Ikkuma Resources Corp. Announces First Quarter 2018 Financial and Operating Results

CALGARY, May 30, 2018 /CNW/ – Ikkuma Resources Corp. (“Ikkuma” or the “Corporation”) (TSXV: IKM) is pleased to report its financial and operating results for the three months ended March 31, 2018.  Financial and operational information is set out below and should be read in conjunction with Ikkuma’s March 31, 2018 unaudited interim financial statements and the related management’s discussion and analysis (“MD&A”).  Ikkuma’s condensed unaudited interim financial statements and MD&A are available for review at www.sedar.com and on the Corporation’s website at www.ikkumarescorp.com.

HIGHLIGHTS

• Achieved record average production for the first quarter of 2018 of 19,292 boe per day, an increase of 194% compared to 6,572 boe per day for the first quarter of 2017.
• Increased revenue by 140% to $24.7 million for the three months ended March 31, 2018 compared to $10.3 million for the three months ended March 31, 2017.
• Decreased general and administrative expense by 51% to $0.80 per boe for the three months ended March 31, 2018 compared to $1.63 per boe for the three months ended March 31, 2017.

FINANCIAL AND OPERATING RESULTS

Average production for the first quarter of 2018 was 19,292 boe per day, an increase of 194% compared to 6,572 boe per day for the first quarter of 2017.  The increase was primarily due to production volumes related to the acquisition of assets located in the Alberta Foothills and British Columbia Deep Basin (the “Foothills Acquisition”), which closed on December 21, 2017.

Petroleum and natural gas revenues increased 140% to $24.7 million for the three months ended March 31, 2018 compared to $10.3 million for the three months ended March 31, 2017.  The increase was primarily due to increased production volumes associated with the Foothills Acquisition.

Operating netbacks for the first quarter of 2018 were $1.55 per boe compared to $6.90 per boe for the first quarter of 2017.  The decrease in operating netbacks for the first quarter of 2018 was primarily due to a 29% reduction in realized natural gas prices and increased operating costs associated with properties acquired with the Foothills Acquisition.  As the acquired properties are fully integrated into existing operations, Ikkuma anticipates that field optimization initiatives will reduce operating costs per boe throughout the remainder of 2018 and into 2019.

With increased production, general and administrative expense per boe decreased by 51% to $0.80 per boe for the three months ended March 31, 2018 compared to $1.63 per boe for the three months ended March 31, 2017.

Adjusted funds flow for the three months ended March 31, 2018 of $0.3 million included realized gains of $1.3 million associated with the Corporation’s risk management program.  In comparison, adjusted funds flow for the three months ended March 31, 2017 was $2.7 million which included $0.1 million of realized gains on risk management contracts.  For 2018, approximately 17% of the Corporation’s expected average daily natural gas production has been hedged at an average price of $2.55/GJ.

Capital expenditures for the three months ended March 31, 2018 were $0.8 million compared to $8.8 million for the three months ended March 31, 2017.  During the first quarter of 2018, a right of first refusal (“ROFR”) agreement associated with the Foothills Acquisition did not close.  Accordingly, the properties and production associated with this ROFR agreement were acquired by Ikkuma for $2.7 million.

Net debt, which includes the Corporation’s syndicated credit facility (the “Credit Facilities”), second lien senior secured term debt facility (“Term debt”) and a working capital deficiency (excluding fair value of risk management contracts) was $61.2 million as at March 31, 2018 compared to $58.0 million as at December 31, 2017. Bank debt was $1.7 million as at March 31, 2018 compared to $10.4 million as at December 31, 2017.

LIQUIDITY

On May 28, 2018 the Corporation entered into an Amending Agreement with respect to its existing Credit Facilities with its banking syndicate, whereby the borrowing base was maintained at $25.0 million.  The Credit Facilities include $15.0 million which is available at full discretion of the Corporation and $10.0 million is restricted by the lenders. The Credit Facilities include a restriction which prevents the funds from being used for capital spending related to the Corporation’s CEE flow-through share obligations and related commitments. The renewal term out date for the Credit Facilities was extended to May 30, 2019.

Ikkuma is actively pursuing several options to fund its 2018 flow-through share obligations.  As previously announced, the Corporation entered into a non-binding letter of intent to sell certain midstream pending execution of a definitive purchase and sale agreement.  The Corporation also announced it has engaged GMP FirstEnergy to sell non-core production and additional infrastructure assets through a public process.

GUIDANCE

Due to the current low natural gas price environment, Ikkuma has shut-in a portion of its gas production during the second quarter of 2018.  As a result, average daily production is expected to be in the range of 15,500 – 16,500 boe/d in the second quarter of 2018.  The Corporation plans to bring the shut-in portion of its production on once natural gas prices improve, which is expected in the fourth quarter of 2018.

As a result of shut in decisions, guidance for average daily production in 2018 is now expected to be in the range of 16,500 – 17,500 boe/d from the previous guidance of 17,500 – 18,500 boe/d.  Production guidance excludes potential non-core asset divestments.

ABOUT IKKUMA

Ikkuma Resources Corp. is a diversified growth-oriented public oil and gas company listed on the TSX Venture Exchange under the symbol “IKM”, with holdings in both conventional and unconventional projects in Western Canada.  The Company is focused in the Foothills Region of Western Canada with a team that has extensive experience in the area with the unique skills at successfully exploiting a complex and potentially prolific play type.  Corporate information can be found at: www.ikkumarescorp.com.