CALGARY, May 30, 2018 /CNW/ - Ikkuma Resources
Corp. ("Ikkuma" or the "Corporation") (TSXV: IKM) is pleased
to report its financial and operating results for the three months
ended March 31, 2018. Financial
and operational information is set out below and should be read in
conjunction with Ikkuma's March 31,
2018 unaudited interim financial statements and the related
management's discussion and analysis ("MD&A"). Ikkuma's
condensed unaudited interim financial statements and MD&A are
available for review at www.sedar.com and on the Corporation's
website at www.ikkumarescorp.com.
HIGHLIGHTS
- Achieved record average production for the first quarter of
2018 of 19,292 boe per day, an increase of 194% compared to 6,572
boe per day for the first quarter of 2017.
- Increased revenue by 140% to $24.7
million for the three months ended March 31, 2018 compared to $10.3 million for the three months ended
March 31, 2017.
- Decreased general and administrative expense by 51% to
$0.80 per boe for the three months
ended March 31, 2018 compared to
$1.63 per boe for the three months
ended March 31, 2017.
|
|
(Expressed in
thousands of Canadian dollars except per boe and
share amounts)
|
Three Months
Ended
|
March 31,
2018
|
|
March 31,
2017
|
OPERATIONS
|
|
|
|
|
|
Average daily
production
|
|
|
|
|
|
Natural gas
(mcf/d)
|
|
113,003
|
|
|
38,248
|
Light oil
(bbl/d)
|
|
193
|
|
|
80
|
NGLs
(bbl/d)
|
|
265
|
|
|
117
|
Total equivalent
(boe/d)
|
|
19,292
|
|
|
6,572
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Average
prices
|
|
|
|
|
|
Natural gas
($/mcf)
|
$
|
1.92
|
|
$
|
2.72
|
Light oil
($/bbl)
|
|
69.33
|
|
|
60.15
|
NGLs
($/bbl)
|
|
49.19
|
|
|
40.37
|
Operating
netback
|
|
|
|
|
|
Revenue
($/boe)
|
$
|
14.21
|
|
$
|
17.41
|
Realized gain on risk
management contracts ($/boe)
|
|
0.76
|
|
|
0.14
|
Royalties
($/boe)
|
|
(1.03)
|
|
|
(0.57)
|
Net operating
expenses ($/boe)
|
|
(11.38)
|
|
|
(8.08)
|
Transportation
expenses ($/boe)
|
|
(1.01)
|
|
|
(2.00)
|
Operating netback
(1) ($/boe)
|
$
|
1.55
|
|
$
|
6.90
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FINANCIAL
|
|
|
|
|
|
Petroleum and natural
gas revenues (2)
|
$
|
24,666
|
|
$
|
10,295
|
Cash provided by
operating activities
|
$
|
5,611
|
|
$
|
3,270
|
|
Per share – basic and
diluted
|
$
|
0.05
|
|
$
|
0.03
|
Funds flow from
operations (1)
|
$
|
240
|
|
$
|
2,729
|
|
Per share – basic and
diluted
|
$
|
0.00
|
|
$
|
0.03
|
Adjusted funds flow
(1)
|
$
|
327
|
|
$
|
2,828
|
|
Per share – basic and
diluted
|
$
|
0.00
|
|
$
|
0.03
|
Net income (loss) and
comprehensive income (loss)
|
$
|
(5,097)
|
|
$
|
2,464
|
|
Per share – basic and
diluted
|
$
|
(0.05)
|
|
$
|
0.03
|
Capital
expenditures
|
$
|
821
|
|
$
|
8,769
|
Property
acquisitions
|
$
|
2,711
|
|
$
|
-
|
Net debt
(1,3)
|
$
|
61,247
|
|
$
|
38,505
|
Shares outstanding
('000s)
|
|
109,335
|
|
|
94,244
|
Weighted average
shares outstanding
|
|
|
|
|
|
|
basic and diluted
('000s)
|
|
109,335
|
|
|
94,244
|
|
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(1)
Operating netback, funds flow from operations, adjusted funds
flow, net operating expenses and net debt are non-IFRS measures.
See "Non- IFRS Measures".
|
(2) Before
royalties.
|
(3) Net debt includes bank debt
under its Credit Facilities (as hereinafter defined), Term debt (as
hereinafter defined) and working capital deficiency (surplus),
excluding fair value of risk management contracts.
|
FINANCIAL AND OPERATING RESULTS
Average production for the first quarter of 2018 was 19,292 boe
per day, an increase of 194% compared to 6,572 boe per day for the
first quarter of 2017. The increase was primarily due to
production volumes related to the acquisition of assets located in
the Alberta Foothills and British Columbia Deep Basin (the
"Foothills Acquisition"), which closed on December 21, 2017.
