Angle Announces 2012 Third Quarter Results

Marketwired

CALGARY, ALBERTA--(Marketwire - Nov. 7, 2012) - Angle Energy Inc. ("Angle" or the "Company") (NGL.TO) is pleased to announce its financial and operating results for the three and nine months ended September 30, 2012.

The Company has filed its unaudited interim consolidated financial statements and related management's discussion and analysis (MD&A) for the period ended September 30, 2012 on www.sedar.com and www.angleenergy.com. Certain selected financial and operational information for the three and nine months ended September 30, 2012 and the 2011 comparatives are set out below and should be read in conjunction with Angle's interim consolidated financial statements for the period ended September 30, 2012 and related MD&A.

Angle is pleased to report our financial and operating results for the three and nine months ended September 30, 2012. The Company has demonstrated progress in its goal to add value on a per share basis, with an emphasis on growing light oil and condensate volumes and improving the quality of production reported in barrels of oil equivalent per day.

COMPANY HIGHLIGHTS

  • Production for the third quarter averaged 14,222 boe/d of which 21 percent was light oil and condensate, 24 percent was NGLs and 55 percent was natural gas.

  • Funds from operations for the third quarter of $19.7 million or $0.24 per diluted share.

  • Light crude oil and condensate production increased 55 percent to 3,066 bbls/d, while total light crude oil and natural gas liquids production increased by 6 percent to reach 6,441 bbls/d, all as compared to the third quarter of 2011.

  • Continued focus on light crude oil and condensate production resulted in a 39 percent increase in production to average 3,066 bbl/d in the quarter when compared to January 2012 (approximately 2,200 boe/d). Cardium oil volumes in Harmattan tied-in during October bring total light crude oil and condensate production to approximately 3,465 bbl/d, a 58 percent increase over January 2012.

  • Capital spending in the third quarter was $31.2 million which included the drilling and rig release of 10 gross (7.1 net) horizontal wells in the quarter, with 8 gross (5.1 net) wells targeting Cardium light oil.

  • Angle's corporate borrowing base has increased by 14 percent to $250 million as a result of the semi-annual review with the banking syndication. Combined with the $60 million in outstanding convertible debentures, the Company's total credit capacity is $310 million.

Financial

In the third quarter of 2012, oil and natural gas revenues were $41.7 million as compared to $47.7 million in the third quarter of 2011, due primarily to a 39 percent decline in natural gas prices and a 34 percent decline in NGL prices (ethane, propane, butane mixture).

The commodity mixture Angle produces has changed materially, with light oil and condensate at 21 percent of corporate production as compared to 14 percent of corporate production in the third quarter of 2011. This successful shift to a higher quality 6:1 barrel of oil equivalent (boe) has resulted in approximately $6.8 million of additional revenue in this quarter versus the revenue that would have resulted without a change in the commodity mixture. Illustrating this point another way, the additional 1,089 bbls/d of light oil and condensate the Company produced over last year's comparative quarter is the revenue equivalent of 31.2 mmcf/d (5,200 boe/d) of natural gas.

Funds from operations were $19.7 million or $0.24 per diluted share, and the Company recorded a net loss of $2.4 million or $0.03 per diluted share due to calculated unrealized derivative instrument losses.

Angle exited the quarter with bank debt, including working capital deficiency, of $174.5 million on a recently updated bank line of $250 million. In addition, the Company has $60 million of convertible debentures outstanding for total net debt of $234.5 million compared to total credit capacity of $310 million. The balance sheet shows healthy flexibility, with the bank line increase of 14 percent directly attributable to Angle's successful drilling efforts in the Harmattan Cardium light oil play. 

Angle anticipates actual 2012 results will be materially consistent with our guidance, with the exception of capital and net debt. Capital expenditures are expected to be $161 to $163 million for the year due to the acceleration of projects based on favourable results from the Cardium plays in Harmattan and Edson. This capital allocated late in the fourth quarter is expected to mainly impact 2013 operating results. Total gross wells drilled in 2012 will be 48 (37.5 net) and year-end net debt will be between $237 and $242 million.

