EARNINGS / MMRL Reports Excellent Progress on its Major Developments
TSE SYMBOL: MM
NOVEMBER 19, 1998
TORONTO, ONTARIO--
Message to Shareholders
Notwithstanding low crude oil prices and reduced cash flows and
earnings, MMRL made substantial progress on its major projects
during the third quarter of 1998. The principal accomplishments
were as follows:
1. Success at Saltfleetby
The second development well at Saltfleetby has been completed and
is currently being tested and evaluated. Results to date have
exceeded plan with initial production rates of 15 mmcf/d of
natural gas and 400 bbls/d of liquids. This well follows the
previously announced development well at Saltfleetby that tested
at over 10 mmcf/d of natural gas and 230 bbls/d of liquids.
Based on these results, production from Saltfleetby during its
first full year should exceed 20 mmcf/d of natural gas and 500
bbls/d of liquids. At the current sales price of natural gas in
the UK of $3.50 per mcf, this project should generate $22,000,000
of cash flow for MMRL in its first twelve months of operation
commencing in late 1999. The development is conveniently located
11 km from one of the UK's largest gas plants at Theddlethorpe and
can be tied in by pipeline along an existing pipeline right of
way.
2. First Kyle Development Well Exceeds Expectation
The first development well in the Kyle offshore field demonstrated
a productive capacity double the forecasted rate. Initial
production from the first well is expected in May 1999 at rates
net to MMRL of over 2,000 boe/d. Based on the current development
plan that calls for three more development wells over the next two
years, production net to MMRL in the year 2000 is expected to be
3,000 boe/d. At a Brent oil price of US$14.00 per barrel the
Kyle field is expected to generate cash flow for MMRL in 1999 of
$6,000,000 and in the year 2000 of over $15,000,000.
3. MMRL's UK Onshore Acreage Has Substantial Potential
Work continued during the summer on evaluating MMRL's 1.25 million
onshore acreage position. A total of over 40 exploration
prospects have now been identified. Several of these prospects
have reserve potential comparable to Saltfleetby. Given the
company's high success rate to date from onshore exploration
drilling in the UK this land position provides MMRL with
substantial growth potential in the years ahead.
4. MMRL Acquires Large Heavy Oil Acreage Position
In September, 1998 MMRL completed the assembly of the final
portion of a large acreage position in North East Alberta. MMRL
is a 33.3 percent partner in this land acquisition located about
65 km north of the Pelican Lake heavy oil project. This acreage is
estimated to contain over one billion barrels of oil in place.
Testing is continuing to determine if this oil can be recovered
economically using primary recovery techniques.
Production
Total production averaged 4,025 boe/d in the third quarter down 43
percent from the second quarter and down 49 percent from a year
earlier. Crude oil and natural gas liquids averaged 3,848 bbls/d
in the third quarter of 1998 as compared to 6,443 bbls/d a year
earlier. Natural gas production averaged 1.2 mmcf/d in the third
quarter of 1998 versus 13.5 mmcf/d in 1997. These results reflect
the asset sales made during the second quarter of 1998.
Financial
Cash flow from operations totalled $1.8 million in the third
quarter or $0.12 per share fully diluted as compared to $10.4
million or $0.57 per share a year earlier and $5.0 million in the
second quarter of 1998. A net loss of $3.2 million was recorded
in the third quarter or $0.19 per share fully diluted, compared to
net earnings of $3.2 million last year. The year to date net loss
was $6.7 million or $0.37 per share fully diluted compared to net
earnings of $9.2 million in 1997.
Drilling
For the three month period ended September 30, 1998, MMRL
participated in the drilling of 2 wells, one of which was the
successful Kyle well and the second a successful oil well onshore
in the UK. During this period of low crude oil prices, the
company has deferred the drilling of its onshore oil and gas
prospects and allocated its financial resources and capital
spending to its two major development projects at Saltfleetby and
Kyle.
/T/
DRILLING RESULTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
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Canada UK Total
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Gross Net Gross Net Gross Net
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Oil 10 2.4 4 3.1 14 5.5
Natural Gas 5 1.1 1 1.0 6 2.1
Abandoned 6 2.0 2 2.0 8 4.0
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Total 21 5.5 7 6.1 28 11.6
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Success Ratio 71 64 71 67 71 66
percent percent percent percent percent percent
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Exploration Development
Wells Wells Total
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Canada 9 12 21
UK 2 5 7
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Total 11 17 28
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/T/
Outlook
MMRL continued its focus on efficiency and cost savings which has
resulted in a number of staff reductions. The financial benefit
of these restructuring efforts will be reflected in results
commencing on January 1, 1999.
