Angle Energy Inc.
TSX : NGL

Angle Energy Inc.

August 08, 2012 17:37 ET

Angle Announces 2012 Second Quarter Results

CALGARY, ALBERTA--(Marketwire - Aug. 8, 2012) - Angle Energy Inc. ("Angle" or the "Company") (TSX:NGL) is pleased to announce its financial and operating results for the three and six months ended June 30, 2012.

The Company has filed its interim consolidated financial statements and related management's discussion and analysis (MD&A) for the period ended June 30, 2012 on www.sedar.com and www.angleenergy.com. Certain selected financial and operational information for the three and six months ended June 30, 2012 and the 2011 comparatives are set out below and should be read in conjunction with Angle's interim consolidated financial statements for the period ended June 30, 2012 and related MD&A.

Angle is pleased to report our financial and operating results for the six months ended June 30, 2012. The Company continues to deploy its strategy of developing the highest rate of return projects, and applying prudent initial investment in future high return prospects.

COMPANY HIGHLIGHTS

  • Achieved record production for the second quarter averaging 15,569 boe/d (21% light crude oil and condensate, 23% NGLs and 56% natural gas) an increase of 20% as compared to the second quarter of 2011, and a 3% increase from the first quarter of 2012.
  • Light crude oil and condensate production increased 49% to 3,270 bbls/d, while total light oil and natural gas liquids production increased by 25% to reach 6,872 bbls/d, all as compared to the second quarter of 2011.
  • Capital spending in the second quarter was $37.2 million which included the drilling of 7 gross (7.0 net) wells, all of which were successful. In Harmattan and Lone Pine Creek, Angle drilled 2 gross (2.0 net) horizontal Mannville wells and 5 gross (5.0 net) horizontal Cardium oil wells.
  • The Harmattan Cardium oil project reached a total producing volume of over 2,500 boe/d (91% light oil) within the quarter, having grown from zero volume in November of 2011.

Financial

In the second quarter of 2012, commodity revenues were $43.7 million as compared to $48.6 million in the second quarter of 2011 and $48.2 million in the first quarter of 2012. Angle increased its weighting of higher value commodities in the revenue stream as compared to the first quarter of 2012 resulting in only a 9% decrease in revenue, despite an approximate 12% drop in both gas and oil pricing, and a 27% drop in average NGL pricing quarter over quarter. Funds from operations were $20.3 million or $0.25 per diluted share and the Company recorded earnings of $2.4 million or $0.03 per diluted share.

Angle exited the quarter with bank debt, including working capital deficiency, of $163.5 million on a bank line of $220 million. In addition, the Company has $60 million of convertible debentures outstanding for total net debt of $223.5 million on total credit capacity of $280 million.

Subsequent to the first quarter, Angle entered into additional financial hedge arrangements to limit commodity price volatility in cash flow projections, and to underpin values in project economics. Refer to the second quarter report for details on the following hedge positions in place as of August 7, 2012:

Period Commodity % of production (1 ) Hedge price range
Jun. 1 to Dec. 31, 2012 Natural gas 36 % CAD $2.43 to $3.00/GJ
Jul. 1 to Dec. 31, 2012 Crude oil 41 % Up to US $98.85/bbl(2 )
Jan. 1 to Dec. 31, 2013 Natural gas 27 % CAD $3.04 to $3.14/GJ
Jan. 1 to Jun. 30, 2013 Crude oil 46 % Up to US $98.00/bbl(2 )
Jul. 1 to Dec. 31, 2013 Crude oil 31 % Up to US $95.00/bbl(2 )
(1) Calculated based on average production for the second quarter of 2012. Percentages for crude oil are based on combined average light crude oil and condensate production.
(2) A portion of the hedge position relates to a modified collar hedge contract, refer to the Management's Discussion and Analysis for further details.

