CALGARY, April 16 /CNW/ - The end of fiscal 2003 marked the completion of the Company's first year in business as Wrangler West Energy Corp. ("Wrangler West" or "the Company"). Wrangler West is an emerging junior oil and gas producer driven to increase shareholder value by focusing on growth through the drill bit. We are pleased to announce our 2003 financial results and operational achievements.
Achievements for 2003 include:
- 33% increase in production volumes
- 117% increase in proved reserves
- 56% increase in net asset value per share
- Reverse takeover of Kerr Energy Limited
- Acquisition of Replay Resources Limited
- Drilled 14 gross (13.3 net) wells (77% success ratio)
- 5 cased gas wells awaiting tie-in, expected production in second quarter of 2004 <<
Highlights - Financial
For the three months For the years
ended December 31 ended December 31
2003 2002 2003 2002
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Financial ($000s)
Petroleum & natural gas
revenues (net of hedges) 1,120 671 4,007 2,925 Other income 17 4 48 12 Royalties (net of ARTC) (144) (55) (434) (239) Operating costs (246) (47) (802) (429) General and Administrative (259) (240) (526) (496) Interest 13 (2) (49) (46) Current taxes - (6) - (49) ------------------------------------------------------------------------- Cash flow from operations 501 325 2,244 1,678 Depletion and depreciation (735) (247) (1,674) (887) Provision for future site restoration (29) (85) (79) (85) Future tax (expense) reduction 128 (39) 19 (79) ------------------------------------------------------------------------- Net earnings (loss) (135) (46) 509 628 ------------------------------------------------------------------------- -------------------------------------------------------------------------
Outstanding shares
Weighted average -
basic and diluted 4,404,156 3,325,125 Period end - basic and diluted 5,968,394 3,998,354 5,968,394 3,998,354
Cash flow - basic and
diluted ($/share) 0.09 0.09 0.51 0.50 Earning (loss) - basis and diluted ($/share) (0.04) (0.01) 0.12 0.19 ------------------------------------------------------------------------- -------------------------------------------------------------------------
Highlights - Operations
For the three months For the years
ended December 31 ended December 31
2003 2002 2003 2002
-------------------------------------------------------------------------
Production
Oil and liquids (bbls/d) 292 267 300 272 Natural gas (mcf/d) 717 - 363 - Boe/d at 6:1 412 267 361 272 Total boe produced 37,883 24,562 131,674 99,283 -------------------------------------------------------------------------
Prices
Oil and liquids (net
of hedge) ($/bbl) 26.69 27.34 28.98 29.46 Natural gas ($/mcf) 6.09 - 6.26 - -------------------------------------------------------------------------
Per BOE ($)
Petroleum and natural gas
revenues (net of hedge) 29.55 27.34 30.43 29.46 Other income 0.44 0.17 0.36 0.12 Royalties (net of ARTC) (3.80) (2.23) (3.29) (2.40) Operating costs (6.49) (1.90) (6.09) (4.32) ------------------------------------------------------------------------- Field netback 19.70 23.38 21.41 22.86 General and Administrative (6.83) (9.82) (4.00) (5.00) Interest 0.34 (0.07) (0.37) (0.46) Current taxes - (0.25) - (0.50) ------------------------------------------------------------------------- Cash flow from operations 13.21 13.24 17.04 16.90 Depletion and depreciation (19.39) (10.03) (12.72) (8.93) Provision for future site restoration (0.77) (3.47) (0.60) (0.86) Future tax (expense) reduction 3.38 (1.61) 0.14 (0.79) ------------------------------------------------------------------------- Net earnings (loss) (3.57) (1.87) 3.86 6.32 ------------------------------------------------------------------------- -------------------------------------------------------------------------
Disclosure provided herein in respect of BOEs may be misleading, particularly if used in isolation. A BOE conversion ratio of 6 Mcf:1 Bbl is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.
MANAGEMENT'S DISCUSSION AND ANALYSIS
On January 20, 2003 Wrangler West Energy Corp. acquired all the issued and outstanding shares of Kerr Energy Limited ("Kerr") by way of a reverse takeover. For purposes of this discussion, the comparative figures are those of Kerr for the year ended December 31, 2002. The following information has been prepared by management and should be read in conjunction with the audited consolidated financial statements for the years ended December 31, 2003 and 2002. Petroleum and natural gas reserves and volumes are converted to a common unit of measure on a basis of six thousand cubic feet (mcf) of gas to one barrel (bbl) of oil.