Based on the production capacity in both Saltfleetby and Kyle
together with the company's recent cost cutting measures, cash
flow in 1999 should be considerably higher than 1998 levels even
at existing commodity prices. Cash flow at the end of 1999, when
both projects are on stream, is expected to be running at annual
rates of $40,000,000.
Peter A. Braaten
President and C.E.O.
November 19, 1998
This news release contains forward-looking information. Actual
future results may differ materially. The risks, uncertainties
and other factors that could influence actual results are
described in MMRL's annual report to shareholders and other
documents filed with regulatory authorities.
/T/
---------------------------------------------------------------
HIGHLIGHTS
1998
---------------------------------------------------------------
3Q 2Q 1Q
---------------------------------------------------------------
Production
Canada:
Oil & NGLs (bbls/d) 610 2,391 2,585
Natural Gas (mcf/d) 327 10,663 12,642
UK:
Oil & NGLs (bbls/d) 3,238 3,480 3,675
Natural Gas (mcf/d) 864 987 957
Total:
Oil & NGLs (bbls/d) 3,848 5,871 6,260
Natural Gas (mcf/d) 1,191 11,650 13,599
---------------------------------------------------------------
Financial ($000's)
Production revenues 6,349 11,176 13,486
Cash flow from
operations 1,796 4,981 5,163
Net earnings (loss) (3,220) (1,524) (1,991)
Working capital 759 (961) (2,103)
Total assets 167,462 160,062 212,806
Long term debt 62,243 50,076 53,571
Shareholders' equity 83,933 88,009 131,819
Capital expenditures 11,990 (44,111)(x) 13,414
---------------------------------------------------------------
Per share ($)
Cash flow basic 0.14 0.26 0.26
fully
diluted 0.12 0.25 0.26
Earnings basic (0.19) (0.08) (0.10)
fully
diluted (0.19) (0.08) (0.10)
Dividends - - 0.05
---------------------------------------------------------------
1997
---------------------------------------------------------------
4Q 3Q 2Q 1Q
---------------------------------------------------------------
Production
Canada:
Oil & NGLs
(bbls/d) 2,663 2,643 2,672 2,805
Natural Gas
(mcf/d) 13,666 12,886 15,086 13,108
UK:
Oil & NGLs
(bbls/d) 4,005 3,800 4,063 3,400
Natural Gas
(mcf/d) 945 638 953 894
Total:
Oil & NGLs
(bbls/d) 6,668 6,443 6,735 6,205
Natural Gas
(mcf/d) 14,611 13,524 16,039 14,002
---------------------------------------------------------------
Financial ($000's)
Production
revenues 16,822 16,588 17,294 18,277
Cash flow from
operations 8,536 10,439 9,662 11,014
Net earnings
(loss) 1,595 3,157 2,131 3,896
Working capital (146) 11 (814) (7,200)
Total assets 214,467 190,233 184,928 165,682
Long term debt 46,308 59,359 55,930 37,138
Shareholders'
equity 134,843 105,203 103,446 99,403
Capital
expenditures 23,237 11,791 24,021 8,714
---------------------------------------------------------------
Per share ($)
Cash flow basic 0.42 0.60 0.56 0.65
fully
diluted 0.42 0.57 0.52 0.60
Earnings basic 0.08 0.18 0.12 0.23
fully
diluted 0.08 0.18 0.12 0.21
Dividends 0.05 0.05 0.05 0.05
---------------------------------------------------------------
(x) net of proceeds from disposition of Mountain Energy Inc.
and Kinghaven assets.
