Strong Operational Performance Drives Sherritt’s Q4 2019 Results
Sherritt International Corporation 1
For immediate release
Strong Operational Performance Drives Sherritt’s Q4 2019 Results
NOT FOR DISTRIBUTION TO UNITED STATES NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED
STATES
Toronto – February 26, 2020 – Sherritt International Corporation (“Sherritt”, the “Corporation”, the “Company”) (TSX: S), a
world leader in the mining and hydrometallurgical refining of nickel and cobalt from lateritic ores, today reported its financial
results for the three- and 12-month periods ended December 31, 2019. All amounts are in Canadian currency unless otherwise
noted.
CEO COMMENTARY
“Sherritt ended 2019 meeting or exceeding our production guidance for operations in Cuba despite a number of challenges we
faced during the year, including the adverse effects of increased U.S. sanctions against Cuba, reduced availability of diesel fuel
supply at Moa, rail service disruption in Canada, and increased volatility of input commodity prices,” said David Pathe, President
and CEO of Sherritt International. “Our ability to reach our guidance targets is indicative of the effectiveness that operational
excellence initiatives implemented over the past 18 months as well as targeted mitigation strategies had on our results.”
Mr. Pathe added, “We have been advised by our Cuban partners that we will receive an incremental US$5.0 million per month
to fund Energas operations and apply to overdue receivables in addition to the approximate US$2.5 million per month payment
under last year’s receivables agreement, which will continue. With greater visibility on expected cash flow from Cuba, today we
are launching a balance sheet initiative that benefits all stakeholders by strengthening our capital structure, reducing annual
cash interest expenses by approximately $19 million, and providing a resolution to the legacy of debt from Ambatovy.”
SUMMARY OF KEY Q4 DEVELOPMENTS
Sherritt’s share of finished nickel and cobalt production at the Moa Venture (Moa JV) in Q4 2019 were 4,049 tonnes
and 411 tonnes, respectively. The totals, which enabled Sherritt to meet or exceed its finished nickel and cobalt
production guidance for the year at the Moa JV, reflect the success of strategies implemented during the quarter to
offset the negative impact that the CN rail strike had on the transportation of mixed sulphides in Canada and the reduced
availability of diesel fuel supply in Cuba had on Moa operations.
Excluding $79.8 million of cash and cash equivalents held by Energas, Sherritt ended Q4 2019 with cash and cash
equivalents of $86.3 million. Sherritt’s consolidated cash position of $166.1 million at the end of Q4 was down from
$169.3 million at the end of Q3 2019. The change in Sherritt’s liquidity was due to a combination of factors, including
interest paid on outstanding debentures and the lower receipt of Cuban energy payments.
Received $14.9 million in dividend distributions from the Moa JV despite softening nickel and cobalt prices in the
quarter.
Received US$13.4 million in Cuban energy payments, including US$5.9 million related to the overdue receivables
agreement ratified in June and US$7.5 million attributable to Sherritt’s Oil and Gas operations.
Adjusted EBITDA(1) was $17.9 million, up 67% from $12.4 million in Q4 2018. The year-over-year improvement was
driven primarily by stronger realized nickel prices but offset by lower cobalt prices.
Net loss included $132.8 million of non-cash impairment losses related to investments in the Ambatovy Joint Venture
and the Power business assets in addition to revaluations of allowances for expected credit losses on the Ambatovy
Joint Venture loans receivable.
Sherritt and the General Nickel Company S.A. celebrated the 25-year anniversary of the formation of the Moa Joint
Venture on December 1, 2019.
SUMMARY OF KEY 2019 DEVELOPMENTS
Sherritt’s share of dividend distributions from the Moa JV totaled $43.3 million (US$32.5 million), indicative of higher
nickel prices and operational performance for 2019. Sherritt’s share of dividends in 2018 totaled $11.9 million.
Excluding the impact of stock-based compensation and depreciation, administrative expenses in 2019 declined by 5%
to $39.0 million, down from $41.2 million in 2018. Since 2014, Sherritt has reduced its administration expenses by
30%.
