EARNINGS - TOP 21 / CRESTAR MEETS 1997 EXIT TARGET RATE; ANNOUNCES
YEAR END AND FOURTH QUARTER 1997 RESULTS
CALGARY, Feb. 24 /CNW/ - Crestar met its 1997 exit target rate of 97,000
BOE/d, while producing an average of 91,100 BOE/d in the fourth quarter of
1997. The production increases led to record levels of revenue and cash flow
for both the fourth quarter and full year 1997.
FISCAL 1997 RESULTS
Revenues for fiscal 1997 increased 13% to $575.9 million, resulting in
cash flow of $291.3 million ($5.76 per share), 11% higher than a year ago.
Net income for the year was $32.1 million ($0.64 per share) compared with
$51.6 million ($1.07 per share) in 1996, primarily due to higher royalties,
operating costs, income taxes and depletion and depreciation charges.
Crude oil and natural gas liquids sales for 1997 averaged 43,700 bbls/d,
17% higher than in 1996. Overall, liquids realizations fell 10% to $20.07 per
barrel for the year. Natural gas sales in 1997 increased 12% to average 358
mmcf/d. Crestar's average natural gas realizations rose 11% in 1997, to $1.96
per mcf.
FOURTH QUARTER RESULTS
Volatile commodity prices in the fourth quarter resulted in a 21% decline
in average liquids prices, partially offset by a 19% improvement in natural
gas realizations. Despite this low price environment, higher production
volumes in the fourth quarter of 1997 resulted in a 19% increase in revenues
and cash flow. Fourth quarter liquids volumes of 49,700 bbls/d were up 10%
compared with the third quarter and 25% higher than the fourth quarter last
year. Average natural gas sales of 414 mmcf/d were 13% higher than the third
quarter and 27% higher than the fourth quarter of 1996. Net income declined
to $4.0 million ($0.08 per share) from $14.8 million ($0.30 per share) in the
fourth quarter of 1996.
EXPLORATION AND DEVELOPMENT ACTIVITY
Crestar drilled a record 493 net wells in 1997, more than double the
number drilled last year. This increase reflects our growing inventory of
prospects. In the fourth quarter, Crestar drilled 58 net development wells
and 47 net exploratory wells. While much of this activity was centered around
our Southern and West of Five core regions, we also expanded our new venture
exploration.
In the Jenner area, Crestar drilled 26 horizontal wells (including a
milestone 100th horizontal well in the area) leading to a production increase
of 4,300 bbls/d by year-end. At Little Bow, production climbed 2,300 bbls/d
with the drilling of four horizontal infill wells and the tie in of 17 wells
to new battery facilities. Completion of facilities at Czar and Hayter
added 900 bbls/d. In the fourth quarter Crestar tied in new production from
the Turner Valley pool at Dalemead, adding 12 mmcf/d of natural gas.
Horizontal drilling and added compression at Three Hills Creek boosted natural
gas sales in that area by 8 mmcf/d.
On December 1, 1997, we announced new pool discoveries at Hamburg,
Claresholm and Jenner, and the commencement of our 1998 winter drilling
program, the most active in our history. At Hamburg, in northern Alberta, we
completed our discovery well at 15-21-96-10 W6M, which tested at a rate of 20
mmcf/d of natural gas and 1,500 bbls/d of condensate. Two follow-up wells
were drilled in the fourth quarter, with indicated hydrocarbon pay. The wells
will be tied in during the first quarter of 1998. Exploration is continuing in
the first quarter at Hamburg, Lapp, Clarke/Klua and Peggo/Pesh. Development
programs are underway at Vulcan and Niton.
RESERVE ADDITIONS
Crestar's 1997 reserve additions are a testament to the growing momentum
of our full cycle exploration and development program. We recorded
significant reserve additions at Jenner, Little Bow, Hamburg and Mantario.
Exploration and development activities added established reserves of 56.8
mmBOE, the largest increase in the history of the Company. This represents
196% of Crestar's annual production, up from 132% in 1996. Despite higher
industry-wide costs for services in 1997, finding costs for established
reserves from internally generated activity averaged $6.30 per BOE, $0.06 per
BOE lower than last year. On a proven only basis, Crestar's exploration and
development program added reserves of 45.0 mmBOE, at a cost of $7.95 per BOE.
Including net acquisitions, established reserves additions of 96.6
million BOE replaced 333% of production at a cost of $7.69 per BOE. Overall,
our capital program added proven reserves of 77.3 mmBOE, replacing 266% of
production at a cost of $9.60 per BOE. Crestar's overall finding and
development cost includes the cost of the Grad & Walker acquisition. We
expect that this acquisition will lead to the addition of further reserves in
the future at lower costs as we drill out the targets we have identified on
Grad & Walker lands.
