Greenfields Petroleum Corporation

TSX VENTURE : GNF
TSX VENTURE : GNF.DB


Greenfields Petroleum Corporation

August 29, 2014 16:15 ET

Greenfields Petroleum Corporation Announces Financial Results for the Three and Six Months Ended June 30, 2014 and Operations Update

HOUSTON, TEXAS--(Marketwired - Aug. 29, 2014) -

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Greenfields Petroleum Corporation (the "Company" or "Greenfields") (TSX VENTURE:GNF)(TSX VENTURE:GNF.DB), an independent exploration and production company with producing assets in Azerbaijan, announces its financial results and operating highlights for the second quarter and year-to-date of 2014. Except as otherwise indicated, all dollar amounts referenced herein are expressed in United States dollars.

Second Quarter and Year-to-Date 2014 Financial Results and Operating Highlights

  • For the second quarter and year-to-date 2014, the Company recorded revenues of $0.5 million and $0.9 million and realized net losses of $4.9 million and $3.8 million, respectively. For the second quarter and year-to-date 2014, the results represented a loss per share (basic and diluted) of $0.24 and $0.20, respectively. In comparison with the same periods in 2013, the Company recorded revenues of $0.7 million and $1.4 million and realized net income of $0.5 million and a net loss of $3.3 million, respectively. In addition, in comparison with the same periods in 2013, the Company realized earnings per share of $0.03 and a loss per share of $0.21, respectively.
  • The Company's 33.33% share of Bahar Energy Limited ("Bahar Energy") entitlement sales volumes averaged 321 bbl/d and 6,983 mcf/d or 1,485 boe/d in the second quarter 2014, and 378 bbl/d and 7,980 mcf/d or 1,708 boe/d year-to-date 2014. In comparison to the average volumes for the same periods in 2013, the bbl/d volumes decreased 42% and 24%, respectively, while mcf/d volumes increased 50% and 97% respectively, and boe/d increased 12% and 46%, respectively.
  • For the second quarter and year-to-date 2014, the Company, through its interest in Bahar Energy, realized average oil prices of $101.83 and $102.13 per barrel, respectively. These prices compared favorably in comparison with the averages of $97.52 and $101.26 per barrel realized for the same periods in 2013. The Company, through its interest in Bahar Energy, realizes average gas prices of $3.96 per mcf, which is a contractually constant fixed price.
  • The Company's 33.33% share of Bahar Energy financial results provided a net loss of $0.2 million in the second quarter and net income of $3.0 million year-to-date. These results compare to net income of $1.1 million and a net loss of $1.0 million, respectively, for the same periods in 2013.
  • On April 17, 2014, Bahar Energy Operating Company ("BEOC") informed SOCAR that on March 31, 2014, BEOC met the TPR2(1) requirement in accordance with the ERDPSA. By achieving this production target, SOA, with a 20% interest, is obligated to pay its share of costs and will also start repayment of the contractual carry that has been in place since the beginning of the project from their respective share of petroleum revenues attributable to cost recovery.
    (1) TPR2 refers to Target Production Rate 2 under the ERDPSA whereby BEOC must maintain a daily production rate for 30 consecutive days equal to 2 times the average 2008 production rate, that rate being 9,258 boe/d.

