CANADIAN PHOENIX RELEASES THIRD QUARTER RESULTS
Symbol: CXP-TSXV
CALGARY, Nov. 26 /PRNewswire-FirstCall/ - CANADIAN PHOENIX RESOURCES CORP. ("Canadian Phoenix") announces its results for the three and nine months ended September 30, 2010:
SUMMARY OF THIRD QUARTER AND YEAR-TO-DATE 2010 FINANCIAL RESULTS
($000's except as indicated) |
For the three months ended September 30 |
For the nine months ended September 30 |
||||||||
2010 | 2009 | 2010 | 2009 | |||||||
Avg P&NG Production (boe/d) | 27 | 931 | 514 | 960 | ||||||
Avg realized price - ($/boe) | 35.39 | 57.66 | 59.65 | 48.16 | ||||||
P&NG revenue | 87 | 4,939 | 8,366 | 12,621 | ||||||
Netbacks - $/boe | (9.36) | 24.72 | 20.00 | 19.57 | ||||||
Equity Investment loss | - | (2,330) | (1,026) | (8,110) | ||||||
Income (Loss) for the period | (2,002) | (4,576) | 10,866 | (24,869) | ||||||
Per share - basic & diluted | ($0.04) | ($0.10) | $0.23 | ($0.55) | ||||||
Funds from Operations | (325) | 408 | (4,698) | 260 | ||||||
Capital Expenditure | 14 | 270 | 580 | 8,306 | ||||||
Cash on hand | 65,650 | 208 | 65,650 | 208 | ||||||
Working Capital (Deficiency) | 67,153 | (11,395) | 67,153 | (11,395) | ||||||
Total assets | 70,322 | 103,511 | 70,322 | 103,511 | ||||||
Weighted Average Number of Shares | ||||||||||
Outstanding - Basic & Diluted (000's)* | 46,252 | 45,276 | 46,252 | 45,276 | ||||||
Number of Shares Outstanding (000's)* | 47,937 | 45,276 | 47,937 | 45,276 | ||||||
Number of Shares Outstanding - Diluted (000's)* | 76,757 | 73,568 | 76,757 | 73,568 |
*all figures have been adjusted to reflect the 25 for 1 share consolidation effective Nov 16, 2009
During the third quarter of 2010, there were few transactions of significance. The only events of note:
- On August 27, 2010, the Corporation's Board of Directors cancelled the Stock Appreciation Rights ("SARs") Plan. Under the SARs Plan, termination of the Plan results in the immediate exercise of all outstanding unexercised rights. The payout of the 1.92 million outstanding SARs to holders in September 2010 was $1 million. The pay-out on the termination of the Plan had been largely accrued at June 30, 2010, and therefore did not significantly impact the third quarter results.
- In conjunction with the cancellation of the SARs Plan, on August 27, 2010, the Board issued 2,310,000 options to directors. The options have a five-year term and an exercise price of $1.28, which was the closing price of the Corporation's shares on the TSX Venture Exchange on the date of issue. The fair value of the options, as determined utilizing the Black-Scholes model, was $1,573,094 which was expensed immediately as the options vested immediately.
- On September 30, 2010 1,317,159 warrants were exercised, generating cash proceeds of $1.65 million and resulted in the issuance of 1,317,159 shares.
The most significant events year-to-date in 2010, were the following divestments:
- On May 26, 2010, the shareholders of the Corporation and the shareholders of the Corporation's subsidiary Serrano Energy Ltd ("Serrano") approved the sale of all of Serrano's shares to an intermediate oil and gas producer. The disposition of the Corporation's 10,981,000 shares in Serrano yielded gross proceeds of $24.8 million, of which $2.1 million were immediately used to repay the Corporation's mezzanine loan.
- On April 27, 2010 the Corporation entered into a voting agreement with its 58% owned investee Marble Point Energy Ltd ("Marble Point", now Teine Energy Ltd) and a third party, pursuant to which the Corporation agreed to vote its shares held in Marble Point in favor of an amalgamation between Marble Point and the third party, subject to receipt of requisite shareholder and regulatory approval.
The Corporation's shareholders approved the transaction at a special meeting of shareholders held on May 26, 2010, while the shareholders of Marble Point approved the transaction (under slightly modified terms, none of which impacted the cash consideration available to the Corporation) on June 25, 2010. Gross proceeds on the sale of the Corporation's 90 million shares in Marble Point were $45 million.
With the closing of these transactions, the Corporation now has significant cash holdings (approximately $67 million at present) to go along with approximately $62 million of tax pools, and is positioned for a significant re-investment into the oil and gas sector. The Corporation's Special Committee is currently analyzing and evaluating opportunities in this regard.
