Skope Energy Inc.
TSX : SKL

Skope Energy Inc.

June 29, 2012 09:01 ET

Skope Energy Announces the Filing of Its Annual Financial Statements, MD&A and Annual Information Form and Extended Credit Facility

CALGARY, ALBERTA--(Marketwire - June 29, 2012) - Skope Energy Inc. ("Skope" or the "Company") (TSX:SKL) is pleased to announce the filing of its annual audited consolidated financial results for the year ended March 31, 2012, the accompanying Management's Discussion and Analysis and its Annual Information Form. The Company also announced the extension of its credit facility to July 31, 2012.

OPERATIONAL AND FINANCIAL HIGHLIGHTS


(000s, unless otherwise stated)
Q4 2012
Mar. 31, 2012
Q4 2011
Mar. 31, 2011
Year ended Mar. 31, 2012 Period ended Mar. 31, 2011
Petroleum and natural gas revenues 4,552 8,039 28,484 16,779
Royalties (784 ) (702 ) (3,558 ) (1,565 )
Realized gain (loss) on commodity contracts 2,008 11 3,649 (3 )
Operating expenses (2,351 ) (2,887 ) (12,426 ) (6,524 )
Operating Netback 3,425 4,461 16,149 8,687
G&A and other expenses (686 ) (772 ) (2,816 ) (3,817 )
Cash interest paid (1) (2,777 ) (737 ) (3,322 ) (1,414 )
Funds from operations (38 ) 2,952 10,011 3,456
$ per share - Basic and diluted - 0.37 1.24 0.64
Impairment loss (12,167 ) - (31,524 ) (20,817 )
Net loss and comprehensive loss (2) (10,765 ) (3,376 ) (31,562 ) (28,836 )
Net loss per share - Basic and diluted (1.33 ) (0.42 ) (3.91 ) (5.31 )
Bank debt (current and long term) 56,451 60,797 56,451 60,797
Working capital (3) 2,396 5,911 2,396 5,911
Net debt 54,055 54,886 54,055 54,886
Total assets 89,656 131,661 89,656 131,661
Total shares outstanding 8,078,281 8,078,281 8,078,281 8,078,281
Weighted average shares outstanding - Basic and diluted 8,078,281 8,078,281 8,078,281 5,431,745
OPERATIONAL HIGHLIGHTS
Average daily production
Natural gas (mcf/d) 24,731 24,962 25,316 26,102
Total (boe/d) 4,122 4,160 4,219 4,350
$ per mcfe
Petroleum and natural gas revenues 2.02 3.58 3.07 3.53
Royalties (0.35 ) (0.31 ) (0.38 ) (0.33 )
Realized gain (loss) on commodity contracts 0.89 0.01 0.39 -
Operating expenses (1.04 ) (1.29 ) (1.34 ) (1.37 )
Operating netback 1.52 1.99 1.74 1.83
G&A and other expenses (0.30 ) (0.34 ) (0.30 ) (0.80 )
Cash interest paid (1) (1.23 ) (0.33 ) (0.36 ) (0.30 )
Funds from operations (0.01 ) 1.32 1.08 0.73
  1. Cash interest paid represents cash interest paid on credit facility and on realized losses on interest rate financial contracts.
  2. Net loss and comprehensive loss is inclusive of the impairment loss.
  3. Current assets less current liabilities, excluding fair value of financial instruments and current portion of credit facility.

PRESIDENT'S MESSAGE TO SHAREHOLDERS

With the advent of a 12-year low in natural gas prices and volatile capital markets, it has been a challenging year for Skope. On the positive, our natural gas production has performed better than originally planned averaging a very stable 25 mmcf/d with only $6.3 million of capital spent over fiscal year 2012, including the drilling of five shallow horizontal gas wells. Actual decline rates on production have been reduced from an expected 17% at acquisition (September 2010) to the current rate of approximately 8% to 10%. This lower decline rate is the result of focused field activity including swabbing, recompletions and workover operations.

In light of current commodity and financial market conditions, Skope will continue to minimize capital spending on its assets. This includes postponing not only drilling and recompletions, but also turnarounds and swabbing activities, both of which can be reactivated quickly as commodity prices recover. We expect a slight decline in production as a result, but our net financial position will be stronger as a result.

