Pebercan Inc. has unveiled its results for the third quarter ended September 30, 2008. All amounts are in U.S. dollars.
Highlights: Q3 2008 versus Q3 2007
Third Quarter 2008 Results
Block 7 total production fell 7.7%, to 1,678,548 barrels (18,245 bbl/d) against 1,818,926 barrels (19,771 bbl/d) in the third quarter of 2007.
Pebercan's net share of Block 7 production stood at 550,128 barrels (5,980 bbl/d), down 15.1% from the 647,900 barrels (7,042 bbl/d) recorded in the same year-ago quarter. This decrease is explained by the increase in profit oil for which the allocation percentage is lower than for cost recovery. The allocation affects Pebercan's share of total production.
Revenues grew 32.3% to $38,696,000 as at September 30, 2008 against $29,252,000 in the third quarter of 2007.
As a result of the increase in oil revenues associated with greater cost recovery and the surge in the price of oil, Pebercan recorded net earnings of $8,175,000 ($0.11 per share, basic and diluted) in the third quarter of 2008 compared to $9,234,000 ($0.12 per share, basic and diluted) at the same time last year, a decrease of 11.5%.
However, as a result of payment arrears totalling $108.5 million, the Company recorded an unrealized impairment loss of $8.6 million against its oil receivables.
Results for the First Nine Months of 2008
Block 7 total production slipped 0.7% to 5,281,708 barrels (19,347 bbl/d).
Pebercan's net share of Block 7 total production stood at 1,770,710 barrels, down 17.3% from the 2,142,079 recorded for the same period in 2007.
Nine months into the year, oil revenues were up 30.3% to $107,704,000 versus $82,687,000 for the first three quarters of 2007. This increase is mainly owed to the rise in the gross sales price, which jumped 55.8%, from $45.15/barrel in the third quarter of 2007 to $70.34/barrel a year later.
Despite the terms of the renegotiated sales agreement with Cupet under which discounts rose from 18% and 19% to 26% and 27%, the Company is reaping the benefits of higher oil prices.
Revenues from drilling services recorded until March 2007 stopped completely once the equipment was sold in April 2007.
Net earnings for the first three quarters of 2008 reached $33,524,000$ ($0.45 per basic share and $0.44 per diluted share), against $26,806,000$ ($0.36 per basic share and $0.35 per diluted share) for the same year-ago period, largely due to the surge in the sales price of oil.
Working capital stood at $151,210,000 versus $103,511,000 at the end of last year.
As at September 30, 2008, oil receivables were $138,557,000 versus quarterly sales of $38,696,000. Cupet's late payments rose sharply in the third quarter of 2008.
At the date hereof, despite frequent contact between Pebercan management and Cupet, no concrete, objective action has been taken to settle the arrears.
Moreover, it should be noted that the global economic slowdown and the fallout of hurricanes Gustav and Ike on Cuba are affecting all the Cuban government's actions.
With this in mind and in accordance with CICA Section 3855, the Company discounted the value of its oil receivables to reflect Cupet's late payments, as it had done in the second quarter, resulting in an unrealized impairment loss of $8,608,000.
However, negotiations concerning the debt repayment are scheduled with Cupet in the next quarter so that Pebercan will have a clear idea of where it stands as at December 31, 2008. Whether or not a provision will be made for its oil receivables hinges on the outcome of these negotiations.
For the first nine months of the year, Pebercan made investment commitments of 17,239,000 ($38,134,000 in 2007) and spent $25,911,000 ($45,851,000 in 2007).
The 2009 investment program will be developed based on the financial agreements concluded with Cupet.
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