Bengal Energy Ltd. (TSX: BNG) ("Bengal")
announces its financial results for the third quarter of fiscal 2021 ended December 31, 2020.
Subsequent Event Notice
As previously announced, Bengal has reached an agreement with its senior secured lender Westpac Banking Corporation ("Westpac") to settle all principal amounts outstanding under the credit facility (the "Credit Facility") and extinguish the debt
owing to Westpac (the "Debt Settlement"). To facilitate the Debt Settlement, the Company entered into an agreement with Texada Capital Management Ltd. ("Texada") to invest US$10 million to settle the outstanding debt plus an additional CAD$4 million to
assist with the Company's working capital needs and its development activities in the Cooper Basin in the upcoming year. In exchange, Texada will receive common shares priced at CAD$0.05 per share (the "Private Placement"). The transaction is subject
to the acceptance of the Private Placement by the Toronto Stock Exchange ("TSX") and the Australian Foreign Investment Review Board. The TSX has conditionally approved the Private Placement, subject to Bengal fulfilling all of the requirements of the TSX on or before March 5, 2021.
THIRD QUARTER FISCAL 2021 SUMMARY
The following is an overviewof the financial and operational results during the three month period ended December 31, 2020:
- Sales Revenue -Crude oil sales revenue was $1.3 million in the third quarter of fiscal 2021, which is 48% lower than the $2.4 million recorded in Q3 fiscal 2020. Lower sales volume in Q3 fiscal 2021 compared to Q3 fiscal 2020 was the main driver for the weaker revenue performance along with significantly lower commodity prices quarter over quarter.
- Hedging - The Company's Credit Facility required that a minimum of 50% of oil production be hedged forward by a minimum of 12 months. The hedging requirements have been waived by Westpac as at fiscal Q3 2021 and all existing
hedges expired on December 31, 2020. With the Credit Facility maturity date expiring on February 28, 2021 and the Company's discussions with Westpac during fiscal Q3 2021 to payout the Credit Facility, no newhedges were placed on any production after December 31, 2020.
- Cash from Operations - Bengal generated cash from operations of $0.1 million during Q3 fiscal 2021 compared to $0.3 million of cash from operations in Q3 fiscal 2020. Cash flowgenerated from operations for the nine months ended Q3 fiscal 2021 was $0.2 million compared to $1.1 million in the nine months ended Q3 fiscal 2020. The primary reason for
the lower cash from operations in Q3 fiscal 2021 is due to lower sales volumes and lower weighted average US Brent pricing.
- Net Income - Bengal reported net income of $0.7 million for the current quarter compared to net income of $0.6 million in the third quarter of fiscal 2020. Three factors contributed to the positive net income in the current quarter - lowG&A expenditures, reduced operating costs and asignificant unrealised foreign exchange gain.
- Credit Facility - The Credit Facility matures on February 28, 2021. During fiscal Q3 2021, management was engaged with Westpac to extend/restructure the Credit Facility. On January 25, 2021, the Company announced that it had reached an agreement with Westpac to purchase the entire facility for US$10 million and extinguish the debt owing to Westpac,
subject to regulatory approvals. Pursuant to the Private Placement, Texada plans to purchase common shares in Bengal at CAD$0.05 per share to finance the Debt Settlement and to provide the Company with CAD$4 million of cash. This will allowthe Company to pursue its attractive opportunities in Australia.
- Oil Pricing -Brent crude oil pricing improved from an average of US$43.37/bbl in calendar Q3 2020 to an average of US$45.24/bbl in calendar Q4 2020. Average US Brent pricing year to date in 2021 has been $56.06/bbl.
- Production Volumes - The Company's light crude oil production in the current quarter was 19,444 bbls, which represents a 25% decline from the 25,758 bbls produced in the third quarter of fiscal 2020. The current quarter production averaged 211 bbls/d compared to 280 bbls/d produced in the third quarter of fiscal 2020. The decline in production is aresult of natural decline and conversion of the Cuisinier 24 well from producer to water injector
- Capital Expenditures - Bengal incurred $0.5 million in capital expenditures during Q3 fiscal 2021. This investment went
towards the final instalments for the waterflood program.
Water Injection Pilot - The Cuisinier field sawthe commencement of the water injection pilot project in late January 2021.
This program is designed to begin increasing pressure in the pool and thereby increase the expected oil recovery in both
productivity and reserves. As injected volumes ramp up, the project is also expected to benefit from decreased water disposal fees.
Farmin Activity - The location for the previously announced Santos farmin well has been finalized with drilling expected in
calendar H2 of 2021. The well, which has no cost to Bengal through drilling, is targeting liquids-rich natural gas from the Permian Toolachee and Patchawaraformations. Access to production infrastructure is available ashort distance away to the southeast.
Development and Exploration - Continued lowcommodity pricing resulted in no newdevelopment or exploration drilling
during the 2020 calendar year. The newpool discovery made at the Cuisinier 29 well continued to produce at forecast rates and
averaged approximately 80 bbls/d (net 24 bbls/d) during the period. As disclosed in Bengal's MD&Afor the period ending September 30 2020, the Company received regulatory approval for aspecial amendment to the initial work program on ATP 934. As acondition of the approval of the special amendment, the Company agreed to relinquish an additional 17% of the acreage subject to the permit in addition to the 33% mandatory relinquishment for atotal of 50% (240 sub-blocks) of the acreage at the
end of the first term on the permit. The acreage subject to the 50% relinquishment was determined by Bengal as being the least prospective land from atechnical perspective and with the most challenging surface access conditions. In return, the Company
was granted areduction in the total commitment from CAD$12.3 million to $1.1 million and does not expect to make any additional investments prior to the approval of asecond term on the ATP. The Company is currently working with the Government
of Queensland on amending the commitment requirements and is expecting aresolution by the end of February 2021. Progress continues to be made in preparation for recommissioning of the Wareena Gas wells on PL 114 as well as the completion of the
Poolowanna oil zone in the Ramses 2 well on PL 188.