Total production up 43%

Manitok Energy (ticker: MEI) announced first quarter results today, showing a net loss of $3.8 million, or ($0.01) per share.

Manitok has grown significantly in the last year, with production growing from 4,407 BOEPD in Q1 2016 to 6,300 BOEPD in Q1 2017. This 43%year-over-year growth is primarily driven by Manitok’s expanding natural gas production, which grew by 66% in the last year. Light oil makes up about 26% of the company’s production, while natural gas provides 63% and NGLs make up the remaining 11%.

Average commodity prices have improved as well, with the company receiving significantly more for production this quarter than Q1 2016. The company reports that its production-weighted average sale price was C$29.89/BOE, up 32% from the C$22.63/BOE received in Q1 2016.

Amended lease terms refocus on core assets

Manitok also recently announced amended terms for one of its lease and drilling commitments. The agreement is with an undisclosed Alberta based royalty company. Under the new agreement, announced May 24, Manitok will surrender about 148,000 acres of undeveloped leased lands and pay a cash consideration of just under $2 million. In addition, Manitok will transfer its seismic data on the acreage to the royalty company.

In exchange, the royalty company will decrease Manitok’s remaining drilling and completion expenditure commitment from $50 million to $24 million. Manitok will extend its term on 3,885 acres of undeveloped land that was previously due to expire in June, but will instead be renewed for another three years. Finally, the new agreement terms will allow Manitok to extend the primary term for all undeveloped land through the end of 2020 for a higher upfront cost but no capital commitment.

This agreement allows Manitok to focus on its core properties, while removing commitments to develop non-core assets. Manitok reports that the lands retained in the agreement have about 100 potential drilling locations.

Craft Oil acquisition adds acreage

Manitok also announced the acquisition of Craft Oil earlier in May, adding about 48,000 acres for $6.6 million in stock. Craft shareholders will meet on June 5 to consider approval of the transaction. The Craft Board of Directors has already unanimously agreed to recommend the approval of the arrangement.


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