2019 Fourth Quarter Report
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2 Sherritt International Corporation
Sherritt’s Cuban partners ratified an overdue receivables agreement for the repayment of US$150 million from Energas
S.A., and made US$21.1 million in payments under the plan through December 31, 2019.
Filed a National Instrument 43-101 technical report on SEDAR that confirmed the Moa JV’s current Mineral Reserves
and outlined increased Mineral Resources with the potential to extend Moa’s mine life beyond its current 15 years.
Implemented a number of austerity measures, including the elimination of discretionary expenditures, the deferral of
non-critical projects and limiting the number of new hires, aimed at preserving liquidity.
DEVELOPMENTS SUBSEQUENT TO THE QUARTER END
Announced a transaction aimed at improving the Corporation’s liquidity, reducing debt levels and building balance sheet
strength. Pending approval by the requisite debtholders, court approval and the satisfaction or waiver of the other
conditions to the transaction, the transaction will reduce Sherritt’s total debt by approximately $414 million and reduce
annual cash interest payments by approximately by $19 million by, among other things, exchanging the Corporation’s
existing note obligations in the aggregate principal amount of approximately $588 million, plus all accrued and unpaid
interest thereon until the closing of the transaction, for new second lien notes of approximately $319 million (assuming
completion of the transaction at the end of April 2020), and exchanging Sherritt’s partner loans relating to the Ambatovy
Joint Venture for its 12% interest in the Ambatovy Joint Venture and related subordinated obligations owing to Sherritt
by the Ambatovy Joint Venture or amended loans with no recourse against Sherritt. The transaction will also result in
an extension of the maturity of the Corporation’s note obligations from 2021, 2023 and 2025, respectively, under its
existing notes to April 2027 under the new second lien notes.
In addition to the payments of US$2.5 million per month Sherritt is receiving following ratification of the overdue
receivables agreement with its Cuban partners in June 2019, Sherritt received a commitment from its Cuban partners,
subsequent to the end of Q4 2019, for an incremental US$5 million per month, which will be used to fund Energas
operations and reduce overdue amounts owed to Sherritt.
Sherritt completed drilling on Block 10 in December 2019, reaching the target depth of approximately 5,700 meters.
Preliminary testing, which began late in 2019, is expected to resume in the coming days now that additional work on
the well and recertification of specific pieces of equipment have been completed. Sherritt will provide an update on
progress as material developments occur.
Sherritt’s operations and partners in Cuba continue to be negatively affected by the increasing number of sanctions
and restrictions that the U.S. government has imposed against the country since May 2019. These sanctions have
included enforcement of Title III of the Helms-Burton Act, restrictions on travel to Cuba by U.S. citizens, bans on cruise
ships from porting in Cuba, restrictions on commercial vessels entering Cuba, bans on U.S. flights to Cuba except
Havana, limits on the amount of U.S. content in supplies that can enter the country, restrictions on certain types of
financial transactions, limits on family remittances to Cuba to US$1,000 per quarter, and sanctions against Cuban
medical missions abroad.
(1) For additional information see the Non-GAAP measures section of this press release.
Sherritt International Corporation 3
Q4 2019 FINANCIAL HIGHLIGHTS(1)
For the three months ended For the years ended
2019 2018 2019 2018
$ millions, except per share amount December 31 December 31 Change December 31 December 31 Change
Revenue 31.4 37.1 (15%) $ 137.6 $ 152.9 (10%)
Combined revenue(2) 143.4 142.6 1% 546.2 600.7 (9%)
Net earnings (loss) for the period (185.5) (53.1) (249%) (367.7) (64.2) (473%)
Adjusted EBITDA(2) 17.9 12.4 44% 47.3 126.2 (63%)
Cash provided (used) by continuing operations 7.3 12.6 (42%) (10.9) 7.4 (247%)
Combined adjusted operating cash flow(2) (3.4) (9.8) 65% (6.1) 29.9 (120%)
Combined free cash flow(2) 28.1 12.4 127% (24.2) 6.6 (467%)
Average exchange rate (CAD/US$) 1.320 1.320 - 1.327 1.296 -
Net earnings (loss) from continuing operations per share (0.46) (0.17) (171%) (0.92) (0.21) (338%)
(1) The financial results for the Ambatovy JV are only discussed as part of share of earnings in associate based on financial statement amounts. Prior period non-GAAP
measures have been revised to exclude the Ambatovy JV performance.
