Diaz announces year end results and reserves summary
CALGARY, April 1 /PRNewswire-FirstCall/ - Diaz Resources Ltd. (TSX: DZR) announces that it has filed its 2009 MD&A, Financial Statements, and Annual Information Form ("AIF").
2009 was a difficult year for Diaz and gas-weighted junior oil and gas companies generally. The North American economy moved into recession during the second half of 2008 and 2009 and had two significant effects on the Company. They were:
- A drop in natural gas consumption, particularly in the US, leading to
an over supply and downward pressure on natural gas prices, and
- A tightening of capital markets available to the Company to raise
additional investment funds.
In addition, a number of the Company's US natural gas wells declined, at higher than anticipated rates.
As a result, Diaz revenues were significantly reduced and operating cash flows available for reinvestment were greatly reduced compared with prior years.
Diaz anticipated that 2009 would be a challenging year and the management worked to ensure that the Company came through the year successfully. Hence, Diaz focused on the reduction of balance sheet leverage, put in place fixed gas price contracts for half of the Company's 2009 gas production, and refocused the Company's exploration and development activities on heavy oil projects.
The results of these efforts were:
- Asset dispositions - $4.4 million was raised from the sale of
properties in Canada and in the United States,
- Financing - the Company closed a financing, raising $926,000 at the
end of 2009,
- 2009 Fixed Gas Price Contracts - Diaz received approximately $925,000
in additional revenue from fixed gas price contracts during 2009,
- Oil Development - Diaz commenced a heavy oil development program in
the Lloydminster area, participating in the successful drilling of
three wells during Q4 2009
- Heavy Oil Exploration - the Company acquired prospective acreage on a
number of oil development projects in Alberta and Saskatchewan.
As a result of the above actions, Diaz reduced its net current bank debt from $8.5 million in January 2009 to approximately $5.8 million at the end of the year. The Company plans to continue to rationalize non-core assets with the sale of its remaining U.S. producing assets, which, being principally natural gas, will be marketed when natural gas prices recover to what management regards as an acceptable level.
With the improvement in the financial condition of the Company, available capital was redirected into its heavy oil exploration and development activity in East Central Alberta and West Central Saskatchewan.
Financial
Revenue for 2009 decreased to $7.0 million compared with $15.1 million for the prior year. Cash flow from operations for 2009 decreased to $1.9 million or $0.03 per share compared with $7.7 million or $0.12 per share for the prior year. Diaz reported a loss for 2009 of $14.3 million or ($0.21) per share versus a loss of $4.1 million or ($0.06) per share in the prior year, as it took an impairment write down against its oil and gas assets of $11.4 million during Q1 2009.
Capital expenditures for 2009, totalled $4.4 million compared with $7.8 million in the prior year. Capital expenditures and debt retirement were financed from cash flow from operations and the sale of two oil and gas properties.
At December 31, 2009, Diaz had net current debt of $5.8 million versus $8.5 million at the beginning of the year. Diaz also had convertible debentures outstanding of $7.1 million (face value) that mature on March 26, 2012.
Production
The Company's total production for the year ended December 31, 2009, decreased 28% to 642 BOEd compared with the prior year average of 886 BOEd. For the fourth quarter, total production declined 39% to 532 BOEd compared with 871 BOEd in Q4 2008.
In Canada, production for the year decreased 21% as a result of the sale of production from the Carmangay (Q1) and Parkman (Q4) fields and a significant drop in production from the Leahurst and Big Bend fields. In the U.S., production rates for the year fell by 45% as mature well production declines combined with the abandonment of the Black Owl field.
Reserves and Reserves Values
The independent engineering evaluation of Diaz's properties assigned proved reserves, before royalties, of 1.6 million BOE and total reserves, before royalties, of 3.8 million BOE at December 31, 2009. These reserve estimates result in a before tax present value of estimated future net revenues, discounted at 10%, of $52.4 million.