Operations

The third quarter of 2012 was primarily focused on drilling operations on our light oil Cardium projects in Harmattan and Edson with 8 gross (5.1 net) wells of the 10 gross (7.1 net) horizontal wells rig released in the quarter. To date in 2012, the Company has drilled 35 horizontal wells, 25 gross (19.9 net) horizontal wells targeted Cardium light oil projects and of those 25 wells, 17 net wells were in the Harmattan Cardium project. The third quarter operational activities were described in detail in Angle's October 16, 2012 press release. Subsequent to this release, Angle has completed the well tie-ins discussed, and is currently producing in excess of 15,000 boe/d (22 percent light oil and condensate, 27 percent NGLs, and 51 percent natural gas). 

Outlook

The Cardium light oil play at Harmattan will continue to be the focus of Angle's capital investment, with rates of return over 50 percent per well in the current commodity environment. Importantly, in the third quarter, the Company successfully drilled and tested three Cardium oil wells which were several miles south and west from the earliest wells drilled in the northern area of the project, with results proving good productivity. The play is now producing 1,802 bbls/d of light oil, 182 bbls/d of NGLs and 178 boe/d of gas, for total production of 2,162 boe/d, from 19 wells. Total undrilled inventory in the play is over 176 wells at a four well per section development density. Angle is showing consistent success on a large, eight year drilling project.

In environments such as the past nine months of 2012, it is key to be a low cost operator. The Company has managed a marginal 3 percent increase in operating expenses per boe while achieving a 55 percent increase in light oil and condensate production. At $5.93/boe, Angle is in the top decile of its peers with a low cost structure. In order to continue this low cost advantage, the Company has continued in its plans to build a 4,000 bbl/d battery in Harmattan to handle future growth from the play. Angle has maintained or improved its controllable costs, with drilling costs down 8 percent per well from last year, and cash costs per barrel down 4 percent from last year. 

The strategy the Company will continue to pursue is increasing value per share, and not solely chasing growth on a per barrel of oil equivalent basis without an attractive rate of return on capital. To this end, Angle plans to demonstrate the value in its portfolio of projects and maximize the return to shareholders. The Company looks forward to reporting the results of its 2012 fourth quarter activities, anticipated to be released early in 2013.