Management's Discussion and Analysis contains the term "cash flow from operations", which should not be considered an alternative to, or more meaningful than, cash flow from operations as determined in accordance with Canadian generally accepted accounting principals as an indicator of Wrangler West's performance. Wrangler West's determination of cash flow from operations may not be comparable to that reported by other companies. Wrangler West presents cash flow from operations per share whereby per share amounts are calculated consistent with the calculation of earnings per share. The consolidated statement of cash flows in the audited annual consolidated financial statements presents the reconciliation between net earnings and cash flow from operations. "Cash flow from operations" and "funds from operations" as presented in the consolidated financial statements are terms that are used synonymously.
Production
Daily Production Three months Twelve months
ended December 31 ended December 31
2003 2002 % 2003 2002 %
-------------------------------------------------------------------------
Oil & liquids (bbl/d) 291 267 9 300 272 10
Gas (mcf/d) 717 - - 363 - -
BOE at 6:1 411 267 54 361 272 33
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Production for the year ended December 31, 2003 averaged 361 boe/d compared to 272 boe/d for the year ended December 31, 2002, representing a 33% increase. The production increase in 2003 was primarily due to the addition of natural gas production. The Company did not produce any natural gas in 2002.
Revenues
Production revenues ($000s) Three months Twelve months
ended December 31 ended December 31
2003 2002 % 2003 2002 %
-------------------------------------------------------------------------
Oil and liquids (net of
hedge) 718 671 7 3,176 2,925 9
Natural gas 402 - - 831 - -
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Petroleum & natural gas
revenues 1,120 671 67 4,007 2,925 37
Production revenues Three months Twelve months
ended December 31 ended December 31
2003 2002 % 2003 2002 %
-------------------------------------------------------------------------
Oil and liquids (net
of hedge) ($/bbl) 26.69 27.34 (2) 28.98 29.46 (2)
Natural gas ($/mcf) 6.09 - - 6.26 - -
Petroleum & natural gas
revenues ($/boe) 29.55 27.34 8 30.43 29.46 3
Gross revenue for the year ended December 31, 2003 was $4,006,533 compared to $2,924,918 for the year ended December 31, 2002. The 37% increase was a result of increased production during 2003. The Company received an average oil and liquid price of $28.98 per barrel for 2003 compared to $29.46 per barrel for 2002. The average gas price received for 2003 was $6.26 per mcf.
From time to time, Wrangler West enters into hedging transactions that are designed to protect the Company's ability to achieve its capital budget. During 2003, the Company entered into a fixed price contract for the delivery of 150 bbls/d at a price of $27.80 US ($43.91 Cdn) WTI for the period from May 1, 2003 to April 30, 2004. The Company made net settlement payments of $300,368 for the year ended December 31, 2003.
Royalties
Royalties ($000s) Three months Twelve months
ended December 31 ended December 31
2003 2002 % 2003 2002 %
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Crown 164 105 56 471 289 63
Gross overriding 13 18 (25) 71 18 294
ARTC (33) (68) (51) (108) (68) 59
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Total royalties 144 55 162 434 239 81
Royalties ($/boe) Three months Twelve months
ended December 31 ended December 31
2003 2002 % 2003 2002 %
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Crown 4.32 4.27 1 3.57 2.91 23
Gross overriding 0.36 0.73 (51) 0.54 0.18 200
ARTC (0.88) (2.77) (68) (0.82) (0.69) 19
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Total royalties 3.80 2.23 70 3.29 2.40 37
Royalties, net of ARTC, for the year ended December 31, 2003 were $433,507 compared to $238,892 for 2002. The 81% increase in royalties during 2003 was a result of increased production. The Company experienced a low corporate royalty rate during 2002 due to the fact that all production was oil production with several wells on royalty holiday. The new gas wells contributing to the production increase in 2003 do not have royalty holidays and therefore have increased the average royalty rate. The Company expects the corporate royalty rate to continue to increase in the next year as some of the oil wells will no longer be on royalty holiday. The corporate average royalty rate of $3.29 per boe for 2003 remains below the industry average royalty rate, despite the increase in total royalties.
