CARACAL ENERGY INC 
By
Caracal Announces 2013 Full Year Results
A year of world-class success in Chad
CALGARY, March 31, 2014 /CNW/ - Caracal Energy Inc. ("Caracal" or the
"Company") (LSE:CRCL) is pleased to announce its 2013 year end results, its
first full year results as a listed company. A summary of the results follows,
which should be read in conjunction with the full audited financial statements,
related Management's Discussion & Analysis ("MD&A") and annual information form
("AIF") which are available at www.caracalenergy.com and on the Caracal's SEDAR
profile at www.sedar.com.
Operational Highlights:
· Commenced production in September and exited the year with gross
production of 10,000 barrels of oil per day ("bopd");
· Commenced exploration drilling with first two successful wells:
· Mangara-5 a discovery in the lower Cretaceous E sands tested at up to
1,917 bopd1 and
· Krim, a discovery in Cretaceous C, D and E sands tested at up to
1,470 bopd, 702 bopd and 2,580 bopd maximum oil rate respectively2
· Closed the Farm-In Agreement with GlencoreXstrata plc ("Glencore" or
"Joint Venture Partner") on June 17, 2013 whereby Glencore paid US$300 million
for a 25% working interest in the Badila and Mangara EXAs;
· Commenced trading on the premium list of the London Stock Exchange on
July 9, 2013;
· Closed a US$203 million firm placing and open offer in December 2013;
Continued Success In 2014
· Oil production grew to 14,200 gross barrels of oil per day ("bopd"),
as at March 5, 2014, from 12,000 bopd in January, 2014;
· targeting gross average production in 2014 of 22,000 to 26,000 bopd
· Revenue generation commenced on March 23, with Caracal's first
lifting of approximately 560,000 barrels of oil, net to the Company. Pricing
for the crude was in line with the Company's competent person's report
assumptions of Brent minus a differential of five per cent;
· Badila-7 drilled and tested in March, and flowed naturally at a rate
of 4,500 barrels of oil per day3. The well is expected to be tied-in during
April;
· Badila-9 spudded on March 20, 2014;
· Mangara-4 has been successfully side-tracked and cased as a
Cretaceous E sands producer;
· Mangara-6 has been completed and testing of the Cretaceous E sands is
underway. The comprehensive completion program will also include tests of the
Cretaceous D and C sands;
· The first of the four new drilling rigs contracted in 2014 has
arrived at the port in Cameroon, on schedule, and should be on site in Q2;
· The Company remains on track to mobilize six drilling and three
completion rigs by the end of 2014 to support the active exploration, appraisal
and development drilling program;
· 2014 exploration programs in the Doba and Doseo basins have commenced
to test one billion barrels of unrisked mean Prospective Resources with the
first 8 to 10 wells in the program;
· Finally, furthering its long term strategy, on March 15, 2014 Caracal
entered into an arrangement agreement to merge with TransGlobe Energy
Corporation (TSX:TGL)(NASDAQ:TGA) ("TransGlobe") by way of an exchange of
shares pursuant to a plan of arrangement under the Business Corporations Act
(Alberta) (the "Arrangement"). The Arrangement would create one of the largest
independent Africa focused oil producers, which together will be poised for
strong growth in oil production and reserves from development and exploration
in Chad and Egypt.
Gary Guidry, Chief Executive of Caracal, said:
"2013 was a very significant year for Caracal. We commenced production, closed
a major farm-in agreement with Glencore and listed on the London Stock
Exchange. All of which enabled us to maintain our operational development with
the drilling of development and exploration wells.
"Since the year end, we have become revenue generating with the first lifting
earlier this month. Production is increasing inline with our expectations and
we are on track to hit our target of gross 2014 production of 22-26,000 bopd.
The exploration programme has commenced and the first 8 to 10 exploration wells
will test one billion barrels of unrisked mean Prospective Resources.
