Dejour Reports 202% Production Increase & Year-to-date Operating Cash Flow of $0.3 million
15.11.2010 | Business Wire
New Wells Drive Significant Improvements in EBITDA & Netback
Dejour Enterprises Ltd. (NYSE-AMEX: DEJ / TSX: DEJ) ('Dejour?), an
independent oil and natural gas company operating multiple exploration
and production projects in Northeastern British Columbia and Western
Colorado, today announced the release of its financial results for the
third quarter period ended September 30, 2010.
After successfully bringing two new wells into production at
Drake/Woodrush, Dejour delivered strong operating performance in the
second and third quarters of 2010, with the average production for both
quarters almost double the average production for the 1st
quarter of 2010. This substantial production improvement provided the
Company with the generation of positive operating cash flow for the
second and third quarters of 2010. In addition, according to the
recently updated reserve evaluation report from an independent
consultant, Dejour raised the net present value of proved and probable
reserves at Drake/Woodrush by 150% to $17 million at June 30, 2010. In
view of its strong production growth and significant increase in reserve
value at Drake/Woodrush, the Company will continue its focus on
exploiting development opportunities in these properties in the near
future.
Q3 2010 Key achievements
In the 3rd quarter of 2010, Dejour continued its focus on
increasing production and operational efficiency at the Drake/Woodrush
properties, while maintaining all prospective acreage holdings and
positioning for renewed drilling activities as both the business
environment and commodity prices improved.
During the quarter, the Company achieved the following major corporate
objectives and also made significant progress on key strategic
initiatives that resulted in:
Average production increased to 610 BOE/D in Q3 2010, a 202% increase
over Q3 2009.
Operating netback increased to $1.6 million in Q3 2010, a 326%
improvement over Q3 2009.
EBITDA in Q3 2010 increased by 23% over Q2 2010, and yielded a higher
Adjusted EBITDA for the quarter.
Generated a positive operating cash flow of $687,000 in Q3 2010,
compared to a negative operating cash flow of $727,000 in Q3 2009.
Summary of Selected Financial Highlights
(Unaudited)
| Three months ended September 30, | ||||||
| 2010 | 2009 | |||||
$ | $ | |||||
Revenue | Note (1) | 2,544,000 | 1,056,000 | |||
Net loss | Note (2) | (893,000) | (2,528,000) | |||
Net loss per share | Note (3) | (0.01) | (0.03) | |||
Operating cash flow (1) | Note (4) | 687,000 | (727,000) | |||
Operating netback (1) | Note (5) | 1,629,000 | 382,000 | |||
EBITDA (1) | Note (6) | 810,000 | (870,000) | |||
Adjusted EBITDA (1) | Note (6) | 970,000 | (572,000) | |||
(1) Operating cash flow, Operating netback, EBITDA and | ||||||
Notes:
(1) Revenue for Q3 2010 increased to $2,544,000 from $1,056,000 for Q3
2009. The increase in revenue was mainly attributable to the increased
oil and gas production from the two new wells in the Woodrush area that
commenced production in May 2010. As a result of low gas commodity
prices, most of the productive gas wells were shut in and suspended
production in Q3 2009. This also contributed to the increase in revenues
for the current quarter.
(2) Net loss for Q3 2010 decreased to $893,000 from $2,528,000 for Q3
2009. The decrease in net loss was due to increased revenues and
decreased depletion and general and administrative expenses, partially
offset by increased royalties and interest expense and finance fee.
(3) Net loss per share for Q3 2010 was $0.01 compared to $0.03 for Q3
2009. The decrease was mainly the result of lower net loss for the
current quarter.
(4) The Company generated a positive operating cash flow of $687,000 for
Q3 2010 compared to a negative operating cash flow of $727,000 for Q3
2009. It was primarily the result of the two new wells commenced
production in May 2010.
(5) Operating netback for Q3 2010 increased to $1,629,000 from $382,000
for Q3 2009. The increase was due to higher revenues and lower operating
and transportation expenses. This was partially offset by increased
royalties.
(6) EBITDA for Q3 2010 was $1,680,000 higher than Q3 2009. It was mainly
attributable to lower net loss. Adjusted EBITDA for Q3 2010 was
$1,542,000 higher than Q3 2009. It was primarily attributable to higher
EBITDA. This was partly offset by lower impairment loss of uranium
properties.
