Bengal Energy Ltd. announces its financial and operating results for the fourth quarter of fiscal 2022 ended March 31, 2022.
FOURTH-QUARTER FISCAL 2022 HIGHLIGHTS:
The following is an overview of the financial and operational results during the three-and twelve-months ending March 31, 2022. All amounts are in Canadian funds unless otherwise noted:
• Reserves - Bengal's independently evaluated Proved Plus Probable ("2P") reserves for the fiscal year ended March 31, 2022, are 5,778 thousand barrels of oil ("Mbbls") and Proved ("1P") reserves are 2,145 Mbbls compared to 5,789 Mbbls and 2,163 Mbbls for 2P and 1P reserves respectively at March 31, 2021. The net present value (NPV10, before tax) of Bengal's 2P reserves, net of future development costs, at March 31, 2022, is $149.0 million, or $0.30 per share compared to $87.6 million at March 31, 2021. The 2P after-tax net asset value is $115 million for the current year compared to $69.2 million in the prior year.
• Sales revenue - Crude oil sales revenue was $2.4 million in the fourth quarter of fiscal 2022, which is 50% higher than the $1.6 million recorded in Q4 fiscal 2021. Full year fiscal 2022 sales revenue was $7.7 million compared to $5.2 million for the full year fiscal 2021.
• Funds from (used in) operations1 - Bengal generated $0.5 million of funds from operations during Q4 fiscal 2022 compared to a $0.2 million funds used in operations during Q4 fiscal 2021. For the full-year fiscal 2022, the Company generated $1.4 million of funds from operations compared to $0.2 million during the prior fiscal year.
• Net income - Bengal reported net income of $0.2 million for the current quarter compared to net income of $3.9 million in the fourth quarter of fiscal 2021. For the full-year fiscal 2022, the Company reported a net loss of $0.4 million compared net income of $3.9 million in the prior year. Several non-operational items contributed to net income during the prior year that were absent in the current period, including $3.7 million of foreign exchange gains and a $3.5 million gain on the settlement of the Company's Credit Facility.
• Private placement - On March 7, 2022, the Company closed a private placement to issue 52.3 million shares for $4.2 million of proceeds.
• Working capital1 - At March 31, 2022 the Company had $5.5 million of working capital and no debt.
• Production volumes - The Company's share of total production in the current quarter was 15,647 bbls of light crude oil, which is a 14% decline from the 18,222 bbls produced in the fourth quarter of fiscal 2021. The current quarter production averaged 174 bbls/day compared to 202 bbls/day produced in the fourth quarter of fiscal 2021. Full year fiscal 2022 saw total production of 66,797 bbls compared to 80,530 bbls for full year fiscal 2021. The full year fiscal 2022 production per day averaged 183 bbls compared to 221 bbls/day for the full year fiscal 2021.
• Capital expenditures - During the year, the Company commenced capital programs on two of its 100% owned and operated projects at Wareena (Petroleum Lease ("PL") 1110 & Producing Pipeline ("PPL") 138) and Caracal (Authority to Prospect ("ATP") 732). Bengal incurred $2.2 million in capital expenditures during Q4 fiscal 2022 as compared to $0.5 million in Q4 fiscal 2021 and a total of $4.3 million during the current year compared to $1.2 million during fiscal 2021. Work in these projects is currently ongoing.
Bengal has filed its consolidated financial statements and management's discussion and analysis for the year ended March 31, 2022, with the Canadian securities regulators.
Bengal's producing and non-producing assets are situated in Australia's Cooper Basin, a region featuring large accumulations of very light and high-quality crude oil and natural gas. The Company's core Australian assets, PL 303 Cuisinier, ATP 934 Barrolka, ATP 732 Tookoonooka, and four petroleum licenses acquired in calendar 2019 are situated within an area of the Cooper Basin that is well served with production infrastructure and take-away capacity for produced crude oil and natural gas. Still in early stages in terms of appraisal and development, Bengal believes these assets offer attractive upside potential for both oil and gas. Australia presents a stable political, fiscal, and economic environment in which to operate, and a favourable royalty regime for oil and gas production.
