Waldron Energy Corporation
TSX : WDN

Waldron Energy Corporation

August 13, 2013 08:00 ET

Waldron Energy Corporation Announces Second Quarter 2013 Results

CALGARY, ALBERTA--(Marketwired - Aug. 13, 2013) - Waldron Energy Corporation ("Waldron" or the "Corporation")(TSX:WDN) is pleased to announce its financial and operational results for the three and six months ended June 30, 2013. These reports are available for review at www.sedar.com and on the Corporation's website at www.waldronenergy.ca.

Q2 2013 Highlights

  • Second quarter average production of 2,010 boe per day (28% oil and liquids);
  • Second quarter funds from operations of $1.4 million were impacted by a one-time crown royalty adjustment of $0.3 million;
  • Realized natural gas pricing of $3.86 per mcf, NGL pricing of $45.64 per bbl and light oil pricing of $81.84 per bbl resulted in an average realized price of $32.06 per boe;
  • Net debt, excluding the change in fair value of commodity contracts, decreased from $34.7 million at March 31, 2013 to $33.7 million at June 30, 2013; and
  • Disciplined capital program of $0.4 million concentrated on the reactivation of Belly River oil wells at Ferrybank.
Q2 2013 Financial Highlights
Three months ended June 30 Six months ended June 30
2013 2012 2013 2012
Financial (000's except for per share amounts) (unaudited) (unaudited) (unaudited) (unaudited)
Petroleum and natural gas sales $ 5,865 $ 5,741 $ 11,815 $ 12,477
Funds from operations(1) 1,365 1,907 3,316 4,090
Per share basic & diluted(1)(2) 0.03 0.06 0.08 0.12
Net loss (1,938 ) (1,479 ) (3,198 ) (8,075 )
Per share basic & diluted(2) (0.05 ) (0.04 ) (0.08 ) (0.24 )
Capital expenditures(3) 355 2,471 1,077 5,978
Working capital deficiency (excluding bank debt) 733 1,458 733 1,458
Bank debt 32,950 34,415 32,950 34,415
Property and equipment 80,457 92,056 80,457 92,056
Exploration and evaluation assets 10,091 12,429 10,091 12,429
Shareholders' equity 45,441 55,108 45,441 55,108
Number of shares outstanding at year end 40,035 34,333 40,035 34,333
Notes:
(1) Funds from operations is a non-GAAP measure and the Corporation calculates this measure as cash provided from operations before changes in non-cash working capital and decommissioning expenses.
(2) At June 30, 2013, there were 2,191,333 (2012 - 2,409,000) options and 7,182,560 (2012 - 7,182,560) warrants outstanding that were not included in the calculation of weighted average shares outstanding as the effect would be anti-dilutive.
(3) Capital expenditures include dispositions and decommissioning expenditures and exclude stock based compensation.
Q2 2013 Operational Highlights
Three months ended June 30 Six months ended June 30
2013 2012 2013 2012
Average Production (unaudited) (unaudited) (unaudited) (unaudited)
Natural Gas (mcf/d) 8,751 11,069 9,087 11,736
NGL (bbls/d) 399 485 395 536
Light crude oil (bbls/d) 152 191 154 170
BOE/day 2,010 2,520 2,064 2,663
Realized Pricing
Natural Gas ($/Mcf) $ 3.86 $ 2.02 $ 3.67 $ 2.13
NGL ($/bbl)) 45.64 52.44 48.79 54.55
Light crude oil ($/bbl) 81.84 80.25 82.23 83.99
Average realized price $ 32.06 $ 25.03 $ 31.63 $ 25.75
Netback per boe
Sales price $ 32.06 $ 25.03 $ 31.63 $ 25.75
Realized loss on commodity contracts - 0.27 - 0.11
Royalties (5.40 ) (1.41 ) (3.73 ) (2.30 )
Operating expenses (11.78 ) (8.84 ) (11.50 ) (8.19 )
Transportation expenses (1.66 ) (1.78 ) (1.77 ) (1.86 )
Operating netback $ 13.22 $ 13.27 $ 14.63 $ 13.51
Operating field cash flow ($000's) $ 2,418 $ 3,043 $ 5,466 $ 6,548
2013 Hedging
The Corporation has entered into the following commodity price contracts:
Period Commodity Type of Contract Quantity Contracted Contract price ($CDN)
Apr 1, 2013 - Dec 31, 2013 Crude Oil Swap 200 bbl/d WTI $96.31/bbl
Apr 1, 2013 - Oct 31, 2013 Natural gas Swap 1,680 mcf/d AECO $3.77/mcf
May 1, 2013 - Oct 31, 2013 Natural gas Swap 707 mcf/d AECO $3.83/mcf
Conversion factor: 1 Mcf = 1.131 GJ

Bank update

At June 30, 2013, the Corporation has a revolving operating demand loan credit facility of $36.0 million. The next review date is expected to occur on October 1, 2013.

