TSX TRADING SYMBOL: ABG
ANGUILLA, British West Indies, May 14 /CNW/ -
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HIGHLIGHTS:
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(In US dollars unless otherwise stated)
- Arawak produced an average 9,088 bopd in Kazakhstan and Russia in the
first quarter of 2007, an increase of 43% from average production of
6,369 bopd in the same period of 2006 and up 2% despite severe
disruption from unusually harsh weather conditions from the average
8,872 bopd produced in the fourth quarter of 2006.
- Sales rose 31% to 826,973 barrels, from 631,805 in the first quarter
of 2006 and 10% from 749,064 barrels in the last quarter of 2006.
- Funds from operations fell slightly to $8.6 million from the first
quarter of 2006, due to higher costs and a fall in average prices
received in Kazakhstan, but more than doubled from the $4.2 million
generated in the fourth quarter of 2006.
- 3D seismic interpretation of the Besbolek field in Kazakhstan has been
completed resulting in the identification of 4 new leads and
2 possible extensions of existing structures, as well as numerous new
drilling locations. Initial results from the 71.5 sq km 3D seismic
survey of Akzhar are also very encouraging.
- The central processing facility in Besbolek was completed on time and
on budget in the first quarter, removing a bottleneck in potential
production capacity from the Besbolek and Karataikyz fields.
- Gross output from North Irael, acquired in June 2006, averaged
1,769 bopd in Q1 2007, or 885 barrels net to Arawak, up from an
average 619 bopd gross or 310 bopd net to Arawak in 2006 an increase
of 185%.
- Due to delays in the receipt of permits, 3D seismic on the North Irael
field has been postponed to next winter. It has been decided, however,
to drill a further development well in the north part of the field
discovered through well No.61 in 2006, and to drill another
exploration well before the end of 2007.
FINANCIAL HIGHLIGHTS
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(In thousands, except per share amounts)
For the three months ended March 31 2007 2006
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Crude oil sales $35,804 $27,719
Net income $1,268 $5,292
Per share - basic $0.007 $0.031
Per share - diluted $0.007 $0.030
Funds from operations(*) $8,636 $10,971
Per share - basic $0.050 $0.063
Per share - diluted $0.050 $0.063
Capital expenditure $7,700 $9,627
Shareholders' equity $130,042 $115,543
Shares outstanding - basic 173,392 173,175
Shares outstanding - diluted 174,476 174,622
Weighted average shares - basic 173,392 173,039
Weighted average shares - diluted 174,476 174,486
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(*) Funds from operations is a non-GAAP measure that represents cash
generated from operating activities before changes in non-cash
working capital.
OPERATIONAL HIGHLIGHTS
----------------------
For the three months ended March 31 2007 2006
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Production - barrels 817,983 573,223
Average daily production - barrels 9,088 6,369
Sales - barrels 826,973 631,805
Revenue and expenses per barrel sold
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Crude oil sales $43.30 $43.87
Interest and other income $0.36 $0.25
Royalties and taxes ($10.29) ($7.76)
Production costs ($4.87) ($2.84)
Transportation and selling expenses ($4.98) ($4.79)
Net operating income $23.52 $28.73
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>>
OPERATIONS REVIEW
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Arawak Energy Corporation ("Arawak" or the "Company") made a good start
to 2007 with average production from Kazakhstan and Russia reaching
9,088 barrels of oil per day ("bopd") in the first three months of 2007, up
43% from 6,369 bopd in the first quarter of 2006 and up 2% from 8,872 bopd in
the fourth quarter of 2006.
Sales rose 31% to 826,973 barrels from 631,805 in the first quarter of
2006 and 10% from 749,064 barrels in the last quarter of 2006.
Production would have risen further had it not been for extraordinary
weather conditions in Kazakhstan, where snowfall in the Aktobe region reached
record levels in February and March. Extreme snow storms caused a temporary
halt in production at the Akzhar field in February and the subsequent thaw
left the steppe roads to and from Akzhar and Besbolek in very poor condition
throughout March. The thaw was exacerbated by heavy rainfall in mid-April
which further impeded the Company's ability to evacuate oil by truck to the
KazTransOil pipeline system. These roads are only just starting to dry out. As
a result, Kazakh production dropped to an average 4,767 bopd in the first
quarter of 2007 from 4,838 bopd in the final quarter of 2006, while average
Russian output of 4,322 bopd in the first three months of the year rose from
4,034 bopd in the fourth quarter of 2006. The recent improvement in weather in
Kazakhstan has led to production once again reaching over 10,000 bopd,
approximately 60% of which is contributed by Kazakhstan and 40% by Russia.
Royalties and taxes have increased on a per barrel basis due to a change
in the sales mix in Russia away from domestic sales and towards export sales,
which have a higher sales price but which are liable to export duty.
Production costs on a per barrel basis have also increased due to a
combination of factors including the inclusion of higher cost production from
Recher, local currency cost inflation in both Russia and Kazakhstan, and the
effect of a weak US dollar pushing up local currency costs in US dollar terms.
