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Meekwap information from PANATLAS
FOR: PANATLAS ENERGY INC.
TSE SYMBOL: PA
NOVEMBER 12, 1998
PanAtlas Increases Production 59 Percent; Releases Nine
Month Results
CALGARY, ALBERTA--Production of oil and natural gas averaged 2,179
barrels of oil equivalent per day in the first nine months of
1998. This 59 percent increase in production volume compared to
the corresponding period ended September 30, 1997 reflects the
larger production base from last year's corporate expansion into
Alberta. Last year, PanAtlas changed its fiscal year end to
December 31 from September 30 and our fiscal quarters now coincide
with calendar quarters. One of our stated long-term objectives
was to balance our production portfolio between oil and natural
gas by the end of 1999. We have made significant progress in
achieving this objective in the first nine months of 1998. In the
first nine months of last year natural gas accounted for 21
percent of the Company's production volume. In the first nine
months of 1998 natural gas production was 35 percent of our total
production volumes. This represents a 167 percent increase in
natural gas production to 7.65 million cubic feet per day compared
to 2.86 million cubic feet per day in the previous year's period.
The increase to our natural gas volumes came collectively from the
additions, expansion and production optimization at Drumheller,
and new gas well tie-ins in our Craigmyle/Byemoor core area.
/T/
OPERATING AND FINANCIAL HIGHLIGHTS
--------------------------------------------------------------
Percent
Nine months ended September 30, 1998 1997 Change
------------------------------- ---- ---- -------
OPERATIONS
Daily Oil (Bopd) 1,414 1,082 31
Daily Gas (Mcfd) 7,650 2,860 167
Daily Boe (Boepd) 2,179 1,368 59
Average Oil Price (Bbl) $ 17.19 $ 24.80 (31)
Average Natural Gas Price (Mcf) $ 1.88 $ 1.72 9
Average Production Costs (Boe) $ 5.75 $ 4.66 23
Field Netback (Boe) $ 9.84 $ 13.37 (26)
FINANCIAL (000's, except per share)
Revenue (net of royalties) $ 9,337 $ 6,750 38
Funds from Operations $ 4,078 $ 3,951 3
per share $ 0.08 $ 0.12
Net Earnings (Loss) $ (801) $ 1,276
per share $ (0.02) $ 0.04
Net Capital Additions $ 6,216 $ 5,817 7
Long-term Debt $ 14,400 $ 10,600 36
WEIGHTED AVERAGE SHARES
OUTSTANDING (000's) 49,675 33,200 50
/T/
In addition to increasing our natural gas volumes, oil production
was increased 31 percent to 1,414 barrels per day in the first
nine months of 1998 as compared to the first nine months of 1997.
The oil volume increases are attributable to the addition of the
Drumheller property in Alberta along with a successful seven well
development program at Drumheller and Meekwap, Alberta.
Our crude oil averages 33 degree API and as such receives light
stream pricing which was not adversely affected by the widening
price differential between light and heavy crude oils.
Nevertheless, the collapse of world crude oil prices in the first
nine months of the year has challenged our growth objectives.
Crude oil prices declined 31 percent to $17.19 per barrel in the
first nine months of 1998, compared to $24.80 per barrel in the
first nine months of 1997.
Natural gas prices during the period were $1.88 per mcf, nine
percent higher than the same period in 1997. Approximately 50
percent of our natural gas production is dedicated to long term
systems contracts, 25 percent to short term contracts and 25
percent to spot.
In spite of lower prices, the 59 percent increase in production
volumes resulted in increased revenue for the period. Net revenue
increased 38 percent to $9,337,000 in the first nine months of
1998 compared to $6,750,000 in the first nine months of 1997.
Cash costs on an equivalent barrel basis, including net royalties,
production, interest, administrative expenses and capital taxes
were slightly lower in the period than last year. Cash flow
increased three percent to $4,078,000 ($0.08 per share) compared
to $3,951,000 ($0.12 per share) in the corresponding period in
1997.
Lower crude oil pricing and higher depletion, depreciation and
site restoration charges in the first nine months of 1998 resulted
in a net loss of $801,000 ($0.02 per share) compared to net
earnings of $1,276,000 ($0.04 per share) in the corresponding
period in 1997.
INVESTING ACTIVITIES
Net investing activities for the nine months ended September 30,
1998 was $6,216,000. Fourteen (4.83 net) wells were drilled of
which 9 (3.55 net) were oil wells, 2 (0.75 net) were natural gas,
and 3 (0.53 net) were dry and abandoned.