(2) For additional information see the Non-GAAP measures section.
$ millions, as at December 31 2019 2018 Change
Cash, cash equivalents and short-term investments 166.1 207.0 (20%)
Loans and borrowings 713.6 705.7 1%
Cash, cash equivalents and short-term investments at December 31, 2019 were $166.1 million, down from $169.3 million at
September 30, 2019. The decline was due to a number of factors, including lower cash generated from consolidated operations,
$15.1 million in interest payments on outstanding debentures, and $6.6 million in capital expenditures primarily related to drilling
on Block 10. The decline was partly offset by the receipt of $14.9 million in dividend distributions from the Moa JV and $17.9
million in positive working capital changes primarily related to Cuban energy receipts.
Cuban energy receipts consisted of US$5.9 million received in accordance with the Energas overdue receivables agreement
ratified in June 2019 and US$7.5 million received from CUPET for Oil and Gas receivables. No regular payments from Energas
outside of the overdue receivables agreement were received by Sherritt in Q4 2019.
Under the terms of the agreement, Sherritt received payments averaging US$2.6 million in 2019. The monthly payments were
made by way of a currency exchange involving the Moa JV and Energas with foreign currency that would be used by the Moa
JV to pay for specified costs in Cuba instead being provided to Sherritt in exchange for local currency held by Energas. Total
overdue scheduled receivables at December 31, 2019 were US$158.4 million, up from US$154.8 million at September 30, 2019.
Energy payments in FY2019 were affected by the negative impact that increasing U.S. economic and political sanctions against
Cuba have had on the country’s access to foreign currency. These sanctions include limits placed on U.S. travel to Cuba, a ban
on U.S. cruise ships entering Cuba, bans on specific types of banking transactions, and limits on the sending of family
remittances from the U.S. to Cuba to US$1,000 per quarter.
As at December 31, 2019, $79.8 million of Sherritt’s cash and cash equivalents was held by Energas in Cuba, up from $77.3
million at the end of Q3 2019.
In addition to the payments of approximately US$2.5 million per month Sherritt is receiving following ratification of the overdue
receivables agreement with its Cuban partners in June 2019, Sherritt received a commitment from its Cuban partners,
subsequent to the end of Q4 2019, for an incremental US$5.0 million per month, which will be used to fund Energas operations
and reduce overdue amounts owed to Sherritt.
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Adjusted net earnings (loss)(1)
2019 2018
For the three months ended December 31 $ millions $/share $ millions $/share
Net earnings (loss) from continuing operations (182.5) (0.46) (69.1) (0.17)
Adjusting items:
Unrealized foreign exchange (gain) loss 8.4 0.02 (20.7) (0.05)
Ambatovy impairment and ACL revaluation 112.5 0.28 44.1 0.11
Power impairment of intangible assets 20.3 0.05 - -
Other 10.4 0.03 24.9 0.06
Adjusted net loss from continuing operations (30.9) (0.08) (20.8) (0.05)
2019 2018
For the years ended December 31 $ millions $/share $ millions $/share
Net earnings (loss) from continuing operations (364.7) (0.92) (80.2) (0.21)
Adjusting items:
Unrealized foreign exchange (gain) loss 14.5 0.05 (33.3) (0.09)
Ambatovy impairment and ACL revaluation 169.5 0.43 47.4 0.12
Power impairment of intangible assets 20.3 0.05 - -
Other 1.3 (0.01) 15.6 0.05
Adjusted net loss from continuing operations (159.1) (0.40) (50.5) (0.13)
(1) For additional information see the Non-GAAP measures section.
Net loss from continuing operations for Q4 2019 was $182.5 million, or $0.46 per share, compared to a net loss of $69.1 million,
or $0.17 per share, for the same period last year.
