SDX.V current production 1,911 barrels a day
Sea Dragon Energy Inc Announces Fourth Quarter and Year-end 2012 Financial and Operating Results
CALGARY, April 12, 2013 /CNW/ - Sea Dragon Energy Inc. ("Sea Dragon" or the "Company") (TSXV: SDX) is pleased to announce its financial and operating results for the three months and year ended December 31, 2012. All dollar values are expressed in United States dollars unless otherwise stated.
2012 Highlights:
Increased oil sales during the last three months of 2012 by 28% to 1273 bopd as compared to 991 bopd during the same period in 2011
Increased Netbacks during the last three months of 2012 by 43% to $5.3MM ($45.09/bbl) as compared to $3.7MM($40.75/bbl) during the same period in 2011
Reduced 2012 G&A costs by 22% to $4.7MM from $6.0MM in 2011
Completed the acquisition of National Petroleum Company Shukheir Marine Ltd. ("NPC SHM") as of December 1st.2012, thus adding circa 500 bopd from the Shukheir Bay and Gamma oil fields in the Gulf of Suez
Exited the year with production of 1665 bopd, cash and cash equivalents of $5.7MM and working capital of $6.6 MM and no net debt
Realized a net loss of $28.1MM, due to an impairment loss on the Company's Kom Ombo asset.
Subsequent to year-end:
Production is currently 1911 boepd
Collected $6.2MM in outstanding accounts receivable, thus reducing the Company's receivables to $3.5MM, equating to two months of production
Paid back $1.0MM of debt, with a current cash balance of $5.1MMand nill net debt
Successfully completed the AASE#14 well as a Kareem Formation producer in NW Gemsa initially contributing 1333 boepd of new production
Successfully drilled the AASE#16 well as a new Kareem Formation water injector
Finalized the West Al Baraka Development Lease and placed the West Al Baraka#2 well on extended production testing
Completed the gas conservation project in the NW Gemsa concession with condensate, NGL and sales gas commencing in February, 2013 and adding some 180boepd of net production
During the first quarter of 2013 additional testing results from West Al Baraka field were significantly lower than anticipated. These results are an indicator of impairment for the Kom Ombo concession and as a result the carrying amount will be tested for impairment in the subsequent period.
Three months ended Twelve months ended
December 31 December 31
$000's except per unit amounts 2012 2011 2012 2011
Financial
Oil sales 12,353 9,527 44,998
41,901
Royalties (6,496) (4,713) (23,804) (21,407)
Operating costs (578) (1,100) (3,680) (3,007)
Netback (1) 5,279 3,714 17,514 17,487
Net loss (6,447) (14,389) (28,108) (12,838)
Cash and cash equivalents 5,658 6,125 5,658 6,125
Cash and cash equivalents plus working capital 6,645 11,939 6,645 11,939
Total assets 52,006 75,663 52,006 75,663
Debt 3,000 3,000 3,000 3,000
Shareholders' equity 41,250 68,877 41,250 68,877
Capital expenditures 1,358 1,892 8,355 8,024
Weighted average outstanding shares 376,459 376,459 376,459 376,459
Drilling
Gross wells (number of wells) 1 2 10 9
Success rate (%) 100 100 80 89
Net wells (number of wells) 0.1 0.2 2.6 2.1
Success rate (%) 100 100 62 76
Company Gross Reserves (2)
Proved
Natural gas (mmcf) 2,532 2,664 2,532 2,664
Oil and liquids (mbbl) 3,370 3,815 3,370 3,815
Total oil equivalent (mboe) 3,792 4,259 3,792 4,259
-
Proved plus probable -
Natural gas (mmcf) 3,897 3,839 3,897 3,839
Oil and liquids (mbbl) 5,894 6,608 5,894 6,608
Total oil equivalent (mboe) 6,544 7,248 6,544 7,248
-
Proved plus probable plus possible -
Natural gas (mmcf) 3,988 3,940 3,988 3,940
Oil and liquids (mbbl) 6,993 8,829 6,993 8,829
Total oil equivalent (mboe) 7,658 9,486 7,658 9,486
Three months ended Twelve months ended
December 31 December 31
$000's except per unit amounts 2012 2011 2012 2011
Net present value of future cash flows after tax ($000's) (3) -
Proved -
5% discount rate 45,015 56,630 45,015 56,630
10% discount rate 38,433 46,856 38,433 46,856
15% discount rate 33,499 39,883 33,499 39,883
-
Proved plus probable -
5% discount rate 77,290 97,327 77,290 97,327
10% discount rate 62,115 73,336 62,115 73,336
15% discount rate 51,593 57,194 51,593 57,194
-
Proved plus probable plus possible -
5% discount rate 105,255 148,252 105,255 148,252
10% discount rate 82,754 109,300 82,754 109,300
15% discount rate 67,259 83,389 67,259 83,389
-
Reserve life index (years) (4) -
Proved 8.2 11.8 8.2 12
Proved plus probable 14.1 20.0 14.1 20
(1) Netback is a non-GAAP measure that represents sales net of all operating expenses and government royalties.
