CALGARY, ALBERTA--(Marketwired - April 20, 2016) - Hawk Exploration Ltd. ("Hawk" or the "Corporation") (TSX VENTURE:HWK.A) announces that it has filed on SEDAR its audited annual financial statements, and related management's discussion and analysis for the year ended December 31, 2015. The Corporation has also filed on SEDAR its Form 51-101F1 - Statement of Reserves Data and Other Oil and Gas Information as of December 31, 2015; Form 51-101F2 - Report on Reserves Data by Independent Qualified Reserves Evaluator; and Form 51-101F3 - Report of Management and Directors on Oil and Gas Disclosure as mandated by National Instrument 51-101 - Standards of Disclosure for Oil and Gas Activities of the Canadian Securities Administrators. Copies of these filings can be found at www.sedar.com or on the Corporation's website at www.hawkexploration.ca under Investor Info - Financial Reports.
HIGHLIGHTS
Highlights for the year ended December 31, 2015 were as follows:
- Reported record annual production of 712 boe/d in 2015, a 3% increase from the 691 boe/d in 2014, despite limited capital expenditures during the year;
- Drilled two (1.7 net) wells in western Saskatchewan in 2015 resulting in two (1.7 net) oil wells;
- Decreased operating and transportation expense in 2015 by 16% to a combined $19.22 per boe compared to $22.89 per boe in 2014;
- Increased total proved plus probable reserves by 16% in 2015 to 3,338 thousand barrels of oil equivalent ("MBoe") from 2,875 MBoe in 2014 and increased total proved reserves by 11% in 2015 to 1,481 MBoe from 1,335 MBoe in 2014; and
- Added total proved plus probable reserves in 2015 at a finding and development cost of $6.96 per Boe, including the change in future development costs and added total proved reserves at a finding and development cost of $11.35 per Boe, including the change in future development costs.
Selected financial and operational information for the year and three months ended December 31, 2015 are provided as follows:
| |
Three months ended
December 31, |
|
Year ended
December 31, |
|
| |
2015 |
2014 |
% Change |
|
2015 |
|
2014 |
|
% Change |
|
| Financial ($000's except per share amounts) |
|
| Petroleum and natural gas sales |
$ |
1,901 |
$ |
4,136 |
(54 |
%) |
$ |
9,996 |
|
$ |
18,402 |
|
(46 |
%) |
| Cash flow from operations (1) |
|
388 |
|
1,816 |
(79 |
%) |
|
2,713 |
|
|
7,256 |
|
(63 |
%) |
| |
Per share |
|
0.01 |
|
0.04 |
(75 |
%) |
|
0.06 |
|
|
0.19 |
|
(68 |
%) |
| Comprehensive income (loss) |
|
2,377 |
|
397 |
498 |
% |
|
(7,134 |
) |
|
212 |
|
n/a |
|
| |
Per share |
|
0.05 |
|
0.01 |
400 |
% |
|
(0.16 |
) |
|
(0.00 |
) |
n/a |
|
| Capital expenditures (2) |
|
368 |
|
3,453 |
(89 |
%) |
|
2,085 |
|
|
10,669 |
|
(80 |
%) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
| |
Three months ended
December 31, |
|
Year ended
December 31, |
|
| |
2015 |
|
2014 |
|
% Change |
|
2015 |
|
2014 |
|
% Change |
|
| Working capital deficit - excluding bank debt and commodity contracts, end of period (3) |
|
|
|
|
|
|
|
|
$ |
1,269 |
|
$ |
3,298 |
|
(62 |
%) |
| Bank debt, end of period |
|
|
|
|
|
|
|
|
|
9,100 |
|
|
7,700 |
|
18 |
% |
| Total assets, end of period |
|
|
|
|
|
|
|
|
$ |
32,035 |
|
$ |
39,801 |
|
(20 |
%) |
| Common Shares outstanding end of period: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Class A Shares |
|
|
|
|
|
|
|
|
|
45,576 |
|
|
45,576 |
|
- |
% |
| |
Options to acquire Class A Shares |
|
|
|
|
|
|
|
|
|
4,485 |
|
|
4,527 |
|
(1 |
%) |
| Operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Production |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Crude oil and natural gas liquids (bbl/d) |
|
654 |
|
|
733 |
|
(11 |
%) |
|
690 |
|
|
673 |
|
3 |
% |
| |
Natural gas (mcf/d) |
|
124 |
|
|
110 |
|
13 |
% |
|
129 |
|
|
112 |
|
15 |
% |
| |
Total (boe/d) |
|
675 |
|
|
751 |
|
(10 |
%) |
|
712 |
|
|
691 |
|
3 |
% |
| Oil and liquids as percent of total |
|
97 |
% |
|
98 |
% |
(1 |
%) |
|
97 |
% |
|
97 |
% |
- |
% |
| Average Selling Price |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Crude oil and ngls (per bbl) |
$ |
31.10 |
|
$ |
60.77 |
|
(49 |
%) |
$ |
39.13 |
|
$ |
74.21 |
|
(47 |
%) |
| |
Natural gas (per mcf) |
|
2.61 |
|
|
3.61 |
|
(28 |
%) |
|
2.80 |
|
|
4.60 |
|
(64 |
%) |
| |
Total (per boe) |
|
30.62 |
|
|
59.82 |
|
(49 |
%) |
|
38.45 |
|
|
72.95 |
|
(47 |
%) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Operating netback (per boe at 6:1) (4) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Price |
$ |
30.62 |
|
$ |
59.82 |
|
(49 |
%) |
$ |
38.45 |
|
$ |
72.95 |
|
(47 |
%) |
| |
Royalties |
|
(4.74 |
) |
|
(13.11 |
) |
(64 |
%) |
|
(7.34 |
) |
|
(15.50 |
) |
(53 |
%) |
| |
Production expense |
|
(16.80 |
) |
|
(19.43 |
) |
(14 |
%) |
|
(17.79 |
) |
|
(21.39 |
) |
(17 |
%) |
| |
Transportation expense |
|
(1.61 |
) |
|
(1.34 |
) |
20 |
% |
|
(1.43 |
) |
|
(1.50 |
) |
(5 |
%) |
| Operating netback ($/boe) |
$ |
7.47 |
|
|
25.94 |
|
(71 |
%) |
$ |
11.89 |
|
|
34.56 |
|
(66 |
%) |
| |
|
| (1) |
