EARNINGS / Pursuit Resources 1998 First Interim Report
TSE SYMBOL: PUT
MAY 15, 1998
CALGARY, ALBERTA--During the first quarter of 1998, Pursuit
continued its history of consistent production increases. New
property additions and an expanding exploration program will
provide substantial growth throughout the remainder of the year.
/T/
Highlights
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Three Months Ended
March 31, Percent
1998 1997 Change
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Financial (thousands)
Oil and gas revenue $ 5,817 $ 7,174 (19)
Funds flow from operations 2,354 3,686 (36)
Per share .10 .16 (38)
Net earnings (loss) (299) 923 ---
Per share (.01) .04 300
Capital expenditures 1,692 1,651 2
Weighted average shares
outstanding (millions) 24.4 23.5 4
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Operating
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Production
Oil - bbls/d 1,610 1,728 (7)
Natural gas - mmcf/d 21.4 16.8 27
boe/d 3,750 3,407 10
Prices
Oil - $/bbl $ 14.08 $ 23.95 (41)
Natural gas - $/mcf $ 1.96 $ 2.28 (14)
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Wells Drilled (net)
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Oil 2 (0.6) 5 (2.2)
Gas 1 (1.0) 3 (0.9)
Dry 1 (0.0) 4 (2.0)
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Total 4 (1.6) 12 (5.1)
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Success rate - net (percent) 100 61
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/T/
MESSAGE TO SHAREHOLDERS
OPERATIONS
Pursuit's reported exploration and development success during 1997
was reflected in the Company's production results for the first
quarter of 1998 with a 10 percent increase in oil equivalent
production compared to the first quarter of 1997. Furthermore,
Pursuit's increasing development of its natural gas properties has
resulted in 57 percent of the Company's barrel equivalent
production relating to natural gas in the first three months of
1998, compared to 49 percent in the first quarter of 1997.
The significant drilling programs at Prairiedale, Saskatchewan and
Chigwell, Alberta undertaken in 1997 resulted in each of those
properties contributing approximately three million cubic feet of
natural gas to the Company's daily production. The Inga Halfway
wells tied-in in Northeast B.C. during the latter half of 1997 are
now contributing 300 daily barrels of oil equivalent gas and
liquids production.
Due to low international oil prices and widening price
differentials for heavy and medium gravity crude, field prices for
oil prices have been particularly depressed in recent months. The
Company's production of heavy crude represents approximately seven
percent of its total production and several wells have been
shut-in due to low netbacks at current prices.
EXPLORATION AND DEVELOPMENT
Early in the first quarter, production commenced from the sour gas
treatment facilities constructed by Pursuit in the Princess area
of Southern Alberta. Approximately one million cubic feet per day
of gas and 20 barrels per day of associated liquids are being
processed through the facility. Based on the excellent performance
of the facilties, Pursuit will endeavor to expand its property
base in this area.
Pursuit participated in the drilling of four wells (1.6 net)
during the first quarter of 1998, including three exploration
wells. This activity resulted in two oil wells and one gas well.
The Company still anticipates drilling 35 wells in 1998.
The first of two wells were spudded on the Company's Inga Halfway
project in Northeast British Columbia in the first quarter. Both
wells are cased and are waiting on completion operations.
The seven well 1998 Prairiedale, Saskatchewan development drilling
program commenced in the first quarter and the program is now
completed. An additional one million cubic feet per day of gas
production is expected to result from this drilling in early June.
FINANCIAL
Pursuit's oil and gas production increased by 10 percent in the
first quarter of 1998 compared to the same quarter of 1997 to
3,750 barrels of oil equivalent per day. Natural gas production
increased to 21.4 million cubic feet per day in 1998, a 27 percent
increase from 16.8 million cubic feet per day in 1997 while oil
and liquids production was down seven percent to 1,610 barrels per
day in the 1998 quarter. The gas production increases reflect the
tie-in of the Company's recently installed Princess gas processing
facility as well as a full quarter's of production from 1997
projects at Prairiedale, Chigwell, and Inga Halfway, British
Columbia. Oil production decreases reflect the shutting in of
several heavy oil properties and production declines from the
Alderson property.
Oil and gas revenues for the first quarter of 1998 were $5.8
million, a 19 percent decrease from $7.2 million for the first
quarter of 1997. The positive effects of the production increases
outlined above were offset by significantly lower commodity prices
during the first quarter of 1998.
Pursuit's realized gas price for the first quarter of 1998 was
$1.96 per thousand cubic feet, a decrease of 14 percent from $2.28
per thousand cubic feet for the 1997 quarter. Even more dramatic
was the 41 percent decline in the Company's realized oil price to
$14.08 per barrel for the three months ended March 31, 1998 from
$23.95 per barrel for the comparable 1997 period. West Texas
Intermediate oil futures on the NYMEX Exchange averaged US$15.94
for the first three months of 1998, a 30 percent decrease compared
to US$22.77 for the 1997 quarter. Oil prices have improved
slightly since the end of the first quarter to the mid US$16 range
and gas prices have strengthened considerably. Based on current
market prices for natural gas, it appears that the first quarter
prices may be the lowest prices realized during 1998.
