EARNINGS / Poco Q3 results
Poco Petroleums Ltd. Interim Report Nine Months ended September 30, 1998
CALGARY, Nov. 3 /CNW/ -
Nine Month Highlights
- Poco achieved record cash flow of $243.9 million or $1.84 per share in
the nine months ended September 30, 1998.
- A strong year-to-date natural gas price averaging $2.14 per thousand
cubic feet and production increases supported Poco's earnings of $39.7
million. While a decrease from $49 million for the same period in 1997,
Poco's earnings are excellent given current industry conditions.
- Natural gas production rose 13 per cent to 483.6 million cubic feet per
day and production of crude oil and natural gas liquids increased seven
per cent to 40,248 barrels per day in the nine months of 1998 compared
to the same period in 1997.
- Nine month proven and probable reserve additions totaled 76.1 million
barrels of oil equivalent, which equates to 234 per cent of forecast
1998 production, with reserves added at a cost of $7.55 per barrel of
oil equivalent.
- During the quarter Poco acquired Canrise Resources Ltd. for $140
million.
- Poco remains confident of further financial and production growth,
principally from its natural gas-related activities which currently
comprise 77 per cent of Poco's production.
<<
Three months ended Nine months ended
September 30 September 30
% Increase % Increase
FINANCIAL HIGHLIGHTS 1998 1997 (decrease) 1998 1997 (decrease)
-------------------------------------------------------------------------
Oil and gas revenue
($ thousands) 145,407 142,449 2 463,806 448,195 3
Funds from operations
($ thousands) 77,956 77,478 1 243,938 235,596 4
Per share ($) 0.56 0.60 (7) 1.84 1.84 -
Net earnings
($ thousands) 8,913 14,903(x) (40) 39,679 48,969(x) (19)
Per share ($) 0.06 0.11(x) (45) 0.30 0.38(x) (21)
Capital expenditures
($ thousands) 291,420 112,229 160 574,565 499,306 15
Weighted average
shares outstanding
(thousands) 136,636 128,071 7 132,357 127,726 4
-------------------------------------------------------------------------
OPERATIONAL HIGHLIGHTS
-------------------------------------------------------------------------
Natural Gas
Daily production
(mmcf) 500.1 443.8 13 483.6 429.1 13
Sales price ($/mcf) 1.91 1.56 22 2.14 1.83 17
Royalties ($/mcf) (0.15) (0.13) 15 (0.25) (0.28) (11)
Production expenses
($/mcf) (0.45) (0.47) (4) (0.43) (0.43) -
-------------------------------------------------------------------------
Netback ($/mcf) 1.31 0.96 36 1.46 1.12 30
-------------------------------------------------------------------------
Natural Gas Liquids
Daily production
(bbls) 20,259 17,135 18 19,596 16,525 19
Sales price ($/bbl) 12.27 18.40 (33) 13.81 18.97 (27)
Royalties ($/bbl) (1.22) (3.34) (63) (2.03) (4.10) (50)
-------------------------------------------------------------------------
Netback ($/bbl) 11.05 15.06 (27) 11.78 14.87 (21)
-------------------------------------------------------------------------
Crude Oil
Daily production
(bbls) 19,841 21,665 (8) 20,652 20,968 (2)
Sales price
($/bbl) 18.47 24.59 (25) 18.06 25.85 (30)
Royalties ($/bbl) (1.88) (4.54) (59) (2.86) (5.45) (48)
Production expenses
($/bbl) (6.21) (5.74) 8 (7.08) (6.43) 10
-------------------------------------------------------------------------
Netback ($/bbl) 10.38 14.31 (27) 8.12 13.97 (42)
-------------------------------------------------------------------------
(x) restated
>>
Message to the Shareholders
Poco's ability to achieve record cash flow in the current difficult
industry environment is the direct result of the natural gas focus of its
business plan. Poco continues to be a dominant explorer in the deeper portion
of the western Canadian sedimentary basin where it has been very successful in
finding high quality reserves. In addition to exploration and development
activity, strategic acquisitions and the disposition of non-core assets
continue to high-grade Poco's asset base. A high proportion of natural gas
production in combination with extremely weak crude oil prices should place
Poco's 1998 results among the best of the senior producers.
OPERATIONAL HIGHLIGHTS
-------------------------------------------------------------------------
Continued natural gas-related exploration and development, along with
strategic acquisitions, substantially increased production volumes in the nine
months of 1998. Natural gas volumes increased 13 per cent to 483.6 million
cubic feet per day. Natural gas liquids volumes rose 19 per cent to 19,596
barrels per day. Crude oil volumes decreased by two per cent to 20,652 barrels
per day, mainly due to non-core asset sales in Eastern Alberta.
