REG - Canadian O'Seas Petr - Q1 2022 Financial Results and Operations Update

Canadian Overseas PetroleumAnnouncement

17/05/2022 07:00

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RNS Number : 6930L  Canadian Overseas Petroleum Ltd  17 May 2022

 

 

First Quarter 2022 Financial Results and Operations Update

London, United Kingdom; Calgary, Canada: May 17, 2022 - Canadian Overseas
Petroleum Limited and its affiliates ("COPL" or the "Company") (XOP: CSE)
& (COPL: LSE), an international oil and gas exploration, production and
development company with production and development operations focused in
Converse and Natrona Counties, Wyoming, USA, is pleased to announce financial
results for the first quarter ending March 31, 2022.

 

First Quarter 2022 Financial Highlights:

 

COPL's net crude oil sales before royalties remained consistent at an average
of 1,114 bbl./d as compared to 1,094 bbl./d in the fourth quarter of 2021
("Q421"). Due to Cuda Energy LLC's ("Cuda") operating arrears liability, as a
joint interest partner in the Wyoming assets, the Company has held Cuda's
average production of approximately 477 bbl./d in the first quarter of 2022
("Q122") and 506 bbl./d in Q421 to offset the ongoing arrears. Thus, in
aggregate, the Company's total net average oil production in Q122 was 1,591
bbl./d as compared to 1,600 bbl./d in Q421.

 

Petroleum sales, net of royalties increased to $7.1 million from $5.8 million
in Q421. Cuda's petroleum sales, net of royalties was $2.7 million in Q122 and
$2.3 million in Q421 for an aggregate amount to the Company's account of $9.8
million for Q122 an increase from $8.1 million in Q421.

 

The Company's realized hedging loss was $0.9 million as compared to a realized
hedging gain of $0.2 million in Q421. This is comprised of a realized loss of
$3.5 million on crude oil hedge (swap) sales contracts, as compared to a loss
of $1.4 million in Q421; offset by a realized gain of $2.6 million on butane
hedge (swap) purchase contracts, as compared to a gain of $1.6 million in
Q421.

 

COPL's operating netback was $48.53/bbl., before the net realized gain or loss
on crude oil and butane hedge contracts as compared to $41.21/bbl. in Q421.

 

In an effort to manage its capital resources and liquidity, the Company
reduced capital expenditures to $3.0 million as compared to $10.7 million in
Q421.

 

On March 31, 2022, the COPL received a waiver from its lender with respect to
covenant defaults as at December 31, 2021, subject to certain conditions and
fees. Due to the waiver, the Company is no longer in technical default on the
credit facility and the as a result COPL's indebtedness has been re-classified
as a non-current liability as at March 31, 2022.

 

Operations Update

 

In Q122 the Company completed a rigorous reservoir simulation for the Barron
Flats Shannon Unit, which commenced in October 2021. This current simulation
closely mirrors the working surface pressures and restricted well production
observed in the field since late August 2021. As well, this simulation
suggests the placement of an efficient miscible bank has been successfully
positioned in the reservoir from the increased enriched gas injection program
implemented in April 2021. As a result, the Company has currently eliminated
the butane component of the enriched gas injection scheme and is now injecting
pure methane at overall reduced volumes into the reservoir. In the fourth
quarter of 2022, butane enriched gas will be injected into certain injection
wells as the Company expands the miscible flood with additional production and
injection wells. Other injection wells will continue to receive a pure methane
injection stream. The reduction of butane from the injection stream will have
a significant operating cash benefit going forward, as it eliminates then
reduces a significant cost component of the miscible injection program.

 

Oil production from the Barron Flats Shannon (miscible) Unit continues to be
restricted due to high surface working pressures impacting the produced gas
gathering system. The Company is attempting to temporarily mitigate these
issues by reducing and shifting injection volumes between injection wells
until remedial work on the gas gathering system can be completed later in
2022. This effort is showing some positive results which should become
apparent later in the second quarter of 2022.

 

Response of the miscible flood at the Barrons Flats Shannon Unit continues to
exceed expectations when the Company made the acquisition of Atomic Oil and
Gas in March 2021. Recently two pumping wells commenced flowing in line with
the predictions of the current reservoir simulation. Re-configuration of these
wells to flowing wells has been completed with production increases to be
evident later in the second quarter of 2022.

 

Planning for the delineation of the Company's deep oil discovery at the Barron
Flats Federal (Deep) Unit is ongoing and permitting of 16 well locations is
underway. Late in Q122, the Company reached an agreement with the Bureau of
Land Management of the Department of the Interior for a minimum yearly
drilling program to satisfy leasehold drilling obligations. This obligation
from March 31, 2022 to March 31, 2023, and subsequent 12-month periods, is for
the drilling of a minimum of 3 vertical or 2 horizontal wells. It is the
Company's intention to drill at least 2 horizontal wells by March 31, 2023
into the Upper Cretaceous Frontier Formation to satisfy this requirement.

