TOSCANA ENERGY ANNOUNCES FISCAL YEAR 2015 FINANCIAL AND OPERATING RESULTS AND 2015 RESERVES AND SUSPENDS DIVIDEND

CALGARY, Alberta, March  17, 2016  (GLOBE NEWSWIRE) — Toscana Energy Income Corporation (“TEI” or the “Corporation”) (TSX:TEI) announces financial and operating results for the fourth quarter and year ended December 31, 2015, and the Corporation’s 2015 year-end reserves.

2015 Highlights

  • Continued to grow its high quality, long life, low decline asset base
  • Increased Total Reserves by 9%
  • Proved Reserves at 72% of Total Reserves
  • Acquired four strategic acquisitions in an opportunistic commodity price environment
  • Realized hedging gains of $7.2 million
  • Reduced G&A by $1.12/boe

Financial and operating results:

The following summarizes information contained in the Consolidated Financial Statements and Management’s Discussion and Analysis (“MD&A”) for the year ended December 31, 2015. This news release should not be considered a substitute for reading the full disclosure documents, which are available on SEDAR at www.sedar.com and on the Corporation’s website at www.sprott-toscana.com.
Three months ended December 31, Year ended December 31,
2015 2014 Change 2015 2014 Change
Average daily production (boe/d) 2,517 2,407 5 % 2,259 2,484 (9 %)
Petroleum and natural gas revenue,
net of royalties ($)
6,084,131 8,124,585 (25 %) 22,705,919 39,608,974 (43 %)
Netback ($)1 4,972,688 5,571,213 (11 %) 16,403,222 22,015,104 (25 %)
Netback per boe ($)1 21.47 25.16 (15 %) 19.90 24.28 (18 %)
Funds flow from operations, prior to
Performance Fee internalization ($)1, 2
2,997,122 3,548,876 (16 %) 10,950,299 15,039,700 (27 %)
Capital expenditures ($) 5,262,465 798,880 559 % 25,728,640 23,767,008 8 %
Dividends paid per common share ($) 0.300 0.405 (26 %) 1.305 1.620 (19 %)
At December 31,
2015 2014 Change
Total assets ($) 122,250,976 115,465,094 6 %
Credit facility availability($)1       8,652,111 37,164,365 (77 %)
Shareholder’s equity ($) 42,157,240 67,235,345 (37 %)
Common shares outstanding at period end     7,174,614 7,204,192 (0 %)

1 Non-IFRS measure.
2 One-time expense of approximately $4.6 million incurred in the second quarter of 2015,  relating to the previously announced performance fee buyout.

Corporate Reserves:

The reserves data set forth below is based upon independent reserve assessments and evaluations prepared by:

  • Sproule Associates Limited (“Sproule”) dated February 18, 2016 with an effective date of December 31, 2015;
  • GLJ Petroleum Consultants (“GLJ”) dated March 7, 2016 with an effective date of December 31, 2015; and
  • McDaniel and Associates Consultants Ltd. (“McDaniel”) dated March 17, 2016 with an effective date of December 31, 2015
    (together referred to as the “Reserve Reports”).

The following summarizes the Corporation’s crude oil, natural gas liquids and natural gas reserves and the net present values before income taxes of future net revenue for the Corporation’s reserves using forecast prices and costs based on the Reserve Reports. The Reserve Reports have been prepared in accordance with the standards contained in the Canadian Oil and Gas Evaluation Handbook (the “COGE Handbook”) and the reserve definitions contained in National Instrument 51-101 – Standards of Disclosure for Oil and Gas Activities (“NI 51-101).

All evaluations and reviews of future net revenues are stated prior to any provisions for interest costs or general and administrative costs and after the deduction of estimated future capital expenditures for wells to which reserves have been assigned. It should not be assumed that the estimates of future net revenues presented in the tables below represent the fair market value of the reserves. There is no assurance that the forecast prices and cost assumptions will be attained and variances could be material. The recovery and reserve estimates of our crude oil, natural gas liquids and natural gas reserves provided herein are estimates only and there is no guarantee that the estimated reserves will be recovered. Actual crude oil, natural gas and natural gas liquids reserves may be greater than or less than the estimates provided herein for the fiscal year ended 2015.

