(1) "Operating netback" is a non-GAAP measure and is calculated as revenues from oil sales less royalties and production costs. Operating netback is used as an indicator of operating performance, profitability and liquidity. Operating netback does not have a standardized meaning prescribed by IFRS. It is unlikely for non-GAAP measures to be comparable to similar measures presented by other companies. For the three months ended March 31, 2013, operating netback was $13,166,815 (calculated as gross oil sales revenue of $16,449,646 less royalties of $2,102,781 and production costs of $1,180,050). For the three months ended March 31, 2012, operating netback was $7,082,158 (calculated as gross oil sales revenue of $11,627,807 less royalties of $2,544,183 and production costs of $2,001,466).(2) "Funds flow from operations" is an additional GAAP measure because it is presented in the consolidated statement of cash flows. Funds flow from operations and funds flow from operations per share are used to analyze operating performance and liquidity. Funds flow from operations is calculated as net cash generated from (used by) operating activities (as determined in accordance with IFRS) before changes in non-cash balance sheet operating items. Funds flow from operations per share is calculated by dividing funds flow from operations by the weighted average number of shares outstanding. Funds flow from operations should not be considered an alternative to, or more meaningful than net cash generated from (used by) operating activities as determined in accordance with IFRS. Funds flow from operations per share should not be considered an alternative to, or more meaningful than earnings (loss) per share as determined in accordance with IFRS.(3) Diluted weighted average number of common shares outstanding is computed by adjusting basic weighted average number of common shares outstanding for dilutive instruments. The number of shares included with respect to options, warrants and similar instruments is computed using the treasury stock method, which assumes any proceeds received by the Company upon exercise of the in-the-money instruments would be used to repurchase common shares at the average market price for the period. For the three months ended March 31, 2013, 4,192,149 (March 31, 2012 - 10,829,330) common shares were deemed to be issued for no consideration in respect of options.(4) Working capital is a non-GAAP measure and is calculated as current assets less current liabilities. Working capital is used to assess liquidity and general financial strength. Working capital does not have a standardized meaning prescribed by IFRS. It is unlikely for non-GAAP measures to be comparable to similar measures presented by other companies. Working capital should not be considered an alternative to, or more meaningful than current assets or current liabilities as determined in accordance with IFRS.(5) As of the current date, 212,779,440 common shares and 18,135,593 stock options are outstanding.
First Quarter Highlights and Recent Developments
-- Eleven conventional wells were drilled during the first quarter of 2013, some of which are currently on production and some of which are being tied in for production. Recent drilling on Medanito Sur has resulted in the discovery of new production areas, including El Alpataco, El Calden Este and Amilcar.-- In March 2013, a workover was completed on the LHo.x-1 well on the Totoral block, individually testing each of the three fractured intervals. This testing determined that all of the fracture stages are vertically connected and confirmed the large extension of the fractures from the hydraulic stimulation in the well. The detailed analysis completed on all of the static information available, logs, conventional and sidewall cores, shows no evidence that there could be free water in the Vaca Muerta formation. Therefore, management is of the opinion that the water comes from the underlying Quebrada del Sapo and/or Lotena formations. Plans are being made to put the well on production, with Early Production Facilities, beginning in the third quarter for a test period of at least six (6) months. As well, Americas Petrogas is considering the drilling of one or two Vaca Muerta vertical appraisal wells in order to optimize the evaluation of the formation. Additionally, consideration is being given to horizontal drainage of the Vaca Muerta formation, as this area may be technically and economically ideal for a horizontal drilling development.-- Ryder Scott Company has been engaged to prepare a resources report on the Company's unconventional properties. The report is expected to be completed by early third quarter of 2013.-- In respect of the Bayovar concession in Peru, the Company completed a brine mineral resource estimate relating to Potassium Chloride (KCl, potash) in accordance with National Instrument 43-101.-- In April 2013, the Company began the process of exercising the option to acquire an interest in the Bayovar concession. The exercising of the option is subject to government approval of the required documents for exercising the option.