Aurora Oil & Gas Corporation Announces First Quarter 2008 Results
TRAVERSE CITY, Mich., May 9, 2008 /PRNewswire-FirstCall via COMTEX/ --
Company: Aurora Oil & Gas Corp (AOG)
Aurora Oil & Gas Corporation (Amex: AOG) today reported revenues of $6.9 million for the quarter ended March 31, 2008, representing a 10% increase from the same period in 2007. The net loss for the quarter totaled $1.2 million or ($0.01) per basic and diluted share, as compared to a net loss of $0.7 million or ($0.01) per basic and diluted share in 2007.
Mr. William W. Deneau, Chairman and Chief Executive Officer, commented, "As many are aware, we are undergoing a very important restructuring of our capital structure in the middle of a turbulent credit environment. Though our work is not quite complete, we are optimistic for a solid resolution that would allow our team to return to drilling our undeveloped properties. In the interim, we are focused on three things: Increasing production, managing costs, and optimizing our asset portfolio. All of these efforts will allow us to not only improve our business in the interim, but emerge as a stronger, more efficient enterprise."
At this time, the Company has elected to forego hosting a conference call. When more conclusive information is available about proposed changes in corporate and capital structure, and anticipated capital expenditures, management will hold a conference call and provide appropriate detail. In the interim, all questions may be directed to the Investor Relations contact below.
Financial Review
Oil and natural gas production revenues totaled over $6.4 million on sales of 824 million cubic feet of natural gas equivalent (Mmcfe) for the quarter. This is a 13% increase over the first quarter of 2007. In addition, production revenues recognized for the quarter were reduced by $1.0 million related to unrealized losses in fair value on financial hedges. Excluding this adjustment, first quarter production revenues would have increased to a record high of $7.4 million.
Expenses totaled $8.1 million, a 15% increase from the same quarter in 2007. The primary driver of the change was a 45% increase in production and lease operating expenses ("LOE"). The $0.9 million increase in LOE was the result of increased operations, increased energy costs, and repairs and maintenance. General and administrative expenses dropped $0.3 million from the prior year, a result of reduced employee levels and reduced consulting services. This was offset by a $0.5 million increase in interest expense from higher utilization of debt.
Though considered a non-GAAP measure, excluding the negative adjustment to revenues from the unrealized loss in fair value from financial hedges, and excluding stock-based compensation ($0.7 million), the net income for the first quarter would have reached $0.5 million or $0.00 per basic and diluted share for the quarter.
Additional detail on the financial results can be found in the Company's Form 10-Q filed May 9, 2008. This form can be retrieved from the Securities and Exchange Commission or via the Company website at http://www.auroraogc.com/SEC_Filings.htm . Selected historical quarterly financial data is provided for reference below.
Drilling Activities
During the first quarter of 2008, drilling activities were limited as a result of weather conditions, state and county regulations, capital availability, and overall restructuring efforts which began in 2007. Five (1.53 net) wells were drilled by Aurora's partners, concentrated in the Michigan and Texas properties. A summary of the Company's well inventory on March 31, 2008 is as follows:
New Albany
Antrim Antrim Non- New Albany Non-
Well Status as of Operated Operated Operated Operated
March 31, 2008 Gross Net Gross Net Gross Net Gross Net
Producing 198 188.71 391 93.96 6 6.00 25 1.25
Waiting on Hook-Up 1 1.00 5 1.00 0 0.00 0 0.00
Res. Assessment 9 8.91 17 3.45 1 0.49 7 1.95
Total 208 198.62 413 98.41 7 6.49 32 3.20
Well Status as of Other Total
March 31, 2008 Gross Net Gross Net
Producing 29 14.48 649 304.40
Waiting on Hook-Up 3 2.18 9 4.18
Res. Assessment 4 2.26 38 17.06
Total 36 18.92 696 325.64
First Quarter Production Activities
Total company production during the first quarter of 2008 averaged 9,060 Mcfe per day, an improvement over the previous year, which averaged 8,140 Mcfe per day. As summarized in the table below, the first quarter's production decreased from the fourth quarter of 2007, largely a result of increased downtime from weather conditions and additional repairs and maintenance at the Company's Michigan and Indiana properties.
