Artek Exploration Ltd.

Artek Exploration Ltd.

November 09, 2011 19:52 ET

Artek Announces Third Quarter 2011 Financial Results and Updates Operations

CALGARY, ALBERTA--(Marketwire - Nov. 9, 2011) - Artek Exploration Ltd. ("Artek" or the "Company") (TSX:RTK) is pleased to provide this summary of its financial and operating results for the three and nine month periods ended September 30, 2011. A complete copy of the Company's comparative financial statements for the three and nine months period ended September 30, 2011, along with management's discussion and analysis in respect thereof will be filed on SEDAR and on the Company's website at


Three Months Ended September 30, Nine Months Ended September 30,
2011 2010 Change 2011 2010 Change
(000s, except per share amounts) ($ ) ($ ) ( %) ($ ) ($ ) ( %)
Oil and gas revenues 11,566 5,657 104 32,626 20,151 62
Funds flow from operations (1) 5,318 1,558 241 14,681 6,960 111
Per share – basic 0.13 0.05 160 0.39 0.26 50
– diluted 0.13 0.05 160 0.39 0.26 50
Net earnings (loss) 1,914 (1,357 ) (747 ) (2,288 )
Per share – basic 0.05 (0.04 ) (0.02 ) (0.08 )
– diluted 0.05 (0.04 ) (0.02 ) (0.08 )
Capital expenditures 11,084 5,135 116 30,172 19,936 51
Working capital deficiency 50,868 45,511 12 50,868 45,511 12
Shareholders' equity 101,285 85,759 18 101,285 85,759 18
(000s) (# ) (# ) ( %) (# ) (# ) ( %)
Share Data
At period-end
Basic 39,583 33,083 20 39,583 33,083 20
Options and warrants 3,455 3,461 -- 3,455 3,461 --
Weighted average
Basic 39,583 30,524 30 37,798 27,164 39
Diluted 39,889 30,524 31 37,798 27,164 39
( %) ( %)
Natural gas (mcf/d) 8,406 6,324 33 8,068 7,446 8
Crude oil (bbls/d) 1,022 505 102 914 518 76
NGLs (bbls/d) 75 44 70 74 54 37
Total (boe/d)(2) 2,498 1,602 56 2,332 1,813 29

Average wellhead prices
Natural gas ($/mcf)(3) 4.52 4.43 2 4.57 4.83 (5 )
Crude oil ($/bbl)(3) 83.18 72.35 15 86.38 73.57 17
NGLs ($/bbl) 72.02 61.80 17 73.43 62.12 18
Total ($/boe)(4) 51.98 41.99 23 52.38 42.76 22
Royalties ($/boe) (11.06 ) (7.71 ) 43 (10.55 ) (6.74 ) 57
Operating cost ($/boe) (11.06 ) (12.85 ) (14 ) (11.33 ) (12.78 ) (11 )
Transportation cost ($/boe) (1.70 ) (1.74 ) (2 ) (1.75 ) (1.73 ) 1
Operating netback ($/boe)(5) 28.16 19.69 43 28.75 21.50 34
Drilling activity – gross (net)
Development (#) 1 (0.6 ) 2 (1.6 ) 3 (1.5 ) 3 (2.1 )
Exploration (#) 1 (0.6 ) 1 (0.6 ) 2 (1.6 ) 3 (2.6 )
Abandoned (#) -- (-- ) -- (-- ) -- (-- ) -- (-- )
Total (#) 2 (1.2 ) 3 (2.2 ) 5 (3.1 ) 6 (4.7 )
Average working interest (%) 60 73 62 78
Success rate (%) 100 100 100 100

(1) Funds flow from operations is calculated using cash flow from operating activities, as presented in the statement of cash flows, before changes in non-cash working capital and settlement of asset retirement costs. Funds flow from operations is used to analyze the Company's operating performance and leverage. Funds flow from operations does not have a standardized measure prescribed by International Financial Reporting Standards ("IFRS"), and therefore, may not be comparable with the calculations of similar measures for other companies.

(2) For a description of the boe conversion ratio, refer to the advisories contained herein.

(3) Product prices include realized gains/losses from financial derivative contracts.

(4) Oil equivalent price includes minor sulphur sales revenue.

(5) Operating netback equals revenue less royalties, transportation and operating costs calculated on a per boe basis. Operating netback does not have a standardized measure prescribed by IFRS, and therefore, may not be comparable with the calculations of similar measures for other companies.

