Corridor Resources Inc. ("Corridor") (TSX:CDH) announced today its first quarter financial results.
The following table provides a summary of Corridor's financial and operating results for the three months ended March 31, 2017, with comparisons to the three months ended March 31, 2016. Corridor's unaudited financial statements and management's discussion and analysis for the first quarter have been filed on SEDAR at www.sedar.com and are available on Corridor's website at www.corridor.ca.
All amounts referred to in this press release are in Canadian dollars unless otherwise stated.
2017 First Quarter Highlights
As reported on April 6, 2017, Corridor, together with other partners of Anticosti Hydrocarbons L.P., has entered into negotiations with the Government of Québec with the goal of terminating the exploration joint venture project on Anticosti Island. The Anticosti joint venture is a limited partnership formed in 2014 between Corridor, Ressources Québec Inc., a subsidiary of Investissement Québec (an affiliate of the Government of Québec), Pétrolia Inc. and Saint-Aubin E&P Québec Inc. No assurance can be given that the negotiations will be successfully concluded. Corridor will only update the market further on the matter if an agreement is reached or the negotiations end without agreement.
Over the past two years, Corridor has employed a production optimization strategy whereby it has restricted its production (to varying degrees) in the McCully field in New Brunswick during the months from spring to fall. These voluntary shut-ins allow the producing horizons in Corridor's wells to build up reservoir pressure, which in turn results in flush production once the wells are placed back on unrestricted production. Corridor typically plans the restarting of the McCully field production to coincide with the North American heating season (generally considered to be November 1 to March 31) when natural gas prices have historically traded at significant premiums at Algonquin City-Gates (AGT), Corridor's natural gas market. Corridor's production optimization objective is to achieve similar field operating netback when compared to a continuous production model, while deferring production volumes for the future and extending the McCully field reserve life. The 12% decrease in Corridor's average daily natural gas production in Q1 2017 compared to Q1 2016 is largely due to management's decision to only partially restrict production during the summer/fall of 2016 versus a much more extensive shut-in in the summer/fall of 2015, the effect of which led to more flush production in Q1 2016 versus Q1 2017. In keeping with its past practices, Corridor initiated a shut-in of the vast majority of its production at McCully on April 1, 2017.
Future natural gas prices at AGT recently traded at an average of approximately $3.30 USD/mmbtu from now until the beginning of the heating season, while the 2017/18 heating season prices recently traded at an average of approximately $7.00USD/mmbtu, with prices approximating $9.00 USD/mmbtu in January and February 2018. As a component of its production optimization strategy, Corridor entered into a financial hedge for the period from December 1, 2017 to March 31, 2018 for 2,500 mmbtu per day of natural gas production (approximately 2.3 mmscf per day) at a fixed price of $US7.40/mmbtu.
Corridor has gained some key learnings from its production optimization strategy over the past two years. For example, the flush production volumes have generally lasted longer than originally expected. In addition, the elevated production rates and flowing pressures following the shut-in periods have helped reduce certain operating costs. Finally, the pressure build-up data gathering has been instrumental in modeling flush production expectations for economic analysis, as well as production uplift opportunities.
Corridor intends to purchase a user license for a controlled source electro-magnetic ("CSEM") data program to investigate the resistivity of geological prospects over the Newfoundland and Labrador sector of the Old Harry prospect, similar to resistivity logging in well bores of potential hydrocarbon zones. Highly resistive layers in a geological structure measured with CSEM technology could indicate hydrocarbon bearing reservoirs and, therefore, would serve to reduce exploration risk and increase the likelihood of finding commercial quantities of hydrocarbons. The undertaking of the CSEM program, currently planned by an independent service provider for a seven to ten day period in the fall of 2017, is subject to the receipt of the necessary regulatory approvals and vessel availability.
Annual and Special Meeting
Corridor's annual and special meeting of shareholders will be held at the offices of Bennett Jones LLP, 4500 Bankers Hall East, 855 - 2nd Street S.W., Calgary Alberta on Thursday, May 11, 2017 at 3:00 p.m. (MDT). Steve Moran, President and CEO, will make a presentation. A new management presentation will be made available on Corridor's website at www.corridor.ca on May 12, 2017.
"We are very pleased with our results from the first quarter of 2017" said Steve Moran, President and CEO. "Despite lower natural gas prices and production volumes in the first quarter of 2017, we generated a 26% increase in our cash flow from operations over Q1 2016 to a top decile of $34.20 per boe." Management is finalizing its production optimization strategy for the period from April 1, 2017 to March 31, 2018 and plans to provide capital, production and revenue guidance for that period in due course. The Company is well positioned with $33.2 million of working capital as at March 31, 2017.
Corridor is a Canadian junior resource company engaged in the exploration for and development and production of petroleum and natural gas onshore in New Brunswick and Québec and offshore in the Gulf of St. Lawrence. Corridor currently has natural gas production and reserves in the McCully Field near Sussex, New Brunswick. In addition, Corridor has a shale gas prospect in New Brunswick, an offshore conventional hydrocarbon prospect in the Gulf of St. Lawrence and an unconventional hydrocarbon prospect through a 21.67% interest in Anticosti Hydrocarbons L.P., a joint venture which has undiscovered resources on Anticosti Island, Québec.
SOURCE: Corridor Resources Inc.
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