Quattro Exploration and Production Ltd. (TSX-V:QXP)
("
Quattro" or the "
Company")
reports the release of its financial results for year-ended
December 31st, 2015, reporting a CDN $0.08 per share loss due to a
number of non-reoccurring charges totaling $4,488,200 while
increasing reserves on a 2P basis by 166% at a cost of $4.80 per
boe.
Despite the almost 48% decrease in world oil (WTI) and 40%
decrease in natural gas prices (NYMEX) in 2015 from 2014, the
Company realized gross revenues of $15,038,644 in 2015,
representing a modest reduction of only 16.5% compared to gross
revenues of $18,003,800 in 2014. 2015 was a challenging year
for the industry and Quattro was not immune, realizing $4,488,203
in expenses for non-recoverable partner expenses (due to partner
receiverships and bankruptcies), and administrative restructuring
charges, which are in management’s opinion non-recurring in nature
and therefore will not impact future profitability of the
Company. These challenges were compounded by over 61 days of
maintenance and plant turn-rounds by mid-stream operators,
materially restricting the Company’s revenues in 2015.
Despite these challenges in 2015 the Company’s strong balance
sheet at the end of 2014, positioned the Company to make the best
of a challenging year. Below is a summary of the key results
from the year-ended December 31, 2015:
Revenues |
|
|
|
$ |
15,038,644 |
|
Net
income from operations (net of non-reoccurring expenses) $15.56 per
boe “Net Back” |
|
$ |
7,313,912 |
|
Net
income (net of non-reoccurring expenses) |
|
$ |
846,769 |
|
Comprehensive loss |
|
$ |
3,641,434 |
|
Cash
and equivalents |
|
$ |
2,100,363 |
|
Working capital (net of Long Term Debt) |
|
$ |
1,522,608 |
|
Net debt
(excluding decommissioning liabilities & deferred taxes) |
|
$ |
11,100,855 |
|
At December 31, 2015, the Company’s restricted exit production
was 1,580 boe/day, representing a 4% increase from December 31,
2014. The Company’s average production was 1,546 boe/day for
the 304(net) days that were available which resulted in an
annualized average production rate of 1,288 boe/d.
The Company continues to focus on the strengthening of its
financial foundation, as summarized above, and reported in its
audited financial statements and corresponding management
discussion and analysis.
Leonard Van Betuw, President and CEO commented, “Through
measured capital spending decisions, and a continued focus on cost
reductions in combination with strategic acquisitions, the Company
is pleased to report year-over-year growth of 150% in Quattro’s oil
gas reserves of 6.602 mmboe on a Total Proven (1P) Reserves basis
valued on December 31, 2015 at $58.5 million (NPVdiscounted10%) and
10.977 mmboe on a Proven plus Probable (2P) basis valued at
$112.9 million (NPVdiscounted10%). This growth, despite an
extremely challenging macro-environment for the Company, proving to
the market, Quattro’s continuing focus on maintaining the capacity
to make patient, measured and sound business decisions that
ultimately are for the betterment of all stakeholders.”
Quattro remained focused in 2015 on the long term development of
its business and completed three strategic acquisitions funded
through the issuance of three series of non-voting Class C
preferred shares totaling a value of $6,063,500. The Acquisitions
targeted additions to Quattro’s existing core areas in British
Columbia and Saskatchewan.
Following the filing of the year-end financial statements and
correlated MD&A, Quattro will be filing with the Alberta
Securities Commission for the revocation of the management cease
trade order currently in place.
In December 2015, the Company completed the 100% acquisition of
SRD Innovations Inc. (via the issuance of a fourth series of
non-voting Class C shares), which was a strategic investment in a
technology company which has certain products and intellectual
property that in Management’s opinion will; vastly enhance the
quality of data for the Company’s long term exploration and
development program, reduce capital costs associated with this
program, and potentially provide a significant diversified revenue
stream to the Company.
Strategic Investment – SRD Innovations Inc.
“The acquisition of SRD Innovations Inc., remains consistent
with Quattro’s mission statement, of being positioned as a
competitively priced supplier of energy and an environmentally
responsible Company,” said Leonard B. Van Betuw, President and CEO
of Quattro. “SRD has been a known asset to Quattro for many
years. A power house of intellectual personnel and capacity,
recognized by a far reaching array of their peers including the
IEEE, the National Science and Engineering Research Council and the
Alberta Research Council. Quattro’s interest in SRD has been as a
passive supporter for the past 5 years. Their skills as
innovators are boundless, ranging from the foundations of cellular
wireless standards, and Wi-Fi in the 1980’s to development of the
stable power systems required for what is now commonly known as the
MIR.”
