MORE BACKGROUND:
Thursday May 28, 8:53 am Eastern Time
Company Press Release
Black Sea Energy Announces First Quarter 1998 Results
CALGARY, May 28 /CNW-PRN/ - Black Sea Energy Ltd. (BSX on the TSE) today reported results for the first quarter of 1998. These results were impacted by the continuing depressed demand for oil and the resulting decline in world oil prices. Sales during the first three months of 1998 were into Russian domestic markets only and as a consequence, resulted in Black Sea realizing a decline of only five percent decline in average price per barrel of $10.16, as compared $10.72 per barrel for the first quarter of 1997. During the quarter, Black Sea's share of oil held in inventory increased significantly to 233,793 barrels as at March 31, 1998. Domestic sales opportunities were available during the period but were rejected because of collection risks.
Black Sea's share of oil production for the first quarter of 1998 was 68,030 barrels (4,089 barrels per day) which represented a 71 percent increase from 215,679 barrels (2,396 barrels per day) during the same period in 1997. Approximately 70% or 255,865 barrels of this production was sold in the first quarter of 1998 with the balance being added to inventory.
Petroleum revenues for the three months ended March 31, 1998 were $2,600,655 ($2,311,266 for the three months ended March 31, 1997). Cash flow provided by operations was $97,072 ($0.00 per share) as compared to a negative cash flow of $168,393 ($0.00 per share)forthe same period in 1997. The net loss for the first three months of 1998 amounted to $461,157 ($0.01 per share) as compared to a net loss of $459,989 ($0.01 per share) for the first quarter of 1997.
Operating expenses of $1,249,545 or $4.88 per barrel for the quarter were down from $4.97 per barrel incurred during the first quarter of 1997, reflecting cost savings and higher production volumes. Operating costs per barrel are expected to decrease as production volumes continue to grow and Black Sea continues to implement cost reduction measures. Production taxes averaged $2.73 per barrel as compared to $1.92 per barrel in 1997 when an oil excise tax exemption was in effect. The Russian government is currently considering proposals to reduce excise taxes and transportation costs however the exact date of implementing these changes is unknown. Depletion and depreciation costs provided for the first three months of 1998 were $1.90 per barrel as compared to $1.35 per barrel provided for the same period in 1997.
During the first quarter of 1998, Black Sea invested $8,857,115 in exploration and development activities, and $5,963,089 in drilling equipment.
HIGHLIGHTS
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Three Months Ended Three Months Ended
March 31, 1998 March 31, 1997
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FINANCIAL
Petroleum revenue $ 2,600,655 $ 2,311,366
Cash flow from operations $ 97,072 $ (168,393)
(Per share) $ 0.00 $ 0.00
Net loss $ (461,157) $ (459,989)
(Per share) $ (0.01) $ (0.01)
Capital expenditures
Oil properties $ 8,857,115 $ (6,558,487)
Equipment $ 5,935,052 $ 1,855,597
OIL PRODUCTION
(Black Sea's share)
Total barrels 368,030 215,679
Average per day 4,089 2,396
Exit rate
(barrels per day) 4,250 2,300
NETBACK PER BARREL
Sales price $ 10.16 $ 10.72
Production costs
(including capital
taxes) $ 5.25 $ 4.97
Production taxes $ 2.73 $ 1.92
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Netback before Russian
income taxes $ 2.18 $ 3.83
Russian income tax
recovery $ 0.12 $ 0.00
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Cash flow netback per
barrel $ 2.30 $ 3.83
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Black Sea Energy is a Canadian company focused exclusively on the initiation, rehabilitation, exploration and development of major oil properties in Russia. With Russian partners, the Company is actively involved in two exploration and development projects, Tura Petroleum and Radonezh Petroleum in Western Siberia and one production rehabilitation project, Kuban Technologies in the Krasnodar region of Southern Russia.
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