EARNINGS / Upton Resources reports 1997 Results
CALGARY, March 4 /CNW/ - (URC-TSE) -''Upton finds success in strategic
shift back to Mississippian and increases production 25% from 4200 barrels per
day in early October to 5251 barrels per day average for December.''
1997 Results
Production volumes averaged 4852 barrels per day in 1997, 35 percent
higher than a year ago. Average sales price of $24.18 a barrel, a 6 percent
decrease, resulted in revenues of $42.8 million an increase of 27%. Operating
and cash netbacks of $15.89 and $12.94 per barrel respectively propelled cash
flow to a record $22.9 million. Basic cash flow per share of $1.52 was equal
to 1996 despite a 25% increase in average shares outstanding.
On the income side, Upton had a loss for the year of $18.9 million or
$1.25 per basic share due to a $21 million after tax ceiling test write down
related to lower prices and the sale of deep assets near Midale. In the
fourth quarter, Upton sold its deep production and rights in the Midale area
for $25 million and an increased working interest in production and
undeveloped rights in the shallower Frobisher-Alida Beds covering 42,000
acres. The deep production and rights originally acquired in February 1997
were driving up operating and finding costs due to declining production
volumes and poorer than anticipated drilling results. Results from the
Frobisher-Alida Beds on the other hand were meeting and exceeding
expectations. Subsequent to year end, Upton increased its working interest in
the Frobisher-Alida Beds at Midale from 50 percent to 100 percent at a cost of
$1.55 million and increased production volumes to over 400 barrels of oil per
day.
Year end debt of $16.6 million represented less than one times 1997 cash
flow. Cash received from the asset exchange strengthened the company's
balance sheet and positioned the company favorably.
FOURTH QUARTER RESULTS
Upton's fourth quarter 1997 results exclude the Midale deep production,
allowing shareholders to evaluate the company's performance based on its
strategic shift back to Mississippian targets and assess the company on a
prospective basis.
Upton exited December at 5,251 barrels per day, averaging 4,944 barrels
per day for the quarter. This dramatic production growth was achieved by a
combination of exploration results, increasing working interest in existing
properties through acquisition and development of existing properties. Cash
flow increased over the third quarter 1997 (which included Midale Red River
production) by 17 percent to $6 million, from $0.31 to $0.36 basic per share.
The average sales price averaged $22.81 per barrel in the quarter while
operating and cash netbacks were $16.02 and $13.19 per barrel respectively.
High netbacks were aided by operating costs which at $3.24 per barrel were
down significantly from $5.16 in the third quarter of 1997.
RESERVE ADDITIONS and CAPITAL EXPENDITURES
Upton's 1997 proved and probable reserve additions were 2.9 million
barrels (net of revisions) to total 7.9 million barrels at year end. Capital
expenditures were $66.9 million, resulting in 1997 finding and development
costs of $22.38 per barrel. The lack of success in the Midale deep zones led
to a renewed fourth quarter focus on the shallower zones for a much improved
finding cost. The process began in September and included stringent criteria
and a detailed review of the risk reward profile of each project. Fourth
quarter capital expenditures were $13.9 million (excluding the asset swap).
Proved and probable reserve additions were 1.9 million barrels for a finding
cost of $7.43 per barrel. Upton's fourth quarter netback was $13.19 for a
recycle ratio of 1.8 times. Upton plans to continue this process, and is
working hard to achieve finding costs that will give us a recycle ratio of 2.0
in 1998.
OPERATIONAL REVIEW
During 1997 we participated in drilling 77 wells with an overall success
rate of 81 percent. This total included 20 (11.6 net) exploration wells with a
52 percent success rate and 57 (36.9 net) development wells with a 89 percent
success rate. Our activity was focused in the Willliston basin as we continued
to target light oil.
An effective development drilling program at Queensdale/Alida/Cantal,
Gainsborough and Wilmar added production and reserves. At Gainsborough, Upton
purchased an additional working interest for $2.5 million at an effective cost
of $12,000 per producing barrel. The Midale Frobisher drilling program was
also successful as Upton moved production from zero to an exit rate of 200
barrels per day with seven wells drilled at an average working interest of 60
percent. Subsequent to year end the Company acquired the remaining working
interest for $1.55 million and now owns 100 percent of this exciting
development opportunity.
