747 0 Kommentare Arcan Announces 2014 Year End Results

CALGARY, ALBERTA--(Marketwired - March 25, 2015) - Arcan Resources Ltd. (TSX VENTURE:ARN) ("Arcan" or the "Corporation") announces its financial and operating results as well as reserves for the year ended December 31, 2014.

"Corporate initiatives to strengthen our balance sheet dominated our news flow in 2014, culminating in the February 2015 conversion of $171.3 million of debentures into equity. Some key operational achievements were also worth highlighting, including maintaining flat production at 3,828 barrels of oil equivalent (BOE) per day while investing only within funds from operations, and further reducing our operating costs to $15.24 per BOE, well below the $16.00 to $17.00 we had estimated for 2014," said Terry McCoy, Arcan's Chief Executive Officer. "We stopped our drilling program in December 2014 and will be running only minimal operations until October 2015 at the earliest. That start date will be dependent on commodity prices at the time. We continue to preserve the significant inventory of development locations to add value in the right pricing environment".

"Crude oil pricing has been driving headlines in world news and is a focal point for an exploration and production company like Arcan that produces 97 percent liquids. Arcan has had a significant multi-year hedge program in place and that strategy has proven very prudent in this rapidly changed commodity environment. This translates to our 2015 strategy, in which capital in the first quarter will be roughly equal to our cash flow. For the second and third quarters we will be at reduced activity levels and only with stronger crude oil prices will we look to spend capital into the winter program. With first quarter capital programs and annual reporting activities now completed, Arcan now focuses its efforts to working with its banking group to extend or re-negotiate its maturing credit facility as well as reviewing other financing options." commented Doug Penner, Arcan's President.

2014 Highlights

Arcan's specific goals during the last year have been:

Balance sheet debt deduction - Arcan reduced its debt by $171.3 million on conversion of its debentures in February 2015, reducing annual interest costs by almost $11.0 million. In addition, Arcan reduced its bank debt and working capital (including all hedges) by $38.5 million from $166.9 million at December 31, 2013 to $128.4 million at December 31, 2014.
Cash flow stabilization and operating within cash flow - Arcan has been extensively hedged for the past two years and is hedged through the second quarter of 2016. Hedged cash flow is expected to be $32.0 to $35.0 million in 2015, well within capital spending of $24.5 million. With only an estimated $8.0 to $10.0 million in capital expended in the first quarter, the majority of capital spending slated for the fourth quarter of 2015 is budgeted as discretionary. Arcan invested $33.1 million in net capital ($38.9 million of expenditures less $5.8 million in asset sales) in 2014 and generated $42.0 million in funds from operations.
Reducing operating and production costs - Operating costs dropped 15 percent to $15.24 per BOE in 2014 from $17.84 per BOE in 2013 and are expected to range from $14.00 to $16.00 per BOE in 2015. The Corporation expects further reductions to production and operating expenses in 2015 from a number of cost saving initiatives mainly associated with the commissioned Ethel oil sales pipeline and Ethel oil battery expansion.
Production - Production in 2014 averaged 3,828 BOE per day, which was above the guided range of 3,400 to 3,800 BOE per day. Rates have remained almost flat from average production of 3,848 BOE per day in 2013, with only $24.1 million spent during the year to drill and complete wells. Production is expected to average 3,500 BOE per day in Q1 2015 as Arcan experienced a pipeline issue which has been rectified. Production is expected to average 3,300 to 3,600 BOE per day during 2015.
Waterflood strategy - Arcan injected approximately 3,640 barrels ("bbls") of water per day in 2014 compared to 3,290 bbls in 2013. Arcan recognized limitations related to restricted capital expenditures and this affected its ability to inject sufficient water into the Deer Mountain Unit for the first half of 2014 and directly impacted reserves. A return to voidage targets in Deer Mountain occurred through the second half of 2014. A good correlation exists between overall injection and oil production in the active Arcan enhanced oil recovery schemes.
Higher cash general and administrative ("Cash G&A") costs - Costs increased to $8.32 per BOE in 2014 from $5.17 per BOE in 2013. The increase is mainly the result of the transaction related costs from the debenture conversion and the proposed transaction with Aspenleaf Energy Ltd., as well as retention costs. Debenture conversion transaction costs will impact Q1 2015 and staff retention costs will conclude after August 2015.
Reduced StimSol exposure - StimSol operations and related costs have been eliminated.
Property, plant and equipment impairment - based on significantly lower commodity prices, Arcan incurred a $135.0 million impairment at year end December 31, 2014.