ASSET MANAGEMENT
Crestar maintains an ongoing program of asset management to increase its
interests in core areas and dispose of non core properties. In the fourth
quarter, net proceeds of dispositions totaled $25.7 million. Further
dispositions in the range of $10 to $15 million will be completed in the first
quarter of 1998. In addition, we have offered a number of minor properties
and our producing interests in southeastern Saskatchewan for sale. These
sales are expected to close in the second and third quarter of 1998.
OUTLOOK
Since its inception in 1992, Crestar has delivered a solid record of
growth through a blend of exploration, development and acquisition activity.
In the past five years, annual cash flow has climbed to $291 from $91 million.
Established reserves have grown an average of 16% per year, outpacing annual
production increases of 14%.
Over the last few months, prices of both crude oil and natural gas have
declined substantially. If sustained, these declines will lead to a marked
reduction in cash flow, despite our significant production increases. Our
exploration and development program has strong positive momentum which will
lead to continuing production increases. To maintain this momentum in the
face of lower commodity prices, on February 18, 1998, Crestar issued 5.25
million common shares to a syndicate of Canadian underwriters for net proceeds
of $111.9 million.
Three months ended Year ended
December 31 December 31
FINANCIAL HIGHLIGHTS 1997 1996 1997 1996
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(millions of dollars, unless
otherwise indicated)
Revenue 171.1 143.2 575.9 511.9
Net Income 4.0 14.8 32.1 51.6
Per share (dollars) 0.08 0.30 0.64 1.07
Cash flow from operations 86.2 72.3 291.3 263.1
Per share (dollars) 1.64 1.47 5.76 5.47
Net capital expenditures 65.4 58.3 747.4 281.0
Long term debt at period end 746.4 398.0 746.4 398.0
Shareholders' equity 569.1 454.6 569.1 454.6
Shares outstanding (millions)
At period end 52.4 49.1 52.4 49.1
Weighted averaged 52.4 49.1 50.6 48.1
OPERATING HIGHLIGHTS
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Net undeveloped land (thousands
of acres) 3,585 2,516 3,585 2,516
Drilling activity (gross/net
wells drilled) 138/105 93/75 589/493 305/236
Sales
Natural gas (mmcf/d) 414 325 358 319
Liquids(1) (mbbls/d) 49.7 39.7 43.7 37.4
Equivalence(2) (mBOE/d) 91.1 72.2 79.5 69.3
Average realizations
Natural gas ($/mcf) 2.23 1.87 1.96 1.77
Liquids(1) ($/bbl) 18.79 23.90 20.07 22.31
Netback ($/BOE(2))
Product revenue 20.41 21.57 19.84 20.20
Royalties 3.56 3.77 3.71 3.56
Operating expense 4.18 5.40 4.17 4.37
General and administrative
expense 0.67 0.48 0.71 0.57
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Operating netback 12.00 11.92 11.25 11.70
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(1) Liquids includes volumes of crude oil, natural gas liquids and
condensate
(2) Natural gas is converted to barrels of equivalent (BOE) at 10
thousand cubic feet (10 mcf) of gas per barrel
1997 DRILLING SUMMARY
(net wells) 1997 Net 1996 Net
Success Success
Year ended December 31 Oil Gas Dry Total Rate Rate
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Exploratory 51 53 155 259 40% 45%
Development 113 100 21 234 91% 92%
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Total 164 153 176 493 64% 63%
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NET CAPITAL EXPENDITURES
Three months ended Year ended
December 31 December 31
(millions of dollars) 1997 1996 1997 1996
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Lease acquisitions and rentals 3.7 12.1 40.0 33.7
Geological and geophysical 5.2 7.1 46.6 26.6
Exploration drilling 28.7 19.3 119.6 64.9
Development drilling 26.0 8.8 75.2 36.8
Plant and facilities 26.1 13.7 76.4 49.8
Property acquisitions 3.4 (2.4) 19.5 7.3
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93.1 58.6 377.3 219.1
Corporate acquisitions (2.8) 0.3 408.9 86.6
Other 0.8 0.6 5.3 5.4
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Total capital expenditures 91.1 59.5 791.5 311.1
Proceeds from dispositions (25.7) (1.2) (44.1) (30.1)
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Net capital expenditures 65.4 58.3 747.4 281.0
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Reserves Continuity
Crude Oil and NGLs Natural Gas
(millions of barrels) (billions of cubic feet)
Proven Probable Total Proven Probable Total
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Reserves, December
31, 1996 85.9 33.2 119.1 908 180 1,088
Discoveries and
extensions 25.6 14.4 40.0 152 65 217
Revisions of prior
estimates 4.9 1.5 6.4 (7) 12 5
Purchases 20.4 9.6 30.0 189 78 267
Dispositions (6.3) (1.9) (8.2) (7) (6) (13)
Production (15.9) -- (15.9) (131) -- (131)
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Reserves, December
31, 1997 114.6 56.8 171.4 1,104 329 1,433
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CONSOLIDATED STATEMENT OF INCOME AND RETAINED EARNINGS
Three months ended Year ended
(millions of dollars December 31 December 31
except per share data) 1997 1996 1997 1996
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REVENUES
Petroleum and natural gas 171.1 143.2 575.9 511.9
