Hawk Exploration Ltd. (TSXV:HWK.A)
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CALGARY, Aug. 29, 2011 /CNW/ --
CALGARY, Aug. 29, 2011 /CNW/ - Hawk Exploration Ltd. ("Hawk" or the
"Corporation") announces its results for the three and six months ended
June 30, 2011. Selected financial information for the three and six
months ended June 30, 2011 is provided as follows:
Three months Six months
ended June 30, ended June 30,
% %
2011 2010 Change 2011 2010 Change
Financial ($000's
except per share
amounts)
Petroleum and $ 2,519 $ 1,845 37% $ 4,760 $ 3,742 27%
natural gas sales
Funds flow from 1,180 745 58% 2,044 1,622 26%
operations ((1))
Per share 0.05 0.03 67% 0.09 0.07 29%
Comprehensive 160 (1,627) 110% 27 (2,260) 101%
income (loss)
Per share 0.01 (0.07) 114% (0.00) (0.10) 100%
Capital 4,753 2,546 87% 5,396 7,026 (23%)
expenditures
Working capital
surplus (deficit) -
excluding bank debt $ (2,277) $ 2,761 (182%)
and commodity
contracts, end of
period
Bank debt, end of 5,850 - -
period
Total assets, end $ 32,625 25,379 29%
of period
Common Shares
outstanding, end of
period:
Class A 21,981 21,981 0%
Shares
Class B 1,080 1,080 0%
Shares
Subscription
receipts,
convertible to 12,500 - -
Class A
Shares
Options to
acquire Class A 2,110 2,077 (2%)
Shares
Operations
Production
Crude oil and
natural gas 336 305 10% 342 287 19%
liquids (bbl/d)
Natural gas 227 250 (9%) 307 320 (4%)
(mcf/d)
Total (boe/d) 374 346 8% 393 341 15%
Average Selling
Price
Crude oil and $ 79.63 $ 63.44 26% $ 73.32 $ 67.00 9%
ngls (per bbl)
Natural gas (per 3.90 3.82 2% 3.94 4.49 (12%)
mcf)
Total (per boe) 73.94 58.57 26% 66.85 60.72 10%
Operating netback
(per boe at 6:1) (
(2))
Price $ 73.94 $ 58.57 26% $ 66.85 $ 60.72 10%
Royalties (13.42) (11.75) 14% (12.10) (12.43) (2%)
Production (16.68) (15.04) 11% (17.67) (14.66) 21%
expense
Transportation (1.96) (1.64) 20% (1.81) (1.66) 9%
expense
Operating netback $ 41.88 $ 30.14 39% $ 35.27 $ 31.97 10%
($/boe)
((1) )Management uses funds flow from operations and funds flow from
operations per share to analyze operating performance, leverage and
liquidity. Funds flow from operations and funds flow from operations
per share as presented do not have any standardized meaning prescribed
by International Financial Reporting Standards ("IFRS") and therefore
may not be comparable with the calculation of similar measures by other
entities.
((2) )Management considers operating netbacks as an important measure as it
demonstrates profitability relative to current commodity prices.
Operating netbacks do not have a standardized meaning prescribed by
IFRS and therefore may not be comparable with the calculation of
similar measures by other entities.
HIGHLIGHTS
Highlights for the three months ended June 30, 2011 were as follows:
-- Increased petroleum and natural gas revenue by 37% in the
second quarter of 2011 compared to 2010,
-- Generated record funds flow from operations of $1.2 million in
the quarter, an increase of 58% over the $0.7 million for the
comparable quarter of 2010,
-- Recorded net income of $0.2 million in the quarter compared to
a net loss of $1.6 million for the second quarter of 2010,
-- Improved the Corporation's operating netback to $41.88 per boe
in the quarter compared to $29.27 per boe for the first quarter
of 2011,
-- Drilled seven (4.2 net) wells in west central Saskatchewan in
the quarter as discussed in further detail below,
-- Closed a bought deal private placement of subscription receipts
for gross proceeds of $10 million, and
-- Increased the Corporation credit facility from $7.5 million to
$11 million, comprised of an $8.5 million revolving line of
credit and a $2.5 million dollar development line.
OPERATION UPDATE
Hawk had an active second quarter of 2011, drilling seven (4.2 net)
wells in western Saskatchewan including three (2.2 - net) vertical oil
wells at Edam, Silverdale and Hoosier as well as four (2.0 - net)
dual-leg horizontal wells at Seagram Lake.