"Earlier this month we announced the agreement to merge with TransGlobe to
create one of the largest independent Africa focused oil producers with focused
operations in Chad and Egypt. Post-merger, we will continue to be entirely
focused on onshore, conventional oil production, development and exploration.
The combination will provide shareholders with significant organic production
and reserves growth."
Selected Financial results for the three and twelve months ended December 31,
2012 and 2013
Three months ended Year ended
December 31 December 31
2013 2012 2013 2012
Tariff Revenue 80 - 80 -
Oil Revenue - - - -
Change in Oil Inventory 27,159 - 27,159 -
27,239 - 27,239 -
Expenses
Operating expenses 4,249 - 4,249 -
Transportation expenses 2,527 - 2,527 -
Depreciation and depletion 4,508 328 5,823 1,082
Salaries and benefits 8,175 4,072 21,108 13,122
Share-based compensation 3,589 2,076 11,044 8,564
General and administrative 3,949 5,523 27,996 30,493
Travel 2,590 3,167 8,586 7,821
Finance expense 7,290 7,246 28,872 8,083
Foreign exchange loss (gain) (140) 474 1,573 228
36,737 22,886 111,778 69,393
Net loss before tax 9,498 - 84,539 69,393
Deferred tax reduction (329) (5,381) (329) (5,381)
Net and comprehensive loss 9,169 17,505 84,210 64,012
Oil Production and Inventory
The Company commenced production from the Badila field on September 30, 2013,
and net entitlement share of production for the period to December 31, 2013 was
264,575 barrels. All production for the period to December 31, 2013 was
directed towards the Company's portion of the required line fill. As such,
there was no sale of crude oil in 2013. The Company completed its share of line
fill inventory, on February 6, 2014 following which production accumulated as
"lifting entitlement" for cargo sales for the lifting on March 25, 2014.
Pursuant to industry standard, the Company can draw on its share of line fill
inventory if required to meet the standard cargo size and replace the draw
during the next production inventory build period. Hence, the Company's net
entitlement share of production for the period ended December 31, 2013 has been
recognised as crude oil inventory and valued at the estimated net realisable
value. As per the Joint Marketing Agreement with its joint venture partner,
Glencore Energy UK Ltd. (the "JMA") in place for the sale of the Company's
crude oil, the price formula uses a dated Brent average and certain
adjustments, including a discount or premium to Brent for the difference in
crude oil quality. In computing the estimated net realisable value the forward
March 2014 Brent price as at December 31, 2013 has been used and reduced for
estimated adjustments under the JMA price formula. The estimated net realizable
value as at December 31, 2013 has been adjusted for the transit fees that will
be due and paid once the volumes are loaded on a tanker.
The estimated net realisable value of crude oil for the period has been
recorded in the statement of operations as an increase in the value of crude
oil inventory and the value of the inventory is shown in the current assets
within the Company's statement of financial position. The following table
depicts the Company's crude oil inventory position as at December 31, 2013:
Volumes Net Realizable
(BBLS) Value
US$ '000
Opening crude oil inventory as at January - -
1, 2013
Entitlement production 264,575 27,159
Cargo lifting - -
Re-valuation - -
Ending crude oil Inventory as at December 264,575 27,159
31, 2013
Inland Transportation Pipeline 2013 2012
Tariff revenue 80 -
During the year ended December 31, 2013, the Company also earned revenue
related to the tariff charged for the use of the Company's inland
transportation pipeline operated by, its subsidiary PetroChad Transportation
Company.
Oil inventory comprises production volumes accumulated in pipeline and storage
facilities that have not yet been offloaded and transported to market. The
first off load of oil production occurred on March 21, 2014 which resulted in
the sale of approximately 560,000 barrels of oil net to the Company.
Operating and Transportation Costs, and Depreciation and Depletion
Operating and transportation costs for the Company's inaugural quarter of
production were $4.2 million and $2.5 million, respectively. The unit costs of
$17.43 and $9.55 per barrel for operating and transportation relate to the
264,575 barrels of oil produced in 2013 and held as oil inventory. The unit
costs are expected to decrease as production increases. Production commenced in
late 2013 and as such there was no operating or transportation expense recorded
in the comparative periods.
