CALGARY, Aug. 29, 2018 /CNW/ - Ikkuma Resources
Corp. ("Ikkuma" or the "Corporation") (TSXV: IKM) is pleased
to report its financial and operating results for the three and six
months ended June 30, 2018.
Financial and operational information is set out below and
should be read in conjunction with Ikkuma's June 30, 2018 unaudited interim financial
statements and the related management's discussion and analysis
("MD&A"). Ikkuma's condensed unaudited interim financial
statements and MD&A are available for review at
www.sedar.com and on the Corporation's website at
www.ikkumarescorp.com.
HIGHLIGHTS
- Achieved average production of 18,276 boe per day for the six
months ended June 30, 2018, an
increase of 194% compared to 6,214 boe per day for the same period
in 2017.
- Increased revenue by 109% to $41.1
million for the six months ended June
30, 2018 compared to $19.7
million for the six months ended June
30, 2017.
- In line with Ikkuma's field optimization initiatives, net
operating expenses per boe were reduced 5% from $11.38/boe in the first quarter of 2018 to
$10.79/boe in the second quarter of
2018.
- Decreased general and administrative expense per boe by 59% to
$0.84/boe for the six months ended
June 30, 2018 as compared to
$2.06/boe for the six months ended
June 30, 2017.
- On July 4, 2018, announced the
purchase and sale agreement to sell certain midstream assets in the
Alberta Foothills for a total cash consideration of $23.0 million, subject to customary
adjustments.
- On August 24, 2018, announced
that Ikkuma and Pieridae Energy Limited ("Pieridae") entered into a
definitive agreement ("Arrangement Agreement") providing for the
acquisition by Pieridae of all of the issued and outstanding shares
of Ikkuma by way of a plan of arrangement.
|
|
|
(Expressed in
thousands of Canadian dollars
except per boe and
share amounts)
|
Three Months Ended
June 30,
|
Six Months Ended
June 30,
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
OPERATIONS
|
|
|
|
|
|
|
|
|
Average daily
production
|
|
|
|
|
|
|
|
|
Natural gas
(mcf/d)
|
|
100,252
|
|
34,259
|
|
106,592
|
|
36,243
|
Light oil
(bbl/d)
|
|
244
|
|
27
|
|
219
|
|
53
|
NGLs
(bbl/d)
|
|
318
|
|
125
|
|
292
|
|
121
|
Total equivalent
(boe/d)
|
|
17,271
|
|
5,861
|
|
18,276
|
|
6,214
|
Average
prices
|
|
|
|
|
|
|
|
|
Natural gas
($/mcf)
|
$
|
1.18
|
$
|
2.82
|
$
|
1.57
|
$
|
2.77
|
Light oil
($/bbl)
|
|
76.12
|
|
56.26
|
|
73.15
|
|
59.17
|
NGLs
($/bbl)
|
|
59.85
|
|
30.21
|
|
55.04
|
|
35.09
|
Operating
netback
|
|
|
|
|
|
|
|
|
Revenue
($/boe)
|
$
|
10.47
|
$
|
17.55
|
$
|
12.43
|
$
|
17.48
|
Realized gain on risk
management contracts ($/boe)
|
|
1.20
|
|
0.36
|
|
0.97
|
|
0.24
|
Royalties
($/boe)
|
|
(0.40)
|
|
(0.01)
|
|
(0.73)
|
|
(0.30)
|
Net operating
expenses ($/boe)
|
|
(10.79)
|
|
(8.36)
|
|
(11.10)
|
|
(8.22)
|
Transportation
expenses ($/boe)
|
|
(1.06)
|
|
(2.03)
|
|
(1.04)
|
|
(2.01)
|
Operating netback
(1) ($/boe)
|
$
|
(0.58)
|
$
|
7.51
|
$
|
0.53
|
$
|
7.19
|
FINANCIAL
|
|
|
|
|
|
|
|
|
Petroleum and natural
gas revenues (2)
|
$
|
16,462
|
$
|
9,362
|
$
|
41,128
|
$
|
19,657
|
Cash provided by
(used in) operating activities
|
$
|
(3,176)
|
$
|
2,204
|
$
|
2,435
|
$
|
5,474
|
|
Per share – basic and
diluted
|
$
|
(0.03)
|
$
|
0.02
|
$
|
0.02
|
$
|
0.06
|
Funds flow from (used
in) operations (1)
|
$
|
(3,323)
|
$
|
2,045
|
$
|
(3,083)
|
$
|
4,774
|
|
Per share – basic and
diluted
|
$
|
(0.03)
|
$
|
0.02
|
$
|
(0.03)
|
$
|
0.05
|
Adjusted funds flow
(1)
|
$
|
(3,255)
|
$
|
2,064
|
$
|
(2,928)
|
$
|
4,892
