Wilmington Capital Management Inc.
TSX : WCM.A
TSX : WCM.B

Wilmington Capital Management Inc.

August 11, 2015 18:00 ET

Wilmington Announces 2015 Second Quarter Results

TORONTO, ONTARIO--(Marketwired - Aug. 11, 2015) - Wilmington Capital Management Inc. (TSX:WCM.A)(TSX:WCM.B) ("Wilmington" or the "Corporation") reported net income attributable to shareholders for the three months ended June 30, 2015 of $0.8 million or $0.09 per share compared to net income of $0.2 million or $0.02 per share for the same period in 2014. For the six months ended June 30, 2015, the Corporation generated a net income attributable to shareholders of $0.5 million or $0.06 per share compared to a net loss of $17,000 or $0.00 per share for the same period in 2014.

To view a full copy of the Corporation's unaudited interim financial results for the three and six months ended June 30, 2015 including the Corporation's unaudited interim Consolidated Financial Statements and accompanying interim Management Discussion and Analysis ("MD&A"), please refer to SEDAR's website at www.sedar.com.

SECOND QUARTER 2015 FINANCIAL HIGHLIGHTS

The operating and financial results of the Corporation's investment in associated and controlled entities account for the majority of the Corporation's financial results and are based on the ownership interest in each entity. The following are the operating and financial highlights for the second quarter of 2015 for each of the entities in which the Corporation has an ownership interest:

Self-storage facilities

  • The Trust generated funds from operations of $1.1 million in the second quarter which represents an increase of 38% over the $0.8 million generated in the second quarter 2014. A significant portion of the increase reflects the earnings contribution from the three facilities acquired and successfully integrated in the first quarter of 2015;
  • The Trust distributed $236,000 (Q2 2014 - $179,000) to unit holders in the period, representing 4% per annum of invested capital.

Private equity

  • Network Capital Management Inc.'s ("NCMI") assets under management of approximately $39.5 million as at June 30, 2015 decreased from approximately $52.8 million as at March 31, 2015 due to the divesture of underlying investments in certain funds and distribution of proceeds to unit holders. A total of $8.6 million was distributed to unit holders during the second quarter of 2015 (Corporation's share - $1.5 million).

Natural gas assets

  • Shackleton 2011 Limited Partnership (the "Shackleton Partnership") generated $0.2 million in funds flow from operations for the second quarter compared to $0.5 million for the second quarter in 2014 as a result of significantly lower natural gas prices and the natural decline of production volumes;
  • Northpoint Resources Ltd. ("Northpoint") generated a negative funds flow from operations of $0.5 million in the second quarter compared to a positive $0.5 million in funds flow from operations for the comparable period 2014. The decrease was due to significantly lower natural gas prices realized in 2015 and a decrease in production volumes.

    Given the severity of the downturn in the energy sector, Northpoint is revising its business plan to address cost cutting measures as well as farm-out drilling strategies to preserve capital and extending debt maturities.

As at June 30, 2015, Wilmington had assets under management in its operating platforms of approximately $157 million ($59 million representing Wilmington's share).

OPERATIONS REVIEW

Self - Storage Facilities

Real Storage Private Trust

The Trust (43% owned) owns 23 self-storage facilities comprising 961,421 square feet of net rentable area and an interest in a development project. During the second quarter of 2015, same store occupancy levels averaged 83% compared to 85% in Q2 2014; same store operating margins averaged 57% in Q2 2015 compared to 60% in Q2 2014. The impact of lower occupancy levels and lower margins was offset by rental rate increases and the contribution of the three facilities acquired in the first quarter of 2015.

The Trust paid distributions to unit holders in the amount of $236,000 (Corporation's share - $100,000), equivalent to 4% per annum on invested capital during the second quarter of 2015.

Private Equity

Network Capital Management Inc. and Network 2012 Fund

NCMI (50% owned) had funds under management totaling approximately $39.5 million as at June 30, 2015. The underlying investments in each of the various funds consist of a mix of early stage energy companies and energy service companies. The Corporation invested $8.0 million of capital in the Network 2012 Fund and has received cumulative distributions of $3.0 million to date. NCMI is focused on deployment of capital raised in its most recent fund which closed in the fall of 2014 and continues to monitor investments in its other funds.