HIGHLIGHTS

  Three Months Ended September 30   Nine Months Ended September 30  
  2012   2011   Change   2012   2011   Change  
(000s, except per share data) ($ ) ($ ) (% ) ($ ) ($ ) (% )
FINANCIAL                        
Oil and natural gas revenues 41,678   47,698   (13 ) 133,510   140,362   (5 )
Funds from operations (1) 19,747   24,852   (21 ) 61,545   71,579   (14 )
  Per share - basic ($) 0.24   0.34   (29 ) 0.77   0.99   (22 )
  Per share - diluted ($) 0.24   0.34   (29 ) 0.77   0.97   (21 )
Cash flow from operating activities 20,201   25,949   (22 ) 60,453   74,931   (19 )
Net income (loss) and comprehensive income (loss) (2,430 ) 5,040   (148 ) 558   15,411   (96 )
  Per share - basic ($) (0.03 ) 0.07   (143 ) 0.01   0.21   (95 )
  Per share - diluted ($) (0.03 ) 0.07   (143 ) 0.01   0.21   (95 )
Capital expenditures (2) 31,178   45,163   (31 ) 128,363   123,730   4  
Total assets (end of period) 670,358   609,819   10   670,358   609,819   10  
Net debt (end of period) (3) 234,467   202,043   16   234,467   202,043   16  
Shareholders' equity (end of period) 371,094   343,446   8   371,094   343,446   8  
(000s)                        
COMMON SHARE DATA                        
Shares outstanding                        
  At end of period 81,052   72,821   11   81,052   72,821   11  
  Weighted average - basic 80,974   72,706   11   79,858   72,423   10  
  Weighted average - diluted 81,010   73,907   10   80,014   73,749   8  
OPERATING                        
Sales (000s)                        
  Natural gas (mcf/d) 46,681   47,510   (2 ) 49,828   46,349   8  
  NGLs (bbls/d) 3,375   4,098   (18 ) 3,562   3,400   5  
  Light crude oil and condensate (bbls/d) 3,066   1,977   55   3,083   2,116   46  
  Total oil equivalent (boe/d) 14,222   13,993   2   14,950   13,241   13  
Average wellhead prices                        
  Natural gas ($/mcf) 2.38   3.88   (39 ) 2.24   3.93   (43 )
  NGLs ($/bbl) 22.64   34.11   (34 ) 26.89   35.58   (24 )
  Light crude oil and condensate ($/bbl) 84.32   93.96   (10 ) 88.42   95.56   (7 )
  Combined average ($/boe) 31.36   36.45   (14 ) 32.09   38.18   (16 )
Netbacks ($/boe)                        
  Operating (4) 19.20   22.97   (16 ) 19.23   23.97   (20 )
  Funds from operations (1) 15.09   19.31   (22 ) 15.02   19.80   (24 )
Gross (net) wells drilled (#)                        
  Natural gas 2
(2.0
) 6
(6.0
) -67
(-67
) 10
(9.7
) 16
(16.0
) -38
(-39
)
  Oil 8
(5.1
) 3
(2.6
) 167
(96
) 26
(20.4
) 9
(8.6
) 189
(137
)
  Dry and abandoned -
(-
) 1
(1.0
) -100
(-100
) -
(-
) 3
(3.0
) -100
(-100
)
  Total 10
(7.1
) 10
(9.6
) -
(-26
) 36
(30.1
) 28
(27.6
) 29
(9
)
Average working interest (%) 71   96   (26 ) 84   99   (15 )
(1) Funds from operations, funds from operations per share and funds from operations per boe are not recognized measures under International Financial Reporting Standards (IFRS). Refer to the Management's Discussion and Analysis for further discussion.
(2) Total capital expenditures, including acquisitions.
(3) Current assets less current liabilities, bank debt and the face value of the convertible debentures, excluding current derivative instruments.
(4) Operating netback equals oil and natural gas revenues including realized gains and losses on derivative instruments less royalties, operating costs and transportation costs calculated on a per boe basis. Operating netback is not a recognized measure under IFRS and therefore may not be comparable with the calculations of similar measures presented by other companies.
(5) For a description of the boe conversion ratio, refer to "Boe Conversions" in the Management's Discussion and Analysis.

INTERIM CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

As at Note September 30,
2012
  December 31,
2011
 
($000s of Canadian Dollars) (unaudited)          
ASSETS          
  Accounts receivable   17,625   20,279  
  Deposits and prepaid expenses   4,356   3,564  
  Total current assets   21,981   23,843  
Exploration and evaluation 3 58,985   54,780  
Property and equipment 4 589,392   517,068  
    670,358   595,691  
LIABILITIES          
  Accounts payable and accrued liabilities   33,280   35,345  
  Derivative instruments 9 720   400  
  Total current liabilities   34,000   35,745  
Bank debt 5 163,168   144,990  
Convertible debentures 6 54,410   53,188  
Derivative instruments 9 549   -  
Decommissioning liabilities 7 18,937   14,695  
Deferred tax liabilities   28,200   28,362  
    299,264   276,980  
SHAREHOLDERS' EQUITY          
  Share capital 8 361,331   311,436  
  Equity component of convertible debentures   4,105   4,105  
  Contributed surplus   14,280   12,350  
  Deficit   (8,622 ) (9,180 )
  Total equity   371,094   318,711  
Commitments 11        
    670,358   595,691  
See accompanying notes to the interim consolidated financial statements.

