Sea Dragon Energy Inc First Quarter 2014 Financial Results, Year End Reserves and Annual Operations Update

LONDON, May 30, 2014 /CNW/ - Sea Dragon Energy Inc. ("Sea Dragon" or the "Company") (TSXV: SDX) announces its 2014 first Quarter Financial and Operating Results (the "Quarter" or "Q1 2014"), Annual Reserves and Operations Update.

First Quarter 2014 Highlights:

Operational Performance

  • Successfully drilled two wells in the North West Gemsa concession - AASE-19 and AASE-21- both  producers following successful test results
  • Completed the subsurface technical update on the Shukheir Marine concession
  • Advanced the technical review of work program with partners on the South Ramadan concession
  • Paid the US$4.0 MM signature bonus and issued the US$9.0 MM guarantees required for the South Disouq concession
  • Acquisition of the South Disouq concession ratified by the Egyptian government

Financial Performance

  • Recorded production of 1,705 boepd, of which sales volumes of 1,686 boe/d for the quarter from both North West Gemsa and Shukheir Marine concessions (Q1 2013: 1,495 boe/d)
  • Recorded funds from operations of US$1.3 MM for the quarter (Q1 2013: US$1.962 MM)
  • Maintained Accounts Receivables largely below 90 days
  • Exited the quarter with Working Capital of US$5.7 MM

Annual Reserves and Operations Update:

Annual Reserves

  • Ryder Scott certified reserves as at year end 2013 for NW Gemsa and Shukheir Marine fields under the 51-101 instrument as published in the Company's AIF
  • Proved & Probable (2P) reserves :
    • 3.75 MMboe (predominantly light crude oil)
    • Net Present Value at 10% discount of  USD 42 million (USD $11/boe)
  • Proved Reserves (1P) representing 80% of total Proved & Probable (2P) reserves in volume and 84% in value, demonstrating that the fields are developed and mature, with long life production and cash flow
  • The underlying 1P and 2P reserves position remains consistently strong. The change in reserves numbers from the prior year relates to asset sales during the period and reinvestment in additional development opportunities

Annual Operations Update

  • NW Gemsa (10% Working Interest)
    • Field successfully developed, producing at a plateau rate of circa 13 Mboe/d gross
    • Waterflood program successful in supporting reservoir pressure and contributing incremental reserves recovery factor. The last producing well (Al Amir SE-21) was placed onstream at record rates and the last water injector well (Al Amir SE-22) has been drilled and completed. The partners will now focus on field optimization and specific well workovers
    • Capital expenditure programme substantially completed with operational cash flow now being reinvested into other assets
  • Shukheir Marine (100% Working Interest)
    • Drillable prospects identified, targeting undrilled fault blocks
    • Focusing on evaluating resources and work program including the drilling of at least 1 additional well, subject to receipt of a 10-year concession extension.
  • South Ramadan (12.75% Working Interest)
    • 4 prospects identified, 2 targeting by-passed oil up-dip from existing wells and 2 targeting shallower horizons on trend with producing fields in adjacent concessions.
    • Focusing on completing prospect evaluations and planning for a drilling campaign beginning in 2015.
  • South Disouq (100% Working Interest)
    • Completing prospect evaluations and preparatory work for seismic campaign in 2015.
    • Exploration program will be targeting transformational gas & liquids potential in the Nile Delta basin, an area in which the Company's management has had successful technical and operational experience.

Paul Welch, President & CEO of Sea Dragon commented:

"Throughout 2013 and 2014, we completed the development of North West Gemsa and positioned the Company to reinvest Gemsa's cash flow into other assets in the portfolio, building on our focus areas in the Nile Delta and Gulf of Suez. The Company has solid proven and probable reserves, underpinning stable production and cash flow. We look forward to firming up our resource evaluations for the other assets in the portfolio and then implementing development plans that will generate value for shareholders".

KEY FINANCIAL & OPERATING HIGHLIGHTS

    THREE MONTHS ENDED MARCH 31
FISCAL YEAR Prior Quarter (1) 2014 2013
FINANCIAL $000's      
Cash, end of period 4,287 875 5,598
Working capital 9,879 5,747 6,806
Funds from operations 177 1,297 1,962
  per share 0.00 0.00 0.00
Net (Loss) (1,071) (1,033) (6,820)
  per share (0.00) (0.00) (0.02)
Capital expenditures 1,625 4,853 1,819
Total assets 39,295 40,026 44,711
Shareholders' equity 34,341 33,363 34,605
Common shares outstanding (000's) 376,459 376,459 376,459
       
OPERATIONAL      
Oil sales (bbl/d) 1,570 1,489 1,495
Gas sales (mcf/d) 1,110 1,058 -
NGL sales (bbl/d) 24 22 -
Total boe/d 1,779 1,686 1,495
       
Brent oil price ($/bbl) 108.70 108.14 112.07
       
Realized oil price ($/bbl) 104.26 102.31 106.28
Realized gas price (US$/mcf) 1.00 1.00 -
Realized NGL price (US$/bbl) 75.18 72.43 -
Net Realized price ($/boe) 93.65 91.86 106.28
       
Royalties ($/boe) 51.86 53.60 54.76
Operating costs ($/boe) 14.31 12.23 12.11
Netback - ($/boe) 27.49 26.02 39.42
       
(1) Denotes the three months ended December 31, 2013      

 

Consolidated financial statements with Management's Discussion and Analysis ("MD&A") are now available on the Company's website at www.seadragonenergy.com and on SEDAR at www.sedar.com.

