Trimble Resources posts six-months results

Published May 13th, 2002 - 02:00 GMT

Trimble Resources Corporation, a Canadian company primarily engaged in the acquisition, development and production of crude oil properties, announced the financial results of its business operations during the six months’ period, which ended October 31, 2001.  

 

Trimble currently holds, through a subsidiary, 41.25 percent equity and 50 percent voting interest in Comeco Petroleum Inc. The major asset of Comeco is a 28.57 percent interest in the East Shabwa Development Area (ESDA) of Yemen, an oil development project.  

 

During the current six-month period, the gross revenue from sales of oil was nine million dollars compared to $13.8 million in the comparative period the previous year, a decrease of 35 percent while crude oil prices rose from $23.83 per barrel on April 30, 2001 to $23.84 per barrel on October 31, 2001.  

 

During the period, Trimble's share of East Shabwa oil sales was 372,549 barrels, gross, compared to 427,249 barrels, gross, for the comparative period last year, a decrease of 13 percent. The average price per barrel was $24.09 for current period compared to $32.27 in the comparative period, a decrease of 25 percent.  

 

During the current period, notes receivable totaled $9.5 million. The notes receivable consist of two loans. One of the loans is a $3.9 million demand note bearing interest at seven percent, which is to be fully repaid on December 14, 2001. The other note is for $5.6 million bearing interest at five percent and is due December 31, 2003.  

 

Direct Operating expenses were $1.5 million for the current period compared to $1.1 million for the comparative period, primarily as a result of maintenance services provided in the current period. This resulted from the extended use of machinery and equipment in the preceding year, due to the increase in the oil production.  

 

Transportation facilities usage fees and tariffs decreased from $0.6 million in the comparative period to $0.5 million in current period. Depletion, depreciation and amortization decreased from $4.9 million in the comparative period to $3.6 million in the current period, primarily due to the decrease in oil production.  

 

Trimble reported operating income of $3.5 million and $7.1 million in periods 2001 and 2000 respectively, before interest and general and administrative expenses. General and administrative expenses were $0.9 million in periods 2001 and 2000 respectively. The most significant general and administrative expenses included financing fees of $200,000, amortization of deferred charges of $251,582 and consulting and advisory fees totaling $232,200.  

 

The financing fees were paid to a bank subsidiary of MFC Bancorp Ltd., a corporation which acquired approximately 53 percent of the common shares of Trimble, effective October 12, 2001. The financing fees related to advising the board of directors of Trimble regarding strategies for dispositions of assets, future financing strategies and other future strategic directions for the company.  

 

The consulting and advisory fees included consulting fees of $75,000 pertaining to an acquisition project and a commitment fee of $100,000 pertaining to a line of credit commitment fee, which were paid or accrued to the bank subsidiary of MFC. Legal fees for the period were $35,718 and accounting fees totaled $82,692.  

 

Although Trimble's investment in Comeco is passive, the company is actively seeking other strategic options and potential disposition alternatives for its interest in Comeco. As a result, Trimble has incurred soft costs in considering such alternatives, which accounts for the relatively high general and administrative expenses which include items such as legal and accounting fees incurred in drafting documents and analyzing strategic alternatives.  

 

Each quarter, an independent consultant from the oil and gas industry hired by Trimble, meets with the operators of the ESDA and assesses the operations of the company's Yemen investment.  

 

Direct operating costs increased from $1.1 million in the comparative period to $1.5 million in the current period, an increase of $0.4 million or 31 percent. The operator of the ESDA, TOTAL/FINA, incurs direct operating and maintenance expenses in the following categories: field labor; water disposal including chemical treatment; workover of producing wells including recompletions and pump changes; geotechnical studies including reservoir modeling; and field transportation charges such as trucking both oil and water where necessary.  

 

Income before income taxes was $1.6 million in current period compared to $4.4 million in the comparative period, primarily as a result of the decrease in oil sales, which was partially offset by gain on investments in current period.  

 

Trimble paid income taxes to the Yemen government of $2.1 million and $3.2 million in the 2001 and 2000 periods respectively relating its oil and gas activities in Yemen. Due to uncertainty of utilizing the non-capital loss carryforwards that are available only in Canada, Trimble provides a full valuation allowance for future income tax assets.  

 

No interest or G&A costs were capitalized during the respective periods. Trimble does not expect that site restoration costs will be material or have a material adverse effect on the company's financial position, according to a company press release. 

 

The ongoing development of the ESDA requires: the drilling of additional production wells, the drilling of additional water disposal wells, the building of new or the expansion of existing water handling facilities; and an ongoing seismic program to determine the existence of other prospective oil or gas fields. Workovers of existing wells are treated as part of operating costs by the operator. During the six months ended October 31, 2001, Trimble's share of such capital expenditure programs was $563,253.  

 

The ESDA is governed by a Production Sharing Agreement (PSA) providing that all of the costs and expenses incurred by the working interest partners, which includes Comeco, be recovered out of 40 percent per year of the crude oil produced and the remaining crude oil, after deducting the Cost Oil, is to be shared 70 percent by the Yemen government and 30 percent by the working interest partners up to 25,000 barrels of oil per day. Incremental oil  

production above the threshold is to be shared 75 percent by the Yemen government and the working interest partners, respectively.  

 

The exploration and development program has resulted in the discovery and partial exploitation of three currently producing oil fields: Khair, Atuf N.W. and the Wadi Taribah. Commercial oil production has been established from three primary geologic horizons: the Biyad sandstones, the Saar carbonates, and the fractured granitic Basement.  

 

The Kharir field is the largest of the three fields containing a total of 11 producing wells. The Kharir field is partitioned into three areas: Kh1 and Kh2 producing from the Biyad sandstones only, and Kh3 producing from both the Biyad and Saar formations. The Atuf N.W. field is the second largest field with current production only from the Biyad sandstones penetrated by three production wells. The Wadi Taribah has only one currently producing oil well from the fractured Basement zone.  

 

In addition to the existing producing oil fields, several prospective anomolies have been identified through a recent 2-D seismic program. A drilling program is being prepared by the operator of the ESDA to test the larger of these anomolies.  

 

Oil is transported by pipeline from the Kharir field to the main export pipeline in the adjacent Masila block, which is operated by Nexen (formerly Canadian Occidental). A short pipeline spur connects the Atuf N.W. field to the main Kharir pipeline. Oil is trucked from the Wadi Taribah field to the Kharir field. The produced oil is marketed in conjunction with Nexen's production.  

 

Effective October 12, 2001, MFC Bancorp Ltd., through its wholly owned subsidiaries, acquired 4,511,835 common shares in Trimble, representing approximately 53 percent of Trimble's outstanding common shares.  

 

Subsequent to October 31, 2001, Trimble sold its investments with a carrying value of $3.8 million to an independent trust of its parent company for $4.2 million cash, representing the fair market value on the date of transaction. — (menareport.com) 

© 2002 Mena Report (www.menareport.com)


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