Canamax Energy Ltd.
TSX VENTURE : CAC

Canamax Energy Ltd.

July 30, 2014 08:30 ET

Canamax Announces First Quarter May 31, 2014 Financial and Operating Results

CALGARY, ALBERTA--(Marketwired - July 30, 2014) -

(NOT FOR DISSEMINATION IN THE UNITED STATES OF AMERICA)

Canamax Energy Ltd. ("Canamax" or the "Company") (TSX VENTURE:CAC) is pleased to announce the Company's financial and operational results for the first quarter ended May 31, 2014.

Highlights

Canamax exited the first quarter ended May 31, 2014 with a net production rate of approximately 820 boe/d and has increased net production to approximately 1,200 boe/d as at late July. As a result of the activities below, the Company was able to almost double its exit production rate from the previous quarter end of February 28, 2014 (430 boe/d net) to the current quarter end. In addition, Canamax strengthened its financial position at May 31, 2014 with $6.7 million of working capital and no debt.

  • During March, Canamax completed a successful horizontal, Cardium farm-in well at Wapiti in which Canamax earned a 70% working interest. The initial 30-day production rate (IP30) for this well was approximately 405 boe/d gross (86% oil and NGL's) and 286 boe/d net. The well flowed during April and May and at May 31 the net production rate was approximately 100 boe/d.
  • On April 30, Canamax acquired 100% of the shares of Ki Exploration Inc. ("Ki") in exchange for 3.0 million Canamax units valued at $4.4 million for accounting purposes. At the acquisition date, Ki's net production was approximately 330 boe/d (34% oil and NGL; 66% natural gas). During May, significant maintenance work was performed on the Ki wells as little maintenance capital had been spent on these wells by Ki over the past year due to financial constraints.
  • On April 30 and May 15, respectively, Canamax closed two tranches of a brokered, private placement financing that raised aggregate gross proceeds of $13.0 million (net cash proceeds of $12.1 million). The financing significantly exceeded management's initial target of $5.0 - $8.0 million.
  • During May, Canamax acquired 5 sections (net 4) of land at Flood from a peer company for $0.8 million. The acquisition also included 40 bbl/d of net Montney oil production from five producing wells, compression facilities and a gas sales line for produced solution gas. This acquisition increased the Flood property to 42 (net 41) sections at May 31.
  • During March, the following senior management team members were appointed by the Company: Brad Gabel, President & CEO; Chris Martin, Vice President, Finance & CFO and Jeremy Krukowski, Vice President, Operations and COO. Mr. Gabel and Mr. Martin bring significant acquisition and divestiture and public markets experience to Canamax, while Mr. Krukowski brings significant operational experience to the Company.

Subsequent to quarter end May 31, 2014, and through late July, Canamax completed the following:

  • Drilled two successful vertical Montney wells at Flood and placed these wells on production on July 18.
  • Acquired the remaining working interest on the 5 newly acquired sections at Flood. After this acquisition, the Company's working interest at Flood increased to 100% on all 42 sections.
  • Activated the water handling/disposal facilities on the southwest portion of the Flood property and placed four shut-in wells on production that were waiting for these facilities to start up. As a result of the new drills, the working interest acquisition and start-up of the shut-in wells, the aggregate Montney oil production at Flood increased from 40 boe/d at May 31 to approximately 350 boe/d in late July.
  • Increased the production from the acquired Ki properties by approximately 130 boe/d through four well re-completions and the optimization of a number of wells.
  • Established a $6 million revolving credit facility with a Canadian Chartered bank.
  • Continued to build the Canamax team to match the increased activity levels in the Company including the hiring of the following new employees: land manager, field superintendent, controller, and operations manager.

During May, Canamax announced a capital expenditure budget of $14 million for the months of June through December 2014. The majority of the budget (approximately 75%) has been allocated to the continued development of Flood and includes the drilling of 8 wells (two of which were completed in June/July), and expanded infrastructure to tie in all of the wells to Canamax's central water handling/disposal facilities.

During late June, all Brazeau River production (approximately 340 net boe/d) was shut-in for a three week period as the Keyera gas plant in the area was down for a plant turnaround. Full production resumed in the area on July 12.

Financial and Operational Summary

Financial
($000 except share, per share and per boe amounts)
Three months ended
May 31, 2014
Three months ended
May 31, 2013
Revenue $3,250 $24
Operating netback (1) $1,560 ($6)
Funds from continuing operations (1) (2) (3) $528 ($97)
- per share $0.02 ($0.01)
Net loss - continuing operations (2) ($1,221) ($120)
- per share ($0.04) ($0.01)
Net loss - discontinued operations (2) - ($146)
- per share - ($0.02)
Net capital expenditures (4) $3,052 -
Net proceeds from financings $12,080 -
Proceeds from share purchase warrant and stock option exercises
$518

-
Cash and working capital - end of period $6,698 ($505)
Weighted average shares outstanding (in 000) 31,450 9,788
Common shares outstanding - end of period (in 000) 41,281 9,788
Operating
Average Daily Production
Oil and NGL's (bbls/d) 293 4
Natural gas (mcf/d) 2,197 5
Oil equivalent (boe/d) 659 5
Average Price
Oil and NGL's ($/bbl) $80.87 $57.02
Natural gas ($/mcf) $5.28 $4.22
Oil equivalent ($/boe) $53.56 $56.47
Royalties & Operating expenses ($/boe) (5) $27.85 $62.04
Operating netback ($/boe) $25.71 ($5.57)
(1) See "Non-IFRS Measures".
(2) During the year ended February 28, 2014, Canamax terminated its Colombia operations (including shutting down the office in Bogota and terminating all staff) to focus on operations in western Canada. The Colombia operations have therefore been reflected as discontinued operations in the prior period.
(3) The funds from continuing operations were impacted by a one-time restructuring cost of $0.4 million associated with changes in the executive management team.
(4) Net capital expenditures reflect property acquisitions combined with drilling, completion and facility expenditures.
(5) Significant one-time charges to operating expenses were incurred in May related to maintenance costs for the newly acquired Ki wells.

