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Cub Energy Inc. Announces Q2 2017 Financial and Operational Results

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Cub Energy Inc. Announces Q2 2017 Financial and Operational Results

Cub Energy Inc. Announces Q2 2017 Financial and Operational Results

HOUSTON, TEXAS--(Marketwired - Aug 22, 2017) - Cub Energy Inc. ("Cub" or the "Company") (TSX:KUB), a Ukraine-focused upstream oil and gas company, announced today its unaudited financial and operating results for the second quarter of 2017. All dollar amounts are expressed in United States Dollars unless otherwise noted. This update includes results from KUB-Gas LLC ("KUB-Gas"), which Cub has a 35% equity ownership interest, Tysagaz LLC ("Tysagaz"), Cub's 100% owned subsidiary and CNG LLC ("CNG"), which Cub has a 50% equity ownership interest.

Mikhail Afendikov, Chairman and CEO of Cub said: "We are pleased to report income from our equity investment during the six months ended June 30 2017 amounted to $3.6 million and our net income was $0.9 million. During the most recent quarter, the Company made a capital commitment to purchase a new nitrogen rejection unit with the goal of re-commencing production on our wholly-owned western Ukraine RK field. To date in 2017, the Company has received $1.7 million in dividends from its eastern Ukraine investment."

Operational Highlights

  • Production averaged 1,004 boe/d (97% weighted to natural gas and the remaining to condensate) for the quarter ended June 30, 2017, which decreased 15% as compared to the 1,185 boe/d in the comparative 2016 quarter and a decrease of 9% as compared to the 1,107 boe/d average for the first quarter ended March 31, 2017.
  • Achieved average natural gas price of $5.71/Mcf and condensate price of $65.93/bbl during the quarter ended June 30, 2017 as compared to $5.55/Mcf and $52.89/bbl for the comparative 2016 quarter and compared to $6.88/Mcf and condensate price of $62.70/bbl during the quarter ended March 31, 2017. Gas prices are historically lower during the summer months due to seasonal heating demand in Ukraine.
  • In June 2017, the Company contracted to purchase a new Nitrogen Rejection Unit ("NRU") to re-commence production on the wholly-owned RK field in western Ukraine.
  • A 118 square kilometer 3D seismic program was completed during the quarter on the Uzhgorod licence which was largely funded by our partner. The 3D seismic will be interpreted and the Company hopes to identify drill targets.
  • KUB-Gas completed a 150 kilometer 2D seismic survey during the quarter on the West Olgovskoye licence in eastern Ukraine. KUB-Gas will utilize the 2D seismic survey to identify drill targets.
  • During the second quarter of 2017, KUB-Gas spud the Olgovskoye-26 ("O-26") well in eastern Ukraine. KUB-Gas will be testing the B-14 zone after unproductive tests of the S-5 and S-4 zones.

Financial Highlights

  • Netbacks of $21.53/boe or $3.59/Mcfe for the quarter ended June 30, 2017 as compared to netback of $18.20/Boe or $3.03/Mcfe for the comparative 2016 quarter.
  • During the three months ended June 30, 2017, the Company received dividends of approximately $1.0 million (2016 - $Nil) from KUBGAS Holdings Limited ("KUBGAS"), which owns 100% of KUB-Gas. Subsequent to the quarter ended June 30, 2017, the Company received a further $0.4 million in dividends from KUBGAS. The National Bank of Ukraine ("NBU") eased certain capital controls by allowing limited dividends. The Company expects to continue to repatriate dividends to the extent possible and allowed by the NBU, although there are no assurances the NBU will continue to ease restrictions indefinitely.
(in thousands of US Dollars) Three Months Ended

June 30,

2017
Three Months Ended

June 30,

2016
Six Months Ended

June 30,

2017
Six Months Ended

June 30,

2016
Petroleum and natural gas revenue 6 - 24 1,456
Pro-rata petroleum and natural gas revenue(1) 3,223 3,873 7,406 9,776
Revenue from gas trading 2,040 - 6,035 -
Net income 15 583 931 2,040
Income per share - basic and diluted 0.00 0.00 0.00 0.01
Funds generated from operations(2) 124 (966 ) (646 ) (1,075 )
Pro-rata funds generated from operations(3) (1,143 ) 2,326 248 3,541
Capital expenditures(4) 12 24 810 162
Pro-rata capital expenditures(4) 1,220 46 2,688 336
Pro-rata netback ($/boe) 21.53 18.20 24.64 22.05
Pro-rata netback ($Mcfe) 3.59 3.03 4.11 3.67
June 30,

2017
December 31,

2016
Working capital 556 3,255
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