HOUSTON, TEXAS--(Marketwire - Aug. 7, 2009) - Caza Oil & Gas, Inc. ("Caza" or the "Company") (TSX:CAZ)(AIM:CAZA) is pleased to provide its unaudited financial and operational results for the three months ended June 30, 2009.
Highlights for the quarter include:
- Caza's production increased 33% to 121,786 Mcfe for the three-month period ended June 30, 2009, up from 91,519 Mcfe for the comparative period in 2008;
- Lower costs as net G&A expenses were reduced to $576,770 for the three-month period ended June 30, 2009, following savings and contributions from joint venture partners (Q2 2008 $1,377,619);
- Cash balance of $11.2 million as of June 30, 2009 (March 31, 2009 $9.8m). Improved cash position is primarily a result of joint venture receipts and reimbursements;
- The Caza/Endeavour participation agreement executed and effective as of April, 2009.
W. Michael Ford, Chief Executive Officer commented:
"I'm very pleased with progress to date in 2009, and believe that Caza is positioned to not only survive in the current gas price environment but do well as a result of the actions we have taken. The work program with Endeavour International Corporation has been agreed through year end, and the first of several planned wells is currently drilling. Our cash position is strong and we look forward to providing operational updates throughout the second half of the year."
Copies of the Company's unaudited financial statements for the first quarter ended June 30, 2009, and the accompanying management's discussion and analysis are available on SEDAR at www.sedar.com and the Company's website at www.cazapetro.com.
ADVISORY REGARDING FORWARD LOOKING STATEMENTS
Information in this news release that is not current or historical factual information may constitute forward-looking information within the meaning of securities laws. Such information is often, but not always, identified by the use of words such as "seek", "anticipate", "plan", "continue", "estimate", "expect", "may", "will", "project", "predict", "potential", "targeting", "intend", "could", "might", "should", "believe" and similar expressions. Information regarding the Prolithic exploration agreement and the Endeavour participation agreement contained in this news release constitutes forward-looking information within the meaning of securities laws.
Implicit in this information, particularly in respect of "joint ventures" and the Endeavour participation agreement and work program and budget are assumptions regarding projected revenue and expenses. Specifically, the Company has assumed that these agreements will produce positive results. These assumptions, although considered reasonable by the Company at the time of preparation, may prove to be incorrect. Readers are cautioned that actual future operating results and economic performance of the Company are subject to a number of risks and uncertainties, including general economic, market and business conditions and could differ materially from what is currently expected as set out above.
For more exhaustive information on these risks and uncertainties you should refer to the Company's most recently filed annual information form which is available at www.sedar.com. You should not place undue importance on forward-looking information and should not rely upon this information as of any other date. While we may elect to, we are under no obligation and do not undertake to update this information at any particular time.
MANAGEMENT'S DISCUSSION AND ANALYSIS
The following interim Management's Discussion and Analysis ("MD&A") of the financial results for Caza Oil & Gas, Inc. ("Caza" or the "Company") should be read in conjunction with the unaudited consolidated interim financial statements as at and for the three and six month periods ended June 30, 2009, the audited consolidated financial statements and corresponding MD&A for the year ended December 31, 2008. Additional information relating to the Company can be found on SEDAR at www.sedar.com. All figures herein have been prepared in accordance with Canadian Generally Accepted Accounting Principles ("GAAP") unless otherwise stated. This MD&A is dated August 7, 2009.
Forward Looking Information
In addition to historical information, the MD&A contains forward-looking statements that are generally identifiable as any statements that express, or involve discussions as to, expectations, beliefs, plans, objectives, assumptions or future events of performance (often, but not always, through the use of words or phrases such as "will", "may", "will likely result", "expected", "is anticipated", "believes", "estimated", "intends", "plans", "projection" and "outlook"), are not historical facts and may be forward-looking and may involve estimates, assumptions and uncertainties which could cause actual results or outcomes to differ materially from those expressed in such forward-looking statements.
These statements are based on certain factors and assumptions regarding the results of operations, the performance of projected activities and business opportunities. Specifically, we have used historical knowledge and current industry trends to project budgeted expenditures for 2009 and into 2010. While we consider these assumptions to be reasonable based on information currently available to us, they may prove to be incorrect.