Depreciation and depletion expense increased by $4.2 million and $4.7 million,
respectively, for the three and twelve months ended December 31, 2013. The
increase is the result of the recognition of depletion in the net book value of
the Badila EXA which commenced production in September 2013. Prior there to,
depreciation related primarily to corporate assets.
General and Administrative Costs
Salaries and benefits - Increased $8.0 million for the year ended December 31,
2013. The increase is a result of the Company progressing from planning,
development, engineering, and procurement to staffing for operating two
drilling rigs, one service rig, constructing a variety of facilities and
infrastructure, and operating production facilities. With the a high level of
activity throughout 2013 and beyond, the Company undertook the required
recruiting campaign to attract and retain needed professionals, scaling its
headcount from approximately 113 employees at the end of December 31, 2012 to
approximately 287 employees at the end of December 31, 2013.
Share-based compensation - Increased for the three and twelve months ended
December 31, 2013 by $1.5 million and $2.5 million respectively. The increase
relates to stock options granted to employees as well as the establishment of
the Long Term Incentive Plan for officers and other key executives of the
Company aimed at retaining, attracting and motivating key executives
responsible for executing the Company's long term business strategy.
General and administrative costs - General and administrative costs decreased
by $1.6 million for the three months ended December 31, 2013 and $2.5 million
for the year ended December 31, 2013. During the year ended December 31, 2012,
the Company accrued $10.5 million to provide for potential penalties and fines
for an issue that was resolved in the first quarter of 2013. During the third
quarter of 2013, Caracal paid $9.8 million in listing fees relating to legal,
financial and accounting advisory services in conjunction with listing the
common shares of Caracal on the London Stock Exchange. As Caracal did not raise
any capital, at that time all fees were expensed.
Travel - The increase in travel during year ended December 31, 2013 is
primarily due to increased personnel traveling to Chad supervising and
executing capital and operating programs. The Company's share of travel for the
three months ended December 31, 2013 compared to the three months ended
December 31, 2012 has decreased due to the change in the carrying interest of
the Company.
Finance expense
On September 13, 2012, Caracal completed a financing through the issuance of
$173.6 million unsecured convertible bonds with a maturity date of September
30, 2017, and can be called in September 2015 at par. The interest rate was
subject to increases unless a qualifying public offering occurred. The
qualifying public offering occurred in 2013 and the interest rate is fixed at
12.5% until maturity. In December 30, 2013, upon completion of the qualifying
public offering, $28.7 million of accrued and unpaid interest was paid out in
cash and shares.
Outlook
With production from Badila coming on-stream during the fourth quarter of 2013
and Mangara production targeted for the third quarter of 2014, Caracal's
financial strategy for 2014 will focus its cash flow from operating activities
to fund the Company's 8-10 high-impact exploration drilling prospects.
About Caracal Energy Inc.
Caracal Energy Inc. is an international exploration and development company
focused on oil and gas exploration, development and production activities in
the Republic of Chad, Africa. In 2011, the Company entered into three
production sharing contracts ("PSCs") with the government of the Republic of
Chad. These PSCs provide exclusive rights, along with its partners, to explore
and develop reserves and resources over a combined area of 26,103 km2 in
southern Chad. The PSCs cover two world-class oil basins with oil discoveries,
and numerous exploration prospects.
The Company's shares trade on the London Stock Exchange under the symbol CRCL.
