CALGARY, ALBERTA — (Marketwired) — 05/28/13 — Alexander Energy Ltd. (TSX VENTURE: ALX) (“Alexander” or the “Company”) has filed its Interim Financial Statements and related Management–s Discussion and Analysis for the three months ended March 31, 2013 all of which are available on the Company–s profile at (“SEDAR”).
The Company is pleased to announce its highest quarterly cash flow since Q3 2008. Alexander achieved cash flow of $1.8 million in Q1 2013, up 47% from 2012, despite a 9% decrease in oil prices and an increase in per barrel royalty expense. Importantly, net debt decreased slightly while net debt to annualized cash flow fell sharply from 2.5:1 to 1.7:1.
This was achieved without any production from the $1.5 million first quarter drilling program which resulted in two successful wells. The 7-7-56-26W4 well was put on production in April at 60 bbls/day (48 bbls/day net) and the 12-12-56-27W4 well is expected to be put on production in mid-June at 125 bbls/day (118 bbls/day net).
In Q2 2013 the Company carried out a recompletion/workover on an upper Detrital zone in the 11-12-56-27W4 well that tested at over 260 bbls/day (244 bbls/day net).
Including the 11-12-56-27W4 recompletion/workover, the Company expects over 200 bbls/day (net) of new production to be on-stream by mid-June. We are currently working on preliminary estimates of reserve additions from our recent successes.
This is reflective of the success of the program put into place by the new management team starting from the AGM in September, 2012. Management–s strategy can be summarized as investing in our Alexander property and improving our operations prior to looking to sell or merge the Company when the right opportunity is presented, hopefully by the end of 2013.
Starting from the September 7th, 2012 AGM your Company has directed all spending to Company enhancing activities. We have invested in drilling, workovers, seismic interpretation, geological and geophysical interpretation, critical land activities, and perhaps most importantly on an engineering analysis of a potential waterflood on our property with an associated application to the ERCB for an extension to our maximum allowable production rates which was approved by the ERCB.
In the six months prior to the AGM in September 2012, your Company spent $85,000 per month on legal, proxy, financial advisor and director fees. In the first quarter of 2013 the comparable monthly expense was $1,800, a saving of $83,200 (98%) per month.
Your management team has made significant progress in rebuilding the land files, updating critical leases affecting our oil production, rebuilding the well files, continuing with our required engineering work, analyzing our 3D seismic and drilling successful wells. The result of all of this is a much better understanding of our key property. This is critical for our relationship with the ERCB regarding the possibility of being granted GPP (good production practices) status or waterflood approval, or an additional extension of our allowable maximum production rates.
We now believe that the Detrital zone may continue to the south east of our existing producing wells. We have acquired 2 1/2 sections of land and associated 3D seismic which we are currently processing using our proprietary analysis. We also own other land in the general area which may be prospective for Detrital production.
Alexander will continue to focus on maximizing the Company–s value, reducing the debt, and preparing for a process to maximize shareholder value, possibly this fall.
Recently Alexander has received communication from some significant shareholders who have indicated they would like to take control of the Company. After the numerous expensive distractions and disruptions the Company has experienced over the past few years we have now built positive momentum and a positive environment. We do not believe that yet another management team is in the best interests of shareholders.
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Liquidity and Financial Condition
As at March 31, 2013, bank debt including working capital (net debt) was $12.3 million. The Company–s net debt to first quarter 2013 annualized cash flow from operations was 1.7:1 (March 31, 2012 – 2.5:1).
Alexander has flexibility to finance future expansions of its capital programs, through the use of its current funds generated from operations and its debt facilities. The Company expects to continue to improve the net debt to cash flow ratio in 2013.
Effective March 20, 2013 the Company renewed its credit facilities with a Canadian Chartered Bank. Facility A is a revolving operating demand loan with a maximum limit of $13.0 million. Facility B is a non-revolving acquisition/development demand loan that provides an additional $2.25 million of financing subject to bank approval. Interest is at prime plus 2.0% per annum for Facility A and prime plus 2.5% per annum for Facility B. The Company has the ability to draw on the development loan for acquisitions and the drilling of new wells subject to certain working capital ratio restrictions.
For the balance of 2013, Alexander plans to invest approximately $5.0 million on its capital program within its core area. Alexander intends on financing this capital program from cash flow from operations.
Forward-Looking Statements: All statements, other than statements of historical fact, set forth in this news release, including without limitation, assumptions and statements regarding the volumes and estimated value of the Company–s proved and probable reserves, future production rates, exploration and development results, financial results, and future plans, operations and objectives of the Company are forward-looking statements that involve substantial known and unknown risks and uncertainties. Some of these risks and uncertainties are beyond management–s control, including but not limited to, the impact of general economic conditions, industry conditions, fluctuation of commodity prices, fluctuation of foreign exchange rates, environmental risks, industry competition, availability of qualified personnel and management, availability of materials, equipment and third party services, stock market volatility, timely and cost effective access to sufficient capital from internal and external sources. The reader is cautioned that assumptions used in the preparation of such information, although considered reasonable by the Company at the time of preparation, may prove to be incorrect. There can be no assurance that such statements will prove to be accurate and actual results and future events could differ materially from those anticipated in such statements.
These assumptions and statements necessarily involve known and unknown risks and uncertainties inherent in the oil and gas industry such as geological, technical, drilling and processing problems and other risks and uncertainties, as well as the business risks discussed in Management–s Discussion and Analysis of the Company under the heading “Business Risks”. The Company does not undertake any obligation, except as required by applicable securities legislation, to update publicly or to revise any of the included forward-looking statements, whether as a result of new information, future events or otherwise.
Barrels of oil equivalent (boe) is calculated using the conversion factor of 6 mcf (thousand cubic feet) of natural gas being equivalent to one barrel of oil. Boes may be misleading, particularly if used in isolation. A boe conversion ratio of 6 mcf:1 bbl (barrel) is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. Given that the value ratio based on the current price of crude oil as compared to natural gas is significantly different from the energy equivalency of 6:1, utilizing a conversion on a 6:1 basis may be misleading as an indication of value.
Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
Contacts:
Alexander Energy Ltd.
Hugh M. Thomson
Vice-President Finance and Chief Financial Officer
(403) 523-2505
(403) 264-1348 (FAX)