Caza Announces Results for the Year Ended December 31, 2015
HOUSTON, TEXAS--(Marketwired - March 31, 2016) - Caza Oil & Gas, Inc. ("Caza" or "the Company") (TSX:CAZ)(AIM:CAZA) is pleased to announce the Company's final results for the year ended December 31, 2015.
2015 Financial and Reserve highlights include:
- Annual revenues for the twelve month period ended December 31, 2015 decreased 56% to US$10.1 million ("MM") (US$22.9MM: 2014)
- Quarterly revenues for the three month period ended December 31, 2015 decreased 63% to US$1.77MM (US$4.82MM for the comparable three month period ended December 31, 2014)
- Average production volumes for the year 2015, decreased 24% to 706 barrels of oil equivalent ("boe") per day ("boe/d") (923 boe/d: 2014)
- As estimated by the independent report completed by CGA (as defined below under Reserve Data) dated as of December 31, 2015 (all reserve figures are net to Caza):
- Proven (1P) reserves increased 98.1% to 12.243 MMboe (6.18 MMboe: 2014)
- Proven plus Probable (2P) reserves increased 13.3% to 16.136 MMboe (14.24 MMboe: 2014)
- Proven plus Probable plus Possible (3P) reserves increased 42.1% to 30.658 MMboe (21.6 MMboe: 2014)
- Raised gross debt restructuring proceeds of approximately US$45.5 million through the placing of approximately 9,467,419,937 common shares at a price of approximately US$0.0048 (equivalent to approximately 0.32 pence) per share (see "Recent Developments" below)
- Entered into a credit agreement for a five-year, senior secured, reserve-based, revolving credit facility for a maximum of US$100 million governed by an initial borrowing base of US$15 million (see "Recent Developments" below)
- Cash and cash equivalents at December 31, 2015, are US$1.62MM (US$5.2MM as at December 31, 2014)
- On December 23, 2015, Caza issued and sold to Talara Opportunities V, LP ("Talara") an aggregate of 9,467,419,937 common shares in the capital of the Company for aggregate consideration of
US$45.5 million. Concurrently with closing, the Company paid an aggregate of US$43.9 million to YA Global Master SPV Ltd. and GSC SICAV p.l.c. (the "Yorkville Parties") and to Apollo Investment
Corporation ("AIC") to extinguish all debts and obligations owed to them by the Company and its subsidiaries, as well as all oil and gas interests previously granted to AIC by Caza. The remaining
proceeds of the private placement were allocated to working capital for general corporate purposes. Closing followed receipt of requisite approvals from the TSX, including permission to rely on the
financial hardship exemption provided for in the TSX Company Manual. Caza is currently subject to a TSX delisting review as a result of its reliance on the financial hardship exemption.
In connection with the closing, certain members of Caza's Management Team and the Board exchanged their exchangeable shares of Caza Petroleum, Inc. ("Caza Petroleum") for an aggregate of 26,502,000 Common Shares, and purchased from Talara an aggregate of 176,863,889 Common Shares at an effective price of approximately US$0.0048 (equivalent to approximately 0.32 pence) per share. In addition, the Yorkville Parties agreed to transfer ownership of approximately 29,878,886 Common Shares back to the Company in connection with closing.
Immediately following such transactions, Talara held 9,290,556,048 Common Shares (representing approximately 95.3% of the outstanding Common Shares) and members of the Management Team held 198,707,100 Common Shares (representing approximately 2% of the outstanding Common Shares). The Board was also reconstituted at closing to consist of David Zusman, David Young, Andrew Heyman and Sharon O'Shea, being Talara nominees, J. Russell Porter and Cornelius Dupré II.
Following admission, the Company had 9,744,153,908 Common Shares admitted to trading. The figure of 9,744,153,908 Common Shares may be used by shareholders as the denominator for the calculations by which they will determine if they are required to notify their interest in, or change their interest in, the Company under the Financial Conduct Authority's Disclosure and Transparency Rules.
