CALGARY,
Aug. 22, 2014 /CNW/ - Hawk
Exploration Ltd. ("Hawk" or the "Corporation") is pleased to
announce its results for the three and six months ended
June 30, 2014. The Corporation's
interim financial statements for the three and six months ended
June 30, 2014 and its management's
discussion and analysis for the three and six months ended
June 30, 2014 are available for
viewing on SEDAR at www.sedar.com under Hawk's profile or on the
Corporation's website at www.hawkexploration.ca under Investor
Information - Financial Reports.
HIGHLIGHTS
Highlights for the three months ended
June 30, 2013 were as follows:
- Generated cash flow from operations of $1.9 million in the second quarter, a 28%
increase from the $1.6 million in
cash flow in the second quarter of 2013;
- Averaged 659 boe/d of production in the second quarter of 2014,
a 5% increase over the 628 boe/d average production in the same
period of 2013;
- Earned comprehensive income of $0.3
million in the second quarter of 2014, a 1% increase over
the second quarter of 2013;
- Drilled three (2.9 net) wells in western Saskatchewan during the second quarter of
2014;
- Subsequent to the second quarter, entered into a new revolving
credit facility in the amount of $13.5
million with a Canadian bank; and
- Subsequent to the second quarter, entered into a purchase and
sale agreement with Trihawk Energy Ltd. to acquire certain
producing assets in the plains region of Alberta and western Saskatchewan.
Selected financial and operational information
for the three and six months ended June 30,
2014 is provided as follows:
| |
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|
|
|
| |
|
|
Three months ended June 30, |
|
Six months ended June 30, |
| |
|
|
2014 |
|
2013 |
|
% Change |
|
2014 |
|
2013 |
|
% Change |
| Financial ($000's
except per share amounts) |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Petroleum and natural
gas sales |
|
$ |
4,979 |
$ |
3,893 |
|
28% |
$ |
9,639 |
$ |
6,810 |
|
42% |
| Cash flow from
operations (1) |
|
|
1,949 |
|
1,613 |
|
21% |
|
3,708 |
|
2,817 |
|
32% |
| |
Per share |
|
|
0.06 |
|
0.05 |
|
20% |
|
0.11 |
|
0.08 |
|
38% |
| Comprehensive income
(loss) |
|
|
334 |
|
332 |
|
1% |
|
(317) |
|
173 |
|
(283%) |
| |
Per share |
|
|
0.01 |
|
0.01 |
|
0% |
|
(0.01) |
|
0.01 |
|
(200%) |
| Capital expenditures
(2) |
|
|
1,849 |
|
419 |
|
341% |
|
4,717 |
|
2,537 |
|
86% |
| Working capital deficit - excluding
bank |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
debt and commodity contracts, end
of period (1) |
|
|
|
|
|
|
|
$ |
1,900 |
$ |
876 |
|
117% |
| Bank debt, end of
period |
|
|
|
|
|
|
|
|
6,700 |
|
3,750 |
|
79% |
| Total assets, end of
period |
|
|
|
|
|
|
|
$ |
36,849 |
|
31,227 |
|
18% |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
Three months ended June 30, |
|
Six months ended June 30, |
| |
|
|
2013 |
|
2012 |
|
% Change |
|
2013 |
|
2012 |
|
% Change |
| Common Shares
outstanding end of period: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Class A
Shares |
|
|
|
|
|
|
|
|
34,726 |
|
34,481 |
|
1% |
| |
Class B
Shares |
|
|
|
|
|
|
|
|
1,080 |
|
1,080 |
|
-% |
| |
Options to acquire Class A
Shares |
|
|
|
|
|
|
|
|
3,200 |
|
2,473 |
|
29% |
| Operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Production |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Crude oil and natural gas liquids
(bbl/d) |
|
|
643 |
|
598 |
|
8% |
|
662 |
|
598 |
|
11% |
| |
Natural gas
(mcf/d) |
|
|
95 |
|
178 |
|
(47%) |
|
110 |
|
168 |
|
(35%) |
| |
Total (boe/d) |
|
|
659 |
|
628 |
|
5% |
|
680 |
|
626 |
|
9% |
| Oil and liquids as
percent of total |
|
|
98% |
|
95% |
|
3% |
|
97% |
|
96% |
|
1% |
| Average Selling
Price |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Crude oil and ngls (per
bbl) |
|
$ |
84.33 |
$ |
70.44 |
|
20% |
$ |
79.55 |
$ |
61.97 |
|
28% |
| |
Natural gas (per
mcf) |
|
|
4.81 |
|
3.61 |
|
33% |
|
5.38 |
|
3.47 |
|
55% |
| |
Total (per boe) |
|
|
83.00 |
|
68.13 |
|
22% |
|
78.27 |
|
60.13 |
|
30% |
| Operating netback
(per boe at 6:1) (3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Price |
|
$ |
83.00 |
$ |
68.13 |
|
22% |
$ |
78.27 |
$ |
60.13 |
|
30% |
| |
Royalties |
|
|
(17.23) |
|
(14.84) |
|
16% |
|
(16.15) |
|
(11.65) |
|
39% |
| |
Production
expense |
|
|
(21.61) |
|
(18.03) |
|
20% |
|
(21.51) |
|
(17.60) |
|
22% |
| |
Transportation
expense |
|
|
(1.81) |
|
(1.99) |
|
(9%) |
|
(1.73) |
|
(1.75) |
|
(1%) |
| Operating netback
($/boe) |
|
$ |
42.35 |
$ |
33.27 |
|
27% |
$ |
38.88 |
$ |
29.13 |
|
33% |
| (1) The terms cash flow from operations, cash flow
from operations per share, working capital deficit and net debt to
annualized cash flow ratio are additional GAAP financial measures.