Funds from operations were also down for the first quarter of 1998
at $2.4 million, 36 percent lower than the $3.7 million for the
comparable 1997 quarter. In addition to lower oil and gas
revenues, Pursuit incurred incremental interest charges in 1998
related to higher average borrowings under the Company's credit
facility during the current quarter. The Company continues to
enjoy good success in controlling the costs of its oil and gas
operations. Unit production costs were $4.22 per barrel of oil
equivalent for the first quarter of 1998 compared to $5.89 and
$4.82 per barrel of oil equivalent for the first quarter of and
full year 1997, respectively.
Increased depletion expense and deferred taxes arising from a
portion of depletion not being deductible for income tax purposes
resulted in a net loss of $299,000 for the first quarter of 1998
($0.01 per share) compared to net earnings of $923,000 ($0.04 per
share) for the comparable 1997 period.
Based on the Company's growth and exploration and development
success, Pursuit's lenders have increased the credit availability
under its credit facility to $38 million. Pursuit expects to incur
capital spending approximately equal to projected cash flow of $15
million in 1998, resulting in year end debt of approximately $30
million.
OUTLOOK
Commodity prices and particularly natural gas prices have improved
significantly from their first quarter levels. At current futures
price levels, Pursuit projects a realized 1998 average gas price
of $2.10 per thousand cubic feet.
While oil prices have improved somewhat, a significant price
recovery does not appear imminent. This oil price environment has
already begun to be reflected in a moderation of the prices for
oil assets and a meaningful reduction in the cost of oilfield
services. Pursuit remains well positioned with a growing gas
property portfolio of productive assets as well as an expanded
drilling program which will provide continued growth during the
year.
Respectfully submitted on behalf of the Board of Directors,
/T/
D. Nolan Blades Douglas R. Martin
President and CEO Chairman and CFO
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
Three months ended March 31
(000's except per share amounts) 1998 1997
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(unaudited)
Revenue
Oil and gas $ 5,817 $ 7,174
Royalties, net (966) (960)
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4,851 6,214
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Expenses
Production 1,477 1,807
Administrative 560 406
Interest 428 279
Depletion, depreciation
and amortization 2,635 2,023
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5,100 4,515
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Earnings (loss) before income taxes (249) 1,699
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Income and other taxes
Capital taxes 32 36
Deferred taxes 18 740
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50 776
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Net earnings (loss) $ (299) $ 923
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Per Share $ (.01) $ .04
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN FINANCIAL
POSITION
Three months ended March 31
(000's except per share amounts)
1998 1997
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(unaudited)
Cash provided by (used in)
Operating Activities
Net earnings (loss) $ (299) $ 923
Items not affecting cash
Depletion, depreciation and
amortization 2,635 2,023
Deferred income taxes 18 740
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Funds from operations 2,354 3,686
Change in non-cash working capital (2,715) 961
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(361) 4,647
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Financing Activities
Share capital (147) 30,182
Long-term debt 2,200 11,104
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2,053 41,286
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Cash available for investing 1,692 45,933
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Investing Activities
Exploration and development of
oil and gas properties (1,692) (1,651)
Acquisitions of oil and
gas properties --- (44,282)
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(1,692) (45,933)
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Change in cash position --- ---
Cash position, beginning of period --- ---
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Cash position, end of period $ --- $ ---
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Funds from operations per share $ .10 $ .16
CONDENSED CONSOLIDATED BALANCE SHEETS
(thousands)
March 31 December 31
1998 1997
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(unaudited)
Assets
Accounts receivable $ 7,651 $ 5,233
Property, plant and equipment, net 84,006 84,821
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$ 91,657 $ 90,054
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Liabilities and Shareholders' Equity
Accounts payable $ 7,550 $ 7,847
Long-term debt 31,715 29,515
Provision for future site restoration 670 542
Deferred income taxes 2,770 2,752
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42,705 40,656
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Shareholders' Equity
Share capital 45,755 45,902
Retained earnings 3,197 3,496
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48,952 49,398
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$ 91,657 $ 90,054
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CORPORATE INFORMATION
Board of Directors
D. Nolan Blades
Gerald J. DeSorcy
Olivier de Vregille
Gregory S. Fletcher
Harvey L. Johnson
David H. Kennedy
Douglas R. Martin
Auditors
KPMG, Calgary, Alberta
Legal Counsel
Burstall Ward, Calgary, Alberta
Bankers
Royal Bank of Canada, Calgary, Alberta
Reserve Evaluation Engineers
Fekete Associates Inc., Calgary, Alberta
Officers and Key Personnel
D. Nolan Blades
President and Chief Executive Officer
Douglas R. Martin
Chairman and Chief Financial Officer
John L. Fenniak
Vice President, Business Development
Bill Ibbitson
Vice President, Operations
Chris Zinkan
Vice President, Exploration
Judy Dingwall
Controller
Kurt Miles
Vice President, Land and Contracts
Cam Sebastian
Vice President, Finance
Harley L. Winger
Secretary
/T/
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