Cash flow from operations in the fourth quarter of 2012 totaled $10.0 million ($0.06 per share basic and diluted) up 18% from the fourth quarter of 2011. This increase of 18% from the comparable period in 2011 results from a 36% increase in quarter over comparative quarter production. Lower average commodity prices over the quarter resulted in a decline of 14% in the average price received per Boe and was the major contributor to a 17% decline in the operating netback. General and administrative expenses and interest and other financing charges increased in 2012 over 2011 due to an increase in the number of employees and to a higher average debt level.
Annual 2012 cash flow of $31.1 million ($0.20 per share basic and diluted) was 6% higher than 2011. Cash flow for 2011 included a $3.4 million realized gain on commodity contracts versus a gain of $93,178 in 2012. Interest and other financing charges increased 144% or by $1.4 million in 2012 due primarily to a higher average debt level maintained in 2012.
Arsenal's Q4 production mix was 77% liquids and 23% natural gas. The operating netback for Q4 2012 of $30.44 was 17% lower than $36.80 received in Q4 2011 due to a $9.81 per boe decline in the average price received. As a result of lower average prices, royalties were lower while operating costs on a boe basis remained constant. For 2012, the operating netback was down $10.41 per boe to $27.50 per boe due to an $11.52 per boe decrease in the average price received. Royalties were therefore lower while operating costs on a boe basis remained constant.
Capital expenditures for Q4 2012 totaled $10.7 million and for 2012 totaled $42.7 million. Of this, $3.3 million was incurred to purchase land at Princess and Galahad in Canada and at Rennie Lake/Black Slough in North Dakota. Total debt at year end was $68.5 million.
Q4 2012 production averaged 3,934 boe/d versus 2,899 for Q4 2011. The 36% improvement in production over Q4 2011 was largely due to increased production of light oil and natural gas liquids from the Bakken in North Dakota, from recent drilling at Princess in Alberta, and from a mid Q4 2011 property acquisition. Production in 2012 increased 67% over 2011 to 3,723 boe/d due to a mid Q4 2011 acquisition of 1,500 boe/day and due to increased production from Bakken wells drilled in North Dakota.
In 2012, at Stanley, North Dakota, Arsenal participated in 8 gross, 2.88 net wells. The Company operated 2 of these wells. In 2012, at Princess, Alberta, the Company drilled two successful Glauconite formation oil wells. Both of these wells were on production in Q4 2012. The Company's 8-5 well at Princess is currently averaging 255 boe/day after 6 months of production. The company drilled a successful offset well in Q1 2013. 3D seismic has identified, and Arsenal intends to drill, 5 net additional locations at Princess in 2013. The Princess Glauconite represents a significant new discovery that will be the focus of the company's Canadian development program in 2013.
Due to the widening of oil prices differentials in Canada in Q1 2013, the Company decided to delay Canadian capital projects and accelerate drilling in the North Dakota Bakken where differentials on Company operated Bakken wells has narrowed to approximately $4.00 per bbl. In North Dakota, Arsenal placed 7 gross, 1.11 net Bakken wells on production in Q1 2013 and spudded the first of 2 gross, 1.25 net operated wells that should come on production towards the end of Q2 2013. In addition, it is expected that one gross, 0.20 net partner operated well will be drilled in Q1 2013 with 6 gross, .48 net additional Bakken wells planned for the latter half of 2013.
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