Greenfields Petroleum Corporation Announces Financial Results and Operating Highlights for the Three and Six Months Ended June 30, 2017

Greenfields

HOUSTON, Aug. 25, 2017 (GLOBE NEWSWIRE) — Greenfields Petroleum Corporation (the “Company” or “Greenfields“) (TSX VENTURE:GNF), an independent exploration and production company with producing assets in Azerbaijan, announces its financial results and operating highlights for the second quarter of 2017.  Selected financial and operational information is set out below and should be read in conjunction with the Company’s complete financial statements as of and for the three and six months ended June 30, 2017, with the notes thereto and related management’s discussion and analysis (“MD&A”), which can be found on Greenfields’ website at www.Greenfields-Petroleum.com and on SEDAR at www.sedar.com.  Except as otherwise indicated, all dollar amounts referenced herein are expressed in United States dollars.

Second Quarter 2017 Financial Results and Operating Highlights

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  • Bahar Energy Limited’s (“BEL”) entitlement sales volumes averaged 674 bbl/d for crude oil and 17,120 mcf/d for natural gas or 3,527 boe/d in the second quarter 2017 and 691 bbl/d and 17,207 mcf/d or 3,559 boe/d year-to-date 2017. As compared to the same quarter in 2016, average entitlement sales volumes decreased 13% for oil, increased 18% for natural gas and increased 10% for boe/d, while year-to-date average entitlement volumes for oil decreased 17%, increased 22% for natural gas and increased 12% for boe/d.
  • For the second quarter and year-to-date 2017, BEL realized an average oil price of $41.96 and $44.70, respectively, per barrel.  This reflects an increase from $39.56 and $34.28, respectively, per barrel for the same periods in 2016.  BEL realized a natural gas price of $2.69 per mcf for the second quarter 2017 and $3.32 per mcf year-to-date compared to $3.96 per mcf for the same periods in 2016. The gas price was contractually fixed at $3.96 price and renegotiated to a new 5-year term at $2.69 per mcf effective April 1, 2017.
  • For the second quarter and year-to-date 2017, the Company realized a net loss of $3.1 million and $4.5 million, respectively, which represents a loss per share (basic and diluted) of $0.02 and $0.03, respectively.  In comparison, for the same periods in 2016, the Company realized a net loss of $2.6 million and $6.2 million, respectively, with a loss per share (basic and diluted) of $0.12 and $0.28, respectively.
  • On May 12, 2017, the Company completed a non-brokered private placement of 2,398,630 common shares of the Company at a price of CAD$0.20 per share (USD$0.146) for aggregate gross proceeds of approximately $350 thousand. Also, on June 27, 2017, the Company completed a brokered private placement of 18,258,201 common shares of the Company at a price of CAD$0.20 per share (USD$0.148) for aggregate gross proceeds of approximately $2.7 million.
  • On March 3, 2017, Bahar Energy Operating Company (“BEOC”) signed an amendment to the gas sales agreement (the “Amended GSA”) for the sale of non-associated natural gas produced under the ERDPSA with SOCAR, which took effect April 1, 2017. Please see the Company’s press release dated May 26, 2017 for further details on the Amended GSA.
  • On April 19, 2017, BEL and SOCAR signed a protocol in respect of the carry of certain costs and related issues (the “Protocol”) which addresses the shortfall by SOA in funding its 20% share of project expenditures incurred under the ERDPSA since April 2014.  In accordance with the Protocol, which is effective April 19, 2017, SOA’s 20% share of project expenditures will be funded from SOA’s entitlement share of profit petroleum revenues and revenues generated from the sale of SOCAR’s compensatory petroleum.  Any funding deficiencies in SOA’s cash call payments will be borne by BEL and added to the outstanding Carry 1 balance which will subsequently be reimbursed in accordance with the terms of the ERDPSA through payment of SOA’s share of cost recovery petroleum revenues to BEL.

