Americas Petrogas Inc. ("Americas Petrogas" or the "Company") (TSX VENTURE:BOE) announces its third quarter 2013 results and that it has posted a new investor presentation on its website at www.americaspetrogas.com.
Selected financial and operational information is outlined below and should be read in conjunction with the Company's condensed interim consolidated financial statements and the related Management's Discussion and Analysis ("MD&A") for the quarter, which have been filed on SEDAR under the Company's profile at www.sedar.com and are also available on the Company's website. All amounts are in Canadian dollars unless otherwise stated.
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Cash and investments position: $26.5 million of consolidated cash, cash equivalents and available-for-sale financial assets as of September 30, 2013.
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Oil sales volume: during the third quarter of 2013, the Company continued to produce and sell oil primarily from its Medanito Sur conventional block. Sales volume averaged 2,065 bopd (net) for the third quarter of 2013 compared to 2,118 bopd (net) during the third quarter of 2012 and compared to 2,398 bopd (net) in the second quarter of 2013. The average gross production was lower due to natural decline and the fact that the Company did not drill any conventional wells during the third quarter of 2013. However, as a result of recent optimization studies, supported by the updated reserve numbers (41% increase in proved plus probable light oil reserves and 42% increase in proved plus probable before-tax net present value, discounted at 10%), the Company decided to expand its conventional program by drilling a total of seven (7) wells, beginning in October and ending in late November 2013. Four of the seven wells are already on production while the others remain to be completed and tied-in.
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Net revenue: for the nine months ended September 30, 2013, net revenue increased by $11.9 million to $42.4 million, an increase of 39% compared to same period of 2012. Net revenue for the three months ended September 30, 2013 was $13.2 million, which is relatively consistent with that for the same period of 2012.
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Operating netback: for the nine months ended September 30, 2013, operating netback (excluding Oil Plus benefits) was $27.2 million ($43.49 per barrel) and operating netback (including Oil Plus benefits) was $44.1 million ($70.65 per barrel). Oil plus benefits of $17.0 million, relating to production increases in past years, were credited to production costs during the nine months ended September 30, 2013. For the third quarter of 2013, operating netback (excluding Oil Plus benefits) was $7.1 million ($37.27 per barrel) and operating netback (including Oil Plus benefits) was $11.4 million ($60.10 per barrel). Oil Plus benefits of $4.3 million, relating to production increases in past years, were credited to production costs during the third quarter of 2013.
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Funds flow from operations: $32.9 million during the nine months ended September 30, 2013, compared to $10.1 million for the equivalent period of 2012, representing an increase of $22.9 million or 227%. Funds flow from operations was $8.1 million during the three months ended September 30, 2013, compared to $4.6 million for the equivalent period of 2012, representing an increase of $3.4 million or 74%.
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Net income: Net income attributable to owners of the Company was $3.9 million or $0.02 per share during the nine months ended September 30, 2013, compared to a net loss of $11.9 million or $0.06 per share for the equivalent period of 2012, representing an increase of income by $15.7 million and an increase to earnings per share by $0.08. For the three months ended September 30, 2013, net loss attributable to owners of the Company was $5.6 million or $0.03 per share, compared to a net loss of $3.3 million or $0.02 per share for the equivalent period of 2012. This loss for the third quarter of 2013 is attributable primarily to a non-cash, foreign exchange loss on an intercompany loan between the Canadian parent company and its Argentina subsidiary.
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Oil Plus benefits: during the third quarter of 2013, the Company recognized $4.3 million of Oil Plus benefits (related to production increases) and the total amount for the nine months ended September 30, 2013 was $18.9 million (related to production and reserve increases). This is in addition to $1.3 million recognized in the fourth quarter of 2012. As of the current date, a total of $18.7 million of Oil Plus benefits have already been collected. An additional $18.0 million has been applied for and remains to be collected.
