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Cuda Oil and Gas Inc. Announces Second Quarter Financial and Operating Results

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Calgary, Alberta--(Newsfile Corp. - August 30, 2021) - Cuda Oil and Gas Inc. (TSXV: CUDA) ("Cuda" or the "Company") announces its financial and operating results for the three and six months ended June 30, 2021. Cuda's unaudited interim condensed consolidated financial statements and related management's discussion and analysis ("MD&A") as at and for the periods ended June 30, 2021 and 2020, are available under the Company's profile on the SEDAR website at www.sedar.com. Selected financial and operating information for the three and six months ended June 30, 2021 and 2020 appear below and should be read in conjunction with the related financial statements and MD&A.

Summary Financial and Operational Results(1)(2)

Three months ended
June 30

Six months ended
June 30

2021

2020

2021

2020

OPERATING

Production

Crude oil (bbls/d)

374

307

360

326

Natural gas (mcf/d)

954

1,908

918

1,557

Natural gas liquids ("NGLs")(bbls/d)

15

35

16

30

Total (boe/d)

548

660

529

615

Operating Netbacks($/boe)

Average realized price (boe)

50.44

23.77

49.10

30.98

Royalties and production taxes

(17.17)

(6.36)

(16.31)

(8.44)

Operating and transportation

(17.70)

(10.03)

(15.02)

(10.76)

Operating netback

15.57

7.38

17.77

11.78

FINANCIAL($)

Revenue

Crude oil

2,175,952

960,462

4,006,920

2,633,085

Natural gas

249,645

394,658

525,000

664,164

NGLs

88,109

72,948

165,490

169,288

Total

2,513,706

1,428,068

4,697,410

3,466,537

Adjusted funds flows from (used in) operations

159,584

269,724

1,846,328

(674,199)

Net loss

(5,222,772)

(5,387,345)

(8,313,676)

(4,470,119)

Capital expenditures

2,903,557

883,762

3,193,626

8,275,806

Working capital deficit

74,359,172

59,053,802

74,359,172

59,053,802



Notes:

1. For further discussion and disclaimers regarding the results above, see the Company's unaudited interim condensed consolidated financial statements and MD&A for the three and six months ended June 30, 2021 and 2020, available under the Company's profile on SEDAR.

2. See "Non-GAAP Measures".

Second Quarter Highlights

  • Second quarter oil production from Wyoming increased 8% to 374 bbls/d, from 347 bbls/d in the first quarter of 2021, and increased 22% from 307 bbls/d in the second quarter of 2020. The production increase in the second quarter of 2021 was due to higher quantities of gas injection as second quarter propane prices were lower after reaching seasonal highs in the first quarter of 2021.

  • Realized higher WTI prices and stable natural gas prices during the second quarter of 2021. Wyoming oil production realized 9% higher WTI prices, $64.01 per boe compared to $58.63 per boe during the first quarter of 2021, and 86% higher compared to $34.33 per boe for the same quarter of 2020 which were negatively impacted by COVID-19 and OPEC+ supply constraint disagreements. The continuation of stable natural gas prices in Alberta allowed the Company to continuously produce in higher price environments. Realized natural gas prices in Alberta were $2.88 per mcf in the second quarter of 2021, following realized gas prices of $3.47 per mcf from the first quarter of 2021.

  • Improving operating netback prices in 2021. The Company's operating netback in 2021 improved in the first and second quarter of 2021 to $20.16 per boe and $15.57 per boe respectively, compared to operating netbacks of $16.87 per boe and $7.38 per boe in the same quarters of 2020.

  • On August 7, 2021 the Company and its lenders (Senior and Subordinated Facilities) agreed to an amended and restated agreement whereby the Senior Facility lender agreed to increase the credit facility from $9.0 million to $13.0 million with the advance of an additional $4.0 million under the Senior Facility B. Proceeds from the Senior Facility B will be used to repay outstanding joint interest billings owed under the unit operating agreement to the operator of the Company's exploration, development and production assets in Wyoming.

Financial Position
For the three and six months ended June 30, 2021, the Company reported net losses of approximately $5.2 million and $8.3 million, respectively, and cash flows from operating activities of approximately $0.05 million and $0.1 million, respectively, compared to net losses of $5.4 million and $4.5 million, respectively, and cash flows from operating activities of $0.4 million and $1.3 million respectively, for the three and six months ended June 30, 2020. At June 30, 2021, the Company had a working capital deficiency of approximately $74.4 million including outstanding credit facilities, convertible debenture, and a promissory note, compared to a working capital deficiency of approximately $59.1 million at June 30, 2020.