Operational Review

North West Gemsa Concession   (10% working interest, onshore Gulf of Suez)

During the quarter, the Company drilled two successful wells and commenced operations to drill a third well at North West Gemsa, which was completed subsequent to quarter end:

  • The Al Amir SE-19 development well encountered significant oil bearing reservoir section in both the Kareem Rahmi and Shagar formations. The well was drilled to a depth of 10,000 feet where both the Shagar and the Rahmi oil reservoirs were encountered. Log analysis indicated 19 feet of net Shagar oil pay and 10.5 feet of net Rahmi oil pay. The well flowed on test light 42.3 º API oil at a rate of 1,365 bopd with 1.405 mmscfd of associated gas. The well has been placed on production in the Shagar.

  • The AASE-21 well was completed as a producer in the Shagar. It came in on prognosis and had 19 feet of net Shagar oil pay and 4 feet of net Rahmi oil pay. The well flowed 42.2 API oil on test from the Shagar at a rate of 3,005 bopd and 3.228 mmscfd of gas. The well has been placed on production as a Shagar producer.

  • The AASE-22 was intended as a Rahmi injector and a preliminary evaluation indicates 23 feet of good quality but a marginally saturated (Sw: 60%) reservoir section in the Shagar and 24 feet of marginally saturated (Sw: 45-60%) in the Rahmi. The well will be completed in the current location and the Rahmi tested to see if it flows oil. Upon positive results, it will be completed as a producer and flowed until it waters out, then converted to an injector. If it flows water, on initial test, it will be completed as an injector.  The AASE-22 is the last approved development well within the current budget. The drilling rig will has now been released.

Production at NW Gemsa averaged 13,124 boe/d during the quarter (1,312 boe/d net to the Company).  Total oil production averaged 11,036 bopd with sales gas adding 10,698 mscfd.

Shukheir Marine Concession   (100% working interest, shallow offshore Gulf of Suez)

The subsurface technical update on the concession's Gamma and Shukheir Bay fields has been completed.  A commercial evaluation is currently being conducted on the identified opportunities to determine their suitability as investment assets.

Concurrently, the Company is in continued discussions with EGPC and the Ministry for the extension of the concession for another 10 years.  The extension application was submitted in Q32013 and the authority is currently working through its internal evaluation process.  The Company will continue to monitor progress but does not anticipate any resolution on the issue until after mid-year 2014.

Oil production at Shukheir Marine averaged 393 bopd during the quarter from 3 wells.

South Ramadan     (12.75% working interest, offshore Gulf of Suez)

The Company acquired a 12.75% equity interest in the concession on December 23, 2013.  The concession partners (Pico: 37.5% and GPC: 50%) are currently in the process setting up the JV Company.  Once this process is completed the first technical and management meetings concerning the 2014 work program and budget will be held. It is anticipated that these tasks will be completed during the second half of 2014.

South Disouq     (100% working interest, onshore Nile Delta)

The South Disouq concession was ratified by the Government of Egypt on March 19, 2014 upon satisfaction by the Company of bonus and guarantee requirements under the terms of the concession. The Company is conducting studies that will be preparing for the work program (3-D seismic and one well) that has to be performed during the first phase of the exploration period of 3 years.

Certain statements contained in this press release constitute "forward-looking statements" as such term is used in applicable Canadian and US securities laws. These statements relate to analyses and other information that are based upon forecasts of future results, estimates of amounts not yet determinable and assumptions of management. In particular, statements concerning the 2014 drilling and capital expenditure programs of the NW Gemsa, Shukheir Marine and South Disouq and the results referenced or implied herein should be viewed as forward-looking statements.

Any statements that express or involve discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, assumptions or future events or are not statements of historical fact and should be viewed as "forward-looking statements".  All reserves information contained herein as well as the net present value of such reserves should be considered as forward looking statements. Such forward looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements.  Such risks and other factors include, among others, costs and timing of exploration and production development, availability of capital to fund exploration and development and political, social and other risks inherent in carrying on business in Egypt.  There can be no assurance that such statements will prove to be accurate as actual results and future events could vary or differ materially from those anticipated in such statements.  Accordingly, readers should not place undue reliance on forward-looking statements contained in this news release.

Forward-looking statements are made based on management's beliefs, estimates and opinions on the date the statements are made and the Company undertakes no obligation to update forward-looking statements and if these beliefs, estimates and opinions or other circumstances should change, except as required by applicable law. Although Sea Dragon has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward-looking statements, there may be other factors that cause actions, events or results not to be as anticipated, estimated or intended. Investors are cautioned that such forward-looking statements involve risks and uncertainties.  Actual results may differ materially from those currently anticipated.  See Sea Dragon's Annual Information Form for the year ended December 31, 2013 for a description of the risks and uncertainties associated with the Company's business, including its exploration activities. The forward-looking statements contained herein are expressly qualified by this cautionary statement.

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.

Notes to Editors

Sea Dragon Energy is an international exploration and development Oil Company with a focus on North Africa. Activities are currently concentrated in Egypt, with interests in three concessions with short- and long-term potential. For further information please see the Company website at www.seadragonenergy.com or the Company's filed documents at www.sedar.com

SOURCE Sea Dragon Energy Inc.

For further information:


Sea Dragon Energy Inc.

Paul Welch
President and Chief Executive Officer
Tel: +44 (0) 203 219 5640

Olivier Serra
Chief Financial Officer
Tel: +44 (0) 203 219 5640

Financial PR 
Bell Pottinger
Philip Dennis / Joanna Boon
Tel: +44 (0) 207 861 3232

Investor Relations
Brisco Capital Partners Corp.
Scott Koyich
Tel: +1 (403)262.9888