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| | Three months ended
September 30 | Nine months ended
September 30 |
| | | 2013 | | 2012 | | 2013 | | 2012 |
| | Gross oil sales revenue | $ | 15,380,507 | $ | 14,905,094 | $ | 49,054,408 | $ | 36,262,730 |
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| | Operating netback (including Oil Plus benefits)(1) | $ | 11,419,026 | $ | 9,286,914 | $ | 44,120,986 | $ | 22,224,309 |
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| | Operating netback (excluding Oil Plus benefits) per barrel(1) | $ | 37.27 | $ | 47.66 | $ | 43.49 | $ | 46.54 |
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| | Operating netback (including Oil Plus benefits) per barrel(1) | $ | 60.10 | $ | 47.66 | $ | 70.65 | $ | 46.54 |
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| | Net income (loss) attributable to owners of the Company | $ | (5,592,699) | $ | (3,314,583) | $ | 3,866,625 | $ | (11,858,077) |
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| | Funds flow from operations(2) | $ | 8,075,419 | $ | 4,628,895 | $ | 32,941,350 | $ | 10,070,739 |
| | | Per share - basic and diluted | $ | 0.04 | $ | 0.02 | $ | 0.15 | $ | 0.05 |
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| Weighted average number of common shares outstanding(3) |
| | | | Basic | | 212,576,723 | | 209,172,505 | | 212,701,737 | | 203,474,945 |
| | | | Diluted | | 213,821,408 | | 213,954,048 | | 215,091,991 | | 212,228,677 |
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| | Cash flow from operating activities | $ | 5,638,379 | $ | 132,862 | $ | 23,416,393 | $ | 1,633,715 |
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| | Capital expenditures | $ | 14,314,341 | $ | 17,465,920 | $ | 68,674,022 | $ | 56,379,302 |
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| | Average barrels sold per day | | 2,065 | | 2,118 | | 2,288 | | 1,743 |
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| | Average selling price per barrel | $ | 80.96 | $ | 76.48 | $ | 78.55 | $ | 75.94 |
| | | September 30, 2013 | | December 31, 2012 |
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| | Working capital(4) | $ | 23,363,621 | $ | 51,974,194 |
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| | Equity outstanding | | | | |
| | | Common shares | | 212,572,440 | | 212,728,283 |
| | | Stock options | | 18,135,593 | | 11,821,750 |
| Notes: |
| (1) | "Operating netback" is a non-GAAP measure and is calculated as revenues from oil sales less royalties and production costs. Operating netback is used as an indicator of operating performance, profitability and liquidity. "Operating netback (excluding Oil Plus benefits)" excludes any Oil Plus benefits credited to production costs. "Operating netback (including Oil Plus benefits)" is net of any Oil Plus benefits credited to production costs. Operating netback does not have a standardized meaning prescribed by IFRS. It is unlikely for non-GAAP measures to be comparable to similar measures presented by other companies. For the three months ended September 30, 2013, operating netback including Oil Plus benefits was $11,419,026 (calculated as gross oil sales revenue of $15,380,507 less royalties of $2,138,262 and production costs of $1,823,219). For the three months ended September 30, 2012, operating netback was $9,286,914 (calculated as gross oil sales revenue of $14,905,094 less royalties of $1,957,596 and production costs of $3,660,584). For the nine months ended September 30, 2013, operating netback including Oil Plus benefits was $44,120,986 (calculated as gross oil sales revenue of $49,054,408 less royalties of $6,609,640 plus production costs recovery of $1,676,218). For the nine months ended September 30, 2012, operating netback was $22,224,309 (calculated as gross oil sales revenue of $36,262,730 less royalties of $5,747,477 and production costs of $8,290,944). |
| (2) | "Funds flow from operations" is an additional GAAP measure because it is presented in the consolidated statement of cash flows. Funds flow from operations and funds flow from operations per share are used to analyze operating performance and liquidity. Funds flow from operations is calculated as net cash generated from (used by) operating activities (as determined in accordance with IFRS) before changes in non-cash balance sheet operating items. Funds flow from operations per share is calculated by dividing funds flow from operations by the weighted average number of shares outstanding. Funds flow from operations should not be considered an alternative to, or more meaningful than net cash generated from (used by) operating activities as determined in accordance with IFRS. Funds flow from operations per share should not be considered an alternative to, or more meaningful than earnings (loss) per share as determined in accordance with IFRS. |
| (3) | Diluted weighted average number of common shares outstanding is computed by adjusting basic weighted average number of common shares outstanding for dilutive instruments. The number of shares included with respect to options, warrants and similar instruments is computed using the treasury stock method, which assumes any proceeds received by the Company upon exercise of the in-the-money instruments would be used to repurchase common shares at the average market price for the period. For the three and nine months ended September 30, 2013, 1,244,685 (three months ended September 30, 2012 – 4,781,543) and 2,390,254 (nine months ended September 30, 2012 – 8,753,732) common shares were deemed to be issued for no consideration in respect of options. |
| (4) | Working capital is a non-GAAP measure and is calculated as current assets less current liabilities. Working capital is used to assess liquidity general financial strength. Working capital does not have a standardized meaning prescribed by IFRS. It is unlikely for non-GAAP measures to be comparable to similar measures presented by other companies. Working capital should not be considered an alternative to, or more meaningful than current assets or current liabilities as determined in accordance with IFRS. |
Third Quarter Highlights and Recent Developments
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Recently, the Company obtained a one-year extension of its exploration contract terms for the Loma Ranqueles block. As well, the Company continues to work towards an extension of its contract terms for Totoral, Yerba Buena and Bajada Colorada while the Company's joint venture partner on the Huacalera block, Apache, continues to work towards an extension of the contract terms on that block.
