Cub Energy Inc.
TSX VENTURE : KUB

Cub Energy Inc.

May 30, 2013 07:00 ET

Cub Energy Inc. Announces Record Revenue and Production Growth For First Quarter of 2013

HOUSTON, TEXAS--(Marketwired - May 30, 2013) - Cub Energy Inc. ("Cub" or the "Company") (TSX VENTURE:KUB) a Black Sea region-focused upstream oil and gas company, announced today the filing of its unaudited interim financial and operating results for the three months ended March 31, 2013. Cub filed its first quarter operating and financial results on May 29, 2013 on SEDAR (www.sedar.com) and has posted them on its website at www.cubenergyinc.com. All currency references in this press release are in US dollars except as otherwise indicated.

First Quarter 2013 Operational Highlights

  • Record quarterly production averaged 1,528 Boe/d (96% natural gas) an increase of 53% over first quarter 2012;
  • Fourth consecutive quarter of production and revenue growth;
  • First quarter net back of $43.84/Boe or $7.31/Mcfe;
  • Strong natural gas price of $11.88/Mcf and condensate price of $95.69/bbl;
  • O-15 well cased to a total depth of 3,246 metres with four potential zones of pay identified and completion operations underway;
  • The K-7 well tested 5.9 MMcf/d and the land acquisition and regulatory approval process is proceeding for the flowline;

First Quarter 2013 Financial Highlights

  • Gross revenue from hydrocarbon sales for the period increased 48% to $9.67 million (Q1 2012 - $6.54 million) (includes the Company's pro-rata 30% portion of revenue from hydrocarbon sales in its equity investment in Kubgas Holdings);
  • The Company estimates that its pro-rata portion of cash flow from operations from Kubgas Holdings, not including changes in working capital, to be approximately $3,633,000;
  • A $3 million dividend received during the period from Kubgas Holdings with an additional $2.4 million dividend received since period end;
Quarter ended
March 31, 2013
Quarter ended
March 31, 2012
($)
Petroleum and natural gas revenue 1,055,000 -
Income from equity investment (30%) net 2,153,000 1,909,000
Funds generated from operations (1) 696,000 1,790,000
Net Income / (loss) 763,000 2,191,000
Per share - basic 0.00 0.02
Per share - diluted 0.00 0.02
Capital expenditures (2) 323,000 -
Capital expenditures within equity investment (30% net) 1,548,000 3,022,000
Working capital / (deficit) 10,611,000 3,390,000
Cash and cash equivalents 11,740,000 4,593,000
Long-term debt 0 0
  1. Funds generated from operations calculated as revenue plus income from equity investment less cost of sales and selling and general administrative expenses.
  2. Includes exploration and evaluation costs.

Corporate Highlights

  • On March 8, 2013, the Company announced that it has entered into an agreement to acquire a private Ukrainian oil and gas exploration company ("TGI"). TGI assets consist of approximately 70,000 gross acres of undeveloped land. As consideration for TGI, Cub will issue 55,555,555 common shares at a deemed price of $0.45 per share, representing aggregate consideration to TGI two shareholders of $25 million. The number of shares to issue to TGI will remain fixed. The transaction is expected to occur on or around June 30, 2013, and is subject to the satisfaction of standard conditions, including the receipt of applicable stock exchange and Ukraine regulatory approvals.
  • On April 26, 2013, the Company signed an arrangement agreement providing for the acquisition of all of the issued and outstanding shares of Anatolia Energy Corp. ("Anatolia"), a Company listed on the TSX Venture Exchange trading under the symbol AEE (the "Transaction"). Pursuant to the Transaction, the shareholders of Anatolia will receive 0.106 of a share in the Company for each Anatolia share held. Anatolia shareholders will receive approximately 13.9 million shares of the Company. Anatolia owns an interest in 11 licenses in four primary project areas in Turkey consisting of 1,162,856 gross acres (581,429 net) which are highly prospective for both conventional and unconventional resources.