“Quattro’s interest in SRD Innovations developed into a need two
years ago, as SRD’s patent portfolio and research resulted in their
first commercialized application; the hyMesh™ wireless solution,
developed for the collection of real-time seismic imaging for
exploration, reservoir engineering and micro-seismic monitoring and
the analysis of hydraulic fracking. This innovative solution, is
now quickly migrating, as all proven technologies do, into a vast
arena of needs, including wireless communications, voice and video.
Applications range from private and secure wireless communications
and data networks, to collecting data from remote industrial work
sites, to monitoring pipelines, to wireless video monitoring,” said
Mr. Van Betuw.
“Quattro commenced negotiations with SRD Innovations Inc. in
2014 for the application of SRD’s technologies in the areas of
focus Quattro thought were a priority, only to realize that we were
competing with a growing monster, just a few competing
industries were; WIRELESS COMMUNICATION NETWORKS, AGRI-TECH,
INDUSTRIAL ASSET MANAGEMENT, AND ATONOMOUS EQUIPMENT CONTROL AND
VIDEO DATA STREAMING.”
“After 18 months of contract negotiations, and the development
of a strong appreciation of SRD’s technological applications,
potential and challenges it became apparent that buying the
Company, participating in the growing licensing revenues and
gaining control over the SRD’s technology in the areas of resources
exploration and development was not only the best solution for the
low cost implementation and the continuing application of the
technology for Quattro’s needs but it had the potential to be a
very accretive investment opportunity.”
Summary of the Acquisition
Market: |
|
|
WIRELESS NETWORKS, MONITORING AND SECURE DATA TRANSMISSION |
Purchase Price: |
|
|
$3,500,800 of Preferred Class C shares priced @ $100 each. |
Business: |
|
|
Wireless Communications, 100% of hardware sales and 25% (net) of
licensing revenues. |
Employees: |
|
|
2
employees, plus consultants growing to 12 in 5 years
(estimated) |
Assets: |
|
|
Patents, Inventory, Research Laboratories and Office
Equipment Potential**: Sales of more than $100,000,000 per
year by 2020. |
|
|
|
|
**Quattro anticipates that annual savings due to the
illumination of alternative services through the application and
implementation of SRD’s “technology” starting in 2016 will result
in a savings of approximately $500,000 per year in the next 5 years
at current production levels and sheltering the Company from
additional costs of $8,000,000 in costs, over the same 5 years
based on the Company’s, exploration and production plans from 2016
– 2020.
Results of Quattro Acquisition of SRD Innovations Inc.
(Note 7 to Quattro’s Audited December 31, 2015)
On November 26, 2015, the Company acquired 100% of all
total outstanding Class A shares of a technology company and
intellectual property data for $3,501,000, paid by the issuance of
35,010 Class C Series IV convertible preferred shares at $100 per
share, and an earn-out payable estimated at $2,120,443 on the
acquisition date. The earn-out was determined based on
post-acquisition forecasted unit sales of the newly acquired
subsidiary, payable over 20 years. The purchase and sale agreement
was signed on November 21, 2015, with an effective date of December
30, 2015. The transaction was accounted for as
business combination under IFRS 3 - “Business Combinations” as the
assets met the definition of a business.
The results of operations of Quattro
(SRD) Innovations are included in the audited
consolidated financial statements beginning on the date of
acquisition and contributed $312,437 to the Company’s net loss for
the year ended December 31, 2015. Had
Quattro (SRD) Innovations been
consolidated from January 1, 2015, its contribution to net loss
would have been reduced by a SRED recovery of
$123,979.
Net assets acquired |
|
|
|
|
|
Cash |
|
|
|
$ |
|
3,746 |
|
Accounts
receivables |
|
|
|
|
|
159,961 |
|
SRED receivables |
|
|
|
|
|
123,979 |
|
Prepaid expenses |
|
|
|
|
|
1,080 |
|
Fixed assets |
|
|
|
|
|
29,008 |
|
Inventory |
|
|
|
|
|
93,019 |
|
Fair value
of identifiable net
assets |
|
|
|
|
|
410,793 |
|
Identified intangible assets on
acquisition |
|
|
|
|
|
3,709,192 |
|
Goodwill |
|
|
|
|
|
2,502,940 |
|
Deferred tax
liability |
|
|
|
|
|
(1,001,482 |
) |
Total identifiable net
assets |
|
|
|
|
|
5,621,443 |
|
Consideration |
|
|
|
|
|
35,010 preferred
shares |
|
|
|
$ |
|
3,501,000 |
|
Earn-out payable |
|
|
|
|
|
2,120,443 |
|
|
|
|
|
|
|
5,621,443 |
|
The net assets acquired have been allocated to the
Quattro Innovations Inc. business segment, while the intellectual
property has been recorded as an intangible asset within the
property and equipment of Quattro Exploration and Production Ltd.
(Please refer to Note 12).
The purchase price allocation for this transaction has not been
finalized as of the current reporting date. Under IFRS, the
allocation must be finalized within one year of the acquisition
date.