Operations Update

Arcan completed some of the strongest producing wells in its history in the first quarter of 2014, two of which have been recognized by Scotiabank to be in the top 10 oil wells drilled in Alberta in 2014 based on cumulative production over the past 12 months. Following up on those wells, Arcan recently completed its 2014 winter program. One 48 percent well was drilled south of Morse River, one 50 percent well was drilled in Deer Mountain West and two 100 percent wells were drilled in Ethel. The last two wells were completed after year end and all of these wells are now tied in.
The Ethel oil sales pipeline was commissioned late in the fourth quarter of 2014 and is now fully operational providing anticipated operating cost reductions starting in 2015. Arcan has delayed the electrification of the north half of Ethel as part of its restricted capital program.
Arcan has identified 117 high grade drilling locations inside its land base which totals 116 gross (105 net sections) in the Swan Hills area. These locations are based on geology and offsetting wells and are expected to deliver results above the average type curve. Drilling continues to validate these identified locations. Arcan maintains a high state of development readiness with 19 wells licensed, two drill-ready sites and future locations identified for the balance of its 2015 and 2016 drilling programs.

Consolidated Financial and Operating Summary

Certain selected financial and operations information for the three months and year ended December 31, 2014, and the comparative information for 2013 is outlined below and should be read in conjunction with Arcan's Audited Consolidated Financial Statements for the years ended December 31, 2014 and 2013, together with the notes thereto, and accompanying Management's Discussion and Analysis.

Financial and Operating Highlights
		Three Months Ended				Year Ended
		December 31,		December 31,		December 31,		December 31,
		2014		2013		2014		2013
Financials ($000s except per share
amounts)
Petroleum and natural gas revenue		21,692		25,811		119,064		122,835

Cash flow from operating activities		14,059		11,466		38,847		58,301
Funds from operations ⁽¹⁾		13,496		7,744		41,981		45,797
	Per share basic and diluted⁽¹⁾⁽³⁾	0.14		0.08		0.43		0.47
Net loss ⁽⁴⁾		(101,673	)	(17,988	)	(109,458	)	(24,518	)
	Per share basic and diluted ⁽³⁾	(1.04	)	(0.18	)	(1.12	)	(0.25	)
Capital expenditures, net - cash⁽¹⁾		14,959		(2,073	)	33,068		30,806
Total assets⁽⁴⁾		479,891		609,071		479,891		609,071
Total liabilities⁽⁴⁾		363,462		383,368		363,462		383,368
Debenture face value		171,250		171,250		171,250		171,250
Shareholders' equity⁽⁴⁾		116,429		225,703		116,429		225,703
Bank loan		144,487		159,423		144,487		159,423
Net debt ^{(1) (4)}		289,940		313,311		289,940		313,311
Operating
Production:
	Crude oil and NGLs (barrels	3,428		3,433		3,712		3,781
	("bbls") per day)
	Natural gas (thousand cubic feet	691		429		691		402
	("Mcf") per day)
	BOE per day (6:1) ⁽²⁾	3,543		3,504		3,828		3,848
Average realized price:
	Crude oil and NGLs ($ per bbl)	68.14		81.36		87.12		88.71
	Natural gas ($ per Mcf)	3.19		3.03		4.02		2.86
	Combined price per BOE ($ per BOE)	66.55		80.07		85.22		87.46

Netback ($ per BOE)⁽¹⁾⁽²⁾
Petroleum and natural gas sales		66.55		80.07		85.22		87.46

Royalties		(15.96	)	(17.01	)	(16.20	)	(16.64	)
Production and operating expenses		(14.59	)	(18.58	)	(15.24	)	(17.84	)

Operating netback ($ per BOE) ⁽¹⁾⁽²⁾		36.00		44.48		53.78		52.98
Realized economic hedging gains (losses) - cash		7.13		(2.33	)	(5.63	)	(1.42	)
G&A		(11.42	)	(6.22	)	(8.32	)	(5.17	)

Finance expenses - cash		(13.59	)	(13.88	)	(12.79	)	(12.67	)
Corporate netback⁽¹⁾		18.12		22.05		27.04		33.72
Common Shares (000's)
Shares outstanding		97,860		97,860		97,860		97,860
	Weighted average - basic	97,860		97,860		97,860		97,860
	Weighted average - diluted	97,860		97,860		97,860		97,860

All amounts in the above table exclude Stimsol's discontinued operations unless otherwise indicated.

