HALIFAX, NOVA SCOTIA — (Marketwired) — 11/12/14 — (TSX: CDH) – Corridor Resources Inc. (“Corridor”) announced today its third quarter financial results.
The following table provides a summary of Corridor–s financial and operating results for the three and nine months ended September 30, 2014, with comparisons to the three and nine months ended September 30, 2013. Corridor–s unaudited financial statements and management–s discussion and analysis for the third quarter have been filed on SEDAR at and are available on Corridor–s website at .
All amounts referred to in this press release are in Canadian dollars unless otherwise stated.
Selected Financial Information
(1) Cash flow from operations is a non-IFRS measure. Cash flow from operations represents net earnings adjusted for non-cash items including depletion, depreciation and amortization, deferred income taxes, share-based compensation and other non-cash expenses. See “Non-IFRS Financial Measures” in Corridor–s MD&A for the nine months ended September 30, 2014.
Highlights
Q3 2014 Netback Analysis
Corridor–s netback for Q3 2014 decreased to $0.84/mscf from $1.63/mscf in Q3 2013 primarily due to the decrease in the average natural gas sales price to $3.38/mscf in Q3 2014 from $4.23/mscf in Q3 2013. The Company–s netback was also adjusted by the following changes in royalty, transportation and production expenses.
Effective April 1, 2014, the Government of New Brunswick implemented a new two-tier royalty regime for natural gas production. The new regime changes the basic royalty rate payable from the previous 10% to a royalty rate equal to the greater of a 4% basic royalty calculated on the wellhead revenues and a 2% minimum royalty calculated on gross revenues. As a result of this new royalty regime and the requirement to pay a minimum royalty rate of 2%, Corridor–s royalty expense for Q3 2014 increased to $47 thousand from nil in Q3 2013.
Transportation expense for Q3 2014 decreased to $837 thousand from $961 thousand for Q3 2013 due to lower natural gas production in 2014 and the decrease in the cost of Canadian firm transportation effective April 1, 2014.
Net production expense for Q3 2014 decreased to $667 thousand from $902 thousand in Q3 2013 due primarily to lower repairs and maintenance and workover expenses. Corridor–s annual plant shut-down was conducted in the second quarter of 2014 as opposed to the third quarter of 2013.
Outlook
Corridor has decreased its estimated average net daily gas production for 2014 from 8.0 mmscfpd to 7.3 mmscfpd, as the additional production forecasted from the 2014 well re-entry and fracturing campaign is lower than originally budgeted due to fewer fracture stimulations being completed and the start of the additional production being delayed by approximately one month. However, this will be partially offset by the increase in the estimated average natural gas price in Q4 2014 to $10.40/mscf from $8.70/mscf due to higher estimated premiums at the Algonquin city-gate in December. Accordingly, Corridor has increased its forecast average natural gas sales price for 2014 from $9.00/mscf to $9.20/mscf (based on an estimate of US$4.35/mmbtu at Henry Hub, an average estimated premium at the Algonquin city-gate of US$3.55/mmbtu and an estimate of the exchange rate of $0.91 U.S. per Canadian dollar). The 2014 estimated average natural gas price includes the forward sale of 4,000 mmbtupd at an average price of $US11.74/mmbtu from November 1, 2014 to December 31, 2014.
As a result, Corridor has maintained its budgeted 2014 cash flow from operations of $14 million as the lower natural gas sales recognized in Q3 2014 and the expected decrease in the forecasted 2014 natural gas production are expected to be offset by lower estimated production expenses and a higher estimated average natural gas sales price in Q4 2014.
Corridor has decreased its 2014 capital budget from $27.2 million to $25.7 million to reflect the decrease in the estimated cost of the well re-entry and fracturing program. Based on available working capital of $17.3 million at December 31, 2013 and Corridor–s revised capital budget of $25.7 million for 2014, Corridor has increased its net positive working capital forecast from $17.6 million to $19.1 million, with no outstanding debt, at December 31, 2014.
