TIDMCOPL
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 or at
the Company's website at 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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