Subsequent to the Acquisition of SRD Innovations
Inc.
Quattro Exploration and Production Ltd., as the owner of SRD
Innovations, in December strengthened the business relationship
under the direction of Quattro and negotiated an expanded
relationship previously under development at SRD with a Saskatoon
based Manufacturer and Distributor of Agri-Tech services
equipment. The result was the sale of the exclusive
manufacturing and distribution rights to Intelliconn Communication
Solutions Inc. of Quattro (SRD) Innovations Inc. hyMesh™ Wireless
Products in the areas of agricultural applications and associated
rural regions.
Investments (Note 23 to Quattro’s Audited December 31,
2015)
On December 15, 2015, the Company entered into an arm's
length agreement, whereby it sold the exclusive worldwide
distribution rights to certain of its intellectual property in the
areas of agricultural and associated rural markets to a private
company for $5,000,000. The purchase price was settled by way
of cash and notes payable of $2,000,000 and 600,000 common
non-voting shares of the distributor at a deemed value of $5 per
share. Following closing and year end, a fair value
assessment in accordance with IFRS was concluded and the
acquisition of the 600,000 shares received was recorded at a fair
value of $1.50 per share.
“Intelliconn products, business, network of distributors and
potential is impressive. We look forward to a long
relationship with Intelliconn. The distributorship is anticipated
to grow from revenues of $500,000 (net) annually to $16,000,000
(net) in 2020 for Quattro (SRD) Innovations Inc. Quattro is
pleased to announce the results of this strategic investment,” said
Leonard B. Van Betuw, President and CEO. “To some this may appear
to be a distraction, but Quattro’s decision is based on boldly
investing in Innovations that the industry needs.
The Sale to Intelliconn Communication Solutions
Inc. was an opportunity to put a solid footing under Quattro
Innovations as a standalone subsidiary, and transition Quattro
Innovations Inc. into a profitable business unit that will allow it
to continue to focus on its remaining core markets of wireless
communication networks, industrial asset management and security in
addition to addressing Quattro’s needs in the areas of production
management, monitoring, real-time seismic imaging for exploration,
reservoir engineering and the growing need for micro-seismic
monitoring and the analysis of hydraulic fracking.”
About Quattro Exploration and Production
Ltd.
Quattro Exploration and Production Ltd. (“QXP”) continues to
focus on the conventional exploration and development of oil and
natural gas reserves in Western Canada, with an expanding presence
in Alberta and British Columbia. It’s core low risk
production base will provide the Company the capacity to
aggressively pursue a series of high impact exploration and
development efforts in Central and South America. Quattro
intends to balance this portfolio of activities to assure its
shareholders that it achieves material growth in both reserves and
production.
This release includes certain statements that may be deemed
“forward-looking statements”. All statements in this release, other
than statements of historical facts, that address future
production, reserve potential, exploration drilling, exploitation
activities and events or developments that the Company expects are
forward-looking statements. Although the Company believes the
expectations expressed in such forward looking statements are based
on reasonable assumptions, such statements are not guarantees of
future performance and actual results or developments may differ
materially from those in the forward-looking statements. Factors
that could cause actual results to differ materially from those in
forward looking statements include market prices, exploitation and
exploration successes, continued availability of capital and
financing, and general economic, market or business conditions.
Investors are cautioned that any such statements are not guarantees
of future performance and those actual results or developments may
differ materially from those projected in the forward-looking
statements. For more information on the Company, Investors should
review the Company’s registered filings which are available at
www.sedar.com.
This news release shall not constitute an offer to sell or the
solicitation of any offer to buy, nor shall there be any sale
of these securities in any jurisdiction in which such offer,
solicitation or sale would be unlawful. The securities offered have
not been and will not be registered under the U.S. Securities Act
of 1933, as amended, and may not be offered or sold in the United
States absent registration or applicable exemption from the
registration requirements of the U.S. Securities Act and applicable
state securities laws.
BOE presentation:
Barrel ("bbl") of oil equivalent ("boe") amounts may be
misleading particularly if used in isolation. All boe conversions
in this report are calculated using a conversion of six thousand
cubic feet of natural gas to one equivalent barrel of oil (6 mcf=1
bbl) and is based on an energy conversion method primarily
applicable at the burner tip and does not represent a value
equivalency at the well head.
Trading in the securities of Quattro Exploration and Production
Ltd. should be considered highly speculative. 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 this release.
FOR FURTHER INFORMATION PLEASE CONTACT:
Leonard Van Betuw President and Chief ExecutiveOfficer Office
(403) 984-3917 Ext.102Direct Line (587)
228-7070leonard@qxp-petro.com
Or
Tianda DranchukBusiness Developmenttianda.d@qxp-petro.com
www.qxp-petro.com