Management believes that netback is a useful supplemental measure to analyze operating performance and provide
an indication of the results generated by the Company's principal business activities prior to the consideration of other
income and expenses. Management considers netbacks an important measure as it demonstrates the Company's
profitability relative to current commodity prices. Netback may not be comparable to similar measures used by other
companies.
(2) Company gross reserves are gross working interest reserves before the deduction of royalties as determined
by the Company's independent reserves evaluators.
(3) As determined by Ryder Scott, the Company's independent reserves evaluators. Estimated values of future net
revenue disclosed do not represent fair market values.
(4) Calculated by dividing the Company's gross reserves by the 2012 fourth quarter production rate
(5) Disclosure provided herein in respect of BOEs may be misleading, particularly if used in isolation. A BOE
conversion ratio of 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.
CEO's Message:
In 2012, the Company closed on the acquisition of the shallow offshore Shukheir Marine concession in the prolific Gulf of Suez area in Egypt, thus adding circa 500 bopd to its production from the Shukheir Bay and Gamma fields, with significant upside potential once we firm up new drillable loctions. With the capital markets remaining difficult, the Company was able to conclude this acquisition with a cash consideration of only $250,000 after working capital adjustments.
The following highlights the results of our 2012 activities,
Exited the year with production of 1665 bopd compared to 1012 bopd in December, 2011
Reduced 2012 G&A costs by 22%
Exited the year with cash and cash equivalent of $5.7 million and no net debt.
Through the use of its existing cash flows, the Company continued to exploit its reserves in the NW Gemsa and Kom Ombo concessions. The Company participated in the drilling of 10 wells with a success ratio of 80%. As well, the solution gas conservation and hydrocarbon extraction project in NW Gemsa was completed and gas and liquids sales commenced in February 2013 adding to the peak production being almost double over a 1-year period.
In 2013, the Company intends to continue to consolidate its reserve and production base in Egypt through exploration and appraisal drilling of existing properties, the acquisition of new properties and participation in concession bid rounds. The recently acquired Shukheir Marine concession holds significant upside potential which is currently being evaluated for future appraisal.
The Company is also continuing to search for attractive acreage in Africa, which could add significantly to the Company's resources and reserves, and contribute towards its diversification strategy.
Year in Review:
North West Gemsa
The 2012 activity was directed towards continued development/appraisal drilling and waterflood expansion. The program was successful with six wells drilled and completed, four producers and two injectors. Two additional wells have, thus far, been drilled in 2013.
Production averaged 8674 bopd in 2012 (867 net to Sea Dragon) and is currently averaging 11200 boepd (1120 net to Sea Dragon, including 120 boepd of gas and liquids). Cumulative oil production from the Concession has now exceeded 10.9 million barrels. Water injection which began in 2011 in the Al Amir SE field was expanded to include the Geyad field in January 2012, with a continued positive pressure response to water injection being observed in several wells. The netback for NW Gemsa for 2012 is $25.5 per barrel.
The NW Gemsa year-end independent reserves report supports the Company's Gross Proven and Proved plus Probable reserves of 3.23 and 4.96 million barrels of oil equivalent, respectively.
The Company's $3.0MM capital expenditure program for 2013 includes, but is not limited to, the drilling of two development wells, three water injection wells, and completing the gas compression facilities.
Kom Ombo
In 2012 the Company's exploration commitments were fulfilled, with the West Al Baraka Development lease receiving Government approval in January 2013 following the drilling of the West Al Baraka-2 discovery well. The Kom Ombo concession generated netbacks of $39.0 per barrel.
Gross production averaged 490 bopd in 2012 (245 bopd net to Sea Dragon) with current rates averaging 378 bopd gross (189 bopd net to Sea Dragon).
The Kom Ombo year-end independent reserves report estimates Company Gross Proven and Proved plus Probable reserves of 0.38 and 1.29 million barrels of oil, respectively. The Company's $0.5 million capital expenditure program for 2013 is covering the monitoring of production performance of the West Al Baraka-2 well.
Shukheir Marine
Effective December 1, 2012, the Company acquired all of the issued and outstanding shares of National Petroleum Company Shukheir Marine Limited. The acquired assets include a 100% participating interest in the Shukheir Marine Concession which contains the Shukheir Bay and Gamma oil fields, both located in the shallow offshore Gulf of Suez, 300 Km SE of Cairo.
In December 2012, the Company installed a new water injection pump to replace the previous rental unit and in February 2013 a workover was successfully completed on the SHB-5 producer to replace a corroded tubing string, with production being restored at previous levels.
Production in 2012 averaged 486 bopd. The Shukheir Marine concession generated netbacks of $26.85 per barrel in December 2012.
The Shukheir Marine year-end independent reserves report supports Company Gross share of Proved and Proved plus Probable reserves of 0.18 and 0.30 million barrels of oil equivalent, respectively.