Reserves Summary

The Corporation’s total proved plus probable reserves (including royalty interests) increased by 9% in fiscal 2015 to 10,419 Mboe. Proved reserves increased by 12% to 7,463 Mboe and comprised 72% of the Corporation’s total proved plus probable reserves at December 31, 2015. The Corporation had 350 Mboe of proved undeveloped reserves (including royalty interests) at December 31, 2015, representing 3% of total proved and probable reserves and 5% of total proved reserves.

The future capital in the Reserve Reports (undiscounted) is $4.4 million for the proved and probable reserves and $3.0 million for total proved reserves.

The following table provides summary reserve information based upon the Reserve Reports and using published price forecasts used by each of Sproule, GLJ and McDaniel.

  Light and Medium
Crude Oil

Natural Gas

NGL

Total Oil
Equivalent

Reserves Category Gross Net1   Gross Net1   Gross Net1   Gross Net1
(Mbbl) (Mbbl) (MMcf) (MMcf) (Mbbl) (Mbbl) (MBOE) (MBOE)
Proved                
Developed Producing 2,430 2,207 18,931 19,096 599 502 6,184 5,891
Developed Non-Producing 112 111 1,828 1,724 28 19 445 417
Undeveloped 176 152 717 53 176 326
Total Proved 2,718 2,470 20,759 21,537 627 574 6,805 6,634
Probable 1,059 912 8,776 8,902 205 191 2,727 2,587
Total Proved plus
Probable
3,777 3,382 29,535 30,439 832 765 9,532 9,221

Notes:

(1) “Net” reserves means the Corporation’s working interest (operated and non-operated) share after deduction of royalty obligations, plus the Corporation’s royalty interest in reserves.(2) Due to rounding, certain totals may not be consistent from one table to the next.

 
 

  Light and
Medium Crude
Oil
  Natural Gas

  NGL

  Total Oil
Equivalent

  Royalty Interest Royalty Interest Royalty Interest Royalty Interest
  (Mbbl) (Mmcf) (Mbbl) (Mboe)
Developed Producing 63 1,773 118 475
Developed Non-Producing 8 5 8
Undeveloped 1 717 53 175
Total Proved 72 2,495 171 658
Probable 25 878 57 229
Total Proved plus Probable 97 3,373 228 887

 

  Light and
Medium Crude
Oil
  Natural Gas   NGL   Total Oil
Equivalent
  Company Interest1 Company Interest1 Company Interest1 Company Interest1
  (Mbbl) (Mmcf) (Mbbl) (Mboe)
Developed Producing 2,493 20,704 717 6,659
Developed Non-Producing 120 1,833 28 453
Undeveloped 177 717 53 351
Total Proved 2,790 23,254 798 7,463
Probable 1,084 9,654 262 2,956
Total Proved plus Probable 3,874 32,908 1,060 10,419

Note:
(1) “Company Interest” reserves means the Corporation’s working interest (operating and non-operating) share before deduction of royalties and includingroyalty interests of the Corporation.   


Reserves Values

The estimated before tax net present value of future net revenues associated with the Corporation’s reserves effective December 31, 2015 and based on the published future price forecasts are summarized in the following table:

Reserve Values ($’000s)            
    Undiscounted 5 % 10 % 15 % 20 %
Proved Producing 169,583 123,383 96,761 79,574 67,625
Non-producing 8,581 6,622 5,245 4,258 3,160
Undeveloped 12,732 9,578 7,560 6,160 5,027
Total Proved   190,896 139,583 109,566 89,992 75,812
Probable 88,492 48,899 31,331 21,968 14,517
Total Proved and Probable   279,388 188,482 140,897 111,960 90,329

Notes: 
(1) The estimated future net revenues are stated after deducting future estimated site restoration costs and are reduced for estimated future abandonment costs and estimated capital for future development associated with the reserves. 
(2) The net present value of future revenues does not represent fair market value.