Operations

The second quarter of 2012 was focused on completion operations for 9 Harmattan Cardium oil wells, and continued with the drilling of 5 additional Cardium oil wells in the project. Three rigs were active in the Harmattan area on both the Mannville and Cardium projects. The second quarter operational activities were described in detail in Angle's June 27, 2012 press release. Updates further to the last release are as follows:

  • Current field production is 15,300 boe/d with an additional 1,000 boe/d of tested volumes to be tied in and 3.3 net wells awaiting completion. Current production consists of approximately 22% light crude oil and condensate, 24% NGLs and 54% natural gas.
  • Angle has completed drilling 3 (3.0 net) Cardium oil wells and 1 (1.0 net) Mannville horizontal gas well in the Harmattan area, and 1 non-operated (0.24 net) Cardium oil well in the Edson area in the third quarter to date. Completion activities are underway on 1 (1.0 net) Cardium oil well in the Harmattan area and 1 non-operated (0.3 net) Cardium oil well in Edson. Currently 1 (1.0 net) Mannville gas well is drilling in Harmattan.

Outlook

Angle's June 27, 2012 press release outlined the Company's plans for the balance of 2012 in light of the commodity price environment viewed at mid-year under strip forecast price assumptions. The main points within the updated guidance are the following:

  • Average production in the range of 15,000 to 15,500 boe/d. Average oil and condensate production of 3,300 bbl/d or 22% of total production. Exit production (December month average) in the range of 16,000 to 16,500 boe/d comprised of 22% light oil and condensate, 24% NGLs and 54% natural gas.
  • Capital expenditures of $140 million and funds from operations in the range of $82 to $87 million. Exit 2012 net debt of $220 to $225 million, based upon forecast prices of approximately $2.35/mcf AECO and $82.57/bbl WTI ($70.45/bbl Edmonton light) for the period of July 1 to December 31, 2012.

Current strip forecast commodity prices for the remainder of 2012 have improved over the June budget reforecast levels, with Edmonton light oil pricing increasing 14%, or $10 per barrel, and natural gas prices increasing 17%, or $0.37 per gigajoule (AECO). The Company will retain flexibility in capital spending plans as compared to cash flow projections.

Angle is positioning a 2013 exploitation plan for the Deep Basin assets in the Greater Edson area to complement the Harmattan Cardium oil and Mannville gas liquids plays. Recent activity proximal to Angle's position in Edson in the Duvernay shale will provide further information to value this 100% working interest, 72 section block. Ongoing work in the Wilrich and the Rock Creek from industry competitors has yielded improved completion techniques for Angle to adopt to increase profitability in an over $3.00/GJ AECO gas price environment.

The Cardium oil continues to represent significant value in Angle's portfolio, with superior results in the Harmattan area offsetting ongoing drilling by a super-major. Angle will continue to develop the play southward and begin to delineate the play westward into higher-pressured areas. It is clear to the Company that the sum of the value contained within the assets exceeds our trading valuation. Angle will continue to pursue the highest rate of return projects and position the Company for the best value for shareholders. Management looks forward to reporting the results of Angle's program during the balance of 2012.