|
|
Per share – basic and
diluted
|
$
|
(0.03)
|
$
|
0.02
|
$
|
(0.03)
|
$
|
0.05
|
Net income (loss) and
comprehensive income (loss)
|
$
|
(9,182)
|
$
|
(898)
|
$
|
(14,279)
|
$
|
1,566
|
|
Per share – basic and
diluted
|
$
|
(0.08)
|
$
|
(0.01)
|
$
|
(0.13)
|
$
|
0.02
|
Capital
expenditures
|
$
|
1,544
|
$
|
2,388
|
$
|
2,365
|
$
|
11,157
|
Property
acquisitions
|
$
|
-
|
$
|
-
|
$
|
2,711
|
$
|
-
|
Net debt
(1,3)
|
$
|
66,114
|
$
|
39,511
|
$
|
66,114
|
$
|
39,511
|
Shares outstanding
('000s)
|
|
109,334,987
|
|
94,243,766
|
|
109,334,987
|
|
94,243,766
|
Weighted average
shares outstanding
|
|
|
|
|
|
|
|
|
|
basic and diluted
('000s)
|
|
109,334,987
|
|
94,243,766
|
|
109,334,987
|
|
94,243,766
|
(1)
Operating netback, funds flow from (used in) operations,
adjusted funds flow, net operating expenses and net debt are
non-IFRS measures. See "Non- IFRS Measures".
|
(2)
Before royalties.
|
(3)
Net debt includes Bank debt under its Credit Facilities (as
hereinafter defined), Term debt (as hereinafter defined) and
working capital deficiency (surplus), excluding fair value of risk
management contracts.
|
FINANCIAL AND OPERATING RESULTS
Average production for the six months ended June 30, 2018 was 18,276 boe per day, an increase
of 194% compared to 6,214 boe per day for the same period in 2017.
The increase was primarily due to production volumes related to the
acquisition of assets located in the Alberta Foothills and British
Columbia Deep Basin (the "Foothills Acquisition"), which closed on
December 21, 2017. Due to the current
low natural gas price environment, Ikkuma shut-in a portion of its
gas production during the second quarter of 2018. Total
production reported for the second quarter of 2018 of 17,271 boe/d
was impacted by shut in gas production decisions that reduced
production expected in the quarter by approximately 2,000 boe/d.
The impact of the shut-in decisions was less than expected as the
Corporation brought a portion of the shut-in gas back on production
throughout the quarter.
Petroleum and natural gas revenues increased 109% to
$41.1 million for the six months
ended June 30, 2018 compared to
$19.7 million for the six months
ended June 30, 2017. The
increase was primarily due to increased production volumes
associated with the Foothills Acquisition.
Net operating expenses per boe decreased 5% quarter over
quarter, from $11.38 per boe for the
three months ended March 31, 2018 to
$10.79 per boe for the three months
ended June 30, 2018. Ikkuma
anticipates that field optimization initiatives will continue to
reduce net operating costs per boe throughout the remainder of 2018
and into 2019.
Operating netbacks for the six months ended June 30, 2018 were $0.53 per boe compared to $7.19 per boe for same period in 2017. The
decrease in operating netbacks was primarily due to a 43% reduction
in realized natural gas prices and increased operating costs
associated with properties acquired with the Foothills
Acquisition.
With increased production, general and administrative expense
per boe decreased by 59% to $0.84 per
boe for the six months ended June 30,
2018 compared to $2.06 per boe
for the six months ended June 30,
2017.
Adjusted funds flow for the six months ended June 30, 2018 of negative $2.9 million included realized gains of
$3.2 million associated with the
Corporation's risk management program. In comparison,
adjusted funds flow for the six months ended June 30, 2017 was $4.9
million and included $0.3
million of realized gains on risk management contracts.
