EARNINGS / Probe Exploration Third Quarter Report
PROBE EXPLORATION INC. - RECORD OPERATING RESULTS FOR THIRD QUARTER
CALGARY, AB--
Probe Exploration Inc. (PRX-TSE) is pleased to announce its
financial and operational results for the quarter and nine months
ended September 30, 1998. The highlights to date are as follows:
* Revenues increased 145% to $27.8 MM for the nine months ended
Sept. 30, 1998
* Cash flow increased 98.5% to $13.2 MM for the nine months ended
Sept. 30, 1998
* Increase in natural gas revenues of $1.14 Mcf for gas sold
after Nov. 1, 1998
* Agreement to increase the credit facility to $145 MM
* Current production at 12,000 BOE/d with an additional 3,000
BOE/d remaining to come on-stream
* Further production increases expected based on continued
development drilling at Majestic and Leduc
* Establishment of a new 350 section core area west of Leduc
* Expansion of Majestic project into 60 section core area with
both gas and oil potential
* 43 wells to be drilled in the Wabamun in fourth and first
quarters, total of 86 drillable locations identified
* Sparky waterflood project commenced, with initial water
injection performing better than anticipated
FINANCIAL REVIEW
Revenues for the nine months ended September 30, 1998 increased
145% to $27.8 million from $11.4 million for the comparable
period of 1997. For the same periods, cash flow from operations
totalled $13.2 million, an increase of 98.5% from $6.7 million.
For the three months ended September 30, 1998 revenues increased
76% to $9.8 million from $5.6 million for the comparable period
of 1997. Cash flow from operations for the third quarter
totalled $4.0 million, an increase of 14% from $3.6 million for
the third quarter of 1997.
HIGHLIGHTS
Three Months Ended Nine Months Ended
September 30 September 30
1998 1997 1998 1997
($ thousands except
where noted)
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Total Revenue 9,826 5,583 27,811 11,359
Funds Flow from
Operations 4,034 3,548 13,167 6,651
per share 0.06 0.07 0.20 0.11
Net Earnings (1,409) 1,489 (5) 2,014
per share (0.02) 0.03 (0.00) 0.04
Capital Expenditures, net
31,983 2,535 74,752 78,659
Operating Costs per BOE
4.08 3.56 4.07 4.16
Netback per BOE 9.53 10.00 7.36 10.31
General and Administrative
Expenses per BOE 0.65 1.22 0.86 1.39
Average Natural Gas Production
(MMcf/d) 39.2 13.9 35.5 9.0
Average Natural Gas Price
($/Mcf) 1.47 1.35 1.54 1.61
Average Oil and Natural Gas
Liquids Production
(bbls/d) 5,842 3,084 5,356 1,953
Average Oil and Natural Gas
Liquids Gas Price
($/bbl) 12.19 16.82 12.27 18.52
Average Total Production
(BOE/d) 9,764 4,470 8,907 2,856
Average Price
($/BOE) 15.94 15.81 16.42 17.91
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The average price received for production during the third
quarter increased to $15.94 per BOE from $15.81 per BOE for the
third quarter of 1997. Natural gas prices for the quarter
averaged $1.47 per thousand cubic feet; however, due to the
completion of long term contracts, Probe is able to take
advantage of Alberta spot prices effective November 1, 1998.
This will result in an increase in natural gas revenues of $1.14
per thousand cubic feet for gas sold after that date, based on a
November average price of $2.61. NGL pricing will also show an
increase in the fourth quarter as ethane has also been swapped
for Alberta spot gas prices on a multi-year contract.
Probe's operating netback for the first nine months decreased to
$7.36 per BOE compared to $10.31 per BOE for the first nine
months of 1997 due to continued low oil prices. The Company's
general and administrative expenses and its operating costs were
$0.86 per BOE and $4.07 per BOE respectively.
