Bengal Energy Announces Fourth Quarter and Fiscal 2019 Year end Financial, Operating and Reserve Results

Company Bengal Energy LP 
Tags Reserve Update, Capital Spending, Guidance, Strategy - Corporate, Financial & Operating Data
Date June 25, 2019

Bengal Energy Ltd. (TSX: BNG) ("Bengal" or the "Company") today announces its financial and operating results for the fourth quarter and the fiscal year ended March 31, 2019 and the results of its independent reserve evaluation for the year ended March 31, 2019 as prepared by GLJ Petroleum Consultants Ltd. ("GLJ").

Despite pricing volatility and a year of minimal development activity, fiscal 2019 saw overall improved sales revenue from the Company's core light oil field in the Cooper Basin, Australia. Very strong netbacks of $53.16 continue to support positive cash flow. Development activity has now been accelerated within the Cuisinier field with development drilling, fracture stimulations and water injection all commencing during Q4 fiscal 2019 to Q1 fiscal 2020 (H1 calendar 2019). These activities are expected to result in increased production and cash flow from the field starting in fiscal Q2 2020 (Q3 calendar 2019). These initiatives will further underpin the next phases of development at Cuisinier, which has an estimated Oil Initially In Place (OIIP) of 95.6 million barrels in the Total Proved Plus Probable reserves case based on the independent reserve assessment and evaluation prepared by GLJ with an effective date of March 31, 2019 (the "GLJ Report").

FISCAL YEAR END & FOURTH QUARTER 2019 HIGHLIGHTS:

The following is an overview of the financial and operational results during the three and twelve month periods ended March 31, 2019:

Financial Summary:

  • Sales Revenue - Crude oil sales revenue was $2.7 million in the fourth quarter of fiscal 2019, which is 4% lower than the $2.8 million recorded in Q4 fiscal 2018. Full year fiscal 2019 sales revenue was $11.2 million compared to $10.7 million for the full year fiscal 2018. The improved full year performance in fiscal 2019 compared to fiscal 2018 was due primarily to an overall higher average US Brent price, despite a lower overall production volume.

  • Hedging - The Company's credit facility requires that a minimum of 50% of oil production be hedged forward by a minimum of 12 months. At year-end fiscal 2019, the realized loss on financial instruments was $1.2 million while an unrealized gain on financial instruments of $1.1 million was recorded. The quarter ended March 31, 2019 had hedges in place at US$55.40/bbl while the two subsequent quarters have a portion of expected production hedged at over US$72/bbl. For the quarter ending December 31, 2019, a portion of production has been hedged using puts and swaps at US$54.20/bbl. For the period Jan -March 2020, the hedging program has a combination of puts and swaps at US$63.74/bbl.

  • Funds from Operations - Bengal generated funds from operations of $0.8 million during Q4 fiscal 2019compared to $0.5 million of funds from operations in Q4 fiscal 2018. For the full year fiscal 2019, the Company generated funds from operations of $2.2 million, down from $3.7 million of funds from operations in fiscal 2018. The primary reason for the decrease in funds from operations during fiscal 2019as compared to fiscal 2018 was the impact of the realized loss on financial instruments.

  • Net loss - Bengal reported a net loss of $2.1 million for the current quarter compared to a net loss of $12.5 million in the fourth quarter of fiscal 2018. For the full year fiscal 2019, the Company reported a net loss of $2.5 million compared to fiscal 2018 net loss of $12.3 million. The primary driver for the net loss for both the current quarter and full year fiscal 2019 was an asset impairment of $1.9 million and $2.8 million respectively.

  • Adjusted Net Income - Bengal reported adjusted net income of $0.4 million for the current quarter and $0.5 million for the full year fiscal 2019. Net income is adjusted for unrealized gain (loss) on financial instruments, the unrealized foreign exchange gain (loss) for the period and the non-cash impairment of non-current assets.

Operational Summary:

  • Production Volumes - The Company's share of total production in the current quarter was 25,303 bbls, which is a 16% decline from the 30,050 bbls produced in the fourth quarter of fiscal 2018. The current quarter production averaged 281 bbls per day compared to 334 bbls per day produced in the fourth quarter of fiscal 2018. Full year fiscal 2019 saw total production of 108,731 compared to 131,455 for full year fiscal 2018. The full year fiscal 2019 production per day averaged 298 bbls compared to 360 bbls per day for the full year fiscal 2018. Normal production declines and reduced capital spending in time to realise any increase in production during the fiscal year, are the reason for the reduction in productionfor year over year.

