Marquee Energy Ltd. Announces Second Quarter 2014 Financial Results with Record Funds Flow and Production

CALGARY, Aug. 21, 2014 /CNW/ - Marquee Energy Ltd. ("Marquee" or the "Company") (TSXV: "MQL") (OTCQX: MQLXF) is pleased to report record funds flow from operations and production for the second quarter of 2014. The Company's financial statements and Management's Discussion and Analysis ("MD&A") for the three and six months ended June 30, 2014 are available on SEDAR at www.sedar.com and on Marquee's website at www.marquee-energy.com.

Financial and Operational Highlights include:

  • Achieved significant growth in both revenue and funds flow from operations in the second quarter of 2014. Revenue increased 19% to $25.6 million, compared to $21.6 million in Q1-2014 and $12.3 million in Q2-2013.  Funds flow from operations increased 36% to $9.3 million, compared to $6.8 million in Q1-2014, and $4.4 million in Q2-2013.
  • Increased production to average 5,035 boe/d (43% oil and NGLs) in the quarter, a 25% improvement over Q1-2014 and 138% higher than Q4-2013.
  • Closed a $20.1 million bought deal equity financing on May 2, 2014
  • The Company incurred $5.2 million in capital expenditures in the quarter, mainly in the Company's core Michichi area, and realized proceeds of $0.5 million from the sale of non-core assets.
  • Drilled one horizontal oil well and spud a second well in June at Michichi. Both wells are now on production.
  • Subsequent to the end of the quarter, entered into a syndicated credit facility agreement with two Canadian chartered banks that provides total credit availability of $95 million, comprising of a  revolving and operating facility of up to $80 million, plus an acquisition facility of up to $15 million. The Company's net-debt at the end of the second quarter was $56.9 million.

Financial and Operational Summary

Financial and operational details for the three and six month periods ended June 30, 2014 with comparative data for 2013 are set out below and should be read in conjunction with the condensed interim financial statements and related  MD&A.

(unaudited)






Three months ended June 30

Six Months ended June 30


2014

2013

2014

2013

Financial (000's except per share and per boe amounts)





Oil and natural gas sales (1)

$

25,625

$

12,317

$

47,201

$

22,712

Funds flow from operations

$

9,273

$

4,420

$

16,093

$

7,448

      Per share - basic and diluted

$

0.08

$

0.08

$

0.16

$

0.14

      Per boe

$

20.24

$

21.41

$

19.62

$

18.15

Net income (loss)

$

900

$

484

$

(1,850)

$

(2,100)

      Per share - basic and diluted

$

0.01

$

0.01

$

(0.02)

$

(0.04)

Capital expenditures

$

4,173

$

1,543

$

17,170

$

10,133

Asset acquisitions including non-cash consideration

$

1,015

$

-

$

12,842

$

-

Dispositions

$

(501)

$

(688)

$

(529)

$

(786)

Net debt (2)



$

56,911

$

45,735

Total Assets



$

282,939

$

163,017

Weighted average basic and diluted shares outstanding

112,534

54,661

100,482

54,661






Operational





Net wells drilled

1.0

-

6.0

2.1

 

Daily sales volumes





Oil (bbls per day)

1,434

830

1,329

832

Heavy Oil (bbls per day)

525

534

518

533

NGL's (bbls per day)

195

80

188

69

Gas (mcf per day)

17,285

4,942

14,983

4,998

Total (boe per day)

5,035

2,268

4,532

2,267

% Oil and NGL's

43%

64%

45%

63%

Average realized prices





Oil ($/bbl)

$

100.12

$

88.10

$

97.49

$

84.12

Heavy Oil ($/bbl)

$

82.23

$

69.53

$

77.46

$

59.48

NGL's ($/bbl)

$

58.92

$

56.28

$

65.21

$

61.30

Gas ($/mcf)

$

4.82

$

3.80

$

5.26

$

3.63

Netbacks





Revenue ($/boe)

$

55.93

$

59.68

$

57.54

$

55.35

Royalties ($/boe)

$

7.31

$

5.41

$

6.45

$

4.67

Opex and transportation ($/boe)

$

19.66

$

20.78

$

21.18

$

21.67

Field operating netbacks

$

28.96

$

33.49

$

29.91

$

29.01






(1) Before royalties.

(2) Net debt is calculated as currents assets less current liabilities, excluding commodity contracts and flow-through share premiums.


