CALGARY,
Nov. 26, 2014 /CNW/ - Hawk
Exploration Ltd. ("Hawk" or the "Corporation") is pleased to
announce its results for the three and nine months ended
September 30, 2014. The Corporation's
interim financial statements for the three and nine months ended
September 30, 2014 and its
management's discussion and analysis for the three and nine months
ended September 30, 2014 are
available for viewing on SEDAR at www.sedar.com under Hawk's
profile or on the Corporation's website at www.hawkexploration.ca
under Investor Information - Financial Reports.
HIGHLIGHTS
Highlights for the three months ended
September 30, 2014 were as
follows:
- Averaged production of 652 boe/d in the third quarter of 2014,
an increase of 6% from 613 boe/d of production in the third quarter
of 2013;
- Generated cash flow from operations of $1.7 million in the third quarter, a 18% decrease
from the $2.1 million of cash flow
generated in the third quarter of 2013 due to lower realized oil
prices;
- Drilled two (1.4 net) wells in the third quarter of 2014
resulting in one (0.7 net) successful heavy oil well and one (0.7
net) abandoned well;
- Closed the previously announced asset acquisition from Trihawk
Energy Ltd,
- Entered into a new $13.5
million credit facility with Alberta Treasury Branches,
and
- Subsequent to the third quarter, drilled three (3.0 net)
successful heavy oil wells in western Saskatchewan.
Selected financial and operational information
for the three and nine months ended September 30, 2014 is provided as follows:
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Three months ended Sept.
30, |
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Nine months ended
Sept. 30, |
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2014 |
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2013 |
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% Change |
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2014 |
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2013 |
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% Change |
Financial ($000's
except per share amounts) |
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Petroleum and natural gas sales |
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$ |
4,627 |
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$ |
4,788 |
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(3%) |
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$ |
14,266 |
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$ |
11,598 |
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23% |
Cash flow from
operations (1) |
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1,732 |
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2,105 |
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(18%) |
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5,440 |
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4,922 |
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11% |
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Per share |
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0.05 |
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0.06 |
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(17%) |
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0.16 |
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0.14 |
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14% |
Comprehensive income
(loss) |
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131 |
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67 |
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99% |
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(185) |
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240 |
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(177%) |
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Per share |
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0.00 |
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0.00 |
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0% |
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(0.01) |
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0.01 |
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(200%) |
Capital expenditures
(2) |
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2,499 |
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3,342 |
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(25%) |
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7,216 |
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5,879 |
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23% |
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Working capital deficit - excluding
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debt and commodity
contracts, end of period (1) |
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$ |
2,461 |
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$ |
2,613 |
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(6%) |
Bank debt, end of
period |
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6,900 |
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3,250 |
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112% |
Total assets, end of
period |
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$ |
37,442 |
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33,349 |
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12% |
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Three months ended Sept.
30, |
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Nine months ended Sept.
30, |
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2014 |
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2013 |
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% Change |
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2014 |
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2013 |
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% Change |
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Common Shares outstanding end of
period: |
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Class A
Shares |
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45,576 |
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34,481 |
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32% |
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Class B
Shares |
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- |
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1,080 |
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(100%) |
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Options to acquire Class A
Shares |
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4,527 |
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2,473 |
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83% |
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Operations |
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Production |
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Crude oil and natural gas liquids
(bbl/d) |
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632 |
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593 |
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7% |
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652 |
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596 |
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9% |
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Natural gas (mcf/d) |
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116 |
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123 |
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(6%) |
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112 |
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153 |
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(27%) |
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Total (boe/d) |
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652 |
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613 |
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6% |
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671 |
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621 |
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8% |
Oil and liquids as percent of
total |
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97% |
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97% |
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0% |
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97% |
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96% |
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1% |
Average Selling Price |
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Crude oil and ngls (per bbl) |
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$ |
78.79 |
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$ |
87.38 |
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(10%) |
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$ |
79.30 |
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$ |
70.48 |
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13% |
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Natural gas (per mcf) |
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4.09 |
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2.51 |
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63% |
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4.93 |
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3.21 |
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54% |
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Total (per boe) |
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77.18 |
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84.95 |
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(9%) |
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77.91 |
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68.38 |
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14% |
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Netbacks (per boe at 6:1)
(3) |
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Price |
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$ |
77.18 |
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$ |
84.95 |
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(9%) |
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$ |
77.91 |
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$ |
68.38 |
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14% |
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Royalties |
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(16.89) |
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(17.54) |
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(4%) |
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(16.40) |
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(13.25) |
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24% |
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Production expense |
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(23.39) |
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(18.76) |
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25% |
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(22.13) |
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(18.35) |
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21% |
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Transportation expense |
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(1.21) |
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(1.75) |
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(31%) |
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(1.56) |
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(1.75) |
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(11%) |
Operating netback ($/boe) |
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$ |
35.69 |
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$ |
46.90 |
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(24%) |
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$ |
37.82 |
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$ |
35.03 |
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8% |
(1) The terms cash flow from operations, cash flow
from operations per share, working capital deficit and net debt to
annualized cash flow ratio are additional GAAP financial measures.
