TORONTO, March 29, 2012 /CNW/ - (TSX: SCP) Sprott Resource Corp. ("SRC" or the "Company") today announced that it has filed its annual audited financial statements for the twelve months ended December 31, 2011 and the related management discussion and analysis, as well as its Annual Information Form, which includes its Statement of Reserves Data and Other Oil and Gas Information. All filings can be found on SEDAR.
"In 2011, despite the volatility in the financial markets, we successfully executed on our strategy to create value for our shareholders through the continued growth of our subsidiaries and minority investments," said Kevin Bambrough, President and CEO of Sprott Resource Corp. "For the twelve-months ended December 31, 2011, we reported net income of $98.7 million ($0.90 per basic and diluted share) and increased net asset value (defined as total assets less liabilities and non-controlling interest) to $511.5 million from $433.2 million a year earlier. We continue to believe that our shares are trading well below their fair value and, as a result, we have been regularly buying back stock through our normal course issuer bid," continued Mr. Bambrough.
"Waseca Energy Inc. ("Waseca") reported tremendous production, reserves and net asset value growth last year," said Paul Dimitriadis, SRC's Chief Operating Officer and Director of Waseca. "Exit rate of production increased from 1,046 barrels of oil per day ("bbl/d") as at December 31, 2010 to 3,746 bbl/d as at December 31, 2011. Waseca's proved and probable reserves increased from 4.7 million barrels of oil equivalent ("boe") (95% heavy oil) as at December 31, 2010 to 24.5 million boe (99% heavy oil) as at December 31, 2011 and their net present value (10% discount rate and after income tax) increased from $84.4 million as at December 31, 2010 to $262.7 million as at December 31, 2011. As at December 31, 2011, the carrying value of our 81% stake in Waseca was approximately $42 million, which does not reflect the significant growth in Waseca's net present value during the year. We look forward to further growth from Waseca this year, with production targeted to exit 2012 at between 4,600 bbl/d and 5,000 bbl/d (all heavy oil)."
"In the agriculture segment, the Company invested in Potash Ridge Corporation ("Potash Ridge"), a private mineral resource company focused on its two 100% owned potash deposits in Utah. One Earth Farms Corp. ("One Earth Farms") also continued to expand its operations and, in 2012, will be exploring opportunities to develop premium-branded products from its crop and cattle operations," said Steve Yuzpe, the Company's Chief Financial Officer.
The following table outlines SRC's net asset value as at December 31, 2011 and reflects the value at which individual items are carried on SRC's balance sheet as at such date.
SRC 2011 Net Asset Value
|(in thousands)||As at|
|Dec. 31, 2011|
|Cash and Cash Equivalents1||$15,336|
|Other current assets||996|
|Consolidated investment in:3|
|OEOG (defined below)||11,493|
|One Earth Farms||47,879|
|Fair value investment in:|
|WestFire (defined below)4||162,541|
|Guide (defined below)5||48,731|
|Union Agriculture Group6||45,441|
|Potash Ridge (defined below)7||9,900|
|VA Uranium Holdings, Inc.||4,421|
|Equity investment in:|
|Less: Current Liabilities||(3,421)|
|Less: Non-Current Liabilities||(16,060)|
- This represents cash held at SRC or Sprott Resource Limited Partnership and does not include cash held within subsidiaries of SRC or investee companies.
- As at December 31, 2011, SRC held 73,971 ounces of gold bullion valued at $1,590 per ounce.
- Waseca, OEOG and One Earth Farms are controlled subsidiaries of SRC and are carried at their adjusted book value.
- As at December 31, 2011, SRC owned 28.7 million shares of WestFire (common and non-voting convertible) valued at $5.67 per share.
- As at December 31, 2011, SRC owned 15.5 million common shares of Guide valued at $3.14 per share.
- As at December 31, 2011, SRC owned 3.4 million common shares of Union Agriculture Group valued at $13.42 per share, which is the price at which Union Agriculture Group completed its last financing.
- As at December 31, 2011, SRC owned 13.2 million common shares of Potash Ridge valued at $0.75 per share, which is the price at which Potash Ridge completed its last financing.
- As at December 31, 2011, SRC owned 46.9 million common shares of Stonegate Agricom valued at $0.37 per share. The December 31, 2011 value of these shares was $0.89.
SRC 2011 Financial Highlights
- SRC reported net income of $98.7 million for the twelve-months ended December 31, 2011 compared to a net loss of $5.6 million for the same period in 2010.
- Net assets (defined as total assets less total liabilities and non-controlling interest) attributable to the shareholders of the Company increased from $433.2 million as at December 31, 2010 to $511.5 million as at December 31, 2011.
