Treaty Energy Corporation Newsletter for the Week of September 23, 2013
This newsletter is for the week of September 20, 2013 and contains information current Company operations as of September 23, 2013. Information contained in this newsletter may be outdated at the time of release. Prior issues of the newsletter may be found on the Company’s website located at http://www.treatyenergy.com/investors/news . Comments on the Quarterly Financials (Treaty Energy Corporation):
With the release of the Q1, work has begun on Q2 and Q3 of 2013. The Company has requested that auditors come to the Company’s headquarters in an attempt to speed up the time between the next release(s). As stated previously in prior newsletters.
“Prior to their release, shareholders should be aware that the Q1 2013 financial statement will reflect actions taken by management in its evaluation of existing well operations, while simultaneously making several internal operating changes. Q2 2013 will reflect the transition in operating strategy from marginal “shallow well” operations to exploratory drilling operations with new “deeper” wells (Mitchell #3 and #4). Q3 2013 and beyond will start reflecting the success of management’s strategic policy changes.”
The Company released the Q1 financials with full disclosure to shareholders that expenses were high. However, as stated in the press release announcing the Q1 financials, the Company noted several positive gains, especially that revenue for the three months ending March 31, 2013 increased 58.9% to $138,617 from $57,016 revenues in the same period a year earlier and that the results of lease evaluations resulted in the Company’s oil and gas leases producing revenues equal to 81% of the previous reported 2012 year’s total revenues.
In February of 2013, the Company specifically promised shareholders that it would increase revenues and production, to which it did during Q1 of 2013. While the Company would like to have had production be higher, it was not possible on the existing lease inventory. Our commitment to increasing production remains strong and to date, the Company is still at higher levels of production than in all of 2012.
Increased A/S
While it is disheartening to several shareholders to see an increase in A/S, it is one of the major ways that the company is able to continue supporting and funding operations. In order to keep external secured debt low (banks and other lenders); the Company uses investment dollars to forward operations. Management believes that until we meet cash flow positive status, the increases in the A/S are considered necessary, but temporary, actions. The Company would also rather issue shares than issue royalty overrides to push the Company closer to CFP quicker.
Increasing the A/S is a sound and strategic option considering circumstances. If an A/S increase did not occur, company developments and operations would likely cease, which would be severely negative for all shareholders. Fortunately, the Company has a strong investor base that believes strongly in the Company’s future. Through this investor base, the Company will be able to grow, increase the earnings per share and reach a revenue positive future.
It should also be noted that this action has not occurred yet. It is a planned and announced action as a result of further and potential financing.
Once the Company moves into cash flow positive status, there will likely be scheduled share buy backs designated to retire shares. This CFP share buyback plan has always been stated as the ultimate goal for the Company. The Company fully intends to make good on its promise once CFP has been reached and company finances reach positive status.
Shareholders who are upset about this A/S increase are strongly encouraged to reach out to the Company’s investor relations line listed at the end of this newsletter so that we may better understand your concerns.
The Company is resolved in increasing production – and has done so considerably since late 2012. The Company is resolved in moving to cash flow positive, which is the current and utmost priority. Achieving a sustainable revenue stream and increasing operations will benefit new and old shareholders alike.
Announced Resignations
As announced in the Q1 2013, Mr. George Warren and Mr. Lee Schlesinger have both voluntarily resigned from the Company’s board of directors and from their respective CFO and CIO positions. The Company planned to issue a more formal announcement on the matter later this week, but it was unknowingly added to the 10-Q right before its release as a subsequent event. The Company intended to add it to the Q2 financials as a subsequent event following a more formal announcement.
While it is unfortunate to have both Mr. Warren and Mr. Schlesinger leave the Company, both parties remain strong supporters of the Company’s future. The Company appreciates the hard work and dedication that both brought to the Company while they were employed by Treaty Energy Corporation. Several details of their departure are still being worked out; however both will be still supporting the Company in some fashion.
These resignations were a part of the Company’s motives to increase profitability quicker. The functions of both the CFO and the CIO will be fulfilled temporarily by the CEO, COO and other staff until profitability is achieved. Once the Company financially develops more substantially, these positions will be refilled.