Exploration and Development
Due to the drop in natural gas prices during the fall of 2008, Diaz changed its exploration focus exclusively to oil prospects. During 2009, Diaz acquired 18,707 acres (14,048 net acres) in Alberta and Saskatchewan resulting in a substantial portfolio of development projects on the Lloydminster oil play in Alberta as well as the Shaunavan, Bird Bear, and Viking oil plays in Saskatchewan.
During Q4 2009, Diaz drilled three Lloydminster heavy oil horizontal wells which are now on production. Subsequent to year end Diaz participated in drilling three additional horizontal on the same prospect at Lloydminster, Alberta and anticipates placing them on production early in the second quarter of 2010.
Business Outlook
The Company anticipates steady growth in the North American economy during 2010.
As a result oil prices should continue to firm as industrial activity recovers. Due to current high natural gas storage levels and significant volumes of gas being developed on North American shale gas projects there is still considerable uncertainty as to when natural gas prices will recover to satisfactory levels. To mitigate the uncertainty in natural gas prices, Diaz has put in place fixed gas price contracts for approximately half of the Company's anticipated 2010 gas production, at prices in excess of $5.75 per Mcf. Diaz has also closed an equity financing raising approximately $1,263,500 net of commissions to fund its ongoing Lloydminster heavy oil development drilling program.
Due to this potential ongoing weakness in the gas sector Diaz will continue to direct its efforts towards heavy oil development during 2010. The Company will continue to focus on its Lloydminster heavy oil development program and if results are successful Diaz would exit 2010 with almost half of its production derived from oil sales.
SUMMARY OF OIL AND GAS RESERVES
AND NET PRESENT VALUES OF FUTURE NET REVENUE
AS OF DECEMBER 31, 2009
FORECAST PRICES AND COSTS
RESERVES
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COMPANY TOTAL LIGHT AND
------------- MEDIUM OIL HEAVY OIL NATURAL GAS
Gross Net Gross Net Gross Net
RESERVES CATEGORY (MBbl) (MBbl) (MBbl) (MBbl) (MMcf) (MMcf)
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PROVED
Developed
Producing 33 25 46 49 3,173 2,701
Developed
Non-producing 7 6 27 22 1,425 1,175
Undeveloped - - 200 185 - 2,199
TOTAL PROVED 40 31 273 256 7,103 6,075
PROBABLE 37 29 617 535 9,594 7,623
TOTAL PROVED PLUS
PROBABLE 77 60 890 791 16,697 13,698
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RESERVES RESERVES RESERVES
----------------- -------- --------
COMPANY TOTAL NATURAL GAS
------------- LIQUIDS TOTAL TOTAL
Gross Net Gross Net
RESERVES CATEGORY (MBbl) (MBbl) (MBOE) (MBOE)
------------------------------------- -------- --------
PROVED
Developed
Producing 22 14 630 538
Developed
Non-producing 6 5 278 229
Undeveloped 32 21 650 573
TOTAL PROVED 60 40 1,558 1,340
PROBABLE 31 20 2,283 1,854
TOTAL PROVED PLUS
PROBABLE 91 60 3,841 3,194
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NET PRESENT VALUES OF FUTURE NET REVENUE
--------------------------------------------
COMPANY TOTAL BEFORE INCOME TAXES
------------- DISCOUNTED AT (% per year)
0 5 10 15 20
RESERVES CATEGORY (MM$) (MM$) (MM$) (MM$) (MM$)
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PROVED
Developed Producing 13.5 11.8 10.5 9.6 8.8
Developed Non-producing 6.8 5.1 4.1 3.3 2.7
Undeveloped 14.6 10.4 7.8 - 4.7
TOTAL PROVED 34.9 27.3 22.4 18.9 16.2
PROBABLE 60.5 41.8 30.0 22.1 16.7
TOTAL PROVED PLUS PROBABLE 95.4 69.1 52.4 41.0 32.9
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NET PRESENT VALUES OF FUTURE NET REVENUE
--------------------------------------------
COMPANY TOTAL AFTER INCOME TAXES
------------- DISCOUNTED AT (% per year)
0 5 10 15 20
RESERVES CATEGORY (MM$) (MM$) (MM$) (MM$) (MM$)
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PROVED
Developed Producing 13.2 11.5 10.3 9.4 8.7
Developed Non-producing 6.6 5.0 4.0 3.2 2.6
Undeveloped 13.9 10.1 7.6 5.9 4.6
TOTAL PROVED 33.7 26.6 21.9 18.5 15.9
PROBABLE 44.7 30.8 22.0 16.2 12.2
TOTAL PROVED PLUS PROBABLE 78.4 57.4 43.9 34.7 28.1
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Further information regarding financial and operating results may be obtained at www.sedar.com, where the Company's MD&A and financial statements have been filed.