INTERIM CONSOLIDATED STATEMENTS OF INCOME (LOSS) AND COMPREHENSIVE INCOME (LOSS)

    Three Months Ended
 September 30
  Nine Months Ended
September 30
 
  Note 2012   2011   2012   2011  
($000s of Canadian dollars, except per share amounts) (unaudited)                  
REVENUE                  
  Oil and natural gas revenues   41,678   47,698   133,510   140,362  
  Royalties   (8,394 ) (9,875 ) (28,501 ) (29,156 )
Oil and natural gas revenues, net of royalties   33,284   37,823   105,009   111,206  
Realized gain on derivative instruments   887   558   1,019   637  
Unrealized gain (loss) on derivative instruments   (3,209 ) 2,766   (869 ) 3,431  
    30,962   41,147   105,159   115,274  
EXPENSES                  
  Operating   8,410   8,164   25,283   23,216  
  Transportation   644   649   1,970   1,967  
  General and administrative   3,412   3,833   11,212   11,884  
  Depletion and depreciation   18,125   18,598   56,479   48,156  
  Gain on disposition of undeveloped land   -   -   -   (1,408 )
    30,591   31,244   94,944   83,815  
Operating income   371   9,903   10,215   31,459  
Interest expense   2,805   2,192   7,631   6,885  
Accretion and financing charges   492   515   1,474   1,483  
Net income (loss) before income tax   (2,926 ) 7,196   1,110   23,091  
Deferred income tax expense (recovery)   (496 ) 2,156   552   7,680  
Net income (loss) and comprehensive income (loss)   (2,430 ) 5,040   558   15,411  
Net income (loss) per share                  
  Basic 8 (0.03 ) 0.07   0.01   0.21  
  Diluted 8 (0.03 ) 0.07   0.01   0.21  
See accompanying notes to the interim consolidated financial statements.

INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

  Share
capital
Convertible
debentures,
equity
component
Contributed
surplus
  Retained
earnings (deficit
) Total
equity
($000s of Canadian dollars) (unaudited)              
Balance at January 1, 2012 311,436 4,105 12,350   (9,180 ) 318,711
Issue of common shares, net of issue costs and deferred income taxes 48,974 - -   -   48,974
Share-based compensation expensed - - 1,613   -   1,613
Share-based compensation capitalized - - 596   -   596
Options exercised 921 - (279 ) -   642
Net income for the period - - -   558   558
Balance at September 30, 2012 361,331 4,105 14,280   (8,622 ) 371,094
 
Balance at January 1, 2011 306,742 - 7,843   1,591   316,176
Share-based compensation expensed - - 3,688   -   3,688
Share-based compensation capitalized - - 935   -   935
Options exercised 4,565 - (1,434 ) -   3,131
Issue of convertible debentures, net of issue costs and deferred income taxes - 4,105 -   -   4,105
Net income for the period - - -   15,411   15,411
Balance at September 30, 2011 311,307 4,105 11,032   17,002   343,446
See accompanying notes to the interim consolidated financial statements.

INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS

    Three Months Ended September 30   Nine Months Ended September 30  
  Note 2012   2011   2012   2011  
($000s of Canadian dollars) (unaudited)          
     
OPERATING ACTIVITIES                  
Net income (loss) and comprehensive income (loss)   (2,430 ) 5,040   558   15,411  
Adjustments for:                  
  Depletion and depreciation 3, 4 18,125   18,598   56,479   48,156  
  Change in fair value of derivative instruments 9 3,209   (2,766 ) 869   (3,431 )
  Accretion and financing charges 7 492   515   1,474   1,483  
  Share-based compensation 8 847   1,309   1,613   3,688  
  Deferred income tax expense (recovery)   (496 ) 2,156   552   7,680  
Gain on disposition of undeveloped land   -   -   -   (1,408 )
Settlement of decommissioning liabilities 7 (53 ) (39 ) (59 ) (136 )
Change in non-cash working capital   507   1,136   (1,033 ) 3,488  
Net cash from operating activities   20,201   25,949   60,453   74,931  
                   
FINANCING ACTIVITIES                  
Issue of common shares, net of issue costs 8 507   870   48,902   3,131  
Increase (decrease) in bank debt   8,409   19,616   18,178   (11,635 )
Issue of convertible debentures, net of issue costs 6 -   -   -   57,171  
Net cash from financing activities   8,916   20,486   67,080   48,667  
                   
INVESTING ACTIVITIES                  
Exploration and evaluation expenditures 3 (7,684 ) (14,367 ) (34,727 ) (53,129 )
Property and equipment expenditures   (23,494 ) (30,796 ) (93,636 ) (70,601 )
Proceeds on disposition of undeveloped land   -   -       2,320  
Change in non-cash working capital   2,061   (1,272 ) 830   (2,188 )
Net cash used in investing activities   (29,117 ) (46,435 ) (127,533 ) (123,598 )
Change in cash and cash equivalents   -   -   -   -  
Cash and cash equivalents, beginning of period   -   -   -   -  
Cash and cash equivalents, end of period   -   -   -   -  
See accompanying notes to the interim consolidated financial statements.