- On January 25, 2016, Caza announced that Caza Petroleum entered into a credit agreement for a five-year, senior secured, reserve-based, revolving credit facility with JP Morgan Chase Bank, N.A., as lender and administrative agent ("JPMorgan"), with JP Morgan Securities LLC acting as sole lead arranger and sole bookrunner of the credit facility (the "Credit Facility"). The Credit Facility commitment was for a maximum of US$100 million governed by an initial borrowing base of US$15 million, including a sub-facility for the issuance of letters of credit up to a maximum aggregate face amount of 10% of the borrowing base in effect.
The Company's strategy is to achieve significant growth in reserves and production through:
- progressing material, internally generated prospects, utilizing cash flows from existing production and exploiting Proven plus Probable reserves; and
- executing strategic acquisitions of assets at all stages of the development cycle to facilitate longer term organic growth.
In the implementation of this strategy, the Company has a clear set of criteria in high-grading projects:
- the Company seeks to retain control of project execution and timing through the operatorship of assets;
- assets should be close to existing established infrastructure, allowing for quick, efficient hook-up and lower operational execution risk;
- drilling targets in close proximity to known producing reservoirs; and
- internal models for core projects should demonstrate the ability to deliver at least a 25% rate-of-return on investment.
The Company is primarily focused in the Permian Basin of Southeast New Mexico and West Texas, which provides the Company with low-risk, liquids-rich development opportunities from many geologic reservoirs and play types. The Permian Basin has a vast operational infrastructure in place. The Company is utilizing recent advances in horizontal drilling and dynamic completion technologies to unlock the significant resources within its asset base and the region.
Management has focused efforts on building a core asset base in the prolific Bone Spring/Wolfcamp play and has concluded that these assets represent the best opportunity for the Company to deliver production and revenue growth within an acceptable timeframe. The Company expects that expanding and diversifying the producing asset base within the play will not only grow the Company but will also make it more resilient to risks associated with any single project.
As at December 31, 2015, the Company had 226 drilling locations and 33 gross (10.2 net) producing wells on its leasehold position in the Bone Spring/Wolfcamp play. The majority of the Company's leases in the play are held-by-production with no drilling obligations. Management believes that the Company is well-positioned with excellent assets and approximately 5,400 net acres (13,260 gross acres), which is approximately 24,300 net effective acres (59,670 gross effective acres) in the Bone Spring/Wolfcamp play, and plans to continue actively monitoring opportunities to build on Caza's current production levels and acreage position.
The Company's Bone Spring/Wolfcamp inventory includes the following 21 properties: Gramma Ridge, Gateway, Marathon Road, East Marathon Road, Lennox, Forehand Ranch, Forehand Ranch South, Jazzmaster, Mad River, Azotea Mesa, China Draw, Bradley 29, Two Mesas, Quail Ridge, Rover, West Rover, Copperline, West Copperline, Chaparral 33, Madera and Roja.
The Company's Bone Spring/Wolfcamp leases are mostly State and Federal leases with primary terms between 5-10 years, many of which are producing and help-by-production. In terms of obligations and commitments, one producing well at any depth will hold each lease in its entirety.
Management believes that once drilling costs come down and commodity prices recover, accelerating and expanding drilling and completion operations on inventoried and producing properties will significantly increase both production and cash flows, which will allow the Company to optimize its Bone Spring/Wolfcamp work program and drive economies of scale.
In this regard, the Company has entered into the Credit Facility with JPMorgan and is constantly evaluating all available financing options that could provide the Company with sufficient leverage and capital to adequately exploit current and future Bone Spring/Wolfcamp opportunities.
The Company continues to actively review its drilling obligations for the year and continues to scale back G&A costs and capital expenditures associated with non-obligatory wells and direct capital towards lease maintenance wells in its Bone Spring/Wolfcamp drilling program. However, dependent upon drilling costs and prevailing commodity prices, the Company's objective is to eventually accelerate and expand its drilling program in the Bone Spring/Wolfcamp play over the next two years. A program of this type would initially utilize the Company's current Credit Facility with JPMorgan and excess operational cash flow to fund further development drilling and lease purchases beyond the initial two year period.