These measures are further described on page 3 of the Corporation's
MD&A for the three and six months ended June 30, 2014 under the
heading "Additional GAAP and Non-GAAP Financial Measures". Users
are cautioned that additional GAAP financial measures may not be
comparable with the calculation of similar measures by other
entities. |
| (2) Capital expenditures include cash exploration
and evaluation expenditure plus cash property, plant and equipment
net of dispositions and exclude asset retirement obligations and
capitalized share-based payments. |
| (3) Management uses the terms operating and cash
flow netbacks per boe which are non-GAAP measures.
These measures are key performance indicators however do not
have a standardized meaning as prescribed by GAAP and therefore,
may not be comparable with the calculation of similar measures by
other entities. Management considers operating and cash flow
netbacks to be important measures as they demonstrate profitability
relative to current commodity prices. |
Operational Review and Update
During the second quarter of 2014, Hawk drilled three (2.9 net)
wells in western Saskatchewan,
however wet weather in this area delayed completion activities
until late July 2014. The
Corporation drilled one (1.0 net) vertical well targeting heavy oil
in the Eureka area of western Saskatchewan, which was a follow up to an
exploration well drilled in the fourth quarter of 2013. The new
well encountered 21 meters of net oil pay in the Basal Mannville
Formation, was completed and placed on production at an average
rate of 25 bopd. Hawk has received approval for a horizontal well
project and plans to drill its first horizontal well at Eureka
during the third or fourth quarter of 2014.
The Corporation also drilled two (1.9 net)
vertical wells targeting heavy oil in the Baldwinton and
Neilburg areas of western
Saskatchewan. This Baldwinton well
(0.9 net) was completed in the Sparky Formation and placed on
production at a rate of 20 (18 net) bopd while the Neilburg well was completed and encountered
uneconomic quantities of oil and was subsequently suspended.
In July 2014, Hawk
shot six square kilometers of three dimensional ("3D") seismic data
in the Forest Bank area of western Saskatchewan where the Corporation recently
entered into a 1,440 acre farm-in agreement ("Farm In") with a
major company. The 3D seismic has been interpreted and Hawk has
identified a number of drilling prospects. Hawk expects to drill
its first prospect on the Forest Bank property in the third or
fourth quarter of 2014 at which point Hawk will earn a 65% percent
working interest in one section of land covered under the Farm In.
The Corporation also expects to re-enter several existing wellbores
on the Forest Bank property later in 2014, after Hawk has earned an
interest in the Farm In lands. These wellbores are expected to be
recompleted in formations that have not been tested and appear to
have bypassed pay on logs.
Financial
Hawk achieved cash flow from operations in the second quarter of
2014 of approximately $1.9 million
compared to $1.6 million for the
second quarter of 2013 due to an 8 percent increase in oil
production and a 19 percent increase in oil prices in the second
quarter of 2014 compared to the second quarter of 2013. Average
Western Canadian Select ("WCS") prices for the second quarter of
2014 increased 11% to US $82.95 per
bbl compared to US $75.06 per bbl in
the second quarter of 2013 while a weaker Canadian dollar, relative
to the US dollar, led to a 19 percent increase in Hawk's realized
oil prices in the second quarter of 2014 to $84.29 per bbl. The differential between
WCS and West Texas Intermediate
crude oil ("Differential") increased slightly to US $20.04 per bbl in the second quarter of 2014
compared to US $19.16 per bbl for the
second quarter of 2013.
Hawk generated an operating netback of
$42.35 per boe for the second quarter
of 2014, a 27 percent increase from the operating netback for the
second quarter of 2013 of $32.50 per
boe due to increased oil prices in Q2 2014. Production expenses
increased in the second quarter of 2014 to average $21.61 per boe compared to $18.03 per boe in the second quarter of 2013 due
to increased work-over costs in the second quarter of 2014 as well
as increased road maintenance due to wet spring weather.
At June 30, 2014,
Hawk had $6.7 million drawn on its
existing $12 million credit facility.
In August of 2014, Hawk entered into a new $13.5 million revolving credit facility with
another Canadian bank to replace its existing $12 million facility. The Corporation continues
to maintain a solid balance sheet with net debt and working capital
deficit of approximately $8.6 million
at June 30, 2014 which equates to a
net debt to annualized cash flow from operations of 1.2:1.