The following table sets forth development costs deducted in the estimation of the future net revenue attributable to the reserve categories noted below.

  Forecast Prices and Costs
Proved
Reserves
  Proved plus Probable
Reserves
Year ($’000s) ($’000s)
2016 872 885
2017   737 1,059
2018 1,176 1,666
2019 571
2020
Remainder (FY 2021 and beyond) 248 247
Total Undiscounted (all years)   3,033 4,428
Total Discounted (10%)   2,510 3,598


Dividend Suspension

In light of the continued volatility and uncertainty in the outlook for commodity prices, Toscana announces that it is suspending its dividend program effective immediately. After careful analysis and weighing the risks associated with potentially increasing its debt position, Toscana believes that suspending the dividend is the right decision and will allow the Corporation to protect its balance sheet as well as to improve its ability to allocate capital to fund growth. The Corporation will consider reinstating its dividend program should industry conditions change.

Special Note Regarding Disclosure of Reserves and Resources

Contingent resources is defined in the COGE Handbook as those quantities of petroleum estimated, as of a given date, to be potentially recoverable from known accumulations using established technology or technology under development, but which are not currently considered to be commercially recoverable due to one or more contingencies. Contingencies may include factors such as economic, legal, environmental, political, and regulatory matters, or a lack of markets. It is also appropriate to classify as contingent resources the estimated discovered recoverable quantities associated with a project in the early evaluation stage. Contingent resources are further classified in accordance with the level of certainty associated with the estimates and may be sub classified based on project maturity and/or characterized by their economic status. The contingent resources estimates herein, including the corresponding estimates of before tax present value estimates, are estimates only and the actual results may be greater than or less than the estimates provided herein. There is no certainty that it will be commercially viable or technically feasible to produce any portion of the resources.

Probability

 
“Low Estimate” is a classification of estimated resources described in the COGE Handbook as being considered to be a conservative estimate of the quantity that will actually be recovered. It is likely that the actual remaining quantities recovered will exceed the Low Estimate. If probabilistic methods are used, there should be a 90% probability (P90) that the quantities actually recovered will equal or exceed the Low Estimate. “Best Estimate” is a classification of estimated resources described in the COGE Handbook as being considered to be the best estimate of the quantity that will actually be recovered. It is equally likely that the actual remaining quantities recovered will be greater or less than the Best Estimate. If probabilistic methods are used, there should be a 50% probability (P50) that the quantities actually recovered will equal or exceed the Best Estimate. “High Estimate” is a classification of estimated resources described in the COGE Handbook as being considered to be an optimistic estimate of the quantity that will actually be recovered. It is unlikely that the actual remaining quantities recovered will exceed the High Estimate. If probabilistic methods are used, there should be a 10% probability (P10) that the quantities actually recovered will equal or exceed the High Estimate.
 
BOE Equivalency
 
Barrel of oil equivalents or BOEs may be misleading, particularly if used in isolation. A BOE conversion ratio of 6 Mcf: 1 bbl 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 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 Mcf: 1 bbl, utilizing a conversion ratio of 6 Mcf: 1 bbl may be a misleading indication of value.

Oil and Gas Advisory


The reserves information contained in this news release have been prepared in accordance with NI 51-101. Complete NI 51-101 reserves disclosure will be included in our Annual Information Form for the year ended December 31, 2015. Listed below are cautionary statements applicable to our reserves information that are specifically required by NI 51-101:

Individual properties may not reflect the same confidence level as estimates of reserves for all properties due to the effects of aggregation.

With respect to finding and development costs, the aggregate of the exploration and development costs incurred in the most recent financial year and the change during that year in estimated future development costs generally will not reflect total finding and development costs related to reserve additions for that year.

This press release contains estimates of the net present value of our future net revenue from our reserves. Such amounts do not represent the fair market value of our reserves.

Reserves included herein are stated on a company interest basis (before royalty burdens and including royalty interests) unless noted otherwise as well as on a gross and net basis as defined in NI 51-101. “Company interest” is not a term defined by NI 51-101 and as such the estimates of Company interest reserves herein may not be comparable to estimates of “gross” reserves prepared in accordance with NI 51-101 or to other issuers’ estimates of company interest reserves.