As announced on August 27, 2010, Mr David A. Tuer, a director of the Corporation since August 2008, resigned from the Board on August 27, 2010. Mr. Tuer's resignation from the Board of Canadian Phoenix followed on from the conclusion of the Marble Point sale transaction.
Financial Performance - three and nine months ended September 30, 2010
Note - the results of Serrano are included to the disposition date of May 26, 2010, and the equity results of Marble Point are included to the disposition date of June 25, 2010.
The third quarter of 2010 saw oil prices remain at levels consistent with the past quarter at around US$76/bbl (WTI), and continued depressed natural gas prices which averaged $3.55 (AECO spot). While oil prices are expected to remain in the $75-$90 range for the remainder of the year, natural gas prices are likely to remain at the current low levels for some time due primarily to excess supply in the North American market. With the disposal of the Corporation's investments in Serrano and Marble Point, movements in oil and natural gas prices are more relevant to the Corporation's re-investment strategies and opportunities than their impact on the Corporation's financial performance.
For the three and nine months ended September 30, 2010 the Corporation recorded a loss after tax of $2.0 million and income after tax of $10.9 million respectively. The third quarter loss includes a non-cash stock-based compensation charge of $1.6 million, and otherwise reflects general and administrative costs in excess of net operating revenue.
Heavily impacting the year-to-date results were the accounting gains recorded on the dispositions of Serrano ($13.2 million) and Marble Point ($12.8 million). These are discussed below in more detail. Excluding these gains, and also excluding a $5 million impairment charge on property and equipment, a loss of $10.1 million was realized year-to-date.
Netbacks from oil and gas sales were around break-even for the third quarter and $2.8 million for nine months ended September 30, 2010. After cash-settled general and administrative costs of $0.4 million and $7.5 million, funds from operations were negative at $0.3 million and $4.7 million for the respective three and nine month periods.
The gain on disposition of Serrano of $13.2 million reflects the difference between the May 26, 2010 carrying value of Serrano's assets, liabilities and the non-controlling interest in the consolidated balance sheet, and the $24.7 million net cash proceeds received. For tax purposes, a capital gain of $4.1 million was realized, being the difference between the tax cost of the Corporation's investment in Serrano of $20.8 million, and the net proceeds received. The discrepancy between the tax and accounting outcomes is due primarily to an $8.6 million lower tax cost than accounting (due to a tax election made in 2008 to transfer the Freemont property to Serrano at its tax cost in order to defer a capital gain), as well as Serrano's losses since acquisition and the write-off in 2008 of goodwill relating to the Serrano purchase (the latter two items only affect the accounting carrying values).
The gain on disposition of Marble Point of $12.8 million represents the excess of net cash proceeds of $44.7 million over the carrying value of the equity investment in Marble Point as at June 25, 2010 of $31.9 million. For tax purposes, a capital loss of $23.6 million was recorded - again, the large discrepancy between the tax and accounting outcomes represents the Corporation's equity share of Marble Point's losses since acquisition, and an impairment charge of $19 million in 2008.
The $5 million impairment charge recorded in the second quarter of 2010 was in relation to the Corporation's property and equipment, as the carrying value exceeded the future cash flows associated with proved and probable reserves discounted at 10 percent.
The interim financial statements and related MD&A can be found on SEDAR's website at www.sedar.com and the Corporation's website at www.canadian-phoenix.com.
About Canadian Phoenix
Canadian Phoenix Resources Corp. is a publicly-traded junior oil and gas exploration, development and production company with operations in Western Canada. Canadian Phoenix's shares trade on the TSX Venture Exchange under the symbol "CXP".
FORWARD-LOOKING STATEMENTS: This news release may contain forward-looking information. All statements and information other than statements of historical fact are forward-looking information. In some cases, forward-looking information can be identified by terminology such as "may", "will", "should", "expect", "plan", "anticipate", "believe", "estimate", "predict", "potential", "continue", or the negative of these terms or other comparable terminology. By their nature, forward-looking statements are subject to numerous risks and uncertainties, some of which are beyond the control of Canadian Phoenix, including the impact of general economic conditions, industry conditions, volatility of commodity prices, currency fluctuations, imprecision of reserve estimates, environmental risks, competition from other industry participants, the lack of availability of qualified personnel or management, stock market volatility and ability to access sufficient capital from internal and external sources. Readers are cautioned that actual results, performance or achievements could differ materially from those expressed in, or implied by, these forward-looking statements and, accordingly, no assurance can be given that any of the events anticipated by the forward-looking statements will transpire or occur, or if any of them do so, what benefits Canadian Phoenix will derive there from. The forward-looking statements and information contained in this news release are made as of the date hereof and Canadian Phoenix undertakes no obligation to update publicly or revise any forward-looking statements or information, whether as a result of new information, future events or otherwise, unless so required by applicable securities laws.
Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
SOURCE Canadian Phoenix Resources Corp.
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