 

 

SECOND QUARTER 2014 FINANCIAL AND OPERATING RESULTS

For the second consecutive quarter, Marquee achieved significant increases in a number of financial and operating categories as a result of the Company's recent drilling programs, together with the acquisitions of the Sonde assets on December 31, 2013 and the Paramount assets on March 6, 2014:

  • Production in Q2-2014 was 5,035 boe/d (43% oil and NGLs), a 122% increase from 2,268 boe/d in Q2-2013.
  • Revenue from oil and natural gas sales was $25.6 million, more than double the $12.3 million in Q2-2013.
  • Funds flow from operations was $9.3 million in the quarter, more than double the $4.4 million in Q2-2013.
  • Net general and administrative expense ("G&A") was $3.65/boe in the quarter, 48% less than Q2-2013.

Field operating netbacks decreased slightly in the quarter to $28.96/boe compared to Q2-2013 and Q1-2014 primarily due to the increase in the proportion of the Company's production from natural gas resulting from the gas-weighted strategic acquisitions mentioned previously.

The Company incurred $5.2 million in capital expenditures in the quarter, mainly in the Company's core Michichi area, and realized proceeds of $0.5 million from the sale of non-core assets. The capital expenditures included:

  • Drilled one Michichi horizontal oil well, and spud a second well.
  • Recompletion and workover program in the greater Michichi/Drumheller.
  • Targeted land acquisition in the Michichi area.

The Company closed a common share bought-deal financing, including a 15% over-allotment option for net proceeds of $20.1 million.  The significant increase in production and contribution from the financing reduced the Company's debt-to-cashflow ratio from 3.1 at the end of Q2-2013 to 1.8 times, based on the funds-flow from operations for the first six months of the year, and net-debt at the end of June 2014.

OPERATIONS UPDATE

Michichi

Marquee has drilled eight horizontal wells at Michichi in 2014. The first three wells have been on production for five months and are now producing at stabilized levels. For the first 90 days, the average production from each of these wells was 143 boe/d (IP90), 76% oil and liquids. The next three wells have been on production for less than a month. Initial results indicate that production from these wells should meet or exceed Marquee's published type curve expectations for Michichi. The seventh well has been hydraulically fractured ("fracked") and is scheduled to be on production before the end of August. Drilling operations recently concluded on the eighth well which is being prepared for completion operations. An additional four wells are planned for the remainder of 2014 as part of the Company's 2014 drilling program of twelve new Banff horizontal wells at Michichi.

Construction of a multi-well battery has been completed to support recent drilling activity which will lead to reduced equipping and operating costs. Equipping costs for wells connected by flowline to the battery are expected to decrease by approximately $250,000 per well. The battery will include separation and gas sweetening facilities and has been designed to accommodate expansion and future drilling in the vicinity.

The Company completed tie-in of all Sonde wells acquired at Michichi into owned gas gathering infrastructure in the second quarter.

Production in the Michichi area averaged 3,665 boe/d in Q2-2014 or 73% of corporate production.

Lloydminster

The Company has drilled one gross (one net) vertical heavy oil well and one gross (one net) horizontal heavy oil well at Lloydminster in Q3, both wells are now on production. Marquee expects to drill one additional vertical and one additional horizontal well here in Q4-2014.

Production in the Lloydminster area averaged 525 bbl/d in Q2-2014 or 10% of corporate production.

OUTLOOK

Marquee has built an extensive, contiguous, operated high working interest land position in its core area of Michichi. The Company further expanded its land holdings, infrastructure and drilling inventory through its strategic acquisitions completed earlier in 2014. The evolution of the Company's technical and operating knowledge at Michichi continues, and is reflected in improved well performance and cost efficiencies. Further consolidation of lands will occur on a targeted basis, and the growth of company owned and operated infrastructure is underway to further reduce operating costs and improve netbacks.

Marquee expects to reach its forecast guidance of 5,600 boe/d by the end of the year through completion of its planned twelve Banff light oil well program at Michichi and six heavy oil well program at Lloydminster.  Average production for the year is expected to be approximately 5,000 boe/d. Production growth in late Q2 and early Q3 was affected by spring breakup and access issues at Lloydminster. All wells drilled in Q1 were placed on production by early April. New production from drilling that occurred since the capital program resumed in June was not realized until early August. In the month of August, five new wells have been tied in and placed on production, three at Michichi and two at Lloydminster.

