Ivanhoe Energy reports 2009 financial results and operational highlights
CALGARY, March 17 /PRNewswire-FirstCall/ - Ivanhoe Energy Inc. (NASDAQ: IVAN; TSX IE) today reported summary financial results and operating highlights for the fourth quarter of 2009 and year ended December 31, 2009. All figures reported are in US dollars unless otherwise noted. Ivanhoe Energy has filed its annual report on Form 10-K for the year ended December 31, 2009.
Highlights
- Ivanhoe Energy transitioned to execution mode on two anchor HTL
(Heavy-to-Light) heavy oil projects - the Tamarack Project in Canada
and the Pungarayacu Project in Ecuador.
- The Company sold small producing assets in the US for approximately
$40 million and redeployed key staff to its Canadian and Ecuadorian
projects.
- In November 2009, Ivanhoe Energy announced the merger of a subsidiary
of the Company with PanAsian Petroleum Inc., an Alberta company
holding oil and gas exploration and production rights to a
16,839-square-kilometre, highly-prospective block in central Mongolia.
This asset will be incorporated into Sunwing Energy, Ivanhoe Energy's
oil and gas subsidiary for Asia.
- In the fourth quarter of 2009, David Dyck was appointed President and
Chief Executive Officer of Ivanhoe Energy Canada and Gerald
Schiefelbein was appointed Chief Financial Officer of Ivanhoe
Energy Inc.
- Jean Chretien, a former Prime Minister of Canada, and William Weld, a
prominent US Attorney and former Governor of Massachusetts, were
appointed as advisors to Ivanhoe Energy.
- A Special Warrant financing of Cdn$150 million was completed in the
first quarter of 2010.
- Revenues from continuing operations were $25.0 million in 2009, down
from $48.4 million in 2008 due to lower year-over-year crude oil
prices.
- In 2009, $12.3 million in cash flow was consumed in operations,
whereas cash flow of $17.1 million was provided in 2008. The decrease
in cash flow was due to lower oil prices and an increase in general
and administrative expenses as the Company moved into execution mode
on its major projects.
- The net loss for 2009 from continuing operations was $37.7 million,
down slightly from the net loss of $38.5 million recorded in 2008.
- Cash and cash equivalents were $21.5 million at December 31, 2009
compared to $38.5 million at December 31, 2008. The Company's cash
position at December 31, 2009 was augmented by the proceeds from the
Cdn$150 million Special Warrant financing completed in early 2010.
"We started 2009 facing one of the most challenging global economic downturns in the past century, and Ivanhoe Energy has emerged in 2010 as a strong, intensely-focused company," said Robert Friedland, Co-Chairman, President and Chief Executive Officer. "With the success of our recent Cdn$150 million financing, we will continue to advance our key projects - the Tamarack Project in Canada and the Pungarayacu Project in Ecuador. Beyond this, we are actively pursuing additional HTL opportunities in the Middle East and Latin America."
"We also took an important step in 2009 to build our Asian business through the merger of one of our subsidiary companies with PanAsian Petroleum Inc. We now will combine PanAsian's Mongolian operations into our 100 percent owned subsidiary, Sunwing Energy Ltd. Our objective is to capitalize on our extensive experience operating in China and to aggressively grow our Asian business through Sunwing."
Tamarack Project - Canada
Ivanhoe Energy completed its winter delineation drilling program at Tamarack in mid-March as scheduled. All key program objectives were achieved and the Company is on track to submit its regulatory application for the development of the Tamarack Project in mid-2010.
The results from this drilling program will be evaluated and included in an updated resource report to be prepared by Ivanhoe Energy's independent reserves evaluator, GLJ Petroleum Consultants Ltd. (GLJ) and made available in the third quarter of 2010. Earlier in 2009, GLJ estimated that Tamarack contains approximately 1.1 billion barrels of discovered petroleum initially-in-place, with best estimate contingent resources of approximately 441 million barrels of bitumen (with a low and high estimate of approximately 320 million and 558 million barrels, respectively). Based on these parameters, Tamarack ultimately should be capable of supporting a production capacity of approximately 50,000 barrels per day for 30 years.