- For the twelve-months ended December 31, 2011, the Company purchased and cancelled 769 thousand common shares under its normal course issuer bid at an average cost of $4.16 per share for a total cost of $3.2 million. Subsequent to year end and to the date hereof, the Company purchased and cancelled 1.1 million common shares under the normal course issuer bid at an average cost of $4.02 per share for a total cost of $4.5 million. The Company believes that it is in the best interest of its shareholders to purchase shares for cancellation when management believes they are trading at a significant discount relative to their value.
Achievements by SRC Subsidiaries and Investees in 2011 (and to the date hereof):
- On June 30, 2011, SRC announced that its now former subsidiary Orion Oil and Gas Corporation completed its strategic merger with WestFire Energy Ltd. ("WestFire") pursuant to a previously announced plan of arrangement ("Arrangement"). The Company recorded a gain of $88.4 million ($77.3 million net of taxes) as a result of the Arrangement. The Company received shares in WestFire and did not receive any cash.
- The Company recorded a fair value increase of $12.0 million in its physical gold bullion holdings during 2011 compared to an increase of $20.8 million in 2010. As at December 31, 2011, the gold bullion had a fair market value of $117.6 million.
- On March 10, 2011, the Company closed a secondary offering of 25 million common shares of Stonegate Agricom Ltd. ("Stonegate Agricom") at a price of $1.75 per common share for aggregate gross proceeds of $43.7 million. On April 6, 2011, the Company announced that the underwriters of the secondary offering of common shares of Stonegate Agricom exercised their over-allotment option in full, resulting in the sale by SRC of an additional 3.8 common shares at a price of $1.75 per share for aggregate gross proceeds to SRC of $6.6 million. SRC currently holds 46.9 million common shares of Stonegate Agricom, representing a 32.5% interest in Stonegate Agricom on an undiluted basis (27.0% on a fully-diluted basis).
- SRC added to its position in Guide Exploration Ltd. ("Guide") and owns as of the date hereof approximately 16.1% of the total issued and outstanding common shares, based on information contained in documents publicly filed by Guide. As at December 31, 2011 SRC owned approximately 16.8% of the common shares. SRC has acquired the common shares of Guide for investment purposes. SRC may purchase or sell securities of Guide in the future on the open market, in private transactions or otherwise, depending on market conditions and other factors material to the investment decisions of SRC.
- On December 9, 2011SRC completed an additional investment into One Earth Oil & Gas Inc. ("OEOG") for $6.3 million to continue to develop opportunities in Central and Northern Alberta. After giving effect to the transaction, SRC's interest in OEOG increased to approximately 91% on an undiluted basis.
- On January 4, 2012 the Company announced that it has invested $6.9 million in Potash Ridge in a series of non-brokered private placements completed by Potash Ridge. As a result of its investment, SRC owns approximately 19.9% of Potash Ridge.
- On March 2, 2012, SRC invested US$50 million in Independence Contract Drilling, Inc. ("ICD"), a newly formed company that will provide land-based contract drilling services in the U.S. through a fleet of technologically advanced, newly constructed drill rigs. SRC owns approximately 31.6% (undiluted) of ICD's outstanding common shares.
- Exit rate of production increased 258% to 3,746 boe/d as at December 31, 2011 compared to the prior year.
- Drilled 75 (72.9 net) wells in 2011, resulting in 64 wells put on production during the year, with two additional wells (drilled in 2011) put on production in 2012
- Waseca recorded $41.6 million in net oil sales in 2011, a 344% increase over 2010.
- Waseca's oil sales generated a netback of $34.10 per boe in 2011, compared to $26.00 per boe in 2010.
- Proved reserves increased from 2.3 million boe as at December 31, 2010 to 4.4 million boe as at December 31, 2011. Proved plus probable reserves increased from 4.7 million boe as at December 31, 2010 to 24.5 million boe as at December 31, 2011.
- On October 18, 2011, Waseca announced the commencement of a process to consider a range of strategic alternatives available, with a view of maximizing shareholder value. Since that time, the Board of Directors of Waseca considered corporate sale proposals, proposals for a material portion of Waseca's assets and a corporate reorganization among other alternatives. After careful analysis, consideration and advice from its financial advisor, the Board concluded that the most beneficial outcome for all shareholders is for Waseca to continue to operate independently and pursue its existing business plan.
- OEOG commenced production on April 1, 2011 in the Wetaskiwin area of Alberta. During 2011, through drilling and acquisitions, the company brought on-stream three additional gas wells (total of four gross and 2.7 net gas wells) and three oil wells (2.2 net oil wells) in Central Alberta and increased average production for the period and the Exit Rate of Production as at December 31, 2011 to 255 boe/d and 366 boe/d respectively.
One Earth Farms
- For the twelve months ended December 31, 2011, recorded a net loss of $14.0 million compared to a net loss of $11.1 million in 2010.
- Expanded its crop acres farmed to 91 thousand from 35 thousand acres in 2010.
- Increased livestock herd to 13,703 from 3,620 in 2010.
- Recorded $18.5 million in revenues for the twelve months ended December 31, 2011, an increase of 133% over the comparative period.
