Greenfields Petroleum Corporation Announces 2018 Financial and Operating Results, Extension of Senior Secured Debt Payments and Appointment of COO

Source Press Release
Company Greenfields Petroleum Corporation 
Tags Debt Financing, Financing, Financial & Operating Data, Strategy - Corporate
Date April 30, 2019

Greenfields Petroleum Corporation (the “Company” or “Greenfields”) (TSX VENTURE: GNF), a production focused company with operating assets in Azerbaijan, announces its financial and operating results for the fourth quarter and year ended December 31, 2018, the extension of senior secured debt payments and the appointment of Chief Operating Officer.

Selected financial and operational information included below should be read in conjunction with the Company’s audited consolidated financial statements for the year ended December 31, 2018 and related management’s discussion and analysis (“MD&A”), which can be found at  and on SEDAR at  . Except as otherwise indicated, all dollar amounts referenced herein are expressed in United States dollars.

2018 Highlights

  • The Company's entitlement share of sales volumes (the “Sales Volumes”) from the offshore block known as the Bahar project (the “Bahar Project”) resulted in revenue of $6.8 million in Q4/18 and $31.0 million in 2018.  Revenue decreased 2% in relation to Q4/17 while increasing 5% year-over-year.

  • Sales Volumes averaged 560 bbl/d for crude oil and 15,868 mcf/d for natural gas or 3,205 boe/d in Q4/18 and 617 bbl/d, 16,689 mcf/d or 3,398 boe/d in 2018. As compared to Q4/17, Sales Volumes increased 2% for crude oil, decreased 2% for natural gas and decreased 1% for boe/d, while year-over-year Sales Volumes decreased 1% for crude oil with no changes for natural gas and boe/d.

  • Realized oil price averaged $54.36/bbl for Q4/18 and $63.42/bbl for 2018, a decrease of 3% in comparison to average prices of $56.04/bbl in Q4/17 and an increase of 33% in relation to average prices of $47.81/bbl realized in full year 2017.  The price of natural gas has been fixed at $2.69/mcf since April 1, 2017. 

  • Operating costs were $7.7 million for Q4/18 and $23.4 million for 2018, compared to $4.8 million and $20.9 million, respectively, for the same periods in 2017. 

  • Capital expenditures were $0.9 million (before write-downs of $1.0 million to operating costs) for Q4/18 and $4.7 million for 2018, compared to expenditures of $1.1 million and $8.4 million, respectively, for the same periods in 2017. 

  • After interest and depreciation expenses, the Company realized a net loss of $5.1 million for Q4/18 and $10.7 million for 2018, representing a loss per share (basic and diluted) of $0.28 and $0.59 in each respective period.  The Company also realized a net loss of $2.2 million in Q4/17 and $9.1 million for 2017, with a loss per share (basic and diluted) of $0.12 and $0.54 in each respective period.

  • The Company’s safety record year to date has been excellent, with zero ‘Lost Time Incidents’, two minor ‘Reportable Incidents’ and no spills. This continued improvement is due to our safety training of workers in the field.

Commenting on the results, John Harkins, Greenfields’ President and CEO, said:

“We continue to build momentum in improving our operating performance and remain focused on realizing the core value attributable to our operations and substantial proven reserves. We have a clear growth strategy to materially enhance production over future periods. We continue to drive performance improvements in relation to workovers that have contributed to restoring and stabilizing production. Critical to our industry, we are also very pleased with the safety consciousness at the Bahar Project in 2018 achieving our best safety record in eight years.”

Operational Review

  • Gross crude oil production in Q4/18 was 737 bbl/d, increasing 7% from Q3/18, due to successful workovers.  In South Gum Deniz Oil Field, workovers are now underway on Platforms 409 and 412 following rig delivery in Q3/18.  In this area, Bahar Energy Operating Company (“BEOC”) plans to equip six additional wells with electric submersible pumps (“ESP”) powered by onsite power generation.  In the Gum Deniz Oil Field, two successful recompletions were conducted and ten well services were performed for sand cleanouts and artificial lift optimization.  Four workovers were underway at the end of the quarter.

  • Gross gas production from the Bahar Gas Field in Q4/18 was 21,056 mcf/d, a 4% decrease relative to Q3/18. Gas production in Q4/18 was impacted by the loss of two wells (B-140 & B-205) due to mechanical failures and liquid loading.  Workovers to reestablish production for these wells are planned as soon as rigs can be mobilized.  The loss of production was partially offset by the end of the fourth quarter 2018 with the successful reactivation of well B-173. For the Bahar Gas Field, BEOC’s construction efforts continue to focus on platform refurbishment to enable access for workovers and production operations, as well as infrastructural improvement projects related to the causeway, facilities and pipelines.