“We are pleased with the third quarter–s activities, including the results of our 2014 well re-entry and fracturing program. The results of the program have demonstrated that the Frederick Brook shale is productive from at least six different sub-intervals across a distance of 25 kilometers. We will now have new production data points when the wells are placed on production in December. The new production information from the Frederick Brook shale will be instrumental in establishing a type curve for single-stage fracture stimulations” said Steve Moran, President and Chief Executive Officer. “We are also encouraged by the information received to date on the stratigraphic corehole program on Anticosti Island as the core obtained from these wells has had positive indications of the presence of hydrocarbons.” said Mr. Moran.
Corridor is an Eastern Canadian junior resource company engaged in the exploration for and development and production of petroleum and natural gas onshore in New Brunswick and Quebec and offshore in the Gulf of St. Lawrence. Corridor currently has natural gas production and reserves in the McCully Field near Sussex, New Brunswick and crude oil reserves in the Caledonia Field near Sussex, New Brunswick. In addition, Corridor has contingent resources and discovered unrecoverable resources in Elgin, New Brunswick and has a 21.67% interest in a joint venture which has undiscovered resources on Anticosti Island, Quebec.
Forward Looking Statements
This press release contains certain forward-looking statements and forward-looking information (collectively referred to herein as “forward-looking statements”) within the meaning of Canadian securities laws. All statements other than statements of historical fact are forward-looking statements. Forward-looking information typically contains statements with words such as “anticipate”, “believe”, “plan”, “continuous”, “estimate”, “expect”, “may”, “will”, “project”, “should”, or similar words suggesting future outcomes. In particular, this press release contains forward-looking statements pertaining to: business plans and strategies; estimated natural gas production; natural gas prices and premiums in the New England market (Algonquin city-gate) and the duration of such premiums; cash flow from operations; capital expenditures for 2014 and, working capital and debt level as at the end of 2014; the characteristics of the Frederick Brook shale; and plans of the Anticosti joint venture.
Undue reliance should not be placed on forward-looking statements, which are inherently uncertain, are based on estimates and assumptions, and are subject to known and unknown risks and uncertainties (both general and specific) that contribute to the possibility that the future events or circumstances contemplated by the forward-looking statements will not occur. There can be no assurance that the plans, intentions or expectations upon which forward-looking statements are based will in fact be realized. Actual results will differ, and the difference may be material and adverse to Corridor and its shareholders.
Forward-looking statements are based on agreements governing the Anticosti joint venture and Corridor–s current beliefs as well as assumptions made by, and information currently available to, Corridor including information concerning anticipated financial performance, business prospects, strategies, regulatory developments, future natural gas commodity prices, future natural gas production levels, the ability to obtain equipment in a timely manner to carry out development activities, the ability to market natural gas successfully to current and new customers, the impact of increasing competition, the ability to obtain financing on acceptable terms, and the ability to add production and reserves through development and exploration activities and the terms of agreements with third parties, such as Corridor–s forward sales and transportation agreements and the Anticosti Joint Venture. Although management considers these assumptions to be reasonable based on information currently available to it, they may prove to be incorrect. By their very nature, forward-looking statements involve inherent risks and uncertainties, both general and specific, and risks that forward-looking statements will not be achieved. These factors may be found under the heading “Risk Factors” in Corridor–s Annual Information Form for the year ended December 31, 2013.
Certain of the forward-looking statements in this release may constitute “financial outlooks” as contemplated by National Instrument 51-102 Disclosure Obligations, including information related to projected cash flow from operations, revenues, expenses, capital expenditures, working capital and debt levels for 2014, which are provided for the purpose of forecasting the financial position of Corridor at the end of the 2014 financial year. Please be advised that the financial outlook in this MD&A may not be appropriate for purposes other than the one stated above.
The forward-looking statements contained in this press release are made as of the date hereof and Corridor does not undertake any obligation to update publicly or to revise any of the included forward-looking statements, except as required by applicable law. The forward-looking statements contained herein are expressly qualified by this cautionary statement.
Contacts:
Steve Moran, President
Corridor Resources Inc.
(902) 429-4511
(902) 429-0209 (FAX)