Operating Costs
Three months Twelve months
ended December 31 ended December 31
2003 2002 % 2003 2002 %
-------------------------------------------------------------------------
Operating costs - $000's 246 47 428 802 429 87
Operating costs - $/boe 6.49 1.90 242 6.09 4.32 41
Operating costs for the year ended December 31, 2003 were $801,677 ($6.09 per boe) compared to $428,529 ($4.32 per boe) for the year ended December 31, 2002. Operating costs of $6.09 was in line with our corporate objective.
Netbacks
Field netback Three months Twelve months
ended December 31 ended December 31
2003 2002 % 2003 2002 %
-------------------------------------------------------------------------
Oil ($/bbl) 19.03 23.38 (19) 21.01 22.86 (8) Natural gas ($/mcf) 3.53 - - 3.89 - - Natural gas liquids ($/bbl) 29.02 - - 29.02 - - ------------------------------------------------------------------------- Field netback ($/boe) 19.70 23.38 (16) 21.41 22.86 (6)
Field netbacks for the year ended December 31, 2003 were $21.41 per boe compared to $22.86 per boe for the year ended December 31, 2002. The increase in royalties and operating costs contributed to the 6% decrease in field netbacks. The method of calculating the field netbacks are shown in the above table. Royalties and operating costs have been deducted from gross revenues and other income.
General & Administrative (G&A)
Three months Twelve months
ended December 31 ended December 31
2003 2002 % 2003 2002 %
-------------------------------------------------------------------------
G&A ($000s) 259 240 8 526 496 6
G&A ($/boe) 6.83 9.82 (30) 4.00 5.00 (20)
General and administrative costs for the year ended December 31, 2003 were $526,489 compared to $496,231 for the year ended December 31, 2002. The addition of Replay Resources Limited management has partially contributed to the increase along with an increase in office space. The Company acquired enough office space prior to year end to accommodate future staff as the Company grows. On a unit basis, G&A decreased from $5.00 per boe to $4.00 per boe. The 20% decrease is a result of increased production volumes without a significant increase in total costs. During 2003, the Company capitalized $345,000 of G&A associated with its exploration department. The Company did not capitalize any G&A during 2002.
Interest Expense
Three months Twelve months
ended December 31 ended December 31
2003 2002 % 2003 2002 %
-------------------------------------------------------------------------
Interest ($000s) (13) 2 (874) 49 46 7
Interest ($/boe) (0.34) 0.07 (602) 0.37 0.46 (20)
Interest expense for the year ended December 31, 2003 was $48,717 compared to $45,670 for the year ended December 31, 2002. Interest expense for 2003 includes bank interest of $20,036 and Part XII.6 tax of $28,681 on flow- through funds raised in 2002. Interest expense of $45,670 for 2002 relates to Part XII.6 tax on flow-through funds raised in 2001.
Depletion, Depreciation and Site Restoration
Three months Twelve months
ended December 31 ended December 31
2003 2002 % 2003 2002 %
-------------------------------------------------------------------------
Depletion & depreciation
($000s) 735 247 198 1,674 887 89
Depletion & depreciation
($/boe) 19.39 10.03 93 12.72 8.93 42
Provision for future site
restoration ($000s) 29 85 (66) 79 85 (7)
Provision for future site
restoration ($/boe) 0.77 3.47 (78) 0.60 0.86 (30)
Depletion and depreciation expense for the year ended December 31, 2003 was $1,674,402 compared to $886,650 for the year ended December 31, 2002. Depletion and depreciation increased 42% on a unit basis. The increase was partially due to compliance with the new reserve reporting requirements (NI 51-101) and an increase in the Company's depletable base. Capital investments made late in the year resulted in reserve increases that are not fully recognized for purposes of the depletion calculation.
Site restoration expense for the year ended December 31, 2003 was $79,288 compared to $85,157 for the year ended December 31, 2002.
