EARNINGS / Chauvco Resources reports 1st 3 months Results
CALGARY, May 13 /CNW/ -
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HIGHLIGHTS Three months ended March 31, 1998
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Financial
Cash flow (deficiency) $ (2,179,838)
Cash flow per common share (0.03)
Earnings (loss) (20,434,377)
Earnings (loss) per common share (0.40)
Capital expenditures 7,654,043
Working capital (deficiency) (6,401,720)
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Production
Barrels of oil per day 2,469
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Drilling Activity
Gross Net
Oil 1 0.9
Dry and abandoned 1 0.9
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2 1.8
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Chauvco Resources International Ltd. (''Chauvco'') reports a loss for the
first quarter of 1998 of US $20.4 million. This loss is composed of an
operating loss of US $2.9 million and a write-down of US $17.5 million of the
book value of petroleum properties, plant, equipment and joint venture
receivables.
Production in the first three months of 1998 has declined 14% to an
average of 2,743 barrels per day (2,469 bbls/d company interest) from 3,200
bbls/d (2,880 bbls/d company interest) reported in December 1997. In response
to the lower than expected production from its Remboue field in Gabon, the
Company has completed, with the assistance of external geological and
engineering consultants, a program of well testing together with
geostatistical and reservoir simulation studies. These studies conclude that
the low energy Remboue reservoir is more heterogereous than early studies
indicated, and that any contemplated waterflood pressure maintenance scheme
would be uneconomic.
Oil prices have declined 20% from US$20 WTI in the fourth quarter of 1997
to US$16 WTI in the first quarter of 1998. The reduction in production,
together with lower oil prices and relatively high fixed operating costs, have
significantly reduced the amount of economically recoverable reserves from the
Remboue field to 1,004 thousand barrels (904 thousand barrels company
interest). This situation has led to the US $17.5 million write-down of the
carrying values for the Company's investment in the Remboue field and an
associated joint venture receivable balance. The write-down includes US $7.2
million of capital expenditures incurred in the first quarter of 1998 related
principally to the drilling of one horizontal well in Remboue East, one
exploratory well to test the deeper Fourou Plage zone in the Remboue field and
several slim-hole exploration test wells. The Fourou Plage well was completed
as a marginal oil well, while the Remboue East horizontal well and slim-hole
explorations wells were abandoned.
The Company has implemented a major cost reduction program to reduce the
fixed costs of its Gabon production operations. At the end of January 1998,
Chauvco acquired the minority interest in its marine transportation
subsidiary, and rationalized the management and operations for transporting
the Company's crude oil production to storage facilities. Effective in May
1998, the Company has access to a lower cost terminal and storage facility in
Gabon and has released its leased storage vessel. Since the beginning of the
year, other steps have been taken and are in process to reduce field
production expenses and maintenance costs. These initiatives are expected to
bring the Remboue field into a positive cash-flow position by June 1998.
During the course of the first quarter of 1998, Chauvco stored its
production in an offshore tanker until a cargo sale could be arranged with a
third party. Accordingly, the financial statements do not show any revenue
nor corresponding operating expenses and related depletion and depreciation
for the first three months of the year. If revenues had been recorded as
crude oil was produced and valued at average market prices for the period, the
following results, presented below on a proforma basis, would have been
disclosed in the financial statements:
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Revenues $ 2,885,552
Royalties (331,815)
Operating costs (3,366,453)
Depletion and depreciation (1,195,492)
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Earnings/(loss) on operations $(2,008,208)
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Because the quarter-end crude oil inventory has been recorded at net
realizable value, the proforma loss on operations corresponds to the
write-down of crude oil inventory on the Consolidated Statement of Loss and
Deficit. On May 9, 1998, the Company completed the sale of its entire
inventory of crude oil for proceeds of $4.9 million.
The Company had a working capital deficiency of US $6.4 million at the
end of the first quarter. Negotiations are continuing with suppliers to
satisfy outstanding balances due to them.
The Company is also seeking to realize on the value of its other Gabon
assets to correct this working capital deficiency. In particular, the Company
is seeking partners which would earn an interest in its high potential
exploration acreage through reimbursement of Chauvco's past exploration
expenditures and by carrying Chauvco in a future multi-well exploration
program. A number of international oil companies have expressed interest in
Chauvco's joint venture proposal.
The goal of the Company remains, after the working capital deficiency has
been remedied, to focus its activities on other international exploitation
project opportunities, particularly in the Middle East.
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CONSOLIDATED STATEMENT OF LOSS AND DEFICIT (UNAUDITED)
Three months ended March 31, 1998
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Revenue
Petroleum and natural gas sales (1) $ -
Royalties -
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-
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Expenses
Operations -
Administration 740,664
Depreciation 120,440
Write-down of crude oil inventory 2,008,208
Write-down of property, plant and equipment 17,503,405
Foreign exchange losses and other 61,660
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20,434,377
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Earnings (loss) for the period (20,434,377)
Retained earnings (deficit) at
beginning of period (70,024)
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Retained earnings (deficit) at end of period $ (20,504,401)
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Loss per common share $ (0.40)
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Weighted average common shares outstanding 51,346,282
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Note:
(1) The Company's policy is to recognize revenue only on crude oil sales
to third parties.
CONSOLIDATED STATEMENT OF CHANGES IN CASH POSITION (UNAUDITED)
Three months ended March 31, 1998
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Operating activities
Earnings (loss) for the period $ (20,434,377)
Add: Depreciation 120,440
Write-down of crude oil inventory 2,008,208
Write-down of property, plant and equipment 17,503,405
Other (829,611)
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Cash flow (deficiency) from operations (1,631,935)
Changes in non-cash working capital 7,242,389
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5,610,454
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Financing activities
Non-controlling interest in subsidiary (136,249)
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Total cash resources provided 5,474,205
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Investing activities
Property, plant and equipment (1) 7,215,912
Marine transportation equipment 281,627
Corporate 156,505
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7,654,044
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Increase (decrease) in cash (2,179,838)
Cash at beginning of period 4,200,867
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Cash at end of period $ 2,021,029
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Cash flow (deficiency) from operations
per common share $ (0.03)
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Notes: (1) Capitalized administration included in
property, plant and equipment. $ 595,436
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CONSOLIDATED STATEMENT OF FINANCIAL POSITION (UNAUDITED)
March 31 December 31
1998 1997
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Assets
Current assets
Cash $ 2,021,029 $ 4,200,867
Accounts receivable 65,940 6,650,957
Crude oil inventory,
at net realizable value 3,934,549 1,043,197
Prepaid expenses 1,069,646 898,550
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7,091,164 12,793,571
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Capital assets
Property, plant and equipment 23,175,194 15,959,282
Marine transportation equipment 3,967,255 3,685,628
Corporate 645,833 489,329
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27,788,282 20,134,239
Accumulated depletion and depreciation (18,965,057) (145,721)
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8,823,225 19,988,518
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Joint venture receivable and
other deposits 468,525 1,442,176
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$ 16,382,914 $ 34,224,265
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Liabilities
Current liabilities
Accounts payable $ 13,492,884 $ 10,746,715
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Non-controlling interest in subsidiary - 153,143
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Shareholders' equity
Share capital 513,463 513,463
Contributed surplus 22,880,968 22,880,968
Retained earnings (20,504,401) (70,024)
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2,890,030 23,324,407
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$ 16,382,914 $ 34,224,265
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Common shares outstanding 51,346,282 51,346,282
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