The Globe and Mail

Go to the Globe and Mail homepage

Jump to main navigationJump to main content

Press release from Marketwire

Financial and Operating Results of Trilogy Energy Corp. for the Three and Six Months Ended June 30, 2010

Wednesday, August 04, 2010

Financial and Operating Results of Trilogy Energy Corp. for the Three and Six Months Ended June 30, 201009:00 EDT Wednesday, August 04, 2010CALGARY, ALBERTA--(Marketwire - Aug. 4, 2010) - Trilogy Energy Corp. (TSX:TET) is pleased to announce its financial and operating results for the three and six months ended June 30, 2010.On February 5, 2010, the Trust completed a conversion (the "Conversion") from an income trust structure to a corporate structure through a business combination with a private corporation pursuant to a plan of arrangement under the Business Corporations Act (Alberta) and related transactions. The name of the resulting corporation is Trilogy Energy Corp. References to Trilogy in this press release for periods prior to February 5, 2010 are references to the Trust and for periods on or after February 5, 2010 are references to Trilogy Energy Corp. Additionally, Trilogy refers to shares, shareholders and dividends which are comparable to units, unitholders and distributions previously under the Trust.FINANCIAL AND OPERATING HIGHLIGHTS- Sales volumes for the second quarter of 2010 averaged 24,087 Boe/d as compared to 23,079 Boe/d for the previous quarter, representing a 4 percent increase quarter over quarter.- Funds flow from operations decreased to $33.9 million during the second quarter of 2010 as compared to $51.1 million for the previous quarter. The decrease was attributed primarily to the absence of an early settlement of a financial instrument gain, lower realized commodity prices and a higher effective royalty rate, partially offset by higher production levels and lower costs for G&A in the current quarter.- Capital expenditures (excluding acquisitions and dispositions) totaled $23.9 million for the second quarter of 2010 (of which $6.0 million was related to Trilogy's Presley Pipeline and Kaybob North Sour Gas Plant expansion projects) versus $52.3 million in the prior quarter ($4.6 million therein was related to the same projects).- Dividends to Shareholders for the second quarter of 2010 were $12.1 million (38 percent of cash flow from operations) as compared to $13.6 million (24 percent of cash flow from operations) for the first quarter.- Loss before tax for the second quarter was $2.7 million as compared to income before tax in the prior quarter of $26.7 million. The decrease in earnings was primarily a function of the decrease in funds flow.- Operating costs for the quarter averaged $8.72 /Boe, consistent with the previous quarter of $8.96 /Boe.- In conjunction with the Presley Pipeline and Kaybob North Sour Gas Plant expansion projects, Trilogy received regulatory approval for the plant expansion project and related acid gas disposal system in the quarter. Concurrent with these approvals, Trilogy received consent to draw, if required, from its $40 million construction credit facility. FINANCIAL AND OPERATING HIGHLIGHTS TABLE (In thousand Canadian dollars except per share amounts and where stated otherwise) Three Months Ended Six Months Ended June 30 June 30, March 31, Change% 2010 2009 Change% 2010 2010 ---------------------------------------------------------------------------- FINANCIAL Petroleum and natural gas sales 71,954 86,268 (17) 158,222 120,578 31 Funds flow From operations(1) 33,888 51,103 (34) 84,993 58,205 46 Per share - diluted 0.29 0.45 (36) 0.74 0.59 25 Earnings Earnings (loss) before tax (2,731) 26,724 (110) 23,993 (22,232) 208 Per share - diluted (0.02) 0.24 (108) 0.21 (0.23) 191 Earnings (loss) after future income tax 1,557 15,392 (90) 16,949 (13,819) 223 Per share - diluted 0.01 0.14 (93) 0.15 (0.14) 207 Dividends/distributions declared 12,075 13,588 (11) 25,663 29,388 (13) Per share 0.105 0.12 (13) 0.225 0.30 (25) Capital expenditures Exploration and development 23,883 52,317 (54) 76,200 46,605 64 Acquisitions, (dispositions) and other - net 8 - 100 8 (57) 114 Net capital expenditures (surplus) 23,891 52,317 (54) 76,208 46,548 64 Total assets 992,967 1,006,149 (1) 992,967 925,240 7 Net debt(1) 260,531 253,653 3 260,531 324,778 (21) Shareholders' equity 465,113 475,145 (2) 465,113 385,658 21 Shares outstanding (thousands) - As at end of period 115,001 114,998 - 115,001 98,295 17 ---------------------------------------------------------------------------- OPERATING Production Natural gas (MMcf/d) 116 110 5 113 94 20 Crude oil and natural gas liquids (Bbl/d) 4,828 