Actual results achieved will vary from the information provided herein as a result of numerous known and unknown risks and uncertainties and other factors. Such factors include, but are not limited to: risks associated with the Company's stage of development; competitive conditions; share price volatility; risks associated with crude oil and natural gas exploration and development; risks related to the inherent uncertainty of reserves and resources estimates; possible imperfections in title to properties; the volatility of crude oil and natural gas prices and markets; environmental regulation and associated risks; loss of key personnel; operating and insurance risks; the inability to add reserves; risks associated with industry conditions; the ability to obtain additional financing on acceptable terms if at all; non operator activities; the inability of investors in certain jurisdictions to bring actions to enforce judgments; equipment unavailability; potential conflicts of interest; risks related to operations through subsidiaries; risks related to foreign operations; currency exchange rate risks and other factors, many of which are beyond the control of the Company. Accordingly, there is no representation by Caza that actual results achieved during the forecast period will be the same in whole or in part as that forecast. Further, Caza undertakes no obligation to update or revise any forward-looking statement or statements to reflect events or circumstances after the date on which such statement is made or to reflect the occurrence of unanticipated events, except as required by applicable securities laws.
Financial outlook information contained in this MD&A about prospective results of operations, financial position or cash flows is based on assumptions about future events, including economic conditions and proposed courses of action, based on management's assessment of the relevant information currently available. Readers are cautioned that such financial outlook information contained in this MD&A should not be used for purposes other than for which it is disclosed herein.
Non-GAAP Measures
The financial data presented herein has been prepared in accordance with GAAP. The Company has also used certain measures of financial reporting that are commonly used as benchmarks within the oil and natural gas production industry in the following MD&A. The measures are widely accepted measures of performance and value within the industry, and are used by investors and analysts to compare and evaluate oil and natural gas exploration and producing entities. Most notably, these measures include "operating netback" and "funds flow from (used in) operations". Operating netback is a benchmark used in the crude oil and natural gas industry to measure the contribution of oil and natural gas sales and is calculated by deducting royalties and operating expenses from revenues. Funds flow from (used in) operations is cash flow from operating activities before changes in non-cash working capital, and is used to analyze operations, performance and liquidity. These measures are not defined under GAAP and should not be considered in isolation or as an alternative to conventional GAAP measures. These measures and their underlying calculations are not necessarily comparable or calculated in an identical manner to a similarly titled measure of another entity. When these measures are used, they are defined as "non GAAP" and should be given careful consideration by the reader.
Note Regarding Boe and Mcfe
In this MD&A, barrels of oil equivalent ("Boes") are derived by converting gas to oil in the ratio of six thousand cubic feet ("Mcf") of gas to one barrel ("bbl") of oil (6 Mcf: 1 bbl) and one thousand cubic feet of gas equivalent ("Mcfes") are derived by converting oil to gas in the ratio of one bbl of oil to six Mcf (1 bbl: 6 Mcf). Boes and Mcfes may be misleading, particularly if used in isolation. A Boe conversion of 6 Mcf of natural gas to 1 bbl of oil, or a Mcfe conversion ratio of 1 bbl of oil to 6 Mcf of natural gas is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the well head.
Currency
References to "dollars" and "$" are of U.S. dollars and references to "CDN$" are to Canadian dollars.