In addition, Skope continues to be one of the lowest cost natural gas producing companies in Canada with operating costs of approximately $1.34/mcf and general and administrative ("G&A") costs of approximately $1.80/boe ($0.30/mcf). This low cost structure makes the Company well positioned to benefit from higher natural gas prices. In the fourth fiscal quarter ending March 31, 2012, Skope recorded reduced operating costs to $1.04/mcf as compared to $1.29/mcf in the fourth quarter ended March 31 2011. G&A expenses were also reduced to $0.30/mcf as compared to $0.34/mcf in the fourth ended March 31, 2011.

By design and since inception, Skope has been very active in the commodity hedging market. As at March 31, 2012, approximately 54% of the Company's net production was hedged at an average price of approximately $4.21/mcf. The hedging program has served to partially shield Skope from the full impact of the severe downturn in natural gas market prices. On May 31, 2012, the Company monetized a portion of its commodity contracts and its entire interest rate swap positions. Net proceeds of $3.1 million were applied to near term expenses and to reduce outstanding amounts under the Company's bank credit facility. The remaining commodity contracts hedge approximately 25% of Skope's anticipated average net production for the next 12 months at a price of approximately $4.10/mcf. Skope currently has approximately $54 million drawn on its credit facility.

Credit Facility

On May 31, 2012, Skope signed an amendment to its credit facility and the lender agreed to extend the revolving period to June 30, 2012 and negotiate a forbearance agreement. On June 28, 2012 the lender agreed to further extend the revolving period to July 31, 2012. Skope remains current on its interest payments, and has repaid almost $12 million of bank debt over the past year. This speaks to the quality of the asset base and the success of the Company's hedging program.

Skope is also in discussion with a number of third party capital providers to restructure its capital. Such capital will be better-suited to Skope's long-term asset base and business strategy.

On behalf of the Board of Directors,

Henry Cohen, President and Chief Executive Officer

FORWARD LOOKING STATEMENTS

This news release contains forward-looking statements relating to the Company's plans and other aspects of the Company's anticipated future operations, management focus, strategies, financial and operating results and business opportunities. Forward-looking statements typically use words such as "anticipate", "believe", "project", "expect", "goal", "plan", "intend" or similar words suggesting future outcomes, statements that actions, events or conditions "may", "would", "could" or "will" be taken or occur in the future. In particular, this press release contains forward-looking statements relating, but not limited to:

  • plans regarding Company's inventory of workover and recompletion prospects and the expected results therefrom;
  • plans regarding the proposed postponement of certain operating activities in light of the current market price of natural gas and anticipated effect on natural gas production;
  • the performance characteristics of our oil and gas properties;
  • expectations regarding the natural gas production decline rate;
  • expectations regarding production decline rates;
  • impact of reduced capital spending activity;
  • possibility of a commodity price recovery;
  • average production for the next 12 months;
  • negotiation and outcome of the negotiation of a forbearance agreement;
  • future outcome of refinancing efforts with third parties; and
  • Skope's business strategy and management focus and the results therefrom.

These forward-looking statements are based on various assumptions including: the outlook for petroleum and natural gas prices; estimated amounts and timing of capital expenditures; the timing, location and extent of future drilling operations; anticipated timing and results of capital expenditures; estimates of future production and operating costs; the state of the economy and the exploration and production business; results of operations; performance; business prospects and opportunities; future exchange and interest rates, Skope's ability to obtain equipment in a timely manner to carry out development activities, impact of increasing competition, ability to market oil and natural gas successfully and the ability of Skope to access capital. While Skope considers these assumptions to be reasonable based on information currently available to it, they may prove to be incorrect. By their nature, forward-looking statements involve numerous assumptions, known and unknown risks and uncertainties and other factors that contribute to the possibility that the predicted outcome will not occur, including, without limitation: risks associated with oil and gas exploration, development, exploitation, production, marketing and transportation; imprecision in reserves estimates; loss of markets; volatility of commodity prices; currency fluctuations; stock market volatility; imprecision of reserve estimates; environmental risks; competition from other producers; inability to retain drilling rigs and other services; incorrect assessment of the value of acquisitions; failure to realize the anticipated benefits of acquisitions; general economic conditions in Canada, the U.S. and globally; risks associated with the Company's credit facility; and ability to access sufficient capital from internal and external sources. Readers are cautioned that the foregoing list of factors is not exhaustive.