Petroleum and natural gas revenues increased 140% to
$24.7 million for the three months
ended March 31, 2018 compared to
$10.3 million for the three months
ended March 31, 2017. The
increase was primarily due to increased production volumes
associated with the Foothills Acquisition.
Operating netbacks for the first quarter of 2018 were
$1.55 per boe compared to
$6.90 per boe for the first quarter
of 2017. The decrease in operating netbacks for the first
quarter of 2018 was primarily due to a 29% reduction in realized
natural gas prices and increased operating costs associated with
properties acquired with the Foothills Acquisition. As the
acquired properties are fully integrated into existing operations,
Ikkuma anticipates that field optimization initiatives will reduce
operating costs per boe throughout the remainder of 2018 and into
2019.
With increased production, general and administrative expense
per boe decreased by 51% to $0.80 per
boe for the three months ended March 31,
2018 compared to $1.63 per boe
for the three months ended March 31,
2017.
Adjusted funds flow for the three months ended March 31, 2018 of $0.3
million included realized gains of $1.3 million associated with the Corporation's
risk management program. In comparison, adjusted funds flow
for the three months ended March 31,
2017 was $2.7 million which
included $0.1 million of realized
gains on risk management contracts. For 2018, approximately
17% of the Corporation's expected average daily natural gas
production has been hedged at an average price of $2.55/GJ.
Capital expenditures for the three months ended March 31, 2018 were $0.8
million compared to $8.8
million for the three months ended March 31, 2017. During the first quarter of
2018, a right of first refusal ("ROFR") agreement associated with
the Foothills Acquisition did not close. Accordingly, the
properties and production associated with this ROFR agreement were
acquired by Ikkuma for $2.7
million.
Net debt, which includes the Corporation's syndicated credit
facility (the "Credit Facilities"), second lien senior secured term
debt facility ("Term debt") and a working capital deficiency
(excluding fair value of risk management contracts) was
$61.2 million as at March 31, 2018 compared to $58.0 million as at December 31, 2017. Bank debt was $1.7 million as at March
31, 2018 compared to $10.4
million as at December 31,
2017.
LIQUIDITY
On May 28, 2018 the Corporation
entered into an Amending Agreement with respect to its existing
Credit Facilities with its banking syndicate, whereby the borrowing
base was maintained at $25.0 million.
The Credit Facilities include $15.0
million which is available at full discretion of the
Corporation and $10.0 million is
restricted by the lenders. The Credit Facilities include a
restriction which prevents the funds from being used for capital
spending related to the Corporation's CEE flow-through share
obligations and related commitments. The renewal term out date for
the Credit Facilities was extended to May
30, 2019.
Ikkuma is actively pursuing several options to fund its 2018
flow-through share obligations. As previously announced, the
Corporation entered into a non-binding letter of intent to sell
certain midstream pending execution of a definitive purchase and
sale agreement. The Corporation also announced it has engaged
GMP FirstEnergy to sell non-core production and additional
infrastructure assets through a public process.
GUIDANCE
Due to the current low natural gas price environment, Ikkuma has
shut-in a portion of its gas production during the second quarter
of 2018. As a result, average daily production is expected to
be in the range of 15,500 – 16,500 boe/d in the second quarter of
2018. The Corporation plans to bring the shut-in portion of
its production on once natural gas prices improve, which is
expected in the fourth quarter of 2018.
As a result of shut in decisions, guidance for average daily
production in 2018 is now expected to be in the range of 16,500 –
17,500 boe/d from the previous guidance of 17,500 – 18,500 boe/d.
Production guidance excludes potential non-core asset
divestments.
ABOUT IKKUMA
Ikkuma Resources Corp. is a diversified growth-oriented public
oil and gas company listed on the TSX Venture Exchange under the
symbol "IKM", with holdings in both conventional and unconventional
projects in Western Canada. The Company is focused in the
Foothills Region of Western Canada
with a team that has extensive experience in the area with the
unique skills at successfully exploiting a complex and potentially
prolific play type. Corporate information can be found at:
www.ikkumarescorp.com.