Net loss for Q4 2019 and FY2019 includes non-cash adjustments of $112.5 million and $169.5 million, respectively, related to
revaluation of allowances for expected credit loss (“ACL”) on Ambatovy Joint Venture loans receivable under IFRS 9 and
impairment on Ambatovy. In addition, Sherritt recognized an impairment of $20.3 million on Power intangible assets in the three-
and 12-month periods ended December 31, 2019.
Adjusted net loss from continuing operations was $30.9 million, or $0.08 per share, for the three months ended December 31,
2019 compared to an adjusted net loss from continuing operations of $20.8 million, or $0.05 per share, for Q4 2018. For FY2019.
Adjusted net loss from continuing operations for FY2019 was $159.1 million, or $0.40 per share, compared to an adjusted net
loss from continuing operations of $50.5 million, or $0.13 per share for the prior year.
Sherritt International Corporation 5
METALS MARKET
Nickel
The nickel market was marked by considerable volatility in the fourth quarter. A combination of geopolitical developments,
including renewed concerns about the impact of a global trade war on China’s economy and its prospects for lower stainless
steel production and a re-assessment of the potential effects of Indonesia’s ore export ban on supply conditions, contributed
to a softening of prices and increased inventory levels by the end of the period.
Nickel prices on the London Metals Exchange (LME) whipsawed for much of Q4 as a result of changing market sentiment.
Nickel prices started at US$7.97/lb, climbed to a peak of US$8.16/lb on October 11 and then dropped to a low of US$5.93 on
December 10 before closing up at US$6.35/lb on December 31. By the end of the fourth quarter, nickel prices had declined
by 20%, reversing the positive momentum enjoyed for much of 2019. Despite the price decrease in Q4, nickel remained the
best performing metal in 2019, climbing 34% from US$4.74/lb on January 1, 2019.
The price volatility experienced in Q4 was matched by swings in inventory levels on the London Metals Exchange (LME) and
the Shanghai Future Exchange (SHFE). News that Indonesia would implement a nickel ore ban effective with the start of
2020 triggered a considerable de-stocking of inventory, dropping inventories in October to their lowest levels since the start of
the financial crisis in 2007. Inventory levels declined almost 50% from 174,000 tonnes to 91,000 tonnes during the month
largely because Chinese stainless steel suppliers looked to lock in supply and traders hoped to take advantage of anticipated
price increases. But as market conditions weakened and carrying costs rose, inventory began to flow back to the LME and
SHFE through much of December. Combined inventory levels on December 31 totaled approximately 190,000 tonnes, up
almost 8% from the start of the quarter.
The price volatility and significant shifts in inventory levels experienced in Q4 2019 are expected to be short lived as underlying
nickel market fundamentals remain strong. Demand for nickel through 2025 is expected to grow by approximately 3% per year
to 2.8 million tonnes, driven largely by the continued growth of the stainless steel sector according to market research by Wood
Mackenzie. Over the longer term, demand for nickel is expected to accelerate with the increased adoption of electric vehicles
since nickel – along with cobalt – is a key metal needed to manufacture assorted energy storage batteries.
A shortage of nickel is anticipated over the coming years since current market prices are below incentive levels needed to
develop new nickel projects. As a result, no new nickel supply is expected to come on stream in the near term.
Cobalt
Cobalt prices decreased by approximately 13% in Q4, reversing the upward trend experienced in the third quarter of 2019
when news emerged that Mutanda, a large, cobalt-producing mine in the Democratic Republic Congo, was to be placed on
care and maintenance. News of the mine shutdown triggered an immediate lift in cobalt prices by more than US$4 per pound
in August.
Standard grade cobalt prices on December 31 closed at US$15.53/lb, down from $17.85/lb at the start of the quarter according
to data collected by Fastmarkets MB. Prices at the beginning of 2019 were $US27.25/lb.
Cobalt prices in 2019 were significantly lower than the highs reached in 2018. The average reference price for standard grade
cobalt in Q4 2019 was US$16.90/lb, down 48% from US$32.23/lb in Q4 2018 according to Fastmarkets MB.