At Edam, Hawk drilled the 06-34-48-20W3well which encountered 4.5 meters
of oil pay in the Waseca formation. This well has been completed and
equipped and is on production at 25 (25 - net) barrels of oil per day
("bbl/d"). At Silverdale, Hawk drilled the 05-23-48-28W3well and
encountered 7.0 meters of oil pay in the Sparky formation. This well
was completed and equipped and is currently producing at 50 (11.9 -
net) bbl/d. At Hoosier, the Corporation drilled a well at 04-26-32-27W3
which encountered 4.0 meters of oil pay in the Basal Mannville
formation. The well is currently being completed.
In Seagram Lake, the Corporation experienced mixed results. A total of
four (2.0 - net) dual-leg horizontal wells were drilled testing
different sections of land in the Leduc pool. The 05-32-42-24W3 well
was drilled adjacent to Hawk's existing producing single leg horizontal
well at 12-32-42-24W3. The 05-32 well encountered good reservoir with
excellent oil staining along both horizontal legs with a total
open-hole length of 2,256 meters. The well was completed with a
selective foam acid stimulation, placed on production in late July and
has been producing at an average rate of 170 (85 - net) bbl/d with a
water cut of 38 percent.
Hawk also drilled two (1.0 - net) dual-leg horizontal wells at
08-33-42-24W3, testing the section immediately to the east of the
original 12-32 producing well and at 16-28-42-24W3, testing the section
immediately to the south of the original producing well. Both wells
encountered good reservoir with excellent oil staining along both
horizontal legs with open-hole lengths of 2,140 meters for the 08-33
well and 2,256 meters for the 16-28 well. Both wells were completed
with a similar foam acid stimulation and were placed on production in
late July. However, unlike the successful 05-32 well, these wells have
thus far produced mainly water with small amounts of oil. A service rig
is currently on the 08-33 well with downhole packers to attempt to
isolate the water source and allow the oil to be produced.
Hawk also drilled a fourth dual-leg horizontal well at a 50% working
interest at 05-33-42-23W3, testing the far eastern edge of the Leduc
formation approximately six miles to the east of the original 12-32
producing well. The drilling of this farm-in well also earned the
Corporation significant additional lands of eleven (5.5 net) sections.
This well encountered moderate reservoir with intermittent oil staining
along both horizontal legs with a total open-hole length of 1,002
meters. This well was also completed with a selective foam acid
stimulation but has thus far only produced water with a trace amount of
oil. This well is currently shut-in awaiting results from the water
shut off operations being conducted at the 08-33 horizontal well.
In summary, the drilling this past quarter at Seagram Lake proved up a
significant amount of discovered petroleum initially-in-place. Hawk
estimates that on its controlled lands there is 185 (92.5 net) million
barrels of discovered petroleum initially-in-place. The challenge going
forward is to determine why some wells have proved to be successful
while other wells have encountered water sources. Hawk will continue to
experiment with different drilling and completion techniques to
optimize the profitability of this project.
Financial
Hawk achieved record funds flow from operations in the second quarter of
2011 of approximately $1.2 million and generated strong operating
netbacks of $41.88 per boe. The Corporation's operating netback of
$41.88 increased 39 percent compared to the second quarter of 2010 due
to higher realized commodity prices.
Hawk had bank debt of $5.85 million at June 30, 2011 on an existing
revolving line of credit of $8.5 million and had a working capital
deficit of $2.3 million. On May 18, 2011, the Corporation closed a
bought deal private placement of 12.5 million subscription receipts at
a price of $0.80 per subscription receipt for gross proceeds of $10
million. On July 7, 2011, the subscription receipts were deemed to be
exercised for 12.5 million Class A Shares and the Corporation received
the net proceeds of the offering. In May 2011, Hawk expanded its credit
facility to $11 million, comprised of an $8.5 million revolving line of
credit and a $2.5 million acquisition and development line of credit,
with the next review date to occur on or before September 30, 2011.
The Corporation continues to maintain a solid balance sheet. The pro
forma net debt and working capital at June 30, 2011 including the
proceeds of its equity offering received on July 7, 2011 would be a
positive working capital of approximately $1.8 Million.
Outlook
Hawk plans to continue to monitor the production from the recently
drilled wells at Seagram Lake and plans to drill an additional one to
two (0.5 to 1.0 - net) single leg horizontal wells at Seagram Lake in
the second half of 2011. Hawk also plans to drill an additional four
(3.2 - net) vertical wells targeting heavy oil in the Lloydminster area
of western Saskatchewan during the balance of 2011. Hawk's current
production is approximately 500 boe/d comprised of over 90 percent
crude oil.
The unaudited financial statements and management's discussion and
analysis for the interim period ended June 30, 2011 have been filed on
SEDAR and are available for viewing at www.sedar.com or on the Corporation's website at www.hawkexploration.ca.
Hawk is an emerging exploration company engaged in the exploration,
development and production of conventional crude oil and natural gas in
western Canada and is based in Calgary, Alberta. The Class A Shares and
Class B Shares of Hawk trade on the TSX Venture Exchange under the
trading symbols of HWK.A and HWK.B, respectively.
