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Press release from CNW Group

ArPetrol Ltd. announces second quarter 2012 financial and operating results

Monday, August 27, 2012

ArPetrol Ltd. announces second quarter 2012 financial and operating results06:00 EDT Monday, August 27, 2012CALGARY, Aug. 27, 2012 /CNW/ - ArPetrol Ltd. ("ArPetrol" or the "Company") (TSXV:RPT) announces its financial and operating results for the three and six months ended June 30, 2012 and provides an operational update on activities this year to date as well as an outlook for the remainder of 2012. The interim condensed consolidated financial statements and management's discussion and analysis (MD&A), have been filed on SEDAR at and posted on the Company's website at Quarter 2012SummaryOperating and Financial ArPetrol had $19 million of working capital and drilling deposits as at June 30, 2012 and no long-term debt.Second quarter production averaged 247 boe per day. This is a decrease of 17 boe per day from the first quarter of 2012 and a decrease of 41 boe per day from the second quarter of 2011. These declines were due to a compressor outage in June and to natural declines.To help offset the volume declines, the Company continues to realize higher prices for its production. For the second quarter of 2012 the average price received for its natural gas was $2.87 per mcf, 16 percent higher than the $2.47 per mcf received in the second quarter of 2011.The average realized price for natural gas liquids also increased year-on-year with second-quarter 2012 prices of $70.23 per barrel, more than $10 per barrel higher from the same period in 2011. These increases reflect the continued trend of strengthening market prices in Argentina. The first and second quarter of 2012 average realized prices were consistent after adjusting for foreign exchange differences.Processing volumes and revenues also continued to increase during the first half of 2012 as third-party processing volumes return to full volumes after the disruption in September 2010. In June 2012, third-party delivery rates peaked at over 80 million cubic feet per day with processing revenue for the second-quarter of $1,007,343, an increase of $598,875 over the same period last year. During the current quarter third-party processing volumes increased by 12 percent compared to the first-quarter of 2012, while process disruptions at our gas plant resulted in slightly lower liquids recovery and revenue.Fixed asset expenditures for the second-quarter 2012 were $8,306,764. Major expenditures were incurred to prepare for and mobilize our extended reach drilling program on our Faro Virgenes block.Net loss for the quarter was $1,181,161, a 27 percent improvement as compared to the net loss for the prior year comparative quarter.Summary of Results(Cdn$ except shares outstanding and per boe1 amounts)Three months ended June 30,Six Months Ended March 31,20122011201220112 (Unaudited)(Unaudited)Financial    Production sales501,736493,3071,030,9861,134,329Processing revenues1,007,343408,4682,141,954819,975Funds flow from operations1(891,604)(1,146,074)(1,519,445)(2,142,826)Cash generated from operating activities(3,295,954)(2,542,833)(3,429,162)(3,442,101)Comprehensive loss(802,806)(1,628,475)(2,136,028)(3,796,600)Fixed asset expenditures8,306,764407,25411,203,356436,775Weighted average shares outstanding (millions)     - basic and diluted572.5572.2572.5419.5Operations    Production       Natural gas - Mcf per day1,3351,5721,3951,815   Natural gas liquids - bbls per day24262327   Total - boe per day1247288256330Average sales price      Natural gas - $ per Mcf2.872.472.862.58  Natural gas liquids - $ per bbl70.2359.0872.8858.96Average operating netback      Production - $ per boe10.984.631.065.10   Processing - $ per Mcf processed10.04(0.10)0.07(0.05)Note 1: See advisories at the end of this news release with respect to non-IFRS measures and BOE presentation. Note 2: The unaudited consolidated results for the Company for the six months ended June 30, 2011 reflect the results of the combined operations of ArPetrol Inc. and RPT Resources Ltd. (now ArPetrol Ltd.) from March 18, 2011 until June 30, 2011 and the results from ArPetrol Inc. only from January 1, 2011 to March 17, 2011.Operational Update and OutlookArPetrol is drilling the first long reach well in the Faro Virgenes field, which was spudded on July 23, 2012. Drilling operations are currently ongoing at 2,070 metres. With success, production from the well will be tied into ArPetrol's 100 percent owned gas plant.Operational delays in mobilization and surface hole drilling delays have increased the estimated cost of this well by up to 15 percent above the previously estimated cost range. The results from the first well will need to be evaluated before the Company commits to drilling a second long reach well at Faro and this may require an extended testing period with the drilling results provided in the fourth-quarter.  Additional financing will be required for the drilling of a second well.  Should only one well be drilled at Faro due to unsatisfactory well results or an inability to obtain additional financing, there will be further  incremental costs allocated to the first well to suspend the drilling program and satisfy prior commitments that were based on a two-well program.All values in this news release are in Canadian dollars unless otherwise indicated.About ArPetrol Ltd.ArPetrol is a Calgary-based publicly traded company engaged in oil and natural gas exploration, development and production and third-party natural gas processing in Argentina, where it owns and operates a gas processing facility with capacity of 85 million cubic feet (mmcf) per day. The Company's common shares are listed on the TSXV under the symbol "RPT".Non-GAAP MeasuresThis news release includes references to financial measures commonly used in the oil and natural gas industry. The terms "operating netback" (production sales and processing sales less royalties, turnover taxes and operating expenses)and "funds flow