TIDMEDG
RNS Number : 1271Y
Edge Resources Inc.
27 November 2014
FOR IMMEDIATE RELEASE
TSX Venture Exchange Symbol: EDE
AIM Exchange Symbol: EDG November 27, 2014
EDGE RESOURCES INC. Calgary, Alberta
Edge Resources Inc. Announces Half Year Results
Edge Resources Inc. ("Edge" or the "Company") is pleased to
report its operating and financial results, for the second quarter
and half year ended September 30, 2014 ("Q2 2015" and "H1
2015").
Detailed operating and financial results are presented in Edge's
unaudited financial statements and related Management Discussion
& Analysis ("MD&A"), which can be accessed on the Company's
website (www.edgeres.com) and on SEDAR (www.sedar.com). The
unaudited results for the three and six month periods ended
September 30, 2014 are highlighted and summarised below.
Highlights for the three and six month periods, ending September
30, 2014:
-- Oil and Natural Gas Sales for H1 2015 amounted to $5,831,131
versus $4,887,341 for the same period last year (19% increase).
-- Cash generated from operating activities continued its trend
and increased to $1,241,000 in H1 2015 from $850,000 one year ago
(46% increase). It increased to $99,000 for Q2 2015, compared to a
loss of $185,000 for the same quarter one year ago.
-- Net income of $170,000 in H1 2015 versus a net loss of
$246,000 for the same period last year.
-- Half yearly Operating Costs for oil decreased to $18.52/bbl
from $20.42/bbl and oil Netbacks increased to $45.37/bbl from
$44.42/bbl. Oil-based half year Netbacks increased to $2,547,000
compared to $2,065,000 one year earlier (23% increase).
-- Continued focus on controlling costs resulted in a 5% and 9%
decrease in G&A Costs for the quarter and half year periods,
respectively.
Brad Nichol, President & CEO of Edge, commented, "We are
very pleased with our half-yearly results, as we held our own
despite a falling oil price - which started the quarter at $105/bbl
and ended the quarter at $91/bbl - and a temporary production issue
that occurred and was resolved during the second quarter. Even with
these challenges, we exited the first half of our financial year
with a Netback above $40/bbl and with more cash and a higher
production rate than when we started the quarter. This success was
aided by a much-improved heavy oil discount to WTI and a weaker
Canadian dollar, both of which appear to be holding steady into the
future." Nichol added, "In hindsight, we made excellent capital
choices, having chosen to conserve cash in the midst of
deteriorating oil prices and take a 'wait and see' approach to our
capital plans. While this tact did not provide a multitude of
drilling activity and announcements, we are still very excited
about the significant number of wells we can, and will, drill in
Eye Hill. This view has been reassured by the robust production
from the wells we drilled last year and that are still producing at
roughly the same - or better - levels than almost one year ago.
Additionally, having just generated sales of $1.1 million from
October production when the average WTI oil price was $84/bbl, we
have nothing but confidence in the path forward. Finally, we are
planning to construct a water disposal facility in Eye Hill East,
which will provide a level of water handling capacity, capability
and cost control that is necessary when considering a large-scale,
long-term drilling programme, which is an important step in the
bigger blueprint for Eye Hill East. We anticipate that this new
facility will enable us to increase production from existing wells
whilst at the same time reduce production costs for existing and
upcoming wells. Our bank has agreed to fund this facility, which
nicely complements our confidence in the long-term strategy and
while oil prices are unstable, bringing down operating costs is
what I believe all oil companies should be focused on."
To view the Company's full financial statements and MD&A,
please go to the Company website www.edgeres.com or to
www.sedar.com.
For more information, visit the company website: www.edgeres.com
or contact:
Brad Nichol, President and CEO Phone: +1 403 767 9905
Sanlam Securities UK Limited Phone: +44 (0)20 7628 2200
Simon Clements / James Thomas / Max Bascombe
SP Angel Corporate Finance LLP Phone: +44 (0)20 3463 2260
John MacKay / Richard Hail / Stuart Gledhill / Zac Phillips
(Research)
About Edge Resources Inc.
