HALIFAX, NOVA SCOTIA -- (Marketwired) -- 03/28/18 -- Corridor Resources Inc. ("Corridor" or the "Company") (TSX: CDH) announced today its 2017 year-end financial results. Corridor's annual financial statements, annual management's discussion and analysis and Annual Information Form for the year ended December 31, 2017 have been filed on SEDAR at www.sedar.com and are available on Corridor's website at www.corridor.ca. All amounts referred to in this press release are in Canadian dollars unless otherwise stated.
Year End Financial Results
The following table provides a summary of Corridor's financial and operating results for the three and twelve months ended December 31, 2017 with comparisons to the three and twelve months ended December 31, 2016.
Selected Financial Information
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Three months ended Twelve months ended
December 31 December 31
thousands of dollars
except per share
amounts 2017 2016 2017 2016
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Sales $ 3,161 $ 2,356 $ 7,674 $ 13,541
Net income (loss) $ 13,598 $ 12,316 $ 17,739 $ (29,291)
Net income (loss) per
share - basic and
diluted $ 0.153 $ 0.139 $ 0.200 $ (0.330)
Field operating netback $ 2,442 $ 1,326 $ 5,622 $ 7,280
Cash flow from
operations (1) $ 1,549 $ 722 $ 2,441 $ 4,307
Capital expenditures $ 2,729 $ 175 $ 3,029 $ 420
Working capital $ 46,918 $ 29,365 $ 46,918 $ 29,365
Total assets $ 124,360 $ 104,618 $ 124,360 $ 104,618
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(1) Cash flow from operations is a non-IFRS measure. Cash flow from
operations represents net earnings adjusted for non-cash items including
depletion, depreciation and amortization, deferred income taxes, share-
based compensation and other non-cash expenses. See "Non-IFRS Financial
Measures" in Corridor's management's discussion and analysis for the
year ended December 31, 2017.
2017 Highlights
-- As at December 31, 2017, Corridor had cash and cash equivalents of
$46,177 thousand, net working capital of $46,918 thousand and no
outstanding debt.
-- During the year, Corridor and the Quebec Government entered into a
settlement agreement which facilitated an end to Corridor's
participation in oil and gas exploration on Anticosti Island, Quebec.
Corridor held a 21.67% interest in Anticosti Hydrocarbons L.P., a joint
venture with undeveloped lands on Anticosti Island. Under the settlement
agreement, Corridor agreed to proceed with the cessation of all
hydrocarbon exploration activities on Anticosti Island, and the Quebec
Government paid Corridor $19.5 million in consideration for, amongst
other things, the prejudice suffered by Corridor in connection with its
interests in Anticosti Hydrocarbons L.P. The compensation received by
Corridor resulted in a net gain on disposition of $5,589 thousand in
2017.
-- In its reserves report effective as at December 31, 2017, GLJ Petroleum
Consultants Ltd. ("GLJ") increased its year over year estimate of
Corridor's proved plus probable natural gas reserves by 12.5% from 20
Bscf to 22.5 Bscf. The increase was due to a combination of higher
annual production forecasts and improved well recovery estimates. GLJ
also increased its forecast natural gas price as a result of expected
increased future sales to the local Maritimes market as opposed to the
New England market. GLJ's increase in reserves and natural gas prices
resulted in the recognition of a reversal of impairment losses of $12
million in 2017.
-- For the year ended December 31, 2017, natural gas sales decreased to
$7,292 thousand from $12,596 thousand for the year ended December 31,
2016 due to the decrease in the average daily natural gas production to
2.5 mmscfpd in 2017 from 5.8 mmscfpd in 2016. The decrease in natural
gas production is due to management's decision to shut-in most of
Corridor's natural gas wells at the McCully Field between April and
December of 2017 as opposed to only partially shutting-in some McCully
wells from September to November of 2016. Management had determined in
each of 2016 and 2017 to shut-in producing natural gas wells to take
advantage of the expected significant differential in the sale price of
natural gas at Algonquin city-gates ("AGT") for the summer/fall relative
to the winter.
