TSX-V: CWV: Crown Point Energy Inc. (“Crown
Point”, the
“Company” or
"
we"
) today announced its
operating and financial results for the three months ended March
31, 2021.
Copies of the Company’s March 31, 2021 unaudited
condensed interim consolidated financial statements and
management’s discussion and analysis (“MD&A”)
filings are being filed with Canadian securities regulatory
authorities and will be made available under the Company’s profile
at www.sedar.com and on the Company’s website at
www.crownpointenergy.com. All dollar figures are expressed
in United States dollars ("USD") unless otherwise stated.
References to "ARS" are to Argentina Pesos.
In the following discussion, the three months
ended March 31, 2021 may be referred to as “Q1 2021” and the
comparative three months ended March 31, 2020 may be referred to as
“Q1 2020".
Q1 2021 SUMMARY
During Q1 2021, the Company:
- Was awarded, together with partner Petrolera Aconcagua Energía
("Aconcagua"), a 25 year exploitation license for the 40.6 km2
Chañares Herrados producing oil block (the “CH Concession”),
located in the Cuyo Basin approximately 50 km south of Mendoza
City, Province of Mendoza. The Company and Aconcagua each hold a
50% working interest in the CH Concession which will be operated by
Aconcagua.Consideration for the exploitation license was a cash
payment of $8.33 million ($4.17 million net to Crown Point) to the
Province. Under the terms of the exploitation license agreement,
the joint venture will pay a 13% royalty on oil production and
commit to an $85.7 million ($42.85 million net to Crown Point)
ten-year work program which includes well work overs,
infrastructure optimization and a multi- well drilling
program.
- Recognized an $8.2 million gain on the acquisition of the 50%
working interest in the Chañares Herrados Concession;
- Reported net income of $8.1 million as compared to a net loss
of $8.7 million in Q1 2020;
- Raised $5.3 million of net proceeds from the issuance of $3.38
million principal amount of Class I notes payable and $2.07 million
(ARS 190 million) principal amount of Class II notes payable. The
Class I and Class II notes payable are repayable in eight equal
installments commencing on July 1, 2022 until the maturity date of
March 31, 2024 and bear interest at 8% per annum and BALDAR
Privados (currently 34%) plus 6.75% per annum, respectively.
- Reported net cash provided by operating activities of $1.6
million and funds flow from operating activities of $0.5 million as
compared to Q1 2020 which reported $0.5 million of net cash used by
operating activities and $0.5 million of funds flow from operating
activities;
- Earned $3.5 million of oil and natural gas sales revenue on
total average daily sales volumes of 1,310 BOE per day, down from
$4.3 million of oil and natural gas sales revenue earned on total
average daily sales volumes of 1,714 BOE per day in Q1 2020 due to
ongoing natural decline rates in gas production and lower oil sales
due to shipping delays;
- Received an average of $1.80 per mcf for natural gas and $56.16
per bbl for oil compared to $2.01 per mcf for natural gas and
$43.83 per bbl for oil received in Q1 2020;
- Reported an operating netback of $13.01 per BOE, up from $5.75
per BOE in Q1 2020 due to the increase in oil prices in Argentina
and a reduction in per BOE operating costs due to lower
transportation and hauling costs;
- Repaid $0.7 million (ARS 60.2 million) and obtained $0.6
million (ARS 50 million) of short-term working capital loans;
and
- Reported a working capital surplus of $4.0 million.
SUBSEQUENT TO Q1 2021, THE COMPANY:
- Made the $4.17 million payment to the Province of Mendoza for
the acquisition of the 50% working interest in the CH Concession;
and
- Repaid $0.27 million (ARS 25 million) of short-term working
capital loans and $0.06 million (ARS 5.8 million) of accrued
interest.
OPERATIONAL UPDATE
Tierra del Fuego Concession
("TDF")
La Angostura Concession
During Q1 2021, San Martin oil production
averaged 1,795 (net 623) bbls of oil per day. Oil is now
transported through the San Martin oil pipeline connecting the
field to the Cruz del Sur facility for storage and subsequent sale.
A workover was performed on SM x-1001 in mid-February to shut off
the original perforations at 1910-1913 m with a packer set at 1902
m, and perform an acid stimulation on the upper perforations at
1871-1876 m before placing the well back on stream on February 17,
2021.
Las Violetas Concession
During Q1 2021, natural gas production from the
Las Violetas concession averaged 13,054 (net 4,537) mcf per day and
oil production averaged 375 (net 130) bbls of oil per day. Oil
produced in association with natural gas production is trucked to
the San Martin field, blended with San Martin oil and transported
via the San Martin oil pipeline to Cruz del Sur for storage and
sale.
