Hawk Announces Second Quarter 2011 Results and Provides Operational Update
30 August 2011 - 9:57AM
PR Newswire (Canada)
CALGARY, Aug. 29, 2011 /CNW/ -- CALGARY, Aug. 29, 2011 /CNW/ - Hawk
Exploration Ltd. ("Hawk" or the "Corporation") announces its
results for the three and six months ended June 30, 2011. Selected
financial information for the three and six months ended June 30,
2011 is provided as follows: Three months Six months ended June 30,
ended June 30, % % 2011 2010 Change 2011 2010 Change Financial
($000's except per share amounts) Petroleum and $ 2,519 $ 1,845 37%
$ 4,760 $ 3,742 27% natural gas sales Funds flow from 1,180 745 58%
2,044 1,622 26% operations ((1)) Per share 0.05 0.03 67% 0.09 0.07
29% Comprehensive 160 (1,627) 110% 27 (2,260) 101% income (loss)
Per share 0.01 (0.07) 114% (0.00) (0.10) 100% Capital 4,753 2,546
87% 5,396 7,026 (23%) expenditures Working capital surplus
(deficit) - excluding bank debt $ (2,277) $ 2,761 (182%) and
commodity contracts, end of period Bank debt, end of 5,850 - -
period Total assets, end $ 32,625 25,379 29% of period Common
Shares outstanding, end of period: Class A 21,981 21,981 0% Shares
Class B 1,080 1,080 0% Shares Subscription receipts, convertible to
12,500 - - Class A Shares Options to acquire Class A 2,110 2,077
(2%) Shares Operations Production Crude oil and natural gas 336 305
10% 342 287 19% liquids (bbl/d) Natural gas 227 250 (9%) 307 320
(4%) (mcf/d) Total (boe/d) 374 346 8% 393 341 15% Average Selling
Price Crude oil and $ 79.63 $ 63.44 26% $ 73.32 $ 67.00 9% ngls
(per bbl) Natural gas (per 3.90 3.82 2% 3.94 4.49 (12%) mcf) Total
(per boe) 73.94 58.57 26% 66.85 60.72 10% Operating netback (per
boe at 6:1) ( (2)) Price $ 73.94 $ 58.57 26% $ 66.85 $ 60.72 10%
Royalties (13.42) (11.75) 14% (12.10) (12.43) (2%) Production
(16.68) (15.04) 11% (17.67) (14.66) 21% expense Transportation
(1.96) (1.64) 20% (1.81) (1.66) 9% expense Operating netback $
41.88 $ 30.14 39% $ 35.27 $ 31.97 10% ($/boe) ((1) )Management uses
funds flow from operations and funds flow from operations per share
to analyze operating performance, leverage and liquidity. Funds
flow from operations and funds flow from operations per share as
presented do not have any standardized meaning prescribed by
International Financial Reporting Standards ("IFRS") and therefore
may not be comparable with the calculation of similar measures by
other entities. ((2) )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 IFRS and therefore may not be
comparable with the calculation of similar measures by other
entities. HIGHLIGHTS Highlights for the three months ended June 30,
2011 were as follows: -- Increased petroleum and natural gas
revenue by 37% in the second quarter of 2011 compared to 2010, --
Generated record funds flow from operations of $1.2 million in the
quarter, an increase of 58% over the $0.7 million for the
comparable quarter of 2010, -- Recorded net income of $0.2 million
in the quarter compared to a net loss of $1.6 million for the
second quarter of 2010, -- Improved the Corporation's operating
netback to $41.88 per boe in the quarter compared to $29.27 per boe
for the first quarter of 2011, -- Drilled seven (4.2 net) wells in
west central Saskatchewan in the quarter as discussed in further
detail below, -- Closed a bought deal private placement of
subscription receipts for gross proceeds of $10 million, and --
Increased the Corporation credit facility from $7.5 million to $11
million, comprised of an $8.5 million revolving line of credit and
a $2.5 million dollar development line. OPERATION UPDATE Hawk had
an active second quarter of 2011, drilling seven (4.2 net) wells in
western Saskatchewan including three (2.2 - net) vertical oil wells
at Edam, Silverdale and Hoosier as well as four (2.0 - net)
dual-leg horizontal wells at Seagram Lake. At Edam, Hawk drilled
the 06-34-48-20W3well which encountered 4.5 meters of oil pay in
the Waseca formation. This well has been completed and equipped and
is on production at 25 (25 - net) barrels of oil per day ("bbl/d").
