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Americas Petrogas Announces First Quarter 2014 Results

CALGARY, ALBERTA -- (Marketwired) -- 05/30/14 -- Americas Petrogas Inc. ("Americas Petrogas" or the "Company") (TSX VENTURE:BOE) announces its first quarter 2014 results.

Summary Financial and Operational Highlights

Selected financial and operational information is outlined below and should be read in conjunction with the Company's interim consolidated financial statements and the related Management's Discussion and Analysis ("MD&A") for the quarter, which have been filed on SEDAR under the Company's profile at www.sedar.com and are also available on the Company's website at www.americaspetrogas.com. All amounts are in Canadian dollars unless otherwise stated.


($ in thousands, except share, per share, and                               
 per barrel amounts)                             Three months ended March 31
                                              ------------------------------
                                                        2014            2013
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Gross oil sales revenue                         $      9,108   $      16,450
                                                                            
Net revenue(1)                                  $      7,763   $      14,347
                                                                            
Operating netback (including Oil Plus                                       
 benefits)(2)                                   $      4,094   $      13,167
                                                                            
Operating netback (including Oil Plus                                       
 benefits) per barrel(2)                        $      36.73   $       60.88
                                                                            
Operating netback (excluding Oil Plus                                       
 benefits) per barrel(2)                        $      36.73   $       47.70
                                                                            
Net income (loss) attributable to owners of                                 
 the Company(3)                                 $    (24,557)  $       4,338
                                                                            
Earnings (loss) per share- basic and diluted    $      (0.12)  $        0.02
                                                                            
Funds flow from operations(4)                   $      2,047   $       9,874
  Per share - basic                             $       0.01   $        0.05
  Per share - diluted                           $       0.01   $        0.05
                                                                            
Weighted average number of common shares                                    
 outstanding(5)                                                             
  Basic                                          212,572,440     212,760,484
  Diluted                                        214,139,198     216,952,633
                                                                            
Cash flow from operating activities             $      8,860   $       5,465
                                                                            
Capital expenditures                            $     10,948   $      27,296
                                                                            
Average barrels sold per day                           1,238           2,403
                                                                            
Average selling price per barrel                $      81.72   $       76.06
                                                                            
                                                                            
                                                                            
($ in thousands)                          March 31, 2014   December 31, 2013
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
Cash and cash equivalents                $        15,217  $           18,334
Working capital(6)                       $        14,746  $           21,687
                                                                            
Equity outstanding                                                          
  Common shares                              212,572,440         212,572,440
  Stock options                               17,946,093          17,946,093

Notes:


1.  "Net revenue" is an additional GAAP measure because it is presented in
    the consolidated statement of income (loss). Net revenue is gross
    revenue less royalties. The Company uses "net revenue" as an indicator
    of operating performance.  
2.  "Operating netback" is a non-GAAP measure and is calculated as revenues
    from oil sales less royalties and production costs. Operating netback is
    used as an indicator of operating performance, profitability and
    liquidity. "Operating netback (excluding Oil Plus benefits)" excludes
    any Oil Plus benefits credited to production costs. "Operating netback
    (including Oil Plus benefits)" is net of any Oil Plus benefits credited
    to production costs. Operating netback does not have a standardized
    meaning prescribed by IFRS. It is unlikely for non-GAAP measures to be
    comparable to similar measures presented by other companies. For the
    three months ended March 31, 2014, operating netback was $4.1 million
    (calculated as gross oil sales revenue of $9.1 million less royalties of
    $1.3 million and production costs of $3.7 million). For the three months
    ended March 31, 2013, operating netback was $13.2 million (calculated as
    gross oil sales revenue of $16.5 million less royalties of $2.1 million
    and production costs of $1.2 million). 
3.  The net loss in 2014 includes a non-cash foreign exchange loss of $17.97
    million associated with the Company's USD intercompany loans. See note
    16(c) of the Company's condensed interim consolidated financial
    statements for the three months ended March 31, 2014 and section "1.4
    Results of Operations -- Foreign Exchange Gain/Loss and Other
    Comprehensive Income/Loss" of the Company's MD&A for the quarter. 
4.  "Funds flow from operations" is an additional GAAP measure because it is
    presented in the consolidated statement of cash flows. Funds flow from
    operations and funds flow from operations per share are used to analyze
    operating performance and liquidity. Funds flow from operations is
    calculated as net cash generated from (used by) operating activities (as
    determined in accordance with IFRS) before changes in non-cash balance
    sheet operating items. Funds flow from operations per share is
    calculated by dividing funds flow from operations by the weighted
    average number of shares outstanding. Funds flow from operations should
    not be considered an alternative to, or more meaningful than net cash
    generated from (used by) operating activities as determined in
    accordance with IFRS. Funds flow from operations per share should not be
    considered an alternative to, or more meaningful than earnings (loss)
    per share as determined in accordance with IFRS. 
5.  Diluted weighted average number of common shares outstanding is computed
    by adjusting basic weighted average number of common shares outstanding
    for dilutive instruments. The number of shares included with respect to
    options, warrants and similar instruments is computed using the treasury
    stock method, which assumes any proceeds received by the Company upon
    exercise of the in-the-money instruments would be used to repurchase
    common shares at the average market price for the period. For the three
    months ended March 31, 2014, 1,566,758 (three months ended March 31,
    2013 - 4,192,149) common shares were deemed to be issued for no
    consideration in respect of options. 
6.  Working capital is a non-GAAP measure and is calculated as current
    assets less current liabilities. Working capital is used to assess
    liquidity and general financial strength. Working capital does not have
    a standardized meaning prescribed by IFRS. It is unlikely for non-GAAP
    measures to be comparable to similar measures presented by other
    companies. Working capital should not be considered an alternative to,
    or more meaningful than current assets or current liabilities as
    determined in accordance with IFRS. 

--  Net loss: The loss for 2014 of $24.6 million is primarily attributable
    to a non-cash, foreign exchange loss of $17.97 million on intercompany
    loans between the Canadian parent company and its Argentina subsidiary,
    which arose primarily due to an approximate 20% decline in the Argentina
    Peso against the US dollar in January 2014. For the three months ended
    March 31, 2013, net income was $4.3 million.  
    
--  Cash position: $15.2 million of consolidated cash and cash equivalents
    as of March 31, 2014. In May 2014, the Company announced that it had
    executed an underwriting agreement to raise gross proceeds of $15
    million. For additional information, see "Highlights and Recent
    Activities" below. 
    
--  Oil Plus benefits: during the first quarter of 2014, the Company did not
    recognize any Oil Plus benefits, though $7.3 million of Oil Plus
    benefits (recognized in 2013) were collected in January 2014. During the
    year ended December 31, 2013, the Company recognized $25.5 million of
    Oil Plus benefits (related to production and reserve increases). As of
    the current date, a total of $26.8 million of Oil Plus benefits have
    already been collected. An additional $16.2 million has been applied for
    and remains to be collected. 

Highlights and Recent Activities


--  In May 2014, the Company entered into an underwriting agreement with a
    syndicate of underwriters to raise $15 million in gross proceeds (the
    "Offering"). The Company has filed a preliminary short form prospectus
    in connection with the Offering, which is being conducted in all
    provinces in Canada (except Quebec) and outside of Canada where
    permitted under applicable securities laws. The Offering consists of
    16,666,666 units (the "Units") of the Company at an offering price of
    $0.90 per Unit, with each Unit consisting of one Common Share and one-
    half of one Common Share purchase warrant (each whole Common Share
    purchase warrant, a "Warrant"). Each Warrant is exercisable for a period
    of 36 months following closing at an exercise price of $1.125 per Common
    Share. The Company has granted to the underwriters an over-allotment
    option which entitles the underwriters to acquire up to an additional
    15% of the Units distributed in the Offering at the Offering price at
    any time up to 30 days following the closing of the Offering. The
    Company expects to close the Offering on or about June 6, 2014, subject
    to satisfaction of customary closing conditions. In connection with the
    Offering, the underwriters will receive a cash commission equal to 6% of
    the gross proceeds raised under the Offering and non-transferable
    compensation options entitling the Underwriters to acquire up to 500,000
    Units (575,000 Units if the over-allotment option is exercised in full)
    for a period of 12 months from the closing date of the Offering at $0.90
    per Unit having the same terms as the Units comprising the Offering.  
    