Outlook
The Corporation will continue to focus on developing its heavy oil
properties in east Central Alberta
and western Saskatchewan and has
set a $10 million capital budget for
2014. Hawk expects to drill five (4.7 net) vertical wells and one
(1.0 net) horizontal well in the second half of 2014. Hawk plans to
drill vertical wells at Forest Bank (1.0 net), in western
Saskatchewan, and Cadogan (0.7
net), in east central Alberta in
the second half of 2014. The Corporation also expects to drill a
horizontal well (1.0 net) in the Eureka area of western
Saskatchewan in the second half of
2014. The remainder of Hawk's capital program for 2014 is expected
to include a combination of additional vertical drilling in the
Lloydminster area of Saskatchewan and recompletion activities at
Forest Bank.
Hawk's current production is approximately 680
boe/d, based on field estimates. As a result of wet spring and
summer weather in western Saskatchewan that delayed drilling and
completion activities, Hawk expects its 2014 production to average
between 700 to 725 boe/d, down from its previous average 2014
production guidance of 800 boe/d.
Hawk is an emerging exploration company engaged
in the exploration, development and production of conventional
crude oil and natural gas in western Canada and is based in Calgary, Alberta. The Class A Shares of Hawk
trade on the TSX Venture Exchange under the trading symbols of
HWK.A.
Neither the TSX Venture Exchange nor its
Regulation Services Provider (as the term is defined in the
policies of the TSX Venture Exchange) accepts responsibility for
the adequacy or accuracy of this release.
Certain statements contained in this press
release constitute forward-looking statements. All forward-looking
statements are based on the Corporation's beliefs and assumptions
based on information available at the time the assumption was made.
The use of any of the words "anticipate", "continue", "estimate",
"expect", "may", "will", "project", "should", "believe" and similar
expressions are intended to identify forward-looking statements.
These statements involve known and unknown risks, uncertainties and
other factors that may cause actual results or events to differ
materially from those anticipated in such forward-looking
statements. Hawk believes the expectations reflected in those
forward-looking statements are reasonable, but no assurance can be
given that these expectations will prove to be correct. Such
forward-looking statements included in this press release should
not be unduly relied upon. These statements speak only as of the
date of this press release.
In particular, but without limiting the
forgoing, this press release contains forward-looking statements
pertaining to the following: the performance characteristics of
Hawk's oil and natural gas properties; business strategies and
plans; projections of market prices and cost; supply and demand for
oil and natural gas; planned development of the Corporation's oil
and natural gas properties; capital expenditure programs for the
remainder of 2014; the timing of and nature of capital expenditure
program for 2014;expected annual average production rates for 2014;
and the expected sources of funding for the capital expenditure
program.
The material factors and assumptions used to
develop these forward looking statements include, but are not
limited to: the ability of the Corporation to engage drilling
contractors, to obtain and transport equipment, services, supplies
and personnel in a timely manner and at an acceptable cost to carry
out its activities and plans; the ability of the Corporation to
market its oil and natural gas and to transport its oil and natural
gas to market; the timely receipt of regulatory approvals and the
terms and conditions of such approval; the ability of the
Corporation to obtain drilling success consistent with
expectations; and the ability of the Corporation to obtain capital
to finance its exploration, development and operations.
Actual results could differ materially from
those anticipated in these forward-looking statements as a result
of the risk factors including, without limitation: volatility in
market prices for oil and natural gas; liabilities inherent in oil
and natural gas operations; uncertainties associated with
estimating oil and natural gas reserves; competition for, among
other things, capital, acquisitions of reserves, undeveloped lands
and skilled personnel; incorrect assessments of the value of
acquisitions and exploration and development programs; geological,
technical, drilling and processing problems; changes in tax laws
and incentive programs relating to the oil and natural gas
industry; failure to realize the anticipated benefits of
acquisitions; general business and market conditions; and certain
other risks detailed from time to time in Hawk's public disclosure
documents (including, without limitation, the other factors
discussed under "Risk Factors" in the Corporation's most recently
filed Annual Information Form).
Statements relating to "reserves" or
"resources" are deemed to be forward-looking statements, as they
involve the implied assessment, based on certain estimates and
assumptions that the resources and reserves described can be
profitably produced in the future. Readers are cautioned that the
foregoing lists of factors are not exhaustive. The forward-looking
statements contained in this press release are expressly qualified
by this cautionary statement. Except as required under applicable
securities laws, Hawk does not undertake any obligation to publicly
update or revise any forward-looking statements.
Barrels of oil equivalent (boe) may be
misleading, particularly if used in isolation. A boe conversion
ratio of six thousand cubic feet (mcf) of natural gas to one barrel
(bbl) of oil is based on an energy conversion method primarily
applicable at the burner tip and is not intended to represent a
value equivalency at the wellhead. All boe conversions in this
press release are derived by converting natural gas to oil in the
ratio of six thousand cubic feet of natural gas to one barrel of
oil. Certain financial amounts are presented on a per boe basis,
such measurements may not be consistent with those used by other
companies.
SOURCE Hawk Exploration Ltd.