Engineering tasks related to the Tamarack HTL facility, the upstream facilities (production and surface facilities), and infrastructure (power and access) are on schedule. Significant engineering has already been completed by AMEC and AMEC-BDR for the HTL and upstream facilities and Phase 1 of the 20,000 barrel per day facility at Tamarack, including completion of Basic Engineering and Design (BED) for the HTL and upstream facilities as well as sufficient Front End Engineering and Design (FEED) for the HTL facility to be able to execute a Class III (+25/-20%) capital cost estimate.
The next engineering step for the integrated project is to generate a Class III cost estimate. It is expected that AMEC and AMEC-BDR will complete this work in the second quarter of 2010. Ongoing reservoir and geological modeling work incorporating the recent data gathered from the winter delineation program will be completed in the second quarter of 2010, in time for the submission of the Tamarack regulatory application.
Pungarayacu Project - Ecuador
The Company began drilling its first well (IP-15) in the Pungarayacu field in Ecuador in December 2009. The primary heavy oil formation target in Pungarayacu and the rest of Block 20 is the Hollin. The IP-15 well was drilled to a total depth of 1,343 feet. As expected, the top of the Hollin formation was reached at a depth of 946 feet and it is approximately 300 feet thick. The Hollin Formation includes three separate sandstone bodies, each consisting of clean, high-quality sands bearing oil. Cores and logs indicate high oil saturation and API gravities between 13.5 degrees and 15.8 degrees. Average porosity was 28% and permeability, in the multi-Darcy range, was excellent. These results indicate a top-tier reservoir and suggest the Hollin would be an excellent candidate for thermal development.
Cyclic steam stimulation of the Hollin Formation has commenced at the IP-15 well and the Company expects to test at least two of the three Hollin sand bodies. This process is expected to continue to the end of April. Each test involves a one-month process of steam injection for up to 10 days, followed by a period of soaking and then a period of production.
Completion of the IP-15 well will be followed by drilling and testing of additional wells in different areas of Block 20. Ivanhoe Energy currently has three wells permitted in Block 20 and is seeking approval for an additional 20 wells.
The Company has initiated preparations for its second appraisal well, IP-5b. Land rights have been secured and infrastructure work has begun. The drilling rig at the IP-15 well site is expected to be moved to the second location, 20 miles to the south, toward the end of April.
Stakeholder Consultation
Ivanhoe Energy is firmly committed to open and transparent consultation with all its key stakeholders. At the Tamarack Project in Canada, Ivanhoe Energy has consulted with a variety of provincial and municipal governments, special interest groups, industry neighbours, landowners and aboriginals. Ivanhoe Energy is establishing meaningful working relationships with several First Nations, Métis and Aboriginal communities that will be maintained over the life of the Tamarack Project. In Ecuador, Ivanhoe Energy continues to build and maintain strong relationships with the local indigenous people, community leaders, government officials and other key stakeholder groups to foster a clear understanding of the Company's activities in Block 20. Ivanhoe Energy strives to develop positive relationships based on integrity, trust, transparency and open communication to continuously earn its social licence to operate.
HTL Technology
In early 2009, Ivanhoe Energy successfully commissioned the Feedstock Test Facility (FTF) in San Antonio, Texas, for its proprietary technology for field upgrading of heavy oil to light oil (HTL). The state-of-the-art HTL testing facility will be used to support detailed engineering and design of commercial-scale HTL plants for the Tamarack Project and Pungarayacu Project, and to test crudes associated with additional potential HTL projects.
During 2009, Ivanhoe Energy made significant technical improvements related to its proprietary HTL technology. The improvements were achieved through a new process configuration developed by an in-house technical team at the FTF. These improvements enable the production of "bottomless" synthetic crude oil through a simplified operation that delivers lower per-barrel capital and operating costs, and allows for larger volumes of crude to be processed in any given sized facility.