- During the fourth quarter of 2011, the Company's cattle operation weaned 6,785 calves and completed its first sale using grass-fed, natural (hormone and antibiotic free) protocols.
- SRC recorded an equity loss of $3.2 million for the year ended December 31, 2011 on its investment in Stonegate Agricom, primarily due to general and administrative expenses, stock based compensation expenses and foreign currency translation losses during the year.
- For the twelve-months ended December 31, 2011, SRC realized a gain of $35.9 million on gross proceeds of $50.3 million on the sale of 28.8 million common shares of Stonegate Agricom. After giving effect to the sales of common shares, the Company's ownership of Stonegate Agricom was 32.5% as at December 31, 2011.
About Sprott Resource Corp.
SRC is a Canadian-based company, the primary purpose of which is to invest and operate in natural resources through its subsidiaries. Through acquisitions, joint ventures and other investments, SRC seeks to provide its shareholders with exposure to the natural resource sector for the purposes of capital appreciation and real wealth preservation. SRC is well positioned to draw upon the considerable experience and expertise of both its Board of Directors and Sprott Consulting LP (SCLP), of which Sprott Inc. is the sole limited partner. Pursuant to a management services agreement between SCLP and SRC, SCLP provides day-to-day business management for SRC as well as other management and administrative services. SRC invests and operates through Sprott Resource Partnership (SRP), a partnership between SRC and Sprott Resource Consulting Limited Partnership, an affiliate of SCLP which is the managing partner of SRP.
Forward Looking Statements
This news release includes forward-looking information relating to Waseca's reserves, Waseca's 2012 production targets and One Earth Farms exploring opportunities to develop premium branded products. Forward-looking information looks into the future and provides an opinion as the effect of certain events and trends on the business of SRC and, more specifically, forward-looking information relating to "reserves" is deemed to be forward-looking information, as such information involves the implied assessment, based on certain estimates and assumptions that the reserves described can be profitably produced in the future. The forward-looking information contained in this news release is based on current expectations and various estimates, factors and assumptions including, among others: historical production in the areas in which the Waseca's reserves are located compared with production rates from similar producing areas; future commodity prices, production and development costs, royalties and capital expenditures; initial production rates; production decline rates; ultimate recovery of reserves; success of future exploitation activities; marketability of production; effects of government regulation; and other government levies that may be imposed over the producing life of reserves.
All forward-looking information is inherently uncertain and subject to a variety of risks, uncertainties and other factors that may cause SRC's actual results, performance or achievements to be materially different from those expressed or implied from such information, including: general economic, market and business conditions; fluctuation in market prices for petroleum and natural gas; fluctuations in foreign exchange rates; changes in laws and regulations; geological, technical, drilling and processing problems and other difficulties in producing petroleum and natural gas reserves; change in business strategy; uncertainties associated with estimating petroleum and natural gas reserves; and risks associated with oil and gas operations generally.
SRC has attempted to identify important factors that could cause its results, performance and achievements to differ materially from those contained in the forward-looking information contained in this news release. However, there can be other factors that cause results, performance and achievements not to be as anticipated, estimated or intended. There can be no assurance that such information will prove to be accurate or that management's expectations or estimates of future developments, circumstances or results will materialize. Accordingly, readers should not place undue reliance on the forward-looking information contained in this news release. SRC does not intend, and does not assume any obligation, to update these forward-looking information contained in this news release except as required by law. For a description of additional material factors that could cause the Company's actual results to differ materially from the forward-looking statements, please see the risks and uncertainties set out in the "Forward-Looking Statements" section and "Risk Factors" section in the Company's Annual Information Form for the year ended December 31, 2011.
Information Regarding Disclosure on Oil and Gas Information
Where amounts are expressed in a barrel of oil equivalent ("boe"), or barrel of oil equivalent per day ("boe/d"), natural gas volumes have been converted to barrels of oil equivalent on the basis that 6 thousand cubic feet ("mcf") is equal to one barrel of oil. Use of the term boe may be misleading, particularly if used in isolation. This boe conversion ratio is based on an energy equivalence methodology, and does not represent a value equivalency. Indeed, the energy and value relationships may differ widely with market conditions. The conversion conforms to the Canadian Securities Regulators' National Instrument 51-101 - Standards of Disclosure for Oil and Gas Activities.
The future net revenue estimates in this news release do not represent fair market value.
International Financial Reporting Standards (IFRS)
The year ended December 31, 2011 is the first annual statements that the Company has reported its results under International Financial Reporting Standards ("IFRS") rather than Canadian GAAP. The Canadian Accounting Standards Board requires publicly accountable enterprises to adopt IFRS for fiscal years beginning on or after January 1, 2011. We have applied IFRS retrospectively as of January 1, 2010 for comparative purposes.
Chief Financial Officer
Tel: (416) 977-7333
Fax: (416) 977-9555