Notes:

(1) The reader is referred to the section "Non-IFRS and Additional-IFRS Measurements".

(2) The reader is referred to the section "Legal Advisories".

(3) Basic and diluted weighted average shares are the same as the effect of stock options and Debentures were anti-dilutive.

(4) Includes both continuing and discontinued operations.

2014 Reserves Highlights

Arcan posts a 27 year reserve life with reserves composed of 95 percent light oil and and natural gas liquids ("NGLs"). Arcan's reserves evaluation is dated March 12, 2015 and effective December 31, 2014 (the "GLJ Report") as prepared by GLJ Petroleum Consultants Ltd. ("GLJ"). Reserves were negatively impacted by commodity pricing and investment timing and were reduced in all reserve categories.

	Reserves Volumes (MMBOE)		Reserves Values ($MM NPV 10)

	December 31, 2014	December 31, 2013	December 31, 2014	December 31, 2013
PDP	9.9	10.9	192.0	238.5
TP	22.4	25.0	311.2	401.6
P+P	35.0	39.0	476.2	582.8

With restricted capital investments, only proved developed producing ("PDP") reserves more than replaced production from Arcan's 2013 year end: PDP reserves decreased 1.0 MMBOE from 10.9 MMBOE; Total Proved ("TP") reserves decreased 2.6 MMBOE from 25.0 MMBOE; and Proved plus Probable ("P+P") reserves decreased 4.0 MMBOE from 39.0 MMBOE.

Reserves Volumes (MMBOE)	Dec 31/14	Dec 31/13	Change	2014 Production	Asset Sales	2014 Reserve Changes	Changes Percentage

PDP	9.9	10.9	(1.0)	(1.4)	-	0.4	3.7
TP	22.4	25.0	(2.6)	(1.4)	-	(1.2)	(4.8)
P+P	35.0	39.0	(4.0)	(1.4)	-	(2.6)	(6.7)

$476.2 million NPV of future net revenue of working interest total P+P reserves, before tax at a ten percent discount rate.
Reserves and additions at December 31, 2014, are increasingly focused on existing developed acreage and are limited in areas requiring future infrastructure commitments.
The GLJ Report, included 93 gross (81) net proved producing wells in the Swan Hills area with a total of 202 gross (171) net P+P wells booked. Future capital has decreased by $36.9 million on a total proved basis and decreased by $74.6 million on a total P+P basis since December 31, 2013. The decrease in future capital and well count reflects ongoing impacts of capital restrictions and commodity prices.
The GLJ Report recorded reserves on approximately 76 sections, or approximately 66 percent, of Arcan's land in the Swan Hills area, leaving Arcan with approximately 40 sections of land on which no reserves have yet been recorded.
Arcan expended net capital of $33.1 million in 2014 ($38.9 spent on asset development and $5.8 million received in asset sales).
Finding, development and acquisition ("FD&A") costs and recycle ratios could not be computed as reserves were down and capital spent was also lower than the reduction in future capital.

Oil and Gas Reserves

Arcan's Statement of Reserves Data and Other Oil and Gas Information, Report on Reserves Data by Independent Qualified Reserves Evaluator and Report of Management and Directors on Oil and Gas Disclosure were prepared in accordance with National Instrument 51-101 - Standards of Disclosure for Oil and Gas Activities and the Canadian Oil and Gas Evaluation Handbook for the year ended December 31, 2014, and is dated March 12, 2015.

