C&C Energia Ltd.
TSX : CZE

C&C Energia Ltd.

August 12, 2011 08:32 ET

C&C Energia Ltd.: Second Quarter 2011 Operating and Financial Results

CALGARY, ALBERTA--(Marketwire - Aug. 12, 2011) -

C&C Energia Ltd. ("C&C Energia" or the "Corporation") (TSX:CZE) is pleased to report its unaudited interim operating and financial results for the three and six months ended June 30, 2011.

C&C Energia reported strong results for the second quarter 2011 highlighted by a 49% increase in average daily production from the second quarter 2010 to 8,259 barrels of oil per day ("bbls/d"). Production continues to increase with current production rates of approximately 9,200 bbls/d despite the effect of restricted access to offloading terminals and available pipeline capacity. Operating cash flow for the second quarter 2011 was US$46.0 million.

During the quarter, the Corporation drilled seven wells (gross and net) resulting in six oil wells of which four are in the Cravoviejo block, two in the Cachicamo block, with one well plugged and abandoned in the Pajaro Pinto block.

C&C Energia has a strong balance sheet with a US$66.4 million adjusted working capital surplus (including US$75.2 million in cash) and no debt at the end of the second quarter. On May 9, 2011, the Corporation closed a previously announced acquisition (the "Acquisition") of certain oil and gas properties in Colombia, (the "Acquired Assets"). As a result of the Acquisition, the Corporation's Proven reserves and Proven plus Probable reserves (as of year-end 2010) increased to 11.47 million barrels and 17.52 million barrels, respectively.

The following table provides a summary of the Corporation's operating and financial results for the three and six months ended June 30, 2011 and 2010. Consolidated financial statements with Management's Discussion and Analysis will be available on the SEDAR website at www.sedar.com.

FINANCIAL and OPERATIONAL HIGHLIGHTS

(All references to $ are to thousands of United States dollars unless otherwise noted.)


                                    Three months ended      Six months ended
                                              June 30,              June 30,
(unaudited)                            2011       2010       2011       2010
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Operating                                                                   

Operating cash flow (1)              46,016     21,144     72,117     31,677

Average crude oil volumes                                                   
 (before royalties)                                                         
 Production (bbls/d)                  8,259      5,561      6,851      5,069
 Sales (bbls/d)                       8,093      5,617      6,835      4,526

Average reference price                                                     
 WTI ($ per bbl)                     102.06      77.25      98.27      78.03

Operating netback ($ per bbl)                                               
 (4)                                                                        
 Average realized price (4)          111.60      74.83     105.29      73.21
 Royalties                            14.68      10.16      14.03      10.51
 Production expenses                  17.26      13.42      17.44      13.67
 Transportation expenses              15.60       9.15      13.21       8.78
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Operating netback                     64.06      42.10      60.61      40.25
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Financial                                                                   
Oil revenues (net of royalties)      71,374     33,054    112,893     51,362
Funds flow from operations (2)       26,453     20,938     50,094     20,938
 Per share - basic ($)                 0.44       0.44       0.88       0.66
 Per share - diluted ($)               0.43       0.44       0.85       0.66

Net income                           23,309      8,920     22,266     11,759
 Per share - basic ($)                 0.39       0.19       0.39       0.26
 Per share - diluted ($)               0.38       0.19       0.38       0.26

Capital expenditures (5)                                                    
Total assets                         44,540     24,467     78,737     40,557
Total long-term financial           476,734    256,501    476,734    256,501
 liabilities                         17,611      6,811     17,611      6,811
Adjusted working capital surplus                                            
 (3)                                 66,389     62,360     66,389     62,360

Common shares outstanding                                                   
 Basic                           63,842,503 54,297,503 63,842,503 54,297,503
 Diluted                         69,364,172 55,096,437 69,364,172 55,096,437
Weighted average common shares                                              
 outstanding                                                                
 Basic                           59,692,503 47,560,019 57,039,713 45,367,206
 Diluted                         61,249,283 47,674,298 58,756,361 45,424,661


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Notes: 

(1) Operating cash flow is oil revenues less royalties, operating
    expenses, transportation expenses and administration expenses.
    Operating cash flow is not a measure recognized by GAAP (as defined
    herein). See "GAAP and Non-GAAP Measures" below 
(2) Funds flow from operations is cash flow from operating activities
    before changes in other non-cash items. Funds flow from operations is
    not a measure recognized by GAAP. See "GAAP and Non-GAAP Measures"
    below. 
(3) Adjusted working capital surplus includes current assets less current
    liabilities excluding risk management contracts (unrealized gains
    (losses) on commodity swaps) and deferred taxes. Adjusted working
    capital surplus is not a measure recognized by GAAP. See "GAAP and
    Non-GAAP Measures" below. 
(4) Excludes impact of risk management contracts. See "GAAP and Non-GAAP
    Measures" below. 
(5) Excludes acquisition costs.