Operating highlights and plans

  • Work continued in the second quarter 2014 on the recording, processing and interpretation of up to 200 square kilometers of 3D seismic over the Gum Deniz Oil Field, which was contracted in 2013. At the end of the quarter, a total of 46.4 square kilometers of data had been acquired. Strong winds and seas continued to impede the seismic acquisition. The acquisition rate has not improved as was expected during the spring and summer months. The Company intends on continuing to acquire as much data as possible prior to the onset of winter weather. Once the new data is acquired, processed, and interpreted, the revised Gum Deniz Oil Field reservoir model will be used to improve well site selection for the drilling program.
  • The interpretation of the 3D seismic survey on the Bahar-2 exploration block recorded in 2012 concluded during the second quarter of 2014. Calibration of the wells to the seismic using Vertical Seismic Profile (VSP) was completed and fluid substitution models were calculated to determine the amplitude versus offset (AVO) response of the seismic. The AVO analysis will be done during the third quarter and the Company intends on evaluating the multiple anomalies seen in the interpretation.
  • A total of 19 workovers were conducted in the Gum Deniz Oil Field during the second quarter for a total of 29 workovers year-to-date. The workover activity, coupled with additional well service jobs, has largely contributed to maintaining production. In the Bahar Gas Field, 3 recompletions were performed during the quarter for a total of 5 recompletions year-to-date. These recompletions have contributed to material gas volume increases over 2013 volumes.
  • Drilling in the Gum Deniz Oil Field was suspended in late March after drilling the 774 well due to unfavorable subsurface results from the last two wells, funding shortfalls by our partner in Bahar Energy and insufficient insurance by a drilling contractor. During the suspension, the focus will shift to less capital intensive operations while the Gum Deniz Oil Field 3D seismic is completed and reservoir model revised to improve well site selections. This work will focus on recompletions in the Bahar Gas Field, which have been successful to date at adding significant gas production. Additionally, work in the Gum Deniz Oil Field will center on continued oil recompletions along with production optimization and Electrical Submersible Pump (ESP) installations to maximize production rates.
  • Construction activity during the second quarter continued to focus on platform upgrades, primarily in the Bahar Gas Field, to support workovers, and on facilities improvement in the tank farm and process areas. It is expected that the construction activity will conclude in the third quarter.
  • On July 2, 2014, the Company closed a $21 million loan facility ("Loan") with an arm's length third party ("Lender") arranged through Meridian SEZC. Pursuant to the terms of the Loan, the Company is entitled to draw up to an aggregate of US$21 million to meet funding obligations under the Bahar Energy shareholders agreement. A 0.15% commitment fee is payable pursuant to the Loan and the Loan will mature on June 30, 2018. In addition, the amounts drawn by the Company bear interest at a rate of 12% per annum.
  • On July 16, 2014, the Company drew $16.5 million under the Loan to enable Greenfields Petroleum International Company Ltd. ("GPIC"), a wholly-owned subsidiary of the Company, to fund the defaulted obligations of Baghlan Energy Limited ("Baghlan"), the other shareholder of Bahar Energy. With the funding of defaulted obligations, GPIC provides protection to the interest of Bahar Energy in the ERDPSA and ensures that the Bahar Project has adequate working capital for operations. All transaction and financing costs resulting from using the Loan are subject to reimbursement by the defaulting partner. GPIC expects the remaining balance of the Loan will also be drawn down to address Baghlan's additional 2014 funding defaults. (See Defaulting Shareholder paragraph in Note 6 - Investment in Joint Venture to the unaudited consolidated financial statements of the Company for the period ended June 30, 2014.)

Selected Information

The selected information below is from the Greenfields' Management Discussion & Analysis for the three and six months ended June 30, 2014. The Company's complete financial statements as of and for the three and six months ended June 30, 2014 and 2013 with the notes thereto and the related Management's Discussion & Analysis can be found on Greenfields' website at www.Greenfields-Petroleum.com and on SEDAR at www.sedar.com. All amounts below are in thousands of US dollars unless otherwise noted.

Greenfields Petroleum Corporation

(US$000's,except as noted)
Three months ended
June 30
Six months ended
June 30
2014 2013 2014 2013
Financial
Revenues 469 684 896 1,371
Net (loss) income (4,900) 517 (3,799) (3,286)
Per share, basic and diluted ($0.24) $0.03 ($0.20) ($0.21)
Capital Items
Cash and cash equivalents 4,910 6,721
Total Assets 65,772 41,973
Working capital 4,865 7,716
Convertible debt and Shareholders' equity 63,802 39,704

Bahar Energy Limited (a Joint Venture)

Total Joint Venture Company's share
(US$000's,except as noted) Three months ended June 30
2014 2013 2014 2013
Financial
Revenues 17,453 20,996 5,817 6,998
Net (loss) income (558) 3,270 (186) 1,090
Operating
Average Entitlement Sales Volumes (1)
Oil and condensate (bbl/d) 964 1,667 321 556
Natural gas (mcf/d) 20,952 13,936 6,983 4,645
Barrel oil equivalent (boe/d) 4,456 3,990 1,485 1,330
Average Oil Price
Oil price ($/bbl) $101.83 $97.52 $101.83 $97.52
Net realization price ($/bbl) $99.47 $95.56 $99.47 $95.56
Brent oil price ($/bbl) $109.69 $102.56 $109.69 $102.56
Natural gas price ($/mcf) $3.96 $3.96 $3.96 $3.96
Capital Items
Total Assets 199,292 139,203 66,424 46,396
Total Liabilities 42,175 40,147 14,058 13,381
Net Assets 157,114 99,056 52,366 33,015
Total Joint Venture Company's share
(US$000's,except as noted) Six months ended June 30
2014 2013 2014 2013
Financial
Revenues 40,351 38,746 13,449 12,914
Net (loss) income 9,099 (2,901) 3,032 (967)
Operating
Average Entitlement Sales Volumes(1)
Oil and condensate (bbl/d) 1,133 1,498 378 499
Natural gas (mcf/d) 23,941 12,132 7,980 4,043
Barrel oil equivalent (boe/d) 5,123 3,520 1,708 1,173
Average Oil Price
Oil price ($/bbl) $102.13 $101.26 $102.13 $101.26
Net realization price ($/bbl) $100.04 $99.26 $100.04 $99.26
Brent oil price ($/bbl) $108.93 $107.26 $108.93 $107.26
Natural gas price ($/mcf) $3.96 $3.96 $3.96 $3.96
Capital Items
Total Assets 199,292 139,203 66,424 46,396
Total Liabilities 42,175 40,147 14,058 13,381
Net Assets 157,114 99,056 52,366 33,015
(1)Daily volumes represent the Company's share of the Contractor Parties entitlement volumes net of compensatory petroleum and the government's share of profit petroleum. Effective October 1, 2013, the compensatory petroleum increased from 5% to 10% where it will remain until specific cumulative oil and gas production milestones are attained.

