Thanks Mike for your evaluation on Scorpion.Does not look good for now.Lots of uncertainties.They released year end results Friday.
I may average down and put a bid in for 10cents on Monday!
FOR FURTHER INFORMATION PLEASE CONTACT:
Scorpion Energy Corporation
Leif Snethun
President
(403) 216-8669
(403) 216-8661 (FAX)
scorpion@cadvision.com
--------------------------------------------------------------------------------
NEWS RELEASE TRANSMITTED BY CANADIAN CORPORATE NEWS
FOR: SCORPION ENERGY CORPORATION
TSE SYMBOL: SEN
APRIL 30, 1999
Scorpion Energy Corporation Announces 1998 Results
CALGARY, ALBERTA--Scorpion Energy Corporation wishes to report its
operating results for the fourth quarter and the year ended
December 31, 1998.
/T/
--------------------------------------------------------------
HIGHLIGHTS
--------------------------------------------------------------
Three months ended Year ended
December 31, December 31,
-------------------------------------
1998 1997 1998 1997
(unaudited)(unaudited) (note 1)
--------------------------------------------------------------
FINANCIAL ($ except for common shares)
--------------------------------------------------------------
Petroleum and natural
gas sales 1,647,186 616,750 5,021,411 925,023
Cash flow from
operations 500,652 188,161 1,346,884 186,550
Per share (basic) 0.07 0.08 0.20 0.08
Per share (fully
diluted) 0.06 0.07 0.17 0.07
Net loss (377,765) (23,246) (1,018,229) (95,042)
Per share (basic) (0.06) (0.01) (0.15) (0.04)
Capital expenditures
(proceeds) (915,782) 3,785,317 7,446,931 6,158,809
Acquisition of Midas
Resources Ltd. - - 5,152,898 -
Total debt (incl
working capital) 7,654,047 1,281,383
Shareholders' equity 11,580,685 4,595,835
Total assets 21,212,011 6,741,584
Common shares outstanding,
end of year
Basic 8,248,358 4,686,935
Fully diluted 9,827,111 5,204,983
--------------------------------------------------------------
HIGHLIGHTS (continued)
--------------------------------------------------------------
Three months ended Year ended
December 31, December 31,
---------------------------------------
1998 1997 1998 1997
(unaudited)(unaudited) (note 1)
--------------------------------------------------------------
OPERATING
--------------------------------------------------------------
Production
Natural gas
Mcf 511,837 156,981 1,394,736 191,681
Mcf per day 5,563 1,706 3,821 525
Oil and Ngls
Bbls 26,331 18,583 131,091 23,683
Bbls per day 286 202 359 65
Barrels of oil
equivalent (10:1)
BOE 77,514 34,281 270,565 42,851
BOE per day 843 373 741 117
Average selling prices
Natural gas per
Mcf $ 2.36 $ 1.79 $ 2.06 $ 1.91
Oil and Ngls per
Bbl $ 16.59 $ 22.43 $ 16.43 $ 22.57
/T/
(1) Pursuant to the reverse take over of Scorpion Energy
Corporation (formerly Midas Resources Ltd.) by Scorpion Energy
Inc. in July 1998, the results of operations include those of
Scorpion Energy Inc. for the year ended December 31, 1998 and
those of Scorpion Energy Corporation for the six months ended
December 31, 1998.
OVERVIEW
After commencing active operations in mid 1997, Scorpion continued
to build its reserve and production base throughout 1998.
/T/
Significant 1998 developments:
(x) $4.5 million private equity placement
(x) Capital expenditure program of $7.4 million, net of sale
proceeds, primarily directed to:
- Strategic undeveloped land acquisitions offsetting the
Company's 1997 Brazeau gas discovery;
- Reserve acquisitions complementing the Brazeau and
Sturgeon Lake properties;
- Drilling, targeting natural gas at Brazeau and N. E.
British Columbia
(x) Reverse take over of Midas Resources Ltd. providing:
- Additional reserves and production;
- New exploration opportunities in central Alberta;
- A TSE listing for the shareholders of Scorpion
Energy Inc.
(x) Increased production and cash flow compared with 1997:
- Average annual production rose to 741 BOE from 117
BOE per day;
- Cash flow from operations increased to $1.3 million from
$0.2 million; and
- Cash flow per share climbed to $0.20 from $0.08 per
share
(x) 1 for 3 share consolidation resulting in 8.2 million
common shares outstanding
/T/
CAPITAL EXPENDITURES
1998 net capital expenditures totaling $7.4 million combined
complementary reserve acquisitions with exploration and
development activities. Of this total, $4.7 million was spent on
reserve acquisitions primarily at Brazeau and Sturgeon Lake.
