CORRIDOR ANNOUNCES SECOND QUARTER RESULTS
HALIFAX, Wednesday, August 12, 2009, (CDH-TSX) announced today its second quarter results.
The following table provides a summary of Corridor’s financial and operating results for the three and six months ended June 30, 2009, with comparisons to the three and six months ended June 30, 2008. Corridor's financial statements and management's discussion and analysis for the second quarter 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.
Selected Financial Information
|
|
Three months ended June 30 |
Six months ended June 30 |
||
thousands of dollars except per share amounts |
2009 |
2008 |
2009 |
2008 |
|
Revenues |
$7,887 |
$19,187 |
$31,699 |
$39,366 |
|
Net earnings |
$118 |
$3,816 |
$6,934 |
$9,897 |
|
Net earnings per share - basic |
$0.001 |
$0.046 |
$0.079 |
$0.119 |
|
Net earnings per share - diluted |
$0.001 |
$0.045 |
$0.079 |
$0.119 |
|
Cash flow from operations(1) |
$3,217 |
$12,042 |
$20,350 |
$26,591 |
|
Capital expenditures |
$2,957 |
$14,704 |
$22,757 |
$32,686 |
|
Gross proceeds from capital stock issues |
$- |
$55,534 |
$- |
$55,546 |
|
Total assets |
$306,603 |
$286,494 |
$306,603 |
$286,494 |
|
(1) Cash flow from operations is a non-GAAP measure. Cash flow from operations represents net earnings adjusted for non-cash items including depletion & depreciation, future income taxes, stock-based compensation and other non-cash expenses. See "Non-GAAP Financial Measures" in Corridor’s management’s discussion and analysis for the six months ended June 30, 2009.
Second Quarter Highlights
- During Q2 2009, natural gas production averaged 15.9 mmscfpd net to Corridor (including production from penalty wells) with an average natural gas sales price of $4.94/mscf, resulting in net earnings of $118 thousand and basic and diluted net earnings per share of $0.001.
- Natural gas revenues for Q2 2009 decreased to $7,164 thousand from $18,466 thousand for Q2 2008 due to the decrease in the average natural gas sales price from $10.97/mscf to $4.94/mscf and a decrease in production from 18.5 mmscfpd to 15.9 mmscfpd.
- Net earnings for Q2 2009 decreased to $118 thousand from $3,816 thousand for Q2 2008, reflecting the decrease in revenues which was partially offset by a decrease in future income tax expense.
- In Q2 2009, the Company recorded a future income tax recovery of $2,640 thousand following a change in New Brunswick’s corporate income tax rates. New Brunswick’s 2009 budget proposed to reduce the Province’s corporate income tax rate from 13% to 12% effective July 1, 2009, with further proposed annual reductions leading up to a rate of 8% effective July 1, 2012. These rates were substantively enacted on April 14, 2009.
- In April 2009, consistent with the Company’s 2009 budget, Corridor suspended further exploration and development drilling in the McCully Field, until natural gas prices improve.
- On June 26, 2009, Corridor reported the results of an independent study of the quantity of shale gas resource contained within the Frederick Brook formation in the Sussex/Elgin sub-basins of Southern New Brunswick. The study addressed only in-place gas volumes since insufficient information was available to estimate the technical or economically recoverable amount of shale gas. The results of this study will assist Corridor in developing a longer term plan for the appraisal and potential development of this vast resource.
- On July 27, 2009, Corridor’s $40 million revolving credit facility with a Canadian chartered bank matured and was replaced on July 31, 2009 with a $20 million revolving credit facility with another Canadian chartered bank. This new credit facility, which expires on July 31, 2010, can be increased at any time up to the current approved borrowing base of $44 million, subject to the bank reconfirming this borrowing base. Corridor determined that a credit amount of $20 million was sufficient based on the Company’s current plans and the lower credit facility resulted in cost savings relating to commitment and stand-by fees otherwise payable to the bank.