from operations" (cash generated from operating activities before changes in refundable Argentinean taxes, non-cash working capital, and translation adjustment on operating items) do not have any standardized meaning under International Financial Reporting Standards (IFRS), which have been incorporated into Canadian generally accepted accounting principles (GAAP) and may not be comparable with similar measures presented by other companies. Funds flow from operations should not be considered an alternative to, or more meaningful than, cash generated from operating activities, net income (loss) or other measures determined in accordance with IFRS, as an indicator of the Company's performance.See the MD&A for the three and six months ended June 30, 2012, filed on SEDAR at and on the Company's website, for further discussion, including a reconciliation of funds flow from operations to cash generated from operating activities which is the most directly comparable measure calculated in accordance with IFRS. There is no IFRS measure that is reasonably comparable to operating netbacks and a detailed calculation of such netbacks is presented in the MD&A for the three and six months ended June 30, 2012, which is filed on SEDAR at PresentationProduction information is commonly reported in units of barrels of oil equivalent (boe). For purposes of computing such units, natural gas is converted to equivalent barrels of oil using a conversion factor of six thousand cubic feet (mcf) to one barrel (bbl). This conversion ratio of 6:1 represents energy equivalency, which is primarily applicable at the burner tip, and does not represent a value equivalency at the wellhead. Such disclosure of boe may be misleading, particularly if used in isolation.Forward-Looking InformationThis news release contains certain forward‐looking statements relating, but not limited, to operational information, achieving additional production based on a successful drilling program at Faro, expected capital expenditures and increased cost estimates, drilling plans and the timing associated with drilling results, availability of funding, the ability to realize growth for our shareholders and expectations regarding the business and political climate in Argentina. Forward‐looking information typically contains statements with words such as "anticipate", "believe", "plan", "intend", "target", "estimate", "propose", "project", or similar words suggesting future outcomes. The Company cautions readers and prospective investors in the Company's securities not to place undue reliance on forward‐looking information as, by its nature, it is based on current expectations regarding future events that involve a number of assumptions, inherent risks and uncertainties, which could cause actual results to differ materially from those anticipated by the Company.Forward-looking information is based on management's current expectations and assumptions regarding, among other things, plans for and results of future operations and transactions, future drilling activity and production rates, future capital and other expenditures (including the amount, nature, timing and sources of funding thereof), future production and processing revenue, future economic conditions, future currency and exchange rates, future pricing, future funding, continued political stability in the areas in which the Company is operating, and the Company's continued ability to obtain and retain qualified staff and equipment in a timely and cost-efficient manner. Although the Company believes the expectations and assumptions reflected in such forward‐looking information are reasonable, they may prove to be incorrect.Forward‐looking information involves significant known and unknown risks and uncertainties. A number of factors could cause actual results to differ materially from those anticipated by the Company, including but not limited to risks associated with the oil and natural gas industry (e.g., operational risks in exploration and drilling; inherent uncertainties in interpreting geological data; changes in plans with respect to exploration or capital expenditures; the uncertainty of estimates and projections in relation to costs and expenses; and health, safety and environmental risks), access to funding, weather delays and natural disasters, processing interruptions and natural declines, union activities, change in government policies, the risk of commodity price and foreign exchange rate fluctuations, and risks associated with international activity.ArPetrol operates outside of Canada and as such, ArPetrol is subject to a number of political risks over which it has no control. These risks may include risks related to economic, social or political instability or change, the uncertainty of negotiating with foreign governments, expropriation and/or nationalization, changes in export or exchange policies, adverse determinations or rulings by governmental authorities, changes in energy policies or in the personnel administering them and currency and inflation risks. See the "Risk Factors" section of the Company's Annual Information Form for a further description of these risks and uncertainties facing ArPetrol.The forward‐looking information included herein is expressly qualified in its entirety by this cautionary statement. The forward‐looking information included herein is made as of the date hereof and the Company assumes no obligation to update or revise any forward‐looking information to reflect new events or circumstances, except as required by law.Additional information relating to the Company is also available on SEDAR at August 27, 2012 ArPetrol's Calgary office address will be 700, 815 8 Avenue S.W., Calgary, AB T2P 3P2Neither the TSXV nor its Regulation Services Provider (as defined in the policies of the TSXV) accepts responsibility for the adequacy or accuracy of this release.SOURCE: ArPetrol Ltd.For further information: Tim Thomas, President and Chief Executive Officer Or Ian Habke, Chief Financial Officer ArPetrol Ltd. Main Phone: 403-263-6738