The year-over-year decline was driven by a combination of factors that has resulted in increased available supply and
decreased demand. Contributing factors included increased supply of intermediate product from the Democratic Republic of
Congo, increased available supply of processed cobalt from China, continued de-stocking of inventory by Chinese consumers
and the deferral of purchases by consumers waiting for prices to reach floor levels. Just as significant, China’s reduction of
electric vehicle purchase subsidies has curbed sales and slowed penetration of the world’s fastest growth market.
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REVIEW OF OPERATIONS
Moa Joint Venture (50% interest) and Fort Site (100%)
For the three months ended For the years ended
2019 2018 2019 2018
$ millions, except as otherwise noted December 31 December 31 Change December 31 December 31 Change
FINANCIAL HIGHLIGHTS
Revenue $ 123.4 $ 120.0 3% $ 461.0 $ 498.1 (7%)
Earnings from operations 8.7 5.4 61% 11.0 78.9 (86%)
Adjusted EBITDA(1) 26.2 17.4 51% 70.1 128.4 (45%)
CASH FLOW
Cash provided by operations $ 51.6 $ 50.2 3% $ 59.6 $ 90.7 (34%)
Adjusted operating cash flow(1) 24.0 13.4 79% 66.3 106.3 (38%)
Free cash flow(1) 44.7 39.3 14% 33.7 57.8 (42%)
Distributions and repayments to Sherritt from the Moa JV 14.9 6.7 122% 43.3 47.7 (9%)
PRODUCTION VOLUMES (tonnes)
Mixed Sulphides 4,203 4,594 (9%) 17,010 17,563 (3%)
Finished Nickel 4,049 4,294 (6%) 16,554 15,354 8%
Finished Cobalt 411 428 (4%) 1,688 1,617 4%
Fertilizer 56,284 64,573 (13%) 249,207 226,989 10%
NICKEL RECOVERY (%) 80% 84% (5%) 84% 83% 1%
SALES VOLUMES (tonnes)
Finished Nickel 4,089 4,291 (5%) 16,698 15,273 9%
Finished Cobalt 437 392 11% 1,766 1,572 12%
Fertilizer 46,467 46,924 (1%) 165,162 163,698 1%
AVERAGE-REFERENCE PRICES (US$ per pound)
Nickel $ 7.01 $ 5.20 35% $ 6.32 $ 5.95 6%
Cobalt(2) 16.90 32.23 (48%) 16.57 37.35 (56%)
AVERAGE REALIZED PRICE(1)
Nickel ($ per pound) $ 9.38 $ 6.84 37% $ 8.37 $ 7.75 8%
Cobalt ($ per pound) 19.69 38.43 (49%) 17.80 46.23 (61%)
Fertilizer ($ per tonne) 351 384 (9%) 417 388 8%
UNIT OPERATING COSTS(1) (US$ per pound)
Nickel - net direct cash cost $ 3.75 $ 2.94 28% $ 4.14 $ 2.24 85%
SPENDING ON CAPITAL(3)
Sustaining $ 6.9 $ 10.5 (34%) $ 33.6 $ 37.0 (9%)
$ 6.9 $ 10.5 (34%) $ 33.6 $ 37.0 (9%)
(1) For additional information see the Non-GAAP measures section.
(2) Average standard grade cobalt published price per Fastmarkets MB.
(3) Spending on capital for the year ended December 31, 2019 excludes right of use assets recognized on adoption of IFRS 16. Refer to note 4 of the audited consolidated
financial statements for the year ended December 31, 2019 for additional information.
Operational excellence initiatives implemented over the previous 18 months, coupled with specific mitigation strategies
implemented in the fourth quarter, helped to offset the negative impact that the week-long CN rail strike had on the transportation
of mixed sulphides in Canada and the reduced availability of diesel fuel supply in Cuba had on Moa operations. As a result of
these mitigation strategies, which included the trucking of mixed sulphides from the port in Halifax to the refinery in Fort
Saskatchewan, the Moa JV produced 4,049 tonnes of finished nickel in Q4, enabling it to exceed nickel production guidance for
the year. Cobalt production in Q4 was 411 tonnes, enabling the Moa JV to meet its cobalt production guidance for 2019.