Natural Gas Assets

Shackleton 2011 Limited Partnership

The Shackleton Partnership (59% owned) owns and operates a 100% interest in natural gas assets in Southwestern Saskatchewan. The Shackleton Partnership's natural gas production amounted to 536 barrel of oil equivalent per day ("boe/d") for three months ended June 30, 2015. The average price realized during the period was $2.69 per mcf and operating netback averaged $1.06 per mcf (realized price of $3.95 per mcf and netbacks of $1.93 per mcf for the comparable period in 2014). The Shackleton Partnership is focused on production optimization through well optimization programs as it continues to weather the depressed natural gas price environment.

Northpoint Resources Ltd.

Northpoint (38.6% owned) is a privately held natural gas producer with assets in the Altares region of Northeastern British Columbia. In addition and as part of an overall recapitalization plan, in 2013 the Corporation acquired $798,000 (carrying value of nil) of the $5.0 million, 10% debentures issued by Northpoint which mature on August 1, 2017. Northpoint's production for the three months ended June 30, 2015 was impacted by a two week shut down during the quarter and averaged 814 boe/d. The average price realized during the second quarter of 2015 was $3.21 per mcf and operating netbacks averaged $0.08 per mcf (realized price of $4.37 per mcf and netback of $1.97 per mcf for the comparable period in 2014). Northpoint continues to evaluate ways of optimizing its production and improving operating efficiencies during this period of a continued low natural gas price environment.

Outlook

The Corporation continues to execute its long-term strategy of building shareholder value by increasing the Trust's ownership of self-storage facilities through development and acquisition as well as judiciously deploying capital and managing investments in its private equity platform The Corporation's goal of scaling its interest in natural gas assets held through the Shackleton Partnership and Northpoint to the equivalent of 4,000 boe/d is not seen as being viable in the current low natural gas price environment. The Shackleton Partnership and Northpoint combined have production of approximately 1,400 boe/d (Corporation's share - 742 boe/d) and the focus is now on preserving capital and optimizing production.

FINANCIAL RESULTS

CONSOLIDATED STATEMENTS OF INCOME (unaudited)

(CDN $ Thousands, except per share amounts) For the three months
ended June 30,
For the six months
ended June 30,
2015 2014 2015 2014
Revenue
Natural gas sales 786 1,295 1,553 2,678
Royalties (121 ) (259 ) (244 ) (599 )
Natural gas revenue 665 1,036 1,309 2,079
Investment and other income 50 50 100 99
715 1,086 1,409 2,178
Expenses
Petroleum operations 357 404 744 732
General and administrative 304 290 612 588
Depletion, depreciation and amortization 230 349 452 691
Stock-based compensation 10 29 20 57
Finance costs 58 51 118 118
959 1,123 1,946 2,186
Loss before share of equity accounted investments and income taxes (244 ) (37 ) (537 ) (8 )
Share of net income from Real Storage Private Trust 278 203 493 288
Loss on ownership change in Real Storage Private Trust --- --- (83 ) ---
Share of net income from Network Capital Management Inc. 110 14 127 19
Share of net income (loss) from Network 2012 Limited Partnership 1,154 8 1,104 (36 )
Share of net income (loss) from Northpoint Resources Ltd. (382 ) 219 (583 ) (106 )
Income before income taxes 916 407 521 157
Income tax taxes 145 180 74 31
Net income 771 227 447 126
Net income attributable to:
Owners of the Corporation 801 174 522 (17 )
Non-controlling interest (30 ) 53 (75 ) 143
771 227 447 126
Net income per share
Basic 0.09 0.02 0.06 ---
Diluted 0.09 0.02 0.06 ---

CONSOLIDATED BALANCE SHEETS (unaudited)

As at June 30, December 31,
(CDN $ Thousands) 2015 2014
Assets
Non-current assets
Investment in Real Storage Private Trust 10,710 10,501
Investment in Network Capital Management Inc. 255 128
Investment in Network 2012 Limited Partnership 5,220 7,793
Investment in Northpoint Resources Ltd. --- ---
Northpoint Debenture --- 583
Natural gas property, plant and equipment 8,661 9,046
Deferred income tax assets 481 317
25,327 28,368
Current assets
Income tax receivable 306 350
Accounts receivables and other assets 668 821
Cash 3,500 2,174
4,474 3,345
Total assets 29,801 31,713
Liabilities
Non-current liabilities
Decommissioning liabilities 869 843
869 843
Current liabilities
Accounts payable and accrued liabilities 892 1,182
Revolving loan facility 4,225 4,400
5,117 5,582
Total liabilities 5,986 6,425
Equity
Shareholders' equity 22,295 23,693
Non-controlling interest 1,520 1,595
Total equity 23,815 25,288
Total liabilities and equity 29,801 31,713