The Company has reached an agreement with the Bank of Montreal to
arrange an increase in the credit facility to $145 million. In
addition, with the completion of the expansion of the Calmar area
infrastructure the Company is now finalizing arrangements to
divest a portion of these assets to a mid-stream operator. This
transaction will result in a reduction of corporate debt to a
level in line with budget forecasts.
OPERATIONS REVIEW
The Company's production for the three months ended September 30,
1998 averaged 9,764 BOE per day, comprising 5,842 barrels per day
of oil and natural gas liquids and 39.2 million cubic feet per
day of natural gas. This represents a 118% increase from 4,470
BOE per day for the same period in 1997. The Company was also
able to increase overall production levels since the second
quarter of 1998, despite delays in the construction of a new
pipeline to the Calmar plant. Current production is 12,000 BOE
per day with an additional 3,000 BOE per day remaining to come on
stream. Further production increases are expected based on
continued development drilling at Majestic and Leduc. Probe also
expanded the Calmar plant capacity from 20 to 30 million cubic
feet per day in response to increased Wabamun production.
During the third quarter, Probe entered into an agreement with
PanCanadian Petroleum Ltd. to acquire the rights to explore over
150 sections of land adjacent to the Company's Leduc project.
Probe is committed to drill 30 wells over the next year with 11
drillable locations identified so far through geological and
seismic interpretation. In November, Probe executed an agreement
to purchase an interest in 200 additional sections within the
same area. The combination of these two transactions has
resulted in Probe evolving into one of the dominant players in
this highly prospective gas-prone area.
Majestic
At Majestic, Probe acquired 100% interests in 33 sections of new
lands directly adjoining the Company's existing lands. The
Majestic project now comprises a total of 60 sections, with 93%
working interest in 1.5 sections and 80% to 100% working interest
in 58.5 sections. Current production at Majestic is approximately
1,200 BOE per day with an additional 1,000 BOE per day to come on
stream. During the quarter, the Company drilled three vertical
exploration wells resulting in two successful gas wells. Probe
has just completed the first of five horizontal development oil
wells which were scheduled to be drilled before year-end.
Stabilized production rates of 100 barrels of oil per day per
well are expected. The Company plans to drill 17 additional
wells at Majestic. In addition, a recently completed geophysical
program has generated a number of promising exploration leads
which will be evaluated throughout 1999.
Leduc
To the end of the quarter, the Company has drilled 18 holes
targeting Wabamun Unit #2 oil and successfully designed and
implemented a sour gas and oil gathering system. Current
production from the Wabamun formation is 2,300 BOE per day. An
additional 700 BOE per day is currently being brought on stream
through the fourth quarter. Optimization of currently producing
wells will also add to production volumes. The Company plans to
drill a total of 43 wells in the Wabamun in the fourth and first
quarters, with a total of 86 drillable locations identified.
Stabilized production rates of 125 BOE per day per well are
expected.
Production from the Ellerslie formation is currently 3,000 BOE/d.
There is still estimated production of 800 BOE per day behind
pipe in the area north of the North Saskatchewan River.
Production has been hampered by delays in finalizing regulatory
issues concerning the re-activating and re-licensing of an
existing sour service river crossing. The Company plans to drill
a total of five wells into the Ellerslie in the fourth and first
quarters.
A total of 39 Sparky wells were drilled to the end of the third
quarter with a current production of 1,700 barrels per day. The
Company plans to drill a total of 58 additional wells into the
Sparky in the fourth and first quarters. The Sparky waterflood
project commenced in October. Initial water injection performed
better than anticipated with current injection rates of over
3,000 barrels a day. Initial pressure response is expected ahead
of schedule with a full response to be evident by summer 1999.
OUTLOOK
With the majority of Probe's infrastructure now complete, volumes
that were previously behind pipe are now being placed on stream
and, when combined with new drilling and development work at
Leduc, will contribute significantly to 1998 production rates.
While management is disappointed with delays in putting this new
production on stream, we are confident that we have regained our
upward momentum to ensure Probe's continued long-term growth.
The Toronto Stock Exchange has neither approved or disapproved
the information contained herein.
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