Edge Resources is focused on developing a balanced portfolio of
oil and natural gas assets from properties in Alberta and
Saskatchewan, Canada. Management has consistently focused on:
1. Shallow, vertical, conventional programs with reduced
capital, operational and geological risks
2. Very high or 100% working interests and fully operated assets
3. Pools and horizons with exceptionally high reserves in place
The management team's very high drilling success rate is based
on the safe, efficient deployment of capital and a proven ability
to efficiently execute in shallow formations, which gives Edge
Resources a sustainable, low-cost, competitive advantage.
Competent Person's Statement
The preparation of the technical information contained herein
was supervised by Brad Nichol, President and CEO of Edge Resources,
who is recognized as a Qualified Person for the purposes of
National Instrument 51-101, and who has reviewed and approved the
findings in this press release
Condensed Interim Balance Sheets
(amounts in Canadian dollars)
(unaudited)
September
30, March 31,
Note 2014 2014
Assets
Current assets
Cash and cash equivalents $ 10,841 $ 39,446
Accounts receivable 840,956 1,401,293
Deposits and prepaid expenses 254,689 86,836
Total current assets 1,106,486 1,527,575
---------------------------------------------- ----- ------------- ------------
Non-current assets
Exploration and evaluation assets 74,061 74,061
Property, plant and equipment 3 38,292,515 37,768,037
---------------------------------------------- ----- ------------- ------------
Total non-current assets 38,366,576 37,842,098
---------------------------------------------- ----- ------------- ------------
Total assets $ 39,473,062 $ 39,369,673
---------------------------------------------- ----- ------------- ------------
Liabilities
Current liabilities
Bank overdraft $ 239,939 $ 858,756
Accounts payable and accrued liabilities 1,159,646 1,832,726
Bank debt 4 5,840,000 5,700,000
Fair value of derivative instruments 204,110 667,316
Total current liabilities 7,443,695 9,058,798
Loans payable 5 10,244,712 9,843,616
Decommissioning provisions 7,000,000 6,044,000
---------------------------------------------- ----- ------------- ------------
Total liabilities 24,688,407 24,946,414
---------------------------------------------- ----- ------------- ------------
Shareholders' Equity
Share capital 36,111,048 36,094,048
Contributed surplus 2,599,156 2,425,249
Deficit (23,925,549) (24,096,038)
---------------------------------------------- ----- ------------- ------------
Total shareholders' equity 14,784,655 14,423,259
---------------------------------------------- ----- ------------- ------------
Total liabilities and shareholders'
equity $ 39,473,062 $ 39,369,673
---------------------------------------------- ----- ------------- ------------
Condensed Interim Statements of Income (Loss) and Comprehensive
Income (Loss)
(amounts in Canadian dollars)
(unaudited)
Three months ended Six months ended
September September September September
30, 30, 2013 30, 2014 30, 2013
Note 2014
Revenue
Oil and natural gas
sales $ 2,356,740 $ 2,566,411 $ 5,831,131 $ 4,887,341
Royalties (389,349) (460,255) (1,059,315) (817,420)
----------------------------------------- ----------- ------------ ----------- -----------
Revenue, net of royalties 1,967,391 2,106,156 4,771,816 4,069,921
----------------------------------------- ----------- ------------ ----------- -----------
Other income (losses)
Realized loss on financial
derivatives (112,294) (47,483) (310,387) (96,329)
Unrealized gain (loss)
on financial derivatives 301,225 (118,808) 463,206 166,972
Gain on disposition
of oil and natural gas
interests - - - 185,000
Other income 10,883 13,152 22,192 26,483
----------------------------------------- ----------- ------------ ----------- -----------
Total income, before
expenses 2,167,205 1,953,017 4,946,827 4,352,047
----------------------------------------- ----------- ------------ ----------- -----------
Expenses
Operating 917,721 830,047 1,835,696 1,684,240
Transportation 83,097 64,538 194,213 166,110
General and administrative 444,887 465,929 903,221 997,415
Depletion and depreciation 386,500 505,200 900,200 1,039,600
Finance 364,805 307,247 700,431 613,405
Stock-based compensation 65,221 47,054 179,907 115,453
Capital taxes 22,916 (52,008) 62,670 (18,508)
Total expenses 2,285,147 2,168,007 4,776,338 4,597,715
----------------------------------------- ----------- ------------ ----------- -----------
Income (loss) and comprehensive
income (loss) for the
period $ (117,942) $ (214,990) $ 170,489 $ (245,668)
----------------------------------------- ----------- ------------ ----------- -----------
Income (loss) and comprehensive
income (loss) per share
Basic and diluted $ (0.00) $ (0.00) $ 0.00 $ (0.00)