Exploration and development expenditures totaled $4.9 million
including $1 million in land sale purchases. Scorpion
participated in seven (3.1 net) wells during 1998 of which four
(1.6 net) resulted in gas wells and three were abandoned.
Approximately 65 percent of the exploration and development
expenditures were on the Brazeau property, the Company's most
significant producing property. Dispositions of mature properties
totaled $2.2 million during the year.
During the fourth quarter, three successful natural gas wells were
drilled at Brazeau and Beg. The Brazeau 16-16 Shunda development
well was drilled to offset the 13-15 discovery and completed and
placed on stream in the first quarter of 1999. Scorpion has a
78.5 percent working interest before penalty payout (47.5 percent
after penalty payout) in the 16-16 well. Although each of the
wells are capable of producing at gross raw gas rates in excess of
10 Mmcf per day of liquids rich natural gas, the wells production
will be restricted due to available plant capacity. The Company
projects its Shunda net production to average 3.6 Mmcf per day
plus associated liquids in 1999. With respect to the 16-16 well,
Scorpion is involved in an unresolved legal dispute with a joint
venture partner with respect to the working interests.
At Beg in N. E. British Columbia, two Halfway gas wells were
drilled in the fourth quarter. The Company has a 25 percent
interest in the b-57-I/94-B-16 well and 22 percent in
a-83-H/94-B-16.
Reserve acquisitions accounted for a significant portion of the
1998 capital expenditures. Of the total $4.7 million spent on
acquisitions, $3.2 million was incurred to acquire a 47.25 percent
working interest in the Brazeau Nisku "I" reserves and additional
Shunda rights offsetting the discovery well.
PRODUCTION
Natural gas accounted for 67 percent of the fourth quarter
production which averaged 5.6 Mmcf per day of natural gas and 286
barrels per day of oil and natural gas liquids or 843 BOE per day.
The Company had approximately 200 BOE per day shut in for the
entire fourth quarter due to unforeseen circumstances with its
Brazeau Nisku "I" and Sturgeon Lake properties.
For the year ended December 31, 1998, Scorpion's daily production
averaged 3.8 Mmcf of natural gas and 359 barrels of oil and
natural gas liquids or 741 BOE per day. These volumes include
those of Midas Resources Ltd. for the six month period subsequent
to the reverse take-over.
RESULTS OF OPERATIONS
Scorpion's 1998 cash flow from operations was approximately $1.3
million or $4.97 per BOE. For 1997, the cash flow totaled $187
thousand or $4.35 per BOE.
/T/
1998 1997
-------------------------------------
$000 $ Per BOE $000 $ Per BOE
---------------- ----------------
Petroleum and natural
gas sales 5,021 18.56 925 21.59
Royalty expense, net
of credits (899) ( 3.33) (137) (3.20)
Operating expense (1,701) ( 6.29) (351) (8.19)
------ ------- ------- -------
Field netback 2,421 8.94 437 10.20
Interest and other
income 80 0.30 1 0.02
General and administrative
expense (847) (3.13) (251) (5.87)
Interest expense (287) (1.06) - -
Large corporations tax (20) (0.08) - -
------ ------- ------- -------
Cash flow from
operations 1,347 4.97 187 4.35
------ ------- ------- -------
/T/
RESERVES
The Company's reserves were independently evaluated by Outtrim
Szabo Associates Ltd. effective December 31, 1998 and 1997.
/T/
Natural Gas (Mmcf) Oil & Ngl (Mbbls)
---------------------------------------
Percent Percent
December 31, 1998(1) 1997 Change 1998(1) 1997 Change
------------------- -------------------
Proved 11,823 4,772 148 783 564 39
Probable 6,665 2,175 207 456 321 42
------------------- -------------------
Total 18,488 6,947 166 1,239 885 40
------------------- -------------------
A reconciliation of the Company's year over year reserves
is as follows:
Natural Gas (Mmcf) Oil & Ngl (Mbbls)
-------------------------------------------
Proved Probable Total Proved Probable Total
--------------------- ---------------------
December 31, 1996 - - - - - -
Additions 1,395 1,085 2,480 263 67 330
Acquisitions 3,569 1,090 4,659 325 254 579
Production (192) - (192) (24) - (24)
--------------------- --------------------
December 31, 1997 4,772 2,175 6,947 564 321 885
Additions 4,145 2,729 6,874 91 64 155
Acquisitions
- Midas 5,400 3,558 8,958 221 145 366
Acquisitions
- other 2,277 447 2,724 400 129 529
Dispositions (724) (480)(1,204) (194) (159) (353)
Revisions (2,651) (1,764)(4,415) (169) (44) (213)
Production (1,396) - (1,396) (130) - (130)
---------------------- --------------------
December 31,
1998(1) 11,823 6,665 18,488 783 456 1,239
---------------------- --------------------
/T/
(1) The Company is involved in an ownership dispute respecting
certain reserves in the Brazeau 16-16 well.