Exploration success late in the year at Browning, White Bear, Wildwood,
Brush Mountain and Palomino had little effect on our 1997 average production.
Delineation of these discoveries in 1998 holds lots of upside.
Upton's fourth quarter success typified the manner in which the company
has prospered in the past. A combination of effective development, strategic
property acquisition and exploration success has positioned Upton for
continued production growth and economic reserve additions in 1998.
OUTLOOK
Continued success early in 1998 has added to the excitement of the coming
year. Upton's first well at Tracey Mountain is on production, averaging over
200 barrels of light sweet oil per day from the Fryburg zone. The Fryburg was
the exploration target and combining its potential with the Tyler sand
development program, recoverable reserves and production additions should
exceed expectations. Upton expects the next Tracey Mountain well to spud in
late April to early May. Four to six wells are planned for 1998 allowing for
continued development through to the year 2000.
At the Frobisher Beds near Midale, Upton currently has 7 wells (100%)
producing from four new pools, two new wells are currently being completed and
11 addition wells are scheduled for drilling by year end. Current production
is in excess of 400 barrels per day and the company has two to three years of
development opportunities at Midale alone.
Early 1998 exploration includes a new light oil discovery at Portal
(100%) that is currently being evaluated and a Nisku horizontal well (40%) at
Sinkhole Montana that flowed light oil on completion and is being equipped for
production. Upton has a strong land position at both discoveries and the
company plans to release more information on production capability, follow up
drilling plans and reserve potential as production results are evaluated.
1998 plans include up to 40 development wells and 17 exploration tests,
with a capital expenditure budget of $24 million.
Upton's continued focus on light oil, low operating costs and high net
backs combined with a large inventory of development and exploration
opportunities will fuel reserve and production growth to the year 2000 from
existing inventory.
Upton Resources Inc. - 1997 Highlights
Three months ended Year Ended
December 31 % December 31 %
1997 1996 Change 1997 1996 Change
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($000's except where noted)
Gross revenue 10,374 10,410 0% 42,826 33,797 27%
Cash flow from
operations 5,998 5,652 6% 22,920 18,206 26%
Net income (loss) (20,433) 1,265 -1715% (18,884) 5,023 -476%
Capital
expenditures (10,859) 9,179 18% 66,865 27,516 143%
Shares outstanding
Basic weighted
average 16,607 12,168 37% 15,055 12,016 25%
Fully diluted
average 17,452 13,292 31% 17,082 13,172 30%
Basic year end 16,607 12,181 36% 16,607 12,181 36%
Long term debt 16,595 15,893 4% 16,595 15,893 4%
Working capital
deficit 6,214 4,914 27% 6,214 4,914 27%
Per share
Cash flow
Basic 0.36 0.46 -22% 1.52 1.52 0%
Fully diluted 0.35 0.43 -17% 1.35 1.38 -2%
Net income (loss)
Basic (1.23) 0.10 -1330% (1.25) 0.42 -398%
Fully diluted (1.17) 0.10 -1270% (1.10) 0.38 -390%
Operating Highlights
Production (bbls/d)
Oil - Average daily 4,944 3,998 24% 4,852 3,594 35%
Oil - Exit rate 5,251 3,983 32% 5,251 3,983 32%
Production netback
($/bbl)
Average sales price 22.81 28.30 -19% 24.18 25.69 -6%
Royalty 3.55 6.67 -47% 4.64 5.84 -21%
Operating cost 3.24 2.71 20% 3.65 2.65 38%
Operating netback 16.02 18.92 -15% 15.89 17.20 -8%
General & admin. 1.80 2.45 -27% 1.30 1.43 -9%
Interest 0.30 0.75 -60% 0.70 0.80 -13%
Current and Capital
tax 0.73 0.35 109% 0.95 1.13 -16%
Cash netback 13.19 16.12 -18% 12.94 14.64 -12%
Wells drilled
Gross 15.0 17.0 0% 77.0 49.0 61%
Net 8.7 9.5 -17% 48.5 31.8 50%
Reserves (mbbls)
Proved 6,709 5,797 16%
Probable 1,215 950 28%
Total 7,924 6,747 17%
Land holdings (acres)
Gross 304 198 54%
Net 190 122 56% |