Ivanhoe Energy is decommissioning its Commercial Demonstration Facility in California and completion is planned for the second quarter of 2010. All future testing activities will be carried out at the FTF.
Ivanhoe Energy continues to pursue HTL business development opportunities globally, with an emphasis on creating value from stranded resources or resource accumulations considered too small to be economically viable using other technologies.
Asia Operations
(unaudited; thousands of U.S. dollars except production amounts)
-------------------------------- ---------------------
Three Months Ended Year Ended
-------------------------------- ---------------------
Dec. 31 Sept. 30 Dec. 31 Dec. 31 Dec. 31
2009 2009 2008 2009 2008
---------- ---------- ---------- ---------- ----------
Financial
---------
Oil revenue -
gross $ 5,309 $ 7,917 $ 10,823 $ 24,968 $ 48,370
Total revenue -
after derivative
gain (loss) $ 4,996 $ 7,989 $ 19,318 $ 23,639 $ 50,108
Depletion and
depreciation $ 2,387 $ 5,130 $ 5,243 $ 18,033 $ 23,135
Capital
investments $ 2,347 $ 1,179 $ 2,812 $ 6,049 $ 8,378
Identifiable
assets (at end
of period) $ 57,528 $ 53,989 $ 64,901
Operating
---------
Net production
(after royalties):
Barrel of oil
equivalent (BOE) 77,771 129,074 125,710 465,804 489,913
BOE/day for the
period 845 1,403 1,366 1,276 1,339
Dagang - China
At the Dagang field, production was 1,240 net barrels of oil per day after royalties from 38 wells at December 31, 2009 compared to 1,289 net barrels of oil per day after royalties from 43 wells at December 31, 2008. No development wells were drilled in 2009, but the Company conducted six fracture stimulations during the year. After 2009 production, total proved and probable reserves at December 31, 2009 increased from December 31, 2008, mainly due to the fracture stimulation program. The program will continue in 2010 in order to offset normal field decline.
Zitong - China
To complete the end of the Phase I relinquishment requirement for the Zitong Block, the Company and its partner, Mitsubishi Gas Chemical Company Inc of Japan, relinquished a further 10 percent of the block in 2009 (for a total relinquishment of 25 percent). After reprocessing seismic data, the Company identified several potential exploration targets in the first quarter of 2009. Two exploration well locations were selected and the Chinese authorities granted final approval to the sites in the third quarter of 2009. The Company is obtaining the necessary approvals to acquire the surface lease and to commence site construction. Drilling at Zitong 1 is expected to commence in the second quarter of 2010.
Mongolia - Block XVI
Through a merger between a subsidiary of Ivanhoe Energy and PanAsian Petroleum Inc., the Company acquired a Production Sharing Contract for the Nyalga Block XVI in Mongolia. The block covers an area of approximately 16,839 square kilometres and provides the Company with the exclusive rights to explore, develop and produce oil or gas within the block. In late 2009 and early 2010, the Company acquired an additional 466 kilometres of 2-D seismic over the block, resulting in a total of 924 kilometres of 2-D seismic data over the Kherulen sub-basin within the Nyalga basin. The Company is processing and interpreting the data to determine the location for its first exploratory well, which is expected to spud in the last quarter of 2010.
