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Cub Energy Inc. Announces Q3 2017 Financial and Operational Results

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Cub Energy Inc. Announces Q3 2017 Financial and Operational Results

Cub Energy Inc. Announces Q3 2017 Financial and Operational Results

HOUSTON, TEXAS--(Marketwired - Nov 29, 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 third 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 nine months ended September 30, 2017 amounted to $4.7 million and our net income was $0.9 million. To date in 2017, the Company has received $2.8 million in dividends from its eastern Ukraine investment. We believe 2018 should provide our shareholders with several key catalysts, including the anticipated drilling of the Uzhgorod and West Olgovskoye licence prospects in western and eastern Ukraine, respectively."

Operational Highlights

  • Production averaged 936 boe/d (97% weighted to natural gas and the remaining to condensate) for the quarter ended September 30, 2017, which decreased 20% as compared to the 1,171 boe/d in the comparative 2016 quarter and a decrease of 7% as compared to the 1,004 boe/d average for the second quarter ended June 30, 2017.
  • Achieved average natural gas price of $6.02/Mcf and condensate price of $70.73/bbl during the quarter ended September 30, 2017 as compared to $5.48/Mcf and $63.99/bbl for the comparative 2016 quarter and compared to $5.71/Mcf and condensate price of $65.93/bbl during the quarter ended June 30, 2017.
  • 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 second quarter on the Uzhgorod licence which was largely funded by our partner. The 3D seismic was processed during the quarter and the Company and its partner hope to drill their first well on the licence in 2018.
  • KUB-Gas completed a 150 kilometer 2D seismic survey during the second quarter on the West Olgovskoye licence in eastern Ukraine. KUB-Gas will utilize the 2D seismic survey to identify drill targets. The Company expects KUB-Gas to drill its first well on the licence in 2018.
  • During 2017, KUB-Gas drilled and tested the Olgovskoye-26 ("O-26") well in eastern Ukraine. The Company expects modest production from the B-14 zone and looking to tie-in the well in the fourth quarter of 2017.

Financial Highlights

  • Netbacks of $23.50/boe or $3.92/Mcfe for the quarter ended September 30, 2017 as compared to netback of $20.89/Boe or $3.48/Mcfe for the comparative 2016 quarter.
  • During the three months ended September 30, 2017, the Company received dividends of approximately $0.4 million (2016 - $Nil) from KUBGAS Holdings Limited ("KUBGAS"), which owns 100% of KUB-Gas. Subsequent to the quarter ended September 30, 2017, the Company received a further $1.2 million in dividends from KUBGAS. The National Bank of Ukraine ("NBU") eased certain capital controls by allowing limited dividends. The Company expects to continue to repatriate dividends to the extent possible and allowed by the NBU, although there are no assurances the NBU will continue to ease restrictions indefinitely.
(in thousands of US Dollars) Three Months Ended September 30, 2017 Three Months Ended September 30, 2016 Nine Months Ended September 30, 2017 Nine Months Ended September 30, 2016
Petroleum and natural gas revenue - - 24 1,456
Pro-rata petroleum and natural gas revenue(1) 3,270 3,634 10,676 13,410
Revenue from gas trading 3,107 2,122 9,142 2,122
Net income 17 2,199 948 4,239
Income per share - basic and diluted 0.00 0.01 0.00 0.01
Funds generated from operations(2) (456 ) (921 ) (1,102 ) (1,966 )
Pro-rata funds generated from operations(3) (853 ) 1,821 (605 ) 5,362
Capital expenditures(4) 231 301 1,041 463
Pro-rata capital expenditures(4) 1,036 1,310 3,724 1,647
Pro-rata netback ($/boe) 23.50 20.89 24.29 21.71
Pro-rata netback ($Mcfe) 3.92 3.48 4.05 3.62
September 30, 2017 December 31, 2016
Working capital (deficit) (442 ) 3,255
Cash and cash equivalents 4,355
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