HIGHLIGHTS

--  Successful drilling results, increased operational efficiencies and the
    previously announced acquisition of an additional 70% interest in the
    Corporation's Cachicamo block increased production for the three months
    ended June 30, 2011 to 8,259 bbls/d, a 49% increase from the comparative
    period in 2010.  
--  During the quarter, the Corporation drilled seven wells (gross and net)
    resulting in six oil wells of which four are in the Cravoviejo block,
    two in the Cachicamo block with one plugged and abandoned in the Pajaro
    Pinto block. 
--  On May 9, 2011, the Corporation closed the previously announced
    acquisition of certain oil and gas assets in Colombia's Llanos Basin for
    a purchase price of $89.0 million (with an additional interim closing
    adjustment of $2.4 million) with an effective date of January 1, 2011.
    The oil and gas properties are comprised of a 70% operated interest in
    the Cachicamo block and a 50% non-operated interest in the Pajaro Pinto
    block. The Acquisition brings the Corporation's ownership to 100% in
    each block, as it already held a 30% interest in the Cachicamo block and
    a 50% operating interest in the Pajaro Pinto block.  
--  Operating netbacks during the quarter were $64.06 per barrel, an
    increase of 50% as compared to the second quarter of 2010 as a result of
    higher oil prices, partially offset by higher transportation expenses. 
--  Current production is approximately 9,200 bbls/d. Production remains
    affected by restricted access to offloading terminals and available
    pipeline capacity, but despite these challenges, the Corporation expects
    production to average approximately 9,400 bbls/d in the second half of
    2011. 
--  Construction of the central production facilities at the Carrizales
    field (Cravoviejo block) is nearly complete and the Corporation
    anticipates that this facility will add 120,000 bbls/d total fluid
    handling capacity and 35,000 barrels of oil storage this year. 
--  Capital expenditures for the three months ended June 30, 2011 were $44.5
    million ($78.7 for the six month period ended June 30, 2011) and are
    estimated at $80 to $85 million for the second half of the year. 
--  The Corporation plans nine (eight net) wells for the balance of the year
    of which five (four net) are new exploratory locations. 

OPERATIONAL REVIEW

C&C Energia has eight blocks (seven operated) in Colombia with a total of 647,514 acres (559,301 net acres). The Corporation's lands are located in the Llanos Basin (four blocks), Middle Magdalena Valley (one block), and Putumayo Basin (three blocks). Working interests for Coati and Andaquies (Putumayo Basin) will be reduced from 100% and 90% respectively to 60% and 54% (after earning) pursuant to a recent farm-out agreement with Canacol Energy Ltd.

During the second quarter of 2011, the Corporation invested approximately $44.5 million on property, plant and equipment. Drilling and completion accounted for the majority of the capital invested at approximately $34.1 million.

All of the Corporation's current production is on the Cravoviejo and Cachicamo blocks in the Llanos Basin with approximately 76% of current production at the Corporation's Cravoviejo block. In the second quarter of 2011, the Corporation drilled and completed six oil wells at Cravoviejo and Cachicamo and one plugged and abandoned well at Pajaro Pinto. C&C Energia has nearly completed construction of centralized production facilities at its Carrizales field which the Corporation expects will add 35,000 barrels of oil storage and 120,000 bbls/d of fluid capacity.

As part of the exploratory program in the second half of 2011, the Corporation plans, subject to well permit approval, to drill three (1.7 net) exploratory wells in the Putumayo Basin on the Andaquies and Coati blocks. As well, both 2-D and 3-D seismic programs will be conducted on all of the Corporation's blocks in the Putumayo Basin which are currently comprised of 279,715 acres (216,728 net acres). The remaining two (gross and net) exploratory tests are in the Cravoviejo and Llanos 19 blocks.

