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Press release from CNW Group

Sea Dragon Energy Inc. announces first quarter 2013 financial and operating results

Friday, May 24, 2013

Sea Dragon Energy Inc. announces first quarter 2013 financial and operating results

09:25 EDT Friday, May 24, 2013

CALGARY, May 24, 2013 /CNW/ - Sea Dragon Energy Inc. ("Sea Dragon" or the "Company") (TSXV: SDX) announces its 2013 first quarter financial and operating results (the "Quarter" or "Q1 2013").   Highlights:

  • Production increased by 47% to average 1,495 bopd for the quarter (Q1 2012: 1,019 bopd)
  • Revenues increased by 34% to US$14.3 MM @ US$106.28/bbl realized price (Q1 2012: US$10.7 MM @$115.10/bbl price)
  • Netbacks increased by 36% to US$5.3MM @ US$39.41/bbl (Q1 2012: US$3.9M @$41.93/bbl)
  • Cash flow from operations increased by 394% to US$1.9MM (Q1 2012: US$0.4MM)
  • US$5.6MM cash and cash equivalents at end of Q1 2013
  • US$6.8MM of non-cash working capital and no net debt at end of Q1 2013
  • Realized a net loss of US$6.4MM, due to an impairment charge of US$7.2MM on the Company's Kom Ombo concession, related to West Al Baraka field. The Company has now completed its impairment review of Kom Ombo, pursuant to the 2012 and Q1 2013 tests.

Post First Quarter events:

  • Production currently stands at 1,959 boepd as the Shukheir Marine well (SHB-5) was returned to production after a workover in February that affected the average production level for the quarter. Quarter end production was 92% above Q1 2012
  • Collected US$2.2MM in outstanding accounts receivable
  • Paid back US$1.0MM of debt, resulting in a cash balance of US$4.0MM and nil net debt
  • Awarded the South Disouq Exploration Concession in the Nile Delta in the EGAS bid round.

Sea Dragon CEO, Paul Welch, commented:

"Q1 2013 has proved to be a strong first period for the Company. We remain focused on increasing production which provides a solid foundation to deliver on our growth strategy throughout 2013 and beyond. The increased operating cash flow has enabled the Company to maintain a solid cash position with no net debt as we continue to develop our existing assets which have significant resource upside.

Sea Dragon is also well placed to capitalise on the current market situation in Egypt where the opportunity for transformational growth exists through participation in exploration bid rounds and potential acquisitions of discounted assets, supported by a management team with strong in-country relationships and expertise. Our recent success in acquiring Shukheir Marine and in the EGAS bid round award of the South Disouq exploration block will underpin the next step in our growth process.  I look forward to our continued success in both increasing production and cash flow from our existing assets while adding new assets to our portfolio."

KEY FINANCIAL & OPERATING HIGHLIGHTS

         
Fiscal Year Prior Quarter (1) Three months ended March 31
    2013 2012
Financial $000's      
Cash, end of period 5,658 5,598 4,285
Working capital 6,645 6,806 8,077
Funds from operations 2,083 1,962 397
  per share 0.00 0.00 0.00
Net loss (6,447) (6,820) (786)
  per share (0.02) (0.02) 0.00
Capital expenditures 1,358 1,819 1,955
Total assets 52,006 44,711 76,876
Shareholders' equity 41,250 34,605 68,289
Common shares outstanding (000's) 376,459 376,459 376,459
Warrants outstanding (000's) - - 30,000
       
Operational      
Oil sales (bbl/d) 1,273 1,495 1,019
       
Brent oil price ($/bbl) 110.51 112.07 118.47
Realized oil price ($/bbl) 105.52 106.28 115.10
Royalties ($/bbl) 55.49 54.76 59.53
Operating costs ($/bbl) 4.94 12.11 13.64
Netback ($/bbl) 45.09 39.41 41.93
(1) Denotes the three months ended December 31, 2012  

 

Consolidated financial statements with Management's Discussion and Analysis ("MD&A") are now available on the Company's website at www.seadragonenergy.com and on SEDAR at www.sedar.com.

Operational Review

North West Gemsa Concession

During the quarter, the Company drilled two successful wells and fracture stimulated one additional producer at North West Gemsa:

  • The Geyad-4 ST-2 infill well that was drilled in November 2011 underwent a fracture stimulation in February, 2013. The Kareem Rahmi sand stimulation was successful and the well resumed production at 750 bopd.
  • The AASE-14st well spud in November 2012 encountered 16 feet of net pay in the Kareem Shagar sand and 13 feet of net pay in the Kareem Rahmi sand.  The Rahmi sand tested at 3,486 bopd and 3.18 mmscfpd of gas.
  • The AASE-16 well spud on February 28, 2013 was completed as a water injection well in the Kareem Shagar sand. The well encountered 27 feet of good quality wet sand in the Shagar. The well adds another water injection point to the field and is anticipated to improve sweep efficiency and maximize oil recovery.