There was in addition some catch-up of costs that were under-accrued in
Kazakhstan in 2006.
Arawak has completed an engineering study into the proposed pipeline from
Akzhar to the KazTransOil system and this project has moved into the project
design phase. Once completed, this pipeline will eliminate the need to truck
oil from the Akzhar field and significantly reduce the impact of adverse
weather on production from Akzhar, Arawak's largest producing field in
Kazakhstan.
Prospects for increased production in Kazakhstan were, however, boosted
by the completion of a new Central Processing Facility at Arawak's second
biggest producing field in Kazakhstan, Besbolek. At a cost of around $700,000
and with a planned capacity to handle up to 5,000 bopd, the CPF came online to
produce sales quality crude oil in the first quarter of 2007 and is currently
able to process 3,000 bopd.
Meanwhile, to alleviate a potential bottleneck in access to the main
KazTransOil export pipeline system for Besbolek and Karakaityz, the
construction of a Company-owned custody point at the KazTransOil station is
underway and scheduled for completion in the third quarter of 2007.
Also, in the first quarter, the Company has commenced the interpretation
of the 3D seismic survey over the southern part of the Besbolek field and as a
result has identified 4 entirely new leads and 2 possible extensions to
existing structures, as well as numerous new drilling locations. In addition,
early results of the 3D survey over the entire Akzhar block are very
encouraging and the company aims to identify locations for at least 4
exploration wells by the end of the second quarter, to be drilled in the
second half of the year.
Turning to drilling, two rigs are now active in Kazakhstan and the first
two new wells of 2007 have been drilled in Akzhar during April. Further wells
are being drilled in Akzhar and drilling has just commenced in Besbolek. The
company remains on target to drill approximately 30 wells in Kazakhstan in
2007.
In Russia, Arawak continued drilling at the Sotchemyu-Talyu fields,
following the re-interpretation in 2006 of existing seismic data. Two new
wells were successfully drilled there in the first quarter of this year and
are being put on production. Three rigs are currently active in our Russian
fields.
At North Irael, difficulties in obtaining forest clearance permits have
meant 3D seismic must be postponed until the winter but the Company intends to
drill two new wells in the block based on 2D seismic. The first of these will
be in the new structure discovered in 2006, but the second will be exploratory
and attempt to prove up oil in a further identified and as yet un-drilled
structure.
In Azerbaijan, 3D seismic over the Coastal block has been completed and
2D over the Central and Northern blocks is under way.
A copy of Arawak's consolidated financial statements and management's
discussion and analysis for the three months ended March 31, 2007 as well as
additional information on Arawak is available on the Company's web-site at
www.arawakenergy.com and on Sedar at www.sedar.com
The TSX does not accept responsibility for the adequacy or accuracy of
this release.
Arawak's common shares are listed for trading on the TSX under the symbol
"ABG". The Company is engaged in the exploration, development and production
of oil and natural gas in Kazakhstan, Russia and Azerbaijan. The Company's
three producing fields and two exploration blocks in Kazakhstan are held
through its 100% wholly-owned subsidiary Altius Energy Corporation ("Altius").
Altius' main producing field is Akzhar, extended in 2006 from 3.8 to 71.5 sq
km, with smaller fields at Besbolek and Karataikyz. The two exploration
blocks, Alimbai and East Zharkamys III, are also situated in western
Kazakhstan. Arawak's assets in Russia are held through ZAO PechoraNefteGas
("PNG") and LLC NK Recher-Komi ("Recher-Komi") in which Arawak has a 50%
interest with the remaining interest being held by Lundin Petroleum AB. Also
in Russia, Arawak holds a 100% interest in the Kymbozhyuskaya exploration
block. In the Azerbaijan Republic, the Company's asset is its interest in the
South West Gobustan fields. Commonwealth Gobustan Limited ("CGL"), in which
Arawak has a 37.17% interest, holds an 80% interest in the EDPSA with the
remaining 20% owned by SOCAR Oil Affiliate.
This press release includes "forward looking statements", which are based
on the opinions and estimates of management at the date the statements are
made, and are subject to a variety of risks and uncertainties and other
factors that could cause actual events or results to differ materially from
those projected in the forward looking statements. These risks and
uncertainties include, but are not limited to, risks associated with the oil
and gas industry (including operational risks in development, exploration and
production; delays or changes in plans with respect to exploration or
development projects or capital expenditures; the uncertainty of reserve
estimates; the uncertainty of estimates and projections in relation to
production, costs and expenses and health, safety and environmental risks),
the risk of commodity price and foreign exchange rate fluctuations, the
uncertainty associated with commercial negotiations and negotiating with
foreign governments and risks associated with international activity. Due to
the risks, uncertainties and assumptions inherent in forward-looking
statements, prospective investors in the Company's securities should not place
undue reliance on these forward-looking statements.
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