-- A key component of the Company's production optimization strategy of the
McCully Field is to enter into financial hedges to mitigate the risks
associated with the volatility of natural gas prices when production
resumes following a shut-in period. The settlement of the Company's
financial hedges in 2017 resulted in realized financial derivatives
gains of $1,101 thousand which partially offset lower natural gas prices
in Q1 2017 as compared to Q1 2016.
-- Transportation expense decreased to $438 thousand in 2017 from $3,443
thousand in 2016 due to the decrease in natural gas production and to
forward sale agreements in place for the delivery of natural gas
production to the local Maritimes market as opposed to the New England
market. The natural gas prices for volumes sold under these forward sale
agreements are based on natural gas prices at AGT but are subject to
lower transportation expenses. Corridor had forward sale agreements in
effect from December 1, 2016 to March 31, 2017 for the sale of 4,755
mmbtupd of natural gas production to the local Maritimes market which
resulted in a decrease in transportation expense of approximately $800
thousand over this period. For the period from December 1, 2017 to March
31, 2018, Corridor had forward sales agreements to the local Maritimes
market for substantially all of its natural gas production resulting in
an estimated decrease of approximately $1.2 million in transportation
expense over the term of the forward sale agreements.
-- Cash flow from operations decreased to $2,441 thousand for the year
ended December 31, 2017 from $4,307 thousand for the year ended December
31, 2016 due to lower natural gas sales related to the increased
duration of the shut-in period in 2017, partially offset by realized
financial derivatives gains of $1,101 thousand and lower transportation
expenses in 2017.
-- Corridor's net income increased to $17,739 thousand for the year ended
December 31, 2017 from a net loss of $29,291 thousand for the year ended
December 31, 2016 due primarily to the recognition of a net gain on
disposition of $5,589 thousand, a reversal of impairment losses of $12
million and a reversal of deferred income tax assets of $2,430 thousand
during the year ended December 31, 2017 as compared to the recognition
of impairment losses of $15.7 million and a write-down of deferred
income tax assets of $11,456 thousand for the year ended December 31,
2016.
2017 Netback Analysis
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Three months ended Twelve months ended
December 31 December 31
thousands of dollars except
$/mscf and $/boe(2) 2017 2016 2017 2016
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Natural gas sales $ 3,088 $ 2,199 $ 7,292 $ 12,596
Other revenues 73 157 382 945
Realized financial
derivatives gain (loss) 7 (121) 1,101 (121)
Current year royalty
expense(3) (103) (54) (196) (276)
Transportation expense (10) (239) (438) (3,443)
Production expense (613) (616) (2,519) (2,421)
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Field operating netback $ 2,442 $ 1,326 $ 5,622 $ 7,280
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Natural gas production per
day(4) (mmscfpd) 2.7 3.0 2.5 5.8
Barrels of oil equivalent
per day(4) (boepd) 447 505 412 963
Average natural gas price
($/mscf) $ 12.51 $ 7.88 $ 8.08 $ 5.96
Natural gas revenues ($/boe)$ 75.06 $ 47.28 $ 48.46 $ 35.74
Other revenues ($/boe) 1.78 3.37 2.54 2.68
Realized financial
derivatives gain (loss)
($/boe) 0.17 (2.60) 7.32 (0.34)
Current year royalty expense
($/boe) (2.50) (1.15) (1.30) (0.78)
Transportation expense
($/boe) (0.23) (5.15) (2.91) (9.77)
Production expense ($/boe) (14.90) (13.25) (16.74) (6.87)
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Field operating netback
($/boe) $ 59.38 $ 28.50 $ 37.37 $ 20.66
General and administrative
expenses ($/boe) (21.38) (15.14) (19.43) (8.43)
Interest, foreign exchange
and other(3) ($/boe) (0.34) 2.16 (1.72) (0.01)
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Cash flow from operations(1)
netback ($/boe) $ 37.66 $ 15.52 $ 16.22 $ 12.22
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(1) Cash flow from operations is a non-IFRS measure. Cash flow from
operations represents net earnings adjusted for non-cash items including
depletion, depreciation and amortization, deferred income taxes, share-
based compensation and other non-cash expenses. See "Non-IFRS Financial
Measures" in Corridor's management's discussion and analysis for the
year ended December 31, 2017.