Plan of Arrangement

On July 31, 2013, Waldron Energy Corporation and Montana Exploration Corp. announced that they have entered into an arrangement agreement pursuant to which Montana will acquire all of the issued and outstanding common shares of Waldron. Under the Arrangement, shareholders of Waldron may elect to receive: (a) 1.8 common shares of Montana for each Waldron share held; or (b) $0.45 cash for each Waldron Share held; or (c) a combination of common shares of Montana and cash, subject to potential proration. Completion of the Arrangement is conditional on customary closing conditions and is subject to conditions precedent with respect to net indebtedness of Waldron, including transaction costs, at closing.

The Arrangement will be carried out by way of a court approved plan of arrangement and will require the approval of, among others, the holders of at least 66 & 2/3% of the Waldron Shares present in person or represented by proxy at a special meeting of Waldron shareholders to be called to consider the Arrangement. The Arrangement is also subject to obtaining the approval of a majority of the votes cast by the holders of Montana shares at the annual and special meeting of Montana shareholders to be called to consider the issuance of Montana shares in connection with the Private Placement and the approval of the Arrangement. In addition to shareholder and court approvals, the Arrangement is subject to applicable regulatory approvals and the satisfaction of certain other closing conditions customary in transactions of this nature, including stock exchange approvals.

Investor Information

Waldron is a Calgary, Alberta based corporation engaged in the exploration, development and production of petroleum and natural gas. The Corporation's common shares are currently listed on the Toronto Stock Exchange under the trading symbol "WDN." Additional information regarding Waldron is available under the Corporation's profile at www.sedar.com or at the Corporation's website, www.waldronenergy.ca.

Forward Looking and Cautionary Statements

This news release contains forward-looking statements relating to the Corporation's plans and other aspects of the Corporation's anticipated future operations, strategies, financial and operating results and business opportunities. These forward-looking statements may include opinions, assumptions, estimates, management's assessment of value, reserves, future plans and operations.

Forward-looking statements typically use words such as "will," "anticipate," "believe," "estimate," "expect," "intend," "may," "project," "should," "plan," and similar expressions suggesting future outcomes, and include statements that actions, events or conditions "may," "would," "could," or "will" be taken or occur in the future. Specifically, this press release contains forward-looking statements relating to the expected timing of the close of the Plan of Arrangement; the timing of the bank's lending review; whether or not recent industry results are favorable; whether or not additional reserves are recognized; whether or not the Corporation achieves guidance; operating costs and netback; and number of horizontal drilling locations and opportunities. The forward-looking statements are based on various assumptions including expectations regarding the success of current or future drill wells; the outlook for petroleum and natural gas prices; estimated amounts and timing of capital expenditures; estimates of future production; assumptions concerning the timing of regulatory approvals; whether or not proved producing reserves form the borrowing base; the state of the economy and the exploration and production business; results of operations; business prospects and opportunities; future exchange and interest rates; the Corporation's ability to obtain equipment in a timely manner to carry out development activities; and the ability of the Corporation to access capital and credit. While the Corporation considers these assumptions to be reasonable based on information currently available to it, they may prove to be incorrect.

Forward-looking statements are subject to a wide range of 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 commodities prices; currency fluctuations; imprecision of reserves estimates; environmental risks; competition from other producers; inability to retain drilling rigs and other services; general economic conditions; delays resulting from or inability to obtain required regulatory approvals; and ability to access sufficient capital from internal and external sources. Readers are cautioned that the foregoing list of factors is not exhaustive.

Although Waldron believes that the expectations represented by such forward-looking statements are reasonable, there can be no assurance that such expectations will be realized. As a consequence, actual results may differ materially from those anticipated in the forward-looking statements and you should not rely unduly on forward-looking statements. The forward-looking statements contained in this news release are made as of the date of this news release. Except as required by applicable law, Waldron does not undertake any obligation to publicly update or revise any forward-looking statements.

Note Regarding Non-GAAP Measures

Funds from operations, operating netback and net debt are not recognized measures under IFRS as issued by the International Accounting Standards Board ("IASB"). Management believes that in addition to cash flow from operations and net earnings, funds from operations and operating netback are useful supplemental measures as they demonstrate the Corporation's ability to generate the cash necessary to fund future growth through capital investment or repay debt if incurred in future periods. The Company uses net debt (bank debt plus negative working capital or less positive working capital, both excluding bank debt) as an alternative measure of outstanding debt and is used as a measure to assess the Company's financial position. Investors are cautioned, however, that these measures should not be construed as an alternative to cash flow from operating activities or net earnings determined in accordance with IFRS as an indication of the Corporation's performance or financial position. The Corporation's method of calculating these measures may differ from other entities and, accordingly, they may not be comparable to measures used by other entities. For these purposes, the Corporation defines funds from operations as cash flow from operations before changes in non-cash operating working capital, financing expenditures related to the costs of acquisitions and decommissioning expenditures and defines operating netback as revenue less royalties, operating and transportation expenses. Net debt is defined as current assets less current liabilities.

Note Regarding BOEs

The term barrel of oil equivalent ("boe") may be misleading, particularly if used in isolation. A conversion ratio for gas of 6 mcf:1 boe 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 conversion ratio of 6:1, utilizing a conversion on a 6:1 basis is misleading as an indication of value.

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