Summit Resources 1997 Financial and Operating Results.CALGARY, ALBERTA--(BUSINESS WIRE)--Feb. 18, 1998-- Summit(TSE See Tokyo Stock Exchange. TSE 1. See Tokyo Stock Exchange (TSE). 2. See Toronto Stock Exchange (TSE). :SUI Sui (swā), dynasty of China that ruled from 581 to 618. This short-lived dynasty reunified China in 589 after 400 years of division and laid the foundation for further consolidation under the T'ang dynasty. .) Summit Resources Limited announced today its 1997 financial and operating results. Activity levels in the Western Canadian Sedimentary Basin The Western Canadian Sedimentary Basin (WCSB) is a vast sedimentary basin underlying 1.4 million square kilometres (550,0000 sq. mi.) of Western Canada including southwestern Manitoba, southern Saskatchewan, Alberta, northeastern British Columbia and the southwest corner of the were at an all time high in 1997, resulting in the drilling of 16,500 wells. Shortages in equipment, trained field personnel and professional staff resulted in delays and escalated costs impacting performance throughout the sector. The industry's heightened interest in heavy oil projects resulted in the heavy oil differential widening significantly, impacting netbacks for heavy oil producers. Summit's blend of higher quality crude oil, with an average API exceeding 35 degrees, mitigated this alarming, but not surprising, spread in the differential. During 1997 Summit participated directly in 77 wells and farmed-out 7 wells to industry partners. Twenty-three per cent of Summit's participation wells were exploratory where the Company posted a 50 per cent success rate, and the remaining 77 per cent were development where the Company achieved an 81 per cent success rate. This drilling activity resulted in 42 oil wells (17.5 net) and 19 gas wells (13.9 net), with an average well depth of 1,700 meters. Summit's 1997 BOE BOE Based on Experience BOE Board of Education BOE BoletÃn Oficial del Estado (Spanish) BOE Bank of England BOE Board of Equalization BOE Board of Elections BOE Barrel of Oil Equivalent BOE Bind on Equip production increased to 12,362 BOE's per day which was within 3 per cent of budgeted production volumes forecast at the beginning of 1997. Oil and liquids production increased from 5,707 BOE's per day in 1996 to 6,145 BOE's per day in 1997, while natural gas production increased to 62.2 MMcf/d from 60.1 MMcf/d the previous year. Summit's 1997 average natural gas price of $2.06 per Mcf (1996 - $1.70 per Mcf) continues to rank in the top quartile Quartile A statistical term describing a division of observations into four defined intervals based upon the values of the data and how they compare to the entire set of observations. Notes: Each quartile contains 25% of the total observations. for the industry. Summit's blend of natural gas contracts and higher than average BTU Btu: see British thermal unit. content contributed to Summit's premium pricing Premium pricing is the practice of keeping the price of a product or service artificially high in order to encourage favorable perceptions among buyers, based solely on the price. for its natural gas production. While natural gas prices firmed in 1997, crude oil prices declined by 6 per cent, with WTI WTI West Texas Intermediate WTI Western Transportation Institute (Montana State University) WTI World Tribunal on Iraq WTI With The Idea (used in chess to point to the idea behind a specific move) prices averaging US$20.61 in 1997 compared to US$22.00 in 1996. As a result, Summit's 1997 realized crude oil price averaged $23.89 per barrel compared with 1996 realized prices of $25.49 per barrel. During 1997 Summit expanded its production base in core areas through a combination of successful property acquisitions, asset rationalizations and an active drilling program which resulted in total expenditures of $88 million. Seventy-two per cent of the $65 million invested in oil and gas exploration and development activities was allocated to Canadian operations, with the remaining 28 per cent invested to expand Summit's light oil exploration and development activities in the U.S. portion of the Williston Basin. Strategic property acquisitions completed in 1997 totaled $75 million and included an expansion of the Company's oil production base through the acquisition of producing assets in the Williston Basin and in Rabbit Hills, Montana, while an acquisition at Fox Creek, Alberta Fox Creek is a small town in northwestern Alberta located on Highway 43. It is roughly 260 km northwest of Edmonton via Highway 43, which will be a completed four-lane divided highway before the winter of 2007, and the Highway 16 for the last stretch. offset a portion of the Company's natural gas and liquids divestitures. As part of Summit's rationalization program in 1997, dispositions of non-core assets totaling $51 million were concluded, including dispositions at Sturgeon Lake Sturgeon Lake may refer to:
