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Pebercan Achieves Net Earnings Of Us$9.8 M And Cash Flows Of Us$29.3 M In 2004
Posted: 28 March 2005
Fiscal 2004 was marked by a temporary decline in production, a recovery in drilling operations, a
promising discovery on the SANTA CRUZ deposit, PEBERCAN’s confirmation as a oil operator and the end of a transition period for a return to production growth.
Montreal, Quebec, March 24, 2005 – During the fiscal year ended December 31, 2004, PEBERCAN Inc. (TSX: PBC) achieved total revenues of $42,401,806, compared with $46,003,789 the previous year. Revenues from oil sales amounted to $38,981,569 in 2004, versus $44,730,502 in
2003. Of this amount, $9,279,077 came from profit oil ($10,700,591 in 2003) and $29,702,492 from cost recovery on Block 7 and other blocks ($34,029,911 in 2003). The Company’s reduction in revenues is attributable mainly to the 14% decline in production on Block 7, which totalled 4,014,114 barrels (10,968 barrels per day) in 2004, down from 4,672,756 barrels (12,802 barrels per day) in 2003. PEBERCAN’s net share was 1,957,178 barrels (5,347 barrels per day) in 2004, compared with 2,276,959 barrels (6,238 barrels per day) in 2003. This lower output is due primarily to the reduction on the CANASI deposit. Production effectively had to be reduced on some wells because of a sharp rise in gas and water volumes. Conversely, production doubled on the SEBORUCO deposit. The average gross selling price of oil went from $19.64 per barrel in 2003 to $19.92 per barrel in 2004.
PEBERCAN’s 2004 fiscal year was marked by a significant recovery in exploration and development
drilling operations on its Cuban concessions. The Company invested a total of $20.2 million in 2004,
up from $6.1 million in 2003. These investments led to the drilling of five new development wells on the SEBORUCO deposit (SEBORUCO 4, 5, 7, 8 and 10), and one exploration well ( SANTA CRUZ 100). All this drilling was successful. As at December 31, 2004 , a total of 17 wells were in production (7 on CANASI and 10 on SEBORUCO), versus 14 wells at the close of the previous year (10 on CANASI and 4 on SEBORUCO). However, the new wells on the SEBORUCO field made little contribution to the Company’s 2004 oil production as they were brought on-stream in the second half of the year.
Due to the recovery in drilling operations, revenues from drilling services rose to $3,420,237 in 2004,
up 168% over $1.273.287 in 2003.
Oil production costs amounted to $7,532,201 in 2004 ($3.85 per barrel) compared with $5,303,301 in 2003 ($2.33 per barrel). These costs consist primarily of fixed costs related to well maintenance, which rose per barrel because of the reduction in production, and fixed costs related to surface facilities, which doubled compared with the previous year. This increase in surface facility related costs can be explained, on the one hand, by the retroactive recognition of the costs of processing some of the SEBORUCO oil at the Processing Centre near YUMURI and, on the other, by the start-up of the CANASI facilities in the second half of 2003.
Depletion of oil properties totalled $16,630,411 in 2004 ($8.50 per barrel), up from $15,295,655 in
2003 ($6.72 per barrel). This rise is attributable to the 35% increase in the year’s investments in oil
properties and the 24% increase in planned investments to develop these reserves ($46 million in 2004
versus $37 million in 2003).
Due to the decline in oil production, PEBERCAN posted net earnings of $9,756,518 ($0.14 per share on a non-diluted basis) in 2004, compared with $14,280,177 ($0.20 per share on a non-diluted basis)during fiscal 2003. Cash flows from operating activities (before changes in non-cash items) totalled $29,256,127 ($0.41 per share on a non-diluted basis), versus $33,174,731 ($0.47 per share on a nondiluted basis) the previous year.
Fourth Quarter 2004
Oil sales totalled $9,547,000 for the quarter ended December 31, 2004 , compared with $9,756,000 for the fourth quarter the previous year. Considering the revenues from drilling services, total revenues amounted to $10,356,000, up from $9,759,000 in the same quarter a year earlier. Total production on Block 7 rose to 967,000 barrels (PEBERCAN’s net share: 462,000 barrels) in 2004, up from 884,000 barrels (PEBERCAN’s net share: 504,000 barrels) in 2003. The CANASI deposit was affected by the temporary shutdown of the CANASI 2 and CANASI 3 wells, bringing its output from 7,316 barrels per day in the fourth quarter of 2003 to 3,503 barrels per day in the fourth quarter of 2004.
Conversely, the start-up of two new wells on the SEBORUCO deposit (SEBORUCO 8 and 10) raised this deposit’s production to 6,670 barrels per day at the end of December 2004, up from 1,963 barrels per day in December 2003.