ABOUT ANGLE

Angle Energy Inc. is a Calgary-based publicly traded oil and natural gas exploration and development company that was incorporated in 2004 and commenced active oil and gas operations in 2005. Angle's goal is to grow its high-quality, focused asset base through a combination of drilling and strategic acquisitions. Angle started in 2004 as a "blind pool" and has grown production while maintaining top-decile operating costs, and finding costs. Angle's proven and dedicated team of industry specialists are focused on identifying and developing high quality assets in the Western Canada Sedimentary Basin, with an emphasis in west central Alberta. Common shares of Angle are listed for trading on the Toronto Stock Exchange under the symbol "NGL".

Basis of Presentation

Production information is commonly reported in units of barrel of oil equivalent ("boe"). For purposes of computing such units, natural gas is converted to equivalent barrels of crude oil using a conversion factor of six thousand cubic feet of gas to one barrel of oil. This conversion ratio of 6:1 is based on an energy equivalent conversion for the individual products, primarily applicable at the burner tip, and does not represent a value equivalency at the wellhead. Such disclosure of boe may be misleading, particularly if used in isolation

Future Outlook and Forward-Looking Information

Information set forth in this press release may contain estimates and forward-looking statements regarding production levels and product mix for the 2012 year, the allocation of the capital program, impact of operating and royalty expense, expected well and reservoir performance, and drilling plans for the balance of 2012 including future development plans and drilling and operating costs. These estimates and statements are made as of November 7, 2012 and are based on assumptions and analysis as of this date, by Angle in light of its experience, current conditions and expected future development in the areas it is currently active and other factors it believes are appropriate in the circumstances. By their nature, these forward-looking statements are subject to numerous risks and uncertainties, some of which are beyond Angle's control, including mechanical failures or inability to access production facilities; the unanticipated encroachment of water or other fluids into the producing formation; unanticipated reservoir performance and, the inability to drill, complete and tie-in wells on schedule due to a lack of oilfield services being available on a cost efficient basis, poor weather, the inability to negotiate surface access or regulatory delays. The drilling plans and expected costs of drilling are subject to all the aforementioned risks and uncertainties, as well as those risk factors identified by Angle's MD&A for the three and nine months ended September 30, 2012, Annual Information Form and MD&A in the most recently complete financial year, all of which are on SEDAR at www.SEDAR.com and includes the impact of general economic conditions, industry conditions, volatility of commodity prices, environmental risks, competition from other industry participants, stock market volatility and ability to access sufficient capital from internal and external sources.

Readers are cautioned that the assumptions and factors discussed in this press release are not exhaustive and that the assumptions used in the preparation of such information, although considered reasonable at the time of preparation, may prove to be imprecise, and as such, undue reliance should not be placed on forward-looking statements. Angle's actual results, performance or achievement could differ materially from those expressed in, or implied by, these forward-looking statements, and accordingly, no assurance can be given that any of the events anticipated by the forward-looking statements will transpire or occur, or if any of them do so, what benefits that Angle will derive there from. Unless required by law, Angle disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. The forward looking statements are expressly qualified by these cautionary statements.

Contact:
Angle Energy Inc.
Heather Christie-Burns
President and Chief Operating Officer
(403) 263-4179
(403) 263-4534

Angle Energy Inc.
Gregg Fischbuch
Chief Executive Officer
(403) 263-4179
(403) 263-4534

Angle Energy Inc.
Stuart Symon
Chief Financial Officer
(403) 263-4179
(403) 263-4534

Angle Energy Inc.
Suite 700
324 Eighth Avenue SW
Calgary, Alberta T2P 2Z2
www.angleenergy.com

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