Q2 2009 Netback Analysis
|
|
Three months ended June 30 |
Six months ended June 30 |
||
thousands of dollars except $/mscf |
2009 |
2008 |
2009 |
2008 |
|
Natural gas revenues |
$7,164 |
$18,466 |
$30,376 |
$37,781 |
|
Royalty expense |
(106) |
(1,179) |
(1,603) |
(2,465) |
|
Production expense |
(652) |
(1,190) |
(1,642) |
(2,378) |
|
Transportation expense |
(2,467) |
(3,156) |
(5,621) |
(5,811) |
|
Netback |
$3,939 |
$12,941 |
$21,510 |
$27,127 |
|
|
|
|
|
|
|
Natural gas production (mmscf) |
1,450 |
1,683 |
3,064 |
3,475 |
|
Natural gas production per day (mmscfpd) |
15.9 |
18.5 |
16.9 |
19.1 |
|
|
|
|
|
|
|
Natural gas revenues ($/mscf) |
$4.94 |
$10.97 |
$9.92 |
$10.87 |
|
Royalty expense ($/mscf) |
(0.07) |
(0.70) |
(0.52) |
(0.71) |
|
Production expense ($/mscf) |
(0.45) |
(0.69) |
(0.54) |
(0.66) |
|
Transportation expense ($/mscf) |
(1.70) |
(1.88) |
(1.83) |
(1.67) |
|
Netback ($/mscf) |
$2.72 |
$7.70 |
$7.03 |
$7.83 |
|
Netback decreased to $3,939 thousand for Q2 2009 from $12,941 thousand for Q2 2008 due to the decrease in the average natural gas sales price from $10.97/mscf in Q2 2008 to $4.94/mscf in Q2 2009 and a decrease in production from 18.5 mmscfpd to 15.9 mmscfpd. The decrease in production is primarily due to the effects of down-hole scaling and mineral deposition within the production wellbores, and the significant volumes of frac fluids (water and methanol) remaining in the reservoirs and wellbores, and also due in part to the technical problems encountered in Q4 2008 with McCully wells N-66 and I-47 which delayed the production from these wells. Corridor will be initiating a well work-over program later this summer to begin addressing these issues
The decrease in the royalty expense per mscf for Q2 2009 to $0.07/mscf from $0.70/mscf for Q2 2008 is due to the significant decrease in the natural gas revenues in Q2 2009 while the deductions allowable in the royalty calculation remained consistent.
Production expense for Q2 2009 decreased to $652 thousand from $1,190 thousand for Q2 2008 due to the decrease in methanol and water disposal costs. The decrease in methanol costs is due to a lower water production and the ability to recover and reuse methanol from produced water following the installation of a methanol regenerator in Q3 2008. The methanol regenerator has also significantly reduced the volume of water for disposal and the related disposal costs.
Transportation expense decreased to $2,467 thousand in Q2 2009 from $3,156 thousand in Q2 2008 due to a decrease in production, a $0.05 decrease in the cost of Canadian firm tolls effective April 1, 2009 and a firm transportation agreement for variable monthly volumes at a cost of 75% of the Canadian firm tolls effective May 1, 2009. These decreases were lessened by a stronger U.S. dollar in 2009 compared to 2008.
2009 Outlook
Corridor has decreased its 2009 budget for revenues from $61 million to $54.5 million to reflect the weakening of the U.S. dollar and a lower forecasted natural gas production level. Corridor has revised its estimate of the exchange rate from $0.825 U.S. per Canadian dollar to $0.90 U.S. per Canadian dollar. Corridor has also decreased its previously estimated average net production for 2009 from 20 mmscfpd to 18 mmscfpd to reflect a decrease in the estimated production from the I-47 well following a pressure failure in the casing patch installed in this well earlier this year resulting in only one frac being successfully completed in the well. The Company will report frac and test results for all three McCully wells in early to mid September once completion activities have been finalized. As a result, Corridor’s previously estimated cash flow from operations is forecast to decrease by approximately $2.5 million to $32.5 million. Corridor is committed to maintaining a strong financial position through this period of low natural gas prices and has further reduced its 2009 capital budget from $41.5 million to $40.0 million. Corridor is currently forecasting a net positive working capital position of $14 million at December 31, 2009.
Corridor is a junior resource company engaged in the exploration for and development and production of petroleum and natural gas onshore in New Brunswick, Prince Edward Island and Québec and offshore in the Gulf of St. Lawrence. Corridor currently has natural gas reserves in the McCully Field near Sussex, New Brunswick and has recently discovered crude oil reserves in the Caledonia Field near Sussex, New Brunswick. In June 2007, Corridor completed the construction of a field gathering system, a gas plant and a pipeline lateral connecting the McCully Field to markets through the Maritimes & Northeast Pipeline.
For further information:
Corridor Resources Inc.#301, 5475 Spring Garden Road,
Halifax, Nova Scotia
B3J 3T2
Contact: Norman W. Miller, President and CEO
Tel: (902) 429-4511
Fax: (902) 429-0209
Web: http://www.corridor.ca/
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 Corridor's outlook for 2009 with respect to expected revenues, net production, cash flow from operations, capital expenditures, working capital, credit requirements, completion activities, fraccing and testing results and the Canada-U.S. exchange rate.
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 Corridor and its shareholders.
Forward-looking statements are based on Corridor’s current beliefs as well as assumptions made by, and information currently available to, Corridor concerning anticipated financial performance, business prospects, strategies, regulatory developments, future natural gas commodity prices, 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, and the ability to add production and reserves through development and exploration activities. 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 may be found under the heading "Risk Factors" in Corridor's Annual Information Form for the year ended December 31, 2008 and also in Corridors management's discussion and analysis for the six months ended June 30, 2009, copies of which are available on SEDAR website at www.sedar.com.
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.