Capital spending on exploration and development and net acquisitions
totaled $574.6 million in the nine months of 1998. Facility expenditures of
$96.9 million included expansion of the Alder gas plant to 40 million cubic
feet per day of raw natural gas from 30 million cubic feet per day. This plant
is currently operating at capacity. During the first three quarters of 1998,
$39.8 million was spent on land, geophysical and lease rentals, which
increased Poco's net undeveloped acreage position to 3.0 million acres.
Drilling expenditures of $199.6 million resulted in 194 gross wells (135 net),
with a success rate of 87 per cent. Included in the capital spending was $140
million for the acquisition of Canrise Resources Ltd.
Poco added proven and probable reserves of 76.1 million barrels of oil
equivalent, replacing 234 per cent of forecast 1998 production at a cost of
$7.55 per barrel of oil equivalent. The additions consisted of 496.6 billion
cubic feet of natural gas and 26.4 million barrels of crude oil and natural
gas liquids.
FINANCIAL HIGHLIGHTS
-------------------------------------------------------------------------
Cash flow from operations increased by four per cent to a record $243.9
million in the nine months of 1998. This increase was due to a 13 per cent
rise in natural gas production and an average natural gas price of $2.14 per
thousand cubic feet, up 17 per cent from $1.83 for the same period of 1997.
Cash flow was restrained by a 30 per cent crude oil price decrease to $18.06,
and a natural gas liquids price decline of 27 per cent to $13.81 for the nine
months of 1998. On a per share basis, year-to-date cash flow of $1.84 was flat
over 1997.
Given current industry conditions, Poco's earnings remained very strong.
For the nine months ended September 30, Poco achieved net earnings of $39.7
million, down from $49.0 million in the first three quarters of 1997 due to
the decline in crude oil and natural gas liquids prices. On a per share basis,
net earnings were $0.30 compared to $0.38 for the same period last year.
In October, Poco's credit facilities were increased by $140 million. In
November, Poco issued $50 million in medium term notes which mature November
2, 2001 and bear interest at 6.20 per cent per annum. Demand for the notes
substantially exceeded $50 million. With over $300 million of unutilized
facilities, Poco has the flexibility to increase its exploration capital
programs as well as pursue asset acquisition opportunities.
EXPLORATION, DEVELOPMENT AND NET ACQUISITIONS
-------------------------------------------------------------------------
Poco's active drilling program has continued throughout 1998 with a focus
on deeper gas-bearing areas of the basin. One of Poco's most active areas is
O'Chiese where 39 gross (34 net) wells were drilled resulting in a 95 per cent
success ratio with 35 gas wells, two oil wells and two abandonments. Poco's
drilling program has filled the O'Chiese gas plant, with current throughput of
more than 60 million cubic feet per day of raw natural gas. Similar results
were obtained in the Whitecourt area located approximately 50 miles northwest
of O'Chiese. In this area Poco drilled 31 gross (29 net) wells resulting in 29
gas wells and two abandonments for a 94 per cent success ratio.
In the Monkman area Poco is currently drilling a well at Boulder (100 per
cent Poco) and a well at Sukunka (50 per cent Poco), both targeting large
natural gas reserves. These wells should reach their target depth in early
November 1998. During the fourth quarter, a new location will be spudded by
Poco at Sukunka.
During the nine months of 1998, Poco completed the disposition of $158.8
million of non-core assets. These dispositions fit with Poco's plan of
disposing of non-strategic assets, primarily in Eastern Alberta, and using the
proceeds to finance acquisitions in areas where Poco has greater growth
potential. During the quarter, the Canrise acquisition was completed with the
issuance of 7.1 million shares and the assumption of $39 million of debt. The
Canrise operations and its 121,000 net acres of undeveloped land have proved
to be an excellent fit. The assimilation of Canrise was completed during the
third quarter of 1998.
SUBSEQUENT EVENT
-------------------------------------------------------------------------
On November 2, 1998 Poco announced a friendly bid to acquire Pan East
Petroleum Corp. The proposed consideration combines $2.65 per share in cash
and the issuance of up to 4.0 million Poco shares at a share exchange ratio of
0.1797 shares of Poco for each share of Pan East. Total cost of the
transaction will be approximately $163 million. Through this transaction Poco
will acquire 31.0 million cubic feet equivalent per day of production, 224.1
billion cubic feet equivalent of proven and probable reserves, 130,074 net
undeveloped acres, and a 10.4 per cent interest in the strategic Kaybob South
No.3 gas plant in west central Alberta.