Although Skope believes that the expectations represented in such forward-looking statements are reasonable, there can be no assurance that such expectations will prove to be correct. As a consequence, actual results may differ materially from those anticipated in the forward-looking statements and you should not unduly rely on forward-looking statements. The forward-looking statements contained in this news release are made as the date of this new release and the Company does not undertake any obligation to update publicly or to revise any of the included forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by applicable securities laws.

NON-IFRS FINANCIAL MEASURES

Skope uses the following terms for measurement within this press release that do not have a standardized prescribed meaning under International Financial Reporting Standards ("IFRS") or previously Canadian Generally Accepted Accounting Principles ("GAAP") and these measurements may not be comparable with the calculation of similar measurements of other entities.

The terms "funds from operations", "operating netback" and "operating netback per mcf" in this press release are not recognized measures under IFRS or previously GAAP. Management believes that these terms are useful supplemental measures to evaluate operating performance and assess leverage. Users are cautioned however, that these measures should not be construed as an alternative to net earnings or cash flow from operating activities determined in accordance with IFRS or previously GAAP as an indication of Skope's performance.

Skope considers funds from operations to be an important measure of its ability to generate the funds necessary to finance capital expenditures and repay debt. All references to funds from operations throughout this press release are based on cash provided by operating activities before the change in non-cash working capital and actual asset retirement expenditures since Skope believes the timing of collection, payment or incurrence of these items involves a high degree of discretion and as such may not be useful for evaluating Skope's operating performance. Skope's method of calculating funds from operations may differ from that of other companies and, accordingly, may not be comparable to measures used by other companies.

Readers may refer to a reconciliation of funds from operations to cash provided by operating activities in Skope's Management's Discussion and Analysis dated June 28, 2012 which has been has been filed under Skope's SEDAR profile at www.sedar.com and on Skope's website at www.skopeenergy.com.

FREQUENTLY USED TERMS

In this press release, the following terms are defined as follows:

"bbl" Barrel

"boe" Barrel(s) of oil equivalent

"boe/d" Barrel(s) of oil equivalent per day

"mcf" Thousand cubic feet

"mcf/d" Thousand cubic feet per day

"mmcf" Million cubic feet

"mmcf/d" Million cubic feet per day

51-101 ADVISORY

The terms "boe" and "mcfe" may be misleading, particularly if used in isolation. A boe conversion ratio of six thousand cubic feet of natural gas to one barrel of oil equivalent (6 mcf: 1 bbl) and a mcfe conversion ratio of one barrel of oil equivalent to six thousand cubic feet of natural gas (1 bbl: 6 mcf) is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. Given that the value ratio based on the current price of crude oil as compared to natural gas is significantly different from the energy equivalency of 6:1, utilizing a conversion on a 6:1 basis may be misleading as an indication of value.

FILINGS

Skope has filed with Canadian securities regulatory authorities its annual audited consolidated financial statements for the year ended March 31, 2012 and the accompanying Management's Discussion and Analysis ("MD&A"). Skope has also filed its Annual Information Form dated June 29, 2012. These filings are available under Skope's SEDAR profile at www.sedar.com. Full pdf versions of the financial statements and the accompanying MD&A are also available on our website at www.skopeenergy.com.

ABOUT SKOPE ENERGY INC.

Skope is in the business of oil and natural gas exploration, development and production in Western Canada with a focus on shallow natural gas. Skope owns an 80% working interest in a package of high quality, long-term, low decline producing shallow gas assets, located in southeast Alberta and southwest Saskatchewan.

Skope's common shares are listed on the Toronto Stock Exchange under the symbol "SKL".

Contact Information

  • Skope Energy Inc.
    Henry Cohen
    President and Chief Executive Officer
    416 850 0193
    henry.cohen@skopeenergy.com

    Skope Energy Inc.
    Viren Wong
    Executive Vice-President and Chief Operating Officer
    416 850 0193
    viren.wong@skopeenergy.com

    Skope Energy Inc.
    Daniel Belot
    Vice President, Finance and Chief Financial Officer
    403 538 8018