At Silverdale, Hawk drilled the 05-23-48-28W3well and encountered
7.0 meters of oil pay in the Sparky formation. This well was
completed and equipped and is currently producing at 50 (11.9 -
net) bbl/d. At Hoosier, the Corporation drilled a well at
04-26-32-27W3 which encountered 4.0 meters of oil pay in the Basal
Mannville formation. The well is currently being completed. In
Seagram Lake, the Corporation experienced mixed results. A total of
four (2.0 - net) dual-leg horizontal wells were drilled testing
different sections of land in the Leduc pool. The 05-32-42-24W3
well was drilled adjacent to Hawk's existing producing single leg
horizontal well at 12-32-42-24W3. The 05-32 well encountered good
reservoir with excellent oil staining along both horizontal legs
with a total open-hole length of 2,256 meters. The well was
completed with a selective foam acid stimulation, placed on
production in late July and has been producing at an average rate
of 170 (85 - net) bbl/d with a water cut of 38 percent. Hawk also
drilled two (1.0 - net) dual-leg horizontal wells at 08-33-42-24W3,
testing the section immediately to the east of the original 12-32
producing well and at 16-28-42-24W3, testing the section
immediately to the south of the original producing well. Both wells
encountered good reservoir with excellent oil staining along both
horizontal legs with open-hole lengths of 2,140 meters for the
08-33 well and 2,256 meters for the 16-28 well. Both wells were
completed with a similar foam acid stimulation and were placed on
production in late July. However, unlike the successful 05-32 well,
these wells have thus far produced mainly water with small amounts
of oil. A service rig is currently on the 08-33 well with downhole
packers to attempt to isolate the water source and allow the oil to
be produced. Hawk also drilled a fourth dual-leg horizontal well at
a 50% working interest at 05-33-42-23W3, testing the far eastern
edge of the Leduc formation approximately six miles to the east of
the original 12-32 producing well. The drilling of this farm-in
well also earned the Corporation significant additional lands of
eleven (5.5 net) sections. This well encountered moderate reservoir
with intermittent oil staining along both horizontal legs with a
total open-hole length of 1,002 meters. This well was also
completed with a selective foam acid stimulation but has thus far
only produced water with a trace amount of oil. This well is
currently shut-in awaiting results from the water shut off
operations being conducted at the 08-33 horizontal well. In
summary, the drilling this past quarter at Seagram Lake proved up a
significant amount of discovered petroleum initially-in-place. Hawk
estimates that on its controlled lands there is 185 (92.5 net)
million barrels of discovered petroleum initially-in-place. The
challenge going forward is to determine why some wells have proved
to be successful while other wells have encountered water sources.
Hawk will continue to experiment with different drilling and
completion techniques to optimize the profitability of this
project. Financial Hawk achieved record funds flow from operations
in the second quarter of 2011 of approximately $1.2 million and
generated strong operating netbacks of $41.88 per boe. The
Corporation's operating netback of $41.88 increased 39 percent
compared to the second quarter of 2010 due to higher realized
commodity prices. Hawk had bank debt of $5.85 million at June 30,
2011 on an existing revolving line of credit of $8.5 million and
had a working capital deficit of $2.3 million. On May 18, 2011, the
Corporation closed a bought deal private placement of 12.5 million
subscription receipts at a price of $0.80 per subscription receipt
for gross proceeds of $10 million. On July 7, 2011, the
subscription receipts were deemed to be exercised for 12.5 million
Class A Shares and the Corporation received the net proceeds of the
offering. In May 2011, Hawk expanded its credit facility to $11
million, comprised of an $8.5 million revolving line of credit and
a $2.5 million acquisition and development line of credit, with the
next review date to occur on or before September 30, 2011. The
Corporation continues to maintain a solid balance sheet. The pro
forma net debt and working capital at June 30, 2011 including the
proceeds of its equity offering received on July 7, 2011 would be a
positive working capital of approximately $1.8 Million. Outlook
Hawk plans to continue to monitor the production from the recently
drilled wells at Seagram Lake and plans to drill an additional one
to two (0.5 to 1.0 - net) single leg horizontal wells at Seagram
Lake in the second half of 2011. Hawk also plans to drill an
additional four (3.2 - net) vertical wells targeting heavy oil in
the Lloydminster area of western Saskatchewan during the balance of
2011. Hawk's current production is approximately 500 boe/d
comprised of over 90 percent crude oil. The unaudited financial
statements and management's discussion and analysis for the interim
period ended June 30, 2011 have been filed on SEDAR and are
available for viewing at www.sedar.com or on the Corporation's
website at www.hawkexploration.ca. 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 and Class B Shares of
Hawk trade on the TSX Venture Exchange under the trading symbols of
HWK.A and HWK.B, respectively. 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;
capital expenditure programs for the remainder of 2011; and the
expected sources of funding for the 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.
Discovered petroleum initially-in-place ("DPIP") is also a
forward-looking statement, and there are numerous uncertainties
inherent in estimating DPIP and no assurance can be given that the
indicated level of DPIP or its recovery will be realized. 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. To view this news release in HTML
formatting, please use the following URL:
http://www.newswire.ca/en/releases/archive/August2011/29/c7024.html
table border="0" valign="top" tr td bSteve Fitzmaurice /bbr/
President, CEO and Chairman br/ Tel: (403) 264-0191 Ext
225 br/ Email: a href="mailto:steve@hawkexploration.ca"
cr="true"steve@hawkexploration.ca/a /td td br/ br/ br/ /td td
br/ br/ br/ /td td br/ br/ br/ /td td bDennis Jamieson/bbr/ Chief
Financial Officerbr/ Tel: (403) 264-0191 Ext 234br/ Email: a
href="mailto:dennis@hawkexploration.ca"denn/aa
href="mailto:dennis@hawkexploration.ca"is@hawkexploration.ca/a /td
/tr /table
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