Third Quarter Financial and Operating Highlights

  • Production averaged 2,498 boe/d, representing a 56% increase from the same three-month period a year ago and an 8% improvement over the second quarter of 2011 despite approximately 300 boe/d being shut-in or restricted.
  • Crude oil and NGLs average production of 1,097 bbls/d rose to 44% of total corporate production, which is up 100% from the third quarter of 2010 and up 7% from the second quarter of 2011.
  • Operating netbacks totaled $28.16/boe, a 43% increase from the same period last year.
  • Funds flow from operations grew to $5.3 million, representing a 241% increase from the third quarter of 2010.
  • Earnings increased to $1.9 million from a loss of $1.4 million for the same period last year.
  • Exited the period with a working capital deficiency of $50.9 million.
  • Capital expenditures totaled $11.1 million, which included the drilling of 2 gross (1.2 net) wells (100% success rate) in the Inga area of British Columbia, including a new oil discovery.
  • The new oil discovery (60%) tested at a restricted rate of 1,650 boe/d (65% crude oil).

Operations Review – Liquids Focus

During the third quarter of 2011, production averaged 2,498 boe/d, up 56% from a year ago and 8% higher than the second quarter, despite approximately 300 boe/d being shut-in or restricted due primarily to ongoing third party facility and plant turnaround issues at Sinclair, Alberta. Crude oil and NGLs production averaged 1,097 bbls/d in the third quarter (93% crude oil), which represents 44% of total corporate production, up 100% from the same period last year. The increased liquids production is a result of the Company's continued focus on increasing liquids production through our capital program. Year-over-year operating costs were down 14% to $11.06/boe from the same period last year and dropped slightly from the second quarter. Operating netbacks of $28.16/boe were up 43% from the third quarter of 2010 as a result of cost reductions, higher liquids prices and the resulting higher netbacks associated with the increased liquids production. Operating netbacks were 11% lower than the second quarter due primarily to realized crude oil prices, which were also 11% lower.

In the Inga area of British Columbia, the Company horizontally drilled and completed a new discovery oil well (60% working interest) in the Doig formation. The well flowed inline at a restricted rate of 1,070 bbls/d of oil and 3.7 mmcf/d of natural gas or approximately 1,650 boe/d at a flowing pressure of 1,830 PSI. The well was drilled with only a 665-metre horizontal lateral and completed with a seven-stage hydrocarbon frac stimulation program. The well was brought on-stream during the quarter at a facility-restricted rate of approximately 660 boe/d.

Two additional horizontal wells (1.2 net) were spud during the third quarter from the same surface location testing independent spacing units. The wells were drilled with horizontal laterals of 1,129 to 1,270 metres and packer assemblies have been landed in both wells for 15-stage hydrocarbon frac programs scheduled for back-to-back completion commencing on or about November 11, 2011. The wells are expected to be flowing back by the end of November. Because of the success at Inga, the Company has expanded its facility from 7 mmcf/d capacity to 16 mmcf/d and is now ready for the new volumes expected from these latest two wells. Artek has accumulated 29 gross (21 net) sections of land and maps approximately 42 gross (25 net) locations on its lands, assuming only two to three horizontal wells per section. Artek anticipates that the well density will increase given the high liquids ratio of the project. Long-term, the Company plans to access additional capacity at a third party deep cut facility, which will result in a further increase in liquids yield for relatively minimal additional pipeline capital costs.

Outlook – Continued Liquids Focus

For the remainder of the year, the Company plans to drill a shallow horizontal well (100% working interest) in the Dunvegan area of Alberta targeting Triassic oil adjacent to a well that Artek drilled and tested in excess of 400 boe/d (approximately 50% oil). The well, which was drilled in the first quarter, is currently producing between 140 and 150 boe/d (30% crude oil). Water from the well is now being disposed of at the Company's operated water disposal facility and netbacks from the well are approximately $30/boe (using a $3.25/GJ natural gas price and a $90/bbl wellhead oil price) and are expected to increase as the well is optimized. Artek has now compiled in excess of 30 sections of land in the Dunvegan area and approximately 55 sections of land on the shallow Triassic oil play in the Peace River Arch area.

For fiscal 2011, the Company still anticipates achieving its average production guidance of 2,400 to 2,550 boe/d as well as meeting or exceeding its year-end exit guidance of between 2,900 and 3,100 boe/d.