 

The Company commissioned Ryder Scott to conduct a resource assessment of the
deep discovery in the form of a Resource Report compliant to Canadian
regulatory requirements pursuant to National Instrument 51-101 - Standards of
Disclosure for Oil and Gas Activities ("NI 51-101"). Receipt of the Resource
Report is expected in late May 2022.

 

Arthur Millholland, President & CEO, commented: "We are proceeding with
our objectives for 2022 as set out in the Company's year-end financial
announcement. The purchase of the Wyoming assets of Cuda has been approved by
the Canadian Courts, with approval by the US Federal Court expected later in
the month. Our finance team is working on the re-finance of COPL America Inc's
senior credit facility with commercial banks. This will reduce our cost of
capital in these times of increasing interest rates. The optimization and
associated increase in oil production will occur later in 2022 with activities
getting started in earnest after the completion of the Cuda acquisition. We
are all looking forward to the commencement of the first phase of the
delineation of our deep oil discovery as it is the start of an exceptional
growth opportunity for the Company."

 

COPL's objectives for 2022:

 

·    Complete the acquisition of the Wyoming assets of Cuda;

·    Re-finance COPL America Inc's credit facility to reduce the Company's
cost of capital;

·    Optimize and increase oil production at the operated Barron Flats
Shannon Unit miscible flood;

·    Commence phase 1 of the delineation of the Barron Flats Deep oil
discovery; and

·    Maintain the Company's ESG operating credentials.

 

The financial results and associated regulatory filing documents, including
the Financial Statements and the Management's Discussion and Analysis for the
first quarter ending March 31, 2022, can be viewed under the Company's name at
www.sedar.com (http://www.sedar.com) or at the Company's website at
www.canoverseas.com (http://www.canoverseas.com) . The Company encourages
interested parties to read the Management's Discussion and Analysis along with
the Financial Statements and accompanying notes.

 

About the Company:

 

COPL is an international oil and gas exploration, development and production
company actively pursuing opportunities in the United States with operations
in Converse and Natrona Counties Wyoming, and in sub-Saharan Africa through
its ShoreCan joint venture company in Nigeria, and independently in other
countries.

 

 
 
For further information, please contact:

 

Mr. Arthur Millholland, President & CEO

Mr. Ryan Gaffney, CFO

Canadian Overseas Petroleum Limited

Tel: + 1 (403) 262 5441

 

Cathy Hume

CHF Investor Relations

Tel: +1 (416) 868 1079 ext. 251

Email: cathy@chfir.com

 

Charles Goodwin

Yellow Jersey PR Limited

Tel: +44 (0) 77 4778 8221

Email: copl@yellowjerseypr.com

 

Peter Krens

Equity Capital Markets, Tennyson Securities

Tel: +44 (0) 20 7186 9033

 

Alex Wood & Keith Dowsing

Joint Broker

Alternative Resource Capital

AW: +44 (0) 7559 910872

KD: +44 (0) 7559 910873

 

Andrew Chubb / Neil Passmore

Advisors/Joint Brokers

Hannam & Partners

+44 (0) 20 7907 8500

 

 

The Common Shares are listed under the symbol "XOP" on the CSE and under the
symbol "COPL" on the London Stock Exchange.

 

 

This news release contains forward-looking statements. The use of any of the
words "initial, "scheduled", "can", "will", "prior to", "estimate",
"anticipate", "believe", "should", "forecast", "future", "continue", "may",
"expect", and similar expressions are intended to identify forward-looking
statements. The forward-looking statements contained herein are based on
certain key expectations and assumptions made by the Company, including, but
not limited to, the ability to raise the necessary funding for operations,
delays or changes in plans with respect to exploration or development projects
or capital expenditures. Although the Company believes that the expectations
and assumptions on which the forward-looking statements are based are
reasonable, undue reliance should not be placed on the forward-looking
statements since the Company can give no assurance that they will prove to be
correct since forward-looking statements address future events and conditions,
by their very nature they involve inherent risks and uncertainties most of
which are beyond the control of Canadian Overseas Petroleum Ltd. For example,
the uncertainty of reserve estimates, the uncertainty of estimates and
projections relating to production, cost overruns, health and safety issues,
political and environmental risks, commodity price and exchange rate
fluctuations, changes in legislation affecting the oil and gas industry could
cause actual results to vary materially from those expressed or implied by the
forward-looking information.  Forward-looking statements contained in this
news release are made as of the date hereof and Canadian Overseas Petroleum
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.

 

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