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KUB.v/TPNEF...Cub Energy Inc. Announces Q4 2016 Financial and Operational Results

HOUSTON, TEXAS--(Marketwired - Mar 22, 2017) - Cub Energy Inc. ("Cub" or the "Company") (TSX VENTURE:KUB), a Ukraine-focused upstream oil and gas company, announced today its audited annual financial and operating results for the fourth quarter of 2016. All dollar amounts are expressed in United States Dollars unless otherwise noted. This update includes results from KUB-Gas LLC ("KUB-Gas"), which Cub has a 35% equity ownership interest (increased from 30% effective February 8, 2016) and Tysagaz LLC ("Tysagaz"), Cub's 100% owned subsidiary.

Mikhail Afendikov, Chairman and CEO of Cub said: "2016 saw Cub Energy return to profitability with reported net income of $3.9 million or $0.01 per share. Cub's cash position and working capital also improved in 2016 with an ending cash position of $4.6 million and positive working capital of $3.3 million as at December 31, 2016."

Operational Highlights

Royalty rates for natural gas in Ukraine declined from 55% to 29% effective January 1, 2016 which materially improved the Company's netbacks and net income.
Production averaged 1,152 boe/d (97% weighted to natural gas and the remaining to condensate) for the quarter ended December 31, 2016, which decreased 15% as compared to the 1,353 boe/d in the comparative 2015 quarter and relatively flat as compared to the 1,171 boe/d average for the third quarter ended September 30, 2016. The decrease in production for the quarter ended December 31, 2016 as compared to the same period in 2015 was a result of the temporary suspension of the RK field on April 1, 2016 due to the termination of a gas blending contract. The Company hopes to commission the Nitrogen Rejection Unit ("NRU") and resume production of the RK field in the second quarter of 2017.
Achieved average natural gas price of $6.39/Mcf and condensate price of $61.59/bbl during the quarter ended December 31, 2016 as compared to $7.22/Mcf and $42.78/bbl for the comparative 2015 quarter and $5.48/Mcf and $63.99/bbl for the third quarter ended September 30, 2016.
On March 11, 2016, the Company's Ukraine subsidiary was awarded a 20-year Uzhgorod production licence covering approximately 75,000 acres in western Ukraine.
On December 28, 2016, the Company's Ukraine subsidiary was awarded a 20-year Stanivske production licence covering approximately 31,000 acres in western Ukraine. The Company is exploring its alternatives for the licence, including potential joint venture partners.
On July 8, 2016, the Company announced that it has entered into a share purchase agreement ("SPA") and shareholders' agreement with a third party, whereby the third party earns a 50% interest in the Company's newly formed subsidiary, CNG Holdings Netherlands B.V, which, in turn, owns CNG LLC (Ukraine LLC), 100% owner of the Uzhgorod production licence in western Ukraine. Pursuant to the terms of the SPA, the third party is to (i) pay Cub EUR1.5 million ($1.6 million) upon transfer of the 50% shares ("Closing") (paid); (ii) fund a 100 square kilometre 3D seismic survey within 20 months of Closing; (iii) fund the drilling of first three wells within four years of Closing; and (iv) fund the tie-in costs of the first three wells up to a maximum EUR0.2 million ($0.2 million) per well within four years of Closing.
Financial Highlights

Netbacks of $25.60/boe or $4.27/Mcfe for the quarter ended December 31, 2016 as compared to netback of $13.13/Boe or $2.19/Mcfe for the comparative 2015 quarter. In addition, netbacks were $20.89/Boe or $3.48/Mcfe for the third quarter ended September 30, 2016. Netbacks in 2016 improved compared to 2015 as a result of the reduced royalty rate effective January 1, 2016 but somewhat offset by lower natural gas prices.
During the three months ended December 31, 2016, the Company received dividends of approximately $0.8 million (2015 - $Nil) from KUBGAS Holdings Limited, which owns 100% of KUB-Gas. The National Bank of Ukraine ("NBU") eased certain capital controls by allowing limited dividends. The Company expects to continue to repatriate dividends to the extent possible and allowed by the NBU, although there are no assurances the NBU will continue to ease restrictions into 2017.
During the three months ended December 31, 2016, the Company's Ukraine subsidiaries, received proceeds of $3.8 million (2015 - $Nil) from KUB-Gas pursuant to unsecured, non-interest bearing loan agreements between the parties.
Commencing August 2016, the Company's 100% owned subsidiary, Tysagaz, began taking possession of its 35% ownership of gas produced at KUB-Gas. Tysagaz purchased the gas from KUB-Gas at the same price that KUB-Gas sold its gas to an affiliate of the majority shareholder of KUB-Gas. During three months ended September, 2016, the Company recorded $4.8 million in gas sales and $4.5 million in cost of the sales for a net profit from gas trading of $0.3 million as compared to no such transactions during 2015.
http://finance.yahoo.com/news/cub-energy-inc-announces-q4-200000382.html