For the year ended December 31, 2012, the Company reported gross oil sales revenue of $53,795,419 and net oil sales revenue, after deducting royalties, of $46,207,873 compared to net oil sales revenues, after deducting royalties, of $8,887,511 for the year ended December 31, 2011 - this represents an increase in net oil sales revenues of 420%. The increase in oil sales revenue in 2012 is a result of increased oil production and higher average sales prices.
The Company reported net loss attributable to owners of the Company of $12,500,031 or $0.06 per share for 2012 compared to $16,740,226 or $0.09 per share for 2011.
Operating Netback and Cash Flow
Operating netback for 2012 was $35,608,189 ($50.11 per barrel) compared to $5,830,721 ($30.60 per barrel) during 2011. This improvement of $29,777,468 represents an increase of 511%.
With respect to funds flow from operations, the Company generated an inflow of $21,743,731 during the year ended December 31, 2012 compared to an outflow of $4,032,282 during the same period of 2011. Funds flow from operations reflects cash flow from operating activities (as determined in accordance with IFRS) before changes in non-cash balance sheet operating items. Alternatively, it reflects net income (loss) on the statement of income (loss), adjusted for non-cash items of income (loss) including, but not limited to, depletion and depreciation, stock-based compensation and unrealized foreign exchange items.
During the year ended December 31, 2012, the Company generated $9.8 million of cash from operating activities (which includes changes in non-cash balance sheet operating items), compared to 2011 when the Company used $1.0 million in operating activities (which includes changes in non-cash balance sheet operating items). The cash inflow in 2012 is attributable primarily to increased gross profit from oil sales (excluding non-cash depletion and depreciation). With respect to investing activities, the Company spent $75.9 million on capital expenditures in the year ended December 31, 2012, compared to $29.3 million spent in 2011. The increase in capital spending focused on increasing production at the Company's conventional operations, particularly Medanito Sur, as well as acquisition and exploration activities pertaining to the Company's unconventional blocks.
As of December 31, 2012, the Company has a cash position (including cash, cash equivalents and short-term investments) of $58.2 million. The December 31, 2012 statement of financial position shows higher current assets. Accounts receivable has increased as a result of increased oil sales and accrual of Oil Plus benefits. The Company's reported exploration and evaluation assets have increased in 2012, net of impairment loss, as a result of continuing activities in Argentina and Peru. The Company's reported property, plant and equipment has increased, net of depletion and impairment loss, primarily as a result of continuing activities on the Medanito Sur block. During 2012, the Company recognized deferred tax assets related to its operations in Argentina. During 2012, the Company settled US$18.95 million of promissory notes.
For further information regarding the Company's financial results, financial position and related changes, please see the consolidated financial statements and the related MD&A.
Additional Information on Unconventional
-- Aguada Los Loros: In 2012, the Aguada Los Loros (ALL.x-1) well, on the Los Toldos I block (98,300 gross acres or 398 square kilometers or 154 sections), was drilled and subsequent to year-end, in early 2013, a four-stage hydraulic stimulation program was performed in the Vaca Muerta shale formation (562 meters or 1,843 feet thick). The well discovered gas and natural gas liquids. The initial production of the Vaca Muerta shale formation, after the clean-up flow back, at depths between 2,570 to 2,929 metres (8,432 to 9,609 feet), increased from 1.3 million cubic feet (36,738 cubic meters) per day to 3.2 million cubic feet (90,418 cubic meters) per day of natural gas with 9 to 18 barrels of oil per day condensate (54-58 degree API) on managed choke sizes (4- 6mm). Testing was conducted over a period of approximately 20 days with high well-head pressure throughout. The well-head pressure declined normally during flow testing. This, in addition to core and other studies, will help the broad evaluation of the future productivity and the potential of the well and the reservoir. Currently the well is shut- in for a Pressure Build-up test but an option is available to connect the well to a nearby regional gas pipeline for long-term testing and possible future production. Hydrocarbon shows were also encountered and data acquired in the following formations: lower Agrio, Mulichinco, Quintuco and Tordillo.-- Los Toldos Este: A five-stage hydraulic stimulation program was performed in the Vaca Muerta shale formation (343 metres or 1,125 feet thick) on the Los Toldos Este (LTE.x-1) well, on the Los Toldos II block (38,400 gross acres or 155 square kilometers or 60 sections). The initial flow rate of the Vaca Muerta shale formation, after the clean-up flow back, at depths between 2,795 to 3,065 metres was 797 barrels of oil equivalent per day (boepd) of which 694 barrels of oil per day (bopd) was high quality light sweet oil, 39.6 degrees API. The average flow rate for the initial 30 days was 309 boepd, of which there was 254 bopd. Two production flow tests were also conducted to determine the productivity of the perforated intervals. This, in addition to core and other studies, will help the broad evaluation of the future productivity and the potential of the well and the reservoir. The well is currently on a long-term production test. Hydrocarbon shows were also encountered and data acquired in the following formations: Upper Agrio, Lower Agrio, Mulichinco, Quintuco and Tordillo.-- Agua de Afuera: Drilling of the Agua de Afuera (ADA.x-1) well, on the Los Toldos II block, reached total depth ("TD") in late 2012. The well drilled through 340 meters or 1,115 feet of the primary target Vaca Muerta shale formation with oil and gas shows through most of this shale section. Hydrocarbon shows were also encountered in secondary targets such as the Agrio, Quintuco and Tordillo. The ADA.x-1 well was drilled to a TD of 3,448 meters or 11,311 feet. A complete suite of logs has been run and conventional and side wall cores were cut and recovered. Casing has been successfully set and cemented to a TD of approximately 3,442 meters or 11,290 feet in preparation for a planned well test. Detailed analysis of the cores and cuttings at international service company laboratories in Argentina and in the USA is ongoing. The ADA.x-1 well is located approximately 9 kilometers west of the LTE.x-1 unconventional, shale well.-- La Hoya: The La Hoya (LHo.x-1) well, located on the Company's Totoral block in the southwestern region of the Neuquen Basin, was drilled (approximately 1,900 metres total depth), cased and cemented in mid- 2012. It intersected the Vaca Muerta Shale formation with thickness of 203 metres or 666 feet with oil and gas shows through the whole shale column. During drilling, hydrocarbon shows were also encountered and data acquired in the Mulichinco, Quintuco, and Quebrada del Sapo formations. Early in 2013, the Company reported the discovery of light oil related to this well. The LHo.x-1 well drilled and established oil production from the Vaca Muerta Shale in a new and large region, the Picun Leufu Sub-Basin, which extends over much of the Company's three southernmost blocks -- Totoral, Yerba Buena and Bajada Colorada (1,126,600 acres or 4,559 square kilometres or 1,760 sections). In January 2013, a three-stage hydraulic stimulation program was performed in the Vaca Muerta shale formation. After the initial clean-up flow back, the well produced through an electrical submersible pump during a 20-day test period at a total liquid rate of 300 to 600 barrels per day (bpd) which included 30 to 60 barrels of oil per day (bopd) of high quality light sweet oil, 33 degrees API gravity. During this test period, the well did not show any rate decline. The LHo.x-1 well is currently being tested to determine the fluid contribution of each interval that was hydraulically stimulated. As well, core analysis and studies are still in progress.