Ikkuma Resources Corp. Announces First Quarter 2016 Financial and Operating Results

CALGARY, May 27, 2016 /CNW/ - Ikkuma Resources Corp. ("Ikkuma" or the "Corporation") (TSXV: IKM) is pleased to report its financial and operating results for the three months ended March 31, 2016. Selected financial and operational information is set out below and should be read in conjunction with Ikkuma's interim condensed financial statements and the related management's discussion and analysis ("MD&A") for the three months ended March 31, 2016. Ikkuma's condensed interim financial statements and MD&A are available for review at www.sedar.com and on the Corporation's website at www.ikkumarescorp.com.

HIGHLIGHTS

• Achieved record average production of 7,497 boe/d in the first quarter (98% gas).
• Oil and natural gas sales were 27% lower at $7.9 million from the $10.8 million reported in Q1 2015, due to the significant decline in natural gas prices.
• Mitigated the impact of the decline in gas price with realized gains from the Corporation's hedging program of $4.52 per boe.
• Generated funds flow from operations in the first quarter of $2.2 million ($0.03/share) despite significantly lower commodity prices.
• Lowered per unit operating costs to $8.00/boe by shutting in 525 boe/d of uneconomic sour gas and implementing other cost reduction plans. These efforts resulted in a 13% reduction in per unit operating costs from Q1 2015 and a 15% reduction from Q4 2015.
• Achieved net income for the quarter of $2.4 million ($0.03/share).
• Spent $3.1 million to drill one oil well within Ikkuma's Foothills land base that will be completed in the third quarter.
• On May12, 2016 Ikkuma completed a bought deal private placement pursuant to which the Corporation issued 14.1 million common shares of Ikkuma on a "flow through" basis at a price of $0.71 per flow-through share for gross proceeds of $10 million ($9.3 million net of share issue costs). The Corporation is committed to incurring $10 million of eligible Canadian exploration expenses prior to December 31, 2017.

 

(Expressed in thousands of Canadian dollars except per boe and Share amounts)			Three months ended March  31,
			2016		2015
OPERATIONS
Average daily production
Natural gas (mcf/d)				44,220		41,629
Light oil (bbls/d)				-		50
NGL's (bbl/d)				127		134
Total equivalent (boe/d)				7,497		7,121
Average prices and operating netback
Natural gas ($/mcf)			$	1.85	$	2.69
Light oil ($/bbl)				-		38.87
NGL ($/bbl)				19.62		18.06
Revenue ($/boe)				11.57		16.84
Realized gain on commodity contracts ($/boe)				4.52		0.80
Royalties ($/boe)				(1.00)		(1.88)
Operating ($/boe)				(8.00)		(9.23)
Transportation costs ($/boe)				(1.83)		(1.53)
Operating netback (1) ($/boe)			$	5.26	$	5.00
FINANCIAL
Oil and natural gas sales			$	7,896	$	10,793
Funds flow from operations (1)			$	2,194	$	1,945
	Per share – basic and diluted		$	0.03	$	0.02
Net income (loss)			$	2,427	$	(4,853)
	Per share – basic and diluted		$	0.03	$	(0.06)
Capital expenditures			$	3,115	$	18,741
Property acquisitions (dispositions)			$	21	$	25
Net debt (1)			$	34,018	$	26,802
Bank loan			$	29,232	$	14,933
Shares outstanding (000)				80,159		80,159
Weighted average shares outstanding
	Basic and diluted (000)			80,159		80,159

(1)Funds flow from operations, operating netback and net debt are non-IFRS measures. See "Non- IFRS Measures".

 

OUTLOOK

The Corporation is expecting to resume field operations in early August 2016. The first operation will be a multistage fracture stimulation of the horizontal oil well drilled in the first quarter. Ikkuma will then spud a second horizontal light oil well in the same area. The results of these field operations will not be fully known until the end of the fourth quarter. These wells are 100% owned and operated by Ikkuma, and the total costs for these operations are expected to be approximately $4 - 6 million resulting in an aggregate 2016 capital budget of $10 - $15 million. A large portion of the costs incurred for the second horizontal light oil drill will reduce Ikkuma's commitment to spend qualifying Canadian exploration expenditures from its recent flow-through share issuance. Additional field operations under consideration include an inventory of oil and gas recompletions; however, the Corporation has elected to defer these projects until such time that forecasted commodity prices supports execution.

Although Ikkuma's production capability is currently 8,000 -8,200 boe/d, recent sales production has been between 6,500 - 7,500 boe/d due to third party curtailments and shutting in uneconomic gas.  Recent downstream curtailments are related, in part, to the forest fires in Alberta. While these are temporary production interruptions, the Corporation anticipates a continuation of challenging natural gas prices through to the end of the third quarter with perhaps some strengthening in the fourth quarter as we head into the winter heating season.  To date, Ikkuma and its operating partners have shut in approximately 800 boe/d (net) of uneconomic sour gas production.