West Texas (C&C Petroleum Management, LLC):
Mitchell #1
On September 17, 2013 a work over rig arrived on site and performed the required maintenance to put the well into production. The well has been put into production and is currently pumping to the tanks, emptying out the remaining fluids that were put into the well when it was reworked.
Stockton #2 & #3
Update at 3:00pm, 9/23/2013: Piping and site preparation began today, please see photos on the Company’s Facebook at: http://www.facebook.com/TreatyEnergyCorp .
As announced last week, drilling is expected to begin on the Stockton #2 and #3 by Wednesday, September 25, 2013. Crews arrived on the site to perform drilling preparations on Thursday afternoon, but were unable to complete site operations due to strong thunderstorms in the area. Rain continued until Saturday evening. Crews arrived on site Monday morning to determine if the ground was dry enough to proceed with operations. Currently, the Company is on track to begin drilling by Wednesday, but may start drilling on Thursday depending on current ground conditions.
Belize (Treaty Belize Energy, Ltd):
Update at 2:30pm, 9/23/2013: The part isin Belize and crews will begin working on removing the packer tomorrow morning (September 24, 2013).
As of current information on Thursday, September 19, 2013, the Company is still awaiting a custom collar to be made for the stuck packer in San Juan #3. To provide more information on the situation in Belize, a custom fitted collar must be manufactured to ensure that the well is not damaged. Ordinarily in these situations, a normal collar could be ordered and the packer could be removed using a rig that specializes in packer removal. However, due to the lack of oil and gas infrastructure in Belize, a custom part must be manufactured to be retrofitted to the Company’s equipment in Belize.
This process can take between 2-3 weeks to custom manufacture and the time delay is unavoidable based on the circumstances. The company manufacturing the part stated that it may be an additional 3 weeks for shipping, however the Company sent a representative to Texas to retrieve the part to expedite the process.
Shareholders need to be aware that while a single well in Texas may take a week or two to complete, it may take months to complete in Belize. This is not unheard of, or unexpected in oil and gas exploration. The geology in the area is unknown, and as such challenges may arise. In this particular case, the porous limestone in the area is particularly troublesome towards Belize operations. Each well brings us a greater understanding of the area and how to overcome particular challenges that the area may bring.
The Company wants to specifically address some concerns regarding Belize at this time. The Company has not completed San Juan #3 at this time. This does not mean the well is a failure or a success, it means that it is not complete. While this may lead to speculation – the Company has been upfront regarding all Belize operations at this time and as a commitment to its shareholders towards greater transparency, will continue to do so.
Another concern has been a map of Belize wells that have appeared on various message boards. San Juan #1 and #2 are non-commercial exploratory wells – the Company admitted to this in early February. The classification is disputed internally, but the Company fully recognizes and understands the classifications given by the Government of Belize.
Notes on Newsletters:
Newsletters are released on every Monday unless otherwise noted. The timing of the release is dependent on multiple factors but will generally be released between 12pm and 5pm, CDT.
If the IR department does not have current information on a specific project, a newsletter will still be released, but that information may be omitted. In these instances, shareholders should assume that the status of those operations remain unchanged.
Following last week’s newsletter, the IR department was inundated with calls regarding Belize operations. The news from the week prior did not change; as such it was omitted from the newsletter. It has not changed this week, but offers some clarification on the delays caused by the increased manufacturing time.
The Company is committed to transparency, and created these newsletters to specifically address shareholder concerns regarding changes in operations and the need for greater transparency on projects. Once changes in operations occur, they will be addressed in the newsletter as part of our commitment to shareholders.
If projects are not addressed, assume that the status remains unchanged. For example, despite speculation, the Mitchells #3 and #4 are still producing daily. However, they are not addressed on a daily basis because this is a normal operation for an oil and gas company.
Investor Packet:
The investor packet will be released on Wednesday, September 25, 2013 and will be downloadable on the Company’s Texas operations page located at: http://www.treatyenergy.com/operations/texas . The Company will also be revamping that portion of the site to coordinate with the informational release. Belize will also receive an informational update at a later time.
Contact:
Treaty Energy Corporation
Investor Relations
investors@treatyenergy.com
Tel: 504-754-6926
Fax: 504-324-0844
Company Links:
Website: http://www.treatyenergy.com
Facebook: https://www.facebook.com/TreatyEnergyCorp
Twitter: https://twitter.com/TreatyEnergyCo
