News Column

Connacher Announces Q2 2014 Results

August 13, 2014

CALGARY, Aug. 13, 2014 /CNW/ - Connacher Oil and Gas Limited (CLL - TSX; "Connacher" or the "Company") announces its financial and operating results for the quarter ended June 30, 2014 ("Q2 2014") (all amounts are in Canadian dollars unless otherwise noted).

Q2 2014 Highlights

• Q2 2014 production increased 18% to 13,689 bbl/d (Q2 2013 - 11,572 bbl/d). Production increases were attributable to the Company's four new well pairs at Pad 104 and four infill wells at Pod One drilled in 2013



• Revenue, net of royalties, increased 5% to $116.4 million in Q2 2014 (Q2 2013 - $110.6 million)



• Adjusted EBITDA decreased 5% to $23.3 million in Q2 2014 (Q2 2013 - $24.4 million) due to higher realized risk management losses, partially offset by higher bitumen netbacks



• Operating costs increased 35% to $31.0 million in Q2 2014 (Q2 2013 - $23.0 million) due to higher natural gas prices, maintenance costs associated with building repairs, and increased fluid disposal and treating costs



• Improvements to the treating process allowed the Company to generate a record low diluent blend ratio of 14.4%



• Net realized bitumen sales price increased 5% to $58.92/bbl (Q2 2013 - $56.38/bbl)



• Q2 2014 capital expenditures totaled $25.9 million (Q2 2013 - $28.4 million) and were focused primarily on the nine new infill wells at Pod One



• A first lien term loan facility (the "Term Loan Facility") was closed on May 23, 2014 for an aggregate principal amount of US$128.4 million (equivalent of $140 million)



• Concurrent with the closing of the Term Loan Facility, unanimous consent was received from the lenders under the credit facility to extend the maturity date to December 31, 2016 and to reduce the borrowing base to $30.0 million



• Connacher closed Q2 2014 with a cash balance of $134.4 million (Q4 2013 - $55.6 million) and available credit facilities of $2.0 million (Q4 2013 - $76.7 million), net of $28.1 million (Q4 2013 - $18.3 million) of outstanding letters of credit


Q2 2014 Financial and Operational Summary

                    
FINANCIAL ($ 000 except per share amounts)    Q2 2014   Q2 2013    %

Change
  YTD 2014   YTD 2013    %

Change
Revenue, net of royalties    $116,446  $110,613   5   $221,398  $211,933   4
Adjusted EBITDA (1)   23,267   24,404    (5)   34,215   35,086    (2)
Net loss    (10,042)   (32,117)    (69)   (72,655)   (78,683)    (8)
Funds flow (used) (1)   1,068   5,678    (81)   (9,117)   (3,833)    138
Per share, basic and diluted (total)    (0.02)   (0.07)    (71)   (0.16)   (0.18)    (11)
Capital expenditures    25,937   28,436    (9)   44,022   48,687    (10)
Cash on hand    134,422   76,724    75           
Working capital surplus (deficiency)    88,898   56,606    57          
Long-term debt    1,026,965   881,396    17          
Shareholders' equity    149,688   265,064    (44)          


(1)    Adjusted EBITDA and funds flow (used) are non-GAAP measures, which are defined in the Advisory section of the

Company's management discussion and analysis for the period ending June 30, 2014


                               
OPERATIONAL              Q2 2014   Q2 2013    %

Change
  YTD 2014   YTD 2013    %

Change
Daily bitumen production (bbl/d)               13,689   11,572    18   13,562   11,986    13
Daily bitumen sales (bbl/d)               13,784   11,742    17   13,078   12,208    7



Operations and Marketing

Connacher's Great Divide production for Q2 2014 averaged 13,689 bbl/d, an 18% increase over Q2 2013 production of 11,572 bbl/d and two per cent higher than the prior quarter (Q1 2014 - 13,433 bbl/d).

Connacher drilled nine infill wells at Pod One in Q1 2014. Steaming began on two of the infills in early July and these wells are on production. Steaming on the next two wells will begin in August.

During the second quarter we achieved the lowest diluent blend ratio ("DBR") in the history of Great Divide at 14.4%. The DBR averaged 20% for 2013 and 19% for the first quarter of 2014. The lower DBR is not reflected in operating costs as it reduces the cost of diluent and improves the bitumen netback.