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The Board of Directors of the Company authorized management to commence a process to review strategic alternatives for maximizing shareholder value. The Company has engaged Jefferies LLC as its sole financial advisor as it considers a range of strategic alternatives, potentially including a sale or merger of the Company, joint venture(s), a sale of specific assets, as well as continued execution of the Company's business plan.
During its strategic review, the Company will continue to delineate and operate a majority of its substantial Vaca Muerta Shale position in the Neuquén Basin, to expand its application of unconventional drilling technology, and to exploit its large inventory of drilling locations through ongoing exploration and development drilling.
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Ryder Scott Company estimated that the Company has 56.1 billion Barrels of Oil Equivalent ("BOE") initially in place and 8.3 billion BOE Recoverable in the Company's nine unconventional shale oil and shale gas properties. The report only considered the Vaca Muerta, Agrio and Los Molles shales. The report did not consider additional zones of interest such as the Quintuco, Tordillo, Mulichinco and other formations.
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After a successful conventional drilling program at Medanito Sur during the first half of 2013, Chapman Petroleum Engineering Ltd. ("Chapman"), an independent petroleum engineering company, was engaged to prepare an independent reserve report ("Chapman Report") of the Company's conventional reserves in the Medanito Sur block. The Chapman Report was effective July 1, 2013. This conventional reserves update (41% increase in proved plus probable light oil reserves and 42% increase in proved plus probable before-tax net present value, discounted at 10%) on the Medanito Sur block contained in the Chapman Report, is in addition to the evaluation of the Company's blocks with potential for unconventional resources, prepared by Ryder Scott (see the Company's news release dated August 22, 2013 announcing an estimated 56.1 billion BOE initially in place and estimated recoverable resources of 8.3 billion BOE).
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Earlier in 2013, drilling on Medanito Sur resulted in the discovery of new production areas, including El Alpataco, El Calden Este, Amilcar and La Meseta. In total, twenty (20) conventional wells were drilled in the first three quarters of 2013. As well, the Company invested $18.5 million in facilities and equipment during the nine months ended September 30, 2013.
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In respect of the Company's unconventional, Vaca Muerta shale exploration wells, the Company, in conjunction with its partner, ExxonMobil, continued to conduct long-term production testing on the LTE.x-1 well and continued to analyze data relating to the ALL.x-1 well and the ADA.x-1 well. A multi-stage hydraulic stimulation program on the ADA.x-1 well was completed in September and testing of the well began in late November.
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With respect to the Bayovar project in Peru, the Company is continuing to work towards obtaining the concession rights.
"Considering that we did not drill any new wells in the third quarter, we are pleased with our results, generating $11.4 million of operating netback at $60.10 per barrel, including Oil Plus benefits," said Barclay Hambrook, President and Chief Executive Officer. Mr. Hambrook went on to say, "Our strategic review is ongoing and will continue into 2014. In the meantime, we continue to execute on our business plan for our conventional and unconventional assets."
For further information regarding the Company's financial results, financial position and related changes, please see the consolidated financial statements and the related MD&A.
About Americas Petrogas Inc.
