Dundee Energy Limited

Dundee Energy Limited

February 15, 2012 18:50 ET

Dundee Energy Limited Announces 2011 Financial Results

TORONTO, ONTARIO--(Marketwire - Feb. 15, 2012) - Dundee Energy Limited (formerly "Eurogas Corporation") ("Dundee Energy" or the "Corporation") (TSX:DEN) today announced its financial results for the year ended December 31, 2011. The Corporation's annual audited consolidated financial statements, along with management's discussion and analysis have been filed on the System for Electronic Document Analysis and Retrieval ("SEDAR") and may be viewed under the Corporation's profile at www.sedar.com or the Corporation's website at www.dundee-energy.com.

  • Cash flow from operating activities was $15.5 million in 2011 compared with cash flow from operating activities of $1.0 million during the prior year. In June 2010, the Corporation completed the acquisition of oil and natural gas properties in southern Ontario, significantly affecting operating cash flow in the current year relative to 2010.
  • Production volumes for the year ended December 31, 2011 averaged 10,538 Mcf/d of natural gas and 718 bbls/d of oil and liquids.
  • Revenues earned from oil and gas sales during the year ended December 31, 2011 were $42.2 million, representing an average price of $4.50/Mcf on sales of natural gas and an average price of $96.15/bbl on sales of crude oil.
  • Field netbacks for the year ended December 31, 2011 were $2.22/Mcf from sales of natural gas and $58.47/bbl from sales of oil and liquids.
  • Capital expenditures during the year ended December 31, 2011 were $11.1 million.
  • Proved and probable reserves increased 10% to 16,091 Mboe at December 31, 2011, compared with 14,645 Mboe at December 31, 2010.
  • Cash and available credit under the Corporation's credit facilities totalled $19.8 million at December 31, 2011.
  • Net loss attributable to owners of the parent for the year ended December 31, 2011 was $1.2 million compared with a net loss attributable to owners of the parent of $11.5 million incurred in 2010. Prior year results include an impairment of $7.3 million against the Corporation's investment portfolio.


Production Volumes
Average daily production volumes
Three months ended
December 31,
Year ended
December 31,
2011 2010 2011 2010
Natural gas (Mcf/d) 10,691 10,417 10,538 10,435
Oil (bbls/d) 766 669 692 669
Liquids (bbls/d) 27 22 26 19
Total (boe/d) 2,575 2,427 2,474 2,427

The acquisition of Torque, completed in August 2011, added approximately 300 Mcf/d of natural gas and 85 bbls/d of oil production.

The Corporation successfully offset the natural annual decline rate of approximately 6% and 15% in its gas and oil production, respectively, through the drilling and completion of two successful gas wells in the fourth quarter of 2011 that will contribute average production volumes of approximately 450 Mcf/d and the drilling of a new oil well in December 2011 that came on production at 23 bbls/d.

Revenue from Oil and Gas Sales

Three months ended Twelve months ended From commencement of production on June 29, 2010 to
December 31, 2011 December 31, 2010 December 31, 2011 December 31, 2010
Natural gas $ 3,981 $ 4,309 $ 17,316 $ 9,190
Oil 6,920 5,342 24,302 10,141
Liquids 176 117 558 189
11,077 9,768 42,176 19,520
Less royalties (1,559 ) (1,467 ) (6,358 ) (3,040 )
Net sales $ 9,518 $ 8,301 $ 35,818 $ 16,480

Global natural gas inventories, drilling and production remain at or near record highs, exerting downward pressure on the price of natural gas. During the year ended December 31, 2011, the Corporation realized an average price of $4.50/Mcf on sales of its natural gas. This represents a decrease of approximately 6% from the average price of $4.79/Mcf realized in the prior year. Due to the proximity of the Corporation's operations to the Dawn Hub, a leading provider of natural gas supply to the greater Toronto market area, the Corporation's realized price from sales of natural gas include a positive basis differential from average industry benchmarks.