Total finished nickel production at the Moa JV for FY2019 was 33,108 tonnes (100% basis), up 8% from 30,708 tonnes produced
in FY2018. Total finished cobalt production at the Moa JV for FY2019 3,376 tonnes (100% basis), up 4% from 3,234 tonnes
produced in FY2018. Growth was primarily driven by efforts to improve ore access and increase equipment reliability over the
past 18 months.
Sherritt International Corporation 7
Mixed sulphides production at Moa in Q4 2019 was 4,203 tonnes down 9% from 4,594 tonnes produced in Q4 2018. The decline
reflected the impact of reduced diesel fuel supply availability caused by economic and trade sanctions imposed by the U.S. on
Cuba and Venezuela, Cuba’s largest oil supplier.
Mixed sulphides production for FY2019 totaled 17,010 tonnes, down 3% from 17,563 tonnes for FY2018. Higher mixed sulphides
production in the first half of FY2019 relative to FY2018 due to operational excellence initiatives, including the deployment of
new mining equipment that significantly improved mining activities and increased ore stockpile capacity, helped to offset lower
mixed sulphides production in the second half of 2019.
Q4 2019 revenue of $123.4 million was up 3% when compared to last year due to a number of factors, including a 37% higher
nickel realized price and higher cobalt sales volume. These increases were offset, however, by a 5% decrease in nickel sales
volume and a 49% decline in cobalt realized prices.
Revenue for FY2019 was $461.0, down 7% from $498.1 for 2018. The decline was largely driven by a 61% lower realized cobalt
price, which offset the positive impact of higher finished nickel and cobalt sales volumes as well as a higher average realized
nickel price. Cobalt revenue for FY2019 included the negative impact of mark-to-market adjustments in Q1 2019 on provisionally
priced sales in Q4 2018 following the significant drop in cobalt reference prices in the new year.
Mining, processing and refining (MPR) costs for Q4 2019 were US$5.31/lb, down 1% from US$5.34/lb for Q4 2018. MPR
costs for FY2019 were 2% higher than FY2018. While FY2019 benefitted from operational excellence initiatives implemented
over the past 18 months, FY2018 MPR costs were positively impacted by lower opening inventory costs that resulted primarily
from lower sulphur and fuel oil prices in 2017 as well as lower 2017 maintenance spending.
NDCC in Q4 2019 was US$3.75/lb, up from US$2.94/lb for the same period last year. The increase was largely due to lower by-
product revenue stemming from the 49% decline in realized cobalt prices, but partially offset by lower sulpur and fuel oil prices.
NDCC in FY2019 was US$4.14/lb, up 85% from FY2018, primarily due to the decrease in cobalt by-product revenue. NDCC was
positively impacted in FY2019 by higher fertilizer by-product contributions and lower third-party feed costs. NDCC in FY2019 was
in line with guidance for the year.
Sustaining capital spending in Q4 2019 was $6.9 million, down 34% from $10.5 million in Q4 2018. The year-over-year decrease
was due to austerity measures implemented in Q2 2019 in response to dramatic commodity price volatility and increased sanctions
imposed by the U.S. against Cuba. Capital spending for FY2019 was US$4 million lower than guidance for the year, and $3.4
million lower than capital spend in FY2018, largely as a result of cash preservation initiatives.
Sherritt received $14.9 million in dividend distributions from the Moa JV in Q4 2019 compared to $11.6 million in Q3 2019 and
$6.7 million in Q4 2018. For FY2019, Sherritt received $43.3 million (US$32.5 million) of dividend distributions from the Moa JV,
compared to $11.9 million (US$9.0 million) in 2018.