Summary of Selected Operational Highlights
| DEAL Production and Netback Summary | ||||||
| Three Months Ended September 30, | ||||||
| 2010 | 2009 | |||||
| Production Volumes: | ||||||
Oil and natural gas liquids (bbls) | 28,233 | 10,761 | ||||
Gas (mcf) | 167,255 | 46,729 | ||||
Total (BOE) | Note (1) | 56,109 | 18,550 | |||
| Average Price Received (Wellhead): | ||||||
Oil and natural gas liquids ($/bbls) | 66.77 | 76.45 | ||||
Gas ($/mcf) | 3.81 | 4.67 | ||||
Total ($/BOE) | 45.16 | 56.12 | ||||
| Royalties ($/BOE) |
| 6.44 | 0.15 | |||
| Operating and Transportation Expenses ($/BOE) | Note (3) | 9.68 | 33.01 | |||
| Netbacks ($/BOE) | Note (4) | 29.04 | 20.61 | |||
Notes:
(1) The increase in production was mainly due to the two new wells
commenced production in May 2010.
(2) Royalties of $6.44 per BOE for Q3 2010 were substantially higher
than the prior year′s quarter of $0.15 per BOE. The significant increase
in royalties was due to higher oil production for the current quarter,
which is subject to higher royalty rate compared to the royalty rate for
natural gas. In Q3 2009, the British Columbia provincial government
approved a royalty holiday for the first 72,000 barrels of oil
production on one of the Company′s oil wells. The Company received a
royalty credit of $280,000 from the BC provincial government, resulting
in a substantially lower royalty for the quarter.
(3) Operating and transportation expenses for Q3 2010 decreased to $9.68
per BOE compared to $33.01 per BOE for Q3 2009 despite higher revenues.
In Q3 2010, the Company successfully recovered from a vendor an one time
reimbursement of past operating expenses of roughly $130,000, which is
equivalent to approximately $2.30 / BOE of operating expense. In
additional, the installation of the compressor in January 2010 resulted
in minimal compression costs, which accounted for the reduction in
operating and transportation expenses for the current quarter. On the
other hand, production shut-in and suspension due to low gas commodity
prices resulted in the curtailed gas production in Q3 2009. As the
majority of the operating expenses are fixed costs, therefore they are
spread over a lower production base, resulting in higher per unit costs
for the quarter.
(4) Operating netbacks for the current quarter increased to $29.04 per
BOE from $20.61 per BOE for Q3 2009. The increase was mainly due to
higher revenues and lower operating and transportation expenses. This
was partially offset by increased royalties.
Liquidity and Capital Resources
Cash Flow
The Company had cash and cash equivalents of $2,409,000 as at September
30, 2010. In addition to the cash balance, the Company also had accounts
receivable of $800,000, most of which was related to September 2010 oil
and gas sales that had been received subsequent to September 30, 2010.
Our investing activities during the nine months ended September 30, 2010
were financed primarily by the proceeds raised from the issuance of
flow-through shares and draw down of bridge loan during the period.
In 2009, the Company successfully completed a turnaround on its oil and
gas operation to reduce operating costs and improve operating netback.
Together with the netback from two successful wells drilled in May 2010,
we generated positive operating cash flow in the 2nd and 3rd
quarter of 2010.
Subsequent to September 30, 2010, the Company had submitted to the
British Columbia Oil and Gas Commission ('OGC?) an application for
improved recovery at Woodrush/Drake property through the implementation
of a waterflood program, expected to be started in early 2011. Oil
production is currently being restricted with well allowables imposed by
the OGC during the waterflood implementation. This temporary reduced
production will result in lower operating revenue and operating cashflow
for the Company in Q4 2010. Proceeds from the disposition of a non-core
property is expected to substantially offset the impact of lower
operating cashflow from reduced production.
Bank Loan and Bridge Loan Financing
In August 2008, DEAL secured a revolving operating loan facility with a
Canadian Bank for up to $7,000,000.
On March 22, 2010, the Company negotiated a credit facility for a bridge
loan of up to $5,000,000. This facility is secured by DEAL′s oil and gas
assets in Canada. The first $2,000,000 of the facility was available and
the Company utilized $1,500,000 to refinance the Company′s existing bank
facility and fund working capital. In June 2010, the Company received
lender′s approval for the availability of an additional $1,500,000 of
the facility. In September 2010, the Company received lender′s approval
for the availability of the remainder of the facility of $1,500,000. The
Company drew additional $2,500,000 ($2,000,000 in June 2010 and $500,000
in September 2010) to support the development of Deal′s oil and gas
properties in the Woodrush/Drake area.
In September 2010, some of the terms of the facility were amended.