For the remainder of 2018, approximately 17% of the
Corporation's expected average daily natural gas production has
been hedged at an average price of $2.55/GJ.
Capital expenditures for the six months ended June 30, 2018 were $2.4
million compared to $11.2
million for the six months ended June
30, 2017.
Net debt, which includes the Corporation's syndicated credit
facility (the "Credit Facilities"), second lien senior secured term
debt facility ("Term debt") and working capital deficiency
(excluding fair value of risk management contracts) was
$66.1 million as at June 30, 2018 compared to $58.0 million as at December 31, 2017. Bank debt was $8.1 million as at June
30, 2018 compared to $10.4
million as at December 31,
2017.
ACQUISITION BY PIERIDAE & FORMATION OF EXPLORECO
As previously announced on August 24,
2018, Ikkuma entered into a definitive agreement (the
"Arrangement Agreement") providing for the acquisition by Pieridae
of all of the issued and outstanding shares of Ikkuma to be
effected by way of a plan of arrangement ("Arrangement"). The
acquisition of Ikkuma provides Pieridae with ownership of an
extensive area of producing and gas-prone reserve and resource
properties situated primarily in the central Alberta Foothills
area. The Arrangement Agreement also provides for the transfer,
prior to the effective date of the Arrangement, by Ikkuma of
certain interests in Cardium light oil-focused Alberta Foothills
properties (the "Crude Oil Properties") to a newly formed private
corporation ("ExploreCo"), contingent on customary regulatory
approvals by the Alberta Energy Regulator (the "AER"). On
completion of the Arrangement, each shareholder of Ikkuma will
receive, for each common share of Ikkuma, 0.1926 of a common share
of Pieridae and 0.1 of a share of ExploreCo (with Ikkuma
shareholders holding 100% of ExploreCo upon completion of the
Arrangement), subject to AER approval of the transfer of the Crude
Oil Properties. If such AER approval is not received by
December 31, 2018, no shares of
ExploreCo will be distributed to shareholders of Ikkuma and those
shareholders will not receive any further consideration. The
exchange ratio values the shares of Ikkuma at $0.86 per share (excluding the value of ExploreCo
shares), representing a premium of 188% to the closing price of
$0.30 per share as of August 23, 2018 of Ikkuma common shares on the
TSX Venture Exchange. The Arrangement remains subject to customary
conditions, including receipt of applicable court, Ikkuma
shareholder and regulatory approvals, and is expected to close in
the fourth quarter of 2018.
Upon completion of the transfer of assets, the receipt of
regulatory approval and the completion of the acquisition by
Pieridae, ExploreCo will be an Alberta Foothills Cardium light oil
focussed company, with undeveloped land, a production base and
associated infrastructure. Estimated production on closing will be
approximately 400 - 600 BOE per day. More details on
ExploreCo's operations, directors and management team will be
disclosed at a later date.
LIQUIDITY
On May 28, 2018, the Corporation
entered into an Amending Agreement with respect to its existing
Credit Facilities with its banking syndicate, whereby the borrowing
base was re-determined and remained at $25.0
million. The Credit Facilities include $15.0 million, which is available at full
discretion of the Corporation and $10.0
million that is restricted by the lenders. The Credit
Facilities include a restriction that prevents the funds from being
used for capital spending related to the CEE flow-through share
obligations and related commitments. The renewal term out date for
the Credit Facilities was extended to May
30, 2019.
Ikkuma is actively pursuing several options to fund its 2018
flow-through share obligations. On July 4,
2018, the Corporation signed a purchase and sale agreement
to sell certain midstream assets in the Alberta Foothills for a
total cash consideration of $23.0
million, subject to customary adjustments. The sale is
expected to close during the third quarter of 2018.
ABOUT IKKUMA
Ikkuma Resources Corp. is a diversified growth-oriented public
oil and gas company listed on the TSX Venture Exchange under the
symbol "IKM", with holdings in both conventional and unconventional
projects in Western Canada. The Company is focused in the
Foothills Region of Western Canada
with a team that has extensive experience in the area with the
unique skills at successfully exploiting a complex and potentially
prolific play type. Corporate information can be found at:
www.ikkumarescorp.com.
