Yoho Resources Inc.
TSX VENTURE : YO

Yoho Resources Inc.

June 01, 2015 07:57 ET

Yoho Resources Inc. Announces Fiscal Q2 2015 Financial Results, Update of Operations, Update of Duvernay Strategic Options Review and $15 Million Private Placement Bought Deal Financing

CALGARY, ALBERTA--(Marketwired - June 1, 2015) -

NOT FOR DISTRIBUTION TO U.S. NEWS WIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES

Yoho Resources Inc. ("Yoho" or the "Company") (TSX VENTURE:YO) has filed today on SEDAR the financial statements for the six months ended March 31, 2015 and the related managements' discussion and analysis ("MD&A"). Copies of these documents may be found on www.sedar.com.

Yoho also announces an update of operations, an update to the Duvernay strategic options review and a $15 Million private placement bought deal financing.

Highlights

  • Yoho's production during fiscal Q2 2015 averaged 1,731 boe per day (34% oil and natural gas liquids), a 17% increase over production for fiscal Q1. Two Duvernay wells (0.83 net) were brought on-stream in May 2015 after the end of the reporting period. Yoho's current production is estimated to be 2,500 boe per day with an additional behind pipe volume of approximately 550 boe per day. Approximately 73% of current corporate production is now Duvernay production from Kaybob.
  • During the quarter the Company experienced very low pricing for all commodities. Yoho generated funds from operations for fiscal Q2 2015 of $0.65 million ($0.01 per share basic and diluted and $4.15 per boe). Operating netbacks for fiscal Q2 2015 were $8.35 per boe, while operating netbacks in fiscal Q2 2015 for the Company's Duvernay properties were $17.03 per boe.
  • With the recent increase in production from the Duvernay at Kaybob and using current strip pricing, Yoho is currently budgeting funds from operations of approximately $1 million per month by fiscal Q4 (July to September 2015).
  • Yoho's total exploration and development expenditures for the first six months of fiscal 2015 were $27.4 million and included the costs of drilling three (1.0 net) Duvernay gas wells. Capital expenditures for the period also included costs to finish drilling and begin completion operations on two wells spud in September 2014. During the winter capital program at Kaybob, the operator experienced difficulties with certain operations resulting in over expenditures of approximately $8.3 million, net to Yoho.
  • Previous drilling activity, along with Yoho's 2015 winter drilling program, will result in approximately 90% of Yoho's net Kaybob Duvernay lands being continued.
  • At March 31, 2015 $15.2 million was utilized on the Company's bank credit facilities. Currently $16.4 million is drawn on the Company's bank credit facilities. Yoho will continue to monitor bank borrowings closely during this time of low commodity prices.

OPERATIONS UPDATE

Kaybob Duvernay

Completion operations on two (0.83 net) horizontal Duvernay wells were finished in January 2015. Yoho also participated in the drilling of a Duvernay horizontal well at 04-31-60-20 W5 (33.3% working interest) with completion operations expected to commence in June 2015. The following table is a summary of the Kaybob Duvernay wells put on production in 2015 in which Yoho participated.

Well Name On-stream Date Lateral Length metres # of Stages Total Sand
(tonne
) Total Water
(m3
) PEAK IP (MMcf per day ) IP30 (MMcf per day ) IP 30
(CGR bbl/
MMcf) (1)
IP30 boe/d sales
16-33-060-20 W5
(33% working interest)
Jan 28, 2015 1,615 19 2,949 21,342 4.6 3.5 83 829
14-21-061-20 W5
(50% working interest)
Mar 9, 2015 2,136 20 3,209 33,669 5.7 3.2 116 961
02-25-062-22 W5
(50% working interest)
May 4, 2015 1,330 13 2,080 20,504 4.4 2.4 308 1,123
14-08-061-20 W5 (2)
(33% working interest)
May 13, 2015 2,175 22 4,108 42,342 4.1 3.5. 116 939.
04-31-061-20 W5 (33% working interest) Aug 2015 Est Completion June 2015

Notes:

  1. CGR bbl/MMcf means Condensate Gas Ratio (barrels of measured field condensate per MMcf)
  2. The volumes for 14-08-061-20 W5 are for the first 17 days of production.

All of the above wells were drilled specifically to satisfy land tenure requirements. Each of these wells is equipped with a bottom-hole choke to restrict initial production and minimize reservoir drawdown.