Forward-Looking Statements and Information and Cautionary
Statements
This press release contains forward‑looking statements and
forward‑looking information within the meaning of applicable
securities laws including, without limitation, those listed under
"Risk Factors" and "Forward-looking Statements and Information" in
Ikkuma's Annual Information Form and in its other filings available
on SEDAR at www.sedar.com. The use of any of the words
"expect", "anticipate", "continue", "estimate", "objective",
"ongoing", "may", "will", "project", "should", "believe", "plans",
"intends" and similar expressions are intended to identify
forward‑looking statements or information. Forward-looking
statements and information in this press release includes, but is
not limited to, full optimization initiatives reducing operating
costs per boe throughout the remainder of 2018 and into 2019, the
sale of certain midstream assets and the sale of non-core
production and additional infrastructure assets through a public
process, the expected range of production during the second quarter
of 2018 and bringing on shut-in production once natural gas prices
improve in the fourth quarter of 2018 and the Corporation's
guidance for average daily production range of 16,500-17,500
boe/day in 2018. Although Ikkuma believes that the expectations and
assumptions on which the forward‑looking statements and information
are based are reasonable, undue reliance should not be placed on
the forward‑looking statements and information because Ikkuma
cannot give any assurance that they will prove to be correct.
Since forward‑looking statements and information address future
events and conditions, by their very nature they involve inherent
risks and uncertainties. Actual results could differ
materially from those currently anticipated due to a number of
factors and risks. These include but are not limited to the
risks associated with the oil and gas industry in general (e.g.,
operational risks in development, exploration and production;
delays or changes in plans with respect to exploration or
development projects or capital expenditures; the uncertainty of
reserve estimates; the uncertainty of estimates and projections
relating to production, costs and expenses; failure to obtain
necessary regulatory approvals for planned operations; health,
safety and environmental risks; uncertainties resulting from
potential delays or changes in plans with respect to exploration or
development projects or capital expenditures; volatility of
commodity prices, currency exchange rate fluctuations; imprecision
of reserve estimates; and competition from other explorers) as well
as general economic conditions, stock market volatility, and the
ability to access sufficient capital. We caution that the
foregoing list of risks and uncertainties is not
exhaustive.
In addition, the reader is cautioned that historical results
are not necessarily indicative of future performance. The
forward-looking statements and information contained in this press
release are made as of the date hereof and Ikkuma undertakes no
obligation to update publicly or revise any forward‑looking
statement or information, whether as a result of new information,
future events or otherwise, unless so required by applicable
securities laws.
Certain information set out herein may be considered as
"financial outlook" within the meaning of applicable securities
laws. The purpose of this financial outlook is to provide
readers with disclosure regarding Ikkuma's reasonable expectations
as to the anticipated results of its proposed business activities
for the periods indicated. Readers are cautioned that the
financial outlook may not be appropriate for other
purposes.
Non-IFRS Measures
This press release provides certain financial measures that
do not have a standardized meaning prescribed by IFRS. These
non-IFRS financial measures may not be comparable to similar
measures presented by other issuers. Funds flow from
operations, operating netback, net operating expenses and net debt
are not recognized measures under IFRS. Management believes
that in addition to net income (loss), funds flow from operations,
operating netback and net debt are useful supplemental measures
that demonstrate the Corporation's ability to generate the cash
necessary to repay debt or fund future capital investment.
Investors are cautioned, however, that these measures should not be
construed as an alternative to net income (loss), determined in
accordance with IFRS, as an indication of Ikkuma's performance.
Funds flow from operations is calculated by adjusting net
income (loss) for depletion and depreciation, exploration and
evaluation expense, impairment, gain (loss) on sale of petroleum,
natural gas and equipment, share-based payments, unrealized gain
(loss) on financial instruments and accretion. Operating
netback equals the total of petroleum and natural gas sales,
realized gains or losses on commodity contracts, less royalties,
transportation and net operating expenses. Net operating expense is
a non-IFRS measure calculated as operating expenses less other
income. Other income includes gas processing income earned
from fees charged to third parties at facilities where Ikkuma has
an ownership interest. Net debt is the total of cash and cash
equivalents plus accounts receivable, plus prepaids and deposits,
less accounts payable and accrued liabilities and bank
debt.
Oil and Gas Advisory
In this press release, the abbreviation boe means a barrel of
oil equivalent derived by converting gas to oil in the ratio of 6
Mcf of gas to 1 bbl of oil (6 Mcf:1 bbl). Boe may be
misleading, particularly if used in isolation. A boe
conversion ratio of 6 Mcf:1 bbl 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 Mcf:1 bbl, utilizing a conversion ratio on a 6 Mcf
of gas to 1 bbl of oil basis may be misleading as an indication of
value.
NEITHER 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 THIS RELEASE.
SOURCE Ikkuma Resources Corp.