Cuda Oil and Gas Inc. Announces Second Quarter Financial and Operating Results
Newsfile Corp.
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Calgary, Alberta--(Newsfile Corp. - September 1, 2020) - Cuda Oil and Gas Inc. (TSXV: CUDA) ("Cuda" or the "Company") announces its financial and operating results for the three and six months ended June 30, 2020. Cuda's unaudited interim condensed consolidated financial statements and related management's discussion and analysis ("MD&A") as at and for the periods ended June 30, 2020 and June 2019, are available under the Company's profile on the SEDAR website at www.sedar.com. Selected financial and operating information for the three and six months ended June 30, 2020 appear below and should be read in conjunction with the related financial statements and MD&A.
Summary Financial and Operational Results (See "Non-GAAP Measures")
Three months ended June 30
Six months ended June 30
2020
2019
2020
2019
OPERATING
Production
Crude oil (bbls/d)
307
306
326
337
Natural gas (mcf/d)
1,908
97
1,557
1,642
Natural gas liquids ("NGLs")(bbls/d)
35
1
30
25
Total (boe/d)
660
324
615
635
Netbacks ($/boe)
Average realized price (boe)
23.77
71.36
30.98
46.83
Royalties and production taxes
(6.36
)
(20.57
)
(8.44
)
(12.24
)
Operating and transportation
(10.03
)
(26.48
)
(10.76
)
(17.20
)
Operating netback
7.38
24.31
11.78
17.39
FINANCIAL ($)
Revenue
Crude oil
960,462
2,086,016
2,633,085
4,263,187
Natural gas
394,658
10,354
664,164
866,438
NGLs
72,948
5,287
169,288
257,623
Total
1,428,068
2,101,657
3,466,537
5,387,248
Adjusted funds flows from (used in) operations
269,724
(1,594,930
)
(674,199
)
(1,974,411
)
Net loss
(5,387,345
)
(24,860,766
)
(4,470,119
)
(28,070,444
)
Capital expenditures
883,762
1,170,017
8,275,806
4,683,157
Second Quarter Highlights
Production in Wyoming continues to respond positively to the gas flood project. Although restrictions on gas injection and oil production impacted the second quarter results, the Company realized meaningful oil production increases from May to June as restrictions were lifted. Ten (10) wells within the seven (7) gas flood patterns increased by over 50% in aggregate, increasing from 375 bbls/d to 568 bbls/d of gross daily average crude oil production.
Second quarter production averaged 660 boe/d, up 16% from 569 boe/d for the first quarter of 2020. The company increased natural gas production in Canada from 1,207 mcf/d in the first quarter, to 1,908 mcf/d in the second quarter of 2020, to maximize cash flow as gas prices improved. This was offset by crude oil restrictions in Wyoming due to oil price volatility where production decreased from 336 bbls/d in the first quarter to 307 bbls/d in the second quarter in 2020.
The Company realized 62% cost savings on operating and transportation expenses which were $10.03 per boe, for the three months ended June 30, 2020, compared to $26.48 per boe, for the three months ended June 30, 2019. Wyoming contributed to most of the savings due to increased production from gas flood responding wells, reduced workover frequency and field electrification.
Cuda's average operating netback (see Non-GAAP measures) decreased to $7.38/boe for the second quarter, from $16.87/boe for the first quarter of 2020, largely due to the unpresented low crude oil prices during the second quarter. However, the improved cost efficiencies allowed Cuda to report adjusted funds flows from operations of $269,724 for the three months ended June 30, 2020 (2019 - ($674,199)).
Financial Position
At June 30, 2020, the Company has a working capital deficiency (including the credit facilities, the convertible debentures and the promissory note) of $59,053,802 and an accumulated deficit of $66,309,794. For the three and six months ended June 30, 2020, the Company reported net losses of $5,387,345 and $4,470,119 respectively and cash flows from operating activities of $387,947 and $1,346,809, respectively.
