CALGARY, ALBERTA–(Marketwired – April 28, 2017) – ROOSTER ENERGY LTD. (the “Company”) (www.roosterenergyltd.com) (TSX VENTURE:COQ) is pleased to announce it has filed on SEDAR (www.sedar.com) its Forms 51-101F1, 51-101F2 and 51-101F3 which includes summary data on the Company’s proved and probable reserves as of December 31, 2016. Additionally, the Company has filed its audited financial statements, related management discussion and analysis (“MD&A”) for the three months (“Q4 2016”) and twelve months ended December 31, 2016 (“FY 2016”). Selected financial and operational information for Q4 2016, FY 2016 is outlined below and should be read in conjunction with the financial statements and related MD&A. All dollar amounts herein are expressed in U.S. dollars.
HIGHLIGHTS:
- Q4 2016 EBITDA Totaled US$6.3 Million Driven By Well Services Activity
- FY 2016 EBITDA Totaled US$21.5 Million Compared To $24.1 Million In FY 2015
- Proved & Probable Reserves Total 12.1 MMBOE, NPV-10% US$126.9 Million
In Q4 2016, the Company produced 149,690 boe, compared to 205,010 boe produced in Q4 2015, a 27% decrease. The lower sales volumes, combined with a significant drop in the gain associated with the Company’s derivative contracts, resulted in a 66% drop in Oil & Gas segment revenues in Q4 2016 to $2.5 million. The decline in revenues was partially mitigated by a 35% drop in lease operating expenses. The Oil & Gas segment reported EBITDA of $0.4 million in Q4 2016 compared to a $0.8 million in Q4 2015, representing a 49% drop from the prior year period.
Utilization at the Well Services segment averaged 19% in Q4 2016, compared to 30% in Q4 2015, a decline of 11 percentage points, as lower cash flows continued to weigh on operator budgets and activity levels. As a result, Well Services revenues declined 69% in Q4 2016 to $1.8 million. However, lower revenues were largely offset by a 62% drop in operating expenses. Decommissioning revenues fell 42% from the prior year period to $6.1 million, due to reduced activity levels associated with the three Cochon fields. In July, 2016, the Company announced that it had entered into a $22 million decommissioning contract that was expected to be completed by the end of the year; however, most of the work related to this contract was deferred to Q1 2017. The Well Services segment reported EBITDA of $6.7 million in Q4 2016 compared to $11.9 million in Q4 2015, which represents a 44% drop from the prior year period.
In Q4 2016, the Company’s consolidated EBITDA totaled $6.3 million compared to $11.4 million in Q4 2015, representing a 45% drop from the prior year period. The Company recorded a net loss of $66.8 million in Q4 2016, which includes $59.6 million of non-cash impairment and asset retirement expenses. Most of the impairment charge relates to the write-off of the High Island A494 development, as the Company’s inability to complete the #B-4 well resulted in the expiration of the lease in January, 2017.
Rooster’s proved & probable reserves fell 28%, or 4.7 million barrels of oil equivalent (MMBOE), to 12.1 MMBOE at December 31, 2016, primarily due to negative revisions associated with the High Island A494, Vermilion 67, and Eugene Island 44 fields. At December 31, 2016, the pre-tax NPV-10% value of Rooster’s proved & probable reserves totaled $126.9 million. The Company’s reserves were evaluated by Netherland, Sewell & Associates, Inc. (NSAI) in accordance with Canadian National Instrument 51-101.
SUMMARY OF NI 51-101 RESERVE REPORT
| Net Reserves | Future Cash Flow (Pre-Tax) | |||||||||||
| Crude Oil | Cond/NGLs | Natural Gas | Total | Undiscounted | NPV-10% | |||||||
| MBbls | MBbls | MMcf | MBoe | ($000s) | ($000s) | |||||||
| Proved Developed Producing | 24.2 | 393.6 | 13,399.4 | 2,651.0 | 28,718.8 | 22,838.9 | ||||||
| Proved Developed Non-Producing | 30.4 | 14.2 | 409.2 | 112.8 | 1,653.6 | 1,291.7 | ||||||
| Proved Undeveloped | 0.0 | 158.3 | 2,168.8 | 519.8 | 1,231.0 | 855.9 | ||||||
| Total Proved | 54.6 | 566.1 | 15,977.4 | 3,283.6 | 31,603.4 | 24,986.5 | ||||||
| Probable | 80.9 | 2,583.9 | 36,889.0 | 8,813.0 | 141,406.9 | 101,918.1 | ||||||
| Total Proved + Probable | 135.5 | 3,150.0 | 52,866.4 | 12,096.6 | 173,010.3 | 126,904.6 | ||||||
As previously reported, in November, 2016, the Company received a notice of default on its Senior Secured Notes for non-compliance with certain covenants required by the Note Purchase Agreement, as amended. As a result, the Senior Secured Notes were classified as current at December 31, 2016, which contributed to a $69.0 million working capital deficit.
