Niko Reports Results for the Quarter Ended September 30, 2013

Niko Reports Results for the Quarter Ended September 30, 2013 
CALGARY, ALBERTA -- (Marketwired) -- 11/15/13 -- Niko Resources Ltd.
("Niko" or the "Company") (TSX:NKO) is pleased to report its
operating and financial results for the quarter ended September 30,
2013. The operating results are effective November 14, 2013. All
amounts are in U.S. dollars unless otherwise indicated and all
amounts are reported using International Financial Reporting
Standards unless otherwise indicated. 
PRESIDENT'S MESSAGE TO THE SHAREHOLDERS 
In the second quarter of fiscal 2014, the Company announced a shift
in its strategic focus to developing and appraising the assets in the
D6 Block in India, while maintaining optionality on the balance of
its exploration portfolio. To provide the financial capacity to
implement this strategy, the Company has signed a non-binding term
sheet for up to $340 million of debt financing and signed a letter of
intent with Diamond Offshore relating to a settlement of the
Company's payment obligations and other commitments under drilling
contracts for the semisubmersible drilling rigs Ocean Lexington and
Ocean Monarch. The settlement agreement is expected to be executed
upon completion of negotiations and concurrently with the Company's
proposed financing. The Company is also finalizing its plans for the
remainder of the portfolio and have engaged Citi to act as its
financial advisor in connection with the sale of certain of its
non-core assets in India and Trinidad. In addition, the Company is
working on farming out portions of its interests in many of its
exploration production sharing contracts and rescheduling its
exploration commitments.  
The management of Niko has been aggressively engaged in active
pursuit of a comprehensive financing arrangement since the beginning
of the fiscal year. To date it has secured net proceeds of $110
million from two short term "bridge" financings and has received
proceeds of $61 million from its program of farm-outs, asset sales
and other arrangements. Despite this aggressive pursuit, the Company
has not been able to raise from conventional sources the funds
required to completely reset its capital structure. As a result, it
has been necessary to look for funds from lenders that are willing to
lend to companies whose credit standing is considered to be high
risk.  
"Admittedly, this will be a very high cost finance package with tight
repayment terms and other highly restrictive terms. However, the
proposed debt financing is to be repaid in four years and there is
the ability to prepay in two years with certain premium
considerations. The D6 Block is a valuable and growing asset that is
expected to have a long life with higher production and revenue from
new wells, new fields and increases in the price of natural gas.
Bridging the gap from the Company's current condition to the expected
higher value and production from D6 and other Niko assets is worth
the high cost of the arrangements."  
Edward S. Sampson - President and Chief Executive Officer, Niko
Resources Ltd. 
LIQUIDITY AND CAPITAL RESOURCES 
The Company has entered into a non-binding term sheet with
sophisticated institutional investors to provide the majority of the
funding for a senior secured credit facility of up to $340 million
(the "Proposed Credit Facility") that would provide funds to
refinance certain of its existing debt obligations, to fund the
Company's investment in the D6 Block and otherwise for general
corporate and working capital purposes. The Proposed Credit Facility
would be secured on a first priority basis, subject to certain
permitted liens, by substantially all of the assets of the Company
and its subsidiaries and would have terms that are customary for debt
financings of this type for similarly situated borrowers. The
Proposed Credit Facility would provide for quarterly interest
payments as well as a certain royalty payment by the Company to the
lenders in respect of revenues received from the D6 Block. 
In addition, the Company has signed a letter of intent with Diamond
Offshore relating to a settlement of the Company's payment
obligations and other commitments under drilling contracts for the
semisubmersible drilling rigs Ocean Lexington and Ocean Monarch. The
settlement agreement is expected to be executed upon completion of
negotiations and concurrently with the Company's proposed financing
transaction. 
The consummation of the Proposed Credit Facility is subject to a
number of closing conditions, including, without limitation,
execution of the settlement agreement with Diamond Offshore,
satisfaction of the Company's unsecured non-convertible notes
obligation from sources other than the Proposed Credit Facility, the
completion of the lenders' due diligence, and the execution and
delivery of certain definitive documentation.  
The Company has engaged Credit Suisse and another global investment
bank to arrange the proposed financing transactions. 
There can be no assurance, however, that the Company will be able to
obtain the Proposed Credit Facility or execute the settlement
agreement with Diamond Offshore on the terms described above or at
all. 
The Company is also finalizing its plans for the remainder of the
portfolio and have engaged Citi to act as its financial advisor in
connection with the sale of certain of its non-core assets in India
and Trinidad. Sale of these assets could provide proceeds that could
be used to fund the Company's future capital programs or pay down the
Proposed Credit Facility. In addition, the Company is working on
farming out portions of its interests in many of its exploration
production sharing contracts and rescheduling its exploration
commitments.  
As at September 30, 2013, the Company had a working capital
deficiency of $110 million. The Company's unrestricted cash and cash
equivalents balance of $55 million at September 30, 2013 and
anticipated revenues from its operating assets are expected to be
sufficient to satisfy the anticipated cash requirements of its
operating subsidiaries for the foreseeable future, but are not
expected to be sufficient to satisfy its current liabilities and meet
its current exploration and drilling rig commitments. The Company has
negotiated extended payment terms with many of its suppliers of
drilling and related services to its exploration subsidiaries.  
The Company's current credit facilities are reserve based lending
facilities that are not expected to provide sufficient borrowing base
capacity for funding of the Company's planned activities. As at
September 30, 2013, the availability under the facilities is $80
million and the facilities are fully drawn. The Company is working
with the syndicate banks on a deferral from October 31 to November
29, 2013 for the date of the re-determination of the borrowing base
under the current credit facility and from November 29 to December
31, 2013 for the date of any required repayment to reflect the new
borrowing base. As at September 30, 2013, the Company had placed $15
million in escrow for the benefit of its credit facility lenders and
a further $18 million received by the Company in October was placed
in escrow, with these funds to be used, if required, to fund any
reduction in outstanding borrowings. The Company has received a
waiver from the syndicate banks of a provision in a previous consent
agreement regarding a restriction on the use of cash balances, with
similar waivers potentially required in future months.  
There is uncertainty regarding whether the Company can complete all
or a portion of the above efforts, raising significant doubt about
the Company's ability to continue as a going concern. 
REVIEW OF OPERATIONS AND GUIDANCE 
Sales Volumes 


