Exall Energy Corporation Announces Results For The Three Months Ended March 31, 2013

CALGARY, May 15, 2013 /CNW Telbec/ - Exall Energy Corporation ("Exall" or the "Company") (TSX:EE EE.DB) is pleased to announce its financial and operating results for the three months ended March 31, 2013.  Exall's public filings can all be found at www.exall.com or www.sedar.com.

Highlights:

  • A first quarter 2013 production average of 1,303 boe per day a 17 percent increase over the same quarter in 2012, the second highest quarterly average in the Compay's history,
  • A first quarter 2013 Net Back of $53.71 a 4 percent increase over the same quarter in 2012, the third highest quarterly average in the Company's history while commodity prices where only the fifth highest in the most recent eight months,
  • A first quarter 2013 cash flow from operations of $5,024,000 a 22 percent increase over the same quarter in 2012, the second highest quarterly average in the Company's history,
  • A 20% reduction in the debt to cash flow, excluding convertible debentures due March 31, 2017, to 2.0:1 at March 31, 2013 from the 2.5:1 at December 31, 2012,
  • Drilled, completed and tied-in 1.0 gross (0.80 net wells) development well (15-25) during the first quarter of 2013,
  • Drilled 1.0 gross (0.80 net wells) exploration well (11-31) during the first quarter of 2013, further refining and correlating the 2012 3D Seismic program,
  • The 11-31 well was cased through the Wabamun and the 11.5 meter thick zone was perforated and hydrocarbon fracture stimulated and swab tested, recovering first frac oil and then transitioning to light oil and formation water, and
  • Completed the Second Derivative analysis of the 2012 3D Seismic program, with the interpreted channel anomaly showing a remarkable correlation to the productive and non-productive well penetrations in the North Waterflood Area.
HIGHLIGHTS   Three months ended
March 31
In thousands of dollars       2013 2012 %
change
Financial ($)            
Gross revenue       9,753 8,604 13
Funds from operations       5,024 4,127 22
  Basic per share       0.08 0.07 14
  Diluted per share       0.04 0.06 (33)
Net income (loss) before tax       1,732 1,529 13
  Basic per share       0.03 0.02 50
  Diluted per share       0.01 0.02 (50)
Net income (loss)       896 1,065 (16)
  Basic per share       0.01 0.02 (50)
  Diluted per share       0.01 0.02 (50)
Capital expenditures, net       6,879 28,200 (76)
             
HIGHLIGHTS   Three months ended
March 31
        2013 2012 %
change
Operations            
Daily production            
  Crude oil (bbl)       1,218 1,004 21
  Natural gas liquids (bbl)       19 15 27
  Natural gas (mmcf)       394 598 (34)
Total daily production (boe @ 6:1)       1,303 1,118 17
Netback per boe (6:1) ($)       53.71 51.89 4
             

Corporate Developments

Outlook

Exall is a light oil-weighted company with high operating margins. Starting from a modest production base of light oil and gas, the Company has historically, excluding the 2012 Reservoir conformance challenges in the south waterflood, shown itself capable of setting and achieving ambitious production and cash flow targets (as can be seen in the chart below reflecting production), production growth that currently translates to 41.9 percent compounded annually from 2007. Exall will continue to focus on organic growth through exploitation and expansion of its existing oil producing properties.

http://files.newswire.ca/357/EE-05152013.pdf

Evaluation of the 2012 Seismic program data continued through Q1 of 2013. Inversion and AVO processing was completed in late 2012 which allowed the calculation of seismic attributes, an important step in the interpretation of a 3D seismic data set and used in the evaluation of potential targets. The derived Second Derivative is frequently used in the exploitation of channel sands, the so-called "channel finder" in geophysical terminology. Drilling to date has been defined utilizing the amplitude anomaly of the Watt Mountain interval, which is host to the Gilwood channel sands. Successful wells to date include the original "Seismic Channel" discovery well (10-24) completed in January 2012 and three additional oil wells drilled and placed on production through 2012 (11-24, 7-25 and 2-25 subsequently converted to water injection). These three wells are currently producing 750 BOPD (530 net).

Three infill wells between the North Seismic Channel discovery well and the Central Waterflood were also drilled and completed in 2012. The locations were chosen on the basis of the interpreted continuity between the North and Central areas and all of the wells penetrated more than three meters of channel sand. One continues to produce more than 290 BOPD (210 net) and the other two are awaiting work overs due to problems encountered during completion.

