Fortaleza Energy Inc.

June 01, 2015 16:56 ET

Fortaleza Announces First Quarter 2015 Financial and Operating Results

CALGARY, ALBERTA--(Marketwired - June 1, 2015) -

THIS NEWS RELEASE IS NOT FOR DISSEMINATION IN THE UNITED STATES OR TO ANY UNITED STATES NEWS SERVICES.

Fortaleza Energy Inc. ("Fortaleza" or the "Corporation") today announces its financial and operating results for the three months ended March 31, 2015. The Corporation's condensed interim consolidated financial statements and management's discussion and analysis for the three months ended March 31, 2015 are available on the Corporation's website (www.fortalezaenergy.com) or SEDAR (www.sedar.com).

Financial and Operating Summary

Three months ended March 31,
($000's except per share amounts) 2015 2014
Financial
Natural gas sales 114 369
Blending services sales 967 -
Total revenue 1,081 369
Funds from (used in) operations (1) (701 ) 12
Per share - basic and diluted (0.01 ) 0.00
Net loss (890 ) (51 )
Per share - basic and diluted (0.01 ) (0.00 )
Working capital (deficiency) (1) (603 ) 3,083
Operations
Average production:
Natural gas (Mcf/d) 313 476
Natural gas liquids (bbl/d) 9 14
Total (Mcfe/d) 365 562
Average sales price:
Natural gas ($/Mcf) 3.02 6.00
Natural gas liquids ($/bbl) 37.50 87.63
Total ($/Mcfe) 3.46 7.30
Operating netback (1) ($/Mcfe) (0.43 ) 4.03
(1) The terms "funds from operations", "operating netback" and "working capital" are not recognized measures under IFRS.Management believes that in addition to net income, funds from operations and operating netback are useful supplemental measures as they provide an indication of the results generated by the Corporation's principal business activities before the consideration of how those activities are financed.Investors are cautioned, however, that these measures should not be construed as alternatives to net income determined in accordance with IFRS.The Corporation's method of calculating funds from operations may differ from that of other companies, and, accordingly it may not be comparable to measures used by other companies.The Corporation calculates funds from operations by taking cash flow from operating activities as determined under IFRS before changes in non-cash operating working capital and abandonment expenditures.Operating netback is calculated on a per Mcfe basis taking natural gas sales and deducting royalties, operating expenses and transportation expenses.Working capital is calculated as current assets less current liabilities.

Highlights

On October 3, 2014, Fortaleza closed the acquisition of the Swan Hills Acid Blending Facility enabling it to provide custom acid blending services for fracture stimulation and production optimization fluids. Fortaleza operates the business through its wholly-owned subsidiary, BlendForce Energy Services Inc.

The decision to pursue this business opportunity was driven by the development of a light oil non-conventional resource play of the Beaverhill Lake complex that was being pursued by a number of operators. In addition, the Swan Hills Acid Blending Facility is located in an area where there is significant industry activity pursuing deep basin unconventional plays such as the Duvernay which utilize acid spearhead blends for the completion of well.

Since establishing BlendForce, it has completed the blending and supply of completion fluids for four Beaverhill Lake wells, which are some of the best performing wells in the Swan Hills area. In addition, BlendForce had completed blending and supply of production enhancement fluids, and fluids for spearheads in 15 wells for six operators located as far north as Fort Nelson, BC. The overall new drilling activity levels have been significantly reduced by the lower commodity prices, however, BlendForce has been successful in gaining market share, blending and supplying production enhancement fluids.

The first quarter operating results were affected by an early and prolonged spring break up and it is expected that the requirements for production enhancement fluids volumes will begin to increase in the second quarter of 2015. We expect drilling activity in the Swan Hills area requiring acid frac systems supplied by BlendForce to commence in the third quarter of 2015 and remain relatively steady through to the end of the first quarter 2015.

Natural Gas, Crude Oil and Natural Gas Liquids (NGL) Conversions

Certain crude oil and NGL volumes have been converted to cubic feet equivalent (cfe) on the basis of one barrel (bbl) to six thousand cubic feet (Mcf). Cfe may be misleading, particularly if used in isolation. A conversion ratio of one bbl to six Mcf is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent value equivalency at the well head.

Caution to Reader

This news release contains forward-looking information, including without limitation statements concerning the BlendForce market outlook. The reader is cautioned that assumptions used in the preparation of such information, although considered reasonable by Fortaleza at the time of preparation, may prove to be incorrect. The actual results achieved in future periods will vary from the information provided herein and the variations may be material.

This press release shall not constitute an offer to sell or a solicitation of an offer to buy nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of such jurisdiction. The common shares of Fortaleza have not and will not be registered under the United States Securities Act of 1933, as amended (the "U.S. Securities Act") or any state securities laws and may not be offered or sold in the United States or to any U.S. person except in certain transactions exempt from the registration requirements of the U.S. Securities Act and applicable state securities laws.

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