Part 1 of 2 - Norcen Energy - Earnings and Cash Flow Reflect Success of 'New Norcen'.CALGARY, ALBERTA--(BUSINESS WIRE)--Nov. 1, 1996-- Norcen(ME NCN NCN National Council of Nurses. ., TSE See Tokyo Stock Exchange. TSE 1. See Tokyo Stock Exchange (TSE). 2. See Toronto Stock Exchange (TSE). NCN.) Norcen Energy Resources Limited today announced earnings of $57 million ($0.67 per share) for the nine months ended September 30, 1996. This compares with earnings of $7 million ($0.08 per share) for the same period in 1995. Third quarter earnings were $16 million compared with a loss of $6 million in the third quarter last year. Strong oil and gas prices combined with cost reductions in the oil and gas and propane propane, CH3CH2CH3, colorless, gaseous alkane. It is readily liquefied by compression and cooling. It melts at −189.9°C; and boils at −42.2°C;. businesses provided improved earnings and operating results. Cash flow for the third quarter reached $126 million, up 48 percent from the $85 million for the third quarter in 1995. Year-to-date Year-to-date (YTD) The period beginning at the start of the calendar year up to the current date. cash flow to the end of September was up 27 percent to $362 million from $285 million. Oil and gas operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. for the first nine months of 1996 was $47 million compared to $8 million in 1995, up 500 percent. Third quarter oil and gas earnings were $19 million, compared to a small loss for the same period last year. Finding and development costs remain consistent at $7.00 per boe of proven reserves. Reserve replacement reached 164 percent of production replaced through in-house In-house In the context of general equities, keeping an activity within the firm. For example, rather than go to the marketplace and sell a security for a client to anyone, an attempt is made to find a buyer to complete the transaction with the firm. prospect development. Grant Billing, 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. , said, "The improvement in operating performance can be attributed to strong core area performance, continued cost management and improved prices. Norcen has made great progress in improving performance over the past two years and we are moving forward on a positive trend." Complete details of the third quarter results follow. Highlights - Nine month earnings already more than triple 1995 year-end results - Cash flow up nearly 50 percent over the same quarter last year - Capital expenditure program almost double compared to 1995 third quarter - Finding and development costs $7.00 per boe for proven reserves - Year-to-date reserve replacement of 164 percent - Balance sheet restructuring restructuring - The transformation from one representation form to another at the same relative abstraction level, while preserving the subject system's external behaviour (functionality and semantics). complete - flexibility and strength achieved - Sold 50 percent of Superior Propane through the Superior Propane Income Fund -0-
three months ended nine months ended
September 30 September 30
1996 1995 1996 1995
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FINANCIAL (millions of dollars except per share amounts)
Sales and Other Revenues $ 275 $ 278 $ 929 $ 941
Net Earnings $ 16 $ (6) $ 57 $ 7
Per common share
basic and fully
diluted $ 0.18 $(0.08) $ 0.67 $ 0.08
Cash Flow $ 126 $ 85 $ 362 $ 285
Per common share
basic $ 1.43 $ 1.03 $ 4.27 $ 3.44
fully diluted $ 1.43 $ 0.90 $ 4.27 $ 3.00
Capital Expenditures $ 144 $ 86 $ 377 $ 312
Short and Long-Term Debt
(net of cash and accrued
sales proceeds)
$ 664 $ 922
Convertible Debentures $ 0 $ 400
Common Shareholders' Equity $1,474 $1,203
Common shares outstanding (000's) 93,155 82,935
OPERATING
Production
Oil (mb/d) 65.3 61.0 63.5 63.1
Natural gas liquids
(mb/d) 6.4 6.2 6.4 6.4
Natural gas (mmcf/d) 494 470 503 522
Average Prices Received
Oil (per bbl) $20.37 $18.99 $19.82 $20.30
Natural gas liquids
(per bbl) $16.44 $15.64 $16.48 $16.57
Natural gas (per mcf) $ 1.87 $ 1.51 $ 1.88 $ 1.60
Wells Drilled
Gross 199 102 432 334
Net 128 53 297 179
Success Ratio (percent) 94 78 86 78
Sales of Propane
(millions of litres) 304 370 1,261 1,319
-0- Third Quarter Results: Strong oil and gas prices combined with cost reductions in the oil and gas and propane businesses provided improved earnings and operating results. Strength has been restored to the balance sheet which allows Norcen flexibility in pursuing core area growth as well as taking advantage of new opportunities that arise. The company has set the stage for solid long-term performance through focused growth and top-quartile capital and operating efficiency. Financial: Net earnings for the third quarter were $16 million, up from a $6 million loss during the same quarter in 1995. Nine-month earnings of $57 million compare to $7 million in earnings for the first nine months of 1995. Cash flow for the third quarter reached $126 million, up 48 percent from the $85 million of the third quarter in 1995. Year-to-date cash flow to the end of September was up 27 percent to $362 million from $285 million. Oil and gas cash flow in particular was up 56 percent in the quarter, primarily from improved prices. Oil and liquids