Yangarra Announces Second Quarter 2015 Financial and Operating Results

CALGARY, Aug. 11, 2015 /CNW/ - Yangarra Resources Ltd. ("Yangarra" or the "Company") (TSX:YGR) announces its financial and operating results for the three and six months ended June 30, 2015.

Second Quarter Highlights

• Adjusted EBITDA (which excludes changes in derivative financial instruments) was $4.1 million ($0.06 per share - basic).
• Oil and gas sales, after royalties, were $5.8 million with funds flow from operations of $3.6 million ($0.06 per share - basic).  This represents a 57% and a 56% decrease, respectively, from the same period in 2014 due to reductions in commodity pricing and shut in production.
• Production was negatively impacted by rolling TCPL sales line shut downs with daily production averaging 2,155 boe/d for the quarter, a 17% decrease from the same period in 2014 and a 18% decrease from the first quarter of 2015.  The Company estimates 650 boe/d was impacted by the shut downs during the quarter, consisting mainly of oil and representing approximately $2.5 million of lost revenue.
• Net loss of $3.2 million ($0.05 per share - basic) or $2.4 million before tax ($0.04 per share - basic). The net loss was impacted by a $1.4 million one-time charge for the increase in the Alberta provincial corporate tax rate.
• Operating costs were $9.93/boe (including $1.71/boe of transportation costs).
• Operating netbacks, which include the impact of commodity contracts, were $24.04 per boe, a 37% decrease from 2014.  Field net backs, which do not include the impact of commodity contracts were $19.84, a decrease of 58% from 2014. 
• G&A costs of $2.27/boe.
• Royalties were 4% of oil and gas revenue excluding commodity contracts and 3% of oil and gas revenue including commodity contracts.
• Total capital expenditures were $8.3 million. The Company drilled 3 gross (2.35 net) wells in the second quarter to earn 4 sections and acquired a 5.5% interest in a third party gas processing plant.
• Net debt (which excludes the current derivative financial instruments) was $45.5 million down from $59.8 at 2014 year end.

Operations Update

Yangarra drilled three farm-in wells during the second quarter (one 1-mile lateral and two 1.5-mile laterals) and expects to complete and tie-in the first 1.5 mile well in August with the two remaining wells scheduled to be completed once pipeline right of ways are acquired. Upon completion of these wells Yangarra has satisfied the earn-in terms of the farm-in, additional wells on the farm-in property will be drilled at Yangarra's sole discretion.

With low commodity pricing and the uncertainty created by the outcome of the recent Alberta provincial election, Cardium land prices have dropped significantly. Yangarra has added approximately 2 years of drilling inventory in 2015.

Drilling and completion costs continue to improve with all wells completed with cemented liner and sliding sleeve technology. The Company also acquired a 5.5% interest in a third party gas processing plant with 50.0 mmcf/d of capacity during the quarter which alleviates shut-in production in north Willesden Green.

Second quarter production averaged 2,155 boe/d (18% decline from Q1) with approximately 650 boe/d shut in over the quarter primarily at the 2-4 Willesden Green gas processing facility. Production from the 2-4 facility is predominantly oil with relatively low rates of gas; however, with the gas shut in the oil is curtailed as well.

The reduced rig count over the past 6 months has helped create spare firm transportation and processing capacity. Arrangements have been made to divert the currently shut-in 650 boe/d to an alternate plant outside the James River gas infrastructure system. The production is expected to be online by mid-August with the costs to tie-in to the new plant low, as the pipeline access to the alternate plant crosses the 2-4 facility sales line. The alternate plant is a shallow cut facility which is currently advantageous to deep cut facilities as produced propane is left in the gas stream which will generate positive cash flow for the propane.

Subsequent to quarter end, Yangarra spud its first Duvernay strata-graphic vertical test well on the 54 section North block.