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Oil and Gas
For the three months ended For the years ended
2019 2018 2019 2018
$ millions, except as otherwise noted December 31 December 31 Change December 31 December 31 Change
FINANCIAL HIGHLIGHTS
Revenue $ 6.3 $ 8.5 (26%) $ 29.7 $ 44.9 (34%)
Earnings (loss) from operations (8.1) (10.4) 22% (25.7) (17.0) (51%)
Adjusted EBITDA(1) (6.2) (7.2) 14% (15.4) (5.9) (161%)
CASH FLOW
Cash provided by operations 5.2 13.1 (60%) 9.5 31.7 (70%)
Adjusted operating cash flow(1) (8.0) (5.4) (48%) (19.6) (19.9) 2%
Free cash flow(1) (1.2) 3.1 (139%) (18.6) 3.7 nm(3)
PRODUCTION AND SALES (bopd)
Gross working-interest (GWI) - Cuba 3,785 4,443 (15%) 4,175 4,839 (14%)
Total net working-interest (NWI) 1,182 1,597 (26%) 1,417 2,209 (36%)
AVERAGE REFERENCE PRICE (US$ per barrel)
West Texas Intermediate (WTI) $ 56.82 $ 59.98 (5%) $ 56.97 $ 65.20 (13%)
U.S. Gulf Coast High Sulphur Fuel Oil (USGC HSFO) 40.76 62.33 (35%) 53.58 61.45 (13%)
Brent 64.29 68.13 (6%) 64.70 71.16 (9%)
AVERAGE-REALIZED PRICE(1) (NWI)
Cuba ($ per barrel) $ 42.07 $ 62.72 (33%) $ 53.67 $ 56.47 (5%)
UNIT OPERATING COSTS(1) (GWI)
Cuba ($ per barrel) $ 24.23 $ 25.16 (4%) $ 21.60 $ 20.21 7%
SPENDING ON CAPITAL(2)
Development, facilities and other $ (0.8) $ - - $ - $ 1.4 (100%)
Exploration 8.6 8.4 2% 29.7 25.0 19%
$ 7.8 $ 8.4 (7%) $ 29.7 $ 26.4 13%
(1) For additional information see the Non-GAAP measures section.
(2) Spending on capital for the year ended December 31, 2019 excludes right of use assets recognized on adoption of IFRS 16. Refer to note 4 of the audited consolidated
financial statements for the year ended December 31, 2019 for additional information.
(3) Not meaningful.
Gross working-interest oil production in Cuba in Q4 2019 was 3,785 barrels of oil per day (“bopd”), down 15% from 4,443 bopd
for Q4 2018. Gross working-interest oil production in Cuba for FY2019 was 4,175 bopd, down 14% from 4,839 bopd for 2018.
Lower production in both current year periods was primarily due to natural reservoir declines and the absence of new development
drilling.
The decline in gross working-interest production in the three- and 12-month periods of 2019 resulted in a corresponding decline
in total net working-interest (profit oil) production. NWI was also lower in Q4 and FY2019 as a result of the sale of Sherritt’s interest
in its Pakistan gas field. NWI production was also lower in FY2019 compared to last year as Sherritt's profit oil percentage was
reduced to 6% from 45% starting in Q2 2018 per the terms of the renewal of the Puerto Escondido/Yumuri PSC.
Revenue in Q4 2019 was $6.3 million, down 26% when compared to Q4 2018. Revenue in FY2019 was $29.7 million down 34%
when compared to the prior year which was primarily attributable to lower NWI and lower realized prices in Cuba, but partially
offset by a weaker Canadian dollar relative to the U.S. dollar.
Unit operating costs in Cuba in Q4 2019 were $24.23 per barrel, down 4% when compared to Q4 2018 as spending on equipment
maintenance has been deferred until the results of testing on Block 10 can be determined. The impact of lower overall costs
adjusted for a slightly weaker U.S. dollar relative to the Canadian currency offset the impact of reduced production. Costs in Cuba
are generally denominated in U.S. currency. Unit operating costs in FY2019 were 7% higher primarily as a result of lower
production volume and a weaker Canadian dollar.
Capital spending in Q4 2019 and FY2019 was $7.8 million and $29.7 million, respectively. The totals were down 7% and up 13%,
respectively, from the same periods in 2018. Exploration capital spending in both the current and prior year periods are primarily
related to drilling on Block 10.