These measures are further described on page 3 of the Corporation's
MD&A for the three and nine months ended September 30, 2014
under the heading "Additional GAAP and Non-GAAP Financial
Measures". Users are cautioned that additional GAAP financial
measures may not be comparable with the calculation of similar
measures by other entities. |
(2) Capital expenditures include cash exploration
and evaluation expenditure plus cash property, plant and equipment
net of dispositions and exclude asset retirement obligations and
capitalized share-based payments. |
(3) Management uses the terms operating and cash
flow netbacks per boe which are non-GAAP measures.
These measures are key performance indicators however do not
have a standardized meaning as prescribed by GAAP and therefore,
may not be comparable with the calculation of similar measures by
other entities. Management considers operating and cash flow
netbacks to be important measures as they demonstrate profitability
relative to current commodity prices. |
Operational Review and Update
During the third quarter of 2014, Hawk completed a 6 square
kilometer three dimensional ("3D") seismic program in the Forest
Bank area of western Saskatchewan
and drilled one (0.65 net) vertical oil well. Under the terms of
the farm-in agreement ("Farm-In") at Forest Bank, Hawk paid for
100% of the capital costs of the well and earned a 65% working
interest in one section of land. The well encountered oil pay in
the McLaren, Waseca and Sparky
formations. The well was completed in the Sparky formation, placed
on production early in the fourth quarter of 2014, and has been
producing at an average rate of 60 bbl/d (39 net). Hawk has
committed to drilling one (0.65 net) additional well under the
Farm-In which will earn the Corporation a 65% working interest in
an additional one section of land at Forest Bank. This well is
expected to be drilled in the first quarter of 2015.
Hawk also drilled one (0.7 net) vertical well in
the Cadogan area of Alberta in the
third quarter of 2014 which did not encounter economic quantities
of oil and was subsequently abandoned.
In the fourth quarter of 2014, Hawk has drilled
two (2.0 net) vertical heavy oil wells and one (1.0 net) horizontal
heavy oil well in western Saskatchewan. At Yonker, Hawk drilled one
(1.0) vertical oil well under a farm-in agreement with an industry
partner and earned a 100% working interest in one section of land
with a flat 5% overriding royalty. The well was completed in the
McLaren formation and has been producing at an average rate of
approximately 40 bbl/d since it was placed on production in the
middle of October 2014.
In the Rush
Lake area of western Saskatchewan, Hawk acquired a 100% working
interest in 160 acres of land offsetting Hawk's existing land
during the third quarter and drilled one (1.0 net) heavy oil well
on the acquired acreage in the fourth quarter of 2014. The well
encountered oil pay in the Waseca
and Sparky/GP formations and is currently being completed and
equipped for production.
In the Eureka area of western Saskatchewan, Hawk drilled one (1.0 net)
horizontal well in the fourth quarter of 2014 in the Lower
Mannville sand adjacent to the Corporation's two existing vertical
oil wells. The horizontal well was completed and recently placed on
production. Hawk has committed to drilling an additional vertical
well in the Eureka area in the first quarter of 2015 which will
earn the Corporation a 100% working interest in 480 acres of
land.
Production for the third quarter of 2014
averaged 652 boe/d, a 6% increase from the 613 boe/d produced in
the third quarter of 2013. Hawk's current production is
approximately 750 boe/d, based on field estimates.
Financial
Hawk achieved cash flow from operations in the third quarter of
2014 of approximately $1.7 million
compared to $2.1 million for the
third quarter of 2013 as a result of lower realized oil prices in
the third quarter of 2014 compared to 2013. Average Western
Canadian Select ("WCS") prices for the third quarter of 2013
decreased 13% to US$76.99 per bbl
compared to US$88.35 per bbl in the
third quarter of 2013, while the differential between WCS and West
Texas Intermediate crude oil ("Differential") widened to
US$20.18 per bbl in the third quarter
of 2014 compared to US$17.48 per bbl
for the third quarter of 2013.
Hawk generated an operating netback of
$35.69 per boe for the third quarter
of 2014 which is a 24 percent decrease from the operating netback
for the third quarter of 2013 of $46.90 per boe due to lower realized oil prices
and an increase in production expenses in Q3 2014. Hawk's average
realized oil price for the third quarter of 2014 averaged
$78.82 per bbl, a 10% decrease from
the $87.55 per bbl realized oil price
for the third quarter of 2013.
At September 30,
2014, Hawk had $6.9 million
drawn on its existing $13.5 million
credit facility. The Corporation continues to maintain a solid
balance sheet with net debt and working capital deficit of
approximately $9.4 million at
September 30, 2014 which equates to a
net debt to annualized cash flow from operations of 1.3:1.
