Cub Energy Inc. Announces Q2 2017 Financial and Operational Results
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E-mailHOUSTON, TEXAS -- (Marketwired) -- 08/22/17 -- Cub Energy Inc. ("Cub" or the "Company") (TSX VENTURE: KUB), a Ukraine-focused upstream oil and gas company, announced today its unaudited financial and operating results for the second quarter of 2017. All dollar amounts are expressed in United States Dollars unless otherwise noted. This update includes results from KUB-Gas LLC ("KUB-Gas"), which Cub has a 35% equity ownership interest, Tysagaz LLC ("Tysagaz"), Cub's 100% owned subsidiary and CNG LLC ("CNG"), which Cub has a 50% equity ownership interest.
Mikhail Afendikov, Chairman and CEO of Cub said: "We are pleased to report income from our equity investment during the six months ended June 30 2017 amounted to $3.6 million and our net income was $0.9 million. During the most recent quarter, the Company made a capital commitment to purchase a new nitrogen rejection unit with the goal of re-commencing production on our wholly-owned western Ukraine RK field. To date in 2017, the Company has received $1.7 million in dividends from its eastern Ukraine investment."
Operational Highlights
-- Production averaged 1,004 boe/d (97% weighted to natural gas and the
remaining to condensate) for the quarter ended June 30, 2017, which
decreased 15% as compared to the 1,185 boe/d in the comparative 2016
quarter and a decrease of 9% as compared to the 1,107 boe/d average for
the first quarter ended March 31, 2017.
-- Achieved average natural gas price of $5.71/Mcf and condensate price of
$65.93/bbl during the quarter ended June 30, 2017 as compared to
$5.55/Mcf and $52.89/bbl for the comparative 2016 quarter and compared
to $6.88/Mcf and condensate price of $62.70/bbl during the quarter ended
March 31, 2017. Gas prices are historically lower during the summer
months due to seasonal heating demand in Ukraine.
-- In June 2017, the Company contracted to purchase a new Nitrogen
Rejection Unit ("NRU") to re-commence production on the wholly-owned RK
field in western Ukraine.
-- A 118 square kilometer 3D seismic program was completed during the
quarter on the Uzhgorod licence which was largely funded by our partner.
The 3D seismic will be interpreted and the Company hopes to identify
drill targets.
-- KUB-Gas completed a 150 kilometer 2D seismic survey during the quarter
on the West Olgovskoye licence in eastern Ukraine. KUB-Gas will utilize
the 2D seismic survey to identify drill targets.
-- During the second quarter of 2017, KUB-Gas spud the Olgovskoye-26 ("O-
26") well in eastern Ukraine. KUB-Gas will be testing the B-14 zone
after unproductive tests of the S-5 and S-4 zones.
Financial Highlights
-- Netbacks of $21.53/boe or $3.59/Mcfe for the quarter ended June 30, 2017
as compared to netback of $18.20/Boe or $3.03/Mcfe for the comparative
2016 quarter.
-- During the three months ended June 30, 2017, the Company received
dividends of approximately $1.0 million (2016 - $Nil) from KUBGAS
Holdings Limited ("KUBGAS"), which owns 100% of KUB-Gas. Subsequent to
the quarter ended June 30, 2017, the Company received a further $0.4
million in dividends from KUBGAS. The National Bank of Ukraine ("NBU")
eased certain capital controls by allowing limited dividends. The
Company expects to continue to repatriate dividends to the extent
possible and allowed by the NBU, although there are no assurances the
NBU will continue to ease restrictions indefinitely.
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Three Months Three Months Six Months Six Months
Ended Ended Ended Ended
(in thousands of US June 30, June 30, June 30, June 30,
Dollars) 2017 2016 2017 2016
----------------------------------------------------------------------------
Petroleum and natural
gas revenue 6 - 24 1,456
----------------------------------------------------------------------------
Pro-rata petroleum and
natural gas revenue(1) 3,223 3,873 7,406 9,776
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Revenue from gas trading 2,040 - 6,035 -
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Net income 15 583 931 2,040
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Income per share - basic
and diluted 0.00 0.00 0.00 0.01
----------------------------------------------------------------------------
Funds generated from
operations(2) 124 (966) (646) (1,075)
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Pro-rata funds generated
from operations(3) (1,143) 2,326 248 3,541
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Capital expenditures(4) 12 24 810 162
----------------------------------------------------------------------------
Pro-rata capital
expenditures(4) 1,220 46 2,688 336
----------------------------------------------------------------------------
Pro-rata netback ($/boe) 21.53 18.20 24.64 22.05
----------------------------------------------------------------------------
Pro-rata netback ($Mcfe) 3.59 3.03 4.11 3.67
----------------------------------------------------------------------------
----------------------------------------------------
June 30, December 31,
2017 2016
----------------------------------------------------
Working capital 556 3,255
----------------------------------------------------
Cash and cash
equivalents 4,034 4,585
----------------------------------------------------
Long-term debt 5,934 6,332
----------------------------------------------------
Notes:
(1) Pro-rata petroleum and natural gas revenue is a non-IFRS measure that
adds the Company's petroleum and natural gas revenue earned in the
respective periods to the Company's 35% equity share of the KUB-Gas
natural gas sales that the Company has an economic interest in.
(2) Funds from operations is a non-IFRS measure and is defined as cash flow
from operating activities, excluding changes in non-cash working
capital.
