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Cub Eyes Ukraine, Turkish Targets; Plans 9-10 Wells

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Cub Eyes Ukraine, Turkish Targets; Plans 9-10 Wells

Cub Energy Inc. has reported its interim financial and operating results for the three months ended March 31, 2013. The company also updated its plans for the rest of the year.

First Quarter 2013 Operational Highlights:

  • Record quarterly production averaged 1,528 Boe/d (96% natural gas) an increase of 53% over first quarter 2012;
  • Fourth consecutive quarter of production and revenue growth;
  • First quarter net back of $43.84/Boe or $7.31/Mcfe;
  • Strong natural gas price of $11.88/Mcf and condensate price of $95.69/bbl;
  • O-15 well cased to a total depth of 3,246 metres with four potential zones of pay identified and completion operations underway;
  • The K-7 well tested 5.9 MMcf/d and the land acquisition and regulatory approval process is proceeding for the flowline;

First Quarter 2013 Financial Highlights:

  • Gross revenue from hydrocarbon sales for the period increased 48% to $9.67 million (Q1 2012 - $6.54 million) (includes the Company's pro-rata 30% portion of revenue from hydrocarbon sales in its equity investment in Kubgas Holdings);
  • The Company estimates that its pro-rata portion of cash flow from operations from Kubgas Holdings, not including changes in working capital, to be approximately $3,633,000;
  • A $3 million dividend received during the period from Kubgas Holdings with an additional $2.4 million dividend received since period end;

Corporate Highlights:

  • On March 8, 2013, the Company announced that it has entered into an agreement to acquire a private Ukrainian oil and gas exploration company ("TGI"). TGI assets consist of approximately 70,000 gross acres of undeveloped land. As consideration for TGI, Cub will issue 55,555,555 common shares at a deemed price of $0.45 per share, representing aggregate consideration to TGI two shareholders of $25 million. The number of shares to issue to TGI will remain fixed. The transaction is expected to occur on or around June 30, 2013, and is subject to the satisfaction of standard conditions, including the receipt of applicable stock exchange and Ukraine regulatory approvals.
     
  • On April 26, 2013, the Company signed an arrangement agreement providing for the acquisition of all of the issued and outstanding shares of Anatolia Energy Corp. ("Anatolia"), a Company listed on the TSX Venture Exchange trading under the symbol AEE (the "Transaction"). Pursuant to the Transaction, the shareholders of Anatolia will receive 0.106 of a share in the Company for each Anatolia share held. Anatolia shareholders will receive approximately 13.9 million shares of the Company. Anatolia owns an interest in 11 licenses in four primary project areas in Turkey consisting of 1,162,856 gross acres (581,429 net) which are highly prospective for both conventional and unconventional resources.

Mikhail Afendikov, Chief Executive Officer of Cub Energy, commented, "I am pleased with our quarterly results and the operational performance of the company. Strong production delivery and the evolution of free cash flow leaves us well positioned for the year. We are excited about the acquisition of three additional licences in Ukraine and our move into Turkey. Both of these moves offer tremendous upside potential as we continue our growth in the Black Sea region. We have the skills and resources to reward investors with consistent, accretive, organic growth. This is a great time in Cub's story and we are excited about what is to come."

2013 Outlook

Cub's 2013 work program is fully financed and the Company is well positioned to build on its operational successes achieved in 2012.

Cub intends to drill nine to ten wells (six in Eastern Ukraine, two to three, in Western Ukraine, and one in Turkey) and will workover or recomplete six wells on the Company's Eastern Ukraine assets. As a result of these projects and from bringing production on-stream from the 2012 CAPEX programme, management forecasts that the Company will exit 2013 with a production rate nearly double that of Cub's year-end 2012 rate of 1,534 Boe/d. 

The Company expects to close on its previously announced acquisition of three additional licences in Eastern Ukraine in the second quarter of 2013 and its acquisition of Anatolia Energy in the third quarter of 2013.