 
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                                             Quarter ended     Quarter ended
(MMcfe/d)                               September 30, 2013     June 30, 2013
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D6 Block, India                                         54                53
Block 9, Bangladesh                                     56                50
Other(1)                                                 2                 3
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  Total(2)                                             113               107
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(1) Other includes Hazira in India, and Canada.                             
(2) Figures may not add up due to rounding.                                 

 
Total sales volumes for the second quarter of fiscal 2014 increased
to 113 MMcfe/d from 107 MMcfe/d for the first quarter of fiscal 2014
due to the positive impact of workovers and the sale of crude oil and
condensate volumes that had been held in inventory at the end of the
first quarter. At the Bangora field in Block 9 in Bangladesh, the
workovers of a suspended well and a producing well increased
production in the quarter, reaching over 67 MMcfe/d from the field in
September 2013. In the D6 Block in India, approximately 400 b/d (2.4
MMcfe/d) of the Company's share of crude oil and condensate
production volumes that had been held in inventory at the end of the
first quarter were sold in the second quarter, with approximately 200
b/d (1.2 MMcfe/d) sold in October.  
Development drilling activities in the D6 Block in India commenced in
September 2013 with the spudding of the MA-8 development well in the
MA oil and gas field, with the well expected to be on-stream in
December 2013. The drilling rig used for this well will now mobilize
to the Dhirubhai 1 and 3 gas fields in the D6 Block to commence a
three-well workover program that is expected to increase the volumes
from this field in the fourth quarter of the fiscal year. These
development activities are targeted to contribute to an annual
average sales volumes forecast for the Company of between 112 and 116
MMcfe/d for fiscal 2014 and 133 MMcfe/d for fiscal 2015.  
Funds from Operations(1) 


 
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                                             Quarter ended     Quarter ended
(millions of U.S. dollars)              September 30, 2013     June 30, 2013
----------------------------------------------------------------------------
Funds from operations                                   32                15
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(1) Includes other income related to cash gain of a farm-out.               

 
Funds from operations for the second quarter of fiscal 2014 were $32
million compared to $15 million for the first quarter of fiscal 2014,
benefitting from the cash gain related to the Company's farm-out of a
40 percent interest in the Grand Prix block in Madagascar and from
increased sales volumes.  
Capital and Exploration Expenditures, net of Proceeds of Farm-outs
and Other Arrangements(1) 


 
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                                             Quarter ended     Quarter ended
(millions of U.S. dollars)              September 30, 2013     June 30, 2013
----------------------------------------------------------------------------
Total                                                  112                37
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(1) Excludes proceeds related to cash gain of a farm-out recorded as other  
 income.                                                                    

 
Capital and exploration expenditures, net of proceeds of farm-outs
and other arrangements, totaled $112 million for the second quarter
of fiscal 2014. Spending in the quarter related primarily to
exploration activities in Indonesia and Trinidad, and the
commencement of drilling of development and appraisal wells in the D6
Block in India. Two wells drilled in Indonesia, the Elang-1 well in
the Cendrawasih Block and the Elit-1 well in the Kofiau Block, did
not encounter significant hydrocarbons and have been expensed. In
addition, the Company suspended its drilling program in Indonesia in
the second quarter and expensed the moving and standby costs related
to the Ocean Monarch drilling rig. 
The level of Company's funds from operations and capital spending for
the remainder of fiscal 2014 and beyond will be dependent on a number
of factors, including the successful execution of the Proposed Credit
Facility transaction, and guidance on funds from operations and
capital spending for fiscal 2014 and fiscal 2015 will be provided at
a later date. 
FINANCIAL RESULTS 
Net Loss 