About Greenfields Petroleum Corporation

Greenfields is a junior oil and natural gas Company focused on the development and production of proven oil and gas reserves principally in the Republic of Azerbaijan. The Company plans to expand its oil and gas assets through further farm-ins, and acquisitions of Production Sharing Agreements from foreign governments containing previously discovered but under-developed international oil and gas fields, also known as "greenfields". More information about the Company may be obtained on the Greenfields website at www.greenfields-petroleum.com.

Forward-Looking Statements

This press release contains forward-looking statements. More particularly, this press release may include, but is not limited to, statements concerning: increased average production, drilling and completion plans and the expected timing thereof, seismic acquisition, construction activity, the Loan and the Company's operational plans. In addition, the use of any of the words "initial", "scheduled", "can", "will", "prior to", "estimate", "anticipate", "believe", "should", "forecast", "future", "continue", "may", "expect", and similar expressions are intended to identify forward-looking statements. The forward-looking statements contained herein are based on certain key expectations and assumptions made by the Company, including, but not limited to, expectations and assumptions concerning the success of optimization and efficiency improvement projects, the availability of capital, current legislation, receipt of required regulatory approval, the success of future drilling and development activities, the performance of existing wells, the performance of new wells, general economic conditions, availability of required equipment and services, weather conditions and prevailing commodity prices. Although the Company believes that the expectations and assumptions on which the forward-looking statements are based are reasonable, undue reliance should not be placed on the forward-looking statements because the Company can give no assurance that they will prove to be correct.

Since forward-looking statements address future events and conditions, by their very nature they involve inherent risks and uncertainties most of which are beyond the control of Greenfields. Should one or more of these risks or uncertainties materialize, or should assumptions underlying the forward-looking information prove incorrect, actual results, performance or achievements could vary materially from those expressed or implied by the forward-looking information. These risks include, but are not limited to, risks associated with the oil and gas industry in general (e.g., operational risks in development, exploration and production; delays or changes in plans with respect to exploration or development projects or capital expenditures; the uncertainty of reserve estimates; the uncertainty of estimates and projections relating to production, costs and expenses, and health, safety, political and environmental risks), commodity price and exchange rate fluctuations, changes in legislation affecting the oil and gas industry and uncertainties resulting from potential delays or changes in plans with respect to exploration or development projects or capital expenditures. Additional risk factors can be found under the heading "Risk Factors" in Greenfields' Annual Information Form and similar headings in Greenfields' Management's Discussion & Analysis which may be viewed on www.sedar.com.

The forward-looking statements contained in this press release are made as of the date hereof and Greenfields undertakes no obligation to update publicly or revise any forward-looking statements or information, whether as a result of new information, future events or otherwise, unless so required by applicable securities laws. The Company's forward-looking information is expressly qualified in its entirety by this cautionary statement.

Notes to Oil and Gas Disclosures

Barrels Oil Equivalent or "boe" may be misleading, particularly if used in isolation. The volumes disclosed in this press release in regards to TPR2 production targets in the footnote under the headings "Second Quarter and Year-to-Date 2014 Financial Results and Operating Highlights" uses a 5.559 mcf: 1boe conversion ratio as the Bahar Contract (ERDPSA) uses a 5.559 mcf: 1boe conversion ratio to measure total field production in calculating the 9,258 boe production thresholds for determining TPR2 target production milestones.

All volumes disclosed elsewhere in this press release use a 6mcf: 1boe, as such is typically used in oil and gas reporting and is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. The Company uses a 6mcf: 1boe ratio to calculate its share of entitlement sales from the Bahar Project for its financial reporting and reserves disclosure.

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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