Americas Petrogas Inc. ("Americas Petrogas" or the "Company") (TSX VENTURE:BOE)
announces its first quarter 2014 results.
Summary Financial and Operational Highlights
Selected financial and operational information is outlined below and should be
read in conjunction with the Company's 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 at www.americaspetrogas.com. All
amounts are in Canadian dollars unless otherwise stated.
($ in thousands, except share, per share, and
per barrel amounts) Three months ended March 31
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2014 2013
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Gross oil sales revenue $ 9,108 $ 16,450
Net revenue(1) $ 7,763 $ 14,347
Operating netback (including Oil Plus
benefits)(2) $ 4,094 $ 13,167
Operating netback (including Oil Plus
benefits) per barrel(2) $ 36.73 $ 60.88
Operating netback (excluding Oil Plus
benefits) per barrel(2) $ 36.73 $ 47.70
Net income (loss) attributable to owners of
the Company(3) $ (24,557) $ 4,338
Earnings (loss) per share- basic and diluted $ (0.12) $ 0.02
Funds flow from operations(4) $ 2,047 $ 9,874
Per share - basic $ 0.01 $ 0.05
Per share - diluted $ 0.01 $ 0.05
Weighted average number of common shares
outstanding(5)
Basic 212,572,440 212,760,484
Diluted 214,139,198 216,952,633
Cash flow from operating activities $ 8,860 $ 5,465
Capital expenditures $ 10,948 $ 27,296
Average barrels sold per day 1,238 2,403
Average selling price per barrel $ 81.72 $ 76.06
($ in thousands) March 31, 2014 December 31, 2013
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Cash and cash equivalents $ 15,217 $ 18,334
Working capital(6) $ 14,746 $ 21,687
Equity outstanding
Common shares 212,572,440 212,572,440
Stock options 17,946,093 17,946,093
Notes:
1. "Net revenue" is an additional GAAP measure because it is presented in
the consolidated statement of income (loss). Net revenue is gross
revenue less royalties. The Company uses "net revenue" as an indicator
of operating performance.
2. "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 March 31, 2014, operating netback was $4.1 million
(calculated as gross oil sales revenue of $9.1 million less royalties of
$1.3 million and production costs of $3.7 million). For the three months
ended March 31, 2013, operating netback was $13.2 million (calculated as
gross oil sales revenue of $16.5 million less royalties of $2.1 million
and production costs of $1.2 million).
3. The net loss in 2014 includes a non-cash foreign exchange loss of $17.97
million associated with the Company's USD intercompany loans. See note
16(c) of the Company's condensed interim consolidated financial
statements for the three months ended March 31, 2014 and section "1.4
Results of Operations -- Foreign Exchange Gain/Loss and Other
Comprehensive Income/Loss" of the Company's MD&A for the quarter.
4. "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.
5. 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
months ended March 31, 2014, 1,566,758 (three months ended March 31,
2013 - 4,192,149) common shares were deemed to be issued for no
consideration in respect of options.
6. Working capital is a non-GAAP measure and is calculated as current
assets less current liabilities. Working capital is used to assess
liquidity and 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.
-- Net loss: The loss for 2014 of $24.6 million is primarily attributable
to a non-cash, foreign exchange loss of $17.97 million on intercompany
loans between the Canadian parent company and its Argentina subsidiary,
which arose primarily due to an approximate 20% decline in the Argentina
Peso against the US dollar in January 2014. For the three months ended
March 31, 2013, net income was $4.3 million.
-- Cash position: $15.2 million of consolidated cash and cash equivalents
as of March 31, 2014. In May 2014, the Company announced that it had
executed an underwriting agreement to raise gross proceeds of $15
million. For additional information, see "Highlights and Recent
Activities" below.
-- Oil Plus benefits: during the first quarter of 2014, the Company did not
recognize any Oil Plus benefits, though $7.3 million of Oil Plus
benefits (recognized in 2013) were collected in January 2014. During the
year ended December 31, 2013, the Company recognized $25.5 million of
Oil Plus benefits (related to production and reserve increases). As of
the current date, a total of $26.8 million of Oil Plus benefits have
already been collected. An additional $16.2 million has been applied for
and remains to be collected.
Highlights and Recent Activities
-- In May 2014, the Company entered into an underwriting agreement with a
syndicate of underwriters to raise $15 million in gross proceeds (the
"Offering"). The Company has filed a preliminary short form prospectus
in connection with the Offering, which is being conducted in all
provinces in Canada (except Quebec) and outside of Canada where
permitted under applicable securities laws. The Offering consists of
16,666,666 units (the "Units") of the Company at an offering price of
$0.90 per Unit, with each Unit consisting of one Common Share and one-
half of one Common Share purchase warrant (each whole Common Share
purchase warrant, a "Warrant"). Each Warrant is exercisable for a period
of 36 months following closing at an exercise price of $1.125 per Common
Share. The Company has granted to the underwriters an over-allotment
option which entitles the underwriters to acquire up to an additional
15% of the Units distributed in the Offering at the Offering price at
any time up to 30 days following the closing of the Offering. The
Company expects to close the Offering on or about June 6, 2014, subject
to satisfaction of customary closing conditions. In connection with the
Offering, the underwriters will receive a cash commission equal to 6% of
the gross proceeds raised under the Offering and non-transferable
compensation options entitling the Underwriters to acquire up to 500,000
Units (575,000 Units if the over-allotment option is exercised in full)
for a period of 12 months from the closing date of the Offering at $0.90
per Unit having the same terms as the Units comprising the Offering.