DUVERNAY STRATEGIC OPTIONS REVIEW UPDATE

On October 29, 2014, Yoho announced that it had appointed BMO Capital Markets to act as its exclusive financial advisor in conjunction with a strategic review of the Company's Duvernay assets. The strategic review process generated a high level of interest and several proposals from counterparties. Included was one proposal that was the subject of lengthy negotiations and due diligence with the counterparty, which proposal Yoho expected to be in a position to advance to a formal agreement. However, due to the prolonged period of declining commodity prices and the ongoing significant uncertainty regarding market conditions, Yoho has been unable to advance any such proposals to a formal agreement stage. Given these factors, Yoho has suspended its Duvernay asset strategic review process.

FINANCING

Yoho is pleased to announce that it has entered into an agreement with a syndicate of underwriters led by Acumen Capital Finance Partners Limited and including FirstEnergy Capital Corp. and National Bank Financial Inc. (collectively, the "Underwriters") pursuant to which the Underwriters have agreed to purchase on a private placement bought deal basis for resale a combination of common shares of the Company (the "Common Shares") at an issue price of $0.63 per Common Share and Common Shares issued on a "flow-through" basis pursuant to the provisions of the Income Tax Act (Canada) in respect of Canadian development expenses (the "Flow-Through Shares") at an issue price of $0.68 per Flow-Through Share for aggregate gross proceeds of $5,000,000.

In addition, the Underwriters have agreed to purchase on a private placement bought deal basis for resale convertible secured second lien debentures ("Debentures) of the Company (the sale of the Debentures together with the sale of the Common Shares and Flow-Through Shares, being referred to herein as the "Offering") for gross proceeds of $10,000,000. The Debentures will bear interest at a rate of 8.25% per annum, payable semi-annually in arrears on the last day of June and December in each year commencing on December 31, 2015, and will mature on June 30, 2020 (the "Maturity Date"). The Debentures will be convertible at the holder's option into Common Shares at any time prior to the earlier of the Maturity Date and the date fixed for redemption at a conversion price of $0.78 per Common Share (the "Conversion Price"), subject to adjustment in certain circumstances. The Debentures will not be redeemable before June 30, 2018. On or after June 30, 2018 and prior to the Maturity Date, the Debentures will be redeemable at Yoho's option at par plus accrued and unpaid interest, provided that the weighted average trading price of the Common Shares on the TSX Venture Exchange during the 20 consecutive trading days ending on the fifth trading day preceding the date on which notice of redemption is given is not less than 125% of the Conversion Price.

Yoho has also granted the Underwriters an option exercisable in whole or in part, for a period commencing on the closing of the Offering and ending 30 days thereafter, to purchase up to an additional 33% of the Offering in any given combination of Common Shares, Flow-Through Shares and Debentures on the same terms and conditions as the Offering for additional aggregate gross proceeds of up to $5,000,000.

Directors and officers of Yoho will subscribe up to a minimum of $7.6 million of the Offering. Proceeds of the Offering will be used to initially reduce Yoho's existing bank indebtedness and for general corporate purposes, with the gross proceeds from the sale of the Flow-Through Shares used to fund ongoing activities eligible for Canadian development expenses which will be renounced in favour of the subscribers of the Flow-Through Shares effective on or before December 31, 2015. The Offering is subject to customary conditions including receipt of applicable regulatory approvals and is expected to close on or about June 22, 2015.

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

READER ADVISORY

Certain information regarding Yoho set forth in this news release, including (among other things): Yoho's expected funds from operations of $1 million per month by fiscal Q4; and the use of the net proceeds of the Offering may constitute forward-looking statements under applicable securities laws and necessarily involve substantial known and unknown risks and uncertainties. These forward-looking statements are subject to numerous risks and uncertainties, certain of which are beyond Yoho's control, including without limitation, risks associated with oil and gas exploration, development, exploitation, production, marketing and transportation, loss of markets, volatility of commodity prices; volatility in production rates, environmental risks, inability to obtain drilling rigs or other services, capital expenditure costs, including drilling, completion and facility costs, unexpected decline rates in wells, wells not performing as expected, delays resulting from or inability to obtain required third party and regulatory approvals, ability to access sufficient capital from internal and external sources, the impact of general economic conditions in Canada, the United States and overseas, industry conditions, changes in laws and regulations (including the adoption of new environmental laws and regulations) and changes in how they are interpreted and enforced, increased competition, the lack of availability of qualified personnel or management, fluctuations in foreign exchange or interest rates, and the uncertainty of estimates and projections of production, costs and expenses.