  • Capital Expenditures - Bengal commenced its five well development drilling program and capitalexpenditures towards the waterflood pilot in the fourth quarter of fiscal 2019. The drilling program completion is expected to occur by the end of Q2 fiscal 2020. The waterflood pilot will take place during second quarter of fiscal 2020. During Q4 fiscal 2019, Bengal incurred $2.4 million in capital expenditures related to this capital program. Full year fiscal 2019 saw total capital expenditure of $4.3 million, which included the exploration well drilling in Q2 fiscal 2019.

Reserve Summary:

  • Bengal's proved plus probable reserves (Company interest) as evaluated by GLJ as at March 31, 2019decreased 6% to 6,026 MBOE from 6,416 MBOE at March 31, 2018. The Company's proved reserves (Company interest) as at March 31, 2019 decreased 13% to 2,257 MBOE from 2,583 MBOE as at March 31, 2018.

  • The net present value ("NPV") of Bengal's estimated future net revenue before income taxes from proved plus probable reserves as at March 31, 2019 is $146 million, an increase from $141 million at March 31, 2018, utilizing the forecast prices and costs assumptions of GLJ as at March 31, 2019 and published on April 1, 2019 (the "GLJ Price Forecast") and discounted at 10%. The net present value of Bengal's estimated future net revenue before income taxes from total proved reserves as at March 31, 2019 is $59.0 million, a decrease from $62.9 million at March 31, 2018, utilizing the GLJ Price Forecast and discounted at 10%.

OPERATING SUMMARY

                         
($000s except per share, %,                         
 volumes and netback amounts)    Three months ended      Twelve months ended   
          March 31            March 31   
    2019      2018      2019      2018   
Oil revenue   2,667     2,783     11,211     10,710   
Operating netback(1)   1,944     1,282     5,780     6,918   
Cash from operations   635     858     2,691     3,627   
Funds from operations(2)   842     525     2,220     3,737   
   Per share ($) (basic and diluted)   0.01     0.01     0.02     0.04   
Net loss   (2,144   (12,526   (2,475  (12,271 
   Per share ($) (basic and diluted)   (0.02   (0.12   (0.03   (0.12 
Adjusted net income (loss)(3)   397     (143   525     1,459   
   Per share ($) (basic and diluted)   0.00     0.00     0.01     0.01   
Capital expenditures   2,473     939     4,346     3,511   
Oil volumes (bbl/d)    281      334      298      360   
Netback(1)($/bbl)   76.82     42.66     53.16     52.63   

(1) Operating Netback is a non-IFRS measure and includes realized gain on financial instruments. Netback per bbl is calculated by dividing revenue (including realized gain (loss) on financial instruments) less royalties and operating costs by the total production of the Company measured in bbls. A reconciliation of the measure can be found in the table on page 7 of the Company's management's discussion and analysis for the Q4 and fiscal year ended March 31, 2019.

(2) Funds from operations is a non-IFRS measure which is calculated by adding back all non-cash expense deductions to the net loss for the quarter and year. Funds from operations per share is a non-IFRS measure calculated as calculated by dividing funds from operations by weighted average basic and diluted shares outstanding for the periods disclosed. A reconciliation of the measures can be found in the table on page 20 of the Company's management's discussion and analysis for the Q4 and fiscal year ended March 31, 2019.

(3) Adjusted net income (loss) and adjusted net income (loss) per share are non-IFRS measures. The comparable IFRS measure is net income (loss). A reconciliation of the two measures can be found in the table on page 20 of the Company's management's discussion and analysis for the Q4 and fiscal year ended March 31, 2019.

(4) The above non-IFRS measures do not have any standardized meaning under GAAP (as that term is defined in National Instrument 52-107 Acceptable Accounting Principles and Auditing Standards) and therefore may not be comparable to similar measures presented by other issuers.

Bengal has filed its consolidated financial statements and management's discussion and analysis for the fourth fiscal quarter of 2019 and year ended March 31, 2019 with the Canadian securities regulators. The documents are available on SEDAR at  or by visiting Bengal's website at  .

Corporate Reserves

The reserves data set forth in this news release is based upon the GLJ Report. The following presentation summarizes the Company's crude oil and the net present values before and after income taxes of future net revenue for the Company's reserves using forecast prices and costs based on the GLJ Report. The GLJ Report has been prepared in accordance with the standards contained in the Canadian Oil and Gas Evaluation Handbook (the "COGE Handbook") and the reserve definitions contained in National Instrument 51-101 - Standards of Disclosure For Oil and Gas Activities ("NI 51-101").

Net Asset Value

The following table provides a calculation of Bengal's estimated net asset value and net asset value per share as at March 31, 2019 based on the estimated future net revenues associated with Bengal's proved plus probable reserves discounted at 10% and utilizing the GLJ Price Forecast, as presented in the GLJ Report.

Bengal's estimated net asset value per (basic) share as at March 31, 2019 is calculated at $1.30 on a before-tax, and $0.94 on an after-tax, basis. Net asset value, as presented, excludes land and exploration value and is calculated using 10% NPV (as defined below) of proved plus probable reserves value of $146.1 million, less net debt of $13.59 million (as at March 31, 2019).