HIGHLIGHTS

Three Months Ended
June 30
Six Months Ended
June 30
2012 2011 Change 2012 2011 Change
(000s, except per share data) ($ ) ($ ) ( %) ($ ) ($ ) ( %)
FINANCIAL
Oil and natural gas revenues 43,665 48,566 (10 ) 91,832 92,664 (1 )
Funds from operations (1) 20,280 23,741 (15 ) 41,798 46,727 (11 )
Per share - basic ($) 0.25 0.33 (24 ) 0.53 0.65 (18 )
Per share - diluted ($) 0.25 0.32 (22 ) 0.53 0.63 (16 )
Cash flow from operating activities 19,414 26,703 (27 ) 40,252 48,982 (18 )
Net income and comprehensive income 2,389 6,161 (61 ) 2,988 10,371 (71 )
Per share - basic ($) 0.03 0.08 (63 ) 0.04 0.14 (71 )
Per share - diluted ($) 0.03 0.08 (63 ) 0.04 0.14 (71 )
Capital expenditures (2) 37,193 41,087 (9 ) 97,185 78,567 24
Total assets (end of period) 660,657 583,479 13 660,657 583,479 13
Net debt (end of period) (3) 223,490 182,563 22 223,490 182,563 22
Shareholders' equity (end of period) 371,866 335,925 11 371,866 335,925 11
(000s)
COMMON SHARE DATA
Shares outstanding
At end of period 80,922 72,596 11 80,922 72,596 11
Weighted average - basic 80,921 72,513 12 79,295 72,280 10
Weighted average - diluted 80,967 73,940 10 79,583 73,690 8
OPERATING
Sales (000s)
Natural gas (mcf/d) 52,182 44,953 16 51,419 45,759 12
NGLs (bbls/d) 3,602 3,295 9 3,656 3,045 20
Light crude oil and condensate (bbls/d) 3,270 2,199 49 3,091 2,187 41
Total oil equivalent (boe/d) 15,569 12,986 20 15,318 12,859 19
Average wellhead prices
Natural gas ($/mcf) 2.03 3.97 (49 ) 2.17 3.96 (45 )
NGLs ($/bbl) 24.22 37.29 (35 ) 28.87 36.59 (21 )
Light crude oil and condensate ($/bbl) 85.14 102.17 (17 ) 90.47 96.29 (6 )
Combined average ($/boe) 30.28 40.50 (25 ) 32.44 39.14 (17 )
Netbacks ($/boe)
Operating (4) 18.63 24.36 (24 ) 19.25 24.53 (22 )
Funds from operations (1) 14.32 20.09 (29 ) 15.00 20.08 (25 )
Gross (net) wells drilled (#)
Natural gas 2 (2.0 ) 7 (7.0 ) -71 (-71 ) 9 (8.7 ) 10 (10.0 ) -10 (-13 )
Oil 5 (5.0 ) 3 (3.0 ) 67 (67 ) 17 (14.3 ) 6 (6.0 ) 183 (138 )
Dry and abandoned - (- ) 1 (1.0 ) -100 (-100 ) - (- ) 2 (2.0 ) -100 (-100 )
Total 7 (7.0 ) 11 (11.0 ) -36 (-36 ) 26 (23.0 ) 18 (18.0 ) 44 (28 )
Average working interest (%) 100 100 - 88 100 (12 )
(1) Funds from operations, funds from operations per share and funds from operations per boe are not recognized measures under International Financial Reporting Standards (IFRS). Refer to the Management's Discussion and Analysis for further discussion.
(2) Total capital expenditures, including acquisitions.
(3) Current assets less current liabilities, bank debt and the face value of the convertible debentures, excluding current derivative instruments.
(4) Operating netback equals oil and natural gas revenues plus realized gains on derivative instruments less royalties, operating costs and transportation costs calculated on a per boe basis. Operating netback is not a recognized measure under IFRS and therefore may not be comparable with the calculations of similar measures presented by other companies.
(5) For a description of the boe conversion ratio, refer to "Boe Conversions" in the Management's Discussion and Analysis.

INTERIM CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

As at Note June 30,
2012
December 31,
2011
($000s of Canadian Dollars) (unaudited)
ASSETS
Accounts receivable 19,490 20,279
Deposits and prepaid expenses 4,739 3,564
Derivative instruments 9 1,993 -
Total current assets 26,222 23,843
Exploration and evaluation 3 59,228 54,780
Property and equipment 4 575,207 517,068
660,657 595,691
LIABILITIES
Accounts payable and accrued liabilities 32,960 35,345
Derivative instruments 9 - 400
Total current liabilities 32,960 35,745
Bank debt 5 154,759 144,990
Convertible debentures 6 53,998 53,188
Derivative instruments 9 53 -
Decommissioning liabilities 7 18,325 14,695
Deferred tax liabilities 28,696 28,362
288,791 276,980
SHAREHOLDERS' EQUITY
Share capital 8 360,603 311,436
Equity component of convertible debentures 4,105 4,105
Contributed surplus 13,350 12,350
Deficit (6,192 ) (9,180 )
Total equity 371,866 318,711
Commitments 11
660,657 595,691
See accompanying notes to the interim consolidated financial statements.

