Alexander Energy Ltd

April 23, 2013 17:26 ET

Alexander Energy Ltd. Announces Fourth Quarter and Year End 2012 Results

CALGARY, ALBERTA--(Marketwired - April 23, 2013) - Alexander Energy Ltd. ("Alexander" or the "Company") (TSX VENTURE:ALX) announces that it has filed its Audited Financial Statements and related Management's Discussion and Analysis for the year ended December 31, 2012, along with other disclosure documents for 2012, all of which are available on the Company's profile at ("SEDAR").

Message to Shareholders

Alexander Energy Ltd. has made consistent progress since the September, 2012 Annual General Meeting; we have a new CEO, Jim Sanden, and a new COO, David Oginski. All of our people are motivated and working diligently. The Company has had drilling and workover success, production and cash flow are up, the debt to cash flow ratio is decreasing, and our share price has increased.

Alexander's December, 2012 production averaged 929 barrels of oil equivalent per day (48 % oil), an increase of 263 barrels of oil equivalent per day or 30% over average third-quarter 2012 production.

As announced by the Company in its press release of March 4, 2013, at December 31, 2012, the Company had an 8% increase in the value of proved plus probable reserves (NPV 10%) to $35.5 million notwithstanding the lower price deck of forecast commodity prices. The Company replaced 169% of 2012 production on a proved plus probable basis. A summary of the McDaniel Report, and additional oil and gas information, is contained in the Company's 51-101F1 report included with the Company's year- end filings on SEDAR. The estimated future net revenue and NPV's contained in the McDaniel Report does not necessarily represent the fair market value of the Company's reserves.

In Q4 2012 and Q1 2013 the Company drilled and cased three Detrital sand oil wells on its Alexander property at an average working interest ("WI") of 89%:

  • The 15-12-56-27W4 well was put on-stream in December, 2012 at the rate of 69 bbl/day of oil (65 bbl/day net) and 100 mcf/day of natural gas (94 mcf/day net). Alexander WI - 94%.

  • The 7-7-56-26W4 well was completed in March, 2013 and flow tested at the rate of 81 bbl/day (64 bbl/day net) and 70 mcf/day of natural gas (55 mcf/day net). Alexander WI - 79%.

  • The 12-12-56-27W4 well was drilled in March, 2013 and well logs indicate three meters of excellent Detrital oil pay. The 12-12 well will be completed and tested immediately after spring breakup. Alexander WI - 94%.

There are several projects Alexander expects to complete during the balance of 2013. All of these projects should add significant value:

  • Oil Treating - currently the Company is trucking oil 120 km and paying to remove and dispose the associated water. We have identified modifications to our treating facilities that will enable us to sell clean oil to any of several terminals in our area. We expect a decrease in trucking and treating costs, and an increase in the sales price for our oil.

  • Detrital wells - the Company expects to drill at least two additional Detrital oil wells during the balance of 2013. The locations are seismically defined and if successful will add reserves and production.

  • New Lands - the Company has recently acquired additional lands and 3D seismic east of and adjacent to our current Alexander area lands. Further 3D seismic shooting and reprocessing is expected to be carried out in 2013 to determine if the Detrital oil pool extends onto these lands.

  • Basal Quartz Production - We currently drill through the BQ sands that are situated uphole of the Detrital zone. We have many producing Detrital oil wells that show BQ oil on logs. Alexander is examining ways to evaluate the productive capacity of this zone - a horizontal well, dual completions or a vertical drilling program.

Your Company has turned around since the AGM of September, 2012. Your CEO, COO and CFO are providing a positive environment and direction for your Company. They have been successful in increasing production, reducing operating costs and creating some room to grow. Alexander has made progress in each of these areas and we are optimistic that we can continue to be successful in 2013.

Three months ended
Dec. 31,
Years ended
Dec. 31,
2012 2011 2012 2011
Financial (thousands, except per share)
Production revenues $ 3,398 $ 2,293 $ 12,076 $ 9,745
Cash flow from operations 990 (35 ) 4,291 3,151
Per share 0.02 - 0.07 0.05
Comprehensive income (loss) (118 ) (5,636 ) 820 (6,516 )
Per share $ - $ (0.09 ) $ 0.01 $ (0.11 )
Three months ended
Dec. 31,
Years ended
Dec. 31,
2012 2011 2012 2011
Operating (boe conversion 6:1 basis)
Oil (bbl/day) 415 182 376 207
Natural gas (mcf/day) 2,132 2,559 2,121 2,670
Oil equivalent (boe/day) 770 608 730 652
Product prices
Oil ($/bbl) $ 71.65 $ 88.59 $ 73.50 $ 79.61
Natural gas ($/mcf) 3.38 3.45 2.57 3.83
Oil equivalent ($/boe) $ 47.95 $ 40.98 $ 45.32 $ 40.96
Three months ended
Dec. 31,
Years ended
Dec. 31,
2012 2011 2012 2011
Netbacks ($/boe)
Production revenues $ 47.95 $ 40.98 $ 45.32 $ 40.96
Royalties (10.95 ) (3.04 ) (6.78 ) (5.59 )
Operating expenses (15.14 ) (16.30 ) (13.12 ) (13.95 )
Field netback 21.86 21.64 25.42 21.42
General and administrative expense (6.22 ) (18.16 ) (7.00 ) (7.57 )
Interest expense (1.95 ) (3.25 ) (2.10 ) (2.06 )
Realized hedging gains (losses) 0.28 (0.86 ) (0.21 ) 1.45
Cash flow from operations $ 13.97 $ (0.63 ) $ 16.10 $ 13.25
Net asset value
(thousands - CDN$) December 31, December 31, %
2012 2011 Change
Present value of proved plus probable reserves, before tax at 10% 1 35,476 32,792 8
Undeveloped land and seismic 2 2,347 2,017 16
Net debt 3 (12,602 ) (12,833 ) (2 )
Net asset value before tax 25,221 21,976 15
Common shares outstanding (000s) 62,239 62,239 -
Net asset value per common share ($/share) 0.41 0.35 15
1 Based on the McDaniel Report
2 Based on management's estimate of fair value
3 Net debt includes bank borrowings and working capital deficiency, but excludes financial derivative instruments