For the 2012 calendar year, Artek has hedged 300 bbl/d of oil at CDN$92.00/bbl. The Company plans to release its 2012 capital spending budget and production expectations following analysis of the completion results on the two Inga horizontal wells discussed above. We will continue to pursue opportunities to divest non-core assets in order to expand investments in our core properties.

We are pleased with the execution of our ongoing strategy of focusing capital on oil and high liquids ratio projects, while managing our exposure to dry natural gas projects in this period of prolonged low natural gas prices. The Company has grown our oil and liquids production 100% from the same period last year and the liquids to total production ratio has increased 29%, while also improving total production 56%. We look forward to reporting our Company's year-end results as we anticipate a strong finish to a solid operational year. ADVISORIES

Forward Looking Statements: This document contains forward-looking statements. Management's assessment of future plans and operations, production estimates and forecasts for 2011 average and exit production, initial production rates, drilling plans, timing of drilling and tie-in of wells, periods in which certain wells may be shut-in, mapping of additional locations and prospectivity of newly acquired lands, the effect of plant turnarounds and outages, productive capacity of new wells, expectations regarding operating netbacks, capital expenditures and the nature and timing of these expenditures, possible divestitures of non-core assets, may constitute forward-looking statements under applicable securities laws and necessarily involve risks including, without limitation, risks associated with oil and gas exploration, development, exploitation, production, marketing and transportation, loss of markets, volatility of commodity prices, currency fluctuations, imprecision of reserve estimates, environmental risks, competition from other producers, inability to retain drilling rigs and other services, incorrect assessment of the value of acquisitions, failure to realize the anticipated benefits of acquisitions, the inability to fully realize the benefits of the acquisitions, delays resulting from or inability to obtain required regulatory approvals and ability to access sufficient capital from internal and external sources. As a consequence, the Company's actual results may differ materially from those expressed in, or implied by, the forward looking statements. Forward looking statements or information are based on a number of factors and assumptions which have been used to develop such statements and information but which may prove to be incorrect. Although Artek believes that the expectations reflected in such forward-looking statements or information are reasonable, undue reliance should not be placed on forward looking statements because the Company can give no assurance that such expectations will prove to be correct.

In addition to other factors and assumptions which may be identified in this document and other documents filed by the Company, assumptions have been made regarding, among other things: the impact of increasing competition; the general stability of the economic and political environment in which Artek operates; the ability of the Company to obtain qualified staff, equipment and services in a timely and cost efficient manner; drilling results; the ability of the operator of the projects which the Company has an interest in to operate the field in a safe, efficient and effective manner; Artek's ability to obtain financing on acceptable terms; field production rates and decline rates; the ability to replace and expand oil and natural gas reserves through acquisition, development or exploration; the timing and costs of pipeline, storage and facility construction and expansion; the ability of the Company to secure adequate product transportation; future oil and natural gas prices; currency, exchange and interest rates; the regulatory framework regarding royalties, taxes and environmental matters in the jurisdictions in which the Company operates; and Artek's ability to successfully market its oil and natural gas products. Readers are cautioned that the foregoing list of factors is not exhaustive. Additional information on these and other factors that could affect the Company's operations and financial results are included in reports on file with Canadian securities regulatory authorities and may be accessed through the SEDAR website ( or at the Company's website ( Furthermore, the forward looking statements contained in this document are made as at the date of this document and the Company does not undertake any obligation to update publicly or to revise any of the included forward looking statements, whether as a result of new information, future events or otherwise, except as may be required by applicable securities laws.

BOE Conversions: Barrel of oil equivalent ("BOE") amounts may be misleading, particularly if used in isolation. A BOE conversion ratio has been calculated using a conversion rate of one tonne of sulphur to one barrel and six thousand cubic feet of natural gas to one barrel. This conversion ratio of six thousand cubic feet of natural gas to one barrel is based on an energy equivalent conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.

Artek is a crude oil and natural gas exploration, development and production company headquartered in Calgary, Alberta, Canada. Artek's shares trade on the TSX under the symbol "RTK".

Contact Information

  • Artek Exploration Ltd.
    Darryl Metcalfe
    President and Chief Executive Officer
    (403) 296-4799

    Artek Exploration Ltd.
    Darcy Anderson
    Vice President Finance and Chief Financial Officer
    (403) 296-4775