Fortaleza Energy Inc.

August 26, 2014 20:34 ET

Fortaleza Announces Second Quarter 2014 Financial and Operating Results

CALGARY, ALBERTA--(Marketwired - Aug. 26, 2014) -

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 and six months ended June 30, 2014. The Corporation's condensed interim consolidated financial statements and management's discussion and analysis for the three and six months ended June 30, 2014 are available on SEDAR (www.sedar.com).

Financial and Operating Summary

Three months ended June 30, Six months ended June 30,
($000's except per share amounts) 2014 2013 2014 2013
Financial
Natural gas sales 201 215 570 409
Funds used in operations (1) 178 643 166 1,054
Per share - basic and diluted 0.00 0.01 0.00 0.02
Net loss 219 710 270 1,267
Per share - basic and diluted 0.00 0.01 0.00 0.02
Working capital (deficiency) (1) 2,754 (3,732 ) 2,754 (3,732 )
Operations
Average production:
Natural gas (Mcf/d) 301 404 388 416
Natural gas liquids (bbl/d) 8 11 11 10
Total (Mcfe/d) 347 470 454 476
Average sales price:
Natural gas ($/Mcf) 5.15 3.98 5.67 3.72
Natural gas liquids ($/bbl) 86.28 70.41 87.15 73.48
Total ($/Mcfe) 6.38 5.03 6.94 4.76
Operating netback (1) ($/Mcfe) 2.40 2.02 3.40 1.78
  1. The terms "funds from (used in) operations", "operating netback" and "working capital" are not recognized measures under IFRS. Management believes that in addition to net income, funds from (used in) 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 (used in) 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 (used in) 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.

STRATEGIC TRANSACTION

On August 5, 2014, Fortaleza announced its entry into the oil and gas service business by providing fracturing and stimulation fluid blending services and operating under the name Blendforce Energy Services Inc. ("Blendforce"). Fortaleza, through its wholly-owned subsidiary Blendforce, entered into an agreement with StimSol Canada Inc. ("StimSol"), a wholly owned subsidiary of Arcan Resources Ltd. ("Arcan"), to lease its Swan Hills Acid Blending facility, all related equipment and laboratory (collectively the "Swan Hills Acid Blending Facility"), to provide custom acid blending services for fracture stimulation and production optimization fluids. As part of the agreement, StimSol will also be providing all of its personnel to assist Blendforce with its business. The Corporation has a right of first refusal to acquire the Swan Hills Acid Blending Facility and related equipment and laboratory, which can be exercised up to September 25, 2014. The Corporation intends to cause Blendforce to exercise the option to purchase the Swan Hills Acid Blending Facility.

The decision to pursue this business opportunity is driven by the development of a light oil non-conventional resource play of the Beaverhill Lake complex being actively pursued by a number of operators. Multi-stage fracturing is being done with 28 percent acid blends. 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 Montney and Duvernay plays which utilize acid spearhead blends for the completion of each well.

There are approximately 45,000 active producing wells in the immediate service area of the Swan Hills Acid Blending Facility, many of which require stimulation and production enhancement fluids for remediation. A key part of the service offering of Blendforce will be providing custom blending and fluid supply for enhancement and stimulation of producing wells.

This business opportunity provides Fortaleza with an opportunity to participate in the growing development of both oil and natural gas non-conventional resource plays in Western Canada as well as provide a base level of business from existing producing wells.

The Corporation expects to raise gross proceeds of $1,462,600 through the private placement of 18,282,500 common shares at a price of $0.08 per share. The proceeds of the financing will be used for general working capital purposes and to fund the business of Blendforce and is expected to close on August 27, 2014.

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 reference to the right of first refusal to acquire the facility and indirect reference to the business opportunity in the Beaverhill Lake area. 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 including Fortaleza may not exercise the right of first refusal or the expected sales of acid blends may not materialize.

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.

Contact Information

  • Fortaleza Energy Inc.
    Mr. J. Cameron Bailey
    President and Chief Executive Officer
    (403) 398-3345 extension 2450
    (403) 398-3351 (FAX)
    cbailey@fortalezaenergy.com

    Fortaleza Energy Inc.
    Mr. Jamie Jeffs, CA
    Chief Financial Officer
    (403) 398-3345 extension 2470
    jjeffs@fortalezaenergy.com