Concerns over oil supply stemming from political unrest in the Middle East contrast with the downside risk of decreased oil demand following austerity measures in the European Union and the potential effect on global consumption. These global economic uncertainties continue to cause significant volatility in the price of oil. During the year ended December 31, 2011, the Corporation realized an average price of $96.15/bbl of oil, a 17% increase over the $82.38/bbl realized in the prior year.

Price Risk Management

The Corporation has entered into fixed price derivative contracts for the purpose of protecting its oil and natural gas revenue from the volatility of oil and natural gas prices and the volatility in Canadian to US foreign exchange rates. During the year ended December 31, 2011, the Corporation realized a gain of $3.1 million (2010 - loss of $0.5 million) from these arrangements, including a realized gain of $1.0 million relating to production in 2011.

At December 31, 2011, the Corporation had locked in pricing for 500 bbls/d of oil production through to December 31, 2012 at a weighted average rate of Cdn$101.20/bbl. It had also locked in pricing on 6.5 million btu/day of natural gas from January 1, 2012 to February 29, 2012 at a fixed price of Cdn$4.66/MMbtu and on 7.0 million btu/day from March 1, 2012 to December 31, 2012 at Cdn$3.84/MMbtu. These risk management contracts protect pricing on approximately 70% of the Corporation's oil and natural gas production.

Field Level Cash Flows

Three months ended Three months ended Twelve months ended From commencement of production on June 29, 2010 to
December 31, 2011 December 31, 2010 December 31, 2011 December 31, 2010
Total sales $ 11,077 $ 9,768 $ 42,176 $ 19,520
Realized risk management gain (loss) 630 (2 ) 1,003 (2 )
Royalties (1,559 ) (1,467 ) (6,358 ) (3,040 )
Production expenditures (2,248 ) (2,926 ) (12,957 ) (5,719 )
Field level cash flows $ 7,900 $ 5,373 $ 23,864 $ 10,759

Field Netbacks

Three months ended Three months ended Twelve months ended From commencement of operations on June 29, 2010 to
December 31, 2011 December 31, 2010 December 31, 2011 December 31, 2010
$/bbl $/Mcf $/bbl $/Mcf $/bbl $/Mcf $/bbl $/Mcf
Total sales $ 97.27 $ 4.05 $ 85.91 $ 4.50 $ 94.83 $ 4.50 $ 81.64 $ 4.79
Realized risk management gain (loss) 0.01 0.64 (0.03 ) - (0.24 ) 0.28 (0.02 ) -
Royalties (13.39 ) (0.59 ) (12.64 ) (0.69 ) (14.37 ) (0.67 ) (12.73 ) (0.74 )
Production expenditures (17.60 ) (0.98 ) (23.29 ) (1.51 ) (21.75 ) (1.89 ) (20.51 ) (1.63 )
Field netbacks $ 66.29 $ 3.12 $ 49.95 $ 2.30 $ 58.47 $ 2.22 $ 48.38 $ 2.42

Capital Expenditures

During the year ended December 31, 2011, the Corporation incurred capital expenditures of $11.1 million on oil and gas properties in southern Ontario. As part of its 2011 offshore work program, the Corporation drilled three gas wells at a total cost of $3.0 million. Two wells were drilled, completed and were connected to the pipeline grid. A third well was shut-in pending further evaluation as part of the Corporation's 2012 work program. During 2011, the Corporation completed its onshore drilling program consisting of two wells at a cost of $3.3 million. In addition, the Corporation incurred $1.5 million of costs to acquire and process seismic data to identify and add prospective sites to the pipeline of potential drill opportunities for 2012 and beyond.

The Corporation's 2012 work program is budgeted at $10.6 million. Due to current natural gas prices, the Corporation has decided to limit its offshore program in 2012.