With respect to forward-looking statements contained in this news release, Yoho has made a number of assumptions. The key assumptions underlying the aforementioned forward-looking statements include assumptions regarding (among other things): the impact of increasing competition; the general stability of the economic and political environment in which the Company operates; the timely receipt of any required third party and regulatory approvals; the ability of the Company to obtain qualified staff, equipment and services in a timely and cost efficient manner; drilling results; the closing of the Offering; that the net proceeds of the Offering will remain consistent with those stated herein; the timing of drilling plans and completion operations; the ability of the operator of the projects which the Company has an interest in operating the field in a safe, efficient and effective manner; the ability of the Company to obtain financing on acceptable terms; field production rates and decline rates; the ability to replace and expand oil and natural gas reserves through acquisition, development of exploration; the timing and costs of pipeline, storage and facility construction and expansion and the ability of the Company to secure adequate product transportation; future commodity prices; currency, exchange and interest rates; the regulatory framework regarding royalties, taxes and environmental matters in the jurisdictions in which the Company operates; and the ability of the Company to successfully market its oil and natural gas production. Certain or all of the forgoing assumptions may prove to be untrue.

Yoho's actual results, performance or achievement could differ materially from those expressed in, or implied by, these forward-looking statements and, accordingly, no assurance can be given that any of the events anticipated by the forward-looking statements will transpire or occur, or if any of them do so, what benefits that the Company will derive therefrom. All subsequent forward-looking statements, whether written or oral, attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by these cautionary statements. Additional information on these and other factors that could affect Yoho's operations and financial results are included in reports on file with Canadian securities regulatory authorities and may be accessed through the SEDAR website (www.sedar.com) or Yoho's website (www.yohoresources.ca).

The forward-looking statements contained in this document are made as at the date of this news release and Yoho 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 Measurements

Within this release references are made to terms commonly used in the oil and gas industry. Funds from operations, funds from operations per share and netbacks do not have any standardized meaning under IFRS and are referred to as non-IFRS measures. Funds from operations per share is calculated based on the weighted average number of common shares outstanding consistent with the calculation of net income per share. Operating netbacks equal total petroleum and natural gas sales net of royalties less operating and transportation expenses calculated on a boe basis. Management utilizes these measures to analyze operating performance. The Company's calculation of the non-IFRS measures included herein may differ from the calculation of similar measures by other issuers. Therefore, the Company's non-IFRS measures may not be comparable to other similar measures used by other issuers. Funds from operations is not intended to represent operating profit for the period nor should it be viewed as an alternative to operating profit, net income, cash flow from operating activities or other measures of financial performance calculated in accordance with IFRS. Non-IFRS measures should only be read in conjunction with the Company's interim financial statements.

Initial Production Levels

Any references in this news release to initial, early and/or test production/performance rates are useful in confirming the presence of hydrocarbons, however, such rates are not determinative of the rates at which such wells will continue production and decline thereafter. Additionally, such rates may also include recovered "load oil" fluids used in well completion stimulation. While encouraging, readers are cautioned not to place reliance on such rates in calculating the aggregate production for Yoho. The initial production rate may be estimated based on other third party estimates or limited data available at this time. The initial production is generally estimated using BOEs. In all cases in this news release initial production or test rates are not necessarily indicative of long-term performance of the relevant well or fields or of ultimate recovery of hydrocarbons.

BOE Equivalency

Barrel of oil equivalents or BOEs may be misleading, particularly if used in isolation. A BOE conversion ratio of 6 Mcf: 1 bbl 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 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 Mcf: 1 bbl, utilizing a conversion ratio of 6 Mcf: 1 bbl may be a misleading indication of value.

Selected Definitions

bbl means barrel
boe means barrel of oil equivalent of natural gas and crude oil on the basis of 1 boe for 6 Mcf of natural gas (this conversion factor is an industry accepted norm and is not based on either energy content or current prices)
boe/d barrel of oil equivalent per day
CGR bbl/MMcf means Condensate Gas Ratio (barrels of measured field condensate per MMcf)
m3 means cubic metres
MMcf means million cubic feet

This press release shall not constitute an offer to sell or a solicitation of an offer to buy the securities in any jurisdiction. The securities of Yoho will not be and have not been registered under the United States Securities Act of 1933, as amended, and may not be offered or sold in the United States, or to a U.S. person, absent registration or applicable exemption therefrom.

Contact Information

  • Yoho Resources Inc.
    Brian McLachlan
    President & Chief Executive Officer
    403-537-1771 x103

    Yoho Resources Inc.
    Wendy Woolsey
    Vice President Finance & Chief Financial Officer
    403-537-1771 x102