Chañares Herrados (“CH”)
Concession
On March 13, 2021, the Crown Point – Aconcagua
joint venture took over operatorship of the CH Concession. By the
end of March 2021, workovers on four shut-in oil wells had been
carried out and the wells placed back on production. Average oil
production for the 18 day period from March 13 to March 31 was 650
(net 325) bbls of oil per day.
Cerro de Los Leones (“CLL”) Exploration
Permit
In February 2021, Mendoza Province issued
Resolution N°6/2021 which extended the Period 3 term of the CLL
exploration permit by one year to February 23, 2022 and confirmed
that the CLL permit area remains at 100,907 acres. The Company is
committed to drilling one exploration well on the CLL permit by
February 22, 2022.
OUTLOOK
The Company’s capital spending for fiscal 2021
is budgeted at $6.8 million comprised of $1.6 million for ongoing
improvements to facilities in TDF, $2.7 million for well workovers,
facilities improvements and optimization in CH and $2.5 million to
drill one exploration well on the CLL exploration permit.
ARGENTINA –
COVID-19
In response to COVID-19, the federal government
has closed the country’s borders to non-residents. In recent weeks,
Argentina has been hard-struck by a second wave of COVID-19 and its
variants. The country has been divided into four zones of
“epidemiological and sanitary risk”, ranging from low, medium, high
and alarm, and an 8:00 p.m. curfew is in place, except for
essential workers. These new measures are currently expected to be
in place until May 21, 2021.
SUMMARY OF FINANCIAL
INFORMATION
(expressed in $, except shares outstanding) |
March 312021 |
December 312020 |
December 312019 |
Working capital |
4,026,325 |
3,021,590 |
1,831,197 |
Exploration and evaluation
assets |
11,182,557 |
11,182,557 |
10,920,359 |
Property and equipment |
34,002,861 |
16,358,182 |
31,151,688 |
Non-current contingent
consideration receivable |
– |
– |
1,634,740 |
Total assets |
56,783,299 |
33,687,340 |
55,638,052 |
Non-current financial
liabilities |
5,855,917 |
972,765 |
3,283,943 |
Share capital |
56,456,328 |
56,456,328 |
56,456,328 |
Total
common shares outstanding |
72,903,038 |
72,903,038 |
72,903,038 |
(expressed in $, except shares outstanding) |
Three months ended |
|
|
March 31 |
|
|
2021 |
2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil and natural gas sales revenue |
3,528,369 |
|
4,320,239 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on acquisition of working
interest |
8,182,410 |
|
– |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment of property and
equipment and goodwill |
– |
|
9,985,549 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before
taxes |
7,583,879 |
|
(10,811,643 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
8,096,106 |
|
(8,676,550 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per share
(1) |
0.11 |
|
(0.12 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used by) from
operating activities |
1,555,521 |
|
(478,934 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash per share – operating
activities (1) |
0.02 |
|
(0.01 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Funds flow from operating
activities (2) |
519,933 |
|
489,957 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Funds flow per share –
operating activities (1)(2) |
0.01 |
|
0.01 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares |
72,903,038 |
|
72,903,038 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) All per share figures are based on the basic
weighted average number of shares outstanding in the period. The
effect of options is anti-dilutive. Per share amounts may not add
due to rounding.(2) "Funds flow from operating activities" and
"Funds flow per share – operating activities" are non-IFRS
measures. See "Non-IFRS Measures" in the "Advisory" section of this
press release and in the Company’s March 31, 2021 MD&A for a
reconciliation of these measures to the nearest comparable IFRS
measures.
Sales Volumes
|
|
|
Three months ended |
|
|
|
March 31 |
|
|
|
|
|
2021 |
2020 |
|
|
|
TDF |
CH |
|
Total |
Total (TDF) |
|
Light oil bbls per day |
|
481 |
71 |
(1) |
552 |
844 |
|
NGL bbls per day |
|
2 |
– |
|
2 |
3 |
|
Natural
gas mcf per day |
|
4,537 |
– |
|
4,537 |
5,202 |
|
Total BOE per day |
|
1,239 |
71 |
|
1,310 |
1,714 |
|
(1) 71 BOE per day is based on 90 days in Q1 2021;
based on 18 days of ownership of the CH Concession from March 13 to
March 31, total CH sales volumes were 354 BOE per day.