The Castor Project continues to progress on schedule and substantially within approved engineering, procurement and construction budgets, reaching an overall completion rate of approximately 95% at December 31, 2011. The Corporation continues to anticipate initial gas injection as originally scheduled in May 2012. The offshore processing platform, which was constructed in the United States, was shipped and received at the project site in November 2011, and has been installed and connected to the offshore wellhead platform by way of an interconnecting bridge. Commissioning of systems and equipment tie- ins are progressing as anticipated.

The 13-well drilling program is essentially completed. The Castor 1 well, drilled 6 years ago, has been tied to the wellhead platform. The subsea pipeline, which connects the processing platform to the onshore pipeline, has been laid on the ocean floor. It has been tested and is in the process of being connected to the processing platform. Construction of the onshore gas treatment plant is nearing completion, with many of the systems being transferred to the operations and maintenance contractor. The pipeline connecting the Castor Project to the Spanish national high-pressure grid has been completed by Enagas, S.A., Spain's top natural gas transportation company, the technical manager of the Spanish gas system and common carrier for the gas network in Spain, as has the associated metering system, which was also built by Enagas.


The Corporation believes that important measures of operating performance include certain measures that are not defined under IFRS and as such, may not be comparable to similar measures used by other companies. While these measures are non-IFRS, they are common benchmarks in the oil and natural gas industry, and are used by the Corporation in assessing its operating results, including net earnings and cash flows.

  • "Field Level Cash Flows" are calculated as revenues from oil and gas sales, less royalties and production expenditures, adjusted for realized price management contracts.

  • "Field Netbacks" refers to field level cash flows expressed on a measurement unit or barrel of oil equivalent basis.


Dundee Energy Limited (formerly "Eurogas Corporation") is a Canadian-based oil and natural gas company with a mandate to create long-term value for its shareholders through the exploration, development, production and marketing of oil and natural gas, and through other high impact energy projects. Dundee Energy holds interests, both directly and indirectly, in the largest accumulation of producing oil and gas assets in Ontario, in the development of an offshore underground natural gas storage facility in Spain and, through a preferred share investment, in certain exploration and evaluation programs for oil and natural gas offshore Tunisia. The Corporation's common shares trade on the Toronto Stock Exchange under the symbol "DEN".


Certain information set forth in these documents, including management's assessment of each of the Corporation's future plans and operations, contains forward-looking statements. Forward-looking statements are statements that are predictive in nature, depend upon or refer to future events or conditions or include words such as "expects", "anticipates", "intends", "plans", "believes", "estimates" or similar expressions. By their nature, forward-looking statements are subject to numerous risks and uncertainties, some of which are beyond the Corporation's control, including: exploration, development and production risks; uncertainty of reserve estimates; reliance on operators, management and key personnel; cyclical nature of the business; economic dependence on a small number of customers; additional funding that may be required to execute on exploration and development work; the ability to obtain, sustain or renew licenses and permits; risks inherent to operating and investing in foreign countries; availability of drilling equipment and access; industry competition; environmental concerns; climate change regulations; volatility of commodity prices; hedging activities; potential defects in title to properties; potential conflicts of interest; changes in taxation legislation; insurance, health, safety and litigation risk; labour costs and labour relations; geo-political risks; risks relating to management of growth; aboriginal claims; volatility of the Corporation's share price; royalty rates and incentives; regulatory risks relating to oil and natural gas exploration; marketability and price of oil and natural gas; failure to realize anticipated benefits of acquisitions and dispositions; information system risk; and other risk factors discussed or referred to in the section entitled "Risk Factors" in the Corporation's Annual Information Form for the year ended December 31, 2011. Readers are cautioned that the assumptions used in the preparation of such information, although considered reasonable at the time of preparation, may prove to be imprecise and, as such, undue reliance should not be placed on forward-looking statements. The Corporation's actual results, performance or achievement could differ materially from those expressed in, or implied by, these forward-looking statements and, accordingly, no assurance can be given that any of the events anticipated by the forward-looking statements will transpire or occur, or if any of them do so, what benefits the Corporation will derive from them. The Corporation disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

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