Canadian 88: Despite Strong Production Growth, Cash Flow Overshadowed by Forward Gas Contract.Business Editors CALGARY, Alberta--(BUSINESS WIRE)--May 16, 2000 Canadian 88 Energy Corp. (TSE See Tokyo Stock Exchange. TSE 1. See Tokyo Stock Exchange (TSE). 2. See Toronto Stock Exchange (TSE). :EEE EEE eastern equine encephalomyelitis. EEE eastern equine encephalomyelitis. .) (AMEX AMEX See: American Stock Exchange :EEE) today announces its results for 1999. Production revenue increased 51% to $105.0 million in 1999 compared to $69.5 million in 1998, and cash flow from operations Cash flow from operations A firm's net cash inflow resulting directly from its regular operations (disregarding extraordinary items such as the sale of fixed assets or transaction costs associated with issuing securities), calculated as the sum of net income plus noncash expenses increased 43% to $31.8 million ($0.30 per share) in 1999 compared to $22.2 million ($0.23 per share) in 1998. The Company recorded a loss of $6.5 million ($0.06 per share) for 1999, compared to earnings of $1.8 million ($0.02 per share) in 1998. Had the natural gas forward sales forward sales npl → ventas fpl a término contract not been in place, cash flow would have been approximately $53.0 million ($0.50 per share) compared to the reported $31.8 million ($0.30 per share). In 1998, the Company sold 100 mmcf per day of gas production at an AECO AECO Aeromedical Evacuation Control Officer AECO Advance Engineering Change Order AECO Architecture, Engineering, Construction and Owner-operated average price of approximately $2.34 per mcf for the period November 1, 1998 to October 31, 1999 and 91 mmcf per day at $2.36 per mcf for the period November 1, 1999 to October 31, 2000 (the "1998 Natural Gas Hedge"). Depletion, depreciation and amortization more than doubled, to $41.6 million in 1999 from $18.8 million in 1998. In addition to increased production in the year, two other developments significantly contributed to the increase in DD&A. First, proved natural gas reserve estimates were revised downward by approximately 25%, principally related to Waterton, and second the $8.0 million writedown of the entire balance of the U.S. cost centre. Change in Management Joe Pritchett III, former Executive Vice President of Duke Energy Hydrocarbons L.L.C., joined Canadian 88 as President and CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. in April 2000. Soheil Asgarpour was appointed Chief Operating Officer Chief Operating Officer (COO) The officer of a firm responsible for day-to-day management, usually the president or an executive vice-president. in 1999, and Don Gardner Don Gardner is an American rhythm and blues drummer and vocalist. Born in Philadelphia, Gardner had formed his own group, the Sonotones, in 1953, but teamed up with Dee Dee Ford in the early 1960s to have his biggest successes. joined the Company as Chief Financial Officer in December 1999. "The financial results for 1999 do not reflect the capability of Canadian 88 to exploit an outstanding portfolio of producing and very attractive natural gas exploration prospects in Canada" said Mr. Pritchett. "Canadian 88's outstanding people team is re-energized in the pursuit of a newly focused and balanced exploration and exploitation strategy." Fiscal Responsibility The 1999 year end debt level was $255 million. Going forward, management plans to bring the debt to cash flow ratio down to a level more consistent with industry norms. The Company has already made substantial progress in reducing debt in 2000. More than $65 million has been realized from Duke's investment and the sale of 50% of our East Coast offshore position. Of this amount, $44 million has been applied to reduce debt, with the balance added to working capital. As well, the increase in operating cash flow Operating cash flow Earnings before depreciation minus taxes. Measures the cash generated from operations, not counting capital spending or working capital requirements. anticipated when the 1998 Natural Gas Hedge ends on October 31, 2000 is expected to significantly improve the Company's debt to cash flow position. Exploration and Development Strategy The focus of our exploration and development strategy for 2000 will be to: * Empower, envision and enable our employees to implement our vision and strategies * Pursue a balanced risk program, including production optimization, workovers, low risk drilling and high impact exploration opportunities * Allocate capital to projects and activities that are critical to our program of re-establishing a strong base of producing reserves at low finding and development costs * Leverage exploration plays through industry participation to maximize our rate of return and mitigate risk * Continue to optimize production and minimize operating costs operating costs npl → gastos mpl operacionales * Divest To deprive or take away. Divest is usually used in reference to the relinquishment of authority, power, property, or title. If, for example, an individual is disinherited, he or she is divested of the right to inherit money. non-core assets, including land and seismic * Monetize non-strategic midstream mid·stream n. 1. The middle part of a stream. 