Operating Highlights and Plans 

  • Gross production volumes produced from the ERDPSA averaged 783 bbl/d for crude oil, 20.1 mmcf/d for natural gas or 4,133 boe/d for the second quarter 2017.  Production was impacted by the slower pace of executing scheduled workovers and lower than expected post-workover production results.
  • During the second quarter 2017, operating expenses were ten percent below budget while capital expenditures were significantly under budget as a result of capital projects being reduced in scope or delayed.
  • In the Gum Deniz Oil Field, BEOC completed three capital and eight service workovers during the second quarter 2017. In the Bahar Gas Field, two capital workovers were completed during the same period.  Two additional workovers were initiated and are expected to be completed in the third quarter 2017.
  • During the remainder of 2017 and in 2018, BEOC plans to reactivate production from the southern area of Gum Deniz Field by refurbishing platforms 409 and 412 and installing Electric Submersible Pumps (ESP) in seven wells. Initial production from this area is expected to commence in late August 2017 with the installation in well GD414. Two more installations are expected follow in September and October.  The refurbishment of the second platform is expected to be ready at about year end, so ESP installation in four additional wells is expected to begin in late December and continue into January 2018.
  • In the second quarter 2017, BEOC continued progress on several construction projects including platform refurbishment, causeway structure reinforcement and processing facility improvements.
  • The dynamic reservoir model simulation studies continued for both the Bahar and Gum Deniz fields and are expected to be completed in fourth quarter 2017.  The results of these simulation studies will enable a more thorough evaluation of development options in the Bahar and Gum Deniz fields. The studies have confirmed more than 50 additional well recompletions to extend the field producing life. Additionally, the studies have identified secondary recovery potential in both the Gum Deniz and Bahar fields. A new plan of development will follow the completion of the studies.
  • For the remainder of 2017, BEOC will focus on increasing gas production from the Bahar Gas Field through a series of recompletions of existing wells to improve project cash flows; and reactivating oil production from South Gum Deniz.  Additionally, BEOC is continuing programs to further reduce field operating costs while maintaining health, safety and environmental standards.

Selected Financial Information

Revenues and operating results in the “Selected Financial Information” have been adjusted to reflect the Company’s share of BEL.  Upon the closing of the acquisition of Baghlan Group Limited’s 66.67% interest in BEL on August 9, 2016 (the “Baghlan Acquisition”), BEL became a wholly-owned subsidiary of the Company and the Company began consolidating 100% of the revenues and operating results from BEL on a going forward basis.  Financial information for the three and six months ended June 30, 2016 presented in the tables below have been adjusted to include the Company’s 33.33% share of petroleum, natural gas and transportation revenues from BEL and do not include Baghlan Group Limited’s 66.67% interest in BEL for such periods. Prior to the Baghlan Acquisition, the Company’s share of BEL revenues was included in the income or loss on Investment in Joint Venture under the equity method of accounting.  The combined financial and operating results have been presented only for comparative purposes and do not reflect proper accounting practices under GAAP for the three and six months ended June 30, 2016.

Greenfields Petroleum Corporation

(US$000’s,except as noted)          
Three months ended
June 30
Six months ended
June 30
2017 2016 2017 2016
Financial
Revenues 6,818 2,973 16,056 5,773
Net (loss) income (3,129 ) (2,551 ) (4,497 ) (6,153 )
Per share, basic and diluted ($0.02 ) ($0.12 ) ($0.03 ) ($0.28 )
Capital Items
Cash and cash equivalents 2,173 428
Total Assets 201,174 97,778
Working capital (1) (47,136 ) (10,351 )
Convertible debt and Shareholders’ equity 138,439 52,377

(1) Working capital at June 30, 2017 include short term loans related party and other short term loans. The Company expects to further restructure these short term loans through a combination of long term debt financing and equity.

Bahar Energy Limited

  Company’s share
(US$000’s, except as noted) Three months ended June 30,
2017 2016 2017 2016
Financial
Revenues 6,818 8,095 6,818 2,698
 
Operating
Average Entitlement Sales Volumes (2)
Oil and condensate (bbl/d) 674 779 674 260
Natural gas (mcf/d) 17,120 14,503 17,120 4,534
Barrel oil equivalent (boe/d) 3,527 3,196 3,527 1,065
% of gross production
volumes (3)
87 % 89 %
Average Oil Price
Oil price ($/bbl) $ 42.89 $ 40.52 $ 42.89 $ 40.52
Net realization price ($/bbl) $ 41.97 $ 39.56 $ 41.97 $ 39.56
Brent oil price ($/bbl) $ 49.52 $ 45.57 $ 49.52 $ 45.57
Natural gas price ($/mcf) $ 2.69 $ 3.96 $ 2.69 $ 3.96
  Company’s share
(US$000’s, except as noted) Six months ended June 30,
2017 2016 2017 2016
Financial
Revenues 16,056 15,494 16,056 5,164
 
Operating
Average Entitlement Sales Volumes (2)
Oil and condensate (bbl/d) 691 833 691 278
Natural gas (mcf/d) 17,207 14,066 17,207 4,688
Barrel oil equivalent (boe/d) 3,559 3,177 3,559 1,059
% of gross production
volumes (3)
85 % 86 %
Average Oil Price
Oil price ($/bbl) $ 45.65 $ 35.18 $ 48.65 $ 35.18
Net realization price ($/bbl) $ 44.70 $ 34.28 $ 44.70 $ 34.28
Brent oil price ($/bbl) $ 51.56 $ 39.80 $ 51.56 $ 39.80
Natural gas price ($/mcf) $ 3.32 $ 3.96 $ 3.32 $ 3.96