Summary of Oil and Gas Reserves - Forecast Prices and Costs

The table below provides a summary of the oil, NGLs and natural gas reserves attributable to Arcan, as evaluated by Arcan's independent qualified reserves evaluator, GLJ, and contained in the GLJ Report based on forecast price and cost assumptions. The tables summarize the data contained in the GLJ Report and, as a result, may contain slightly different numbers than those contained in the original report due to rounding. Also due to rounding, certain columns may not add exactly. Readers should review the definitions and information contained in "Presentation of Arcan's Oil and Gas Reserves" and "Abbreviations" in Arcan's Annual Information Form, dated March 12, 2015, in conjunction with the following table and notes. All of Arcan's reserves are on-shore in Canada.

		Light & Medium Oil		Natural Gas Liquids		Natural Gas⁽¹⁾		Total
		Gross⁽²⁾	Net⁽³⁾	Gross⁽²⁾	Net⁽³⁾	Gross⁽²⁾	Net⁽³⁾	Gross⁽²⁾	Net⁽³⁾
Reserves Category		(Mbbls)	(Mbbls)	(Mbbls)	(Mbbls)	(MMcf)	(MMcf)	(Mbbls)	(Mbbls)
Proved
	Developed Producing	8,533	6,352	966	642	2,440	2,190	9,905	7,359
	Developed Non-Producing	453	395	34	24	162	150	514	443
	Undeveloped	10,203	8,236	1,220	954	3,262	3,031	11,967	9,696
Total Proved		19,189	14,983	2,220	1,620	5,863	5,371	22,386	17,498
Total Probable		10,733	7,913	1,250	909	4,028	3,709	12,655	9,440
Total Proved + Probable		29,922	22,896	3,470	2,528	9,892	9,080	35,041	26,938

Notes:

(1) Estimates of reserves of natural gas include associated and non-associated gas.

(2) "Gross Reserves" are Arcan's working interest share of remaining reserves before the deduction of royalties.

(3) "Net Reserves" are Arcan's working interest share of remaining reserves less all Crown, freehold, and overriding royalties and interests owned by others.

GLJ employed the following pricing, exchange rate and inflation rate assumptions as of December 31, 2014, in the GLJ Report in estimating reserves data using forecast prices and costs⁽¹⁾:

		Medium and Light Crude Oil			Natural Gas
Year	Inflation	WTI Cushing Oklahoma 40° API (US$/bbl)	Edmonton Par Price 40° API ($/bbl)	Cromer Medium 29.3° API ($/bbl)	Alberta Gas Reference Price Plant Gate ($/MMBTU)	AECO - C Spot ($/MMBTU)	Exchange Rate (US$/Cdn$)
2014(actual)	2.0	93.06	94.77	89.86	4.28	4.52	0.905
2015	2.0	62.50	64.71	61.47	3.08	3.31	0.850
2016	2.0	75.00	80.00	76.00	3.53	3.77	0.875
2017	2.0	80.00	85.71	81.43	3.78	4.02	0.875
2018	2.0	85.00	91.43	86.86	4.03	4.27	0.875
2019	2.0	90.00	97.14	92.29	4.28	4.53	0.875
2020	2.0	95.00	102.86	97.71	4.53	4.78	0.875
2021	2.0	98.54	106.18	100.87	4.78	5.03	0.875
2022	2.0	100.51	108.31	102.89	5.03	5.28	0.875
2023	2.0	102.52	110.47	104.95	5.28	5.53	0.875
2024	2.0	104.57	112.67	107.04	5.46	5.71	0.875

Note:

(1) All pricing in the above table, excluding inflation and the exchange rate, is escalated at 2.0 percent per year thereafter. Thereafter, inflation is assumed to be constant at 2.0 percent and exchange rate is assumed to be constant at 0.875 US$/Cdn$.

Net Asset Value ("NAV")

As detailed in the table below, the NAV was estimated at $0.14 per diluted share at December 31, 2014 (on the basis of TP reserves discounted at 10 percent) as adjusted to include the full impact of the debenture conversion which occurred on February 13, 2015 to better reflect the current computation.