Summit's year-end 1997 long-term debt Long-Term Debt Loans and financial obligations lasting over one year. Notes: For example debts obligations such as bonds and notes which have maturities greater than one year would be considered long-term debt. totaled $125 million, including $17.6 million incurred by the Company to finance its investment in Fort Chicago Energy Partners L.P. which is the largest owner of interest in the Alliance Pipeline projects. Excluding the debt associated with this investment, Summit's 1997 debt to cash flow ratio equates to 2.1:1. Increased production levels in 1997 resulted in petroleum and natural gas revenues increasing to $101 million, an 11 per cent increase from the $91 million posted in 1996. Cash flow for the year increased to $51 million ($1.51 per share) compared to $50 million ($1.46 per share) in 1996. 1997 cash flow was impacted by higher operating costs due to increased production volumes from Summit's U.S. production which were converted to Canadian dollars, excess natural gas transportation commitments which have since been mitigated, and generally higher operating costs throughout the industry. Cash flow in the fourth quarter of 1997 totaled $13.8 million ($0.41/share) based on average oil and liquids production of 6,365 barrels per day Barrels per day (abbreviated BPD, bbl/d, bpd, bd or b/d) is a measurement used to describe the amount of crude oil (measured in barrels) produced or consumed by an entity in one day. ($22.65/bbl) and average natural gas production of 67.7 MMcf/d ($2.14/Mcf). Under Generally Accepted Accounting Principles The standard accounting rules, regulations, and procedures used by companies in maintaining their financial records. Generally accepted accounting principles (GAAP) provide companies and accountants with a consistent set of guidelines that cover both broad accounting (GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). ) the Company is required to evaluate the carrying value Carrying Value Also know as "book value," it is a company's total assets minus intangible assets and liabilities, such as debt. Notes: This is different than market value, as it can be higher or lower depending on the circumstances. of its assets in each country against the future cash flows its proven reserves will generate at constant prices over their economic life. In performing the "ceiling test" the Company has the option to either use average commodity prices for the year or prices in effect at the end of the year. In Canada future net revenues are considerably higher than the carrying costs Carrying costs Costs that increase with increases in the level of investment in current assets. of the reserves. Using average oil prices for 1997 (US$20.61 WTI) Summit's proven reserves in the United States satisfies the ceiling test requirements under GAAP. However, using year-end constant prices of US$17.68, a ceiling test deficiency resulted for the Company's U.S. cost centre. In light of the soft crude oil prices that currently exist and the expectation that soft prices are likely to continue in 1998 due to the decreased demand in south-east Asia and OPEC's decision to increase production output, the Company has elected to use the more conservative year-end oil price in its ceiling test calculation. This calculation, together with the Company's decision to write-off certain land and seismic costs on U.S. properties evaluated by the Company, results in Summit recording a net loss of $31 million in 1997, which includes a $34.5 million write-down on the Company's U.S. cost centre. Summit's drilling and acquisition programs during the year added proven reserves of 11.7 million BOE's and 14.5 million BOE's of proven and probable reserves. Given the favourable market conditions during 1997, Summit disposed of some of its non-strategic properties, thereby reducing proven reserves by 5 million BOE's (6.6 million BOE's proven plus probable) while netting the Company proceeds in excess of $10.00 per BOE on a proven basis. Reserve revisions to prior years evaluations accounted for a reduction of 0.6 million proven BOE's and 2.3 million proven plus probable BOE's. The Company's total crude oil and liquids reserves increased to 20.1 million barrels, including 14.6 million barrels proven, while natural gas reserves totaled 185 Bcf, including 147.4 Bcf proven. The Company's U.S. reserves increased by over 300 per cent to 8.4 million BOE's, including 6.3 million barrels of proven reserves. Summit has established a $40 million capital program for exploration and development activities in 1998, including drilling, facilities, land and geophysics. Sixty-eight per cent of this total has been allocated to the drilling of 70 wells, including 23 exploration projects and 47 development wells. Fifty-seven per cent of the Company's drilling and facilities capital has been allocated to natural gas and the remainder to crude oil. Forty wells are planned in Canada to expand the Company's natural gas and light oil production base, and 30 wells are planned in the U.S., mostly located in the Williston Basin, to expand the Company's crude oil production base. 1998 production volumes are projected to increase 13 per cent to 14,000 BOE's per day, comprising 6,700 barrels of oil and liquids per day and 73 MMcf/d of natural gas. Using budget parameters of US$18.50 per barrel for oil and $1.75 per MMcf/d (plus $0.15 per Mcf for settlement of an outstanding gas contract), Summit anticipates cash flow for 1998 of $48 million or $1.45 per share. A conference call with senior management to discuss 1997 results and review the Company's 1998 plans has been set for Thursday, February 19, 1998 at 2:00 p.m. Calgary time. Shareholders, analysts and other interested parties are requested to call (403) 216-9050 access number 5315# for participation in the conference call. Summit Resources Limited is a Canadian corporation engaged in oil and gas exploration, development, acquisition, production and marketing in western Canada and selected basins in the United States. Summit's shares are listed on the Toronto Stock Exchange Toronto Stock Exchange (TSE) Canada's largest stock exchange, trading approximately 1,200 company stocks and 33 options. (trading symbol Trading symbol See: Ticker symbol "SUI"). CONTACT: Summit Resources Limited Larry B. Krause, 403/ 269-4400 403/ 269-4444 (FAX) or Summit Resources Limited David A. Dyck, 403/ 269-4400 403/ 269-4444 (FAX) |
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