CALGARY, ALBERTA--(Marketwired - Nov. 27, 2015) - Hawk Exploration Ltd. ("Hawk" or the "Corporation") (TSX VENTURE:HWK.A) is pleased to announce its results for the three and nine months ended September 30, 2015. The Corporation's interim financial statements for the three and nine months ended September 30, 2015 and its management's discussion and analysis for the three and nine months ended September 30, 2015 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
- Averaged production of 703 boe/d in the third quarter of 2015, an increase of 8% increase from 652 boe/d of production in the third quarter of 2014, despite limited capital expenditures in 2015;
- Increased production for the nine months ended September 30, 2015 to 725 boe/d, an 8% increase over the 671 boe/d of production for the nine months ended September 30, 2014;
- Reduced operating and transportation expense in the third quarter of 2015 to a combined $20.06 per boe, a 18% reduction from the $24.60 per boe in the third quarter of 2014;
- Generated cash flow from operations of $2.3 million for the nine months ended September 30, 2015, a 57% decrease from the $5.4 million of cash flow generated in the same period of 2014 due to substantially lower realized oil prices;
- Drilled one (1.0 net) vertical well heavy oil well in the third quarter of 2015.
Selected financial and operational information for the three and nine months ended September 30, 2015 is provided as follows:
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Three months ended Sept. 30, |
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Nine months ended Sept. 30, |
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2015 |
|
2014 |
%
Change |
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2015 |
|
2014 |
%
Change |
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| Financial ($000's except per share amounts) |
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|
| Petroleum and natural gas sales |
$ |
2,469 |
$ |
4,627 |
(47%) |
$ |
8,095 |
$ |
14,266 |
(43%) |
| Cash flow from operations (1) |
|
435 |
|
1,732 |
(75%) |
|
2,325 |
|
5,440 |
(57%) |
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Per share |
|
0.01 |
|
0.05 |
(80%) |
|
0.05 |
|
0.16 |
(69%) |
| Comprehensive income (loss) |
|
(8,380) |
|
131 |
(6,496%) |
|
(9,511) |
|
(185) |
5,041% |
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Per share |
|
(0.18) |
|
0.00 |
n/a |
|
(0.21) |
|
(0.01) |
2,000% |
| Capital expenditures (2) |
|
618 |
|
2,499 |
(75%) |
|
1,717 |
|
7,216 |
(76%) |
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| Working capital deficit - excluding bank debt and commodity contracts, end of period (1) |
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$ |
1,440 |
$ |
2,461 |
(41%) |
| Bank debt, end of period |
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|
|
8,950 |
|
6,900 |
30% |
| Total assets, end of period |
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$ |
29,426 |
|
37,442 |
(21%) |
| Common Shares outstanding end of period: |
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Class A Shares |
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45,576 |
|
45,576 |
-% |
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Options to acquire Class A Shares |
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|
|
4,485 |
|
4,527 |
(1%) |
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|
Three months ended Sept. 30, |
|
Nine months ended Sept. 30, |
| |
|
2015 |
|
2014 |
%
Change |
|
2015 |
|
2014 |
%
Change |
| |
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|
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| Operations |
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Production |
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Crude oil and natural gas liquids (bbl/d) |
|
680 |
|
632 |
8% |
|
703 |
|
652 |
8% |
| |
Natural gas (mcf/d) |
|
135 |
|
116 |
16% |
|
130 |
|
112 |
16% |
| |
Total (boe/d) |
|
703 |
|
652 |
8% |
|
725 |
|
671 |
8% |
| Average Selling Price |
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Crude oil and ngls (per bbl) |
$ |
38.86 |
$ |
78.79 |
(51%) |
$ |
41.64 |
$ |
79.30 |
(47%) |
| |
Natural gas (per mcf) |
|
3.03 |
|
4.09 |
(26%) |
|
2.86 |
|
4.93 |
(42%) |
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Total (per boe) |
|
38.20 |
|
77.18 |
(51%) |
|
40.91 |
|
77.91 |
(47%) |
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| Netbacks (per boe at 6:1) (3) |
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Price |
$ |
38.20 |
$ |
77.18 |
(51%) |
$ |
40.91 |
$ |
77.91 |
(47%) |
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Royalties |
|
(9.33) |
|
(16.89) |
(58%) |
|
(8.16) |
|
(16.40) |
(55%) |
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Production expense |
|
(18.67) |
|
(23.39) |
(20%) |
|
(18.10) |
|
(22.13) |
(18%) |
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Transportation expense |
|
(1.39) |
|
(1.21) |
15% |
|
(1.38) |
|
(1.56) |
(12%) |
| Operating netback ($/boe) |
$ |
8.81 |
$ |
35.69 |
(69%) |
$ |
13.27 |
$ |
37.82 |
(63%) |
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| (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 nine months ended September 30, 2015 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. |
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Operational Review
In the Eureka area of western Saskatchewan, Hawk drilled one (1.0 net) vertical well in the third quarter of 2015 in the Lower Mannville sand. Production for the third quarter of 2015 averaged 703 boe/d, an 8% increase from the 652 boe/d produced in the third quarter of 2014. Hawk's current production is approximately 675 boe/d, based on field estimates.