The Company expects to fund its capital program for the remainder of 2014 out of cash flows from operations and its existing credit facilities.

Subsequent to the quarter, the Company closed the disposition of a non-core asset for proceeds of $1.2 million dollars, and continues to evaluate non-core asset disposition opportunities.

The Company will be participating in the upcoming Peters & Co. 2014 Energy Conference on September 10, 2014 in Toronto at the Ritz Carlton Hotel. Marquee's CEO, Richard Thompson will be presenting at 8:00 am (EST) in Room B. To register for the live webcast please visit:
http://cc.talkpoint.com/pecl001/090914a_ae/?entity=25_3FM6ULR.

ABOUT MARQUEE

Marquee Energy Ltd. is a publicly traded Calgary-based growth oriented junior oil and natural gas company currently focused on high rate of return oil development and production. Marquee is committed to growing the company through exploitation of existing opportunities and continued consolidation within its core area at Michichi. An updated presentation and additional information about Marquee may be found on its website www.marquee-energy.com and in its continuous disclosure documents filed with Canadian securities regulators on the System for Electronic Document Analysis and Retrieval (SEDAR) at www.sedar.com.

NON-GAAP MEASUREMENTS

This press release contains certain measures, including "funds flow from operations", "net debt" and "field operating netbacks" that do not have standardized meaning as prescribed by IFRS and, therefore, are considered non-GAAP measures. Readers are cautioned that this press release should be read in conjunction with Marquee's disclosure under "Non-GAAP Measures" included at the end of the MD&A at www.sedar.com.

Forward looking Statements or Information

Certain statements included or incorporated by reference in this news release may constitute forward looking statements under applicable securities legislation.  Such forward looking statements or information typically contain statements with words such as "anticipate", "believe", "expect", "plan", "intend", "estimate", "propose", or similar words suggesting future outcomes or statements regarding an outlook.  Forward looking statements or information in this news release may include, but are not limited to: 

  • 2014 capital budget and expenditures;
  • business strategies, objectives and outlook;
  • petroleum and natural gas sales;
  • future production levels (including the timing thereof) and rates of average annual production growth;
  • exploration and development plans;
  • acquisition and disposition plans and the timing and the anticipated benefits thereof;
  • anticipated cash flows;
  • expected cost reductions and production efficiencies derived from recently acquired assets;
  • number and quality of future potential drilling locations future drilling plans;
  • expected debt levels;
  • operating and other expenses;
  • royalty and income tax rates; and
  • the timing of regulatory proceedings and approvals.

Such forward-looking statements or information are based on a number of assumptions all or any of which may prove to be incorrect.  In addition to any other assumptions identified in this document, assumptions have been made regarding, among other things:

  • the ability of the Company to obtain equipment, services and supplies in a timely manner to carry out its activities;
  • the ability of the Company to market crude oil, natural gas liquids and natural gas successfully to current and new customers;
  • the ability to secure adequate product transportation;
  • the timely receipt of required regulatory approvals;
  • the ability of the Company to obtain financing on acceptable terms;
  • interest rates;
  • regulatory framework regarding taxes, royalties and environmental matters;
  • future crude oil, natural gas liquids and natural gas prices; and
  • Management's expectations relating to the timing and results of development activities

Forward-looking information is based on current expectations, estimates and projections that involve a number of risks and uncertainties which could cause actual results to differ materially from those anticipated by the Company and described in the forward-looking information. The material risk factors affecting the Company and its business are contained in Marquee's Annual Information Form which is available under Marquee's issuer profile on SEDAR at www.sedar.com.

The forward-looking information contained in this press release is made as of the date hereof and the Company undertakes no obligation to update publicly or revise any forward-looking information, whether as a result of new information, future events or otherwise, unless required by applicable securities laws. The forward looking information contained in this press release is expressly qualified by this cautionary statement.

Additional Advisories
Boes are presented on the basis of one Boe for six Mcf of natural gas. Disclosure provided herein in respect of Boe may be misleading, particularly if used in isolation. A Boe conversion ratio of 6 Mcf:1 bbl 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.

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 this release.

SOURCE Marquee Energy Ltd.

For further information: Richard Thompson, President & Chief Executive Officer, (403) 817-5561, RThompson@marquee-energy.com; Roy Evans, Vice President, Finance and Chief Financial Officer, (403) 817-5568, REvans@marquee-energy.com; or visit the Company's website at www.marquee-energy.com.