Americas Petrogas Inc. is a Canadian company whose shares trade on the TSX Venture Exchange under the symbol "BOE". Americas Petrogas has conventional and unconventional shale oil and gas and tight sands oil and gas interests in numerous blocks in the Neuquén Basin of Argentina. Americas Petrogas has joint venture partners, including ExxonMobil and Apache, on various blocks in the shale oil and gas corridor in the Neuquén Basin, Argentina. Americas Petrogas also owns an 80% interest in GrowMax Agri Corp., a private company involved in the exploration for near-surface potash, phosphates and other minerals, and potential development of a fertilizer project in Peru. Indian Farmers Fertiliser Co-operative Limited (IFFCO) owns a 20% interest in GrowMax Agri Corp. For more information about Americas Petrogas Inc., please visit www.americaspetrogas.com
This Press Release contains forward-looking information including, but not limited to, the Company's goals and growth, estimates of reserves and resources, production and cash flows, new production areas on the Medanito Sur block, drilling activities on the Medanito Sur block, reviewing various strategic alternatives, continuing to aggressively de-risk and operate a majority of the Company's substantial Vaca Muerta Shale position in the Neuquén Basin, expanding the Company's application of unconventional drilling technology, and exploiting the Company's large inventory of conventional projects through ongoing development drilling, production testing of the LTE.x-1 well, analysis relating to the ALL.x-1 well and ADA.x-1 well, testing of the ADA.x-1, extension of commitments on the Company's various blocks, exploration, appraisal and development activities related to conventional and unconventional oil and gas, and other exploration, development and production activities in respect of the projects in Argentina and Peru. The recovery and resources estimates for the Company's properties described in this Press Release are estimates only and there is no guarantee that the estimated resources will be recovered. The actual resources for the Company's properties may be greater or less than those calculated. Additional forward-looking information is contained in the Company's MD&A for this quarter and the Company's Annual MD&A for December 31, 2012, and reference should be made to the additional disclosures of the assumptions, risks and uncertainties relating to such forward-looking information in those MD&A documents.
Forward‐looking information is based on management's expectations regarding the Company's future growth, results of operations, production, future capital and other expenditures (including the amount, nature and sources of funding thereof), competitive advantages, plans for and results of drilling activity (including the timing, location, depth and the number of wells), environmental matters, business prospects and opportunities and expectations with respect to general economic conditions. Such forward‐looking information reflects management's current beliefs and assumptions and is based on information, including reserves and resources information, currently available to management. Forward‐looking information involves significant known and unknown risks and uncertainties. A number of factors could cause actual results, performance or achievements to differ materially from any future results, performance or achievements expressed or implied by the forward‐looking information, including but not limited to, risks associated with the oil and gas industry (e.g. operational risks in development, exploration and production, delays or changes to plans with respect to exploration or development projects or capital expenditures; the uncertainty of reserve estimates; the uncertainty of geological interpretations; the uncertainty of estimates and projections in relation to production, costs and expenses and health, safety and environment risks, extensions of concessions and commitments), the risk of commodity price and foreign exchange rate fluctuations, the uncertainty associated with negotiating with foreign governments and third parties located in foreign jurisdictions and the risk associated with international activity.
Although the forward-looking information contained herein is based upon assumptions which management believes to be reasonable, the Company cannot assure investors that actual results will be consistent with this forward-looking information. This forward-looking information is made as of the date hereof and the Company assumes no obligation to update or revise this information to reflect new events or circumstances, except as required by law. Because of the risks, uncertainties and assumptions inherent in forward-looking information, prospective investors in the Company's securities should not place undue reliance on this forward-looking information.
The term BOE (barrels of oil equivalent) is used in this press release. All calculations converting natural gas to BOE have been made using a conversion ratio of six thousand cubic feet (six "Mcf") of natural gas to one barrel of oil, unless otherwise stated. The use of BOE may be misleading, particularly if used in isolation, as the conversion ratio of six Mcf of natural gas to one barrel of oil is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. Given that the value ratio based on the current price of crude oil as compared to natural gas is significantly different from the energy equivalency of 6:1, utilizing a conversion on a 6:1 basis may be misleading as an indication of value.
NEITHER THE TSX VENTURE EXCHANGE NOR ITS REGULATION SERVICES PROVIDER (AS THAT TERM IS DEFINED IN THE POLICIES OF THE TSX VENTURE EXCHANGE) ACCEPTS RESPONSIBILITY FOR THE ADEQUACY OR ACCURACY OF THE RELEASE.