Consolidated Financial Highlights
(unaudited; thousands of U.S. dollars except per share and production
amounts)
-------------------------------- ---------------------
Three Months Ended Year Ended
-------------------------------- ---------------------
Dec. 31 Sept. 30 Dec. 31 Dec. 31 Dec. 31
2009 2009 2008 2009 2008
---------- ---------- ---------- ---------- ----------
Financial
---------
Net income (loss)
from continuing
operations $ (11,915) $ (2,795) $ (16,321) $ (37,731) $ (38,476)
Net income (loss)
from discontinued
operations (net
of tax of $29.6
million) - (23,290) 2,341 (23,921) 4,283
---------- ---------- ---------- ---------- ----------
Net income (loss)
and comprehensive
income (loss) $ (11,915) $ (26,085) $ (13,980) $ (61,652) $ (34,193)
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Net income (loss)
per share:
Income (loss) from
continuing
operations, basic
and diluted $ (0.04) $ (0.01) $ (0.06) $ (0.13) $ (0.15)
Income (loss)
from discontinued
operations, basic
and diluted - (0.08) 0.01 (0.09) 0.02
---------- ---------- ---------- ---------- ----------
Net income (loss)
per share, basic
and diluted $ (0.04) $ (0.09) $ (0.05) $ (0.22) $ (0.13)
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Net cash provided
(used) by
operating
activities from
continuing
operations $ (4,130) $ (1,066) $ 8,422 $ (14,993) $ 10,780
Net cash provided
(used) by
operating
activities from
discontinued
operations - (135) 1,232 2,703 6,273
---------- ---------- ---------- ---------- ----------
Net cash provided
(used) by
operating
activities $ (4,130) $ (1,201) $ 9,654 $ (12,290) $ 17,053
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Highlights - Continuing Operations
----------------------------------
Oil revenue -
gross $ 5,309 $ 7,917 $ 10,823 $ 24,968 $ 48,370
Total revenue -
after derivative
gain (loss) $ 4,999 $ 7,991 $ 19,525 $ 23,658 $ 50,670
Depletion and
depreciation $ 2,560 $ 5,308 $ 5,897 $ 19,868 $ 25,761
Capital
investments $ 8,650 $ 5,823 $ 7,988 $ 26,373 $ 21,063
Total assets (at
end of period) $ 281,763 $ 285,030 $ 346,875
Cash and cash
equivalents (at
end of period) $ 21,512 $ 39,466 $ 38,477
Summary of Fourth Quarter
Oil revenue totalled $5.3 million in the fourth quarter of 2009 compared to $7.9 million in the third quarter of 2009, reflecting lower benchmark crude oil prices. Cash flow used in operating activities was $4.1 million during the fourth quarter of 2009, compared to $1.2 million in the third quarter of 2009. Capital investments for during the fourth quarter increased to $8.7 million compared to $5.8 million in the third quarter of 2009.
In July 2009, Ivanhoe Energy completed the sale of its wholly-owned subsidiary Ivanhoe Energy (USA) Inc. including the subsidiary's accumulated tax loss carry-forwards. Ivanhoe Energy had future tax assets arising from these loss carry-forwards that had offset certain future income tax liabilities from its remaining US subsidiaries. The $23.9 million loss from discontinued operations was primarily the result of a $29.6 million loss from the disposition of Ivanhoe Energy (USA) Inc.'s future income tax assets associated with its accumulated tax loss carry-forwards.
Liquidity and Capital Resources
The Company's operating activities used $4.1 million in cash for the fourth quarter of 2009 and capital investments during the quarter were $8.7 million.
Ivanhoe Energy's cash and cash equivalents were $21.5 million at December 31, 2009, compared to $39.5 million at September 30, 2009, representing a decrease in cash and cash equivalents of $18.0 million. This decrease in cash position was primarily due to cash used in operating activities of $4.1 million, payment of $7.0 million in debt obligations related to Sunwing Energy, and net cash used for capital investments of $7.6 million, partially offset by $0.8 million in proceeds from the exercise of stock options during the fourth quarter of 2009.
Ivanhoe Energy's two initial HTL projects will require significant capital for full development. The Company's strategy is to finance the development of these two projects primarily with funding from strategic partners. Ivanhoe Energy is engaged in various discussions and due diligence efforts to establish key strategic and financing arrangements. The pace of the development of the Company's projects will be determined in conjunction with these strategic partnership discussions.