ABOUT IKKUMA

Ikkuma Resources Corp. is a diversified junior public oil and gas company listed on the TSXV under the symbol "IKM", with holdings in both conventional and unconventional projects in Western Canada.  The technical team has worked together for over a decade in the Foothills Region of Western Canada, through two successful, publicly traded companies.  The unique skills and repeat success at exploiting a complex, potentially prolific play type are fundamental ingredients for a successful growth-oriented company in Western Canada.  Corporate information can be found at: www.ikkumarescorp.com.

Forward-Looking Statements and Information and Cautionary Statements

This press release contains forward‑looking statements and forward‑looking information within the meaning of applicable securities laws including, without limitation, those listed under "Risk Factors" and "Forward-looking Statements" in Ikkuma's Annual Information Form and in its other filings available on SEDAR at www.sedar.com.  The use of any of the words "expect", "anticipate", "continue", "estimate", "objective", "ongoing", "may", "will", "project", "should", "believe", "plans", "intends" and similar expressions are intended to identify forward‑looking statements or information.  Forward-looking statements and information in this press release includes, but is not limited to, Ikkuma's 2016 capital budget ranging from $10 million to $15 million depending on commodity prices and the timing of completion and drilling projects. Although Ikkuma believes that the expectations and assumptions on which the forward‑looking statements and information are based are reasonable, undue reliance should not be placed on the forward‑looking statements and information because Ikkuma cannot give any assurance that they will prove to be correct.  Since forward‑looking statements and information address future events and conditions, by their very nature they involve inherent risks and uncertainties.  Actual results could differ materially from those currently anticipated due to a number of factors and risks.  These include but are not limited to the risks associated with the oil and gas industry in general (e.g., operational risks in development, exploration and production; delays or changes in plans with respect to exploration or development projects or capital expenditures; the uncertainty of reserve estimates; the uncertainty of estimates and projections relating to production, costs and expenses; failure to obtain necessary regulatory approvals for planned operations; health, safety and environmental risks; uncertainties resulting from potential delays or changes in plans with respect to exploration or development projects or capital expenditures; volatility of commodity prices, currency exchange rate fluctuations; imprecision of reserve estimates; and competition from other explorers) as well as general economic conditions, stock market volatility, and the ability to access sufficient capital.  We caution that the foregoing list of risks and uncertainties is not exhaustive.

In addition, the reader is cautioned that historical results are not necessarily indicative of future performance.  The forward-looking statements and information contained in this press release are made as of the date hereof and Ikkuma undertakes no obligation to update publicly or revise any forward‑looking statement or information, whether as a result of new information, future events or otherwise, unless so required by applicable securities laws.

Certain information set out herein may be considered as "financial outlook" within the meaning of applicable securities laws.  The purpose of this financial outlook is to provide readers with disclosure regarding Ikkuma's reasonable expectations as to the anticipated results of its proposed business activities for the periods indicated.  Readers are cautioned that the financial outlook may not be appropriate for other purposes.

Non-IFRS Measures

This press release provides certain financial measures that do not have a standardized meaning prescribed by IFRS. These non-IFRS financial measures may not be comparable to similar measures presented by other issuers. Funds flow from operations, operating netback and net debt are not recognized measures under IFRS. Management believes that in addition to net income (loss), funds flow from operations, operating netback and net debt are useful supplemental measures that demonstrate the Corporation's ability to generate the cash necessary to repay debt or fund future capital investment. Investors are cautioned, however, that these measures should not be construed as an alternative to net income (loss), determined in accordance with IFRS, as an indication of Ikkuma's performance. Funds flow from operations is calculated by adjusting net income (loss) for depletion and depreciation, exploration and evaluation expense, impairment, gain (loss) on sale of petroleum, natural gas and equipment, share-based payments, unrealized gain (loss) on financial instruments and accretion. Operating netback equals the total of petroleum and natural gas sales, realized gains or losses on commodity contracts, less royalties, transportation and operating expenses. Net debt is the total of cash and cash equivalents plus accounts receivable, plus prepaids and deposits, less accounts payable and accrued liabilities and bank debt.

Oil and Gas Advisory

In this press release, the abbreviation boe means a barrel of oil equivalent derived by converting gas to oil in the ratio of 6 Mcf of gas to 1 bbl of oil (6 Mcf:1 bbl).  Boe 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.  Given that the value ratio based on the current price of crude oil as compared to natural gas is significantly different from the energy equivalency of 6 Mcf:1 bbl, utilizing a conversion ratio on a 6 Mcf of gas to 1 bbl of oil basis may be misleading as an indication of value.

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 RELEASE.

SOURCE Ikkuma Resources Corp.

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