prices were up quarter over quarter but were slightly lower than the prices for the same nine-month period in 1995. Gas prices were stronger for both the third quarter and the nine-months ended September 30, primarily as a result of the higher prices for the U.S. Gulf Coast production. During the quarter, the company established fixed price positions for 20,000 b/d of 1998 oil production at US$18.60 per bbl. Operating Efficiency: Operating income from oil and gas for the third quarter was $19 million, compared to a small loss for the same period last year. For the nine-months, earnings were $47 million in 1996 versus $8 million in 1995, up 500 percent. This increase can be attributed to strong core area performance, continued cost management and improved prices. Compared to last year, operating, administrative and interest costs have been reduced by $0.87 per boe for the quarter and $1.34 per boe on a year-to-date basis. Oil, NGL NGL - A dialect of IGL. and natural gas production were all up over the same quarter last year. Oil and NGL production was 71,807 b/d for the quarter compared to 67,229 b/d for the third quarter of 1995. Gas production increased from 470 mmcf/d in 1995 to 494 mmcf/d in 1996. While year-to-date oil and NGL production was up slightly over the same period last year, gas production slipped slightly from 522 mmcf/d to 503 mmcf/d. This is due to asset sales of 100 mmcf/d in late 1995 which have been substantially offset by continued growth in gas production in the Gulf of Mexico Noun 1. Gulf of Mexico - an arm of the Atlantic to the south of the United States and to the east of Mexico Golfo de Mexico Atlantic, Atlantic Ocean - the 2nd largest ocean; separates North and South America on the west from Europe and Africa on the east and Western Canada
Western Canada, commonly referred to as the West . On a "boe" basis, production in the third quarter was approximately equivalent to the second quarter. production in the third quarter was adversely affected by some temporary restrictions on Gulf of Mexico production due to delays in installing new compression at Ship Shoal and delays in some Northern Alberta Norhern Alberta is a region located in the Canadian province of Alberta. Its primary industry is oil and gas, with large heavy oil reserves being exploited at the Athabasca Oil Sands and Wabasca Area in the east of the region. gas projects caused by extremely wet weather. All of these projects will be completed early in the fourth quarter. Capital Efficiency and Opportunities: Capital expenditures for the third quarter jumped significantly from the same quarter in 1995. 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. went from $86 million to $144 million, primarily due to a 78 percent increase in oil and gas spending. For the nine months to the end of September, capital expenditures were $377 million, up from $312 million a year earlier. Drilling activity was strong in the quarter with 199 wells drilled, resulting in 128 net wells and a 94 percent success ratio. Finding and development costs remain consistent at $7.00 per boe of proven reserves. Reserve replacement reached 164 percent of production replaced through in-house prospect development in the nine months to the end of September. New proven reserves of 3.3 mmbbls were booked in Venezuela during the quarter as the result of the drilling of nine development wells and a second exploration well. The first exploratory well on the Oritupano-Leona block is now producing 2,500 b/d and the second well is expected to produce at similar rates. A third exploration well is currently drilling. Drilling activity was strong in Western Canada for the third quarter. Norcen was the fifth most active overall driller in the quarter and sixth in exploration meters drilled. In the Provost PROVOST. A title given to the chief of some corporations or societies. In France, this title was formerly given to some presiding judges. The word is derived from the Latin praepositus. region, two million barrels of medium and heavy oil reserves Oil reserves refer to portions of oil in place that are claimed to be recoverable under economic constraints. Oil in the ground is not a "reserve" unless it is claimed to be economically recoverable, since as the oil is extracted, the cost of recovery increases incrementally were added in the quarter and a major infill in·fill n. 1. The use of vacant land and property within a built-up area for further construction or development, especially as part of a neighborhood preservation or limited growth program. 2. program was completed with 38 wells drilled. Two million barrels of heavy oil reserves were also added in the Lindbergh region as a result of 22 successful oil wells. Eight wells were drilled in the Progress region and net reserves of 21 bcf were booked during the quarter. Two new oil pool discoveries in the Kaybob core area came on production in September at 400 b/d each. Norcen expects an increase in activity in the fourth quarter as the northern core areas commence their winter-access programs. During this period, construction will begin on a new gas plant in the Jedney core area in northeast B.C. to support anticipated growth for Norcen from the current 8 mmcf/d to 35 mmcf/d during 1997. 