During the first quarter of 2010, Ivanhoe Energy raised gross proceeds of Cdn$150 million through the private placement of Special Warrants. Each Special Warrant was issued at a price of Cdn$3.00 and entitles the holder to receive, upon exercise, one Common Share and one quarter (0.25) of one Common Share Purchase Warrant. Each whole Purchase Warrant entitles the holder to acquire one Common Share of Ivanhoe Energy at an exercise price of Cdn$3.16 on or before the first anniversary of the closing date. Ivanhoe Energy plans to use the proceeds from this offering for the Tamarack Project in the Athabasca region in Western Canada, drilling operations in the Pungarayacu Project in Ecuador and general corporate purposes.
This news release summarizes our 2009 fourth quarter results of operations and financial condition and should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2009, which contains financial statements and Management's Discussion and Analysis of Financial Condition and Results of Operations. The Form 10-K was filed on March 16, 2010 and copies may be obtained from the Ivanhoe Energy website at www.ivanhoeenergy.com, on EDGAR at www.sec.gov or SEDAR at www.sedar.com.
Ivanhoe Energy is an independent international heavy oil development and production company focused on pursuing long-term growth in its reserves and production using advanced technologies, including its proprietary heavy oil upgrading process (HTL). Core operations are in Canada, Ecuador, and China, with business development opportunities worldwide. Ivanhoe Energy trades on the NASDAQ Capital Market with the ticker symbol IVAN and on the Toronto Stock Exchange with the symbol IE.
For more information about Ivanhoe Energy Inc. please visit our web site at www.ivanhoeenergy.com.
FORWARD-LOOKING STATEMENTS: This document includes forward-looking statements, including forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include, but are not limited to, statements concerning the potential benefits of Ivanhoe Energy's heavy oil upgrading technology, the potential for commercialization and future application of the heavy oil upgrading technology and other technologies, statements relating to the continued advancement of Ivanhoe Energy's projects, the potential for successful exploration and development drilling, dependence on new product development and associated costs, statements relating to anticipated capital expenditures, the necessity to seek additional funding, statements relating to increases in production and other statements which are not historical facts. When used in this document, the words such as "could," "plan," "estimate," "expect," "intend," "may," "potential," "should," and similar expressions relating to matters that are not historical facts are forward-looking statements. Although Ivanhoe Energy believes that its expectations reflected in these forward-looking statements are reasonable, such statements involve risks and uncertainties and no assurance can be given that actual results will be consistent with these forward-looking statements. Important factors that could cause actual results to differ from these forward-looking statements include the potential that the Company's projects will experience technological and mechanical problems, new product development will not proceed as planned, the HTL technology to upgrade bitumen and heavy oil may not be commercially viable, geological conditions in reservoirs may not result in commercial levels of oil and gas production, the availability of drilling rigs and other support services, uncertainties about the estimates of reserves, the risk associated with doing business in foreign countries, environmental risks, changes in product prices, our ability to raise capital as and when required, competition and other risks disclosed in Ivanhoe Energy's Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission on EDGAR and the Canadian Securities Commissions on SEDAR.
RESERVES DATA AND OTHER OIL AND GAS INFORMATION: Ivanhoe Energy's disclosure of reserves data and other oil and gas information in the Annual Report on Form 10-K is made in reliance on an exemption granted to Ivanhoe Energy by Canadian securities regulatory authorities, which permits Ivanhoe Energy to provide disclosure in accordance with U.S. disclosure requirements rather than in accordance with the requirements of Form 51-101F1. Reports on Form 51-101F2 and Form 51-101F3 have been filed in Canada concurrently with the Annual Report on Form 10-K and copies may be obtained at www.sedar.com.
The information provided by Ivanhoe Energy may differ from the corresponding information prepared in accordance with Canadian disclosure standards under National Instrument 51-101 (NI 51-101). Further information about the differences between the U.S. requirements and the NI 51-101 requirements is set forth under the heading "Reserves, Production and Related Information" in Ivanhoe Energy's Annual Report on Form 10-K.
SOURCE Ivanhoe Energy Inc.
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