Earnings
Three months Twelve months
ended December 31 ended December 31
2003 2002 % 2003 2002 %
-------------------------------------------------------------------------
Net earnings (loss) ($000s) (135) (46) 194 509 628 (19)
Net earnings (loss) ($/boe) (3.57) (1.87) 91 3.86 6.32 (39)
Earning (loss) - basis &
diluted ($/share) (0.04) (0.01) 300 0.12 0.19 (35)
Net earnings for the year ended December 31, 2003 were $508,823 ($0.12 per share) compared to $627,782 ($0.19 per share) for 2002. The increase in depletion and depreciation contributed to the 19% decrease in net earnings. In addition, a 32% increase in weighted average number of shares outstanding for the year contributed to the 37% decrease in earnings per share.
Cash Flow and Liquidity
Three months Twelve months
ended December 31 ended December 31
2003 2002 % 2003 2002 %
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Cash flow from operations
($000s) 501 325 54 2,244 1,678 34
Cash flow from operations
($/boe) 13.21 13.24 (0) 17.04 16.90 1
Cash flow - basic & diluted
($/share) 0.09 0.09 - - 0.50 (99)
Cash flow for the year ended December 31, 2003 was $2,243,867 ($0.51 per share) compared to $1,678,276 ($0.50 per share) for the year ended December 31, 2002. On a per share basis, cash flow remained constant year over year due to a 32% increase in the weighted average number of shares outstanding for the year.
The Company had net debt of $2.6 million at December 31, 2003 which was a result of the fourth quarter expenditure program initiated to satisfy 2002 flow through obligations. The net debt was also partially affected by a private placement of flow through and regular common shares for proceeds of $1.6 million in December, 2003.
The Company currently has a revolving demand credit facility of $3.5 million. The credit facility will be reviewed in the second quarter of 2004 and increased as a result of reserve additions.
At December 31, 2003, Wrangler West's market value of common shares was $38 million based on a December 31 closing price of $5.91 per share. There were 5,968,394 shares outstanding at December 31, 2003.
Total Capitalization
Common shares outstanding - December 31, 2003 5,968,394
Closing market price - December 31, 2003 $ 5.91
Market value of common shares $ 35,273,209
Net debt 2,566,486
------------
Total capitalization - December 31, 2003 $ 37,839,695
Total Assets
Wrangler West had total assets of $18,118,875 at December 31, 2003, consisting of $1,392,060 of current assets and $16,726,815 of petroleum and natural gas properties. The Company had total assets of $7,489,200 total assets at December 31, 2002, consisting of $2,120,654 of current assets and $5,268,546 of petroleum and natural gas properties.
Capital Expenditures
Cash capital expenditures for the year ended December 31, 2003 totalled $8.6 million compared to $2.8 million one year earlier. The Company expended an additional $4.5 million by issuing shares to acquire the petroleum and natural gas properties of Replay Resources Limited. Exploration and development accounted for 61% of the cash capital expenditures. The remainder of the cash capital expenditures related to equipment (23%) and land (16%).
Capital Expenditures ($000s)
Amount % of total
Land costs 1,380 16%
Seismic costs 646 7%
Drilling and completion costs 4,655 54%
Tangible production equipment 1,941 23%
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Cash capital expenditures 8,622 100%
Replay acquisition 4,510
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Total 13,132
Future Income Taxes
Three months Twelve months
ended December 31 ended December 31
2003 2002 % 2003 2002 %
-------------------------------------------------------------------------
Future tax expense
(reduction) ($000s) (128) 39 (425) (19) 79 (124)
Future tax expense
(reduction) ($/boe) (3.38) 1.61 (310) (0.14) 0.79 (118)
There was a future income tax reduction of $18,646 for the year ended December 31, 2003 compared to a future income tax expense of $78,687 for the year ended December 31, 2002. The reduction is primarily due to the effect of future changes in income tax rates.
