Fortaleza Energy Inc.

March 31, 2015 16:17 ET

Fortaleza Energy Announces 2014 Financial and Operating Results

CALGARY, ALBERTA--(Marketwired - March 31, 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 and reserves for the year ended December 31, 2014. The Corporation's financial statements, management's discussion and analysis, and Annual Information Form for the year ended December 31, 2014 are available on the Corporation's website (www.fortalezaenergy.com) or under the Corporation's profile on SEDAR (www.sedar.com).

Financial and Operating Summary

Three months ended
December 31,
Year ended
December 31,
($000's except per share amounts) 2014 2013 2014 2013
Financial
Natural gas sales 124 298 937 946
Blending services sales 1,036 - 1,036 -
Total revenue 1,160 298 1,973 -
Funds from (used in) operations (1) (610 ) 1,137 (1,251 ) (404 )
Per share - basic and diluted (0.01 ) 0.02 (0.02 ) (0.01 )
Net income (loss) (1,174 ) 5,040 (1,986 ) 2,779
Per share - basic and diluted (0.01 ) 0.08 (0.03 ) 0.05
Working capital (deficiency) (1) 107 3,087 107 3,087
Operations
Average production:
Natural gas (Mcf/d) 253 538 360 469
Natural gas liquids (bbl/d) 8 16 10 12
Total (Mcfe/d) 301 632 421 542
Average sales price:
Natural gas ($/Mcf) 3.50 3.90 4.92 3.59
Natural gas liquids ($/bbl) 58.53 72.89 77.69 74.68
Total ($/Mcfe) 4.47 5.12 6.09 4.78
Operating netback(1) 0.87 2.56 2.45 2.07
(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 petroleum and natural gas sales and deducting royalties, operating expenses and transportation expenses. Working capital is calculated as current assets less current liabilities.

Reserves Data

Management engaged Sproule Associates Limited ("Sproule") to provide an independent engineering evaluation of the Corporation's petroleum and natural gas reserves as of December 31, 2014 (the "Sproule Report"). The Sproule Report is contained in the Corporation's Annual Information Form dated March 31, 2015 for the year ended December 31, 2014.

SUMMARY OF OIL AND GAS RESERVES
AS OF DECEMBER 31, 2014
FORECAST PRICES AND COSTS
Reserves
Light/Medium Oil
(MBbl)
Natural Gas
(MMcf)
NGL
(MBbl)
Gross Net Gross Net Gross Net
Proved
Developed Producing 0 0 852 679 24.3 19.4
Developed Non-Producing 0 0 0 0 0.0 0.0
Undeveloped 0 0 0 0 0.0 0.0
Total Proved 0 0 852 679 24.3 19.4
Probable 0 0 2,034 1,735 26.0 20.8
Total Proved plus Probable 0 0 2,886 2,413 50.3 40.2
SUMMARY OF NET PRESENT VALUES OF FUTURE NET REVENUE
AS OF DECEMBER 31, 2014
FORECAST PRICES AND COSTS
Before Income Tax
Discounted At
After Income Tax
Discounted At
Unit Value
$/BOE Net
Reserves
Discounted
at 10%
before
Income
Tax
0% 5% 10% 15% 20% 0% 5% 10% 15% 20%
(M$) (M$) (M$) (M$) (M$) (M$) (M$) (M$) (M$) (M$) ($/BOE)
Proved
Developed Producing 1,412 1,137 940 797 689 1,412 1,137 940 797 689 7.09
Developed Non-Producing 0 0 0 0 0 0 0 0 0 0 0
Undeveloped 0 0 0 0 0 0 0 0 0 0 0
Total Proved 1,412 1,137 940 797 689 1,412 1,137 940 797 689 7.09
Probable 3,423 2,542 1,924 1,476 1,143 3,423 2,542 1,924 1,476 1,143 6.21
Total Proved plus Probable 4,835 3,679 2,865 2,273 1,832 4,835 3,679 2,865 2,273 1,832 6.47

Notes:

(1) The Sproule Report estimates the Corporation's share of future capital expenditures necessary to achieve the estimated net present value of future net revenue based on escalating costs from proved Reserves to be $nil and Proved and Probable Reserves to be $1,426,000.

Corporate 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.

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 share, reserves, net present values, future capital, and oil and natural gas prices. 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.

Contact Information