(2) For the purpose of calculating unit revenues and costs, natural gas has
been converted to barrels of oil equivalent ("boe") on the basis of six
thousand cubic feet ("mscf") of natural gas being equal to one barrel of
oil. Boe may be misleading, particularly if used in isolation. A boe
conversion ratio of six mscf to one 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.
(3) Prior year royalty audit assessment of $198 thousand included in
interest, foreign exchange and other.
(4) Corridor shut-in most of its natural gas production between April 2017
and December 2017 and partially shut-in its natural gas production
between September 2016 and November 2016. The increased duration of the
shut-in period in 2017 as compared to 2016 resulted in a decrease in
natural gas production for the three and twelve months ended December
31, 2017.
-- Corridor's cash flow from operations netback for Q4 2017 increased to
$37.66/boe from $15.52/boe in Q4 2016 as a result of higher natural gas
sales prices and lower transportation expense.
-- Natural gas sales increased to $3,088 thousand for Q4 2017 from $2,199
thousand in Q4 2016 due to an increase in the average natural gas price
to $12.51/mscf in Q4 2017 from $7.88/mscf in Q4 2016 partially offset by
the decrease in natural gas production to 2.7 mmscfpd in Q4 2017 from
3.0 mmscfpd in Q4 2016 due to the shut-in of all the McCully wells in
October and November 2017 as compared to only a partial shut-in of the
McCully wells in October and November 2016.
-- Corridor's royalty expense for Q4 2017 increased to $103 thousand from
$54 thousand for Q4 2016 due to higher natural gas sales in Q4 2017.
-- Transportation expense decreased significantly to $10 thousand for Q4
2017 from $239 thousand for Q4 2016 primarily due to a forward sale
agreement in place for December 2017 for the delivery of substantially
all of Corridor's natural gas production to the local Maritimes market
as opposed to the New England market which sales incurred much lower
transportation expenses.
Old Harry Update
During Q4 2017, a third party-operated Controlled Source Electromagnetic ("CSEM") survey was completed over the Newfoundland and Labrador portion of the Old Harry prospect. The processing and interpretation of the CSEM survey results are expected to be completed by the end of April 2018. To enhance the integration of the CSEM data with Corridor's geological and geophysical models, Corridor has decided to reprocess approximately 760 kilometers of its 2D seismic data base over the Old Harry structure. By employing modern offshore data processing techniques, Corridor should gain a better understanding of the stratigraphy within the Old Harry structure, which in turn, will facilitate a more robust integrated geotechnical model. Corridor expects the reprocessing of its seismic data base to be completed by the end of May 2018 after which Corridor intends to update its shareholders on its go forward plans for the Old Harry prospect.
Corporate Presentation
Corridor plans to update its management presentation, which will be available on Corridor's website at www.corridor.ca on or about March 29, 2018.
Guidance
Corridor is on track to achieve its guidance disclosed in its press release dated February 13, 2018 for the period from April 1, 2017 to March 31, 2018, despite a weakening in natural gas prices at AGT from those previously forecasted for February and March 2018. This is due to Corridor's financial hedges in place during this period, daily production optimization efforts and a strengthening in the US dollar.
Corridor is currently evaluating alternatives for its production optimization strategy for the period from April 1, 2018 to March 31, 2019 and anticipates providing guidance for that period at its annual shareholders' meeting, which is scheduled for May 15, 2018.
"Corridor is well positioned for 2018" said Steve Moran, President and Chief Executive Officer. "Our balance sheet is very strong, with a forecast $57 million of working capital at the end of Q1 2018. We will continue with a disciplined approach to identify opportunities for deploying our surplus working capital. We are very pleased with the results of our optimization strategy over the past three years, taking advantage of the winter pricing premium of our natural gas market, while preserving reserves for production in future years. We expect this winter pricing premium to continue for the foreseeable future".
