Skope Energy Inc.

Skope Energy Inc.

August 29, 2011 08:00 ET

Skope Energy Announces the Filing of its Quarterly Financial Statements, MD&A for the Three Months Ended June 30, 2011

CALGARY, ALBERTA--(Marketwire - Aug. 29, 2011) - Skope Energy Inc. ("Skope" or the "Company") (TSX:SKL) is pleased to announce the filing of its quarterly consolidated financial results as at and for the three months ended June 30, 2011 and the accompanying Management's Discussion and Analysis.


($thousands, except share, per share and operational data)
Q1 Ended
June 30, 2011
Q4 Ended
March 31, 2011
Petroleum and natural gas revenues 8,243 8,039
Royalties 761 701
Realized (gain)/loss on financial instruments (300 ) (11 )
Operating expenses 3,241 2,888
Operating Netback 4,541 4,461
G&A 621 772
Interest expense 777 997
Operating income 3,143 2,692
Net loss (1,214 ) (4,410 )
Per share – Basic and diluted (0.15 ) (0.85 )
Bank debt 60,387 60,797
Working capital 6,174 5,911
Net debt 54,213 54,887
Total assets 126,668 135,038
Total shares outstanding 8,078,281 8,078,281
Weighted average shares outstanding
– Basic and diluted
8,078,281 8,078,281
OPERATIONAL (Per mcf amounts may not add due to rounding)
Average daily production
Natural gas (mcf/d) 24,863 24,962
Total (boe/d) 4,144 4,160
Average prices received
Natural gas ($/mcf) 3.64 3.58
$ per mcf
Petroleum and natural gas revenues 3.64 3.58
Royalties 0.34 0.31
Realized (gain)/loss on financial instruments (0.13 ) (0.01 )
Operating expenses 1.43 1.29
Operating netback 2.00 1.99
G&A 0.27 0.34
Interest expense 0.34 0.35
Operating income 1.39 1.30


Skope is pleased to report to shareholders the Company's activities as at and for the three month period ended June 30, 2011. Skope was incorporated in June 2010 and at that time established an innovative and ambitious business plan designed to take advantage of a cyclical low in conventional natural gas prices and to provide investors with a stable rate of return in the form of dividends. Since the establishment of its public listing on the Toronto Stock Exchange in December 2010, Skope has paid over $4.2 million in dividends ($0.53 per common and non-voting share) to its investors.

Skope's assets consist of an 80% working interest in a package of high quality producing shallow natural gas assets, located in southeast Alberta and southwest Saskatchewan. Since acquiring these assets in September 2010, Skope has identified a large inventory of work-over and recompletion prospects which should contribute to stable production.

In July of this year, Skope completed its first two horizontal wells in the Pendor area targeting the Second White Specks and Medicine Hat formations. These are the first two horizontal wells drilled in the Pendor area, and Skope is encouraged by the early results. Skope is confident that horizontal wells can be drilled, completed and tied in for a capital cost of approximately $400,000 net to the Company.

Skope plans to drill three shallow horizontal natural gas wells in the Pendor area targeting the Manville, Second While Specks and the Bow Island formations. Depending upon the success of these horizontal wells, Skope has identified over 20 potential follow-up locations as well as several workover opportunities.

For the first quarter ended June 30, 2011, revenues were $8.2 million or $3.64 per mcf as compared to $8.0 million or $3.58 per mcf for the fourth quarter ended March 31, 2011. The increase in revenue in the first quarter compared to the fourth quarter is due to higher realized gas prices partially offset by slightly lower production.

It is Skope's policy to actively manage commodity risk and interest rate risk, with the primary objective being the funding of capital expenditures and dividends. As a portion of our overall risk management position, as of today, we have an average of 14,900 Gj/d (14,100 mcf/d) of financial put and swap contracts at an average price of $3.92/Gj ($4.14/ mcf) protecting the natural gas price downside for the next 12 months.

In addition, as of today, we have $43 million of financial interest rate swaps in place for various terms and maturities to 2013 and 2015. These interest rate swap contracts represent approximately 69% of Skope's outstanding bank debt as at June 30, 2011.

Credit Facility

As at June 30, 2011, the Company had a $75 million credit facility with a Canadian chartered bank, as lender and agent. Effective August 1, 2011, the revolving period was extended to December 31, 2011, which may be extended for a further 364-day period at the request of the Company subject to approval by the lender. The next determination of the borrowing base is scheduled to occur on or before October 31, 2011.

Approximately $60 million is currently outstanding under the credit facility. Effective August 22, 2011, the Company agreed with the lender to reduce the credit facility to $65 million. To the extent that the aggregate principal amount under the credit facility exceeds $55 million, the Company has also agreed to apply net cash proceeds from any private or public offerings of equity by the Company of up to $10 million, or such lesser amount as may be required to permanently reduce the aggregate principal amount and commitment amount of the credit facility to $55 million.

As at the date hereof, the Company is in compliance with the terms of the credit facility. The Company has sufficient liquidity, capital resources and funds from operations to fund planned capital expenditures and dividend payments for the remainder of fiscal 2012.


Skope continues to be well positioned for the acquisition of additional high quality natural gas assets and continues to be one of the few dedicated buyers. Management continues to identify and evaluate potential acquisition opportunities.

On behalf of the Board of Directors,

Henry Cohen, President and Chief Executive Officer


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:

  • The Company's business plan;
  • anticipated drilling, completion and tie-in costs;
  • drilling plans and the timing thereof;
  • Skope's project inventory;
  • expectations drilling and completion costs at Pendor;
  • expectations regarding Skope's credit facility;
  • Skope's capital expenditure program and the source of funding thereof;
  • availability of acquisition opportunities;
  • risk management strategy;
  • Skope's acquisition strategy and outlook; and
  • Skope's dividend policy

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 and the results therefrom; the timing, location and extent of future drilling operations; 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; loss of markets; volatility of commodity prices; currency fluctuations; 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; 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.


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 of Skope 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 August 23, 2011 which has been has been filed under Skope's SEDAR profile at and on it's website at


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


In conformity with National Instrument 51-101, Standards for Disclosure of Oil and Gas Activities ("NI 51-101"), natural gas volumes have been converted to barrels of oil equivalent using a conversion rate of six thousand cubic feet of natural gas to one barrel of oil. This ratio is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.

Readers are cautioned that the term "boe" may be misleading, particularly if used in isolation.


Skope has filed with Canadian securities regulatory authorities its audited financial statements as at and for the three months ended June 30, 2011 and the accompanying Managements' Discussion and Analysis ("MD&A"). These filings are available under Skope's SEDAR profile at and on it's website at


Skope is a Canadian public company in the business of oil and natural gas exploration, development and production in Western Canada with a focus on shallow natural gas. Skope's assets consist of an 80% working interest in a package of producing shallow gas assets, located in southeast Alberta and southwest Saskatchewan.

Skope's common shares are listed on the TSX under the symbol "SKL".

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