Mikhail Afendikov, Chief Executive Officer of Cub Energy, commented, "I am pleased with our quarterly results and the operational performance of the company. Strong production delivery and the evolution of free cash flow leaves us well positioned for the year. We are excited about the acquisition of three additional licences in Ukraine and our move into Turkey. Both of these moves offer tremendous upside potential as we continue our growth in the Black Sea region. We have the skills and resources to reward investors with consistent, accretive, organic growth. This is a great time in Cub's story and we are excited about what is to come."

2013 Outlook

Cub's 2013 work programme is fully financed and the Company is well positioned to build on its operational successes achieved in 2012.

Cub intends to drill nine to ten wells (six in Eastern Ukraine, two to three, in Western Ukraine, and one in Turkey) and will workover or recomplete six wells on the Company's Eastern Ukraine assets. As a result of these projects and from bringing production on-stream from the 2012 CAPEX programme, management forecasts that the Company will exit 2013 with a production rate nearly double that of Cub's year-end 2012 rate of 1,534 Boe/d.

The Company expects to close on its previously announced acquisition of three additional licences in Eastern Ukraine in the second quarter of 2013 and its acquisition of Anatolia Energy in the third quarter of 2013.

About Cub Energy Inc.

Cub Energy Inc. (TSX VENTURE:KUB) is an upstream oil and gas company, with a proven track record of exploration and production cost efficiency in the Black Sea region. The Company's strategy is to implement western technology and capital, combined with local expertise and ownership, to increase value in its undeveloped land base, creating and further building a portfolio of producing oil and gas assets within a high pricing environment.

For further information please contact us or visit our website: www.cubenergyinc.com.

Oil and Gas Equivalents

Production information is commonly reported in units of barrel of oil equivalent ("boe" or "Mboe" or "MMboe") or in units of natural gas equivalent ("Mcfe" or "MMcfe" or "Bcfe"). However, boe(s) or Mcfe(s) may be misleading, particularly if used in isolation. A boe conversion ratio of 6 Mcf = 1 barrel, or a Mcfe conversion ratio of 1 barrel = 6 Mcf, is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.

Reader Advisory

Except for statements of historical fact, this news release contains certain "forward-looking information" within the meaning of applicable securities law. Forward-looking information is frequently characterized by words such as "plan", "expect", "project", "intend", "believe", "anticipate", "estimate" and other similar words, or statements that certain events or conditions "may" or "will" occur. Cub believes that the expectations reflected in the forward-looking information are reasonable; however there can be no assurance those expectations will prove to be correct. We cannot guarantee future results, performance or achievements. Consequently, there is no representation that the actual results achieved will be the same, in whole or in part, as those set out in the forward-looking information.

Forward-looking information is based on the opinions and estimates of management at the date the statements are made, and are subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ materially from those anticipated in the forward-looking information. Some of the risks and other factors that could cause the results to differ materially from those expressed in the forward-looking information include, but are not limited to: general economic conditions in the Ukraine and globally; industry conditions, including fluctuations in the prices of natural gas; governmental regulation of the natural gas industry, including environmental regulation; unanticipated operating events or performance which can reduce production or cause production to be shut in or delayed; failure to obtain industry partner and other third party consents and approvals, if and when required; competition for and/or inability to retain drilling rigs and other services; the availability of capital on acceptable terms; the need to obtain required approvals from regulatory authorities; stock market volatility; volatility in market prices for natural gas; liabilities inherent in natural gas operations; competition for, among other things, capital, acquisitions of reserves, undeveloped lands, skilled personnel and supplies; incorrect assessments of the value of acquisitions; geological, technical, drilling, processing and transportation problems; changes in tax laws and incentive programs relating to the natural gas industry; failure to realize the anticipated benefits of acquisitions and dispositions; and the other factors. Readers are cautioned that this list of risk factors should not be construed as exhaustive.

This cautionary statement expressly qualifies the forward-looking information contained in this news release. We undertake no duty to update any of the forward-looking information to conform such information to actual results or to changes in our expectations except as otherwise required by applicable securities legislation. Readers are cautioned not to place undue reliance on forward-looking information.

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

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