Netback equals (a) petroleum and natural gas revenue (including royalty revenues), net of royalty expense (b) realized gains and losses on risk management contracts and (c) less operating costs, net of processing income.

Non-IFRS measures:

Management uses “netback”, “funds flow from operations prior to performance fee internalization”, “funds flow from operations”,  “unused portion of credit facility”, “credit facility utilization” and “credit facility availability” to analyze operating performance and to determine the Corporation’s ability to fund future capital investment.  These terms, as presented, do not have any standardized meaning prescribed by International Financial Reporting Standards (“IFRS”) and therefore may not be comparable with the calculation of similar measures for other entities.

Forward-Looking Statements:

This news release contains forwardlooking statements and forwardlooking information within the meaning of applicable securities laws. These statements relate to future events or future performance.  All statements other than statements of historical fact may be forwardlooking statements or information.  Forwardlooking statements and information are often, but not always, identified by the use of words such as “appear”, “seek”, “anticipate”, “plan”, “continue”, “estimate”, “approximate”, “expect”, “may”, “will”, “project”, “predict”, “potential”, “targeting”, “intend”, “could”, “might”, “should”, “believe”, “would” and similar expressions.

More particularly and without limitation, this news release contains forwardlooking statements and information concerning the Corporation’s petroleum and natural gas production and reserves. The forwardlooking statements and information are based on certain key expectations and assumptions made by management of the Corporation, including expectations and assumptions concerning well production rates and reserve volumes; project development and overall business strategy. Although management of the Corporation believes that the expectations and assumptions on which such forward looking statements and information are based are reasonable, undue reliance should not be placed on the forwardlooking statements and information since no assurance can be given that they will prove to be correct.

Forward-looking statements and information are provided for the purpose of providing information about the current expectations and plans of management of the Corporation relating to the future. Readers are cautioned that reliance on such statements and information may not be appropriate for other purposes, such as making investment decisions. Since forwardlooking statements and information address future events and conditions, by their very nature they involve inherent risks and uncertainties. Actual results could differ materially from those currently anticipated due to a number of factors and risks. These include, but are not limited to, the risks associated with the oil and gas industry in general such as 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 relating to reserves, production, costs and expenses; health, safety and environmental risks; commodity price and exchange rate fluctuations; marketing and transportation; loss of markets; environmental risks; competition; incorrect assessment of the value of acquisitions and failure to realize the anticipated benefits of acquisitions; ability to access sufficient capital from internal and external sources; failure to obtain required regulatory and other approvals and changes in legislation, including but not limited to tax laws, royalties and environmental regulations. Accordingly, readers should not place undue reliance on the forwardlooking statements, timelines and information contained in this news release. Readers are cautioned that the foregoing list of factors is not exhaustive.

The forwardlooking statements and information contained in this news release are made as of the date hereof and no undertaking is given to update publicly or revise any forwardlooking statements or information, whether as a result of new information, future events or otherwise, unless so required by applicable securities laws or the Toronto Stock Exchange (“TSX”).  The forward-looking statements or information contained in this news release are expressly qualified by this cautionary statement.

About Toscana Energy Income Corporation

Toscana Energy Income Corporation is a conventional oil and gas producer with the mandate to acquire high quality, long life oil and gas assets including royalties, non-operated working interests and unitized production for yield and capital appreciation. Toscana Energy Income Corporation is managed by Sprott Toscana through Toscana Energy Corporation. Sprott Toscana is a member of the Sprott Group of Companies.

Neither the TSX nor its Regulation Services Provider (as that term is defined in the policies of the TSX) accepts responsibility for the adequacy or accuracy of this release.

For further information, please visit our website at www.sprott-toscana.com or 
Contact: Joseph S. Durante, Chief Executive Officer
Tel: (403) 410-6793
Fax: (403) 444-0090
E-Mail: jdurante@sprott-toscana.com