The Company's $0.5MM capital expenditure program for 2013 includes minor fixed asset expenditures and well performance monitoring and stimulation plans.
Reserves:
Reserve estimates have been calculated in compliance with the National Instrument 51-101 Standards of Disclosure ("NI 51-101"). Under NI 51-101, proved reserves are defined as reserves that can be estimated with a high degree of certainty to be recoverable with a target of a 90 percent probability that the actual reserves recovered over time will equal or exceed proved reserve estimates, while probable reserves are defined as having an equal (50%) probability that the actual reserves recovered will equal or exceed the proved and probable reserve estimates. In accordance with NI 51-101, proved undeveloped reserves have been recognized in cases where plans are in place to bring the reserves on production within a short, well defined time frame. Proved undeveloped reserves often involve infill drilling into existing pools. Of the net present value of the Company's reserves, 100 percent were evaluated by an independent third party engineer, Ryder Scott Company Canada ("Ryder Scott") in their report dated February 21, 2013.
Total Proved Plus
Company gross reserve reconciliation (mboe) Proved Probable
December 31, 2011 Reserves (mboe) 4,259 7,248
2012 Production (mbbl) (410) (410)
Net Additions (mboe) (879) (1,111)
December 31, 2012 Reserves (mboe) 3,792 6,544
Year over year increase (decrease) in reserves -11% -10%
Production replacement -214% -271%
Company gross reserves Natural Gas Liquids Oil Total
Reserves Category (mmcf) (mbbls) (mbbls) (mboe)
Proved:
Proved Producing 1,280 87 1,817 2,117
Undeveloped 1,252 85 1,381 1,675
Total Proved 2,532 172 3,198 3,792
Probable 1,365 92 2,432 2,752
Total Proved Plus Probable 3,897 264 5,630 6,544
Possible 91 7 1,092 1,114
Total Proved Plus Probable Plus Possible 3,988 271 6,722 7,658
Net present value after income tax ($000's) Discount Factor
Reserves Category 0% 5% 10% 15%
Proved:
Proved Producing 30,496 27,073 24,459 22,399
Undeveloped 23,588 17,941 13,975 11,100
Total Proved 54,084 45,015 38,433 33,499
Probable 46,260 32,276 23,682 18,095
Total Proved Plus Probable 100,344 77,290 62,115 51,593
Possible 39,083 27,964 20,639 15,665
Total Proved Plus Probable Plus Possible 139,427 105,255 82,754 67,259
Reserves and Netbacks Proved Proved Plus
Probable
Capital expenditures ($000's) 8,355 8,355
Change in future development costs 2,197 (9,718)
Total costs 10,552 (1,363)
Net additions (mboe) excluding acquisitions (467) (705)
2012 Netback ($/bbl) 39.85 39.85
Net Asset Value 2012 2011
Net present value of oil and gas reserves, discounted at 10%, after income tax $ 62,115 $ 73,336
Working capital $ 6,143 $ 11,939
Net asset value $ 68,258 $ 85,275
Shares outstanding (000's) 376,459 376,459
Net asset value per share $ 0.18 $ 0.23
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The NW Gemsa Concession ("NW Gemsa") is a 250 square kilometer onshore concession located approximately 300 kilometers south east of Cairo in the Eastern Desert. As at December 21, 2009, the Company acquired a ten (10%) percent participating interest in NW Gemsa with an effective date of July 1, 2009. The Company's partners in NW Gemsa are Vegas Oil and Gas (operator, 50% interest) and Circle Oil Plc (40% interest).
Said Arrata P.Eng., served as Chairman and Chief Executive Officer of Centurion Energy International Inc. (Centurion Energy) until its purchase by Dana Gas, where he still serves as a board member of the corporation. Mr. Arrata built Centurion Energy into a billion dollar corporation, with a peak production of 40,000 boepd, operating internationally in Egypt, Tunisia and with holdings in Sao Tome Principe. During more than 40 years in the oil and gas industry, Mr. Arrata held management positions with major oil and gas companies in Canada and overseas.
Mr. Anton has over 40 years experience in the oil & gas industry and was the former Sr. Vice President of Centurion Energy International Inc. and COO in charge of operations in Egypt and Tunisia.
Mr. Serra has 17 years of investment banking experience, primarily focused on the oil & gas industry. He was the former Group Head of the Europe, Middle East and Africa (EMEA) Oil and Gas Department of BNP Paribas. Mr. Serra advised Centurion Energy International Inc. from 2004 - 2006. He holds an MBA from Columbia University.
Ahmed Farid Moaaz has over 30 years experience in the oil and gas industry. Mr. Moaaz was the Vice President, Operations of Trident Petroleum International, an international oil company until 2006, which currently operates in Egypt and has a joint venture with the EGPC operating a field in the Red Sea coast.
Mr. Zayat has over 40 years experience in the oil & gas industry. He was the former Vice-President Exploration and Business Development of Centurion Energy International Inc. Mike has held key positions with Mobil Oil in Canada and Internationally and consults on exploration and development strategies, mainly in the Middle East and North.