INTERIM CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

Three Months Ended June 30 Six Months Ended June 30
Note 2012 2011 2012 2011
($000s of Canadian dollars, except per share amounts) (unaudited)
REVENUE
Oil and natural gas revenues 43,665 48,566 91,832 92,664
Royalties (7,699 ) (11,624 ) (20,107 ) (19,281 )
Oil and natural gas revenues, net of royalties 35,966 36,942 71,725 73,383
Realized gain on derivative instruments 6 15 132 79
Unrealized gain on derivative instruments 3,321 2,573 2,340 665
39,293 39,530 74,197 74,127
EXPENSES
Operating 8,869 7,510 16,873 15,052
Transportation 711 656 1,326 1,318
General and administrative 4,007 4,139 7,800 8,051
Depletion and depreciation 19,734 15,024 38,354 29,558
Gain on disposition of undeveloped land - - - (1,408 )
33,321 27,329 64,353 52,571
Operating income 5,972 12,201 9,844 21,556
Interest expense 2,443 2,230 4,826 4,693
Accretion and financing charges 491 502 982 968
Net income before income tax 3,038 9,469 4,036 15,895
Deferred income tax expense 649 3,308 1,048 5,524
Net income and comprehensive income 2,389 6,161 2,988 10,371
Net income per share
Basic 8 0.03 0.08 0.04 0.14
Diluted 8 0.03 0.08 0.04 0.14
See accompanying notes to the interim consolidated financial statements.

INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

Share
capital
Convertible
debentures,
equity
component
Contributed
surplus
Retained
earnings (deficit
) Total
equity
($000s of Canadian dollars) (unaudited)
Balance at January 1, 2012 311,436 4,105 12,350 (9,180 ) 318,711
Issue of common shares, net of issue costs and deferred income taxes 48,974 - - - 48,974
Share-based compensation expensed - - 766 - 766
Share-based compensation capitalized - - 292 - 292
Options exercised 193 - (58 ) - 135
Net income for the period - - - 2,988 2,988
Balance at June 30, 2012 360,603 4,105 13,350 (6,192 ) 371,866
Balance at January 1, 2011 306,742 - 7,843 1,591 316,176
Share-based compensation expensed - - 2,379 - 2,379
Share-based compensation capitalized - - 633 - 633
Options exercised 3,299 - (1,038 ) - 2,261
Issue of convertible debentures, net of issue costs and deferred income taxes - 4,105 - - 4,105
Net income for the period - - - 10,371 10,371
Balance at June 30, 2011 310,041 4,105 9,817 11,962 335,925
See accompanying notes to the interim consolidated financial statements.

INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS

Three Months Ended June 30 Six Months Ended June 30
Note 2012 2011 2012 2011
($000s of Canadian dollars) (unaudited)
OPERATING ACTIVITIES
Net income and comprehensive income 2,389 6,161 2,988 10,371
Adjustments for:
Depletion and depreciation 3, 4 19,734 15,024 38,354 29,558
Change in fair value of derivative instruments 9 (3,321 ) (2,573 ) (2,340 ) (665 )
Accretion and financing charges 7 491 502 982 968
Share-based compensation 8 338 1,319 766 2,379
Deferred income tax expense 649 3,308 1,048 5,524
Gain on disposition of undeveloped land - - - (1,408 )
Settlement of decommissioning liabilities 7 (6 ) - (6 ) (97 )
Change in non-cash working capital (860 ) 2,962 (1,540 ) 2,352
Net cash from operating activities 19,414 26,703 40,252 48,982
FINANCING ACTIVITIES
Issue of common shares, net of issue costs 8 135 502 48,395 2,261
Increase (decrease) in bank debt 45,143 20,123 9,769 (31,251 )
Issue of convertible debentures, net of issue costs 6 - - - 57,171
Net cash from financing activities 45,278 20,625 58,164 28,181
INVESTING ACTIVITIES
Exploration and evaluation expenditures (11,163 ) (21,233 ) (27,043 ) (38,762 )
Property and equipment expenditures (26,030 ) (19,854 ) (70,142 ) (39,805 )
Proceeds on disposition of undeveloped land - - - 2,320
Change in non-cash working capital (27,499 ) (6,241 ) (1,231 ) (916 )
Net cash used in investing activities (64,692 ) (47,328 ) (98,416 ) (77,163 )
Change in cash and cash equivalents - - - -
Cash and cash equivalents, beginning of period - - - -
Cash and cash equivalents, end of period - - - -
See accompanying notes to the interim consolidated financial statements.