The Company's Antrim shale properties experienced severe winter weather, which resulted in freezing water lines, complications with compression systems, and limited access to wells. Also, the South Knox project in Indiana experienced significant flooding, which resulted in a complete shutdown of the production system. These production issues led to lower than expected production revenues and higher production expenses.
A summary of production for the past two quarters is provided below:
Estimated Production by
Play/Trend (net mcfe) Q1 2008 Q4 2007
Total Daily Average Total Daily Average
Antrim Shale 740,841 8,141 810,373 8,808
New Albany Shale 38,552 424 19,932 217
Other 45,096 495 41,652 453
Total 824,489 9,060 871,957 9,478
Operated 536,947 5,900 579,256 6,296
Non-operated 287,542 3,160 292,701 3,182
Total 824,489 9,060 871,957 9,478
Update on Acreage
The Company's acreage has grown slightly from December 31, 2007. The primary increase occurred in the New Albany shale, as leasing activities were concentrated in areas targeted for the upcoming operated drilling campaign. Following is a summary of the Company's acreage inventory on March 31, 2008.
March 31, 2008
Acreage by Play/Trend Gross Net
Michigan Antrim shale 310,470 155,733
Indiana Antrim shale 15,837 15,837
New Albany shale 849,900 447,013
Woodford shale 36,802 32,753
Other 88,177 66,285
Total 1,301,186 717,621
Update on Proved Reserves
The Company has generated an internal reserve report which integrates the recent increase in energy prices. Though the SEC method, as reported in our Form 10-K/A, filed April 11, 2008, is the required metric, a typical economic PV-10 valuation of proved reserves would incorporate market-based pricing.
In this updated scenario, the approved Schlumberger Data & Consulting
Services reserve report from December 31, 2007 has been updated with first
quarter 2008 production, the April 23, 2008 NYMEX forward curve (4 years, then
held constant for the remaining asset life), a location basis differential,
and the Company's existing hedge positions. Based on this scenario, the
valuation of the Company's reserves approaches $310 million, as summarized
below:
Pre-Tax PV-10 ($MM)
Play/Trend (net mcfe) PDP PDNP PUD Total
Antrim Shale 173.0 11.6 45.5 230.1
New Albany Shale 23.8 6.9 33.6 64.3
Other 4.4 4.7 5.5 14.6
Total 201.2 23.2 84.6 309.0
Operated 146.8 15.8 57.0 219.6
Non-operated 54.4 7.4 27.6 89.4
Total 201.2 23.2 84.6 309.0
Update on Capital Restructuring
Earlier this year, the Company determined that its existing capital structure was not adequate to fund its anticipated growth. Currently, Aurora is able to maintain its operations through existing cash balances and internally generated cash flows from sales of oil and natural gas production. However, management believes the best long-term method of funding the Company's growth strategy is with project financing for its emerging plays in the New Albany shale and the Woodford shale.
Aurora's goal is to establish separate financing entities for each play while ensuring the financing structure is non-recourse to its parent entity. Its current credit facilities are reserve-based loans which are appropriate for a mature development play like the Antrim shale. The Company has been in the process of negotiating several term sheets to replace existing credit facilities and establish project financing for its two primary development opportunities.
Mr. Deneau commented, "We expect that our restructuring efforts will result in several key improvements: A flexible capital structure with a blend of project financing and reserve-based lending; an emphasis on science and engineering; a focus on financial modeling, risk analysis and cost control; a well-defined plan for asset development; and, a reduced risk profile via an optimized asset portfolio. We believe this structure is the solid foundation we need to build a successful enterprise."
Annual Shareholder Meeting
The Company has scheduled its annual shareholder meeting for August 15, 2008, to be held in Traverse City, Michigan. At that time, conclusive results from the Company's corporate restructuring efforts may be concluded and discussed in full by Aurora's management team.
Information that would have been included in a definitive Proxy Statement (Form DEF 14A), such as the "Compensation Disclosure and Analysis," has been included in Part Three of Form 10-K/A, filed on April 11, 2008. All filings required by the Securities and Exchange Commission ("SEC") have been completed and filed with the SEC in accordance with its laws and regulations.