----------------------------------------- ----------- ------------ ----------- -----------
Condensed Interim Statements of Changes in Shareholders'
Equity
(amounts in Canadian dollars)
(unaudited)
Contributed Total Shareholders'
Share Capital surplus Deficit Equity
Balance at March 31, 2014 $36,094,048 $2,425,249 $(24,096,038) $ 14,423,259
Issue of common shares on exercise
of stock options 17,000 (6,000) - 11,000
Stock-based compensation - 179,907 - 179,907
Income for the period - - 170,489 170,489
----------------------------------- -------------- ------------ --------------- --------------------
Balance at September 30, 2014 $36,111,048 $ 2,599,156 $(23,925,549) $ 14,784,655
----------------------------------- -------------- ------------ --------------- --------------------
Balance at March 31, 2013 $32,691,059 $ 2,097,875 $ (22,392,438) $ 12,396,496
Stock-based compensation - 115,453 - 115,453
Loss for the period - - (245,668) (245,668)
Balance at September 30, 2013 $32,691,059 $ 2,213,328 $ (22,638,106) $ 12,266,281
----------------------------------- -------------- ------------ --------------- --------------------
Condensed Interim Statements of Cash Flows
(amounts in Canadian dollars)
(unaudited)
Three months ended Six months ended
September September September
30, 30, 2014 30, 2013
2014 September
30, 2013
Cash flows provided by (used
for):
Cash flows generated from operating
activities
Income (loss) $ (117,942) $ (214,990) $ 170,489 $ (245,668)
Items not affecting cash:
Unrealized gain (loss) on financial
derivatives (301,225) 118,808 (463,206) (166,972)
Gain on disposition of oil and
natural gas interests - - - (185,000)
Foreign exchange gain (loss) (553) 428 11 (1,122)
Depletion and depreciation 386,500 505,200 900,200 1,039,600
Accretion of decommissioning
provisions 41,000 37,000 85,000 74,000
Stock-based compensation 65,221 47,054 179,907 115,453
Changes in non-cash items 26,250 (678,197) 368,998 219,407
Net cash generated from (used
in) operating activities 99,251 (184,697) 1,241,399 849,698
--------------------------------------------------- ----------- ------------ ----------- -----------
Cash flows used in investing
activities
Exploration and evaluation assets
expenditures - (8,637) - (38,332)
Property, plant and equipment
expenditures (190,507) (126,381) (553,678) (555,433)
Changes in non-cash items (170,752) (274,193) (248,498) (1,139,619)
--------------------------------------------------- ----------- ------------ ----------- -----------
Net cash used in investing activities (361,259) (409,211) (802,176) (1,733,384)
--------------------------------------------------- ----------- ------------ ----------- -----------
Cash flows from financing activities
Proceeds from bank debt, net 40,000 350,000 140,000 1,100,000
Proceeds from issuance of common
shares - - 11,000 -
Net cash from (used in) financing
activities 40,000 350,000 151,000 1,100,000
--------------------------------------------------- ----------- ------------ ----------- -----------
Effect of exchange rates on cash
and cash equivalents held in
foreign currency 553 (428) (11) 1,122
--------------------------------------------------- ----------- ------------ ----------- -----------
Net change in cash and cash equivalents
(bank overdraft) (221,455) (244,336) 590,212 217,436
Cash and cash equivalents (bank
overdraft), beginning of period (7,643) 56,983 (819,310) (404,789)
--------------------------------------------------- ----------- ------------ ----------- -----------
Cash and cash equivalents (bank
overdraft), end of period $ (229,098) $ (187,353) $ (229,098) $ (187,353)
--------------------------------------------------- ----------- ------------ ----------- -----------
Certain non-cash transactions have been excluded from the
statements of cash flows
Notes to the Condensed Interim Financial Statements
Three and six months ended September 30, 2014
(amounts in Canadian dollars)
(unaudited)
1. Going Concern
These condensed interim financial statements have been prepared
on a going concern basis which presumes that the Company will be
able to discharge its obligations and realize its assets in the
normal course of business. The Company had a loss and comprehensive
loss of $0.1 million for the three month period ended September 30,
2014. As at September 30, 2014, the Company had a working capital
deficiency of $6.1 million (March 31, 2014 - $6.9 million) that
includes $5.8 million (March 31, 2014 - $5.7 million) in bank debt
(excluding derivative assets/liabilities). The Company had an
unused credit line of $11.2 million on its revolving credit
facility at September 30, 2014. At September 30, 2014, the Company
was not compliant with its lender's senior debt to cash flow
covenant, however as per note 4, the Company obtained a waiver for
the non-compliance.