--  On September 19, 2013, Americas Petrogas announced a strategic review,
    which commenced a process to review strategic alternatives for
    maximizing shareholder value. The Company engaged Jefferies LLC as its
    sole financial advisor to assist management in evaluating a range of
    strategic alternatives. The strategic review is ongoing and the Company
    continues to evaluate a range of alternatives. 
    
--  So far in 2014, as the Company reduces its capital expenditures in an
    effort to preserve its cash position while the strategic review with
    Jefferies is ongoing, oil sales volumes in 2014 have been lower in
    comparison to 2013. Sales volumes during the first quarter of 2014,
    including oil sales from testing unconventional wells, averaged 1,238
    bopd (net), a decrease over the average daily production during the same
    period in 2013, which was 2,403 bopd (net).  
    
--  As of January 2014, the Company successfully completed and brought on-
    stream its own power generation facility at Medanito Sur using
    associated gas from oil production. This now allows substantially all of
    the operations at Medanito Sur to be powered via the produced gas. This,
    in turn, has reduced the need for rental generators and associated
    diesel and labour costs. Management estimates that it will be able to
    power approximately 400 pump jacks and associated surface process
    facilities using this system.  
    
--  In April 2014, the Company began a gas reinjection program, injecting
    approximately 1 million cubic feet per day (mmcfd) of produced gas into
    the top of the El Tordillo formation at the easternmost updip area of
    the El Jabali Field. The total gas treatment and injection capacity is 7
    mmcfd. 
    
--  In May 2014, the Peruvian state-owned company Activos Mineros S.A.C. and
    the Executive Director of ProInversion executed the transfer agreement
    formally granting the Bayovar Property to APPSA, Americas Petrogas'
    Peruvian subsidiary. 
    
--  The Company obtained an extension until September 2015 of its
    exploration contract terms for the Totoral, Yerba Buena and Bajada
    Colorada Blocks while returning to the government a total of
    approximately 1,510 square kilometers in the three blocks, leaving the
    Company with 3,048 square kilometres or 753,200 acres gross (2,743
    square kilometres or 677,880 acres net). Ryder Scott Company estimated
    (updated as of March 31, 2014) that the Company has 7.56 billion BOE P50
    Best Case Unrisked Prospective (Recoverable) Resources (27%
    oil/condensate and 73% gas) in the Company's nine unconventional shale
    oil and shale gas properties. The original estimates (8.3 billion BOE
    P50 Best Case Unrisked Prospective (Recoverable) Resources) were
    included in a report prepared as of June 30, 2013 but, subsequently, the
    estimates were amended to account for the aforementioned return of lands
    to the government on the Totoral, Yerba Buena and Bajada Colorada
    Blocks. The Ryder Scott estimates only considered the Vaca Muerta, Agrio
    and Los Molles shales. The report did not consider additional zones of
    interest such as the Mulichinco, Quintuco, Tordillo, and other
    prospective formations.  

For further information regarding the Company's financial results, financial position and related changes, please see the interim consolidated financial statements and the related MD&A.

About Americas Petrogas Inc.

Americas Petrogas Inc. is a Canadian company whose shares trade on the TSX Venture Exchange under the symbol "BOE". Americas Petrogas has conventional and unconventional shale oil and gas and tight sands oil and gas interests in numerous blocks in the Neuquen Basin of Argentina. Americas Petrogas has joint venture partners, including ExxonMobil and YPF, on various blocks in the shale oil and gas corridor in the Neuquen Basin, Argentina. Americas Petrogas also owns an 80% interest in GrowMax Agri Corp., a private company involved in the exploration for near-surface potash, phosphates and other minerals, and potential development of a fertilizer project in Peru. Indian Farmers Fertiliser Co-operative Limited (IFFCO) owns a 20% interest in GrowMax Agri Corp. For more information about Americas Petrogas Inc., please visit www.americaspetrogas.com.

