Exploration & Production | Quarterly / Earnings Reports

Crown Point Preps for More Tierra del Fuego Drilling Onshore Argentina

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Crown Point Energy Inc. has reported its operating and financial results for the three and nine months ended September 30, 2013.

Highlights:

• Tierra del Fuego Concessions Extended - Approval of ten year extensions to November 2026 received.
• Ten Well Initial Tierra del Fuego Drilling Program Planned - Drilling operations expected to commence in Q1 2014.
• Cerro de Los Leones Oil Exploration Drilling Target Selected - Crown Point plans to drill an exploration well in Q1 2014 on the La Hoyada prospect. This is the western structure of the two separate structures that have been identified on the recent 3-D seismic program. The well will target multiple conventional formations on the same producing structural trend which is productive immediately to the south of Cerro de Los Leones.
• Argentina New Gas Incentive Program - On August 16, 2013, Crown Point submitted to the Argentine Government its formal proposal for participation in the New Gas Program announced by the President of Argentina. Finalization of the New Gas Program structure and terms and the approval of program applications have not yet occurred. 
  
  The New Gas Program is designed to encourage and compensate gas producers by paying cash compensation to companies who increase production above a corporate base production rate provided that their natural gas production remains at or above a negotiated committed level of production.
• Petro Plus Credits - During the nine months ended September 30, 2013, the Company received proceeds of US$2.8 million for the sale of Petroleo Plus Credits. Crown Point received an additional US$1.0 million of proceeds in October 2013 and expects to receive US$2.4 million of proceeds in December 2013 for recently approved certificates relating to 2011 and 2012 production. The Company also has US$2.0 million of outstanding certificates relating to the remainder of 2012 and 2013 production and reserves.
• Argentina and Repsol SA Reach Preliminary Accord on Compensation for the Nationalisation of YPF -Respol SA announced that they have reached a preliminary agreement with the Argentina Government for the compensation payable for the 2012 nationalization by the Argentine Government of Repsol SA's 51-per-cent stake in YPF. Depending on the confirmation and finalization of terms and conditions, any agreement intended to resolve the dispute between Argentina and Repsol SA is expected to be positive for the oil and gas industry in Argentina. Any progress made with Repsol SA would be key to unlocking foreign investment in the energy sector and critical in helping reverse the country's declining energy production trend and reducing the existing energy deficit over the midterm. In turn, new foreign direct investment would help to mitigate the drain of international reserves, which is a top priority for the Argentine government.

Financial & Operating Results

Results for the three and nine months ended September 30, 2013 include:

• Average Sales Volumes: 1,730 BOEPD and 1,841 BOEPD for the three month and nine month periods ended September 30, 2013, as compared to 1,888 BOEPD and 857 BOEPD for the comparative three and nine month periods ended August 31, 2012⁽¹⁾, respectively, and 2,053 BOEPD for the four month period ended December 31, 2012.
• Operating Netback per BOE: $13.23 and $14.16 for the three and nine month periods ended September 30, 2013, as compared to $14.12 and $19.03r for the comparative three and nine month periods ended August 31, 2012, respectively, and $15.65 for the four month period ended December 31, 2012. As Tierra del Fuego volumes, which include a large percentage of natural gas and earn a lower operating netback than oil sales volumes from the El Valle area, are only included in the June 1 to August 31 portion of the nine months ended August 31, 2012, the operating netback is higher for the nine months ended August 31, 2012.
• Funds Flow From (Used By) Operations: $2.5 million and $6.0 million for the three and nine month periods ended September 30, 2013, as compared to $0.3 million and $(0.7) million for the comparative three and nine month periods ended August 31, 2012⁽¹⁾, respectively, and $2.57 million for the four month period ended December 31, 2012.

Exploration, Development & Drilling Plans

• Tierra del Fuego, Argentina
• The Company's 25.78% working interest in the Tierra del Fuego (TDF) area of Argentina covers approximately 489,000 acres (126,000 net acres) in the Austral Basin and includes the Las Violetas, Angostura Sur and Rio Cullen Exploitation Concessions (the "TDF Concessions"). The TDF Concessions are high quality, natural gas weighted assets possessing the capability to deliver increased levels of production and reserves in an expected increasing natural gas price market.
• Crown Point and it partners have defined the first ten drilling locations on the Las Violetas Exploitation Concession. Eight of the proposed wells are development locations in the Las Flamencos pool. These locations are proximal to existing infrastructure and management believes that these wells could be completed and placed on production in a relatively short time frame. The remaining two proposed wells are exploration locations on undrilled fault bounded blocks which are on trend with producing wells. Successful drilling results on these exploration wells may prove up additional development drilling locations.
• Negotiations to obtain a long term contract for a drilling rig for TDF are in an advanced stage.
• Cerro de Los Leones, Neuquén Basin, Argentina
• The Company's 100% interest in the Cerro de Los Leones Exploration Concession covers approximately 306,646 acres in the Mendoza portion of the Neuquén Basin.
• Crown Point has identified and selected drilling co-ordinates on two separate 3-D seismically defined structural features on its Cerro de Los Leones Exploration Concession. These two structural features are the northward extensions of producing structural trends on the adjacent concessions to the south of Cerro de Los Leones.
• Geologic and reservoir modeling work has been completed to determine the resource and economic potential of both structures. Well bore design has been completed, costing and pre drilling logistics are in progress.