Cardinal Energy Ltd.
TSX : CJ

Cardinal Energy Ltd.

November 03, 2014 18:34 ET

Cardinal Energy Announces Third Quarter Results

CALGARY, ALBERTA--(Marketwired - Nov. 3, 2014) - Cardinal Energy Ltd. ("Cardinal" or the "Company") (TSX:CJ) is pleased to announce its operating and financial results for the quarter ended September 30, 2014 which marked the third full operating quarter for Cardinal as a public company. Cardinal also announces that its unaudited condensed interim consolidated financial statements and related Management's Discussion and Analysis for the three and nine months ended September 30, 2014 are available on the System for Electronic Analysis and Retrieval ("SEDAR") and on Cardinal's website at www.cardinalenergy.ca.

Highlights

  • Production averaged 7,587 BOEPD (90% oil) in the third quarter of 2014, which includes limited production from the first Wainwright acquisition and none from the second Wainwright acquisition;
  • Cash flow from operations per share was $0.60 (basic) and $0.58 (fully diluted) for the quarter;
  • Cardinal had net earnings of $22.25 million in the third quarter of 2014 ($0.50 per share fully diluted, $0.52 per share basic);
  • Cardinal's total payout ratio was approximately 56% for the three months ended September 30, 2014, which included approximately 3% of organic production growth compared to the second quarter.

Selected Quarterly Data

Three months ended
Sept 30, 2014
Three months ended
June 30, 2014
Percentage Change
Production
Oil and NGL (bbl/d) 6,849 5,800 18 %
Natural gas (mcf/d) 4,424 4,208 5 %
Oil equivalent (boe/d) 7,587 6,501 17 %
Financial ($000's, except share and per share amounts)
Revenue 54,045 48,194 12 %
Cash flow from operating activities 22,764 25,703 (11 %)
Cash flow from operations 25,858 23,522 10 %
Basic per share ($) 0.60 0.62 (4 %)
Diluted per share ($) 0.58 0.60 (4 %)
Net debt 60,202 (518 ) N/A
Shareholders' Equity 729,317 363,943 100 %
Common shares outstanding 56,654,104 37,804,824 50 %
Weighted average shares outstanding (Basic) 42,997,245 37,733,848 14 %

Operational Update

Cardinal completed two major acquisitions in the third quarter, adding approximately 4,400 BOEPD of long life oil production in the Wainwright area of Alberta. These acquisitions created a new core area for Cardinal. Bantry and Wainwright are now equal sized areas and we expect total Company production to average 10,800 BOEPD in the fourth quarter of 2014.

Bantry

Cardinal continues to focus on operating expense reduction and production enhancement to its base production in Bantry. We continue to see optimization projects which we believe will continue to improve the decline and economics of this production base in 2015.

We started a seismic program in Q3 which Management believes will add to its drilling inventory on our land base. Additionally, we continue to work to add prospective land to further expand our drilling inventory and adding 2.75 sections to our Bantry land base in the quarter.

Cardinal has finished drilling three additional wells in Bantry. Drilling times and drilling costs for these latest wells have continued to improve from the previous drills. We continue to modify our completion programs on the wells and expect to be able to realize cost savings on completions in 2015. Two of the three recently drilled wells have now been fraced. One is now flowing oil and the second is still recovering load fluid from the frac. While it is Cardinal's policy not to release well results with less than 30 days of production history, we can state that the new drill that is currently flowing oil is the best well we have drilled to date, based on the first 15 days of production.

Based on the initial success of these new drills, Cardinal will shut in some of the first Glauconite horizontal drills to do pressure and build up work to model the pools for future water floods without affecting production guidance for the quarter.

Wainwright

With the closing of the two acquisitions, which added 4,400 BOEPD of long life oil production to the Company, Wainwright has the lowest production decline in the Company. We feel that the base production in Wainwright is now at less than a 10% annual decline rate and will provide a solid base of cash flow from operations for the Company for the foreseeable future.

Cardinal is working to expand its drilling inventory in Wainwright and expects to drill two wells on its land base in the first quarter of 2015.

Our focus in Q4 will be to fully integrate the assets acquired in Q3 into the Company. The acquired assets have a higher unit operating expense structures than Cardinal's existing production base and will have a negative effect on our corporate operating expenses per barrel of oil equivalent for the next few quarters. We have seen a slight increase in unit operating expenses due to the acquisition in Q3 and expect the full effect of these increased unit operating expenses in Q4. Management believes the increase will result in corporate operating expenses of approximately $26 per barrel of oil equivalent for the fourth quarter of 2014, but we are confident that we will be able to reduce these costs on a go forward basis.

Q4 Guidance

We exited the third quarter with approximately $62 million drawn on our credit facilities; we expect to reduce this amount by approximately $10 million from fourth quarter cash flow from operations. As part of one of our recent acquisitions we acquired an oil property which does not fit into our long term plans for the Company. Management intends to opportunistically market and sell this property in 2015. We anticipate that a sale of this property would eliminate a large portion of our debt with a minimum impact on our production.

Cardinal will focus on the integration of the recently acquired assets in Q4. We expect to replace declines, grow production by 2-3% and reduce our net debt by $10 million in Q4 on a budgeted $80 (WTI) oil price. On a sustainability basis in the current oil price environment, we expect that we will be able to pay our dividend and hold production flat with approximately 70% of our cash flow from operations in Q4.

Cardinal is well positioned for growth in 2015 with significant financial flexibility to execute its business plan.

About Cardinal Energy Ltd.