1
Interval Maximum Oil Flowing Choke Total Gas-Oil Gravity Productivity
(mKB) Rate WHP Size Flow Ratio (Deg Index
(bopd) (psig) (in.) Duration (scf/stb) API) (bopd/psi)
(hr)
E (2,474 - 1,917 160 64/64 53 100 35 - 39 1.7
2,669)
C (1,896 - 3,200 200 80/64 45.3 540 35 - 37 2.2
2,103.5)
2
Interval Maximum Oil Flowing Choke Total Flow Gas-Oil Gravity
(mKB) Rate WHP Size Duration (hr) Ratio (Deg API)
(bopd) (psig) (in.) (scf/stb)
C (2,012-2,166) 1,470* 140 96/64 38 519 36
D (2,219-2,520) 702** 120 1/2 38 - 35
E (2,582 -2,630) 2,580*** 120 64/64 29 100 34 - 37
* - A total of 1,600 bbls of oil and < 1 bbl of water/completion fluid
recovered
** - A total of 557 bbls of oil and 1 bbl of water/completion fluid were
recovered.
*** - A total of 921 bbls of oil and 8 bbls of water/completion fluid recovered
3
Max Flowing Choke Total
Oil WHP Size Flow
Zones Interval Rate Duration GOR Gravity PI
(mKB) (bopd) (psig) (in.) (hrs) (scf/ (Deg (bopd/
bbl) API) psi)
D2, D3, D4, D5, 1758.0 - 4986 580 56/64 20.0
D6, D8, D9 1932.0 273.00 33.6 9.90
A total of 1,774 bbls of oil and 68 barrels of completion fluid recovered
CAUTIONARY STATEMENTS:
This announcement contains certain forward-looking information and statements.
Forward-looking information typically contains statements with words such as
"intend", "target", "anticipate", "plan", "estimate", "expect", "potential",
"could", "will", or similar words suggesting future outcomes. Information
relating to reserves and resources is deemed to be forward-looking information,
as it involves the implied assessment, based on certain estimates and
assumptions, that the reserves and resources described exist in the quantities
predicted or estimated, and can be profitably produced in the future. The
Company cautions readers not to place undue reliance on forward-looking
information which by its nature is based on current expectations regarding
future events that involve a number of assumptions, inherent risks and
uncertainties, which could cause actual results to differ materially from those
anticipated by the Company. In addition, any forward-looking information is
made as of the date hereof, and each of the Company and its affiliates
expressly disclaim any obligation or undertaking to update, review or revise
such forward-looking information contained in this announcement to reflect any
change in its expectations or any change in events, conditions or circumstances
on which such information is based unless required to do so by applicable law.
Forward-looking information is not based on historical facts but rather on
current expectations and assumptions regarding, among other things, the timing
and scope of certain of the Company's operations and the timing and level of
production from the Company's properties, plans for and results of drilling
activity and testing programs, future capital and other expenditures (including
the amount, nature and sources of funding thereof), continued political
stability, and timely receipt of any necessary government or regulatory
approvals. Although the Company believes the expectations and assumptions
reflected in such forward-looking information are reasonable, they may prove to
be incorrect. Forward-looking information involves significant known and
unknown risks and uncertainties. A number of factors could cause actual results
to differ materially from those anticipated by the Company including, but not
limited to, risks associated with the oil and gas industry (e.g. operational
risks in exploration and production; inherent uncertainties in interpreting
geological data; changes in plans with respect to exploration or capital
expenditures; interruptions in operations together with any associated
insurance proceedings; reductions in production capacity, the uncertainty of
estimates and projections in relation to costs and expenses and health, safety
and environmental risks), the risk of commodity price and foreign exchange rate
fluctuations, the uncertainty associated with negotiating with foreign
governments, risk associated with international activity, including the risk of
political instability, the risk of adverse economic market conditions, the
actual results of marketing activities and the risk of regulatory changes.
Forward-looking information cannot be relied upon as a guide to future
performance. Well-test results are not necessarily indicative of long-term
performance or ultimate recovery. Financial outlook information contained in
this report about the Company's prospective cash flows and financial position
is based on assumptions about future events, including economic conditions and
proposed courses of action, based on management's assessment of the relevant
information currently available. Readers are cautioned that any such financial
outlook information contained herein should not be used for purposes other than
for which it is disclosed herein. The Company does not assume responsibility
for the accuracy and completeness of the forward-looking information or
statements and such information and statements should not be taken as
guarantees of future outcomes. Subject to applicable securities laws, the
Company does not undertake any obligation to revise this forward-looking
information or these forward-looking statements to reflect subsequent events or
circumstances. This cautionary statement expressly qualifies the
forward-looking information and statements contained in this press release.