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (unaudited)

For the three months
ended June 30,
For the six months
ended June 30,
(CDN $ Thousands) 2015 2014 2015 2014
Net income 771 227 447 126
Items that may be reclassified to net income
Share of other comprehensive income (loss) from Network 2012 Fund (2,164 ) 1,425 (2,229 ) 1,830
Deferred income tax expense (recovery) on above items (281 ) 185 (289 ) 238
Other comprehensive income (loss) (1,883 ) 1,240 (1,940 ) 1,592
Comprehensive income (loss) (1,112 ) 1,467 (1,493 ) 1,718
Comprehensive income (loss) attributable to:
Owners of the Corporation (1,082 ) 1,414 (1,418 ) 1,575
Non-controlling interest (30 ) 53 (75 ) 143
(1,112 ) 1,467 (1,493 ) 1,718

Executive Officers of the Corporation will be available at 403-800-0869 to answer any questions on the Corporation's financial results.

DISCLAIMER

Certain statements included or incorporated by reference in this document may constitute forward looking statements under applicable securities legislation. Forward looking statements or information typically contain statements with words such as "anticipate", "believe", "expect", "plan", "intend", "estimate", "propose", or similar words suggesting future outcomes or statements regarding an outlook. Forward looking statements or information in this document may include, but are not limited to: business strategy and objectives; reserve quantities and the discounted present value of future net cash flows from such reserves; revenue; future production levels and rates of average annual production growth; acquisition and disposition plans and the timing thereof; operating and other costs; and royalty rates.

Such forward looking statements or information are based on a number of assumptions all or any of which may prove to be incorrect. In addition to any other assumptions identified in this document, assumptions have been made regarding, among other things: the ability of Wilmington to market natural gas successfully to current and new customers; and future natural gas prices.

Although Wilmington believes that the expectations reflected in such forward looking statements or information are reasonable, undue reliance should not be placed on forward looking statements because Wilmington can give no assurance that such expectations will prove to be correct. Forward looking statements or information are based on current expectations, estimates and projections that involve a number of risks and uncertainties which could cause actual results to differ materially from those anticipated by Wilmington and described in the forward looking statements or information. These risks and uncertainties include but are not limited to: the ability of management to execute its business plan; the risks of the gas industry such as operational risks in producing natural gas and market demand; risks and uncertainties involving geology of natural gas deposits; risks inherent in Wilmington's marketing operations, including credit risk; the uncertainty of reserves estimates and reserves life; the uncertainty of estimates and projections relating to production, costs and expenses; Wilmington's ability to enter into or renew leases; fluctuations in natural gas prices and interest rates; health, safety and environmental risks; uncertainties as to the availability and cost of financing; general economic and business conditions; the possibility that government policies or laws may change or governmental approvals may be delayed or withheld; uncertainty in amounts and timing of royalty payments; risks associated with existing and potential future law suits and regulatory actions against Wilmington; and other risks and uncertainties described elsewhere in this document or in Wilmington's other filings with Canadian securities regulatory authorities.

This new release contains Natural gas volumes which have been converted on the basis of six thousand cubic feet of natural gas to one barrel of oil equivalent. Barrels of oil equivalent ("boe") may be misleading, particularly if used in isolation. A boe conversion ratio of six thousand cubic feet to one barrel of oil 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 forward looking statements or information contained in this document are made as at the date hereof and Wilmington 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 required by applicable securities laws. This summarized news release should not be considered a suitable source of information for readers who are unfamiliar with Wilmington and should not be considered in any way as a substitute for reading the full report. The foregoing lists are not exhaustive, for a full discussion of the Corporation's major risk factors, see the most recent Annual Information Form, available on SEDAR at sedar.com.

Contact Information

  • Wilmington Capital Management Inc.
    Executive Officers
    (403) 800-0869