Interest rate remained at 12% per annum. Drawdown fee adjusted to 2% on
any amounts drawn and deferred fee lowered to 1% fee on any repayments.
As at September 30, 2010, a total of $4,000,000 of this facility was
utilized. The due date of bridge loan is extended to March 31, 2011 and
can be further extended for a period of maximum 3 months. The extension
will be subject to a 1% extension fee per month on the outstanding loan
balance at the beginning of each month.
Consolidated Condensed Balance Sheets (Unaudited) | ||||||
As at September 30, | As at December 31, 2009 | |||||
| Assets: | ||||||
Cash and cash equivalents | $ | 2,410,000 | $ | 2,733,000 | ||
Other current assets | 1,341,000 | 1,280,000 | ||||
Equipment | 103,000 | 115,000 | ||||
Other non-current assets | 41,350,000 | 41,758,000 | ||||
| Total assets | $ | 45,204,000 | $ | 45,886,000 | ||
| Liabilities and shareholders′ equity: | ||||||
Bank line of credit and bridge loan | $ | 4,000,000 | $ | 850,000 | ||
Current liabilities | 1,069,000 | 2,753,000 | ||||
Loans from related parties | 2,310,000 | 2,346,000 | ||||
Other long-term liabilities | 315,000 | 248,000 | ||||
Shareholders′ equity | 37,510,000 | 39,689,000 | ||||
| Total liabilities and shareholders′ equity | $ | 45,204,000 | $ | 45,886,000 | ||
Consolidated Statements of Operations (Unaudited) | ||||||||||||
| For the three months ended September 30, | For the nine months ended September 30, | |||||||||||
| 2010 | 2009 | 2010 | 2009 | |||||||||
| Revenues: | ||||||||||||
Oil and natural gas revenue | $ | 2,534,000 | $ | 1,036,000 | $ | 6,557,000 | $ | 5,131,000 | ||||
Realized financial instrument gain (loss) | 10,000 | 20,000 | 61,000 | 309,000 | ||||||||
2,544,000 | 1,056,000 | 6,618,000 | 5,440,000 | |||||||||
| Expenses: | ||||||||||||
Royalties | 362,000 | 2,000 | 1,134,000 | 506,000 | ||||||||
Operating and transportation | 543,000 | 651,000 | 2,046,000 | 2,525,000 | ||||||||
Amortization, depletion and accretion | 1,393,000 | 1,558,000 | 3,893,000 | 5,533,000 | ||||||||
Interest expense and finance fee | 309,000 | 155,000 | 836,000 | 661,000 | ||||||||
General and administrative | 670,000 | 1,046,000 | 2,426,000 | 2,835,000 | ||||||||
Non-cash stock-based compensation | 150,000 | 183,000 | 465,000 | 499,000 | ||||||||
3,427,000 | 3,595,000 | 10,800,000 | 12,559,000 | |||||||||
| Loss before the following and income taxes |
|
|
|
| ||||||||
Interest and other income | 9,000 | 8,000 | 26,000 | 371,000 | ||||||||
Gain (loss) on disposition of investment | - | - | - | (274,000) | ||||||||
Equity loss from Titan | - | - | - | (142,000) | ||||||||
Foreign exchange gain (loss) | (9,000) | 63,000 | (12,000) | 388,000 | ||||||||
Impairment of uranium properties | (10,000) | (115,000) | (10,000) | (115,000) | ||||||||
| Loss before income taxes | (893,000) | (2,583,000) | (4,178,000) | (6,891,000) | ||||||||
| Future income taxes recovery | - | 55,000 | 464,000 | 1,133,000 | ||||||||
| Net loss for the period | (893,000) | (2,528,000) | (3,714,000) | (5,758,000) | ||||||||
| Deficit, Beginning of the period | (42,207,000) | (29,809,000) | (39,386,000) | (26,579,000) | ||||||||
| Deficit, End of the period | $ | (43,100,000) | $ | (32,337,000) | $ | (43,100,000) | $ | (32,337,000) | ||||
| Net loss per share ? basic and diluted |
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Weighted average number of common shares outstanding ? basic |
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Consolidated Condensed Statements of Cash Flows (Unaudited) | ||||||||||||
| For the three months ended September 30, | For the nine months ended September 30, | |||||||||||
| 2010 | 2009 | 2010 | 2009 | |||||||||
| Cash, beginning of period | $ | 3,020,000 | $ | 1,059,000 | $ | 2,733,000 | $ | 744,000 | ||||
Cash used in operating activities | (1,363,000) | (974,000) | (1,363,000) | (2,017,000) | ||||||||
Cash from (used in) investing activities: | ||||||||||||
Purchase of equipment | (14,000) | (31,000) | (16,000) | (36,000) | ||||||||
Deferred leasehold inducement | - | 40,000 | - | 40,000 | ||||||||
Proceeds on disposal of investment | - | - | - | 2,305,000 | ||||||||
Proceeds from sales of oil and gas properties |
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Resource properties expenditures | (279,000) | (334,000) | (3,420,000) | (1,129,000) | ||||||||
Total cash from (used in) investing activities | (293,000) | 935,000 | (3,436,000) | 6,722,000 | ||||||||