FINANCIAL AND OPERATING RESULTS
Petroleum and Production Revenue
Three months ended Six months ended
June 30, June 30,
2009 2008 2009 2008
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Natural gas
Production (Mcf) 96,667 89,073 170,605 173,927
Revenue ($) 307,097 1,017,719 636,556 1,710,627
Price ($/Mcf) 3.18 11.43 3.73 9.84
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Natural gas liquids
Production (bbls) 387 202 763 477
Revenue ($/bbl) 13,185 23,996 28,812 50,972
Price ($/bbl) 34.03 118.97 37.75 106.95
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Oil Production
Production (bbls) 3,799 206 9,972 297
Revenue ($/bbl) 240,801 25,650 449,631 35,050
Price ($/bbl) 63.38 124.56 45.09 117.91
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Combined
Production (Mcfe) 121,786 91,519 235,019 178,267
Revenue ($) 561,083 1,067,365 1,114,999 1,796,648
Price ($/Mcfe) 4.61 11.66 4.74 10.08
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Mcfe/d 1,338 1,005 1,298 985
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Boe/d 223 168 216 164
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Revenues from oil and gas sales decreased 47% to $561,083 for the three-month period ended June 30, 2009 from $1,067,365 for the three-month period ended June 30, 2008 (the "comparative period") and were 38% lower than the than the six-month period ended June 30, 2008. Caza's production increased 33% to 121,786 Mcfe for the three-month period ended June 30, 2009, up from 91,519 Mcfe for the comparative period. This represents an average daily production rate increase of 333 Mcfe/d for the three months ended June 30, 2009 to 1,338 Mcfe/d, as compared to 1,005 Mcfe/d for the comparative period. The average natural gas price received by Caza decreased 61% to $4.61 per Mcfe during the three-month period ended June 30, 2009 from $11.66 per Mcfe during the comparative period. The decrease in revenues from the second quarter of 2008 is a result of the decrease in commodity prices. Presently the Company has not hedged any of its production and does not have any commodity price management programs in place.
Operating Netback Summary
The following table reconciles the Company's operating netback which is considered to be a non-GAAP measure:
Three months ended Six months ended
June 30, June 30,
(on a Mcfe basis) 2009 2008 2009 2008
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Oil and natural gas revenue $ 4.61 $ 11.66 $ 9.50 $ 20.08
Production expense (1.49) (0.54) (2.63) (1.46)
Severance expense (0.32) (0.79) (0.67) (1.38)
Transportation expense (0.13) (0.12) (0.21) (0.24)
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Operating netback (non-GAAP) 2.67 10.21 5.99 17.00
Production Expenses
Three Months ended Six Months ended
June 30, June 30,
2009 2008 2009 2008
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Severance ($) 38,747 72,619 78,566 123,783
Transportation ($) 15,500 11,891 24,784 22,183
Production ($) 180,970 49,567 310,187 128,998
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Severance, transportation and
production ($) 235,217 134,077 413,537 274,964
Severance, transportation and
production ($/Mcfe) 1.93 1.47 1.76 1.54
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Severance taxes and transportation expenses totaled $54,247 ($0.45/Mcfe) for the three-month period ended June 30, 2009, representing a decrease of 36% from $84,510 ($0.91/Mcfe) incurred during the comparative period. Severance tax is a tax imposed by states on natural resources such as crude oil, natural gas and condensate extracted from the ground. The tax is calculated by applying a rate to the dollar amount of production from the property or a set dollar amount applied to the volumes produced from the property. The decrease in severance taxes and transportation costs are a result of a 61% decrease in the average commodity price received by Caza during the second quarter of 2009.
Production expenses for the three-month period ended June 30, 2009 were $180,970 compared to $49,567 for the comparative period. Caza's average lifting cost for the three-month period ended June 30, 2009 was $1.49 per Mcfe versus $0.54 per Mcfe for the comparative period. This increase in lifting costs occurred as a result of declining production rates, suspended production periods on the Matthys-McMillan GU #1 well where a siphon string was installed to improve production, replacing of two 750 bbl tanks on the SL18582 well and the reworking operations conducted on the Mud Slide Slim well. In addition, four wells were placed on pump at the Glass Ranch property which has inherently higher lifting costs.
Depletion, Depreciation and Accretion
Three Months ended Six Months ended
June 30, June 30,
2009 2008 2009 2008
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Depletion and depreciation ($) 725,370 352,174 1,392,486 671,110
Accretion ($) 6,154 3,567 12,307 7,132
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Depletion, depletion and
accretion ($) 731,524 355,741 1,404,793 678,242
Depletion, depletion and
accretion ($/Mcfe) 6.01 3.88 5.98 3.80
Depletion, depreciation, amortization and accretion expense for the three months ended June 30, 2009 increased to $731,524 ($6.01/Mcfe) from $355,741 ($3.88/Mcfe) in the comparative period. The increase resulted from drilling costs associated with, and production from, the wells drilled by Caza during 2008.