As per note 4, the Company has a revolving credit facility with
a $17.0 million limit, and as of September 30, 2014, there was
$11.2 million available for use. However, given the amount
available for use under the facility is also limited by the "senior
debt to cash flow" ratio, the actual limit will vary on a period by
period basis. Management actively forecasts applicable cash flows
and will conduct an appropriate capital program based on estimated
future credit facility availability. Management believes with its
current credit facility, positive expected cash flows in the near
future, and its planned capital program, that the Company will
generate sufficient cash flows to meet its foreseeable obligations
in the normal course of operations. Management has been and
continues to be active in seeking alternative sources of funding to
help facilitate its planned capital expenditure program, and to
ultimately reduce its total debt. The Company cannot provide any
assurance that sufficient cash flows will be generated from
operating activities to reduce its working capital deficiency and
to carry out its planned capital expenditure program.
The above-noted factors describe matters and conditions that
indicate the existence of a material uncertainty that may cast
significant doubt about the Company's ability to continue as a
going concern. The Company's ability to continue as a going concern
is dependent upon its ability to attain profitable operations,
generate sufficient funds to continue its exploration and
development activities, to repay its debts as they come due, and
continue to obtain sufficient capital from investors or other
sources of financing to meet its current and future
obligations.
Management considers the Company is a going concern and has
prepared the condensed interim financial statements on a going
concern basis.
2. Basis of preparation
These condensed interim financial statements are unaudited and
have been prepared in accordance with International Accounting
Standard ("IAS") 34, "Interim Financial Reporting" using accounting
policies consistent with International Financial Reporting
Standards ("IFRS") as issued by the International Accounting
Standards Board ("IASB"). Certain information and disclosures
normally included in the annual financial statements prepared in
accordance with IFRS have been condensed or omitted.
The condensed interim financial statements should be read in
conjunction with the Company's audited annual financial statements
as at and for the year ended March 31, 2013 and the notes
thereto.
3. Property, plant and equipment
Oil and
natural Corporate
gas interests and other Total
Cost
Balance at March 31, 2013 $ 42,244,490 $ 57,198 $ 42,301,688
Capital expenditures 3,634,251 13,607 3,647,858
Transfers from exploration and evaluation
assets 589,255 - 589,255
Disposition (1) (60,000) - (60,000)
Change in decommissioning provisions (128,000) - (128,000)
Balance at March 31, 2014 46,279,996 70,805 46,350,801
Capital expenditures 552,688 990 553,678
Change in decommissioning provisions 871,000 - 871,000
----------------------------------------------- --------------- ----------- -------------
Balance at September 30, 2014 $ 47,703,684 $ 71,795 $ 47,775,479
----------------------------------------------- --------------- ----------- -------------
Accumulated depletion and depreciation
and impairment losses
Balance at March 31, 2013 $ 6,588,000 $ 28,264 $ 6,616,264
Depletion and depreciation expense 1,962,000 9,500 1,971,500
Disposition (1) (5,000) - (5,000)
----------------------------------------------- --------------- ----------- -------------
Balance at March 31, 2014 8,545,000 37,764 8,582,764
Depletion and depreciation expense 895,000 5,200 900,200
Balance at September 30, 2014 $ 9,440,000 $ 42,964 $ 9,482,964
----------------------------------------------- --------------- ----------- -------------
Oil and
natural Corporate
gas interests and other Total
Net carrying value:
-------------------------- --------------- ----------- -------------
At March 31, 2014 $ 37,734,996 $ 33,041 $ 37,768,037
-------------------------- --------------- ----------- -------------
At September 30, 2014 $ 38,263,684 $ 28,831 $ 38,292,515
-------------------------- --------------- ----------- -------------
(1) On May 15, 2013, the Company completed an asset swap
transaction with an unrelated third party such that $200,000 of oil
and natural gas interests were swapped for $200,000 of undeveloped
lands. The carrying amount of the oil and natural gas interests was
$15,000, including a decommissioning provision of $40,000,
resulting in a gain on sale of $185,000 for the six month period
ended September 30, 2013.