Cardinal is a junior Canadian oil focused company built to provide investors with a stable platform for dividend income and growth. Cardinal's operations are focused in all season access areas in Alberta.

Note Regarding ForwardLooking Statements and Other Advisories

This press release contains forward-looking statements and forward-looking information (collectively "forward-looking information") within the meaning of applicable securities laws relating to Cardinal's plans and other aspects of Cardinal's anticipated future operations, management focus, objectives, strategies, financial, operating and production results and business opportunities, including our drilling and development plans and the timing thereof, Cardinal's plans to further delineate its drilling opportunities and expand its drilling inventory, future operating expenses and other costs, forecast production, optimization plans, decline rates, the Company's dividend policy and future dividends, future debt levels, target cash flow from operations, disposition plans and the timing thereof and expectations regarding future commodity prices. Forward-looking information typically uses words such as "anticipate", "believe", "project", "expect", "goal", "plan", "intend" or similar words suggesting future outcomes, statements that actions, events or conditions "may", "would", "could" or "will" be taken or occur in the future. The forward-looking information is based on certain key expectations and assumptions made by Cardinal's management, including expectations and assumptions concerning prevailing commodity prices, exchange rates, interest rates, applicable royalty rates and tax laws; future production rates and estimates of operating expenses; performance of existing and future wells; reserve and resource volumes; anticipated timing and results of capital expenditures; the success obtained in drilling new wells; the sufficiency of budgeted capital expenditures in carrying out planned activities; the timing, location and extent of future drilling operations; the state of the economy and the exploration and production business; results of operations; performance; business prospects and opportunities; the availability and cost of financing, labor and services; the impact of increasing competition; ability to market oil and natural gas successfully; and Cardinal's ability to access capital.

Although the Company believes that the expectations and assumptions on which such forward-looking information is based are reasonable, undue reliance should not be placed on the forward-looking information because Cardinal can give no assurance that they will prove to be correct. Since forward-looking information addresses future events and conditions, by its very nature they involve inherent risks and uncertainties. Cardinal's actual results, performance or achievement could differ materially from those expressed in, or implied by, the forward-looking information and, accordingly, no assurance can be given that any of the events anticipated by the forward-looking information will transpire or occur, or if any of them do so, what benefits that Cardinal will derive there from. Management has included the above summary of assumptions and risks related to forward-looking information provided in this report in order to provide securityholders with a more complete perspective on Cardinal's future operations and such information may not be appropriate for other purposes.

Readers are cautioned that the foregoing lists of factors are not exhaustive. Additional information on these and other factors that could affect Cardinal's operations or financial results are included in reports on file with applicable securities regulatory authorities and may be accessed through the SEDAR website (www.sedar.com).

These forward-looking statements are made as of the date of this press release and Cardinal disclaims any intent or obligation to update publicly any forward-looking information, whether as a result of new information, future events or results or otherwise, other than as required by applicable securities laws.

Non-GAAP measures

This press release contains the terms "cash flow from operations", "simple payout ratio", "total payout ratio" and "net debt" which do not have a standardized meaning prescribed by International Financial Reporting Standards ("IFRS" or, alternatively, "GAAP") and therefore may not be comparable with the calculation of similar measures by other companies. Cardinal uses cash flow from operations and total payout ratio to analyze financial and operating performance. Cardinal feels these benchmarks are key measures of profitability and overall sustainability for the Company. Each of these terms is commonly used in the oil and gas industry. Cash flow from operations and total payout ratio are not intended to represent operating profits nor should they be viewed as an alternative to cash flow provided by operating activities, net earnings or other measures of financial performance calculated in accordance with GAAP. Cash flow from operations is calculated as cash flows from operating activities adjusted for changes in non-cash working capital and decommissioning expenditures "Total payout ratio" represents the ratio of the sum of dividends declared plus management's expectation of the amount of capital expenditures necessary to maintain our production divided by cash flow from operations. "Simple payout ratio" represents the ratio of the amount of dividends declared, divided by cash flow from operations. Simple payout ratio and total payout ratio are other key measures to assess our ability to finance dividends, operating activities and capital expenditures. The term "net debt" is not recognized under GAAP and is calculated as bank debt plus working capital deficiency or minus working capital surplus (both adjusted for the fair value of financial instruments). Net debt is used by management to analyze the financial position and leverage of Cardinal.

Advisory Regarding Oil and Gas Information

Where applicable, oil equivalent amounts have been calculated using a conversion rate of six thousand cubic feet of natural gas to one barrel of oil. Boes may be misleading, particularly if used in isolation. A Boe conversion ratio of six thousand cubic feet of natural gas to one barrel of oil 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 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 Mcf: 1 Bbl, utilizing a conversion ratio at 6 Mcf: 1 Bbl may be misleading as an indication of value.

Any references in this news release to initial production rates are useful in confirming the presence of hydrocarbons, however, such rates are not determinative of the rates at which such wells will continue production and decline thereafter. While encouraging, readers are cautioned not to place reliance on such rates in calculating the aggregate production for Cardinal.

Contact Information

  • Cardinal Energy Ltd.
    M. Scott Ratushny
    Chief Executive Officer and Chairman
    (403) 216-2706

    Cardinal Energy Ltd.
    Shane Peet
    Chief Operating Officer
    (403) 216-2708

    Cardinal Energy Ltd.
    Suite 1400, 440 - 2nd Avenue S.W.
    Calgary, Alberta T2P 5E9
    (403) 234-8681
    (403) 234-0603 (FAX)