(3) Pro-rata funds from operations is a non-IFRS measure that adds the
Company's funds from operations in the respective periods to the
Company's 35% equity share of the KUB-Gas and 50% equity share of CNG
Holdings funds from operations that the Company has an economic
interest in.
(4) Capital expenditures includes the purchase of property, plant and
equipment and the purchase of exploration and evaluation assets. Pro-
rata capital expenditures is a non-IFRS measure that adds the Company's
capital expenditures in the respective periods to the Company's 35%
equity share of the KUB-Gas and 50% equity share of CNG Holdings
capital expenditures that the Company has an economic interest in.
Outlook
The Company expects KUB-Gas to drill one additional Olgovskoye field well in 2017, O-28, which will be self-funded by KUB-Gas. KUB-Gas will also commence a review and interpretation of a 150 kilometer 2D seismic survey on the West Olgovskoye licence in eastern Ukraine.
In western Ukraine, the Company committed to purchase a new NRU with a goal of resuming production at the RK field in the first quarter of 2018. Also in western Ukraine, CNG LLC completed a 118 square kilometer 3D seismic program and interpretation has commenced to identify drill targets.
Supporting Documents
Cub's complete quarterly reporting package, including the unaudited interim financial statements and associated Management's Discussion and Analysis, have been filed on SEDAR (www.sedar.com) and has been posted on the Company's website at www.cubenergyinc.com.
About Cub Energy Inc.
Cub Energy Inc. (TSX VENTURE: KUB) is an upstream oil and gas company, with a proven track record of exploration and production cost efficiency in Ukraine. The Company's strategy is to implement western technology and capital, combined with local expertise and ownership, to increase value in its undeveloped land base, creating and further building a portfolio of producing oil and gas assets within a high pricing environment.
For further information please contact us or visit our website: www.cubenergyinc.com.
Oil and Gas Equivalents
A barrel of oil equivalent ("boe") or units of natural gas equivalents ("Mcfe") is calculated using the conversion factor of 6 Mcf (thousand cubic feet) of natural gas being equivalent to one barrel of oil. A boe conversion ratio of 6 Mcf: 1 bbl (barrel) or a Mcfe conversion of 1bbl: 6 Mcf is, based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead and is not based on either energy content or current prices. While the boe ratio is useful for comparative measures, it does not accurately reflect individual product values and might be misleading, particularly if used in isolation. As well, given that the value ratio, based on the current price of crude oil to natural gas, is significantly different from the 6:1 energy equivalency ratio, using a 6:1 conversion ratio may be misleading as an indication of value.
The disclosure in this press release is prepared in accordance with NI 51-101 standards.
Reader Advisory
With the current cash resources, suspension of the RK field, uncertainty surrounding the successful installation of the NRU, dividend restrictions, currency fluctuations, reliance on a limited number of customers, and impact on carrying values, the Company may not have sufficient cash to continue the exploration and development activities. These matters raise significant doubt about the ability of the Company to continue as a going concern and meet its obligations as they become due.
Except for statements of historical fact, this news release contains certain "forward-looking information" within the meaning of applicable securities law. Forward-looking information is frequently characterized by words such as "plan", "expect", "project", "intend", "believe", "anticipate", "estimate" and other similar words, or statements that certain events or conditions "may" or "will" occur. Cub believes that the expectations reflected in the forward-looking information are reasonable; however there can be no assurance those expectations will prove to be correct. We cannot guarantee future results, performance or achievements. Consequently, there is no representation that the actual results achieved will be the same, in whole or in part, as those set out in the forward-looking information.
Forward-looking information is based on the opinions and estimates of management at the date the statements are made, and are subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ materially from those anticipated in the forward-looking information. Some of the risks and other factors that could cause the results to differ materially from those expressed in the forward-looking information include, but are not limited to: general economic conditions in Ukraine, the Black Sea Region and globally; political unrest and security concerns in Ukraine; industry conditions, including fluctuations in the prices of natural gas and foreign currency; governmental regulation of the natural gas industry, including environmental regulation; unanticipated operating events or performance which can reduce production or cause production to be shut in or delayed; failure to obtain industry partner and other fourth party consents and approvals, if and when required; competition for and/or inability to retain drilling rigs and other services; the availability of capital on acceptable terms; the need to obtain required approvals from regulatory authorities; stock market volatility; volatility in market prices for natural gas; liabilities inherent in natural gas operations; competition for, among other things, capital, acquisitions of reserves, undeveloped lands, skilled personnel and supplies; incorrect assessments of the value of acquisitions; geological, technical, drilling, processing and transportation problems; changes in tax laws and incentive programs relating to the natural gas industry; failure to realize the anticipated benefits of acquisitions and dispositions; and the other factors. Readers are cautioned that this list of risk factors should not be construed as exhaustive.
This cautionary statement expressly qualifies the forward-looking information contained in this news release. We undertake no duty to update any of the forward-looking information to conform such information to actual results or to changes in our expectations except as otherwise required by applicable securities legislation. Readers are cautioned not to place undue reliance on forward-looking information.
Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
Contacts: Cub Energy Inc. Mikhail Afendikov Chairman and Chief Executive Officer (713) 677-0439 [email protected] Cub Energy Inc. Patrick McGrath Chief Financial Officer (713) 577-1948 [email protected] www.cubenergyinc.com
Source: Cub Energy Inc.
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