Outlook

Management of Canamax continues to assess corporate acquisition opportunities in western Canada given the number of junior oil and gas companies in financial distress - the residual effects of low natural gas prices during 2010 through 2013 and the limited access to capital during those periods. In addition, the Company continues to negotiate property acquisitions with peer companies in an effort to enhance its core operating areas.

The net proceeds of $12.1 million from the recently closed financing, plus the newly established credit facilities of $6 million will give Canamax the financial strength to execute its capital expenditure plan for the remainder of the year and also allow the Company to continue seeking accretive acquisitions.

Non-IFRS Measures

This MD&A refers to certain financial measures that are not determined in accordance with IFRS such as "funds from continuing operations", "funds from continuing operations per share", "operating netback" and "operating netback per boe". These terms do not have any standardized meaning prescribed by IFRS and therefore may not be comparable to similar measures used by other companies. The Company uses these measures to help evaluate its performance.

Management uses funds from continuing operations to analyze performance and considers it a key measure as it demonstrates the Company's ability to generate the cash necessary to fund future capital investments. Funds from continuing operations is a non-IFRS measure and has been defined by the Company as net loss from continuing operations plus non-cash items (depletion, accretion of decommissioning obligation, share based compensation, and deferred income taxes) and excludes the change in non-cash working capital related to operating activities, expenditures on decommissioning obligations and expensed transaction costs. The Company also presents funds from continuing operations per share whereby amounts per share are calculated using weighted average shares outstanding, consistent with the calculation of earnings per share. Funds from continuing operations is reconciled to cash flow from operating activities under the heading "Funds from Continuing Operations".

Operating netbacks are determined by deducting royalties and operating expenses from oil and gas revenue. Operating netbacks are typically on a per boe basis and are used in operational and capital allocation decisions.

Funds from Continuing Operations

The reconciliation from cash flow from operating activities to funds from continuing operations is as follows:

Three months ended May 31 ($000) 2014 2013
Cash flow from operating activities - continuing operations ($4,170) ($6)
Add (deduct):
Change in non-cash working capital 4,254 (91)
Transaction costs-acquisitions 443 -
Funds from continuing operations $528 ($97)

About Canamax

Canamax is a junior oil and gas company in the business of consolidating micro-cap oil and gas companies and exploiting low risk development opportunities in the Western Canadian Sedimentary Basin.

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

Reader Advisories

Certain information in this press release constitutes forward-looking statements under applicable securities law. Any statements that are contained in this press release that are not statements of historical fact may be deemed to be forward-looking statements. Forward-looking statements are often identified by terms such as "may", "should", "anticipate", "expects", "seeks", "potential", "plans", "estimates", and similar expressions. Specific forward-looking statements included in this press release include comments related to expected production rates, cashflow and earnings, completion of facilities, infrastructure and tie-ins for the Company's production.

Forward-looking statements necessarily involve known and unknown risks and uncertainties, including, without limitation, the impact of general economic conditions, the risks and liabilities inherent in oil and natural gas operations; marketing and transportation; loss of markets; volatility of commodity prices; currency and interest rate fluctuations; environmental risks; competition; incorrect assessment of the value of acquisitions; failure to realize the anticipated benefits of acquisitions or dispositions; inability to access sufficient capital from internal and external sources; changes in legislation, including but not limited to income tax, environmental laws and regulatory matters, including changes in how they are interpreted and enforced; changes in incentive programs related to the oil and natural gas industry generally; geological, technical, drilling and processing problems and other difficulties in producing petroleum reserves; and obtaining required approvals of regulatory authorities. Readers are cautioned that the foregoing list of factors is not exhaustive.

Readers are cautioned not to place undue reliance on forward-looking statements. The Company's actual results, performance or achievement could differ materially from those expressed in, or implied by, such forward-looking statements and, accordingly, no assurances can be given that any of the events anticipated by the forward-looking statements will transpire or occur or, if any of them do, what benefits that the Company will derive from them. Such information, although considered reasonable by management at the time of preparation, may prove to be incorrect and actual results may differ materially from those anticipated. Forward-looking statements contained in this press release are expressly qualified by this cautionary statement.

The forward looking statements contained in this news release are made as of the date of this news release, and Canamax 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 expressly required by securities law.

Conversion

BOE's 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. In addition, 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.

Contact Information

  • Canamax Energy Ltd.
    Brad Gabel
    President & CEO
    (587) 349-5186

    Canamax Energy Ltd.
    Chris Martin, C.A.
    Vice President, Finance & CFO
    (587) 349-5186
    www.canamaxenergy.ca