4,801 1 4,815 4,378 10 Total production (Boe/d @ 6:1) 24,087 23,079 4 23,586 20,004 18 ---------------------------------------------------------------------------- Average prices Natural gas (before financial instruments) ($/Mcf) 4.12 5.51 (25) 4.79 4.71 2 Natural gas ($/Mcf)(2) 4.44 6.39 (31) 5.38 5.96 (10) Crude oil and natural gas liquids (before financial instruments) ($/Bbl) 65.23 73.90 (12) 69.54 51.25 36 Crude oil and natural gas liquids ($/Bbl)(2) 65.23 73.90 (12) 69.54 51.22 36 ---------------------------------------------------------------------------- Drilling activity (gross) Gas 2 19 (89) 21 12 75 Oil 1 1 - 2 1 100 D&A - - - - - - Total wells 3 20 (85) 23 13 77 Success rate 100% 100% - 100% 100% - ---------------------------------------------------------------------------- (1) Funds flow from operations and net debt are non-GAAP terms. Funds flow from operations represents cash flow from operating activities before net changes in operating working capital accounts. Net debt is equal to long-term debt plus/minus working capital. Please refer to the advisory on Non-GAAP measures below. (2) Includes realized but excludes unrealized gains and losses on financial instruments. SUBSEQUENT EVENTSOn July 15, 2010 Trilogy declared a dividend per share of $0.035. The dividend is payable on August 16, 2010 to shareholders on record as of August 3, 2010. The ex-dividend date was July 29, 2010.OUTLOOKTrilogy's guidance for 2010 is as follows: Average production 23,000 Boe/d Average operating costs $10.00 /Boe Capital expenditures excluding acquisitions and costs of $23 million to complete the Presley Pipeline and Kaybob North Sour Gas Plant expansion projects $120 million ADDITIONAL INFORMATIONA copy of Trilogy's June 30, 2010 quarterly report to the Shareholders, including the Management's Discussion and Analysis and unaudited interim consolidated financial statements and related notes can be obtained at This report will also be made available at a later date through Trilogy's website at and SEDAR at under "other".ABOUT TRILOGYTrilogy is a petroleum and natural gas-focused Canadian energy corporation that actively acquires, develops, produces and sells natural gas, crude oil and natural gas liquids. Trilogy's geographically concentrated assets are primarily low-risk, high working interest, lower-decline properties that provide abundant infill drilling opportunities and good access to infrastructure and processing facilities, many of which are operated and controlled by Trilogy. Trilogy's common shares are listed on the Toronto Stock Exchange under the symbol "TET".NON-GAAP MEASURESIn this document, Trilogy uses the terms "funds flow from operations", "operating income", "net debt", "adjusted net debt" and "payout ratio", collectively the "Non GAAP measures", as indicators of Trilogy's financial performance. The Non-GAAP measures do not have a standardized meaning prescribed by Canadian generally accepted accounting principles ("GAAP") and therefore are unlikely to be comparable to similar measures presented by other issuers."Funds flow from operations" refers to the cash flow from operating activities before net changes in operating working capital. The most directly comparable measure to "funds flow from operations" calculated in accordance with GAAP is the cash flow from operating activities. "Funds flow from operations" can be reconciled to cash flow from operating activities by adding (deducting) the net change in working capital as shown in the consolidated statements of cash flows."Operating income" is equal to petroleum and natural gas sales before financial instruments and bad debt expenses minus royalties, operating costs, and transportation costs. "Net debt" is calculated as current liabilities minus current assets plus long-term debt. "Adjusted net debt equals net debt excluding the mark to market valuation of financial instruments therein. "Payout ratio" is calculated as the percentage of dividends declared over cash flow from operations for the relevant period. The components described for "operating income", "net debt" "adjusted net debt" and "payout ratio" can be derived directly from Trilogy's consolidated financial statements. Management believes that the Non-GAAP measures provide useful information to investors as indicative measures of performance.Investors are cautioned that the Non-GAAP measures should not be considered in isolation or construed as alternatives to their most directly comparable measure calculated in accordance with GAAP, as set forth above, or other measures of financial performance calculated in accordance with GAAP.FORWARD-LOOKING