Costs of acquiring unproved properties of $10,927,505 were excluded from depletable costs in accordance with Canadian Institute of Chartered Accountants Accounting Guideline 16. A proportionate amount of the carrying value will be transferred to the depletable pool as reserves are proven up through the execution of Caza's exploration program.
General and Administrative Expenses
Three Months ended Six Months ended
June 30, June 30,
2009 2008 2009 2008
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General and administrative ($) 1,182,202 1,451,564 2,239,805 2,712,934
Joint venture partner
reimbursements ($) (575,823) - (575,823) -
General and administrative
recovery ($) (29,609) (73,945) (47,050) (117,064)
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Net general and
administrative ($) 576,770 1,377,619 1,616,932 2,595,870
General and administrative
($/Mcfe) 9.70 15.87 9.53 15.22
Net general and administrative
($/Mcfe) 4.74 15.06 6.88 14.56
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Net general and administrative expenses were $576,770 for the three-month period ended June 30, 2009 and $1,377,619 for the comparative period. Stock-based compensation expense in the amount of $132,915 is included in general and administrative expenses for the three-month period ended June 30, 2009 ($67,639 in 2008). During the three-month period ended June 30, 2009, Caza capitalized general and administrative expenses relating to exploration and development activities of $170,292, of which $61,041 related to capitalized stock-based compensation. Under certain joint venture agreements Caza receives reimbursements of general and administrative expenses.
Net loss
Caza incurred a net loss of $982,247 for the three-month period ended June 30, 2009 compared to a net loss of $536,701 during the comparative period. The increase in net loss from the comparative period occurred as a result of significant reductions in commodity prices and the recognition of future income tax recovery in the second quarter of 2008. The net loss in the quarter was mitigated through reductions in general and administrative expenses.
Investments
Interest income for the three-month period ended June 30, 2009 was $740 down from $33,461 during the same period in 2008. Caza invested its cash in short-term money market funds. The Company does not hold any asset backed commercial paper.
Funds flow from (used in) operations (Non-GAAP)
The following is a reconciliation of funds flow used in operations to net loss:
Three Months ended Six Months ended
June 30, June 30,
2009 2008 2009 2008
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Net loss (982,247) (536,701) (2,318,127) (1,172,386)
Depletion, depreciation,
amortization and accretion 731,524 355,741 1,404,793 678,242
Stock-based compensation 132,915 67,639 272,649 252,227
Asset retirement obligations
settled - - - (9,767)
Future income tax expense
(recovery) - (213,529) - (424,478)
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Funds flow from (used in)
operations (117,808) (326,850) (640,685) (676,162)
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Funds loss per share -
basic and diluted (0.00) (0.00) (0.00) (0.00)
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Capital Expenditures
Three Months ended Six Months ended
June 30, June 30,
By Type ($) 2009 2008 2009 2008
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Drilling and completions 74,493 2,535,064 230,158 5,556,436
Seismic (275,500) 16,314 19,427 166,314
Facilities and
lease equipment 120,021 434,314 202,151 1,375,045
Office furnishings and
equipment - 60,124 - 100,156
Leasehold /geological
/geophysical (50,563) 40,688 636,648 178,443
Other costs (recovery) (70,590) 150,638 24,582 13,914
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Total (202,139) 3,237,142 1,112,966 7,390,308
During the three month period ended June 30, 2009 Caza initiated the 2009 drilling schedule with the Lucky Penny 10 State #1 well located in Lea County, New Mexico. Caza plans to drill sequentially 4 Abo-Wolfcamp wells in 2009. During the three month period ended June 30, 2009, the Company received payments for prior period costs incurred as a result of new joint exploration agreements. This resulted in a decrease to capitalized lease acquisition costs of $556,589 and payments for seismic reprocessing costs previously incurred of $435,500. In addition, the Company increased its working interests in certain oil and gas properties in consideration for the settlement of certain joint venture accounts receivable due to the Company.
Outstanding Share Data
Caza is authorized to issue an unlimited number of common shares without par value, of which 119,319,000 common shares are currently issued and outstanding. An additional 26,502,000 common shares are issuable pursuant to certain exchange rights attached to certain outstanding common shares of Caza Petroleum (as defined herein).
The following table sets forth the classes and number of outstanding securities of the Company and the number of issued and issuable Common Shares on a fully diluted basis.
