Hawk Exploration Ltd.
TSX VENTURE : HWK.A

Hawk Exploration Ltd.

May 27, 2016 19:33 ET

Hawk Announces First Quarter 2016 Results

CALGARY, ALBERTA--(Marketwired - May 27, 2016) - Hawk Exploration Ltd. ("Hawk" or the "Corporation") (TSX VENTURE:HWK.A) announces its results for the three months ended March 31, 2016. The Corporation's interim financial statements for the three months ended March 31, 2016 and management's discussion and analysis for the three months ended March 31, 2016 are available for viewing on SEDAR at www.sedar.com or on Hawk's website at www.hawkexploration.ca under Investor Information - Financial Reports. All amounts herein are reported in Canadian dollars, unless otherwise stated.

HIGHLIGHTS

Highlights for the three months ended March 31, 2016 were as follows:

  • Reduced gross general and administrative costs in the first quarter of 2016 by $0.2 million or 45% compared to the first quarter of 2015; and
  • Reported a net loss in the first quarter of 2016 of $1.3 million or $0.03 per share compared to a net loss of $0.7 million or $0.02 per share in the first quarter of 2015.
Selected financial and operational information for the three months ended March 31, 2016 is provided as follows:
Three months ended March 31,
2016 2015 % Change
Financial ($000's except per share amounts)
Petroleum and natural gas sales $ 884 $ 2,450 (64 %)
Cash flow (used in) from operations (1) (512 ) 730 (170 %)
Per share (0.01 ) 0.02 (150 %)
Comprehensive loss (1,309 ) (738 ) (77 %)
Per share (0.03 ) (0.02 ) (50 %)
Capital expenditures (2) 2 727 (100 %)
Working capital deficit - excluding bank debt and commodity contracts, end of period (1) $ 933 $ 1,445 (35 %)
Bank debt, end of period 9,950 9,550 4 %
Total assets, end of period $ 30,941 38,937 (21 %)
Common Shares outstanding end of period:
Class A Shares 45,576 45,576 - %
Options to acquire Class A Shares 4,485 4,527 (1 %)
Operations
Production
Crude oil and natural gas liquids (bbl/d) 491 758 (35 %)
Natural gas (mcf/d) 113 125 (1 %)
Total (boe/d) 510 779 (35 %)
Oil and liquids as percent of total 96 % 97 % (1 %)
Three months ended March 31,
2016 2015 % Change
Average Selling Price
Crude oil and ngls (per bbl) $ 19.34 $ 35.43 (45 %)
Natural gas (per mcf) 1.87 2.83 (34 %)
Total (per boe) 19.04 34.94 (46 %)
Operating netback (per boe at 6:1) (3)
Price $ 19.04 $ 34.94 (46 %)
Royalties (2.36 ) (6.27 ) (62 %)
Production expense (21.60 ) (17.04 ) 27 %
Transportation expense (1.42 ) (1.26 ) 13 %
Operating netback ($/boe) $ (6.34 ) $ 10.37 (161 %)

(1) The terms cash flow (used in) from operations, cash flow (used in) from operations per share, working capital deficit and net debt to annualized cash flow ratio are additional GAAP financial measures. These measures are further described on page 3 of the Corporation's MD&A for the three months ended March 31, 2016 under the heading "Additional GAAP and Non-GAAP Financial Measures". Users are cautioned that additional GAAP financial measures may not be comparable with the calculation of similar measures by other entities.

(2) Capital expenditures include cash exploration and evaluation expenditure plus cash property, plant and equipment net of dispositions and exclude asset retirement obligations and capitalized share-based payments.

(3) Management uses the terms operating and cash flow netbacks per boe which are non-GAAP measures. These measures are key performance indicators however do not have a standardized meaning as prescribed by GAAP and therefore, may not be comparable with the calculation of similar measures by other entities. Management considers operating and cash flow netbacks to be important measures as they demonstrate profitability relative to current commodity prices.

Financial

Western Canadian Select ("WCS") prices for the first quarter of 2016 averaged US$19.21 per bbl compared to US$33.90 per bbl in the first quarter of 2015, a 44% decrease. Hawk's realized oil and NGL prices decreased by 46% in the first quarter of 2016 to $19.34 per bbl compared to $35.43 per bbl in the first quarter of 2015. As a result of the dramatic decrease in heavy oil prices in the first quarter of 2016, Hawk recorded negative cash flow from operations of approximately $0.5 million compared to positive cash flow from operations of $0.7 million for the first quarter of 2015.

Hawk's operating netback for the first quarter of 2016 was a negative $6.34 per boe compared to a positive operating netback $10.37 per boe for the first quarter of 2015. This decrease is due mainly to the 46% decrease in the Corporation's average realized sales price in the first quarter of 2016 as well as an increase in production expenses per boe in the first quarter of 2016 offset by lower royalty expense per boe.