The NW Gemsa gas conservation project was completed in February 2013. Gas is now being recovered and associated condensate and liquefied petroleum gas volumes are being captured and marketed.  The gas tie-in project involved the installation of an 8" gas pipeline for transporting associated gas to a nearby processing plant.

Solution gas and incremental liquids production commenced on February 12, 2013.  Current sales volumes average 10.7 mmscf/d (1,070 mscf/d net) of sales gas, 100 bbl/d (10 bbl/d net) of condensates and 240 bbl/d (24 bbl/d net) of LPGs.

Water injection at NW Gemsa is ongoing with five injectors currently operating at the Al Amir SE Field and one injector at the Geyad Field. Current total injection rates are approximately 22,500 bwpd at Al Amir SE and 5,000 bwpd at Geyad. Cumulative injection to date is 8.0 million barrels at Al Amir SE and 2.0 million barrels at Geyad.

Cumulative production from the NW Gemsa Concession has now reached 11.3 million bbls of light oil.

Current production averages 10,300 bopd (1,030 bopd net to the Company). Total production, including solution gas and natural gas liquids, reached approximately 12,400 boepd (1,240 boepd net to the Company).

Kom Ombo Concession

During the first quarter of 2013 additional testing results from West Al Baraka field were significantly lower than anticipated. These results triggered an impairment test for the Kom Ombo Concession which resulted in a $7.2MM charge.

Current production from Kom Ombo is approximately 470 bopd gross (235 bopd net to the Company).

Shukheir Marine Concession

In the first quarter of 2013, the Company performed a successful workover and studied further workover plans at Shukheir Marine:

  • In February 2013 the Company successfully replaced a corroded tubing string at the Shukheir Bay field and returned the SHB-5 well to production at 360 bopd.
  • The Company is also studying plans to remove skin damage by using an acid stimulation on the GA-1 well on the Gamma field in the second half of 2013.

Both of these activities will help in reducing operating costs per barrel and sustaining production levels.

Finally, the Company is re-mapping its 3D seismic coverage of the area to evaluate exploratory drilling opportunities on the Gamma lease in the Nubia Formation and on the Shukheir Bay lease in the Upper and Lower Rudeis Formations.

Current production from Shukheir Marine stands at 484 bopd.

Certain statements contained in this press release constitute "forward-looking statements" as such term is used in applicable Canadian and US securities laws. These statements relate to analyses and other information that are based upon forecasts of future results, estimates of amounts not yet determinable and assumptions of management. In particular, statements concerning the 2013 drilling and capital expenditure programs of the NW Gemsa, Shukheir Marine and Kom Ombo Concessions and the results referenced or implied herein should be viewed as forward-looking statements.

Any statements that express or involve discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, assumptions or future events or are not statements of historical fact and should be viewed as "forward-looking statements".  All reserves information contained herein as well as the net present value of such reserves should be considered as forward looking statements. Such forward looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements.  Such risks and other factors include, among others, costs and timing of exploration and production development, availability of capital to fund exploration and development and political, social and other risks inherent in carrying on business in Egypt.  There can be no assurance that such statements will prove to be accurate as actual results and future events could vary or differ materially from those anticipated in such statements.  Accordingly, readers should not place undue reliance on forward-looking statements contained in this news release.

Forward-looking statements are made based on management's beliefs, estimates and opinions on the date the statements are made and the Companyundertakes no obligation to update forward-looking statements and if these beliefs, estimates and opinions or other circumstances should change, except as required by applicable law. Although Sea Dragon has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward-looking statements, there may be other factors that cause actions, events or results not to be as anticipated, estimated or intended. Investors are cautioned that such forward-looking statements involve risks and uncertainties.  Actual results may differ materially from those currently anticipated.  See Sea Dragon's Annual Information Form for the year ended December 31, 2012 for a description of the risks and uncertainties associated with the Company's business, including its exploration activities. The forward-looking statements contained herein are expressly qualified by this cautionary statement.

NEITHER THE 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 THE RELEASE.

\Notes to Editors

Sea Dragon Energy is an international exploration and development Oil Company with a focus on the Middle East and Africa. Activities are currently concentrated in Egypt, with interests in three concessions with short- and long-term potential. For further information please see the Company website at www.seadragonenergy.com or the Company's filed documents at www.sedar.com.

SOURCE: Sea Dragon Energy Inc.

For further information:

Paul Welch 
President and Chief Executive Officer 
Tel: +331 5343 9442

Olivier Serra
Chief Financial Officer and Director
Tel: +331 5343 9442

Pelham Bell Pottinger (Financial PR)
Philip Dennis / Joanna Boon
Tel: +44 (0) 207 861 3232

Brisco Capital Partners Corp. (Investor Relations)
Scott Koyich
Tel: +1 (403)262 9888

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