Drilling in Q1 of 2013 continued on the basis of the amplitude anomaly map. Both of the wells drilled confirmed sand presence, although thinner than anticipated. The first well (15-25) was fracture stimulated and is currently recovering fracture fluid (water) and oil. The second well (11-31) did not encounter reservoir quality porosity and has been abandoned in the Gilwood zone. The well was cased through the Wabamun zone for further cased-hole testing. Log-based parameters were significantly superior to the previously drilled and tested wells, located 4.5 km to the south, both in porosity-thickness and calculated hydrocarbon saturation.

Subsequent to drilling the wells, the Second Derivative map has been refined and integrated with well control. The interpreted channel anomaly shows a remarkable correlation to the productive and non-productive well penetrations in the North Waterflood Area. As a result of this work drilling plans have been initiated to confirm the validity of the correlation. The completed step out well 15-25 referenced above, appears to be drilled into the edge of the Second Derivative anomaly. The Company plans to plug back the 15-25 well and drill a short sidetrack to confirm this interpretation. This is a cost effective means of optimizing reservoir penetration already put to use during the drilling of three successful North WF wells (10-24, 2-25 and 7-25).

As noted previously, the 11-31 well was cased through the Wabamun for further testing. While the Company was aware that a vertical, fracture stimulated completion was likely to produce high water cuts, the intent was to prove movable light hydrocarbon presence in this area, which is located 4.5 km and 16 meters higher structurally than the area tested earlier by Exall. The 11.5 meter thick zone was perforated in the middle and hydrocarbon fracture stimulated. The well was swab tested, recovering first frac oil and then transitioning to light oil and formation water. The well is currently standing as a potential horizontal sidetrack and multi-frac candidate. Exall is seeking joint venture interest to advance the testing program.

Exall's debt to cash flow at March 31, 2013, excluding the Convertible Debentures was 2.0 times. This was a 20% improvement from the 2.5 times at December 31, 2012. It is Exall's goal to continue to reduce its overall debt exposure to exit the 2014 year with a fourth quarter annualized cash flow that would see the debt to cash flow at December 31, 2014, including the Convertible Debentures, being in the order of 1.0 - 1.5 times. This would then give Exall 27 months to establish a $23.0 million fund to pay out the Convertible Debentures in March of 2017, subject to the Debentures not being converted or repurchased.

Overview

Exall's average daily production for the first quarter of 2013 increased 17 percent to 1,303 barrels of oil per day ("boe/d") from 1,118 boe/d in the first quarter of 2012. As at May 13, 2013 Exall's net production rate was as outlined below:

                 
PRODUCTION BY
REGION
  ESTIMATED
Q2 2013
Q1 2013 Q4 2012 Q3 2012 Q2 2012 Q1 2012
Mitsue Waterflood -    Totals            
  Oil bbls/d 1,235 1,216 1,041 884 993 993
  Natural Gas mmcf/d 343 394 297 209 206 331
  Liquids (bbls/d) bbls/d 8 19 14 8 18 7
  Boe/d 1,300 1,301 1,105 927 1,046 1,054
Bow Island Heavy Oil              
  Oil bbls/d 1 2 2 2 2 2
  Natural Gas mmcf/d - - - - - -
  Liquids bbls/d - - - - - -
  Boe/d 1 2 2 2 2 2
Corporate Totals              
  Oil bbls/d 1,236 1,218 1,042 897 1,004 1,004
  Natural Gas mmcf/d 343 394 297 471 464 598
  Liquids bbls/d 8 19 14 16 25 15
  Boe/d 1,301 1,303 1,106 991 1,106 1,118

Exall's estimated second quarter 2013 average daily production at May 13, 2013 is approximately 1,301 boepd. The Company groups the Waterflood Approvals in the Marten Mountain area into three project areas; the South WF, Central WF and North WF. The production issues faced in these three project areas are being successfully addressed, as described below.

Reservoir conformance issues presented challenges in the south waterflood during 2012.  Optimization efforts aimed at improving well performance and oil recovery have had a positive effect.  Polymer treatments were performed on two injection wells resulting in reduced water cuts in one adjacent well, along with an increase in oil production. Current production from the South WF area is 403 boepd (292 boepd net).

The Central WF continues to improve as the result of well optimization and the installation of an Electric Submersible Pump (ESP) into the newest producing well. The new oil well, which was producing 165 boepd, is now producing at 353 boepd (254 boepd net). The Central WF project is currently producing 670 boepd (467 boepd net).

A water source well was drilled, completed and equipped during Q4 2012 and injection of water has begun in the North WF Approval area.  Optimization efforts in the North WF and the addition of two producing wells have increased production to an average of 783 boepd (534 boepd net).