Operating Netback
|
|
Three months ended |
|
|
March 31 |
Per BOE |
|
2021 |
2020 |
|
|
TDF |
|
CH |
|
Total |
|
Total (TDF) |
|
Oil and natural gas revenue ($) |
|
28.95 |
|
47.08 |
|
29.93 |
|
27.70 |
|
Export tax ($) |
|
(1.05 |
) |
– |
|
(1.05 |
) |
(1.68 |
) |
Royalties ($) |
|
(4.62 |
) |
(6.16 |
) |
(4.71 |
) |
(4.11 |
) |
Operating costs ($) |
|
(10.30 |
) |
(26.25 |
) |
(11.16 |
) |
(16.16 |
) |
Operating netback (1) ($) |
|
12.98 |
|
14.67 |
|
13.01 |
|
5.75 |
|
|
|
|
|
|
|
(1) "Operating netback" is a non-IFRS measure.
See "Non-IFRS Measures" in the "Advisory" section of this press
release.
About Crown Point
Crown Point Energy Inc. is an international oil
and gas exploration and development company headquartered in
Calgary, Canada, incorporated in Canada, trading on the TSX Venture
Exchange and operating in Argentina. Crown Point’s exploration and
development activities are focused in three producing basins in
Argentina, the Austral basin in the province of Tierra del Fuego,
and the Neuquén and Cuyo basins in the province of Mendoza. Crown
Point has a strategy that focuses on establishing a portfolio of
producing properties, plus production enhancement and exploration
opportunities to provide a basis for future growth.
Advisory
Non-IFRS Measures: Non-IFRS measures do not have
any standardized meanings prescribed by IFRS and may not be
comparable with the calculation of similar measures used by other
entities. Non-IFRS measures should not be considered alternatives
to, or more meaningful than, measures determined in accordance with
IFRS as indicators of the Company’s performance.
This press release contains the terms “funds
flow (used by) from operating activities” and "funds flow per share
– operating activities" which should not be considered alternatives
to, or more meaningful than, net cash (used by) from operating
activities and net cash per share – operating activities as
determined in accordance with IFRS as an indicator of the Company’s
performance. Management uses funds flow (used by) from operating
activities to analyze operating performance and considers funds
flow (used by) from operating activities to be a key measure as it
demonstrates the Company’s ability to generate cash necessary to
fund future capital investment. Funds flow per share – operating
activities is calculated using the basic and diluted weighted
average number of shares for the period consistent with the
calculations of earnings per share. For a reconciliation of funds
flow (used by) from operating activities to net cash (used by) from
operating activities, which is the most directly comparable measure
calculated in accordance with IFRS, see the Company's MD&A.
This press release also contains other industry
benchmarks and terms, including "operating netbacks" (calculated on
a per unit basis as oil, natural gas and NGL revenues less
royalties, export tax and operating costs), which is a non-IFRS
measure. See "Operating Netback" for the calculation of operating
netbacks. Management believes this measure is a useful supplemental
measure of the Company’s profitability relative to commodity
prices. Readers are cautioned, however, that operating netbacks
should not be construed as an alternative to other terms such as
net (loss) income as determined in accordance with IFRS as measures
of performance. Crown Point’s method of calculating this measure
may differ from other companies, and accordingly, may not be
comparable to similar measures used by other companies.
Abbreviations and BOE Presentation: "API" means
American Petroleum Institute gravity, being an indication of the
specific gravity of crude oil measured on the API gravity scale;
"bbl" means barrel; "bbls" means barrels; "BOE" means barrels of
oil equivalent; "km" means kilometers; "km2" means square
kilometers; "m" means meters; “"mm" means millimeters; "mcf” means
thousand cubic feet, "mmcf" means million cubic feet, "NGL" means
natural gas liquids; "psi" means pounds per square inch; and "YPF"
means Yacimientos Petrolíferos Fiscales S.A. All BOE conversions in
this press release are derived by converting natural gas to oil in
the ratio of six mcf of gas to one bbl of oil. BOE may be
misleading, particularly if used in isolation. A BOE conversion
ratio of six mcf of gas to one bbl of oil (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 price of crude
oil as compared to natural gas in Argentina from time to time may
be different from the energy equivalency conversion ratio of 6:1,
utilizing a conversion on a 6:1 basis may be misleading as an
indication of value.
Forward-looking Information: This document
contains forward-looking information. This information relates to
future events and the Company’s future performance. All information
and statements contained herein that are not clearly historical in
nature constitute forward-looking information. Such information
represents the Company’s internal projections, estimates,
expectations, beliefs, plans, objectives, assumptions, intentions
or statements about future events or performance. This information
involves known or unknown risks, uncertainties and other factors
that may cause actual results or events to differ materially from
those anticipated in such forward-looking information.