Forward-Looking Statements and Information and Cautionary
Statements
This press release contains forward‑looking statements and
forward‑looking information within the meaning of applicable
securities laws including, without limitation, those listed under
"Risk Factors" and "Forward-looking Statements and Information" in
Ikkuma's Annual Information Form and in its other filings available
on SEDAR at www.sedar.com. The use of any of the words
"expect", "anticipate", "continue", "estimate", "objective",
"ongoing", "may", "will", "project", "should", "believe", "plans",
"intends" and similar expressions are intended to identify
forward‑looking statements or information. Forward-looking
statements and information in this press release includes, but is
not limited to, the anticipated reduction of net operating expenses
per boe throughout the remainder of 2018 and into 2019, the
expected closing of the Arrangement and the expected maintenance of
an interest in the Crude Oil Properties resulting from the receipt
of shares in ExploreCo. Although Ikkuma believes that the
expectations and assumptions on which the forward‑looking
statements and information are based are reasonable, undue reliance
should not be placed on the forward‑looking statements and
information because Ikkuma cannot give any assurance that they will
prove to be correct. Since forward‑looking statements and
information address future events and conditions, by their very
nature they involve inherent risks and uncertainties. Actual
results could differ materially from those currently anticipated
due to a number of factors and risks. These include but are
not limited to the risks associated with the oil and gas industry
in general (e.g., operational risks in development, exploration and
production; delays or changes in plans with respect to exploration
or development projects or capital expenditures; the uncertainty of
reserve estimates; the uncertainty of estimates and projections
relating to production, costs and expenses; failure to obtain
necessary regulatory approvals for planned operations; health,
safety and environmental risks; uncertainties resulting from
potential delays or changes in plans with respect to exploration or
development projects or capital expenditures; volatility of
commodity prices, currency exchange rate fluctuations; imprecision
of reserve estimates; and competition from other explorers) as well
as general economic conditions, stock market volatility, and the
ability to access sufficient capital. We caution that the
foregoing list of risks and uncertainties is not
exhaustive.
In addition, the reader is cautioned that historical results
are not necessarily indicative of future performance. The
forward-looking statements and information contained in this press
release are made as of the date hereof and Ikkuma undertakes no
obligation to update publicly or revise any forward‑looking
statement or information, whether as a result of new information,
future events or otherwise, unless so required by applicable
securities laws.
Certain information set out herein may be considered as
"financial outlook" within the meaning of applicable securities
laws. The purpose of this financial outlook is to provide
readers with disclosure regarding Ikkuma's reasonable expectations
as to the anticipated results of its proposed business activities
for the periods indicated. Readers are cautioned that the
financial outlook may not be appropriate for other
purposes.
Non-IFRS Measures
This press release provides certain financial measures that
do not have a standardized meaning prescribed by IFRS. These
non-IFRS financial measures may not be comparable to similar
measures presented by other issuers. Funds flow from
operations, operating netback, net operating expenses and net debt
are not recognized measures under IFRS. Management believes
that in addition to net income (loss), funds flow from operations,
operating netback and net debt are useful supplemental measures
that demonstrate the Corporation's ability to generate the cash
necessary to repay debt or fund future capital investment.
Investors are cautioned, however, that these measures should not be
construed as an alternative to net income (loss), determined in
accordance with IFRS, as an indication of Ikkuma's performance.
Funds flow from operations is calculated by adjusting net
income (loss) for depletion and depreciation, exploration and
evaluation expense, impairment, gain (loss) on sale of petroleum,
natural gas and equipment, share-based payments, unrealized gain
(loss) on financial instruments and accretion. Operating
netback equals the total of petroleum and natural gas sales,
realized gains or losses on commodity contracts, less royalties,
transportation and operating expenses. Net operating expense is a
non-IFRS measure calculated as operating expenses less other
income. Other income includes gas processing income earned
from fees charged to third parties at facilities where Ikkuma has
an ownership interest. Net debt is the total of cash and cash
equivalents plus accounts receivable, plus prepaids and deposits,
less accounts payable and accrued liabilities and bank
debt.
Oil and Gas Advisory
In this press release, the abbreviation boe means a barrel of
oil equivalent derived by converting gas to oil in the ratio of 6
Mcf of gas to 1 bbl of oil (6 Mcf:1 bbl). Boe 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 that
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 on a 6 Mcf
of gas to 1 bbl of oil basis may be misleading as an indication of
value.
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.
SOURCE Ikkuma Resources Corp.