ABOUT ANGLE

Angle Energy Inc. is a Calgary-based publicly traded oil and natural gas exploration and development company that was incorporated in 2004 and commenced active oil and gas operations in 2005. Angle's goal is to grow its high-quality, focused asset base through a combination of drilling and strategic acquisitions. Angle started in 2004 as a "blind pool" and has grown production while maintaining top-decile operating costs, and finding costs. Angle's proven and dedicated team of industry specialists are focused on identifying and developing high quality assets in the Western Canada Sedimentary Basin, with an emphasis in west central Alberta. Common shares of Angle are listed for trading on the Toronto Stock Exchange under the symbol "NGL".

Basis of Presentation

Production information is commonly reported in units of barrel of oil equivalent ("boe"). For purposes of computing such units, natural gas is converted to equivalent barrels of crude oil using a conversion factor of six thousand cubic feet of gas to one barrel of oil. This conversion ratio of 6:1 is based on an energy equivalent conversion for the individual products, primarily applicable at the burner tip, and does not represent a value equivalency at the wellhead. Such disclosure of boe may be misleading, particularly if used in isolation.

Future Outlook and Forward-Looking Information

Information set forth in this press release may contain estimates and forward-looking statements regarding production levels and product mix for the 2012 year, the allocation of the capital program, impact of operating and royalty expense, expected well and reservoir performance, and drilling plans for the balance of 2012 including future development plans and drilling and operating costs. These estimates and statements are made as of August 8, 2012 and are based on assumptions and analysis as of this date, by Angle in light of its experience, current conditions and expected future development in the areas it is currently active and other factors it believes are appropriate in the circumstances. By their nature, these forward-looking statements are subject to numerous risks and uncertainties, some of which are beyond Angle's control, including mechanical failures or inability to access production facilities; the unanticipated encroachment of water or other fluids into the producing formation; unanticipated reservoir performance and, the inability to drill, complete and tie-in wells on schedule due to a lack of oilfield services being available on a cost efficient basis, poor weather, the inability to negotiate surface access or regulatory delays. The drilling plans and expected costs of drilling are subject to all the aforementioned risks and uncertainties, as well as those risk factors identified by Angle's MD&A for the second quarter 2012, Annual Information Form and MD&A in the most recently complete financial year, all of which are on SEDAR at www.SEDAR.com and includes the impact of general economic conditions, industry conditions, volatility of commodity prices, environmental risks, competition from other industry participants, stock market volatility and ability to access sufficient capital from internal and external sources.

Readers are cautioned that the assumptions and factors discussed in this press release are not exhaustive and that the assumptions used in the preparation of such information, although considered reasonable at the time of preparation, may prove to be imprecise, and as such, undue reliance should not be placed on forward-looking statements. Angle's actual results, performance or achievement could differ materially from those expressed in, or implied by, these forward-looking statements, and accordingly, no assurance can be given that any of the events anticipated by the forward-looking statements will transpire or occur, or if any of them do so, what benefits that Angle will derive there from. Unless required by law, Angle disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. The forward looking statements are expressly qualified by these cautionary statements.

Contact Information

  • Angle Energy Inc.
    Heather Christie-Burns
    President and Chief Operating Officer
    (403) 263-4534
    (403) 263-4179 (FAX)

    Angle Energy Inc.
    Gregg Fischbuch
    Chief Executive Officer
    (403) 263-4534
    (403) 263-4179 (FAX)

    Angle Energy Inc.
    Stuart Symon
    Chief Financial Officer
    (403) 263-4534
    (403) 263-4179 (FAX)

    Angle Energy Inc.
    Suite 700
    324 Eighth Avenue SW
    Calgary, Alberta T2P 2Z2
    www.angleenergy.com