-- On September 19, 2013, Americas Petrogas announced a strategic review,
which commenced a process to review strategic alternatives for
maximizing shareholder value. The Company engaged Jefferies LLC as its
sole financial advisor to assist management in evaluating a range of
strategic alternatives. The strategic review is ongoing and the Company
continues to evaluate a range of alternatives.
-- So far in 2014, as the Company reduces its capital expenditures in an
effort to preserve its cash position while the strategic review with
Jefferies is ongoing, oil sales volumes in 2014 have been lower in
comparison to 2013. Sales volumes during the first quarter of 2014,
including oil sales from testing unconventional wells, averaged 1,238
bopd (net), a decrease over the average daily production during the same
period in 2013, which was 2,403 bopd (net).
-- As of January 2014, the Company successfully completed and brought on-
stream its own power generation facility at Medanito Sur using
associated gas from oil production. This now allows substantially all of
the operations at Medanito Sur to be powered via the produced gas. This,
in turn, has reduced the need for rental generators and associated
diesel and labour costs. Management estimates that it will be able to
power approximately 400 pump jacks and associated surface process
facilities using this system.
-- In April 2014, the Company began a gas reinjection program, injecting
approximately 1 million cubic feet per day (mmcfd) of produced gas into
the top of the El Tordillo formation at the easternmost updip area of
the El Jabali Field. The total gas treatment and injection capacity is 7
mmcfd.
-- In May 2014, the Peruvian state-owned company Activos Mineros S.A.C. and
the Executive Director of ProInversion executed the transfer agreement
formally granting the Bayovar Property to APPSA, Americas Petrogas'
Peruvian subsidiary.
-- The Company obtained an extension until September 2015 of its
exploration contract terms for the Totoral, Yerba Buena and Bajada
Colorada Blocks while returning to the government a total of
approximately 1,510 square kilometers in the three blocks, leaving the
Company with 3,048 square kilometres or 753,200 acres gross (2,743
square kilometres or 677,880 acres net). Ryder Scott Company estimated
(updated as of March 31, 2014) that the Company has 7.56 billion BOE P50
Best Case Unrisked Prospective (Recoverable) Resources (27%
oil/condensate and 73% gas) in the Company's nine unconventional shale
oil and shale gas properties. The original estimates (8.3 billion BOE
P50 Best Case Unrisked Prospective (Recoverable) Resources) were
included in a report prepared as of June 30, 2013 but, subsequently, the
estimates were amended to account for the aforementioned return of lands
to the government on the Totoral, Yerba Buena and Bajada Colorada
Blocks. The Ryder Scott estimates only considered the Vaca Muerta, Agrio
and Los Molles shales. The report did not consider additional zones of
interest such as the Mulichinco, Quintuco, Tordillo, and other
prospective formations.
For further information regarding the Company's financial results, financial
position and related changes, please see the interim 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 Neuquen Basin of Argentina. Americas Petrogas has joint
venture partners, including ExxonMobil and YPF, on various blocks in the shale
oil and gas corridor in the Neuquen 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.
Forward Looking Information
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, reviewing various strategic alternatives,
exploration, appraisal and development activities related to conventional and
unconventional oil and gas, other exploration, development and production
activities in respect of the projects in Argentina and Peru, and closing of the
Offering. 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 Annual MD&A and Annual
Information Form for the year ended December 31, 2013, and reference should be
made to the additional disclosures of the assumptions, risks and uncertainties
relating to such forward-looking information in those 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 and the risk
of being unable to raise significant funds on terms acceptable to the Company to
meet its capital and operating expenditure requirements in respect of its
properties.
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.
Prospective Resources are those quantities of petroleum estimated, as of a given
date, to be potentially recoverable from undiscovered accumulations by
application of future development projects. Prospective resources have both an
associated chance of discovery and a chance of development. Uncertainty Ranges
are described by the COGEH as low, best, and high estimates for reserves and
resources. The Best Estimate is considered to be the best estimate of the
quantity that will actually be recovered. It is equally likely that the actual
remaining quantities recovered will be greater or less than the best estimate.
If probabilistic methods are used, there should be at least a 50 percent
probability (P50) that the quantities actually recovered will equal or exceed
the best estimate.
In the case of undiscovered resources or a subcategory of undiscovered
resources, there is no certainty that any portion of the resources will be
discovered. If discovered, there is no certainty that it will be commercially
viable to produce any portion of the resources. For undiscovered hydrocarbons,
the term 'unrisked' means that no geologic or chance of discovery ("play risk")
has been incorporated into the hydrocarbon volume estimates.
The estimates of resources for individual properties may not reflect the same
confidence level as estimates of resources for all properties, due to the
effects of aggregation.
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.
FOR FURTHER INFORMATION PLEASE CONTACT:
Americas Petrogas Inc.
Barclay Hambrook, P. Eng., MBA
President and CEO
(403) 685-1888
inquiries@americaspetrogas.com
www.americaspetrogas.com
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