Forward Looking Information

This Press Release contains forward-looking information including, but not limited to, the Company's goals and growth, estimates of reserves and resources, production and cash flows, reviewing various strategic alternatives, exploration, appraisal and development activities related to conventional and unconventional oil and gas, other exploration, development and production activities in respect of the projects in Argentina and Peru, and closing of the Offering. The recovery and resources estimates for the Company's properties described in this Press Release are estimates only and there is no guarantee that the estimated resources will be recovered. The actual resources for the Company's properties may be greater or less than those calculated. Additional forward-looking information is contained in the Company's Annual MD&A and Annual Information Form for the year ended December 31, 2013, and reference should be made to the additional disclosures of the assumptions, risks and uncertainties relating to such forward-looking information in those documents.

Forward-looking information is based on management's expectations regarding the Company's future growth, results of operations, production, future capital and other expenditures (including the amount, nature and sources of funding thereof), competitive advantages, plans for and results of drilling activity (including the timing, location, depth and the number of wells), environmental matters, business prospects and opportunities and expectations with respect to general economic conditions. Such forward-looking information reflects management's current beliefs and assumptions and is based on information, including reserves and resources information, currently available to management. Forward-looking information involves significant known and unknown risks and uncertainties. A number of factors could cause actual results, performance or achievements to differ materially from any future results, performance or achievements expressed or implied by the forward-looking information, including but not limited to, risks associated with the oil and gas industry (e.g. operational risks in development, exploration and production, delays or changes to plans with respect to exploration or development projects or capital expenditures; the uncertainty of reserve estimates; the uncertainty of geological interpretations; the uncertainty of estimates and projections in relation to production, costs and expenses and health, safety and environment risks, extensions of concessions and commitments), the risk of commodity price and foreign exchange rate fluctuations, the uncertainty associated with negotiating with foreign governments and third parties located in foreign jurisdictions and the risk associated with international activity and the risk of being unable to raise significant funds on terms acceptable to the Company to meet its capital and operating expenditure requirements in respect of its properties.

Although the forward-looking information contained herein is based upon assumptions which management believes to be reasonable, the Company cannot assure investors that actual results will be consistent with this forward-looking information. This forward-looking information is made as of the date hereof and the Company assumes no obligation to update or revise this information to reflect new events or circumstances, except as required by law. Because of the risks, uncertainties and assumptions inherent in forward-looking information, prospective investors in the Company's securities should not place undue reliance on this forward-looking information.

The term BOE (barrels of oil equivalent) is used in this press release. All calculations converting natural gas to BOE have been made using a conversion ratio of six thousand cubic feet (six "Mcf") of natural gas to one barrel of oil, unless otherwise stated. The use of BOE may be misleading, particularly if used in isolation, as the conversion ratio of six Mcf of natural gas to one barrel of oil is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. Given that the value ratio based on the current price of crude oil as compared to natural gas is significantly different from the energy equivalency of 6:1, utilizing a conversion on a 6:1 basis may be misleading as an indication of value.

Prospective Resources are those quantities of petroleum estimated, as of a given date, to be potentially recoverable from undiscovered accumulations by application of future development projects. Prospective resources have both an associated chance of discovery and a chance of development. Uncertainty Ranges are described by the COGEH as low, best, and high estimates for reserves and resources. The Best Estimate is considered to be the best estimate of the quantity that will actually be recovered. It is equally likely that the actual remaining quantities recovered will be greater or less than the best estimate. If probabilistic methods are used, there should be at least a 50 percent probability (P50) that the quantities actually recovered will equal or exceed the best estimate.

In the case of undiscovered resources or a subcategory of undiscovered resources, there is no certainty that any portion of the resources will be discovered. If discovered, there is no certainty that it will be commercially viable to produce any portion of the resources. For undiscovered hydrocarbons, the term 'unrisked' means that no geologic or chance of discovery ("play risk") has been incorporated into the hydrocarbon volume estimates.

The estimates of resources for individual properties may not reflect the same confidence level as estimates of resources for all properties, due to the effects of aggregation.

NEITHER THE TSX VENTURE EXCHANGE NOR ITS REGULATION SERVICES PROVIDER (AS THAT TERM IS DEFINED IN THE POLICIES OF THE TSX VENTURE EXCHANGE) ACCEPTS RESPONSIBILITY FOR THE ADEQUACY OR ACCURACY OF THE RELEASE.

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