(2) Daily volumes represent the Company’s share of the entitlement sales volumes of the contractor parties to the ERDPSA net of compensatory petroleum and the government’s share of profit petroleum.  Compensatory petroleum represents 10% of gross production from the ERDPSA and continues to be delivered to SOCAR at no charge, until specific cumulative petroleum and natural gas production milestones are attained.  Daily entitlement sales volumes for the three and six months ended June 30, 2016 include the Company’s 33.33% share of BEL entitlement sales volumes and 100% of BEL’s entitlement for the three and six months ended June 30, 2017.
(3) Represents the percentage of BEL entitlement sales volumes relative to gross production volumes from the ERDPSA.

About Greenfields Petroleum Corporation
Greenfields is a junior oil and natural gas company focused on the development and production of proven oil and gas reserves principally in the Republic of Azerbaijan.  The Company plans to expand its oil and gas assets through further farm-ins, and acquisitions of Production Sharing Agreements from foreign governments containing previously discovered but under-developed international oil and gas fields, also known as “greenfields”.  More information about the Company may be obtained on the Greenfields website at www.greenfields-petroleum.com.

Forward-Looking Statements
This press release contains forward-looking statements.  More particularly, this press release includes forward-looking statements concerning, but not limited to: operational and development plans of the Company and of BEL; the completion of workovers and anticipated timing thereof; the completion of reactivations and the anticipated timing thereof; the Protocol and the expectations in relation thereto; the Bahar and Gum Deniz field studies and the expectations in relation thereto; production; and programs initiated by BEOC.  In addition, the use of any of the words “initial, “scheduled”, “can”, “will”, “prior to”, “estimate”, “anticipate”, “believe”, “should”, “future”, “continue”, “may”, “expect”, “plan” and similar expressions are intended to identify forward-looking statements.  The forward-looking statements contained herein are based on certain key expectations and assumptions made by the Company, including, but not limited to, expectations and assumptions concerning the success of optimization and efficiency improvement projects, the availability of capital, current legislation and regulatory regimes, receipt of required regulatory approval, the success of future drilling and development activities, the performance of existing wells, the performance of new wells, general economic conditions, availability of required equipment and services, weather conditions and prevailing commodity prices. Although the Company believes that the expectations and assumptions on which the forward-looking statements are based are reasonable, undue reliance should not be placed on the forward-looking statements because the Company can give no assurance that they will prove to be correct.

Since forward-looking statements address future events and conditions, by their very nature they involve inherent risks and uncertainties most of which are beyond the control of Greenfields.  Should one or more of these risks or uncertainties materialize, or should assumptions underlying the forward-looking information prove incorrect, actual results, performance or achievements could vary materially from those expressed or implied by the forward-looking information.  These risks include, but are not limited to, risks associated with the oil and gas industry in general (e.g., 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 production, costs and expenses; and health, safety, political and environmental risks), commodity price and exchange rate fluctuations, changes in legislation affecting the oil and gas industry and uncertainties resulting from potential delays or changes in plans with respect to exploration or development projects or capital expenditures. Additional risk factors can be found under the heading “Risk Factors” in Greenfields’ Annual Information Form and similar headings in the MD&A which may be viewed on www.sedar.com.

The forward-looking statements contained in this press release are made as of the date hereof and Greenfields undertakes no obligation to update publicly or revise any forward-looking statements or information, whether as a result of new information, future events or otherwise, unless so required by applicable securities laws.  The Company’s forward-looking information is expressly qualified in its entirety by this cautionary statement.

Abbreviations

bbls barrels mcf thousand cubic feet
bbls/d barrels per day mmcf million cubic feet
boe barrels of oil equivalent mcf/d thousand cubic feet per day
boe/d barrels of oil equivalent per day mmcf/d million cubic feet per day
mcm million cubic meters
   

Notes to Oil and Gas Disclosures

Barrels of Oil Equivalent or “boe” may be misleading, particularly if used in isolation.  The volumes disclosed in this press release under the headings “Second Quarter 2017 Financial Results and Operating Highlights”, “Operating Highlights and Plans” and “Selected Financial Information” use a 6mcf: 1boe, as such is typically used in oil and gas reporting and is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.  The Company uses a 6mcf: 1boe ratio to calculate its share of entitlement sales from the Bahar project for its financial reporting and reserves disclosure.

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

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