 
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                                             Quarter ended     Quarter ended
(millions of U.S. dollars)              September 30, 2013     June 30, 2013
----------------------------------------------------------------------------
Net loss                                               149                59
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Net loss for the second quarter of fiscal 2014 was $149 million
compared to $59 million for the first quarter of fiscal 2014. In the
current quarter, the Company recorded $122 million of exploration and
evaluation expenses, primarily related to unsuccessful wells in
Indonesia, including two wells drilled in the current quarter and the
Ajek-1 well drilled in the prior year in the Kofiau Block, and to rig
mobilization and standby costs. The Company also recorded impairments
totaling $21 million in the current quarter related to the
relinquishments of the Central Range Shallow and Deep Blocks in
Trinidad and the four Cendrawasih Blocks in Indonesia.  
Q2 Interim Report  
Copies of the Company's Q2 Interim Report for the quarter ended
September 30, 2013 (including Management's Discussion and Analysis
and the consolidated Financial Statements for the quarter ended
September 30, 2013) are available on the Company's website and have
been filed with securities regulatory authorities and will be
available by referring to the Company's profile on SEDAR at
www.sedar.com. 
Conference Call 
Niko will be hosting its Q2 Results conference call on Friday,
November 15th, 2013 at 9:00 am MST/ 11:00 am EST. The conference call
will be webcast and the link to the webcast is
http://www.gowebcasting.com/5066. A transcript of the conference call
will be available on the Company's website until November 29, 2013. 
Forward-Looking Information  
Certain statements in this press release constitute forward-looking
information within the meaning of applicable securities legislation. 
Specifically, this press release contains forward-looking information
relating to the proposed shift in strategic focus of the Company, the
Proposed Credit Facility and settlement agreement with Diamond
Offshore, the proposed sale of non-core assets and farm-out
transactions involving exploratory production sharing contracts, the
satisfaction of all conditions to closing of the Proposed Credit
Facility, including execution of the settlement agreement with
Diamond Offshore and satisfaction of the Company's unsecured
non-convertible notes obligation from sources other than the Proposed
Credit Facility, the re-determination of the Company's borrowing base
under the Company's existing credit facility, drilling activities in
the D6 Block in India and the corresponding increases in sales
volumes from these drilling activities anticipated in fiscal 2014 and
2015. Undue reliance should not be placed on forward-looking
information.  Such forward-looking information reflects the Company's
current beliefs and assumptions and is based on information currently
available to the Company. This forward-looking information is based
on certain key expectations and assumptions, including expectations
and assumptions regarding its 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, environmental
matters, business prospects and opportunities, prevailing commodity
prices and exchange rates, applicable royalty rates and tax laws,
future well production rates, the performance of existing wells, the
success of drilling new wells, the availability of capital to
undertake planned activities, the availability and cost of labour and
services and general market conditions.  The reader is cautioned that
the assumptions used in the preparation of such information, although
considered reasonable at the time of preparation, may prove to be
incorrect. 
Actual results may vary from the information provided herein as a
result of numerous known and unknown risks and uncertainties and
other factors and such variations may be material. Such risk factors
include, but are not limited to: the risks associated with the oil
and natural gas industry in general, such as operational risks in
development, exploration and production, delays or changes in plans
with respect to exploration or development projects or capital
expenditures, the uncertainty of estimates and projections relating
to production rates, costs and expenses, commodity price and exchange
rate fluctuations, marketing and transportation risks, environmental
risks, competition, the ability to access sufficient capital from
internal and external sources, changes in tax, royalty and
environmental legislation, the impact of general economic conditions,
imprecision of reserve estimates, the lack of availability of
qualified personnel or management, stock market volatility, risks
associated with satisfying the conditions to closing for the Proposed
Credit Facility (including, without limitation, the negotiation of
definitive documentation, completion of due diligence to the
satisfaction of  the lenders, access to sources of funding necessary
to retire the outstanding unsecured non-convertible notes, completion
of the settlement with Diamond Offshore), risks associated with the 
completion of the settlement with Diamond Offshore (including the
negotiation of definitive documentation), the risks discussed under
"Risk Factors" in the Company's most recent Annual Information Form
and in the Company's public disclosure documents, and other factors,
many of which are beyond the Company's control.  Niko makes no
representation that the actual results achieved during the forecast
period will be the same in whole or in part as those forecast. 
Non-IFRS Measures 
The selected financial information presented throughout this press
release is prepared in accordance with IFRS, except for "funds from
operations". Funds from operations, which have been derived from the
financial statements and applied on a consistent basis, is used by
management to assess past performance and to help determine its
ability to fund future capital projects and investments. Funds from
operations is calculated as cash flows from operating activities
prior to the change in operating non-cash working capital, the change
in long-term accounts receivable and exploration and evaluation costs
expensed to the statement of comprehensive income. Funds from
operations should not be viewed as a substitute for measures of
financial performance presented in accordance with IFRS or as a
measure of a Company's profitability or liquidity. This non-IFRS
measure do not have any standardized meaning prescribed by IFRS and
is therefore unlikely to be comparable to similar measures presented
by other companies.
Contacts:
Niko Resources Ltd.
Edward Sampson, Chairman of the Board, President & CEO
Glen Valk, VP Finance & CFO
(403) 262-1020
www.nikoresources.com
 
 
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