Outlook
The Corporation had a very successful drilling program in the
second half of 2014 and has grown its land base around its
discoveries through strategic farm in agreements and by way of land
acquisitions. At Forest Bank, in 2015, the Corporation expects to
drill one (0.65 net) well in the first quarter of 2015. Hawk has
also identified several well recompletions to complete existing
wellbores in up-hole zones and has identified additional drilling
locations from its 3D seismic program shot in 2014. At Eureka, the
Corporation expects to drill one (1.0 net) vertical well in the
first quarter of 2015 as part of an existing farm-in agreement in
the area. Hawk also expects to drill additional follow up wells to
its recent discoveries at Yonker and Rush
Lake in western Saskatchewan.
With the recent decline in world oil prices,
Hawk is expecting lower realized oil prices in the fourth quarter
of 2014 although the effect of the lower oil prices is expected to
be lessened with lower heavy oil differentials and a weakening
Canadian dollar. Additionally for the fourth quarter of 2014, Hawk
has hedges in place on 200 bbl/d of oil production an average price
of $100.63 per bbl for Canadian
dollar WTI and a further 100 bbl/d of oil production hedged for the
first half of 2015 at an average price of $104.20 per bbl for Canadian dollar WTI.
The Corporation plans to announce its 2015
capital budget in December 2014.
Hawk is an emerging exploration company engaged
in the exploration, development and production of conventional
crude oil and natural gas in western Canada and is based in Calgary, Alberta. The Class A Shares of Hawk
trade on the TSX Venture Exchange under the trading symbols of
HWK.A.
Neither the TSX Venture Exchange nor its
Regulation Services Provider (as the term is defined in the
policies of the TSX Venture Exchange) accepts responsibility for
the adequacy or accuracy of this release.
Certain statements contained in this press
release constitute forward-looking statements. All forward-looking
statements are based on the Corporation's beliefs and assumptions
based on information available at the time the assumption was made.
The use of any of the words "anticipate", "continue", "estimate",
"expect", "may", "will", "project", "should", "believe" and similar
expressions are intended to identify forward-looking statements.
These statements involve known and unknown risks, uncertainties and
other factors that may cause actual results or events to differ
materially from those anticipated in such forward-looking
statements. Hawk believes the expectations reflected in those
forward-looking statements are reasonable, but no assurance can be
given that these expectations will prove to be correct. Such
forward-looking statements included in this press release should
not be unduly relied upon. These statements speak only as of the
date of this press release.
In particular, but without limiting the
forgoing, this press release contains forward-looking statements
pertaining to the following: the performance characteristics of
Hawk's oil and natural gas properties; business strategies and
plans; projections of market prices and cost; supply and demand for
oil and natural gas; planned development of the Corporation's oil
and natural gas properties; the timing of and nature of capital
expenditure program for the first quarter of 2015;and the expected
sources of funding for the 2015 capital expenditure
program.
The material factors and assumptions used to
develop these forward looking statements include, but are not
limited to: the ability of the Corporation to engage drilling
contractors, to obtain and transport equipment, services, supplies
and personnel in a timely manner and at an acceptable cost to carry
out its activities and plans; the ability of the Corporation to
market its oil and natural gas and to transport its oil and natural
gas to market; the timely receipt of regulatory approvals and the
terms and conditions of such approval; the ability of the
Corporation to obtain drilling success consistent with
expectations; and the ability of the Corporation to obtain capital
to finance its exploration, development and operations.
Actual results could differ materially from
those anticipated in these forward-looking statements as a result
of the risk factors including, without limitation: volatility in
market prices for oil and natural gas; liabilities inherent in oil
and natural gas operations; uncertainties associated with
estimating oil and natural gas reserves; competition for, among
other things, capital, acquisitions of reserves, undeveloped lands
and skilled personnel; incorrect assessments of the value of
acquisitions and exploration and development programs; geological,
technical, drilling and processing problems; changes in tax laws
and incentive programs relating to the oil and natural gas
industry; failure to realize the anticipated benefits of
acquisitions; general business and market conditions; and certain
other risks detailed from time to time in Hawk's public disclosure
documents (including, without limitation, the other factors
discussed under "Risk Factors" in the Corporation's most recently
filed Annual Information Form).
Statements relating to "reserves" or
"resources" are deemed to be forward-looking statements, as they
involve the implied assessment, based on certain estimates and
assumptions that the resources and reserves described can be
profitably produced in the future. Readers are cautioned that the
foregoing lists of factors are not exhaustive. The forward-looking
statements contained in this press release are expressly qualified
by this cautionary statement. Except as required under applicable
securities laws, Hawk does not undertake any obligation to publicly
update or revise any forward-looking statements.
Barrels of oil equivalent (boe) may be
misleading, particularly if used in isolation. A boe conversion
ratio of six thousand cubic feet (mcf) of natural gas to one barrel
(bbl) of oil is based on an energy conversion method primarily
applicable at the burner tip and is not intended to represent a
value equivalency at the wellhead. All boe conversions in this
press release are derived by converting natural gas to oil in the
ratio of six thousand cubic feet of natural gas to one barrel of
oil. Certain financial amounts are presented on a per boe basis,
such measurements may not be consistent with those used by other
companies.
SOURCE Hawk Exploration Ltd.