Kenneth F. Tamplain, Jr., interim Chief Executive Officer, commented that “despite the difficult commodity price environment and subdued activity levels in the Gulf of Mexico, the Company was able to generate $21.5 million of EBITDA in FY 2016, largely driven by execution on its decommissioning contracts. In the first four months of 2017, Well Services activity levels have improved from prior year levels, and the Company has nearly completed its $22 million decommissioning contract. However, the Company is currently operating without a forbearance agreement with the holders of our Senior Secured Notes while managing a significant working capital deficit. As such, until a restructuring of the Senior Secured Notes is executed, the Company’s liquidity constraints remain an immediate challenge for the Company.”
On March 24, 2017, the Company and holders of the Senior Secured Notes entered into a non-binding term sheet setting forth the general terms of a potential restructuring of the Note Purchase Agreement. The Company is and continues to conduct business as usual and continues in negotiations with the holders of the Senior Secured Notes to restructure the terms and conditions of the Note Purchase Agreement and its obligations thereunder in accordance with the term sheet. However, the holders of the Senior Secured Notes may exercise their remedies against the Company at any time since there is no forbearance agreement currently in place. In that event, or if the Company is ultimately unable to finalize the documents to satisfactorily restructure the Senior Secured Notes, then the Company would in all likelihood exercise all of its available alternatives to preserve the going concern value of the Company. Such alternatives could include filing a voluntary petition for relief under Chapter 11 of the U.S. Bankruptcy Code or similar restructuring laws, with recognition of any orders entered thereunder in the appropriate jurisdiction in Canada.
SUMMARY OF OPERATING AND FINANCIAL RESULTS FOR Q4 2016 AND FY 2016
| For the three months ended | For the year ended | ||||||||||||||||
| December 31, | December 31, | ||||||||||||||||
| 2016 | 2015 | 2016 | 2015 | ||||||||||||||
| Oil & Gas Sale Volumes | |||||||||||||||||
| Crude oil (Bbls) | 23,939 | 18,215 | 110,129 | 199,663 | |||||||||||||
| NGLs (Bbls) | 11,234 | 29,658 | 77,756 | 72,505 | |||||||||||||
| Natural gas (Mcf) | 687,106 | 942,826 | 2,890,483 | 4,221,151 | |||||||||||||
| Total (BOE) (a) | 149,690 | 205,010 | 669,633 | 975,693 | |||||||||||||
| Daily (BOE per day) (a) | 1,627 | 2,228 | 1,830 | 2,673 | |||||||||||||
| Financials | |||||||||||||||||
| Revenues | $ | 10,282,144 | $ | 23,407,421 | $ | 33,325,288 | $ | 67,459,817 | |||||||||
| Operating Expenses | (65,155,957 | ) | (44,493,661 | ) | (89,622,079 | ) | (86,519,391 | ) | |||||||||
| Operating income (loss) | (54,873,813 | ) | (21,086,240 | ) | (56,296,791 | ) | (19,059,573 | ) | |||||||||
| Gain on asset retirement obligation | (595,955 | ) | 1,029,255 | 4,690,995 | 4,815,928 | ||||||||||||
| Unrealized gain (loss) on financing warrants | – | – | – | 1,000 | |||||||||||||
| Finance expenses (b) | (9,062,811 | ) | (3,313,868 | ) | (19,751,671 | ) | (12,746,628 | ) | |||||||||
| Income before income taxes | (64,532,580 | ) | (23,370,853 | ) | (71,357,468 | ) | (26,989,274 | ) | |||||||||
| Deferred income tax expense (recovery) | 2,242,000 | (8,486,000 | ) | (102,000 | ) | (7,804,000 | ) | ||||||||||
| Net income (loss) | $ | (66,774,580 | ) | $ | (14,884,853 | ) | $ | (71,255,468 | ) | $ | (19,185,274 | ) | |||||
| Net income (loss) per share | |||||||||||||||||
| Basic | (0.21 | ) | (0.05 | ) | (0.22 | ) | (0.06 | ) | |||||||||
| Diluted | (0.21 | ) | (0.05 | ) | (0.22 | ) | (0.06 | ) | |||||||||
| Weighted average shares outstanding | |||||||||||||||||
| Basic | 324,099,502 | 324,099,502 | 324,099,502 | 324,099,502 | |||||||||||||