The following NAV calculations are presented for December 31, 2014 and incorporate estimates that may not be comparable year-over-year and are presented as at one point in time. The working capital deficit (including working capital, current and long term fair value of commodity contracts, bank loans and face value of debentures) based upon the December 31, 2014 audited financial statements and there are no dilution proceeds included as all stock options are out of the money at December 31, 2014 (compared to the $0.08 December 31, 2014 closing share price of Arcan). GLJ performed an independent evaluation on Arcan's reserves. Reserve estimates are derived from the GLJ Report, which has an effective date of December 31, 2014. Readers are cautioned that this presentation does not reflect all aspects of the Corporation and that estimates of future net revenue do not represent fair market value. The January 1, 2015 pricing assumptions are listed above with market changes having a material impact on this NAV calculation.

Net Asset Value	December 31, 2014
($000s except per share)	(P+P discounted	(P+P discounted	(TP discounted	(TP discounted
	at 5%)	at 10%)	at 5%)	at 10%)
Present value of reserves	740,604	476,225	462,452	311,245
Working capital deficit (including debt) ⁽¹⁾	(299,710)	(299,710)	(299,710)	(299,710)
Working capital adjust for debenture conversion ⁽²⁾	171,250	171,250	171,250	171,250
Dilution proceeds⁽²⁾⁽³⁾	---	---	---	---
Estimated value	612,144	347,765	333,992	182,785
Shares (thousands) ⁽²⁾	1,304,765	1,304,765	1,304,765	1,304,765
Estimated NAV per share ⁽²⁾⁽³⁾	0.47	0.27	0.26	0.14

Note:

(1) Working capital deficit (including debt) for 2014 includes both series of Arcan convertible debentures at their full face value of $171.3 million as well as working capital, current and long term fair value of commodity contracts, and bank loans.

(2) On February 13, 2015 the full value of debentures of $171.3 million was converted into shares at $0.15 per share. The table reflects the debt add back and the addition of 1.2 billion shares affected by the conversion of the debentures.

(3) Share figures include all dilutive securities, namely: 97,860,013 common shares at December 31, 2014 plus the 1,206,904,912 common shares issued on the debenture conversion, and no stock options as none are in the money based on the December 31, 2014 closing share trading price of $0.08. All stock options were canceled on February 2, 2015.

FD&A Costs

FD&A costs for the year ended December 31, 2014 are not meaningful as reserve additions were negative and net capital was also negative both on a TP and a P+P basis. Arcan had a 2.6 MMBOE reserves reduction on P+P reserves (35.0 MMBOE closing reserves plus 1.4 MMBOE production less 39.0 MMBOE opening reserves). Arcan had a negative $41.5 million capital program ($33.1 million of capital from the December 31, 2014 financial statements (audited) plus $385.9 million of closing future development capital in the GLJ Report (P+P) less $460.5 million closing future development capital in Arcan's December 31, 2013 reserve report (P+P)). The aggregate of the exploration and development costs incurred in the most recent fiscal year and the change during that year in estimated future development costs generally will not reflect total FD&A costs related to reserves additions for that year.

Recycle Ratio

Recycle ratio is a measure for evaluating the effectiveness of a company's reinvestment program. The ratio measures how well a company replaced every BOE of production, which is operating netback to FD&A. The recycle ratios cannot be computed for 2014 as FD&A values could not be computed.

Reserve Life Index

Using the fourth quarter ended December 31, 2014 average production of 3,543 BOE per day and December 31, 2014 year-end proved plus probable reserves, Arcan has a reserve life index of approximately 27 years. Arcan estimates that the reserve life index will decline as production rates elevate.

Production (fourth quarter ended December 31, 2014 average BOE per day)	3,543
Proved reserves (MBOE)	22,386
Proved reserve life index (years)	17.3
Proved plus probable reserves (MBOE)	35,041
Proved plus probable reserve life index (years)	27.1

Audited Financial Statements, Management Discussion and Analysis, and Annual Information Form

Arcan has filed with Canadian securities regulatory authorities its audited Consolidated Financial Statements and accompanying Management's Discussion and Analysis for the three months and year ended December 31, 2014. Arcan has also filed its Annual Information Form for the year ended December 31, 2014, which includes Arcan's forms 51-101F1, 51-101F2, and 51-101F3 for the year ended December 31, 2014. These filings are available at www.sedar.com and on the Corporation's website at www.arcanres.com.