MARCH 31, 2019 
 
(CDN $M, $/SHARE)  BEFORE TAX  AFTER TAX 
RESERVES CATEGORY:  Net
Asset
Value 
Net
Asset
Value/basic share 
Net
Asset
Value 
Net 
Asset
Value/basic share 
 
TOTAL PROVED  $45.4  $0.44  $34.5  $0.34   
TOTAL PROVED PLUS 
PROBABLE 
$132.5  $1.30  $95.9  $0.94   
           

Notes:

(1) At March 31, 2019, the Company had approximately 102.3 million common shares outstanding (basic).

Reserves Reconciliation

RECONCILIATION OF COMPANY GROSS(1) RESERVES
BY PRODUCT TYPE
FORECAST PRICES AND COSTS

March 31, 2018  2,583  3,832  6,416  2,583  3,832  6,416 
Discoveries 
Extensions(2)  297  249  546  297  249  546 
Infill drilling(2) 
Improved Recovery(1)  21  27  21  27 
Technical Revisions(3)  (538)  (317)  (855)  (538)  (317)  (855) 
Acquisitions(4) 
Dispositions(4) 
Economic Factors(5) 
Production  (109)  (109)  (109)  (109) 
March 31, 2019  2,257  3,770  6,026  2,257  3,770  6,026 

Notes:

(1) "Gross" reserves are Company's working interest reserves (operating and non-operating) before the deduction of royalties and without including any royalty interest of the Company.

(2) The above change categories correspond to standard set out in the Canadian Oil and Gas Evaluation Handbook (the "COGE Handbook"). For reporting under National Instrument 51-101 - Standards of Disclosure For Oil and Gas Activities ("NI 51-101"), reserves additions under Extensions, Improved Recovery and Infill Drilling are combined and reported as Extensions and Improved Recovery.

(3) Includes technical revisions due to reservoir performance, geological and engineering changes.

(4) Includes production attributable to any acquired interests from the acquisition date to effective date of the report and production realized from disposed interests from the opening balance date to the effective date of disposition.

(5) Includes economic revisions due to changes in economic limits and working interest changes resulting from the timing of interest reversions and related to price and royalty factor changes.

Reserves Summation

The Company's total proved plus probable reserves decreased by 6% in fiscal 2019 to 6,026 MBOE. Proved reserves decreased by 13% to 2,257 MBOE and comprised 37% of the Company's total proved plus probable reserves. Proved undeveloped reserves represent 76% of the total proved reserves. The future capital in the GLJ Report (undiscounted) is $61 million for the proved plus probable reserves and is $27.7 million for total proved reserves. The future capital is programmed over a 10 year time period for probable undeveloped reserves and a 5 year time period for proved undeveloped reserves.

The following table provides summary reserve information based upon the GLJ Report and using the GLJ Price Forecast.

Reserves Data (Forecast Prices and Costs)

SUMMARY OF OIL AND GAS RESERVES
AS OF MARCH 31, 2019
FORECAST PRICES AND COSTS

TOTAL  LIGHT CRUDE 
OIL AND 
MEDIUM 
CRUDE OIL 
HEAVY CRUDE 
OIL 
CONVENTIONAL 
NATURAL GAS 
NATURAL GAS
LIQUIDS 
TOTAL 
           
RESERVES CATEGORY:  Gross 
(Mbbl) 
Net 
(Mbbl) 
Gross 
(Mbbl) 
Net 
(Mbbl) 
Gross 
(Mbbl) 
Net 
(MMcf) 
Gross 
(Mbbl) 
Net 
(Mbbl) 
Gross 
(MBOE) 
Net 
(MBOE) 
                     
Proved Developed                     
     Producing  367  344  367  344 
     Non-Producing  167  157  167  157 
Proved undeveloped  1,723  1,617  1,723  1,617 
TOTAL PROVED  2,257  2,118  2,257  2,118 
PROBABLE  3,770  3,538  3,770  3,538 
TOTAL PROVED PLUS 
PROBABLE 
6,026  5,656  6,026  5,656 

Notes:

(1) "Gross" reserves are Company's working interest reserves (operating and non-operating) before the deduction of royalties and without including any royalty interest of the Company.

(2) "Net" reserves are Company's working interest reserves (operating and non-operating) after deductions of royalty obligations plus the Company's royalty interests.

(3) BOE amounts have been calculated using a conversion rate of six mcf to one bbl. For additional information, see "Cautionary Statements - Barrels of Oil Equivalent" in this news release.

(4) The numbers in this table may not add exactly due to rounding.

Source: EvaluateEnergy® ©2019 EvaluateEnergy Ltd