Consequently, PEBERCAN achieved net earnings of $1,351,728 ($0.02 per share) in the fourth quarter of 2004, compared with $1,787,869 ($0.03 per share) in the last quarter of 2003. Cash flows from operating activities amounted to $7,272,000, up from $6,858,000 in the fourth quarter a year earlier.
Financial Position
Due to new agreements with CUBAPETROLEO in 2004, the national Cuban oil company to which PEBERCAN sells all of its production, the Company reduced its accounts and notes receivable by $10,568,229, from $34,428,825 as at December 31, 2003 , to $23,860,596 as at December 31, 2004 .
The Company thus benefited from cash and cash equivalents of $32,293,462 as at December 31, 2004 ,
up from $12,348,027 as at December 31, 2003 . The value of oil and gas properties rose from $61,080,578 as at December 31, 2003 to $71,111,133 by the close of fiscal 2004. This growth is attributable to the investments of $26,660,996 in exploring and developing its oil and gas properties. Conversely, accumulated depletion went from $35,511,559 as at December 31, 2003 to $52,142,000 as at December 31, 2004 . PEBERCAN continued to show a solid financial position as at December 31, 2004 , with cash and cash equivalents of $32,293,462, working capital of $47,708,848 and share capital of $105,789,947. Furthermore, the Company remains debt-free.
Reserves
As at December 31, 2004 , the evaluation report on all of Block 7 indicated proven and probable reserves of 53.8 million barrels of oil, PEBERCAN’s net share of which was 20.2 million barrels, compared with 24.4 million as at December 31, 2003 . This estimate was made by BEICIP-Franlab, a subsidiary of the French Petroleum Institute, a body accountable to the Canadian and international financial community. Proven reserves totalled 10.8 million barrels as at December 31, 2004 , versus 11.7 million barrels as at December 31, 2003 . On account of the relative decline in production in 2004, the useful life of the proven reserves went from 5.6 years as at December 31, 2003 to 6 years at the close of fiscal 2004.
Outlook
In 2004, the interpretation of a major 3D seismic data acquisition campaign covering the entire offshore portion of Block 7 identified the presence of three potential targets on the western portion of this concession, operated by PEBERCAN.
The first SANTA CRUZ target was drilled in 2004, leading to a new hydrocarbon discovery. This exploration well, drilled between September 19 and December 14, 2004 , highlighted a promising accumulation of hydrocarbons and a superior quality to that produced so far by PEBERCAN. This deposit is currently being evaluated. TARARA and GUANABO, the other two structures, will be drilled in 2005.
What’s more, one month subsequent to the close of fiscal 2004, the Company finished drilling the SEBORUCO 103 well, which highlighted a new reservoir impregnated in a fault little explored until then. This new success will enable the Company increase the size of the deposit and drill at least two new wells to drain this fault.
At the same time on Block 7, PEBERCAN is managing exploration operations (TARARA and GUANABO structures), evaluation operations ( SANTA CRUZ deposit) and development operations (CANASI and SEBORUCO deposits). Major efforts are still in progress on CANASI to improve its processing capabilities so as at to contemplate resuming production on this deposit. On the SEBORUCO deposit, drilling was suspended on SEBORUCO 15 as it failed to meet the structure at the expected level. Lower risk development drilling will resume east of the SEBORUCO 10 oilproducing well. Work continues to increase the processing capacity at the YUMURI Processing Centre where all of SEBORUCO’s output is processed. The drilling and production facility work performed in 2003 and 2004 will bring PEBERCAN out of the transition phase reflected by these two fiscal years’ results and enable it to embark on a new phase focused on significantly increasing the production on Block 7 as of fiscal 2005.
PEBERCAN is finalizing geological studies on VARADERO PROFUNDO, Block 12, Block 13 and Block 15, its other Cuban concessions, before deciding whether to drill an exploration well on each of these permits. Considering the ambitious program implemented on Block 7 in 2005, there will be no drilling on these concessions before 2006. PEBERCAN is pursuing its research as a partner.
Finally, PEBERCAN remains on the lookout for any oil diversification opportunities.
PEBERCAN Inc. is involved in the exploration, development and operation of oil reserves in the Republic of Cuba . Its mining domain includes five concessions covering 6,055 km2, including Block 7, the only concession operated to date. PEBERCAN sells all of its production to the Cuban government. The Company's shares are listed on the TSX under the symbol PBC.
All amounts in this press release are expressed in U.S. dollars. The forward-looking statements contained in this press release are associated with known and
unknown risks, uncertainties and other factors that may mean that the Company's actual results, returns and realizations will differ greatly from the future results, returns or realizations expressed or assumed by these forward-looking facts.
Posted by Editor Pipeline Magazine
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