Under the State of Queensland Regulatory process, ATPs are granted by the State generally for a period of twelve years with one third of the original grant area expiring every four years. At the end of the final term of the ATP, and under certain conditions relative to exploration success, an application can be made to continue a portion of the permit in the form of a PCA (Potential Commercial Area). PCAs have a life span of five to fifteen years. PCA applications include a commercial viability report that indicates that the area is likely to be commercially viable within the applied term. This allows for extra time to commercialize the resource. These PCA's remain a part of the ATP until expiry. If a discovery of oil or gas is made, an application for a PL is made to allow for production. PLs are granted for up to a thirty-year term.
Bengal has two PLs on the former ATP 752 Barta block, PL 303 and PL 1028, in addition to three PCAs, PCA 206, PCA 207 Barta West and PCA 155 Wompi block-Nubba/Yilgarn. Bengal also holds four PLs (PL 114 Wareena, PL 157 Ghina, PL 188 Ramses, PL 411 Karnak) including a pipeline license PPL 138 adjacent to ATP 934.
AUSTRALIA - Cooper Basin, Queensland
PL303 and PL 1028 Cuisinier (controlling permit ATP 752) (30.357% WI)
A pilot reservoir pressure maintenance scheme was initiated during the prior fiscal year and after resolving mechanical issues, water injection activities resumed during calendar Q4 2021. The location of this pilot is in the southeast quadrant of the Cuisinier pool, with injection of water taking place at the Cuisinier 24 well. The broad nature of the Cuisinier structure combined with variable flank aquifer pressure support has resulted in pressure depletion within the central portion of the Cuisinier pool. The injection of produced formation water is anticipated to both increase production in up to four offsetting wells and reduce water handling charges. The Cuisinier water injection pilot has continued to face a range of surface facility-related operational issues resulting in downtimes, which have not allowed the significant subsurface success potential of this pilot to be realized as yet. Bengal Energy personnel are now working with the Operator's Onshore Operations and Development Leadership to work collaboratively towards rectifying the surface facility design challenges.
Upon establishing success of the pilot, the Joint Venture ("JV") expects to begin a multi-phase water injection scheme, targeted fracture stimulation and more commercially efficient development drilling. Since inception of the pilot, 33,500 barrels of water have been injected into the C24 well at an average rate of approximately 275 barrels of water per day over 115 operating days since December 2021. Currently, the water injection rate into C24 is approximately 300 bpd at a wellhead pressure of 9,600 kilopascals. Nearby wells are being monitored for total fluid produced and water cut to help to determine which wells are being affected by the pilot program.
In December 2021, Bengal participated in the Chef exploration drilling project. Following a review of the well logs, the ATP 752 JV parties have decided to plug and abandon the well. This exploration well is located outside of the producing Cuisinier field PL 303, in a location 4 km to the northeast with primary targets in the Jurassic Birkhead Formation and Hutton Sandstone, and secondary targets within the Triassic Nappamerri Group. The well encountered multiple oil shows in the primary and secondary targets; however, no commercial pay was identified at this location. While not a commercial success, the identified oil shows may support continued exploration targeting both the Jurassic Birkhead and newly discovered oil-bearing Triassic Nappamerri formations.
PL 114 Wareena, PL 157 Ghina, PL 188 Ramses, PL 411 Karnak, PPL 138 pipeline (100% WI)
The Company acquired a 100% working interest in four PLs and a natural gas pipeline connected to transportation infrastructure into the Eastern Australia Gas Market (collectively, the "Assets"). These non-productive PLs are highly compatible with and in close proximity to ATP 934. Bengal continues to integrate subsurface data from the PLs to enhance the Company's understanding of ATP 934 and to finalize the selection of exploration and appraisal drilling locations.
Included in this program is the reinstatement of two gas wells (Wareena-1 and Wareena-5) and an existing gas pipeline to produce raw gas into existing infrastructure. Planning and execution of the project continued through Q4 fiscal 2022 including performing a deeper zone water shut off on Wareena-5. Negotiations regarding natural gas processing and sales are ongoing with Santos as the owner of the processing infrastructure. The company is evaluating various options for commercialization of expected natural gas production, including connection through a third-party gathering system existing processing infrastructure and an innovative proof of concept for alternative monetization.