CAPITAL & OUTLOOK

The Corporation had previously announced a capital investment budget for 2011 of between $160 and $180 million. The Corporation will invest funds on the following operations: seismic, approximately $5 million; development drilling and completions, approximately $50 million; facilities, workovers and equipping, approximately $40 million; exploratory drilling, approximately $55 to $75 million and; $10 million for various other projects. The Corporation invested $78.7 million for the six month period ended June 30, 2011 and anticipated capital expenditures are estimated at $80 to $85 million for the second half of 2011. With a strong balance sheet and robust cash flow, the Corporation has sufficient resources to fund its ongoing programs.

ABOUT C&C ENERGIA LTD.

The Corporation, through its subsidiary Grupo C&C Energia (Barbados) Ltd., is engaged in the exploration for, the development and production of, oil resources in Colombia. Its strategy is to develop producing oil assets by appraising and developing existing discoveries and exploring in areas assessed by management to be of low to moderate risk. Now with a total of eight blocks (seven operated) and 647,514 acres in Colombia, management of the Corporation considers the Corporation to have considerable upside for future production and reserve growth.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

This press release contains forward-looking information within the meaning of applicable Canadian securities laws that involves known and unknown risks and uncertainties. Forward-looking information typically contains statements with words such as "anticipate", "estimate", "expect", "potential", "could", "will", "plans" or similar words suggesting future outcomes. The Corporation cautions readers and prospective investors in the Corporation's securities to not place undue reliance on forward-looking information as by its nature, it is based on current expectations regarding future events that involve a number of assumptions, inherent risks and uncertainties, which could cause actual results to differ materially from those anticipated by C&C Energia.

Forward-looking information in this press release includes, but is not limited to: information concerning expectations of the Corporation's future production growth, the Corporation's expectations for average annual production to the end of 2011, the Corporation's capital program for the remainder of 2011, plans for the construction of production facilities, and the Corporation's drilling and exploration plans. These forward-looking statements are subject to assumptions regarding the Corporation's operations and the operating environment in Colombia. In particular, estimates of 2011 production and the Corporation's expected drilling plans and capital expenses are based on the assumptions that the Corporation's plans will be completed without any undue difficulty, that costs will not rise significantly and that events will not cause disruptions in the delivery of the Corporation's oil production to market. The Corporation's capital program and drilling and seismic plans are subject to change if circumstances change or if management of the Corporation determines that other business plans are more appropriate.

Certain risks and other factors could cause results to differ materially from those expressed in the forward-looking statements contained in this MD&A. These include the factors described under the heading "Risks and Uncertainties" above and under "Risk Factors" in the Corporation's annual information form for the year ended December 31, 2010 and other documents that the Corporation files from time to time with securities regulatory authorities. The forward-looking information included herein is made as of the date hereof and C&C Energia assumes no obligation to update or revise any forward-looking information to reflect new events or circumstances, except as required by law.

GAAP and Non-GAAP Measures

Effective January 1, 2011, C&C Energia adopted International Financial Reporting Standards ("IFRS"). The Corporation's interim condensed consolidated financial statements and the 2010 comparative information has been prepared under IFRS which are generally accepted accounting principles ("GAAP") for publically accountable enterprises in Canada ("Canadian GAAP").

This report makes reference to the terms "operating cash flow", "funds flow from operations", "operating netbacks", "netbacks" and "adjusted working capital", which are not recognized measures under Canadian GAAP and do not have a standardized meaning prescribed by Canadian GAAP. Accordingly, the Corporation's use of these terms may not be comparable to similarly defined measures presented by other companies. Operating cash flow is oil revenues less royalties, operating expenses, transportation expenses and administration expenses. Funds flow from operations is cash flow from operating activities before changes in non-cash working capital. Operating netback is determined by dividing oil sales revenues less royalties, production expenses and transportation expenses by sales volumes. Management considers operating netback important as it is a measure of profitability per barrel sold and reflects the quality of production. Netbacks are calculated by subtracting royalties, production expenses, transportation expenses, administrative expense, interest and taxes paid by the Corporation from crude oil revenue and dividing by sales volumes. Adjusted working capital surplus includes current assets less current liabilities excluding risk management and future taxes and is used to evaluate the Corporation's financial leverage. Management uses these non-GAAP measurements for its own performance measures and to provide its shareholders and potential investors with a measurement of the Corporation's efficiency and its ability to fund a portion of its future growth expenditures.

This news release does not constitute an offer to sell or the solicitation of an offer to buy any securities of C&C in the United States.

Contact Information

  • C&C Energia Ltd.
    Richard A. Walls
    President and Chief Executive Officer
    403-262-6046

    C&C Energia Ltd.
    Ken Hillier
    Chief Financial Officer
    403-262-6046