EARNINGS / Draig Energy - Interim Report - Ten Months Ended
September 30, 1998
ASE SYMBOL: DRA
DECEMBER 1, 1998
CALGARY, ALBERTA--Draig announces its unaudited financial results
and supplementary operating data for the ten months ended
September 30, 1998. To reflect the Company's change of year end
from November 30 to December 31, 1998 results are for the ten
months ended September 30, 1998.
HIGHLIGHTS
Draig continues record production volumes and cash flow for the
third quarter and for the ten months ended September 30, 1998.
/T/
Ten Months Nine Months
Third Quarter Ended Ended Percent
1998 1997 Sept. 30/98 Aug. 31/97 Change
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FINANCIAL
Revenue 1,590,000 229,000 3,954,000 882,000 348
Funds from
operations 590,000 52,000 1,480,000 175,000 746
Per share 0.07 0.02 0.18 0.03 500
Net earnings 79,000 (19,000) 304,000 nil -
Per share 0.01 - 0.04 - -
Capital expend-
itures 2,228,000 1,251,000 10,100,000 1,706,000 492
Long term
debt 9,288,000 1,683,000 452
Shares outstanding
Weighted average 8,408,871 5,217,730 61
Outstanding 8,438,602 6,290,135 34
OPERATING
Production
Oil equivalent
(boe/d) 857 107 609 132 361
Natural gas
(mmcf/d) 7.8 0.8 5.0 1.0 400
Liquids
(bbls/d) 72 25 110 30 267
Average price
Natural gas
($/mcf) 2.02 1.81 2.01 2.18 (8)
Liquids
($/bbl) 11.17 42.00 20.89 33.29 (37)
Wells drilled
Gross 3 - 11 6 83
Net 0.94 - 7.3 0.55 1,227
Success rate
(percent) 100 - 91 100 (9)
/T/
MESSAGE TO THE SHAREHOLDERS
CORPORATE
Draig continues record production volumes and cash flow for the
third quarter and for the ten months ended September 30, 1998.
These results reflect the success of both the drilling program and
acquisitions program for 1998.
During the third quarter, Draig made application to the Toronto
Stock Exchange (TSE) to be listed. The Company is pleased to
announce that we have received from the TSE conditional approval
for the listing of the common shares.
During the second quarter Draig initiated an offer to acquire all
the shares of Kensington Energy Ltd. As indicated in the
Company's news release dated July 7, 1998, the conditions of the
offer were not met and accordingly Draig did not pursue the
acquisition.
FINANCIAL
Petroleum and natural gas production gains averaging 361 per cent
on a BOE basis in the ten months ended September 30, 1998
contributed to a 348 per cent increase in gross revenue to $4.0
million compared to $0.9 million in the comparable period in 1997.
Operating costs averaged $5.81 per barrel of oil equivalent during
the ten months ended September 30, a decline of 35 per cent when
compared to $8.96 per barrel of oil equivalent during the
comparable period in 1997.
General and administrative costs of $599 thousand included $257
thousand of expenses associated with the above mentioned
Kensington offer.
For the ten months ended September 30, 1998, funds from operations
were $1.5 million ($0.18 per share) compared to $175 thousand
($0.03 per share) in the same period of the prior year. Net
earnings were $304 thousand ($0.04 per share) compared to $nil
($0.00 per share) in 1997.
Total capital expenditures for the ten months ended September 30,
1998 were $10.1 million compared to $1.7 million for the same
period in 1997. Of the expenditures $3.4 million was for drilling
and completions, $2.0 million for facilities, $0.9 million for
land and seismic and $3.8 million for property acquisitions.
PRODUCTION, EXPLORATION AND ACQUISITIONS
In the ten months ended September 30, 1998, Draig participated in
the drilling of 11 wells (7.3 net) primarily in the Hanna, Brent
and Provost areas of Alberta resulting in 10 (7.1 net) gas wells
and 1 (0.2 net) abandoned well. During the year Draig also
completed a total of 13 property acquisitions adding approximately
850 thousand barrels of oil equivalent of proven reserves at cost
of approximately $4.50 per barrel.
In the first ten months of 1998, Draig increased its natural gas
and liquids production by 353 per cent to 598 barrels of oil
equivalent per day compared to 132 barrels of oil equivalent
during the same period in 1997. This increase was attributable
to continued drilling success and the property acquisitions all
within the Company's core areas of Brent and Hanna. In the third
quarter of 1998, natural gas sales averaged 7.8 million cubic feet
per day, an 875 per cent increase from 0.8 million cubic feet per
day during the same period in 1997. Natural gas volumes were
negatively impacted during the third quarter of 1998 due to a
scheduled turnaround of the Company's Hanna compressor facilities.