Dias has also filed its Annual Information Form which includes the Company's reserves data and other oil and gas information for the year ended December 31, 2009, as mandated by National Instrument 51-101 Standards of Disclosure for Oil and Gas Activities of the Canadian Securities Administrators. Copies of Diaz's AIF may be obtained at www.sedar.com.
Summary of Operations
(Thousands, except per share amounts) Years Ended December 31
-------------------------
2009 2008
Financial
Revenue $ 6,973 $ 15,099
Cash flow from operations 1,881 7,737
per share, diluted 0.03 0.12
Loss for the period (14,355) (4,087)
per share, diluted (0.21) (0.06)
Capital additions 4,415 7,778
Dispositions 4,407 74
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Net capital additions 8 7,704
Net current debt 5,844 8,449
Convertible debentures* 6,377 6,094
Total assets 36,657 56,761
Total shares outstanding at period end 76,576,752 67,177,752
Operations
Production
Gas (MMcfd) 3.3 4.5
Oil (Bopd) 97 140
BOEd (6 Mcf equals 1 Bbl) 642 886
Product Prices
Gas ($/Mcf) $ 4.72 $ 8.32
Oil ($/Bbl) $ 54.51 $ 86.08
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Reserves (proved plus probable, future
costs and prices)
Gas (Bcf) 16.7 20.2
Oil (MBbl) 1,058.0 227.0
BOE (Millions) 3.8 3.7
Net present value of future net revenue,
before tax discounted at 10%** $ 52.4 $ 59.4
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Undeveloped land holdings (net acres)
Canada 54,409 50,108
United States 446 4,321
Total net acreage 54,855 54,429
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* Convertible debentures have a face value of $7.1 million and mature
on March 26, 2012. See Note 7, "Convertible Debentures", in the
notes
to the financial statements for the year ended December 31, 2009.
** Net present value of future net revenue may not represent fair
market value of reserves.
Diaz is an oil and gas exploration and production company based in Calgary, Alberta. Diaz's current focus is on oil development and exploration in Alberta and Saskatchewan.
ADVISORY: This press release contains forward looking statements. Although Diaz believes that the expectations reflected in these forward looking statements are reasonable, undue reliance should not be placed on them because Diaz can give no assurance that they will prove to be correct. Since forward looking statements address future events and conditions, by their very nature they involve inherent risks and uncertainties.
The forward looking statements contained in this press release are made as of the date hereof and Diaz undertakes no obligations to update publicly or revise any forward looking statements or information, whether as a result of new information, future events or otherwise, unless so required by applicable securities laws.
Where amounts are expressed on a barrel of oil equivalent (boe) basis, natural gas volumes have been converted to barrels of oil at six thousand cubic feet (mcf) per barrel (bbl). Boe figures may be misleading, particularly if used in isolation. A boe conversion of six thousand cubic feet per barrel is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. References to oil in this discussion include crude oil and natural gas liquids (NGLs).
NEITHER THE TORONTO STOCK EXCHANGE NOR ITS REGULATION SERVICES PROVIDER (AS THAT TERM IS DEFINED IN THE POLICIES OF THE TORONTO STOCK EXCHANGE) ACCEPTS RESPONSIBILITY FOR THE ADEQUACY OR ACCURACY OF THIS RELEASE.
SOURCE Diaz Resources Ltd.
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