Neither the TSX Venture Exchange nor its Regulation Services Provider
(as the term is defined in the policies of the TSX Venture Exchange)
accepts responsibility for the adequacy or accuracy of this release.
Certain statements contained in this press release constitute
forward-looking statements. All forward-looking statements are based on
the Corporation's beliefs and assumptions based on information
available at the time the assumption was made. The use of any of the
words "anticipate", "continue", "estimate", "expect", "may", "will",
"project", "should", "believe" and similar expressions are intended to
identify forward-looking statements. These statements involve known and
unknown risks, uncertainties and other factors that may cause actual
results or events to differ materially from those anticipated in such
forward-looking statements. Hawk believes the expectations reflected in
those forward-looking statements are reasonable, but no assurance can
be given that these expectations will prove to be correct. Such
forward-looking statements included in this press release should not be
unduly relied upon. These statements speak only as of the date of this
press release
In particular, but without limiting the forgoing, this press release
contains forward-looking statements pertaining to the following: the
performance characteristics of Hawk's oil and natural gas properties;
business strategies and plans; projections of market prices and cost;
supply and demand for oil and natural gas; planned development of the
Corporation's oil and natural gas properties; capital expenditure
programs for the remainder of 2011; and the expected sources of funding
for the capital expenditure program.
The material factors and assumptions used to develop these forward
looking statements include, but are not limited to: the ability of the
Corporation to engage drilling contractors, to obtain and transport
equipment, services, supplies and personnel in a timely manner and at
an acceptable cost to carry out its activities and plans; the ability
of the Corporation to market its oil and natural gas and to transport
its oil and natural gas to market; the timely receipt of regulatory
approvals and the terms and conditions of such approval; the ability of
the Corporation to obtain drilling success consistent with
expectations; and the ability of the Corporation to obtain capital to
finance its exploration, development and operations.
Actual results could differ materially from those anticipated in these
forward-looking statements as a result of the risk factors including,
without limitation: volatility in market prices for oil and natural
gas; liabilities inherent in oil and natural gas operations;
uncertainties associated with estimating oil and natural gas reserves;
competition for, among other things, capital, acquisitions of reserves,
undeveloped lands and skilled personnel; incorrect assessments of the
value of acquisitions and exploration and development programs;
geological, technical, drilling and processing problems; changes in tax
laws and incentive programs relating to the oil and natural gas
industry; failure to realize the anticipated benefits of acquisitions;
general business and market conditions; and certain other risks
detailed from time to time in Hawk's public disclosure documents
(including, without limitation, the other factors discussed under "Risk
Factors" in the Corporation's most recently filed Annual Information
Form).
Statements relating to "reserves" or "resources" are deemed to be
forward-looking statements, as they involve the implied assessment,
based on certain estimates and assumptions that the resources and
reserves described can be profitably produced in the future. Discovered
petroleum initially-in-place ("DPIP") is also a forward-looking
statement, and there are numerous uncertainties inherent in estimating
DPIP and no assurance can be given that the indicated level of DPIP or
its recovery will be realized. Readers are cautioned that the foregoing
lists of factors are not exhaustive. The forward-looking statements
contained in this press release are expressly qualified by this
cautionary statement. Except as required under applicable securities
laws, Hawk does not undertake any obligation to publicly update or
revise any forward-looking statements.
Barrels of oil equivalent (boe) may be misleading, particularly if used
in isolation. A boe conversion ratio of six thousand cubic feet (mcf)
of natural gas to one barrel (bbl) of oil is based on an energy
conversion method primarily applicable at the burner tip and is not
intended to represent a value equivalency at the wellhead. All boe
conversions in this press release are derived by converting natural gas
to oil in the ratio of six thousand cubic feet of natural gas to one
barrel of oil. Certain financial amounts are presented on a per boe
basis, such measurements may not be consistent with those used by other
companies.
To view this news release in HTML formatting, please use the following URL: http://www.newswire.ca/en/releases/archive/August2011/29/c7024.html
table border="0" valign="top" tr td bSteve Fitzmaurice /bbr/ President, CEO and Chairman br/ Tel: (403) 264-0191 Ext 225 br/ Email: a href="mailto:steve@hawkexploration.ca" cr="true"steve@hawkexploration.ca/a /td td br/ br/ br/ /td td br/ br/ br/ /td td br/ br/ br/ /td td bDennis Jamieson/bbr/ Chief Financial Officerbr/ Tel: (403) 264-0191 Ext 234br/ Email: a href="mailto:dennis@hawkexploration.ca"denn/aa href="mailto:dennis@hawkexploration.ca"is@hawkexploration.ca/a /td /tr /table