Two significant wells were drilled on our Meekwap Property in
1998, based on the re-interpretation of a 3D seismic program
covering the entire D-2A Unit. The results of these two wells
confirmed our belief in the upside of this property. The first
well, 4-21-66-15 W5M, commenced production in April 1998 and has
produced 225,000 (39,500 net to PanAtlas) barrels of oil
equivalent. The 4-21 well had an initial pressure of 21,813 kPa
and has flowed water free at an average rate of 1,412 (247 net to
PanAtlas) barrels of oil per day since April 1998. The high
initial pressure is consistent with virgin pressures or waterflood
support.
The second 1998 well, 1-20-66-15 W5M, commenced production in July
1998 and has produced 75,000 (13,000 net to PanAtlas) barrels of
oil equivalent, averaging 900 (158 net to PanAtlas) barrels per
day. As with the 4-21 well initial reservoir pressures were
consistent with virgin conditions or waterflood support. Further
production history and pool pressure mapping may more definitively
determine whether these wells are in an attic position with
respect to the main Nisku pool or in fact are new pool
discoveries. Numerous wells in this area of the Meekwap D-2A Unit
have cumulative production volumes exceeding 2.0 million barrels
of oil per well. The AEUB has approved holding applications for
the D-2A Unit which will allow for closer spacing of wells and
greater exploitation flexibility in the future. Additional
drilling within the Unit was deferred by the unit participants
until individual companies work out budget problems created by the
1998 oil price shock.
PanAtlas is participating for a 16.7 percent working interest in
an exploratory step out well on non-unit expiring lands at
Meekwap. The well is based on 3D seismic and if successful will
either be in an attic position to the east flank of the Meekwap
D-2A Unit or a new pool discovery. Drilling is expected to
commence in December 1998.
Five (2.6 net) oil wells were drilled on our operated property at
Drumheller. These five wells were drilled in the first quarter of
1998 and have a cumulative gross production volume of 53,350
barrels of oil equivalent and have averaged 266 barrels of oil
equivalent per day since start up. Oil prices began to fall in
the first quarter of 1998 and the Company deferred further oil
development drilling at Drumheller due to oil price concerns. We
focused our attention on lower cost production optimization. We
initiated a workover program which was highly successful and
resulted in significant production increases from the Drumheller
area compared to forecast volumes.
This development deferral allowed our exploration team to focus on
developing natural gas exploration plays in the liquids rich W5M
areas of Alberta. During the period we made excellent progress
and invested over $1.0 million in new land acquisitions adding
15,700 gross (8,600 net) acres of undeveloped land. New W5 core
plays have been established at Niton, Carrot Creek and Barrhead.
At Niton, Alberta the Company acquired a 50 percent working
interest in eight sections of new lands at Crown land sales. The
Niton area has been and continues to be highly competitive and the
Company is sensitive about releasing results. The Company press
released on November 2, 1998 that it had participated for a 50
percent working interest in an exploratory well on its Niton
property and the well had been completed and was being tested for
natural gas production.
At Carrot Creek just southwest of Niton the Company acquired a 50
percent working interest in eight sections of new Alberta Crown
lands at 1998 sales. The Company has leveraged a portion of this
position creating a two section pooling and farmout agreement
whereby PanAtlas will participate and maintain a 20 percent
working interest in an exploratory well to be drilled on these
lands.
At Barrhead, Alberta, PanAtlas has acquired a 50 percent interest
in one section of Alberta Crown lands. Seismic data has been
acquired and an exploratory well is planned for the first quarter
of 1999.
OUTLOOK
As evidenced by our rapidly increasing natural gas production
volume from 2.86 mmcf per day to 7.65 mmcf per day in the first
nine months of 1998, we are actively shifting our production
weighting towards natural gas. This move will take on greater
significance as natural gas prices continue to increase. The
signs are pointing towards significant improvements in natural gas
pricing in 1999, as the additional 1.1 bcf per day of export
capacity becomes available to ship Alberta gas to more lucrative
US markets. PanAtlas has created expanded core areas W5M with a
view to building long-term natural gas prospects, to provide
opportunity for PanAtlas shareholders to participate in this
forecast optimism for future natural gas prices. We are clearly
making solid progress.
The situation with respect to the collapse of oil prices is
another matter. The signs are still bearish and the Company is
delaying development drilling plans at Drumheller and tailoring
capital spending to match cash flow and credit lines while
building a solid inventory of natural gas prospects. The senior
companies are flooding the divestiture market with oil and gas
properties which will create solid acquisition opportunities for
healthy companies.
The oil and gas industry is unquestionably cyclical. While low
oil prices may have slowed our development plans in 1998, the
improvement in natural gas prices is very positive. We are
focusing our energies to take advantage of the opportunities that
downturns provide. We are building exploration prospects and
undertaking projects that will help us to define our future path.
PanAtlas is a public oil and gas company based in Calgary with
common shares trading on The Toronto Stock Exchange under the
Symbol "PA
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