Selected Financial Data
The following tables set forth Aurora's financial information as of and for each of the periods indicated. You should review this information together with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the consolidated financial statements and related notes included in Aurora's Form 10-Q for the quarter ended March 31, 2008 and/or the consolidated financial statements and related notes included in Aurora's Form 10-K/A for the year ended December 31, 2007.
For 3 months ended
Statement of Operations Data March 31, 2008 March 31, 2007
Revenues:
Oil and natural gas sales $6,442,558 $5,929,576
Pipeline transportation and processing 224,171 129,268
Field service and sales 123,559 189,518
Interest and other 102,687 13,513
Total revenues 6,892,975 6,261,875
Expenses:
Production taxes 339,314 263,098
Production and lease operating expense 2,787,724 1,925,893
Pipeline and processing operating expense 89,223 113,420
Field services expense 119,155 154,272
General and administrative expenses 1,997,061 2,260,343
Oil and natural gas depletion and
amortization 979,908 746,865
Other assets depreciation and amortization 355,773 568,606
Interest expense 1,462,412 981,532
Taxes (refunds), other (71,292) (25,182)
Total expenses 8,059,278 6,988,847
Loss before minority interest 1,166,303) (726,972)
Minority interest in (income) loss of
subsidiaries (15,105) (13,347)
Net loss $(1,181,408) $(740,319)
Net loss per common share - basic and
diluted $(0.01) $(0.01)
Weighted average common shares outstanding -
basic and diluted 102,227,258 101,552,888
Cash Flow Data
Cash provided by operating activities $3,074,343 $1,638,456
Cash used by investing activities (7,363,862) (18,629,631)
Cash provided by financing activities 9,189,959 17,405,545
As of March 31, As of December 31,
2008 2007
Balance Sheet Data
Cash and cash equivalents $7,326,118 $2,425,678
Other current assets 5,643,944 8,901,774
Oil and natural gas properties, net
(using full cost accounting) 214,246,523 209,818,344
Other property and equipment, net 10,193,032 10,365,599
Other assets 22,477,820 23,160,273
Total assets $259,887,437 $254,671,668
Current liabilities $ 12,835,007 $ 8,580,990
Long-term debt, net of current maturities 126,408,997 113,835,028
Minority interest in nets assets of
subsidiaries 127,766 112,661
Shareholders' equity 120,515,667 132,142,989
Total liabilities and shareholders'
equity $259,887,437 $254,671,668
About Aurora Oil & Gas Corporation
Aurora Oil & Gas Corporation is an independent energy company focused on unconventional natural gas exploration, acquisition, development and production with its primary operations in the Antrim shale of Michigan, the New Albany shale of Indiana and Kentucky, and the Woodford shale of Oklahoma.
Cautionary Note on Forward-Looking Statements
Statements regarding future events, occurrences, circumstances, activities, performance, outcomes, beliefs and results, including future revenues and production, renegotiation of existing credit facilities, the procurement of new credit facilities, anticipated capital availability, anticipated capital expenditures, drilling results, and plans for future growth through acquisition, drilling or production are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Although we believe that the forward-looking statements described are based on reasonable assumptions, we can give no assurance that they will prove accurate. Important factors that could cause our actual results to differ materially from those included in the forward-looking statements include the timing and extent of changes in commodity prices for oil and gas, drilling and operating risks, the availability of drilling rigs, changes in laws or government regulations, unforeseen engineering and mechanical or technological difficulties in drilling the wells, operating hazards, weather-related delays, the loss of existing credit facilities, availability of capital, and other risks more fully described in our filings with the Securities and Exchange Commission. All forward-looking statements contained in this release, including any forecasts and estimates, are based on management's outlook only as of the date of this release and we undertake no obligation to update or revise these forward-looking statements, whether as a result of subsequent developments or otherwise.
SOURCE Aurora Oil & Gas Corporation
http://www.auroraogc.com
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Company: Aurora Oil & Gas Corp (AOG)