Financial
Hawk achieved cash flow from operations in the third quarter of 2015 of approximately $0.4 million compared to $1.7 million for the third quarter of 2014 as a result of substantially lower realized oil prices in the third quarter of 2015 compared to 2014. Average Western Canadian Select ("WCS") prices for the third quarter of 2015 decreased 57% to US$33.15 per bbl compared to US$76.99 per bbl in the third quarter of 2014, while the differential between WCS and West Texas Intermediate crude oil ("Differential") narrowed to US$13.30 per bbl in the third quarter of 2015 compared to US$20.18 per bbl for the third quarter of 2014. Cash flow from operations for the third quarter of 2015 was negatively impacted by a one-time gross overriding royalty adjustment of approximately $142,000 which was recognized as an expense in the third quarter of 2015.
Hawk generated an operating netback of $8.81 per boe for the third quarter of 2015 which is a 75% decrease from the operating netback for the third quarter of 2014 of $35.69 per boe due to significantly lower realized oil prices and as a result of the one-time royalty adjustment recognized in the third quarter. Hawk's average realized oil price for the third quarter of 2015 averaged $35.69 per bbl, a 55% decrease from the $78.82 per bbl realized oil price for the third quarter of 2014. The Corporation continues to see improvement in its cost structure as combined operating and transportation costs per boe for the third quarter of 2015 averaged $20.06 per boe compared to $24.60 per boe for the third quarter of 2014 which is an 18 percent reduction.
As a result of the continued decline in forecast benchmark commodity prices, the Corporation recorded a pre-tax impairment charge of approximately $7.4 million for the three and nine months ended September 30, 2015. For the three and nine months ended September 30, 2015, Hawk reported net losses of approximately $8.4 million and $9.5 million, respectively.
At September 30, 2015, Hawk had $8.95 million drawn on its credit facility and the Corporation's net debt, including working capital deficit, was approximately $10.4 million.
Outlook
For the fourth quarter of 2015, the Corporation plans to complete and equip the vertical well drilled at Eureka in the third quarter of 2015 as well as recomplete one (0.7 net) well in the Forest Bank area of western Saskatchewan. The Corporation has not set a 2016 capital budget but plans to do so in the first quarter of 2016.
The Corporation will continue to focus on debt reduction in light of the continued decline in commodity prices. Hawk continues to expect to see improvements in the overall cost structure in the industry as Hawk's operating and transportation costs per boe for the nine months ended September 30, 2015 have decreased by 18 percent from the same period of 2014.
Despite minimal capital investment in 2015, the Corporation's production has been resilient with production for both the three and nine months ended September 30, 2015 increasing by 8% over the comparative periods of 2014, while current production is estimated at 675 boe/d, based on field estimates.
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; the timing of and nature of capital expenditure program for the fourth quarter of 2015;the expected timing of the 2016 capital budget announcement; and the expected sources of funding for the 2015 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.