The 100% ownership of the acquired Assets presents an appraisal and development opportunity that will be operated by the Company and is seen to be not only complementary to our proven producing, non-operated Cuisinier asset, but also as a key steppingstone for Bengal's natural gas platform upon which future exploration growth through ATP 934 can be undertaken.
ATP 732 Tookoonooka (100% WI)
The Company has conducted preliminary stimulation workover and stimulation program at the Caracal-1 well, a 53 API oil discovery in the Wyandra zone. The well-produced oil to surface, although at lower than expected rates and is currently being assessed to determine capacity for commercial production. This would allow the Company to progress towards a PL or PCA on the block.
In June 2019, the Company applied for an amendment to the LWP for the third term of ATP 732 permit. On October 22, 2019, the Company received approval from the Queensland regulatory authority for an amended LWP for the third, four-year term commencing April 1, 2019, to March 31, 2023. The approved LWP was revised to minimum activities of reprocessing seismic and inversion work with an estimated cost of $0.05 million and geological and geophysical investigation at an estimated cost of $0.05 million during the four-year term.
ATP 934 Durham Downs East Farmout Block (40% WI)
Bengal entered into an agreement with Santos in July of 2020 to farm-in on a portion of the ATP 934 block. Santos carried the drilling costs of one well to earn a 60% operated interest in the ATP 934 southern farm-out block, which represents 57.8% of the total block acreage post-April 2020 relinquishment. On October 14, 2021, Santos completed the drilling of the Legbar-1 exploration well. Santos paid 100% of the costs to drill, plug, and abandon the well and has accordingly earned a 60% working interest in 103,760 km2 gross exploration land.
While the Legbar-1 Well did not indicate commercial quantities of hydrocarbons, thick, high-quality reservoir sands were encountered in the primary Permian Toolachee formation and in the Jurassic Birkhead zone, with evidence of residual hydrocarbon saturation in both zones. In addition, fluorescence shows and elevated gas readings through the Jurassic Birkhead Fm/Top Hutton Sandstone indicate oil has passed through the reservoir, supporting the search for a valid closure to test this play. The findings from the Legbar-1 well will help Bengal refine its exploration targets going forward, both with Santos in the Santos Farm-out Block, and across the balance of ATP 934 which is 100% owned by Bengal.
The Company is in discussions with potential industry and financial partners to fund some of these oil and gas-related activities.
Non-IFRS and Other Financial Measures
Non-IFRS Financial Measures
Within this MD&A, references are made to terms commonly used in the oil and gas industry. Operating netback, operating netback per barrel, funds from operations, funds from operations per share, adjusted net income, and adjusted net income per share do not have any standardized meaning under IFRS and are referred to as non-IFRS measures. Management believes the presentation of the non-IFRS measures above provides useful information to investors and shareholders as the measures provide increased transparency and the ability to better analyze performance against prior periods on a comparable basis.
Bengal utilizes operating netback as a key performance indicator and is utilized by Bengal to better analyze the operating performance of its petroleum and natural gas assets against prior periods. Operating netback is calculated oil sales deducting royalties and operating expenses.
Funds from operations
Management utilized funds from operations a measure to assess the Company's ability to generate cash not subject to short-term movements in non-cash operating working capital. Funds from operations is calculated by adding back all non-cash expense deductions to the net loss for the quarter and year.
Bengal uses working capital to monitor its capital structure, liquidity, and its ability to fund current operations. Working capital is calculated as current assets less current liabilities but excludes other obligations and the current portion of decommissioning obligations.
Non-IFRS Financial Ratios
Bengal uses operating netback per share to assess the Company's operating performance on a per unit of production basis. Operating netback per barrel equals operating netback divided by the applicable number of barrels.
Bengal uses funds from operations per share to assess the ability of the Company to generate the funds necessary for financing, operating, and capital activities on a per-share basis. This is a non-IFRS measure calculated by dividing funds from operations by weighted average basic and diluted shares outstanding for the periods disclosed.