Less: Royalties 29.8 25.0 107.6 90.1
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141.3 118.2 468.3 421.8
Other (0.9) 0.7 3.0 1.3
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140.4 118.9 471.3 423.1
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EXPENSES
Operating 35.1 35.9 121.0 110.8
General and administrative 5.6 3.2 20.6 14.3
Interest on long term debt 11.4 6.6 33.0 26.0
Foreign exchange 1.0 0.2 2.0 1.2
Capital taxes 1.3 0.8 4.1 3.0
Depletion and depreciation 65.9 48.2 218.1 181.5
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120.3 94.9 398.8 336.8
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Income before income taxes 20.1 24.0 72.5 86.3
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INCOME TAXES
Current 0.5 (0.2) 0.5 4.8
Deferred 15.6 9.4 39.9 29.9
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16.1 9.2 40.4 34.7
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NET INCOME 4.0 14.8 32.1 51.6
Retained earnings, beginning of
period 152.2 109.3 124.1 72.5
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RETAINED EARNINGS,
END OF PERIOD 156.2 124.1 156.2 124.1
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NET INCOME PER SHARE
Basic $0.08 $0.30 $0.64 $1.07
Fully diluted $0.08 $0.30 $0.62 $1.05
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CONSOLIDIATED BALANCE SHEET
December 31 December 31
(millions of dollars) 1997 1996
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ASSETS
Current assets 83.6 100.2
Property, plant and equipment 1,675.5 1,117.4
Other 18.8 9.8
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1,777.9 1,227.4
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities 111.9 87.8
Long term debt 746.4 398.0
Deferred income taxes 293.6 237.0
Deferred credits and other obligations 56.9 50.0
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1,208.8 772.8
Shareholders' equity
Share capital 412.9 330.5
Retained earnings 156.2 124.1
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569.1 454.6
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1,777.9 1,227.4
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CONSOLIDATED STATEMENT OF CASH FLOW
Three months ended Year ended
(millions of dollars December 31 December 31
except per share data) 1997 1996 1997 1996
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OPERATING ACTIVITIES
Net income 4.0 14.8 32.1 51.6
Add (deduct) items not involving
cash:
Depletion and depreciation 65.9 48.2 218.1 181.5
Deferred income taxes 15.6 9.4 39.9 29.9
Other 0.7 (0.1) 1.2 0.1
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Cash flow from operations 86.2 72.3 291.3 263.1
Net changes in working capital,
excluding cash 4.2 (11.4) 25.3 (7.3)
Deferred revenue drawdowns (0.1) -- (0.3) (0.3)
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90.3 60.9 316.3 255.5
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FINANCING ACTIVITIES
Net issue (repayment) of long
term debt (12.9) 18.6 334.8 (8.9)
Issue of common share (1.9) 0.6 82.2 55.1
Increase (decrease) in other
liabilities 2.5 (1.4) 3.8 (2.2)
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(12.3) 17.8 420.8 44.0
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Cash available for investing
activities 78.0 78.7 737.1 299.5
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INVESTING ACTIVITIES
Net corporate assets acquired (2.8) 0.3 408.9 86.6
Expenditures on property, plant
and equipment 93.9 65.0 382.6 229.8
Proceeds from disposition of
property plant and equipment (25.7) (1.2) (44.1) (30.1)
Expenditures on abandonment and
restoration 2.3 2.4 7.1 5.2
Increase (decrease) in other assets (1.8) 0.1 (2.6) 0.9
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65.9 66.6 751.9 292.4
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INCREASE (DECREASE) IN CASH(1) 12.1 12.1 (14.8) 7.1
Cash, beginning of period (12.7) 2.1 14.2 7.1
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CASH, END OF PERIOD (0.6) 14.2 (0.6) 14.2
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CASH FLOW FROM OPERATIONS,
PER SHARE
Basic $1.64 $1.47 $5.76 $5.47
Fully diluted $1.57 $1.43 $5.54 $5.31
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(1) Cash is comprised of cash, short term investments and short term
bank indebtedness.
Interest and Asset Coverages
The following financial ratios are provided in connection with the
Company's continuing offering of medium term notes pursuant to the shelf
prospectus dated September 19, 1997.
December 31, 1997
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Annual interest coverage on long term debt (times)
Net income(1) 2.5
Funds from operations(2) 8.6
Net tangible asset coverage on long term debt (times)
After deduction of deferred income taxes and
deferred credits(3) 2.2
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(1) Net income plus income taxes plus interest expense on long term
debt; divided by interest expense on long term debt.
(2) Funds from operations plus interest on long term debt; divided by
interest on long term debt
(3) Total assets minus intangible assets and current and other
liabilities; dividend by long term debt. |