Operating costs increased in Q2 2014 by 35% to $31 million over Q2 2013 ($23 million). Natural gas prices contributed approximately $3 million of the increase as prices increased to $4.43/GJ in Q2 2014 versus $3.36/GJ in Q2 2013. Fluid handling and disposal costs increased due to higher water and off spec volumes associated with the latest round of infill drilling and unexpected operational issues with third-party disposal facilities.

Connacher continues to demonstrate that having diversified market options with solid logistics execution adds value to our barrels and rail remains a very effective strategy for navigating market volatility and optimizing realized bitumen prices. Allocations to rail (approximately 37%) were reduced in Q2 2014 in response to strength in intra-Alberta pricing.

Capital Projects

Following closing of the Term Loan Facility in May 2014, the Company finalized its 2014 growth capital plan of $113 million, excluding maintenance capital. This includes the previously announced initial 2014 growth capital expenditures of $50 million (nine new infill wells at Pod One). The remaining $63 million will be spent primarily on the commercialization of the SAGD+® process at Algar and the mini-steam expansion project at Pod One, both of which are expected to start up in 2015. Funding for the 2014 growth capital plan will come from cashflow and the Term Loan Facility.

2013 Corporate Responsibility Report 

Connacher is pleased to announce that it has published its 2013 corporate responsibility report. This report represents a collection of the Company's achievements in sustainability, which includes empowering a committed workforce, engaging stakeholders by investing in local communities; and protecting the environment and mitigating impacts.

Connacher's corporate responsibility report follows the Global Reporting Initiative to determine the report content, and aligns its performance metrics with the Canadian Association of Petroleum Producers Responsible Canadian Energy™ program. The report was third-party checked by Responsibility Matters Inc. To view the full report, please visit www.connacheroil.com

Q2 2014 Conference Call Details

Connacher will host its quarterly conference call on August 14, 2014 at 8AM MDT. Interested participants can call in to (888) 231-8191. Please use the Conference ID# 64220765. An audio webcast of the conference call will also be available through the Company's website, or through the following link: http://event.on24.com/r.htm?e=812303&s=1&k=AA477C3F02CB9E9A4B496D821C0E46AF. Participants are encouraged to call in 5 minutes prior to commencement of the call.

About Connacher

Connacher is a Calgary-based in-situ oil sands developer, producer and marketer of bitumen. The Company holds a 100 per cent interest in approximately 450 million barrels of proved and probable bitumen reserves and operates two steam assisted gravity drainage facilities located on the Company's Great Divide oil sands leases near Fort McMurray, Alberta.

Forward Looking Information

This press release contains forward looking information, including but not limited to, the expectations relating to the timing for bringing the infill wells on production and the planned future capital expenditures and the funding and timing thereof.

Forward looking information is based on management's expectations regarding the Company's future financial position, the Company's future growth, results of operations and production, future commodity prices and foreign exchange rates, future capital and other expenditures (including the amount, nature and sources of funding thereof), plans for and results of drilling activity, environmental matters, business prospects and opportunities and future economic conditions. Forward looking information involves significant known and unknown risks and uncertainties, which could cause actual results to differ materially from those anticipated. These risks include, but are not limited to:  that cashflow and the Term Loan Facility may not provide adequate funds to fund the Company's 2014 growth capital plan, the risks associated with the oil and gas industry (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 and resource estimates, the uncertainty of geological interpretations, the uncertainty of estimates and projections relating to production, costs and expenses, and health, safety and environmental risks), risk of commodity price and foreign exchange rate fluctuations, risks associated with the impact of general economic conditions, risks and uncertainties associated with maintaining the necessary regulatory approvals and securing the financing to proceed with the operation and continued expansion of the Great Divide oil sands project.

In addition, reported average production levels may not be reflective of sustainable production rates and future production rates may differ materially from the production rates reflected in this press release due to, among other factors, difficulties or interruptions encountered during the production of bitumen.

Additional risks and uncertainties affecting Connacher and its business and affairs are described in further detail in Connacher's Annual Information Form for the year ended December 31, 2013. Although Connacher believes that the expectations in such forward looking information are reasonable, there can be no assurance that such expectations shall prove to be correct. The forward looking information included in this press release is expressly qualified in its entirety by this cautionary statement. The forward looking information included herein is made as of the date of this press release and Connacher assumes no obligation to update or revise any forward looking information to reflect new events or circumstances, except as required by law. 

SOURCE Connacher Oil and Gas Limited


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