,495
RETAINED EARNINGS, beginning
of period 43,821 17,757 27,029 12,370
---------------------------------------
RETAINED EARNINGS, end of
period $ 55,503 $ 22,865 $ 55,503 $ 22,865
NET INCOME PER COMMON SHARE
Basic $ 0.30 $ 0.14 $ 0.75 $ 0.29
Fully diluted $ 0.29 $ 0.14 $ 0.71 $ 0.28
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING
(thousands)
Basic 37,751 36,641 37,751 36,641
Fully diluted 41,473 40,034 41,473 40,034
IMPUTED INTEREST ON THE
DEEMED EXERCISE OF STOCK
OPTIONS (thousands) $ 1,148 $ 747 $ 2,139 $ 1,350
STATEMENT OF CASH FLOW
(Unaudited)
(Thousands of dollars)
Three Months Ended Nine Months Ended
September 30 September 30
2000 1999 2000 1999
(Note 1)
-------------------------------------------------------------------------
OPERATING ACTIVITIES
Net income $ 11,682 $ 5,108 $ 28,474 $ 10,495
Add charges not affecting cash
Depletion and depreciation 8,800 7,495 26,193 19,933
Site restoration provision 144 149 429 396
Future income taxes 12,998 3,739 30,365 7,047
---------------------------------------
Cash flow from operations 33,624 16,491 85,461 37,871
Increase in accounts
receivable (3,509) (552) (11,890) (554)
Increase (decrease) in
accounts payable 12,909 (2,695) 15,798 (9,228)
---------------------------------------
Cash flow from operating
activities 43,024 13,244 89,369 28,089
FINANCING ACTIVITIES
Increase in long-term debt 2,963 1,447 15,694 11,187
Issue of shares 1,146 523 5,596 2,478
---------------------------------------
Cash flow from financing
activities 4,109 1,970 21,290 13,665
---------------------------------------
Cash available for investing
activities 47,133 15,214 110,659 41,754
INVESTING ACTIVITIES
Increase in property,
plant and equipment (45,734) (17,299) (116,638) (45,545)
Site restoration expenditures (81) (4) (227) (31)
Decrease (increase) in capital
accounts receivable (2,967) (859) 3,892 (420)
Increase in capital accounts
payable 1,649 2,948 2,314 4,242
---------------------------------------
Cash flow used in investing
activities (47,133) (15,214) (110,659) (41,754)
---------------------------------------
Change in cash and cash,
beginning and end of period $ - $ - $ - $ -
Other supplemental information:
Cash interest paid $ 2,547 $ 1,602 $ 6,595 $ 4,794
Cash taxes paid $ 208 $ 125 $ 819 $ 615
Note 1: Future Income Taxes
Effective January 1, 2000 Genesis adopted the new recommendations of the
Canadian Institute of Chartered Accountants with respect to accounting for
income taxes. Under the new recommendations, the liability method of tax
allocation is used, based on differences between financial reporting and tax
bases of assets and liabilities. Previously, the deferral method was used,
based on differences in the timing of reporting income and expenses in
financial statements and tax returns. The new method was applied retroactively
with restatement of the 1999 financial statements.
The effect of the new recommendations on the opening 1999 financial
statements was to increase (decrease) the following:
Property, plant and equipment $ 25,296
-------------------------------------------------------------------------
Future income taxes $ 34,360
-------------------------------------------------------------------------
Share capital $ (9,553)
-------------------------------------------------------------------------
Retained earnings $ 489
-------------------------------------------------------------------------
The adjustments were mainly a result of future tax costs related to
acquisitions where the tax basis acquired was less than the purchase price,
and to the tax consequences of flow through share issuance.
Note 2: Financial Instruments
Genesis has purchased a put option at US$24 WTI on 4,000 barrels of oil
per day for the period April 1 to December 31, 2000 at a cost of US$1.50 per
barrel.
%SEDAR: 00003045E
-0- 10/26/2000
For further information: David J. Wilson, President and Chief Executive Officer, Donald J. Sabo, Chairman and Senior Vice President, (403) 266-6900, Facsimile: (403) 266-6988, Web site: www.genesisexp.com, e-mail: info@genesisexp.com To request a free copy of this organization's annual report, please go to www.newswire.ca and click on reports@cnw. |