Outlook

The first quarter of 2016 presented a challenging price environment for most Canadian oil companies and an even more challenging environment for those Canadian companies producing heavy oil; however, the oil pricing environment has recently improved. WCS posted prices averaged US$27.89 per bbl for the month of April 2016 which is a 45% increase in WCS prices over the first quarter of 2016. The current posted WCS price is approximately US$33.70 per bbl which is a 69% increase over the first quarter of 2016. The improved pricing environment for WCS oil is due to both improved West Texas Intermediate prices as well as narrower WCS heavy oil differentials and is expected to improve the Corporation's second quarter 2016 financial results compared to the first quarter of 2016.

The Corporation has shut-in approximately 135 bbl/d of higher operating cost oil production due to the low commodity prices. Hawk expects to reactivate some, or all of the shut-in production should there be a continued and sustained improvement in heavy oil pricing.

Hawk has initiated a formal process to seek value maximizing proposals with a view to enhance shareholder value which may result in a corporate sale or material asset sale transaction. During this process, the Corporation will continue to focus on its near and long term business plan, centered on a commitment to effective cost management.

Hawk is an emerging exploration company engaged in the exploration, development and production of conventional crude oil and natural gas in western Canada and is based in Calgary, Alberta. The Class A Shares of Hawk trade on the TSX Venture Exchange under the trading symbol of HWK.A.

Neither the TSX Venture Exchange nor its Regulation Services Provider (as the term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

Certain statements contained in this press release constitute forward-looking statements. All forward-looking statements are based on the Corporation's beliefs and assumptions based on information available at the time the assumption was made. The use of any of the words "anticipate", "continue", "estimate", "expect", "may", "will", "project", "should", "believe" and similar expressions are intended to identify forward-looking statements. These statements involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking statements. Hawk believes the expectations reflected in those forward-looking statements are reasonable, but no assurance can be given that these expectations will prove to be correct. Such forward-looking statements included in this press release should not be unduly relied upon. These statements speak only as of the date of this press release.

In particular, but without limiting the forgoing, this press release contains forward-looking statements pertaining to the following: the performance characteristics of Hawk's oil and natural gas properties; business strategies and plans; projections of market prices and cost; supply and demand for oil and natural gas; planned development of the Corporation's oil and natural gas properties; and expected second quarter 2016 financial results.

The material factors and assumptions used to develop these forward looking statements include, but are not limited to: the ability of the Corporation to engage drilling contractors, to obtain and transport equipment, services, supplies and personnel in a timely manner and at an acceptable cost to carry out its activities and plans; the ability of the Corporation to market its oil and natural gas and to transport its oil and natural gas to market; the timely receipt of regulatory approvals and the terms and conditions of such approval; the ability of the Corporation to obtain drilling success consistent with expectations; and the ability of the Corporation to obtain capital to finance its exploration, development and operations.

Actual results could differ materially from those anticipated in these forward-looking statements as a result of the risk factors including, without limitation: volatility in market prices for oil and natural gas; liabilities inherent in oil and natural gas operations; uncertainties associated with estimating oil and natural gas reserves; competition for, among other things, capital, acquisitions of reserves, undeveloped lands and skilled personnel; incorrect assessments of the value of acquisitions and exploration and development programs; geological, technical, drilling and processing problems; changes in tax laws and incentive programs relating to the oil and natural gas industry; failure to realize the anticipated benefits of acquisitions; general business and market conditions; and certain other risks detailed from time to time in Hawk's public disclosure documents (including, without limitation, the other factors discussed under "Risk Factors" in the Corporation's most recently filed Annual Information Form).

Statements relating to "reserves" or "resources" are deemed to be forward-looking statements, as they involve the implied assessment, based on certain estimates and assumptions that the resources and reserves described can be profitably produced in the future. Readers are cautioned that the foregoing lists of factors are not exhaustive. The forward-looking statements contained in this press release are expressly qualified by this cautionary statement. Except as required under applicable securities laws, Hawk does not undertake any obligation to publicly update or revise any forward-looking statements.

Barrels of oil equivalent (boe) may be misleading, particularly if used in isolation. A boe conversion ratio of six thousand cubic feet (mcf) of natural gas to one barrel (bbl) of oil is based on an energy conversion method primarily applicable at the burner tip and is not intended to represent a value equivalency at the wellhead. All boe conversions in this press release are derived by converting natural gas to oil in the ratio of six thousand cubic feet of natural gas to one barrel of oil. Certain financial amounts are presented on a per boe basis, such measurements may not be consistent with those used by other companies.

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