Management uses cash flow from operations and cash flow from operations per share to analyze operating performance, leverage and liquidity. Cash flow from operations and cash flow from operations per share as presented do not have any standardized meaning prescribed under Generally Accepted Accounting Principles ("GAAP") and therefore 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) |
Working capital is a non-GAAP measure that includes trade and other accounts receivable, prepaid expenses, and trade and other accounts payables. |
| (4) |
Management considers operating netbacks as an important measure as it demonstrates profitability relative to current commodity prices. Operating netbacks do not have a standardized meaning prescribed by GAAP and therefore may not be comparable with the calculation of similar measures by other entities. |
Operational Review and Update
In 2015, Hawk drilled only two (1.7 net) vertical wells due to the decline in commodity prices during the year. The 2015 drilling program resulted in two (1.7 net) vertical producing oil wells in its core area of western Saskatchewan. At Forest Bank, the Corporation drilled its second earning well under a farm-in agreement where Hawk paid 100% of the drilling, completion and equipping to earn a 65% working interest in this well and one section of land. The well was completed in the Sparky Formation and placed on production in February 2015 and it produced 21,550 (net - 14,008) bbls during the year, or 65 (net - 42) bbl/d. The well is currently producing at a rate of 70 (net - 46) bbl/d. This was a significant discovery for the Corporation which has identified several follow up locations from its seismic data in the area, some of which are included in the Corporation's year end reserve report.
Hawk's second well was drilled in the third quarter of 2015 in the Eureka area which again was the Corporation's second earning well under a farm-in agreement. With the drilling of this well, Hawk earned a 100% working interest in 160 acres of land at Eureka, and an option on a further 480 acres. This well encountered 18 metres of oil pay in the Lower Mannville Formation and is currently producing 15 bbl/d.
Hawk's current production is estimated at approximately 575 boe/d with an additional 125 bbl/d of shut-in production from higher operating cost wells. Hawk expects to reactivate these wells once the price of oil has improved.
Financial
Due to a significant decline in commodity prices in 2015, revenue for the year decreased by 46 percent to $10.0 million from $18.4 million in 2014 despite a slight increase in annual production for the year. Hawk's 2015 annual production increased 3 percent to 712 boe/d compared to 691 boe/d in 2014 while the Corporation's average sales price decreased 47 percent in 2015 to average $38.45 per bbl compared to $72.95 per bbl in 2014.
Hawk achieved cash flow from operations in 2015 of approximately $2.7 million compared to $7.3 million for 2014. The Corporation generated an operating netback of $11.89 per boe in 2015, a 66 percent decrease compared to the 2014 operating netback of $34.56 per boe due to a significant decrease in the Corporation's realized pricing.
Outlook
Hawk has assembled an excellent inventory of drilling opportunities within its core areas at Eureka and Forest Bank as evidenced by the Corporation's 16 percent increase in proved plus probable reserves in 2015 despite limited capital investment and limited drilling activity during the year. However, during the first quarter of 2016, WCS heavy oil prices averaged US$19.21 per bbl which is a 31% decrease from the average WCS price for the fourth quarter of 2015 of US $27.69, making it an exceptionally challenging price environment for heavy oil companies. In response to this challenging price environment, the Corporation had no capital spending in the first quarter of 2016 and has minimal capital planned the remainder of the year unless commodity prices increase and the Corporation has the liquidity to fund development activity. Additionally, in January 2016, the Corporation's six full time employees all agreed to varying cuts in salary which are expected to reduce Hawk's salary requirements in 2016 by 50 percent compared to 2015 levels. Despite these factors the Corporation is expected to report negative cash flow for the first quarter of 2016.
Hawk has initiated a formal process to seek value maximizing proposals with a view to enhance shareholder value which may result in a corporate sale or material asset sale transaction. During this process, the Corporation will continue to focus on its near and long term business plan, centered on a commitment to effective cost management.
Updated Corporate Presentation
An updated corporate presentation has been posted on Hawk's website at www.hawkexploration.ca, and can be located on the home page under Investors.
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; current estimated production levels; and expected first quarter 2016 cash flow.
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.