Results of Operations

Oil and gas exploration and development expenditures were $6,698 for the first quarter of 2013.  During the first quarter of 2013 the Company participated in the drilling of 2.0 gross oil wells (1.59 net) in the Marten Mountain / Mitsue area. Oil and gas property expenditures were $28,165 for the first quarter of 2012.  During the first quarter of 2012 the Company spud 5.0 gross wells (3.28 net) in the Marten Mountain / Mitsue area.

The Company has acquired 480 gross (352 net) acres of undeveloped land in the Mitsue area, during the fiscal period ended March 31, 2013. As at March 31, 2013, the Company had 189,120 acres (140,843 acres net) of undeveloped land in Alberta, Canada.

Production for the first quarter of 2013 of 1,303 boe per day represents a 17% increase over 2012. Funds from operations for the first quarter of 2013 of $5.0 million or $0.08 per share was primarily the result of the increased production, decreased commodity prices received during the year (Exall's prices received were down 2% in Q1 2013 averaging $83.19 per boe compared to $84.54 per boe in 2012), increased royalty prices paid during the year (Exall's royalties paid were up 4% during the first quarter of 2013 averaging $19.58 per boe compared to $18.77 per boe in 2012), and decreased operating costs paid during the first quarter of 2013 (Exall's operating costs were down 29% during the first quarter of 2013 averaging $9.89 per boe compared to $13.88 per boe in 2012).

             
    Three months ended
March 31
Netback per boe (6:1) $       2013 2012 %
Change
             
Production revenue       83.19 84.54 (2)
Royalties       19.58 18.77 4
Operating expenses       9.89 13.88 (29)
Operating netbacks ($/boe)       53.71 51.89 4

Net income, as a result, for the first quarter of 2013 was $896 or $0.01 per share compared to a net income for the first quarter of 2012 of $1,065 or $0.02 per share.

About Exall

Exall is a junior oil and gas company active in its business of oil and gas exploration, development and production from its properties in Alberta. Exall Energy is currently developing the new Mitsue area "Marten Mountain" discovery in north-central Alberta.

Exall Energy currently has 66,634,854 common shares outstanding. The Company's common shares are listed on the Toronto Stock Exchange under the trading symbol EE. The Company's convertible debentures are listed on the Toronto Stock Exchange under the trading symbol EE.DB.

Reader Advisory

This news release contains forward-looking statements, which are subject to certain risks, uncertainties and assumptions, including those relating to results of operations and financial condition, capital spending, financing sources, commodity prices and costs of production. By their nature, forward-looking statements are subject to numerous risks and uncertainties that could significantly affect anticipated results in the future and, accordingly, actual results may differ materially from those predicted. A number of factors could cause actual results to differ materially from the results discussed in such statements, and there is no assurance that actual results will be consistent with them. Such factors include fluctuating commodity prices, capital spending and costs of production, and other factors described in the Company's most recent Annual Information Form under the heading "Risk Factors" which has been filed electronically by means of the System for Electronic Document Analysis and Retrieval ("SEDAR") located at www.sedar.com. Such forward-looking statements are made as at the date of this news release, and the Company assumes no obligation to update or revise them, either publicly or otherwise, to reflect new events, information or circumstances, except as may be required under applicable securities law.

For the purposes of calculating unit costs, natural gas has been converted to a barrel of oil equivalent (boe) using 6,000 cubic feet equal to one barrel (6:1), unless otherwise stated. The boe conversion ratio of 6 mcf: 1 bbl is based on an energy equivalency conversion method and does not represent a value equivalency; therefore boe may be misleading if used in isolation. This conversion conforms to the Canadian Securities Regulators' National Instrument 51-101 - Standards of Disclosure for Oil and Gas Activities.


 

 

PDF available at: http://stream1.newswire.ca/media/2013/05/15/20130515_C7151_DOC_EN_26753.pdf

SOURCE: EXALL ENERGY CORPORATION

For further information:

Exall Energy Corporation

Frank S. Rebeyka
Vice Chairman
Tel: 403-815-6637
 
Roger N. Dueck
President & CEO
Tel: 403-237-7820 x 223
info@exall.com 

Please visit Exall Energy's website at: www.exall.com

Renmark Financial Communications Inc.
Maurice Dagenais: mdagenais@renmarkfinancial.com
Nadia Marks : nmarks@renmarkfinancial.com
Tel.: (514) 939-3989 or (416) 644-2020
www.renmarkfinancial.com



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EXALL ENERGY CORPORATION

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