Financial Summary

		2015		2014		Six Months Ended
		Q2		Q2			2015		2014
Statements of Comprehensive Income
Petroleum & natural gas sales	$	6,010,973	$	13,876,299		$	13,164,147	$	29,571,278
Net income (loss) (before tax)	$	(2,390,401)	$	3,821,726		$	(1,023,089)	$	5,023,794
Net income (loss)	$	(3,202,592)	$	2,851,233		$	(2,257,475)	$	3,570,683
Net income (loss) per share - basic	$	(0.05)	$	0.05		$	(0.04)	$	0.07
Net income (loss) per share - diluted	$	(0.05)	$	0.05		$	(0.04)	$	0.07
Statements of Cash Flow
Funds flow from operations	$	3,627,985	$	8,180,361		$	13,019,339	$	18,640,053
Funds flow from operations per share - basic	$	0.06	$	0.15		$	0.22	$	0.36
Funds flow from operations per share - diluted	$	0.06	$	0.15		$	0.22	$	0.36
Cash from operating activities	$	4,464,139	$	6,386,075		$	10,495,061	$	12,394,854
Statements of Financial Position
Property and equipment	$	230,153,013	$	187,940,259		$	230,153,013	$	187,940,259
Total assets	$	253,348,412	$	212,513,340		$	253,348,412	$	212,513,340
Working capital deficit	$	44,608,443	$	48,493,987		$	44,608,443	$	48,493,987
Adjusted working capital deficit (which excludes current derivative financial instruments)	$	45,531,303	$	41,022,416		$	45,531,303	$	41,022,416
Non-Current Liabilities	$	30,118,786	$	19,289,460		$	30,118,786	$	19,289,460
Shareholders equity	$	162,892,249	$	126,644,146		$	162,892,249	$	126,644,146
Weighted average number of shares - basic		62,118,881		53,558,093			59,949,395		51,359,650
Weighted average number of shares - diluted		62,118,881		55,898,462			59,949,395		51,359,650

Company Netbacks ($/boe)

		2015		2014				Six Months Ended
		Q2		Q2				2015		2014
Sales price		$           30.65		$           58.53				$           30.34		$            60.51
	Royalty income	0.26		0.97				0.26		1.11
	Royalty expense	(1.15)		(3.66)				(1.44)		(3.69)
	Production costs	(8.22)		(6.92)				(7.19)		(6.70)
	Transportation costs	(1.71)		(1.88)				(1.48)		(1.59)
Field operating netback		19.84		47.04				20.50		49.63
	Commodity contract settlement (1)	4.20		(8.81)				14.48		(7.80)
Operating netback		24.04		38.23				34.98		41.83
	G&A and other (excludes non-cash items)	(2.27)		(1.36)				(2.21)		(1.33)
	Finance expenses	(2.83)		(2.78)				(3.42)		(3.06)
Funds flow netback		18.94		34.10				29.35		37.44
	Depletion and depreciation	(13.63)		(16.41)				(13.78)		(16.47)
	Accretion	(0.20)		(0.17)				(0.19)		(0.17)
	Stock-based compensation	(0.67)		(0.46)				(0.57)		(1.06)
	Unrealized gain (loss) on financial instruments	(16.63)		(0.94)				(17.17)		(9.46)
	Deferred income tax	(4.14)		(4.09)				(2.84)		(2.97)
Net Income (loss) netback		$          (16.33)		$           12.03				$           (5.20)		$              7.31
(1) Includes $4 million relating to the monetization of certain commodity contracts in January 2015.