Arcan's credit facility due on May 28, 2015

Arcan's credit facility becomes due on May 28, 2015. The maturity of the credit facility gives rise to material uncertainties that may cast significant doubt on the Corporation's ability to continue as a going concern if the borrowing base on the credit facility is reduced or the credit facility is not renewed or extended on the same or similar terms. The successful future operations of the Corporation are dependent on the Corporation's ability to renew or extend the credit facility, generate sufficient funds through operations or secure funds through other external sources in order to pay off some or all of the credit facility as it becomes due. Arcan has supplied its financial statements and latest reserve reports to the syndicate of lenders and is working to amend, renew, or extend the credit facility and has been in discussions with other lenders. In addition, Arcan is exploring other types of debt and financing arrangements. There are no assurances in relation to the bank facility or that alternative funding will be available on the same or similar terms

Annual and Special General Meeting

Arcan's annual and special meeting is currently scheduled for June 17, 2015, at 3:00 PM in the McMurray Room of the Petroleum Club, located at 319 - 5^th Avenue SW, Calgary, Alberta.

About Arcan Resources Ltd.

Arcan Resources Ltd. is an Alberta, Canada corporation that is principally engaged in the exploration, development and acquisition of petroleum and natural gas located in Canada's Western Sedimentary Basin.

Legal Advisories

All information contained in the press release relating to reserves comes from the GLJ Report dated March 12, 2015, which has an effective date of December 31, 2014, and was prepared by GLJ, a qualified reserves evaluator, in accordance with NI 51-101 and the COGE Handbook. The disclosure was made assuming that development of each property in respect of which the estimate is made will occur, without regard to the likely availability of funding required for that development. Readers are also cautioned that the estimated future net revenue values do not represent fair market value.

BOEs may be misleading, particularly if used in isolation. The calculation of BOEs is based on a conversion ratio of six thousand cubic feet ("Mcf") of natural gas to one barrel ("bbl") of oil based on an energy equivalency conversion primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. In addition, given that the value ratio based on the current price of oil as compared to natural gas may be significantly different from six to one, utilizing a BOE conversion ratio of six Mcf to one bbl could be misleading as an indication of value.

Estimates of reserves and future net revenue for individual properties may not reflect the same confidence level as estimates of reserves and future net revenue for all properties, due to the effects of aggregation.

Additional information about the Corporation, including the Corporation's annual information form for the year ended December 31, 2014, is available under Arcan's profile on SEDAR at www.sedar.com.

Non-IFRS and Additional-IFRS Measurements

The following are Non-IFRS Measurements:

Readers are cautioned that this press release contains the term "funds from operations", which should not be considered an alternative to, or more meaningful than, "cash from operating activities" or "net earnings" as determined in accordance with IFRS as an indicator of Arcan's performance. Arcan also presents "funds from operations per share", whereby funds from operations are divided by the basic and diluted weighted average number of shares of Arcan outstanding to determine per share amounts. Arcan also presents "net debt" which should not be considered an alternative to, or more meaningful than, "current liabilities" or "working capital". Net debt is calculated by subtracting the current liabilities (excluding bank loans), bank loans, and convertible debentures from current assets.

The following are Additional-IFRS Measurements:

Arcan also presents "cash finance expenses" which should not be considered an alternative to, or more meaningful than, "finance expenses". Cash finance expenses is calculated by subtracting accretion of convertible debenture liability and accretion of decommissioning obligations, from finance expenses.

"Operating netbacks" represent Arcan's petroleum and natural gas revenue, less royalties and production and operating expenses. "Corporate netbacks" represent Arcan's operating netback, plus other revenue, plus or minus realized economic hedging gains or losses, less G&A and cash finance expenses in order to determine the amount of funds generated by production. Operating and corporate netbacks have been presented on a per barrel of oil equivalent ("BOE") basis, as well. "Capital expenditures, net - cash" represents capital expenditures less any proceeds received upon the sale of capital assets.