| Diluted | 324,099,502 | 324,099,502 | 324,099,502 | 324,099,502 | |||||||||||||
| EBITDAX (c) | |||||||||||||||||
| Oil & Gas | $ | 418,094 | $ | 827,294 | $ | 7,617,457 | $ | 5,765,207 | |||||||||
| Well Services | 6,672,156 | 11,910,560 | 17,697,866 | 24,527,444 | |||||||||||||
| Corporate allocation & eliminations | (811,002 | ) | (1,382,737 | ) | (3,855,668 | ) | (6,188,740 | ) | |||||||||
| Total EBITDAX | $ | 6,279,248 | $ | 11,355,117 | $ | 21,459,655 | $ | 24,103,911 | |||||||||
| (a) Gas volumes are converted to BOE on the basis of 6 Mcf per 1 barrel. | |||||||||||||||||
| (b) Finance expenses include accretion for asset retirement obligations. | |||||||||||||||||
| (c) EBITDAX is a non-IFRS measure commonly used in the oil and gas industry; see MD&A. | |||||||||||||||||
ABOUT ROOSTER ENERGY LTD.
Rooster Energy Ltd., is a Houston, Texas, based independent oil and natural gas exploration and production company focused on the delivery of well intervention services, including well plugging and abandonment, through its wholly owned subsidiary, Morrison Well Services, LLC, and the development of resources in the shallow waters of the Gulf of Mexico. Our primary assets consist of rig-less plugging and abandonment spreads of well intervention equipment and interests in oil and gas leases.
Investors are welcome to visit our website at www.roosterenergyltd.com.
Forward Looking Information and Statements
Certain statements and information in this press release may constitute “forward-looking information” or statements as such terms are used in applicable Canadian securities laws. Any statement that expresses, involves or includes expectations of future operations (including drill rig commitments and use of proceeds), commerciality of any hydrocarbon discovered, production rates, operating costs, commodity prices, administrative costs, commodity price risk and other components of cash flow and earnings, management activity, acquisitions and dispositions, capital spending, access to credit facilities taxes, regulatory changes, projections, objective, assumptions or future events that are not statements of historical fact should be viewed as “forward-looking statements”. Events or circumstances may cause actual results to differ materially from those predicted, a result of numerous known and unknown risks, uncertainties, and other factors, many of which are beyond the control of the Company. These risks include, but are not limited to, the risks associated with the oil and gas industry, commodity prices, and exchange rate changes. Industry related risks could include, but are not limited to, operational risks in exploration, development and production, delays or changes in plans, risks associated with the uncertainty of reserve estimates, or reservoir performance, health and safety risks and the uncertainty of estimates and projections of production, costs and expenses. The reader is cautioned not to place undue reliance on any forward-looking statement in this press release. The Company disclaims any intention or obligation to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise, except as required by applicable law.
Note Regarding Boe
The term barrel of oil equivalent (“boe”) may be misleading, particularly if used in isolation. A conversion ratio for gas of 6 mcf//1 boe is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. Given that the value ratio based on the current price of crude oil as compared to natural gas is significantly equivalency conversion ratio of 6:1, utilizing a conversion on a 6:1 basis is misleading as an indication of value.
NEITHER THE TSX VENTURE EXCHANGE NOR ITS REGULATION SERVICE PROVIDER (AS THAT TERM IS DEFINED IN THE POLICIES OF THE TSX VENTURE EXCHANGE) ACCEPTS RESPONSIBILITY FOR THE ADEQUACY OR ACCURACY OF THE RELEASE.
Chief Executive Officer
Rooster Energy Ltd.
16285 Park Ten Place, Suite 120
Houston, Texas, USA 77084
Telephone: (832) 463-0625