Terms related to reserves and resources classifications referred to in this
announcement are based on definitions and guidelines in the Canadian Oil and
Gas Evaluation Handbook which are as follows.
"Proved reserves" are those reserves that can be estimated with a high degree
of certainty to be recoverable. It is likely that the actual remaining
quantities recovered will exceed the estimated proved reserves.
"Probable reserves" are those additional reserves that are less certain to be
recovered than proved reserves. It is equally likely that the actual remaining
quantities recovered will be greater or less than the sum of the estimated
proved plus probable reserves.
The qualitative certainty levels referred to in the definitions above are
applicable to individual reserves entities (which refers to the lowest level at
which reserves calculations are performed) and to reported reserves (which
refers to the highest-level sum of individual entity estimates for which
reserves estimates are presented). Reported reserves should target the
following levels of certainty under a specific set of economic conditions:
· at least a 90 percent probability that the quantities actually
recovered will equal or exceed the estimated proved reserves. This category of
reserves can also be denoted as 1P;
· at least a 50 percent probability that the quantities actually
recovered will equal or exceed the sum of the estimated proved plus probable
reserves. This category of reserves can also be denoted as 2P; and
· at least a 10 percent probability that the quantities actually
recovered will equal or exceed the sum of the estimated proved plus probable
plus possible reserves. This category of reserves can also be denoted as 3P.
Additional clarification of certainty levels associated with reserves estimates
and the effect of aggregation is provided in the COGE Handbook. The estimates
of reserves and future net revenue for individual properties may not reflect
the same confidence level as estimates of reserves and future net revenue for
all properties, due to the effects of aggregation.
"Prospective resources" are those quantities of petroleum estimated, as of a
given date, to be potentially recoverable from undiscovered accumulations by
application of future development projects. Prospective resources have both an
associated chance of discovery (geological chance of success or "COS") and a
chance of development (economic, regulatory, market, facility, corporate
commitment or political risks). The chance of commerciality is the product of
these two risk components. The prospective resource estimates referred to
herein have not been risked for either the chance of discovery or the chance of
development.
There is no certainty that any portion of the prospective resources will be
discovered. If a discovery is made, there is no certainty that it will be
developed or, if it is developed, there is no certainty as to the timing of
such development or that it will be commercially viable to produce any portion
of the prospective resources.
Figures related to the Company's reserves and resources are derived from the
December 31, 2013 McDaniel Report and the June 30, 2013 McDaniel Report.
A description of the uncertainties and significant positive and negative
factors associated with the estimates of reserves and resources in respect of
the December 31, 2013 McDaniel Report is contained in the Company's Annual
Information Form dated March 31, 2014 and a description of the uncertainties
and significant positive and negative factors associated with the estimates of
resources in respect of the June 30, 2013 McDaniel Report is contained in the
Company's July 25, 2013 material change report. Copies of these documents are
available on the internet under the Company's profile at www.sedar.com.
Information relating to reserves and resources is deemed to be forward-looking
information, as it involves the implied assessment, based on certain estimates
and assumptions, that the reserves and resources described exist in the
quantities predicted or estimated, and can be profitably produced in the
future. Well-test results are not necessarily indicative of long-term
performance or ultimate recovery.
SOURCE: Caracal Energy Inc.
For further information:
Caracal Energy Inc.
Gary Guidry, President and Chief Executive Officer
Trevor Peters, Chief Financial Officer
+1 403-724-7200
Longview Communications - Canadian Media Enquiries
Alan Bayless +1 604-694-6035
Joel Shaffer +1 416-649-8006
FTI Consulting - UK Media Enquiries
Ben Brewerton / Ed Westropp
+ 44 (0) 207 8313 3113
caracalenergy.sc@fticonsulting.com
(CRCL)
