EARNINGS / Petromet Resources Limited is Pleased to Report its
Results for the Nine Months Ended September 30, 1998
TSE SYMBOL: PNT
NASDAQ SYMBOL: PNTGF
NOVEMBER 9, 1998
CALGARY, ALBERTA--
HIGHLIGHTS
/T/
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Three Months Ended Nine Months Ended
September 30 September 30
1998 1997 1998 1997
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Financial ($ millions,
except per share amounts)
Gross revenue $ 9.8 $ 7.9 $ 26.4 $ 25.1
Net income 0.3 0.7 1.9 4.0
Per share 0.01 0.02 0.04 0.11
Cash Flow 4.9 4.5 14.2 15.6
Per share 0.11 0.12 0.33 0.42
Capital expenditures 31.4 9.3 56.8 31.0
Long-term debt, net of
working capital 86.2 32.4
Shareholders' equity 102.2 102.3
Total assets 211.3 150.5
Common shares outstanding
(millions)
Basic 43.8 42.7
Weighted average 43.6 37.1
Operating
Production
Natural gas (mmcf/d) 46.8 36.3 41.1 37.3
Oil and NGL (bbls/d) 1,472 932 1,255 940
BOE 6,153 4,566 5,362 4,673
Average prices
Natural gas ($/mcf) 1.75 1.77 1.78 1.85
Oil and NGL ($/bbl) 15.04 21.27 16.84 23.11
Other income ($/BOE) 0.38 0.32 0.44 0.29
Oil equivalent ($/BOE)
Revenue 17.34 18.73 18.05 19.68
Royalties 3.08 3.27 2.33 2.96
Operating expense 2.17 1.95 2.49 1.99
Operating netback 12.09 13.51 13.23 14.73
General and
administrative expenses 0.70 0.86 1.18 0.77
Drilling activity
Gross 3 6 13 21
Net 3 5 11 16
Success rate (percent) 100 53 78 61
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/T/
Cash flow per share in the third quarter increased by 24 percent
versus the second quarter, and decreased by seven percent versus
the comparable quarter in 1997.
Petromet's daily production averaged 41.1 mmcf of natural gas and
1,255 bbls of oil and NGL totalling 5,362 BOE for the nine months
ending on September 30, 1998. Production increased by 15 percent
compared to the first nine months of 1997 when the Company
averaged 37.3 mmcf of natural gas and 940 bbls of oil and NGL,
corresponding to total production of 4,673 BOE.
Third quarter production increased by 35 percent compared to the
same period in 1997, and by 20 percent compared to the second
quarter of 1998. Petromet's production rate in September, 1998
averaged approximately 7,025 BOE per day, which corresponds to an
increase of 37 percent compared to the second quarter of 1998.
Natural gas accounted for 76 percent of total production volume in
the third quarter of 1998.
Petromet participated in the drilling of 13 gross (11.3 net) wells
during the first nine months of 1998, resulting in seven natural
gas, three oil, and three dry and abandoned wells with an average
working interest of 87 percent. Additionally, four wells were
drilled by other operators on Petromet owned lands at no cost to
the Company, resulting in one natural gas, one oil, and two dry
and abandoned wells.
Land purchases for the first nine months of 1998 totalled 55,020
gross (54,260 net) acres. Petromet's undeveloped land holdings
have increased to 658,816 gross (603,668 net) acres as of
September 30, 1998.
During the quarter, Petromet acquired all of the assets of Gulf
Canada Resources Limited in the Bigstone area for $20 million. All
of the escrow conditions related to third-party rights of first
refusal have since been satisfied.
Petromet is well positioned to benefit from the favourable
environment anticipated for natural gas. Production gains
achieved during the third quarter and new discoveries to come
on-stream before year end have increased the Company's future
exposure to potentially higher prices for natural gas.
At Wild River, Petromet has made three Leduc reef discoveries
within the past year. The first discovery has consistently
produced at a rate of 9 to 11 mmcf per day since it commenced
production in mid March 1998. Petromet holds a 79 percent working
interest in this well. The second discovery, in which Petromet
has a 50 percent working interest, commenced production in mid
August at a rate of eight to nine mmcf per day. During the third
quarter, the Company made its third discovery at a working
interest of 79 percent. Based on test results, this well is
anticipated to produce at an initial rate of six to eight mmcf per
day. The well will be connected to permanent facilities and
placed on production late in the fourth quarter. Petromet
operates all of these discoveries.