The measures referenced above do not have any standardized meaning prescribed by IFRS and therefore may not be comparable to similar measures presented by other companies. Management believes that funds from operations and both operating and corporate netbacks are useful supplemental measures as they indicate Arcan's ability to fund future growth through capital investment and/or to repay debt. These measures have been described and presented in this press release in order to provide shareholders and potential investors with additional information regarding Arcan's liquidity and its ability to generate funds to finance its operations. Please see the "Results of Operations - Netbacks" section of the 2014 MD&A for reconciliations between both operating netbacks and corporate netbacks to revenue.

Arcan determines funds from operations as cash flow from operating activities before changes in non- cash working capital and restricted share units ("RSU") transaction costs, as follows:

Funds from Operations
	Three Months Ended		Year Ended
($000s)	December 31, 2014	December 31, 2013	December 31, 2014	December 31, 2013
Cash flow from operating activities	14,059	11,466	38,847	58,301
Change in non-cash working capital and RSU's	(2,085)	(3,722)	(312)	(12,504)
Reclamation costs	648	-	1,492	-
Transaction costs⁽¹⁾	874	-	1,954	-
Funds from operations	13,496	7,744	41,981	45,797

(1) Transaction costs are related to the Arrangement (as defined herein) and the Exchange (as defined herein) and are excluded from Funds from Operations as they are not reflective of the Corporation's operating cash flows.

Arcan determines net debt as follows:


Net debt
	As At
($000s)	December 31, 2014	December 31, 2013
Current assets	35,746	24,030
Current liabilities (excluding bank loan)	(25,629)	(28,185)
Bank loan	(144,487)	(159,423)
Debentures	(155,570)	(149,733)
Net debt	(289,940)	(313,311)

Arcan determines cash finance expenses as follows:


Cash finance expenses
	Three Months Ended		Year Ended
($000s)	December 31, 2014	December 31, 2013	December 31, 2014	December 31, 2013
Finance expense	6,132	6,175	24,694	24,224
Less:
Accretion on convertible debenture liability	1,480	1,425	5,837	5,616
Accretion on decommissioning obligations	222	274	985	808
Cash finance expenses	4,430	4,476	17,872	17,800

Readers are cautioned that this press release contains the term "net asset value", which Management believes is a useful supplemental measure as it provides a measure of the potential value of the Corporation. Arcan's method for calculating NAV is detailed in this press release in the section "Net Asset Value" and may differ from that of other companies, and, accordingly, may not be comparable. This measure does not have any standardized meaning prescribed by Generally Accepted Accounting Principles ("GAAP") and therefore is unlikely to be comparable to similar measures presented by other companies. Management believes there is no GAAP measure that is directly comparable to the NAV calculation, although there are GAAP financial statement amounts used in the calculation that have been articulated in that section of the press release, and readers are cautioned in their use of the measure.

Readers are cautioned that this press release contains the term "reserve life index" which Management believes is a useful supplemental measure as it provides a measure for estimating the number of years it will take to produce the Corporation's reserves at current production levels. Arcan's method for calculating the reserve life index is detailed in this press release in the section "Reserve Life Index" and may differ from that of other companies, and, accordingly, may not be comparable. This measure does not have any standardized meaning prescribed by GAAP and therefore is unlikely to be comparable to similar measures presented by other companies. Management believes there is no GAAP measure that is comparable to the reserve life index calculation and readers are cautioned in their use of the measure.

Forward-Looking Information and Statements

This press release contains certain forward-looking information and statements within the meaning of applicable securities laws. The use of any of the words ''expect'', ''anticipate'', ''continue'', ''estimate'', ''guidance'', ''objective'', ''ongoing'', ''may'', ''will'', ''project'', ''should'', ''believe'', ''plans'', ''intends'', "possible" and similar expressions are intended to identify forward-looking information or statements. In particular, but without limiting the foregoing, this press release contains forward-looking information and statements pertaining to, among other things, the following: oil and gas reserves and resources; current and anticipated production; Arcan's expectations respecting its 2015 strategy, including its reduced activity levels and that it would look to spend capital in the winter program if there were stronger crude oil prices; the consequences of Arcan's credit facility coming due; Arcan's expectations regarding reduced production and operating expenses; expected hedging impacts on cash flows; the anticipated results of cost saving initiatives; Arcan's expectations regarding conversion transaction costs and retention costs; the potential of Arcan's identified drilling locations; Arcan's debt and liquidity position; net asset value; future liquidity and financial capacity and resources; the potential inherent in Arcan's Swan Hills land base and the expected benefits from the development thereof; reserve life index; the timing and location of the upcoming shareholder meeting; the benefits of the Ethel pipeline; expectations relating to increased shareholder value and growth per share; results from operations and financial ratios; the volume and product mix of Arcan's oil and gas production; Arcan's income taxes and tax liabilities; oil and natural gas prices and the US$ to CDN$ exchange rate; recovery; and capital expenditures.