This document contains statements that are forward-looking, such as those relating to results of operations and financial condition, capital expenditures, financing, commodity prices, costs of production and the magnitude of oil and natural gas reserves. By their nature, forward-looking statements are subject to numerous risks and uncertainties that could significantly affect anticipated results in the future and, accordingly actual results may differ materially from those predicted. The forward-looking statements contained in this annual report are as of April 16, 2004 and are subject to change after this date. Readers are cautioned 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. Wrangler West Energy Corp. disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
Net Asset Value
($000s, except per share) 2003 2002
Reserves value 1 24,152 9,469
Undeveloped land value 2 1,379 250
Seismic value 2 687 -
Net debt (2,567) 486
Future site restoration (174) (95)
-------------------------
Total 3 23,477 10,110
-------------------------
Outstanding shares 5,968,394 3,998,354
Net asset value per share 3 3.93 2.53
1 Proved plus probable, discounted at 10% before income taxes
2 As estimated by the Company
3 Excludes future income taxes
Finding and Development Costs
2003 2002
Capital expenditures ($000s) 13,133 2,828
Undeveloped land (1,379) (250)
-----------------------
11,754 2,578
-----------------------
-----------------------
Proved reserve additions and revisions (mboe) 778 554 Finding and development costs - proved ($/boe) 15.11 4.65
Proved and probable reserve additions and
revisions (mboe) 1,322 685 Finding and development costs - proved & probable ($/boe) 8.89 3.76
The aggregate of the exploration and development costs incurred in the most recent financial year and the change during that year in estimated future development costs generally will not reflect total finding and development costs related to reserves additions for that year.
Wrangler West's 2003 land acquisition and drilling program culminated in significant growth in reserves. Sproule Associates Limited evaluated Wrangler West's reserves as at December 31, 2003. Total proved plus probable reserves were determined to be 1,876 mboe as at December 31, 2003, a 174% increase from 685 mboe as at December 31, 2002. Proved reserves as at December 31, 2003 were 1,200 mboe, a 117% increase from 554 mboe as at December 31, 2002.
Proved and probable net present value (before income taxes, including ARTC, at a discount factor of 10%) increased to $24 million by the end of 2003.
The table below summarizes Wrangler West's reserves using forecast prices and costs as of December 31, 2003.
Wrangler West Energy Corporation
Summary of the Evaluation of the Company's P&NG Reserves
(As of December 31, 2003)
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Remaining Reserves Net Present Values
--------------------- --------------------------
Company Before Income Taxes (M$)
--------------------- --------------------------
At At At At
Gross Gross Net 0% 10.0% 12.0% 15%
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Light/Medium Oil (Mbbl)
Proved Developed
Producing 352.5 352.5 339.3 4,797 4,173 4,069 3,924
Total Proved 352.5 352.5 339.3 4,797 4,173 4,069 3,924
Probable 176.7 176.7 164.0 2,234 1,488 1,382 1,243
Total Proved plus
Probable 529.2 529.2 503.3 7,030 5,661 5,451 5,166
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Pipeline Gas (MMcf)
Proved Developed
Producing 2,290 2,162 1,695 6,811 5,339 5,124 4,837
Proved Undeveloped 2,399 2,309 1,786 9,155 7,336 7,054 6,669
Total Proved 4,690 4,472 3,481 15,967 12,675 12,178 11,506
Probable 2,841 2,621 2,070 9,783 5,634 5,131 4,497
Total Proved plus
Probable 7,531 7,093 5,551 25,750 18,309 17,309 16,003
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Natural Gas Liquids
(Mbbl) (Values included
with gas)
Proved Developed
Producing 13.5 12.3 7.9
Proved Undeveloped 93.3 89.8 62.5
Total Proved 106.9 102.1 70.5
Probable 69.2 62.1 43.0
Total Proved plus
Probable 176.1 164.2 113.5
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Corporate
Proved Developed
Producing 230 182 175 165
Total Proved 230 182 175 165
Total Proved plus
Probable 230 182 175 165
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GRAND TOTAL (Mboe)
Proved Developed
Producing 747.7 725.1 629.7 11,838 9,694 9,368 8,925
Proved Undeveloped 493.2 474.7 360.3 9,155 7,336 7,054 6,669
Total Proved 1,240.9 1,199.9 989.9 20,993 17,030 16,422 15,594
Probable 719.5 675.7 552.0 12,017 7,122 6,513 5,740
Total Proved plus
Probable 1,960.4 1,875.6 1,542.0 33,010 24,152 22,935 21,334
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>>
Wrangler West Energy Corp. is a public oil and gas producer based in
Calgary trading on the TSX Venture Exchange under the symbol "WX".
The TSX Venture Exchange has not reviewed and does not accept responsibility for the adequacy or accuracy of this release.
/For further information: William E. Kerr, President, bill(at)wranglerwest.ca, Telephone: (403) 290-6801, OR JoAnne Dorval-Dronyk, CFO, joanne(at)wranglerwest.ca, Telephone: (403) 290-6807/