A fourth Leduc reef well is planned at Wild River to test a
seismically identified structure. Petromet holds a working
interest of 100 percent in this prospect. This well is anticipated
to spud by early next year. Further drilling of seismically
identified Leduc reefs is planned for 1999. During the fourth
quarter, the Company intends to expand the existing sales pipeline
to accommodate recently proven production and to provide capacity
for potential future discoveries.
At Bigstone, Petromet completed a pilot project to test the
economic feasibility of infill drilling in the Dunvegan zone. The
pilot project consisted of re-completing the Dunvegan zone in a
second well within each of three sections of land which had
previously been producing from one well per section. The observed
production rate and measured reservoir pressure is higher in the
re-completed wells compared to offsetting wells. This
information, coupled with a reservoir simulation model of the
entire pool, suggests that infill drilling will increase
production and yield incremental reserves. A multi-well drilling
program is planned for the first quarter of 1999 once third party
approvals are obtained.
An exploratory well spudded in the second quarter at Bigstone
resulted in a discovery and was placed on production early in the
fourth quarter at a rate of two mmcf per day. Petromet's working
interest is 100 percent in this well, which is being monitored to
assess possible development locations to delineate the reservoir.
During the third quarter, Petromet also cased another development
well for potential natural gas which is scheduled to be completed
and placed on production before year end. Petromet has a 100
percent working interest in this well.
At Kakwa, the Company is participating in a 4,100 metre
exploration well to test the Wabamun zone. During the third
quarter, additional seismic data was obtained to better resolve an
optimal drilling location on the interpreted structure. The
operator is expected to spud this well by November, 1998.
Petromet's working interest will be 16 percent before payout and
30 percent after payout. Additionally, the Company has secured an
option on 20,480 acres of undeveloped land which is prospective
for natural gas in the Wabamun zone. Petromet has a 100 percent
working interest, before payout, in this prospect. Seismic
operations are planned in late 1998 to further delineate drilling
targets on the optioned land.
At High Prairie, two Gilwood oil wells commenced production in the
third quarter and contributed approximately 75 bbls per day to
third-quarter liquids production. Petromet's current objective
for the area is to optimize the profitability of existing
operations. Further drilling of seismically identified locations
has been deferred in response to weak oil prices.
In the west central foothills region, Petromet has entered into a
farmout agreement with an industry partner to explore and develop
the Company's property at Grande Cache. The agreement includes a
seismic commitment and drilling options under which Petromet will
retain a working interest of at least 50 percent while incurring a
disproportionately lower share of capital costs. The Grande Cache
play has emerged as a significant prospect for the Company based
on a recently proven analogous pool and new infrastructure
developed by competitors in the vicinity.
Royalties in the third quarter, at $3.08 per BOE, were higher than
the $1.85 per BOE incurred during the first six months of 1998.
The increase is attributable to the absence of any ARTC in the
third quarter. Petromet fully realized its cumulative annual
eligibility for ARTC during the second quarter.
During the third quarter, the Company confirmed its earlier
expectation that unit operating costs and unit administrative
costs would improve compared to the first six months of 1998.
Operating expenses for the third quarter averaged $2.17 per BOE
versus $2.70 per BOE for the first six months. Administrative
costs averaged $0.70 per BOE versus $1.48 per BOE for the first
six months. This positive trend is anticipated to continue
through the remainder of 1998 and into next year.
Capital expenditures of approximately seven million dollars are
planned for the fourth quarter of 1998. A preliminary budget of
$35 million has been established for capital expenditures in 1999.
Petromet will continue to focus its capital expenditures on
exploration, development, and acquisition of natural gas
properties.
This press release contains forward-looking statements that are
subject to risk factors associated with the oil and gas business.
The Company believes that the expectations reflected in this
release are reasonable, but results may be affected by a variety
of variables including, but not limited to, price fluctuations,
currency fluctuations, industry competition, environmental risks,
political risks and capital restrictions. |