Cash from (used in) financing activities | 1,046,000 | (617,000) | 4,476,000 | (5,046,000) | ||||||||
| Cash, end of period | $ | 2,410,000 | $ | 403,000 | $ | 2,410,000 | $ | 403,000 | ||||
About Dejour
Dejour Enterprises Ltd. is an independent oil and natural gas company
operating multiple exploration and production projects in North
America′s Piceance / Uinta Basin (109,000 net acres) and Peace River
Arch regions (20,000 net acres). Dejour′s veteran management team has
consistently been among early identifiers of premium energy assets,
repeatedly timing investments and transactions to realize their value
to shareholders' best advantage.
Dejour, maintains offices in Denver, USA, Calgary and Vancouver, Canada.
The company is publicly traded on the New York Stock Exchange Amex (NYSE
- Amex: DEJ) and Toronto Stock Exchange (TSX: DEJ).
Non-GAAP Measures: This news release contains references to
non-GAAP measures as follows:
Operating Cash Flow is a non-GAAP measure defined as net cash provided
by operating activities before changes in assets and liabilities.
Operating Netback is a non-GAAP measure defined as revenues less
royalties and operating and transportation expenses.
EBITDA is a non-GAAP measure defined as net income (loss) before income
tax expense, interest expense and finance fee, and amortization,
depletion and accretion.
Adjusted EBITDA excludes certain items that management believes affect
the comparability of operating results. Items excluded generally are
non-cash items, one-time items or items whose timing or amount cannot be
reasonably estimated.
Certain measures in this document do not have any standardized meaning
as prescribed by Canadian GAAP such as Operating Cash Flow, Operating
Netback, EBITDA and Adjusted EBITDA and therefore are considered
non-GAAP measures. These measures may not be comparable to similar
measures presented by other issuers. These measures have been described
and presented in this document in order to provide shareholders and
potential investors with additional information regarding our liquidity
and our ability to generate funds to finance our operations.
BOE Presentation: Barrel of oil equivalent amounts have been
calculated using a conversion rate of six thousand cubic feet of gas to
one barrel of oil. The term 'BOE? may be misleading if used in
isolation. A BOE conversion ratio of one barrel of oil to six mcf of gas
is based on an energy equivalency conversion method primarily applicable
at the burner tip and does not represent a value equivalency at the well
head. Total BOEs are calculated by multiplying the daily production by
the number of days in the period.
Statements Regarding Forward-Looking Information: This news
release contains statements that may constitute 'forward-looking
statements' or 'forward-looking information' within the meaning of
applicable securities legislation as they involve the assessment that
the reserves and resources described can be profitably produced in the
future, based on certain estimates and assumptions, these
forward-looking statements include but are not limited to, the
availability of funding for future projects, anticipated recovery per
well for Gibson Gulch, the, risks related prospective resource best
estimate being inaccurate or incomplete or based upon errors in
assumptions, adverse general economic conditions, operating hazards,
drilling risks, inherent uncertainties in interpreting engineering and
geologic data, fluctuations in oil and gas prices and prices for
drilling and other well services, government regulation and foreign
political risks, as other risks commonly associated with the exploration
and development of oil and gas properties. Additional information on
these and other factors, which could affect Dejour's operations or
financial results, are included in Dejour's reports on file with
Canadian and United States securities regulatory authorities. We assume
no obligation to update forward-looking statements should circumstances
or management's estimates or opinions change unless otherwise required
under securities law.
The TSX does not accept responsibility for the adequacy or accuracy
of this news release.
Dejour Enterprises Ltd.
Robert L. Hodgkinson, 604.638.5050
Facsimile:
604.638.5051
Co-Chairman & CEO
investor@dejour.com
or
Investor
Relations ? New York
Craig Allison, 914.882.0960
callison@dejour.com