Current petroleum and natural gas production levels are
approximately 950 boe/d.
In the second quarter Draig completed a horizontal gas well at
Hanna and tied this well into the Company's 100 per cent owned
Hanna gas plant. During the third quarter a new gas compressor
was installed at the Hanna gas plant increasing the capacity of
the plant to 6.5 mmcf/d. The plant is producing at near capacity
and the Company is reviewing alternatives to handle increased
natural gas production from this area.
Two 2-D seismic programs in the Hanna area were completed in the
first half of 1998 for a total of 37 kilometres. The first
program contributed to the successful horizontal gas well and the
second program is currently being interpreted for drilling early
in 1999.
Crown purchases and property acquisitions in 1998 have increased
the Company's undeveloped land base to 31,045 net acres, an 89 per
cent increase from the 1997 year end. In the ten months ended
September 30, 1998, Draig added proved reserves of approximately
1.6 million barrels oil equivalent, replacing 849 per cent of
production.
OUTLOOK
Draig is continuing to aggressively develop its internal natural
gas prospect inventory to position itself for an aggressive 1999
drilling program. Draig maintains a natural gas focus with
approximately 90 per cent of its reserves base and production
volumes being natural gas. In this uncertain pricing environment,
Draig has hedged 6.0 mmcf/d of its production from November 1,
1998 to March 31, 1999 at an average price of $2.95/GJ. The
Company is exploring alternatives to capitalize on the positive
pricing outlook for natural gas in Alberta. Additionally the
Company is active in reviewing further property acquisitions and
exploring potential corporate merger and acquisition
opportunities.
Draig Energy is a Canadian company engaged in exploration,
development and production of natural gas and crude oil. Draig's
common shares are listed on the Alberta Stock Exchange under the
trading symbol "DRA".
/T/
DRAIG ENERGY LTD.
Condensed Balance Sheet
As at As at
September 30, 1998 November 30, 1997
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(unaudited)
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ASSETS
Current assets $ 1,215,000 $1,291,000
Property, plant and equipment 17,651,000 8,508,000
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$18,866,000 $9,799,000
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities $ 3,375,000 $2,212,000
Long term debt 9,288,000 2,350,000
Future site restoration 141,000 125,000
Shareholders' equity 6,062,000 5,112,000
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$18,866,000 $9,799,000
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DRAIG ENERGY LTD.
Statement of Earnings and Retained Earnings
Ten months ended September 30, 1998
and nine months ended August 31, 1997
(unaudited)
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1998 1997
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Revenue
Petroleum and natural gas $3,954,000 $882,000
Royalties, net (450,000) (91,000)
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3,504,000 791,000
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Expenses
Operating 1,076,000 324,000
General and administrative 599,000 269,000
Depletion and depreciation 973,000 151,000
Financial charge 344,000 23,000
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2,992,000 767,000
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Earnings before taxes 512,000 24,000
Large Corporations tax 5,000 -
Deferred income taxes 203,000 -
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208,000 -
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Net earnings 304,000 24,000
Retained earnings (deficit),
beginning of period 60,000 (50,000)
Dividends (27,000) (24,000)
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Retained earnings (deficit),
end of period $ 337,000 $(50,000)
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Net earnings per common share $ 0.04 $ 0.00
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DRAIG ENERGY LTD.
Statement of Cash Flows
Ten months ended September 30, 1998
and nine months ended August 31, 1997
(unaudited)
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1998 1997
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OPERATING ACTIVITIES
Net earnings $304,000 $24,000
Items not affecting cash:
Depletion and depreciation 973,000 151,000
Deferred income tax 203,000 -
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Funds generated from operations 1,480,000 175,000
Change in non-cash working capital 1,501,000 (330,000)
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2,981,000 (155,000)
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FINANCING ACTIVITIES
Dividends (27,000) (24,000)
Change in long term debt 6,676,000 748,000
Capital stock 482,000 1,200,000
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7,131,000 1,924,000
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Cash available for investing
activities 10,112,000 1,769,000
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INVESTING ACTIVITIES
Property, plant and equipment
additions (10,100,000) (1,706,000)
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Increase in cash 12,000 63,000
Cash, beginning of period (12,000) (63,000)
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Cash, end of period $ - $ -
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Funds generated from operations
per share $ 0.18 $ 0.03
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Cash consists of cash and bank indebtedness. |