Corridor is a Canadian junior resource company engaged in the exploration for and development and production of petroleum and natural gas onshore in New Brunswick and offshore in the Gulf of St. Lawrence. Corridor currently has natural gas production and reserves in the McCully Field near Sussex, New Brunswick. In addition, Corridor has a shale gas prospect in New Brunswick and an offshore conventional hydrocarbon prospect in the Gulf of St. Lawrence.
Forward Looking Statements
This press release contains certain forward-looking statements and forward-looking information (collectively referred to herein as "forward-looking statements") within the meaning of Canadian securities laws. All statements other than statements of historical fact are forward-looking statements. Forward-looking information typically contains statements with words such as "anticipate", "believe", "plan", "continuous", "estimate", "expect", "may", "will", "project", "should", or similar words suggesting future outcomes. In particular, this press release contains forward-looking statements pertaining to: the characteristics of Corridor's properties; business plans and strategies (including plans to shut-in production to take advantage of expected price differentials and Corridor's optimization strategy, including entering into hedging); exploration and development plans, including timing of such plans; processing of the CSEM data, plans to reprocess 760 kilometers of Corridor's 2D seismic data base over the Old Harry structure; the benefits and timing of such reprocessing; expectations regarding Corridor's positioning for 2018; estimate of working capital at the end of Q1 2018; plans to provide future guidance and timing of such plans and expectations regarding natural gas prices.
Statements relating to "reserves" are forward-looking statements, as they involve the implied assessment, based on certain estimates and assumptions that the reserves described exist in the quantities predicted or estimated and can profitably be produced in the future.
Undue reliance should not be placed on forward-looking statements, which are inherently uncertain, are based on estimates and assumptions, and are subject to known and unknown risks and uncertainties (both general and specific) that contribute to the possibility that the future events or circumstances contemplated by the forward-looking statements will not occur. There can be no assurance that the plans, intentions or expectations upon which forward-looking statements are based, will in fact be realized. Actual results will differ, and the difference may be material and adverse to the Corporation and its shareholders. Forward-looking statements are based on the Corporation's current beliefs as well as assumptions made by, and information currently available to, the Corporation concerning anticipated financial performance, business prospects, strategies, regulatory developments, future natural gas and oil commodity prices, exchange rates, future natural gas production levels, the ability to obtain equipment in a timely manner to carry out development activities, the ability to market natural gas successfully to current and new customers, the impact of increasing competition, the ability to obtain financing on acceptable terms, the ability to add production and reserves through development and exploration activities, and the terms of agreements with third parties such as the Corporation's forward sales contracts and hedging contracts. Although management considers these assumptions to be reasonable based on information currently available to it, they may prove to be incorrect. By their very nature, forward-looking statements involve inherent risks and uncertainties (both general and specific) and risks that forward-looking statements will not be achieved. These factors include, but are not limited to, risks associated with oil and gas exploration, development and production, operational risks, development and operating costs, substantial capital requirements and financing, volatility of natural gas and oil prices, government regulation, environmental, hydraulic fracturing, third party risk, dependence on key personnel, co-existence with mining operations, availability of drilling equipment and access, variations in exchange rates, expiration of licenses and leases, reserves and resources estimates, trading of common shares, seasonality, disclosure controls and procedures and internal controls over financial reporting, competition, conflicts of interest, issuance of debt, title to properties, hedging, information systems, litigation and aboriginal land and rights claims. Further information regarding these factors may be found under the heading "Risk Factors" in the Corporation's Annual Information Form for the year ended December 31, 2017. Readers are cautioned that the foregoing list of factors that may affect future results is not exhaustive.
The forward-looking statements contained in this press release are made as of the date hereof and Corridor does not undertake any obligation to update publicly or to revise any of the included forward-looking statements, except as required by applicable law. The forward-looking statements contained herein are expressly qualified by this cautionary statement.
Contacts:
Steve Moran, President
Corridor Resources Inc.
(902) 429-4511
(902) 429-0209 (FAX)
www.corridor.ca