INFORMATIONCertain information included in this news release constitutes 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", "budget" or similar words suggesting future outcomes or statements regarding an outlook. Forward-looking statements or information in this news release pertain to, without limitation, expected average production, average operating costs and capital expenditures for 2010. Such forward-looking statements or information are based on a number of assumptions which may prove to be incorrect. Such assumptions include: current commodity price forecasts for petroleum and natural gas, current production forecasts, assumptions regarding royalties and expenses, drilling results consistent with our expectations, the ability of Trilogy to obtain equipment, services and supplies in a timely manner to carry out its activities; the ability of Trilogy and its partners to obtain drilling success consistent with expectations; the ability of Trilogy to market oil and natural gas successfully to current and new customers; the timing and costs of pipeline and storage facility construction and expansion and the ability to secure adequate product processing, transmission and transportation and the timely receipt of required regulatory approvals: among others.Although Trilogy 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 Trilogy 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 Trilogy and described in the forward-looking statements or information. These risks and uncertainties include, but are not limited to: fluctuations of oil and gas prices, foreign currency, exchange rates and interest rates, volatile economic and business conditions, the ability of management to execute its business plan; the risks of the oil and gas industry, such as operational risks in exploring for, developing and producing crude oil and natural gas and market demand; risks and uncertainties involving geology of oil and gas deposits; risks inherent in Trilogy's marketing operations, including credit risk; the uncertainty of reserves estimates and reserves life; the uncertainty of estimates and projections relating to future production, costs and expenses; uncertainty in amounts and timing of royalty payouts and applicability of and change to royalty regimes and government incentive programs including, without limitation, the Natural Gas Deep Drilling Programs and the Drilling Royalty Credit Program; potential delays or changes in plans with respect to exploration or development projects or capital expenditures; Trilogy's ability to secure adequate product transmission and transportation; Trilogy's ability to enter into or renew leases; health, safety and environmental risks; the ability of Trilogy to add production and reserves through development and exploration activities; weather conditions; the possibility that government policies, regulations or laws, including without limitation those relating to the environment and taxation, may change or regulatory approvals may be delayed or withheld; risks associated with existing and potential future lawsuits and regulatory actions against Trilogy; uncertainty regarding aboriginal land claims and co-existing local populations; hiring/maintaining staff; the impact of market competition; and other risks and uncertainties described elsewhere in this document or in Trilogy's other filings with Canadian securities authorities.The forward-looking statements and information contained in this news release are made as of the date hereof and Trilogy 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 so required by applicable securities laws.Refer to Trilogy's Management's Discussion and Analysis for additional information on forward-looking information.OIL AND GAS ADVISORYThis news release contains disclosure expressed as "Boe", "Boe/d", "Mcf/d", "MMcf/d", "Bbl" and "Bbl/d". All oil and natural gas equivalency volumes have been derived using the ratio of six thousand cubic feet of natural gas to one barrel of oil. Equivalency measures may be misleading, particularly if used in isolation. A conversion ratio of six thousand cubic feet of natural gas 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 well head.FOR FURTHER INFORMATION PLEASE CONTACT: Trilogy Energy Corp. J.H.T. (Jim) Riddell Chief Executive Officer (403) 290-2900 (403) 263-8915 (FAX) or Trilogy Energy Corp. J.B. (John) Williams President and Chief Operating Officer (403) 290-2900 (403) 263-8915 (FAX) or Trilogy Energy Corp. M.G. (Michael) Kohut Chief Financial Officer (403) 290-2900 (403) 263-8915 (FAX) or Trilogy Energy Corp. 1400 - 332 - 6th Avenue S.W. Calgary, Alberta T2P 0B2