CLOSING COMMENTS
-------------------------------------------------------------------------
Poco's focus on the deeper, more prolific natural gas exploration and
development prospects in the western Canadian sedimentary basin is proving
invaluable during a difficult time for the oil and gas industry. Poco remains
committed to its business plan and, with projections for continued excellent
results, is confident that this strategy will generate profitable growth and
capital appreciation for our shareholders.
On behalf of the Board of Directors,
Craig W. Stewart
President and Chief Executive Officer
November 3, 1998
<<
CONSOLIDATED BALANCE SHEETS
As at September 30 As at December 31
(thousands) 1998 1997
-------------------------------------------------------------------------
(unaudited) (unaudited)
ASSETS (restated)
Current Assets
Accounts receivable $ 95,996 $ 86,407
Inventory 24,776 22,844
-------------------------------------------------------------------------
120,772 109,251
Property, Plant and Equipment note 2,355,500 1,943,921
Other Assets 45,382 31,870
-------------------------------------------------------------------------
$ 2,521,654 $ 2,085,042
-------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts Payable and Accrued
Liabilities $ 123,098 $ 73,923
-------------------------------------------------------------------------
Long Term Debt 1,020,903 812,896
-------------------------------------------------------------------------
Future Site Restoration 15,812 12,417
-------------------------------------------------------------------------
Future Income Taxes note 364,360 340,268
-------------------------------------------------------------------------
Shareholders' Equity
-------------------------------------------------------------------------
Common shares note 1,018,641 906,377
Deficit note (21,160) (60,839)
-------------------------------------------------------------------------
997,481 845,538
-------------------------------------------------------------------------
$ 2,521,654 $ 2,085,042
-------------------------------------------------------------------------
NOTE TO THE CONSOLIDATED FINANCIAL STATEMENTS
(thousands, except per share amounts)
FUTURE INCOME TAXES
-------------------------------------------------------------------------
Poco has adopted the new income tax standard issued by the Canadian
Institute of Chartered Accountants. The income tax standard has been adopted
retroactively resulting in the restatement of 1997 results. The impact of this
restatement on the December 31, 1997 financial statements is as follows:
As Reported Adjustment Restated
As at December 31, 1997
Property, plant and equipment 1,911,668 32,253 1,943,921
Future income taxes 133,503 206,765 340,268
Common shares 904,982 1,395 906,377
Retained earnings (deficit) 115,068 (175,907) (60,839)
For the year ended December 31, 1997
Depletion and depreciation 209,795 3,592 213,387
Income taxes 69,576 (18,173) 51,403
Net earnings 58,293 14,581 72,874
Net earnings per common share
Basic 0.46 0.11 0.57
Fully diluted 0.45 0.11 0.56
-------------------------------------------------------------------------
As a result of the restatement net income for the nine months ended
September 30, 1997 increased by $9.0 million ($0.07 per share) to $49.0
million ($0.38 per share) from the amounts originally reported. Income tax
expense for the nine months declined by $11.7 million and depletion expense
increased by $2.7 million as a result of the restatement.
CONSOLIDATED STATEMENTS OF EARNINGS
For the three months For the nine months
ended September 30 ended September 30
(thousands, except
per share amounts) 1998 1997 1998 1997
-------------------------------------------------------------------------
(unaudited) (unaudited) (unaudited) (unaudited)
(restated) (restated)
Revenue
Oil and gas revenue $ 145,407 $ 142,449 $ 463,806 $ 448,195
Royalty expense 12,426 19,362 58,548 81,253
-------------------------------------------------------------------------
132,981 123,087 405,258 366,942
Expenses
Depletion and
depreciation note 61,912 56,107 176,256 156,117
Production 32,183 30,417 96,988 86,785
Financial charges 20,117 11,948 54,551 33,755
General and administrative 4,489 2,764 11,556 9,225
-------------------------------------------------------------------------
118,701 101,236 339,351 285,882
-------------------------------------------------------------------------
Earnings Before Income Taxes 14,280 21,851 65,907 81,060
Income taxes note 5,367 6,948 26,228 32,091
-------------------------------------------------------------------------
Net Earnings $ 8,913 $ 14,903 $ 39,679 $ 48,969
-------------------------------------------------------------------------
Net Earnings Per Common Share
Basic $ 0.06 $ 0.11 $ 0.30 $ 0.38
Fully diluted $ 0.06 $ 0.11 $ 0.30 $ 0.37
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the three months For the nine months
ended September 30 ended September 30
(thousands, except per
share amounts) 1998 1997 1998 1997
-------------------------------------------------------------------------
(unaudited) (unaudited) (unaudited) (unaudited)
(restated) (restated)
OPERATING ACTIVITIES
Net earnings $ 8,913 $ 14,903 $ 39,679 $ 48,969
Depletion, depreciation
and amortization note 65,529 56,970 183,280 158,635
Future income tax
expense note 3,514 5,605 20,979 27,992
-------------------------------------------------------------------------
Funds from operations 77,956 77,478 243,938 235,596
Change in non-cash working
capital (7,735) 6,267 8,107 (19,944)
-------------------------------------------------------------------------
Funds provided by
operating activities 70,221 83,745 252,045 215,652
-------------------------------------------------------------------------
FINANCING ACTIVITIES
Increase (decrease) in
long term debt (19,095) (141,923) 152,694 101,398
Issue of medium term notes - 149,566 - 149,566
Repayment of senior U.S.