In addition, this document may contain forward-looking
information attributed to third party industry sources. Crown Point
believes that the expectations reflected in this forward-looking
information are reasonable; however, undue reliance should not be
placed on this forward-looking information, as there can be no
assurance that the plans, intentions or expectations upon which
they are based will occur. This press release contains
forward-looking information concerning, among other things, the
following: under "Outlook", our estimated capital spending for
fiscal 2021 in total and in each area and the operational
activities at TDF, CH and CLL that we expect to complete during
fiscal 2021; under "About Crown Point", all elements of the
Company’s business strategy and focus. The reader is cautioned that
such information, although considered reasonable by the Company,
may prove to be incorrect. Actual results achieved during the
forecast period will vary from the information provided in this
document as a result of numerous known and unknown risks and
uncertainties and other factors. A number of risks and other
factors could cause actual results to differ materially from those
expressed in the forward-looking information contained in this
document including, but not limited to, the following: the risks
and other factors described under “Business Risks and
Uncertainties” in our MD&A for the three months ended March 31,
2021 and under “Risk Factors” in the Company’s most recently filed
Annual Information Form, which is available for viewing on SEDAR at
www.sedar.com. In addition, note that information relating to
reserves and resources is deemed to be forward-looking information,
as it involves the implied assessment, based on certain estimates
and assumptions that the reserves and resources described can be
economically produced in the future. With respect to
forward-looking information contained in this document, the Company
has made assumptions regarding, among other things: the impact (and
the duration thereof) that the COVID-19 (coronavirus) pandemic will
have on (i) the demand for crude oil, NGLs and natural gas, (ii)
our supply chain, including our ability to obtain the equipment and
services we require, (iii) our ability to produce, transport and/or
sell our crude oil, NGLs and natural gas, and (iv) the ability of
our customers, joint venture partners and other contractual
counterparties to comply with their contractual obligations to us;
the ability and willingness of OPEC+ nations, Russia and other
major producers of crude oil to reduce or maintain crude oil
production levels and thereby maintain or increase global crude oil
prices; that Roch S.A.'s voluntary reorganization filing will not
have an adverse impact on its ability to operate the TDF
concessions, and therefore will not have an adverse impact on the
TDF UTE, the TDF concessions and/or the Company; matters relating
to the recently completed Chañares Herrados acquisition, including
the amount and timing of capital expenditures thereon, production
rates therefrom and revenues to be derived therefrom; the impact of
inflation rates in Argentina and the devaluation of the Argentine
peso against the USD on the Company; the amount of royalties that
the Company will have to pay to a third party vendor of assets and
the ability of the Company to recover a portion of such royalties
from its joint venture partners; the general stability of the
economic and political environment in which the Company operates,
including operating under a consistent regulatory and legal
framework in Argentina; future oil, natural gas and NGL prices
(including the effects of governmental incentive programs and
government price controls thereon); the timely receipt of any
required regulatory approvals; the ability of the Company to obtain
qualified staff, equipment and services in a timely and cost
efficient manner; drilling results; the costs of obtaining
equipment and personnel to complete the Company’s capital
expenditure program; the ability of the operator of the projects
which the Company has an interest in to operate the field in a
safe, efficient and effective manner; that the Company will not pay
dividends; the ability of the Company to obtain financing on
acceptable terms when and if needed; the ability of the Company to
service its debt repayments when required; field production rates
and decline rates; the ability to replace and expand oil and
natural gas reserves through acquisition, development and
exploration activities; the timing and costs of pipeline, storage
and facility construction and expansion and the ability of the
Company to secure adequate product transportation; currency,
exchange and interest rates; the regulatory framework regarding
royalties, taxes and environmental matters in Argentina; and the
ability of the Company to successfully market its oil and natural
gas products. Management of Crown Point has included the above
summary of assumptions and risks related to forward-looking
information included in this document in order to provide investors
with a more complete perspective on the Company’s future
operations. Readers are cautioned that this information may not be
appropriate for other purposes. Readers are cautioned that the
foregoing lists of factors are not exhaustive. The forward-looking
information contained in this document are expressly qualified by
this cautionary statement. The forward-looking information
contained herein is made as of the date of this document and the
Company disclaims any intent or obligation to update publicly any
such forward-looking information, whether as a result of new
information, future events or results or otherwise, other than as
required by applicable Canadian securities laws.
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 news release.
For inquiries please contact:
Brian Moss
President & CEO
Ph: (403) 232-1150
Crown Point Energy Inc.
bmoss@crownpointenergy.com
Marisa Tormakh
Vice-President, Finance & CFO
Ph: (403) 232-1150
Crown Point Energy Inc.
mtormakh@crownpointenergy.com
Crown Point Energy (TSXV:CWV)
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