The COVID-19 health pandemic resulted in a sudden decline in economic activity and an unprecedented decline in crude oil prices during the second quarter. The pandemic impacted the Company's performance in the quarter by reducing realized oil prices and production from both its Wyoming and Alberta assets. With ongoing uncertainty related to current economic circumstances, the operator and Company has elected to focus Capital Spending in Wyoming, at the "SSRU"- Shannon Secondary Recovery Unit through Increased Miscible Gas Injection for the remainder of 2020. The Company estimates net costs of approximately USD $1.2 million in 2020 to return the Shannon Reservoir to initial pressures maximizing production response and oil revenue.
At June 30, 2020, the Company had $46.7 million outstanding under the Credit Facilities which matured on July 30, 2020 and remain unpaid which constitutes an event of default under the loan agreement. No waiver has been obtained for the event of default, however, the Company is working with the lender to amend the loan agreement, including extend the maturity date and cure the event of default.
At June 30, 2020, the Company had $1.5 million outstanding under the convertible debentures which matured on July 21, 2020 and remain unpaid. The debenture holder provided the Company with a 20-day notice period to pay the amounts owing. The Company requested an extension to the 20-day notice period and received a 30-day extension to September 23, 2020 to avoid a situation of default.
On July 22, 2020 the Company received formal notification from the operator of the Wyoming asset that the Company was in default of its payment obligations under the Unit Operating Agreement in respect of outstanding joint interest billings. The Notice demanded that the Company pay the outstanding amounts in full within 30 days of notice. The Company has been unable to pay the outstanding amounts in the time period set out in the notice and requested that the operator extend the period of time to cure the default. On August 26, 2020, the Company received notification from the operator that it has granted the Company a 60-day extension to September 20, 2020 to cure the default.
Further rationalization of assets and/or funding through share issuances, private placements, restructuring of existing or new credit facilities, non-core property sales, increased production from core properties combined with improvements in realized oil and gas prices received and/or a combination of these alternatives will be required to continue as a going concern.
About Cuda Oil and Gas Inc.
Cuda Oil and Gas Inc. is engaged in the business of exploring for, developing and producing oil and natural gas, and acquiring oil and natural gas properties across North America. The Cuda management team has worked closely together for over 20 years in both private and public company environments and has an established track record of delivering strong shareholder returns. Cuda will continue to implement its proven strategy of exploring, acquiring, and exploiting with a long-term focus on large, light oil resource- based assets across North America including significant operational experience in the United States. The Cuda management team brings a full spectrum of geotechnical, engineering, negotiating and financial experience to its investment decisions.
For further information please contact: Glenn Dawson - President and Chief Executive Officer Cuda Oil and Gas Inc. (403) 454-0862
Non-GAAP Measures
This news release contains the terms "adjusted funds flow from (used in) operations", and "operating netback", which do not have standardized meanings prescribed by IFRS and therefore may not be comparable with the calculation of similar measures presented by other issuers.
Adjusted funds flow from (used in) operations denotes cash flow from (used in) operating activities as it appears on the Company's consolidated statement of cash flows before decommissioning expenditures, if any, and changes in non-cash operating working capital.
Operating netback denotes total revenue less royalty and production tax expenses, and operating and transportation costs calculated on a per boe basis. Management uses operating netback on a per boe basis in operational and capital allocation decisions.
BOEs may be misleading, particularly if used in isolation. A boe conversion ratio of six thousand cubic feet of natural gas to one barrel of oil equivalent (6 Mcf:1 bbl) is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. As the value ratio between natural gas and crude oil based on the current prices of natural gas and crude oil 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.
Forward-Looking Information
This news release contains forward-looking information. All statements other than statements of historical fact included in this news release are forward-looking statements that involve various risks and uncertainties and are based on forecasts of future operational or financial results, estimates of amounts not yet determinable and assumptions of management. Risk factors that could prevent forward looking statements from being realized include the nature and scope of public health restrictions, the availability of key personnel, market conditions, third party and regulatory approvals, ongoing permitting requirements, the actual results of current exploration and development activities, operational risks, risks associated with drilling and completions, uncertainty of geological and technical data, conclusions of economic evaluations and changes in project parameters as plans continue to be refined as well as future oil and gas prices. Although the Company has attempted to identify important factors that could cause actual results to differ materially, there may be other factors that cause results not to be as anticipated, estimated or intended. There can be no assurance that such statements will prove to be accurate as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements. The Company disclaims any intention and has no obligation or responsibility, except as required by law, to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