2. The part of a course that is neither at the beginning nor at the end: the midstream of life. Noun 1. assets Outlook for 2000 Clearly, the impact of the 1998 Natural Gas Hedge will have a significant negative impact on the financial results for much of 2000. This was a costly action and one that will not be repeated in the future. We have taken action in April 2000 to protect the Company's cash flow in the event of significantly higher gas prices through October 31, 2000. The Company has a $65.0 million capital budget for 2000 and intends to fund this program through cash flow and the divestment divestment to strip one's investment from an entity. of non-core assets. Approximately 75% of the planned capital will be directed toward low risk exploitation and production optimization targets with the balance expended ex·pend tr.v. ex·pend·ed, ex·pend·ing, ex·pends 1. To lay out; spend: expending tax revenues on government operations. See Synonyms at spend. 2. on exploration projects. No significant changes in operating performance are anticipated for the first quarter of 2000 compared to the fourth quarter of 1999. This reflects the significant curtailment of capital spending capital spending Spending for long-term assets such as factories, equipment, machinery, and buildings that permits the production of more goods and services in future years. late in 1999 and continuing in 2000. Earnings in the first quarter of 2000 will be negatively affected by a non-recurring charge of approximately $4.5 million to provide for the costs to effect the Duke arrangement. Annual Report The 1999 annual report will be available next week. In the interim, if you require the Company's audited 1999 financial statements, please contact Lyndon Dunkley at (403) 974-8898 (ldunkley@cdn88energy.com). Conference Call Information Canadian 88 has scheduled a conference call for Wednesday, May 17, 2000 at 8:00 a.m. Eastern (6:00 a.m. Mountain) during which the 1999 results and future direction for the Company will be discussed. Joe Pritchett III, President and Chief Executive Officer of Canadian 88 will host the call. Following brief introductory remarks by Mr. Pritchett, the call will be open for questions. Please phone the conference operator at 1-800-735-3051 if outside the Calgary calling area or 216-9050 if in Calgary and enter the four digit code 6733 followed by the pound key(#). Please call in approximately ten minutes before the call is scheduled to begin. An audiotape au·di·o·tape n. 1. A relatively narrow magnetic tape used to record sound for subsequent playback. 2. A tape recording of sound. tr.v. of the call will be available for playback until midnight Friday, May 26, 2000 by calling 1-800-408-3053 and entering passcode 473108 followed by the pound key(#). Forward-Looking Information This release contains statements that constitute forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. within the meaning of section 27A of the Securities Act of 1933 and Section 21 of the Securities Exchange Act of 1934 and are subject to the safe harbor Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. provisions of those sections and the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995. Investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties including those described in our filings with Canadian and U.S. securities commissions, and that the actual results or developments may differ materially from those in the forward-looking statements as a result of various factors. We have based these forward-looking statements on information currently available and disclaim any intention or obligation to update or revise any forward-looking statement.
CANADIAN 88 ENERGY CORP.
1999 Audited Financial & Operating Statistics
Three Months Ended % Year Ended %
December 31 Change December 31 Change
------------------------------------------------
1999 1998 1999 1998
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Financial:
(000's except per
share amount)
Production Revenues $26,421 $17,712 49% $104,979 $69,493 51%
Cash Flow
from Operations $6,093 $5,163 18% $31,776 $22,199 43%
Net Earnings (Loss) ($8,088) ($745) ($6,454) $1,820
Per Common Share:
Cash Flow from
Operations $0.06 $0.05 20% $0.30 $0.23 30%
Net Earnings (Loss) ($0.08) ($0.01) ($0.06) $0.02
Average Common
Shares (000's) 106,032 98,206 8% 106,032 98,206 8%
Operations:
Production Volumes:
Oil & NGL's (bbls/d) 2,486 2,950 -16% 2,714 2,922 -7%
Natural gas (mmcf/d) 95.7 86.0 11% 103.0 76.3 35%
Boe/d (10:1) 12,056 11,550 4% 13,014 10,552 23%
Sales Prices:
Oil & NGL's ($/bbl) $28.20 $13.37 111% $20.82 $15.77 32%
Natural Gas ($/mcf) $2.19 $2.01 9% $2.18 $1.86 17%
Capital
Expenditures (000's):
Property
Acquisition $0 $2,012 $0 $22,284
Exploration &
Development $21,668 $15,425 40% $87,556 $80,561 9%
Plants, Facilities
& Pipelines $750 $11,149 -93% $12,192 $59,376 -79%
Land & Lease $399 $3,954 -90% $4,734 $28,245 -83%
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$22,817 $32,540 $104,482 $190,466
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