Operations Summary

Net petroleum and natural gas production, pricing and revenue are summarized below:

			2015	2014		Six Months Ended
			Q2	Q2		2015	2014
Daily production volumes
	Natural gas (mcf/d)		7,992	7,306		8,353	7,438
	Oil (bbl/d)		554	1,003		668	1,019
	NGL's (bbl/d)		238	309		300	361
	Royalty income
		Natural gas (mcf/d)	147	302		171	329
		Oil (bbl/d)	0	1		0	1
		NGL's (bbl/d)	7	26		9	25
	Combined (boe/d 6:1)		2,155	2,606		2,397	2,700
Revenue
Petroleum & natural gas sales - Gross			$     6,010,973	$   13,876,299		$   13,164,147	$    29,571,278
Royalty income			51,428	229,838		114,278	543,255
Commodity contract settlement (1)			824,490	(2,088,038)		6,282,231	(3,811,377)
Total sales			6,886,891	12,018,099		19,560,656	26,303,156
Royalty expense			(225,059)	(867,916)		(624,203)	(1,805,472)
Total Revenue - Net of royalties			$     6,661,832	$   11,150,183		$   18,936,453	$    24,497,684
(1) Includes $4 million relating to the monetization of certain commodity contracts in January 2015.

Working Capital Summary

The following table summarizes the change in adjusted working capital (deficit) during the six months ended June 30, 2015 and the year ended December 31, 2014: 

		2015		2014
Adjusted Working capital (deficit) - beginning of period	$	(59,766,933)	$	(36,794,243)
Funds flow from operations		13,019,339		38,325,988
Additions to property and equipment		(17,501,166)		(78,125,708)
Additions to E&E Assets		-		(1,680,941)
Issuance of shares		18,736,729		26,408,338
Issuance (repayment) of Subordinated Debt		-		(7,786,632)
Decommissioning costs incurred		-		(76,361)
Other Debt		(19,272)		(37,374)
Adjusted Working capital (deficit) - end of period	$	(45,531,303)	$	(59,766,933)
Current Credit facility limit	$	80,000,000
Current Subordinated debt facility limit	$	10,000,000

Capital Spending

Capital spending is summarized as follows:

		2015		2014		Six Months Ended
Cash additions		Q2		Q2			2015		2014
Land, acquisitions and lease rentals	$	515,989	$	1,037,155		$	574,491	$	2,009,288
Drilling and completion		4,045,835		15,973,721			10,593,367		34,347,461
Geological and geophysical		435,890		368,657			802,469		688,884
Equipment		3,094,615		2,056,234			5,355,984		4,381,182
Other asset additions		168,535		9,462			172,855		7,622
	$	8,260,864	$	19,445,229		$	17,501,166	$	41,434,437
Exploration & evaluation assets additions	$	-	$	-		$	-	$	2,461,506

Disclosure Items

The Company's financial statements, notes to the financial statements and management's discussion and analysis have been filed on SEDAR (www.sedar.com) and are available on the Company's website (www.yangarra.ca). 

Natural gas has been converted to a barrel of oil equivalent (Boe) using 6,000 cubic feet (6 Mcf) of natural gas equal to one barrel of oil (6:1), unless otherwise stated.  The Boe conversion ratio of 6 Mcf to 1 Bbl is based on an energy equivalency conversion method and does not represent a value equivalency; therefore Boe's may be misleading if used in isolation. References to natural gas liquids ("NGLs") in this news release include condensate, propane, butane and ethane and one barrel of NGLs is considered to be equivalent to one barrel of crude oil equivalent (Boe).  One ("BCF") equals one billion cubic feet of natural gas.  One ("Mmcf") equals one million cubic feet of natural gas.  Operating netbacks are calculated as revenue from all products less operating costs.

Forward looking information

Certain information regarding Yangarra set forth in this news release, including management's assessment of future plans, operations and operational results may constitute forward-looking statements under applicable securities law and necessarily involve risks associated with oil and gas exploration, production, marketing and transportation such as loss of market, volatility of prices, currency fluctuations, imprecision of reserves estimates, environmental risks, competition from other producers and ability to access sufficient capital from internal and external sources.  As a consequence, actual results may differ materially from those anticipated in the forward-looking statements.

All reference to $ (funds) are in Canadian dollars.

SOURCE Yangarra Resources Ltd.

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