3-D seismic has been completed on Norcen's exploratory block in the Northwest Territories Northwest Territories, territory (2001 pop. 37,360), 532,643 sq mi (1,379,028 sq km), NW Canada. The Northwest Territories lie W of Nunavut, N of lat. 60°N, and E of Yukon. near Fort Liard. Evaluation of the seismic will be completed over the winter. In the Gulf of Mexico, Norcen has signed agreements for 1.5 years worth of time over the next three years on two deepwater drilling rigs. We are currently considering several deepwater prospects and seismic evaluation is underway. Asset Rationalization rationalization, in psychology: see defense mechanism. : Norcen has accepted an offer of US$5 million for the Indonesian assets and the deal is expected to close in October. As part of our normal acquisition and divestiture The breakup of AT&T. By federal court order, AT&T divested itself on January 1, 1984 of its 23 operating companies, which became known as the Regional Bell Operating Companies (RBOCs). activity, 80 transactions have been completed so far in 1996 resulting in $28 million of acquisitions and $31 million of dispositions. Propane Operations: The Superior Propane Income Fund was created in the third quarter and, effective October 8, Norcen sold 50 percent of the company in the public market for net proceeds Net Proceeds The amount received after all costs are deducted from the sale of a piece of property or security. Notes: In the case of an investor selling a security, net proceeds represent the proceeds from the sale minus any trading costs (i.e. commissions). of $234 million. Norcen intends to use the proceeds as required in the oil and gas business. Norcen maintains management control of Superior and work continues on developing the synergies between the two companies. In September, the head office for Superior was moved to Calgary from Unionville, Ontario Unionville is a suburban community in Markham, Ontario, Canada. It is located 33 km northeast of downtown Toronto and 13 km southeast of Richmond Hill. Main Street, which was Kennedy Road in the mid to late 20th century, runs through Unionville while the new Kennedy runs 300 m to in order to realize overhead cost savings and to improve its corporate focus. Propane operations had an operating loss operating loss The excess of operating expenses over revenue. As with operating income, operating losses exclude revenues and expenses from operations that are not considered a regular part of the business. Also called deficit. Compare operating income. of $2.6 million in the third quarter, an improvement over the $9.6 million loss for the same period in 1995. Improved results were due to the sale of its U.S. subsidiary earlier this year combined with lower operating, administration and interest costs. Debt Refinancing Refinancing An extension and/or increase in amount of existing debt. : In August, Noranda Inc. converted its entire holding of CDN (Content Delivery Network) A system of distributed content on a large intranet or the public Internet in which copies of content are replicated and cached throughout the network. $250 million, 8 percent convertible subordinated debentures subordinated debenture An unsecured bond with a claim to assets that is subordinate to all existing and future debt. Thus, in the event that the issuer encounters financial difficulties and must be liquidated, all other claims must be satisfied before into Norcen common shares at the conversion rate of $25 per share. As a result, Noranda holds approximately 45.1 million, or 48.5 percent, of Norcen's 93.1 million common shares outstanding. Norcen also redeemed re·deem tr.v. re·deemed, re·deem·ing, re·deems 1. To recover ownership of by paying a specified sum. 2. To pay off (a promissory note, for example). 3. the $150 million, 5 percent convertible subordinated debentures during the quarter. Norcen's net debt at September 30, 1996, was $673 million. This is expected to decline further in the fourth quarter as a result of applying the proceeds from the 50 percent sale of Superior and the collection of the final installment of Norcen's interest in the Iron Ore Company of Canada Iron Ore Company of Canada (often abbreviated to IOC) is a Canadian-based producer of iron ore. The company was founded in 1949 from a partnership of Canadian and American M.A. Hanna Company. . Year-end debt-to-cash flow levels are expected to be less than one year. Corporate: Norcen moved to a new head office location at the beginning of September. The move incorporated a new team-oriented, open design concept and consolidated office floors from 15 to six. The company continues to work on ways for improving communciations and team collaboration. A regular quarterly dividend of 15 cents per common share has been declared payable on December 1, 1996 to holders of record on November 15, 1996. CONTACT: Norcen Energy Resources Limited Grant Billing, 403/231-0104 403/231-0292 (FAX) or Norcen Energy Resources Limited Cheryl Dick, 403/231-0274 403/231-0011 (FAX) E-MAIL e-mail: see electronic mail. in full electronic mail Messages and other data exchanged between individuals using computers in a network. : cdick@norcen.com |
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