  • Operating costs were $7.7 million for Q4/18 and $23.4 million for full year 2018. In comparison to the same periods in 2017, operating costs increased 60% and 12%, respectively. The increase in operating costs during 2018 relates primarily to the rentals, platform maintenance, electricity and overtime costs incurred in connection with workovers and wells services conducted to mitigate production declines. Operating costs in Q4/18 were impacted by the cost of capital workovers for two Bahar Gas Field wells charged to expense due to collapsed casing. Also, the lower level of capital projects completed during the year resulted in the expensing of operating costs which would otherwise be capitalized.  Administrative expenses for Q4/18 and full year 2018 were $0.7 million and $3.6 million, respectively, reflecting a decrease of 15% and increase of 18%, respectively, in comparison to the same periods in 2017. The increases in administrative expenses are due to higher professional and technical fees in connection with ongoing corporate initiatives.

  • Capital expenditures were $0.9 million (before write-downs of $1.0 million to operating costs) for Q4/18 and $4.7 million for full year 2018. In comparison to the same periods in 2017, capital expenditures decreased 20% and 32%, respectively. Capital expenditures in fourth quarter were impacted by write-downs involving capital workovers for two Bahar Gas Field wells which costs were charged to expense due to collapsed casing.  In addition, the decrease experienced in 2018 relates primarily to the delay in carrying out workovers and recompletions for the south Gum Deniz Oil Field due to the late delivery of heavier rigs ordered in 2017.


Selected Financial Information

(US$000’s, except as noted)  Years Ended 
  December 31, 
    2018      2017   
Financial     
     
Revenues     
Crude oil and natural gas    30,962      29,446   
     
Net income (loss)    (10,655)      (9,068)   
Net income (loss) per share, basic and diluted  ($0.59  ($0.54 
     
Operating     
     
Average Entitlement Sales Volumes (1)     
Crude Oil (bbl/d)    617      626   
  Change compared to same period in 2017    (1%)      41%   
Natural gas (mcf/d)    16,689      16,628   
  Change compared to same period in 2017  nil      69%   
Barrel oil equivalent (boe/d)    3,398      3,379   
 Change compared to same period in 2017  nil      62%   
     
Entitlement to gross sales volumes (2)    84%      86%   
     
Prices     
Average oil price ($/bbl)    64.56      48.79   
Net realization price ($/bbl)    63.42      47.81   
  Change compared to same period in 2017    33%      27%   
Brent oil price ($/bbl)    71.08      54.12   
     
Natural gas price ($/mcf) (3)    2.69      3.02   
     
Net realization price ($/boe) (4)    24.96      23.75   
Operating cost ($/boe) (4)    (18.92)      (16.93)   
Operating netback ($/boe) (4)    6.04      6.82   
     
Capital Items     
Cash and cash equivalents    565      741   
Total Assets    193,471      200,597   
Working capital deficit    (17,796)      (5,873)   
Long term debt and shareholders’ equity    164,839      180,846   


(1)  Sales Volumes represent the Company’s share of entitlement production marketed by State Oil Corporation of Azerbaijan (“SOCAR”) after in-kind production volumes delivered to SOCAR as compensatory petroleum and the government’s share of profit petroleum.  The Company’s share of entitlement production includes the allocation of the share of cost recovery production of  SOCAR Oil Affiliate (“SOA”) as stipulated by the Carry 1 recovery provisions in the Exploration, Rehabilitation, Development and Production Sharing Agreement (the “ERDPSA”). Compensatory petroleum represents 10% of gross production from the ERDPSA and continues to be delivered to  SOCAR, at no charge, until specific cumulative oil and natural gas production milestones are attained.

(2)  Represents the percentage of the entitlement production volume of Bahar Energy Limited (“BEL”) relative to gross volumes delivered by the ERDPSA.  

(3)  The natural gas price was contractually fixed at $3.96 per mcf in the first quarter 2017 and then renegotiated to a new 5‑year term at $2.69 per mcf effective April 1, 2017.

(4)  Net realization price, operating cost and operating netback are Non-IFRS measures. For more information see “Non-IFRS Measures”.

Extension of senior secured debt payments

The Company has executed payment deferral letters with its senior debt lender, Vitol Energy (Bermuda) Ltd. (“Vitol”), to defer payments in the aggregate of $8.3 million until May 31, 2019. The Company anticipates the deferrals will give the Company sufficient time to comply with its obligations under the thirteenth amending agreement to the loan agreement between the Company and  Vitol.

Appointment of COO

Norman Benson, who served as Senior Vice President and Chief Operating Officer of Greenfields and President of BEOC, will step down from those positions effective May 1, 2019. Mr. Benson has been very instrumental in directing the production activities of the Company for over the past six years.  The Company will appoint Mr. John Harkins to replace Mr. Benson as COO of Greenfields and President of BEOC, in addition to his current roles as President and Chief Executive Officer of Greenfields.

Source: EvaluateEnergy® ©2019 EvaluateEnergy Ltd