Oil and Natural Gas Revenue by Product

Despite lower oil prices, oil and NGL revenue increased substantially in 2012 as oil volumes more than doubled from Q4 2011 to Q4 2012 as the Company brought three new oil wells on-stream. For the year ended December 31, 2012 oil and NGL revenue comprised 84% of total revenue as compared to 62% in 2011.

Three months ended December 31 2012 2011 % Change
Thousands - CDN$
Oil and NGL revenue 2,736 1,486 84
Natural gas revenue 662 807 (18 )
Total revenue 3,398 2,293 48
% Oil and NGLs 81 % 65 %
% Natural gas 19 % 35 %
Years ended December 31 2012 2011 % Change
Thousands - CDN$
Oil and NGL revenue 10,089 6,080 66
Natural gas revenue 1,987 3,665 (46 )
Total revenue 12,076 9,745 24
% Oil and NGLs 84 % 62 %
% Natural gas 16 % 38 %

Liquidity and Financial Condition

As at December 31, 2012, bank debt including working capital (net debt) was $12.6 million. The Company's net debt to fourth quarter 2012 annualized cash flow from operations was 3.2:1 (December
31, 2011 - 4.0:1).

Alexander has flexibility to finance future expansions of its capital programs, through the use of its current funds generated from operations and its debt facilities. The Company expects to continue to improve the net debt to cash flow ratio in 2013.

Effective March 20, 2013 the Company renewed its credit facilities with a Canadian Chartered Bank. Facility A is a revolving operating demand loan with a maximum limit of $13.0 million. Facility B is a non- revolving acquisition/development demand loan that provides an additional $2.5 million of financing subject to bank approval. Interest is at prime plus 2.0% per annum for Facility A and prime plus 2.5% per annum for Facility B. The Company has the ability to draw on the development loan for acquisitions and the drilling of new wells subject to certain working capital ratio restrictions.

On March 20, 2013 the Company drew down the non-revolving acquisition/development demand loan in the amount of $1.2 million.

For 2013, Alexander plans to invest approximately $6.0 million on its capital program within its core area. Alexander intends on financing this capital program with cash flow from operations.

Risk Management

The Company had the following financial derivative instrument contract in place at December 31, 2012:

Description Total Quantity Price Term
WTI (CDN$) - Swap 150 bbls/d CDN$104.94 January 1 - December 31, 2013

On January 17, 2013 the Company entered into two financial derivative instrument contracts.

Description Total Quantity Price Term
Oil WTI (CDN$) - Sold Call 100 bbls/day CDN$100.08/bbl April 1 - October 31, 2013
Gas AECO (CDN$) - Bought Put 1,000 gj/day CDN$3.00/gj April 1 - October 31, 2013

On April 12, 2013 the Company entered into a financial derivative instrument contract.

Description Total Quantity Price Term
Gas AECO (CDN$) - Swap 700 gj/day CDN$3.58/gj January 1 - December 31, 2014

Forward-Looking Statements: All statements, other than statements of historical fact, set forth in this news release, including without limitation, assumptions and statements regarding the volumes and estimated value of the Company's proved and probable reserves, future production rates, exploration and development results, financial results, and future plans, operations and objectives of the Company are forward-looking statements that involve substantial known and unknown risks and uncertainties. Some of these risks and uncertainties are beyond management's control, including but not limited to, the impact of general economic conditions, industry conditions, fluctuation of commodity prices, fluctuation of foreign exchange rates, environmental risks, industry competition, availability of qualified personnel and management, availability of materials, equipment and third party services, stock market volatility, timely and cost effective access to sufficient capital from internal and external sources. The reader is cautioned that assumptions used in the preparation of such information, although considered reasonable by the Company at the time of preparation, may prove to be incorrect. There can be no assurance that such statements will prove to be accurate and actual results and future events could differ materially from those anticipated in such statements.

These assumptions and statements necessarily involve known and unknown risks and uncertainties inherent in the oil and gas industry such as geological, technical, drilling and processing problems and other risks and uncertainties, as well as the business risks discussed in Management's Discussion and Analysis of the Company under the heading "Business Risks". The Company does not undertake any obligation, except as required by applicable securities legislation, to update publicly or to revise any of the included forward-looking statements, whether as a result of new information, future events or otherwise.

Barrels of oil equivalent (boe) is calculated using the conversion factor of 6 mcf (thousand cubic feet) of natural gas being equivalent to one barrel of oil. Boes may be misleading, particularly if used in isolation. A boe conversion ratio of 6 mcf:1 bbl (barrel) 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.

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