dollar notes - - (7,292) (6,881)
Issue of common shares 5,283 7,117 20,514 15,497
Acquisition of Canrise
Resources Ltd. 132,388 - 132,388 -
-------------------------------------------------------------------------
Funds provided by
financing activities 118,576 14,760 298,304 259,580
-------------------------------------------------------------------------
Total funds available for
investing activities $ 188,797 $ 98,505 $ 550,349 $ 475,232
-------------------------------------------------------------------------
INVESTING ACTIVITIES
Additions to property,
plant and equipment $ 89,526 $ 75,558 $ 357,239 $ 356,411
Property acquisitions 91,707 40,077 235,689 160,300
Acquisition of Canrise
Resources Ltd. 140,444 - 140,444 -
Proceeds on dispositions
of property (30,257) (3,406) (158,807) (17,405)
Site restoration costs
incurred 1,072 650 1,465 1,466
Other 665 1,614 3,864 1,963
Change in non-cash
working capital (104,360) (15,988) (29,545) (27,503)
-------------------------------------------------------------------------
Funds used for investing
activities $ 188,797 $ 98,505 $ 550,349 $ 475,232
-------------------------------------------------------------------------
FUNDS FROM OPERATIONS PER COMMON SHARE
Basic $ 0.56 $ 0.60 $ 1.84 $ 1.84
Fully diluted $ 0.55 $ 0.58 $ 1.78 $ 1.76
COMMON SHARE INFORMATION
1997 1998
Q3 Q4 Q1 Q2 Q3
-------------------------------------------------------------------------
Outstanding at quarter end
(millions) 128.7 128.8 130.4 130.8 138.2
High ($/share) 14.35 15.00 16.25 17.25 16.33
Low ($/share) 12.45 10.50 10.00 13.10 11.00
Close ($/share) 13.60 12.75 15.35 14.40 15.05
Shares traded (millions) 40.0 39.5 40.4 25.8 23.6
-------------------------------------------------------------------------
CORPORATE INFORMATION
COMMON SHARES LISTED UNDER REGISTER AND TRANSFER AGENT
SYMBOL ''POC'' FOR TRADING ON:
CIBC Mellon Trust Company
Montreal Exchange 600 The Dome Tower
Toronto Stock Exchange 333-7th Avenue S.W.
Calgary, Alberta T2P 2Z1
Poco Petroleums is included in The TELEPHONE 1-800-387-0825
TSE 100 Components Index and the TSE (Canada & U.S.)
300 Composite Index (416) 643-5500
(Outside Canada & the U.S.
HEAD OFFICE call collect)
Poco Petroleums Ltd. FACSIMILE (416) 643-5501
3700, 250 - 6th Avenue S.W. E-MAIL
Calgary, Alberta Canada T2P 3H7 inquiries@cibcmellon.ca
TELEPHONE (403) 260-8000
FACSIMILE (403) 263-2708 UNSECURED DEBT RATING
Canadian Bond Rating Service
MAILING ADDRESS B++ (high) stable outlook
P.O. Box 4365, Postal Station C
Calgary, Alberta, Canada T2T 5N2 Dominion Bond Rating Service
BBB (high) stable trend
WEBSITE
www.pocopete.ca COMMERCIAL PAPER RATING
Canadian Bond Rating Service
A-1 (low) stable outlook
Dominion Bond Rating Service
R-1 (low) stable trend
-30-
For further information: John W. Ferguson, Vice President and Chief
Financial Officer, (403) 260-8059, Facsimile: (403) 263-2708, E-mail:
ir@pocopete.ca or john_ferguson@pocopete.ca
|