The Company has determined that it was not in compliance with the operational and financial covenants, and the repayment schedule of the Senior Facility during the three months ended June 30, 2021, which represents an event of default. When the Company is not in compliance with the covenants of the Senior Facility, this constitutes an event of default under the Subordinated Facilities and the promissory note. An event of default enables each of the lenders to demand immediate payment of all amounts owing for which the Company is incapable of making such payments. As such, a material uncertainty exists that casts significant doubt on the Company's ability to continue as a going concern.

The Company continues to be in discussions with each of its lenders to attempt to remedy the events of default, as well as the ultimate settlement of finance charges and fees. There can be no guarantee that the Company will be successful in any negotiation, or settlement with the lenders either with respect to the rectification of each of the events of default, or with respect to an ultimate settlement of finance changes and fees. Further strategic alternatives will be required to continue as a going concern.

At June 30, 2021, the Company had credit facilities with an outstanding balance of approximately $67.1 million including all unpaid interest and financing fees. On August 23, 2021, the Company received a limited waiver from the Senior Facility lender. The Senior Facility lender waived the principal and interest repayments required to June 30, 2021, and the ability to apply the default interest rate of 19% per annum up to June 30, 2021. The Senior Facility lender has not waived the operational and financial covenant breaches at June 30, 2021. The Company also had a convertible debenture with an outstanding balance of approximately $1.8 million including accrued interest. The terms of the convertible debenture is still subject to regulatory approval.

The Company and the Senior Facility lender have agreed to engage a sales advisor by August 9, 2021 to pursue a sales process, including the opening of an online data room by August 27, 2021. Additionally, the Company shall execute one or more non-binding letters of intent by September 30, 2021 and a binding offer to purchase by October 31, 2021.

About Cuda Oil and Gas Inc.
Cuda Oil and Gas Inc. is engaged in the business of exploring for, developing and producing oil and natural gas, and acquiring oil and natural gas properties across North America. The Cuda management team has worked closely together in both private and public company environments. Cuda will continue to implement its proven strategy of exploring, acquiring, and exploiting with a long-term focus on large, light oil resource- based assets across North America including significant operational experience in the United States. The Cuda management team brings a full spectrum of geotechnical, engineering, negotiating and financial experience to its investment decisions.

For further information please contact:
Glenn Dawson - President and Chief Executive Officer
Cuda Oil and Gas Inc.
(403) 454-0862

Non-GAAP Measures
This news release contains the terms "operating netback", "working capital deficit" and "adjusted funds flow from (used in) operations" which do not have standardized meanings prescribed by IFRS and therefore may not be comparable with the calculation of similar measures presented by other issuers.

  • Operating netback denotes total revenue less royalty and production tax expenses, and operating and transportation costs calculated on a per boe basis. Management uses operating netback on a per boe basis in operational and capital allocation decisions.

  • Working capital deficit is calculated as current assets less current liabilities. Management uses working capital deficit to assess liquidity and financial strength.

  • Adjusted funds flow from (used in) operations denotes cash flow from (used in) operating activities as it appears on the Company's consolidated statement of cash flows before decommissioning expenditures, if any, and changes in non-cash operating working capital. Management uses adjusted funds flow from (used in) operations to evaluate operating performance.

Glossary

  • bbl barrel

  • bbl/d barrels per day

  • boe barrels of oil equivalent

  • boe/d barrels of oil equivalent per day

  • Mcf thousand cubic feet

  • Mcf/d thousand cubic feet per day

  • GJ Gigajoule

  • WTI West Texas Intermediate, a grade of light sweet crude oil used as benchmark pricing in the United States

Forward-Looking Information

This news release contains forward-looking information. All statements other than statements of historical fact included in this news release are forward-looking information that involve various risks and uncertainties and are based on forecasts of future operations, estimates of amounts not yet determinable and assumptions of management. In particular, this news release includes forward-looking information relating to: (i) the use of proceeds of the financing; (ii) exploration and development activities; and (iii) the intention of the Company to pursue strategic alternatives. These statements are based on certain assumptions of the Company relating to current conditions and expected future developments including assumptions relating to regulatory approvals and business prospects and opportunities. Risk factors that could prevent forward-looking statements relating to Cuda and its operating activities from being realized include ongoing permitting requirements, the actual results of current exploration and development activities, operational risks, risks associated with drilling and completions, uncertainty of geological and technical data, access to capital, market conditions, the availability and nature of alternative sources of energy, conclusions of economic evaluations and changes in project parameters as plans continue to be refined as well as future prices of oil and natural gas. Although Cuda has attempted to identify important factors that could cause actual results to differ materially, there may be other factors that cause results not to be as anticipated, estimated or intended. There can be no assurance that such statements will prove to be accurate as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements. The Company disclaims any intention and has no obligation or responsibility, except as required by law, to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

To view the source version of this press release, please visit https://www.newsfilecorp.com/release/94892.