Finding and on stream costs for proved reserves were approximately
$11.80 per BOE in 1998 compared with $7.75 in 1997. The 1998
costs were negatively impacted by the Company's drilling results,
the acquisition cost of the Midas reserves and year end downward
reserve revisions. On a proved plus probable basis, the cost per
BOE was $7.97 in 1998 and $5.09 in the prior year. Combining 1998
and 1997, the average cost per proved BOE was $10.38 or $6.95 per
BOE proved plus probable.
/T/
Reserves Discounted Cash Flows (before income tax) ($000)
December 31, 1998 1997
--------------------------------
10 15 10 15
Percent Percent
--------------- ---------------
Proved producing 8,067 7,283 6,852 6,179
Proved non-producing 10,026 8,850 13 11
Proved undeveloped 730 608 2,228 1,952
-------------- ---------------
Total proved 18,823 16,741 9,093 8,142
Probable 7,942 6,270 4,344 3,595
-------------- ---------------
Proved + probable 26,765 23,011 13,437 11,737
-------------- ---------------
-------------- ---------------
Proved + 1/2 probable 22,794 19,876 11,265 9,940
-------------- ---------------
Net Asset Value
December 31, ($000 except per share)
1998 1997
-------------------------------
Discount rate 10 15 10 15
Percent Percent
--------------- --------------
Reserves discounted cash
flow(1) (2) 22,794 19,876 11,265 9,940
Undeveloped land 1,000 1,000 1,691 1,691
Working capital (deficiency) (668) (668) (1,281) (1,281)
Bank debt (6,986) (6,986) - -
--------------- ---------------
Net asset value 16,140 13,222 11,675 10,350
--------------- ---------------
--------------- ---------------
Net asset value per share,
basic $1.96 $1.60 $2.49 $2.21
--------------- ---------------
/T/
(1) Discounted before tax cash flow based upon proven plus 1/2
probable reserves and escalating prices.
(2) The Company is involved in an ownership dispute respecting
certain reserves in the Brazeau 16-16 well.
OUTLOOK
The Company's primary reserves and activities are concentrated in
the Brazeau and Gadsby Hackett areas of Alberta. Scorpion's
Brazeau undeveloped lands provide the Company with high impact
reserve potential while the Gadsby Hackett base of operations
provides lower cost and lower risk opportunities to add reserves.
In addition, with many industry participants curtailing capital
spending for 1999, opportunities for Scorpion to explore on third
party lands and establish new reserves have increased.
At December 31, 1998, the Company had fully committed its
available line of credit after taking into consideration the
working capital deficiency. The line of credit is subject to
review and renewal in May of each year. With limited access to
capital from either the equity or debt markets, Scorpion is faced
with a large portfolio of significant value enhancement, yet
without the capital available to exploit the full potential of its
assets. The Company has identified numerous drillable natural gas
prospects in its key areas where successful drilling and
completion activity would substantially augment the cash flow and
asset value. The 1999 capital program is set at the current years
cash flow, anticipated to be between $2 million and $3 million.
The Company is reviewing re-financing options that will allow
shareholders to best realize the value from Scorpion's
opportunities.
Scorpion has 8.25 million shares issued and outstanding and trades
under the symbol SEN on the Toronto Stock Exchange.
FORWARD LOOKING STATEMENTS
Statements in this press release may contain forward looking
statements including expectations of future production and capital
expenditures. Information concerning reserves may also be deemed
to be forward looking statements as such estimates involve the
implied assessment that the resources described can be profitably
produced in the future. These statements are based upon current
expectations that involve a number of risks and uncertainties
which include but are not limited to the background risks of the
oil and gas industry such as operational risks in development,
exploration and production, potential delays or changes in plans
with respect to exploration or development projects or capital
expenditures, the uncertainty of reserve estimates, the
uncertainty of estimates and projections relating to production,
costs and expenses, health, safety and environmental risks, price
volatility and exchange rate fluctuations.
-30-
--------------------------------------------------------------------------------
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