The forward-looking information and statements contained in this press release reflect several material factors and expectations and assumptions of Arcan including, without limitation: that Arcan will continue to conduct its operations in a manner consistent with past operations; the accuracy of current horizontal production data, historical well production and waterflood recovery results; the general continuance of current or, where applicable, assumed industry conditions; continuity of reservoir conditions across Arcan's Swan Hills land base; availability of debt and/or equity sources to fund Arcan's capital and operating requirements as needed; the continuance of existing and, in certain circumstances, proposed tax and royalty regimes; the accuracy of the estimates of Arcan's impairment provisions; the accuracy of the estimates of Arcan's reserve volumes; the accuracy of current horizontal production data; certain commodity price and other cost assumptions and the terms of Arcan's credit facility.

Arcan believes the material factors, expectations and assumptions reflected in the forward-looking information and statements are reasonable at this time but no assurance can be given that these factors, expectations and assumptions will prove to be correct. The forward-looking information and statements included in this press release are not guarantees of future performance and should not be unduly relied upon. Such information and statements involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking information or statements including, without limitation: for reasons currently unanticipated, Arcan's production rates or water source may not be maintained in the manner currently expected; the application and modification of horizontal, multi-stage fracture technologies including the application of additional fracture stimulation stages may not have the impact currently anticipated by Arcan; Arcan's capital spending and operational plans for 2015 may not be completed in the timelines anticipated, in the manner anticipated or at all and the execution of such plans may not have the results currently anticipated by Arcan; water injection may not have the impact on production currently anticipated by Arcan; changes in commodity prices; unanticipated operating results or production declines; waterflood impacts; Arcan may be unable to solve its mechanical/operational issues in the timelines anticipated, in the manner anticipated or at all; changes in tax or environmental laws or royalty rates; increased debt levels or debt service requirements or the inability to renew or repay Arcan's debt obligations when they come due; inaccurate estimation of Arcan's oil and gas reserves volumes; limited, unfavourable or no access to debt or equity capital markets; inaccuracies in Arcan's calculation of reserve life index; for reasons currently unforeseen, the current drilling locations identified by Arcan may prove to be unsuitable or unavailable and drilling on the locations identified may not occur; increased costs and expenses; the impact of competitors; reliance on industry partners; reviews of Arcan's credit facility and/or budget may not occur on the timelines anticipated or at all; and certain other risks detailed from time to time in Arcan's public disclosure documents including, without limitation, those risks identified in this press release, and in Arcan's annual information form, copies of which are available on Arcan's SEDAR profile at www.sedar.com.

This press release contains reserves information. The process of estimating reserves is complex. It requires significant judgments and decisions based on available geological, geophysical, engineering and economic data. These estimates may change substantially as additional data from ongoing development activities and production performance becomes available and as economic conditions impacting oil and gas prices and costs change. The reserve estimates contained herein are based on current production forecasts, prices and economic conditions. As circumstances change and additional data becomes available, reserve estimates also change. Estimates made are reviewed and revised, either upward or downward, as warranted by the new information. Revisions are often required due to changes in well performance, prices, economic conditions and governmental restrictions. Although every reasonable effort is made to ensure that reserve estimates are accurate, reserve estimation is an inferential science. As a result, the subjective decisions, new geological or production information and a changing environment may impact these estimates. Revisions to reserve estimates can arise from changes in year- end oil and gas prices, and reservoir performance. Such revisions can be either positive or negative.

The forward-looking information and statements contained in this press release speak only as of the date of this press release, and Arcan does not assume any obligation to publicly update or revise them to reflect new events or circumstances, except as may be required pursuant to applicable laws.

Neither 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.