4. Bank debt
In July 2014, the Company replaced its bank debt lender with
another Canadian chartered bank. In conjunction with this
replacement, the previous bank debt lender was repaid in full and
those lending facilities cancelled.
As at September 30, 2014, the Company had lending facilities
with a Canadian chartered bank, consisting of a $17 million
revolving demand operating credit facility of which $5.8 million
was drawn. The revolving facility is a borrowing base facility that
is determined based on, among other things, the Company's current
reserve report, results of operations, current and forecasted
commodity prices and the current economic environment. The
revolving credit facility contains standard commercial covenants
for facilities of this nature. The Company also has available a
risk management facility which allows the Company to conduct
certain financial risk management options. The interest rate on the
facility is bank prime plus 1.75% per annum. Guaranteed notes are
subject to a 2.75% acceptance fee plus an applicable market
interest rate. The facilities are secured by a general security
agreement covering all assets of the Company including a
subordination agreement with the lender and repayments are interest
only, subject to the bank's right of demand. The revolving credit
facility provides that advances may be made by way of direct
advances, guaranteed notes, or standby letters of
credit/guarantee.
The revolving facility has the following financial covenant
requirements:
-- The working capital ratio must be maintained above 1.0:1. The
working capital ratio is defined as current assets (excluding
derivative assets if any) plus the undrawn availability of the
revolving facility to current liabilities (excluding the current
portion of bank debt and derivative liabilities if any).
-- The senior debt to cash flow ratio must not exceed 3.0:1. The
senior debt to cash flow ratio is defined as the amount drawn under
the bank facility to net income for the trailing one year period
from the balance sheet date adjusted for non-cash items, and less
dividends declared and repayments of shareholder loans.
The senior debt to cash flow ratio was not met for the period
ended September 30, 2014; however, subsequent to September 30,
2014, the Company's bank provided a waiver of the ratio and also
increased the same ratio to 3.5 to 1.0 from 3.0 to 1.0 for the
period ended December 31, 2014 only.
In addition, the Company may not enter into any risk management
agreements with a term greater than two years or for a volume
greater than 60% of its forecasted currently producing volumes.
The facilities may be reviewed at any time; however the next
review date is scheduled for July 31, 2015.
5. Loans payable
As at September 30, 2014, the Company has a loan payable with a
principal amount of $8 million, which bears interest at 10% per
annum, is secured against the assets of the Company as a second
charge to the Company's lending facility (note 4) and is due
January 31, 2017. Any interest and principal repayments for this
loan are subject to the bank's prior approval. The loan payable is
due to a company that is also a shareholder of the Company, and is
repayable at any time without penalty.
The following table summarizes changes in the loan payable:
Principal
Balance March 31 and September
30, 2014 8,000,000
-----------
Interest
Balance March 31, 2014 1,843,616
Interest expense 401,096
-----------
Balance September 30, 2014 2,244,712
-----------
Total loan payable at September
30, 2014 10,244,712
-----------
6. Availability of the Financial Statements and MD&A
Copies of all the Company's Financial Statements and MD&A's
will be available on the Company's website (www.edgeres.com) and on
SEDAR (www.sedar.com).
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR FEDEEMFLSESF
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