Average Prices Three months to Nine months to
Sept. 30 Sept. 30
---------------------------------------------------------------
1998 1997 1998 1997
-------------------------------------------
Canada:
Oil & NGLs
($/bbl) 13.49 21.34 15.38 23.11
Gas ($/mcf) 1.87 1.79 1.85 1.92
United Kingdom:
Oil & NGLs
($/bbl) 17.75 25.75 18.69 25.94
Gas ($/mcf) 2.63 1.66 3.29 2.90
Total:
Oil & NGLs
($/bbl) 17.08 23.96 17.57 24.77
Gas ($/mcf) 2.42 1.79 2.01 1.98
---------------------------------------------------------------
CONSOLIDATED SUMMARIZED BALANCE SHEETS
(000's)
Unaudited
As at September 30 1998 1997
----------------------------------------------------------------
Assets
Current assets $ 12,063 $ 17,237
Property, plant and equipment, net 155,399 172,996
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167,462 190,233
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Liabilities and shareholders' equity
Current liabilities 11,304 17,226
Long term debt 62,243 59,359
Future site restoration 1,445 1,749
Deferred income taxes 8,537 6,696
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83,529 85,030
Shareholders' equity 83,933 105,203
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$ 167,462 $ 190,233
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CONSOLIDATED STATEMENTS OF EARNINGS AND RETAINED EARNINGS
(000's)
Unaudited
For the three months For the nine months
ended Sept. 30 ended Sept. 30
----------------------------------------------------------------
1998 1997 1998 1997
Revenues
Production $ 6,349 $ 16,588 $ 31,010 $ 52,158
Royalties, net(x) (332) (1,442) (2,784) (4,409)
----------------------------------------------------------------
6,017 15,146 28,226 47,749
Interest and other income (37) 865 420 1,237
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5,980 16,011 28,646 48,986
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Expenses
Production(x) 2,082 2,910 9,622 8,506
General and
administration(x) 967 1,802 3,565 6,509
Interest 1,009 949 2,990 2,738
Depreciation, depletion
and amortization 4,446 5,732 16,965 17,368
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8,504 11,393 33,142 35,121
----------------------------------------------------------------
Earnings (loss) before
income taxes (2,524) 4,618 (4,496) 13,865
Income taxes 696 1,461 2,239 4,681
----------------------------------------------------------------
Net earnings (loss) (3,220) 3,157 (6,735) 9,184
Retained earnings,
beginning of period (610) 20,752 23,643 16,454
Dividends - (880) ( 981) (2,609)
Cancellation of shares - - (19,757) -
----------------------------------------------------------------
Retained earnings,
end of period $ (3,830) $ 23,029 $ (3,830) $23,029
----------------------------------------------------------------
(x) 1997 figures have been restated to conform with 1998
presentation
CONSOLIDATED STATEMENTS OF CHANGES IN FINANCIAL POSITION
(000's)
Unaudited
For the three months For the nine months
ended Sept. 30 ended Sept. 30
----------------------------------------------------------------
1998 1997 1998 1997
Operating activities
Net earnings (loss) $ (3,220) $ 3,157 $ (6,735) $ 9,184
Depreciation, depletion
and amortization 4,446 5,732 16,965 17,368
Amortization of
foreign exchange (64) (8) (157) 18
Deferred income taxes 634 1,558 1,866 4,544
----------------------------------------------------------------
Cash flow from operations 1,796 10,439 11,939 31,114
Change in non-cash
working capital (2,566) (522) (265) (3,297)
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(770) 9,917 11,674 27,817
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Financing activities
Long term debt 12,167 3,431 10,227 18,604
Issue (purchase) of
common shares - 172 (367) 2,902
Redemption of
preferred shares - - - (32,926)
Shares of company acquired
on disposition of
Mountain assets - - (43,000) -
Dividends - (880) ( 981) (2,609)
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12,167 2,723 (34,121) (14,029)
----------------------------------------------------------------
Investing activities
Sale of other assets - 225 - 225
Purchase of property,
plant and equipment (11,990) (11,791) (42,234) (44,526)
Disposition of
Kinghaven assets (16) - 16,356 -
Disposition of
Mountain assets 178 - 44,748 -
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(11,828) (11,566) 18,870 (44,301)
----------------------------------------------------------------
Effect of translation of
foreign currency in
subsidiaries (414) (769) (1,491) (695)
----------------------------------------------------------------
Increase (decrease)
in cash and short
term investments ( 845) 305 (5,068) (31,208)
Cash and short term
investments, beginning
of period 3,022 4,748 7,245 36,261
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Cash and short term
investments,
end of period $ 2,177 $ 5,053 $ 2,177 $ 5,053
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