FINANCING / Gentry Resources Ltd. Reports Operating Results for the
Third Quarter of 1998
CALGARY, Dec. 4 /CNW/ -
SUMMARY
- Oil production increased 23% from the first nine months of 1997 as a
result of acquisitions and successful drilling results.
- BOE production increased 18% from the first nine months of 1997.
- Gentry participated in the drilling of 62 successful oil wells and one
dry hole, resulting in a success rate of 98%.
- Drilling success at Steelman and Dollard will contribute to future
production volumes.
- Cash flow for the third quarter and nine months of 1998 is 43% and 55%
lower respectively than the same period last year due largely to lower
oil prices.
- Debt levels are expected to decrease significantly by year end due to
the sale of two International off-shore concessions.
Highlights - Third Quarter Results
Three months ended Nine months ended
September 30 September 30
1998 1997 % 1998 1997 %
change change
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Financial
Revenue $959,105 $1,155,893 (17%) $2,724,099 $3,240,857 (16%)
Cash Flow 145,481 255,488 (43%) 338,996 756,326 (55%)
per share 0.008 0.017 (53%) 0.019 0.053 (64%)
Net Income
(loss) (358,587) (60,445)(493%) (809,303) 1,664 (487%)
per share (0.021) (0.004)(425%) (0.051) - (439%)
Capital
Expenditures 438,326 732,693 (40%) 2,994,384 4,004,422 (25%)
Long-term Debt 3,935,000 2,820,000 40% 3,935,000 2,820,000 40%
Weighted
Average of
Shares
outstanding 17,437,621 14,765,986 18% 15,889,983 14,295,919 11%
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Production
Oil & Liquids
(bbls/d) 542 496 9% 546 444 23%
Gas (mcf/d) 816 1,076 (24%) 782 860 (9%)
Barrels of oil
equivalent 624 604 3% 624 530 18%
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Average Prices
Gas per mcf $ 1.71 $ 1.52 13% $ 1.78 $ 1.65 8%
Oil & Liquids
per barrel 16.66 22.03 (24%) 15.73 23.56 (33%)
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Gentry recorded production volume increases during the first nine months
of 1998 with crude oil and ngl rates increasing 23% to 546 bbls/d, compared to
444 bbls/d in the corresponding period in 1997. Natural gas sales averaged
782 mcf/d, a decrease of nine percent from 860 mcf/d in the corresponding
period. Gentry's production profile is presently 88% oil and ngls, with
natural gas making up the remaining 12 percent.
The Company continued to expand its drilling and exploration programs and
has seen a total of 63 wells being drilled to September 30, 1998. Gentry
participated in the drilling of 62 successful oil wells and one dry hole,
resulting in a success ratio of 98%. Gentry's domestic activities have mainly
focused on developing reserves on its existing land base.
During the third quarter, the Company tied-in six wells from its drill
program in the Steelman area of southeast Saskatchewan. Three of the wells
were drilled in the Steelman Unit No. 1A with the remaining three in the
Steelman Unit No. 4. Multiple drill programs were also undertaken on the
Company's Dollard, Midale and Weyburn properties.
FINANCIAL PERFORMANCE
In spite of the increase in production volumes, production revenues for
the first nine months of 1998 declined to $2,724,099 compared with $3,240,857
in the corresponding period in 1997, a decrease of 16%. Cash flow from
operations decreased 55% to $338,796 compared to $756,326 while net earnings
(losses) after taxes were $(809,303) compared to $1,664 a year ago.
This decrease in financial performance is largely a result of lower oil
prices realized in the quarter. This year's nine-month crude oil and ngl
prices fell 33% to $15.73 per barrel compared to $23.56 per barrel in the
first nine months of 1997. Natural gas prices offset the loss somewhat
by increasing 8% to $1.78 per mcf compared to $1.65 in the corresponding
period.
An increased charge for depletion and depreciation also contributed to
the overall net loss. Depletion increased $340,219, or 50%, to $1,026,774 from
the corresponding nine-month period. This is largely attributable to the
increase in the size of Gentry's asset base.
FUTURE ACTIVITY
In the Baldwinton area of southwestern Saskatchewan, Gentry (as to a
30.5% interest) and its partners plan to drill six additional wells when
commodity prices increase. Earlier drilling programs added reserves at a cost
of approximately $2.15 per barrel. In the Dollard unit, also in southwestern
Saskatchewan, 5 wells were drilled, four were successful and are presently on
stream, one was abandoned due to technical problems.
In southeastern Saskatchewan, Gentry continues to participate and reap
benefits from its horizontal injection scheme in the Midale unit, operated by
Shell Canada, as well as the $1 billion miscible flood project currently being
carried out by PanCanadian Petroleum in the Weyburn unit. In the Midale unit,
a total of 15 successful horizontal wells have been drilled while in the
Weyburn unit 36 successful horizontal wells have been drilled to date. A
further 10 horizontal wells are planned for the Weyburn unit prior to year
end.
Also in southeastern Saskatchewan, Gentry's key unit interests are the
Steelman 1A, Steelman 4, and Benson units. In addition to the three wells
drilled in each of the Steelman 1A and Steelman 4 units, one horizontal well
was drilled in the Benson unit and is now on stream. The Steelman 1A,
Steelman 4, and Benson units (Gentry's interest being 2.7%, 13.9% and 10.9%
respectively) comprise an area of approximately 34,000 acres or 53 square
miles.
In the third quarter, Gentry continued to purchase shares under its
Normal Course Issuer Bid. Gentry believes that, from time to time, the market
price of the Class B Shares may not reflect the underlying value of such
shares and that, at such times, the purchase of Class B Shares for
cancellation will increase the proportionate interest of, and be advantageous
to, all remaining shareholders. To date, Gentry has purchased 335,000 shares
at an average price of $0.50 per share.
Also in the third quarter, Gentry entered into a Letter Agreement with
PanCanadian Petroleum whereby the Company agreed to sell its working interest
in the two deep-water offshore exploration blocks in Côte d'Ivoire, West
Africa for gross proceeds of $2,500,000. The proceeds from the sale would be
applied to the existing bank indebtedness of the Company for the short-term.
Closing of the transaction is subject to the approval of the Government of Côte
d'Ivoire and the execution of formal documentation. We anticipate closing to
take place in mid-December.
With the effective sale of the Company's two exploration blocks in Côte
d'Ivoire, the Company will remain in solid financial condition with long-term
debt of less than $1,400,000 at year end and $3,000,000 in unused bank lines
of credit. Gentry will achieve solid production growth in 1998 and continues
to be opportunity driven in its efforts to add shareholder value through
well-planned drilling programs and property acquisitions in western Canada.
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