Ironhorse Announces Q2 2014 Financial and Operating Results

CALGARY, Aug. 29, 2014 /CNW/ - Ironhorse Oil & Gas Inc. ("Ironhorse" or the "Company") (TSX-V: IOG) announces its financial and operating results for the three and six months ended June 30, 2014 and provides an operational update on activities to date this year as well as an outlook for the remainder of 2014. 

Financial and Operation Summary

The Company's working capital position has remained strong at $2.3 million at June 30, 2014, compared with $2.2 million at March 31, 2014. Although the Pembina Nisku wells were placed on production in early March of 2014, the Company's reported Q2 production has stayed flat at 30 boe/d, as compared to the first quarter of 2014. Production from the Pembina wells was restricted due to insufficient blend gas volumes at the Sinopec Daylight Energy Ltd. (Sinopec) operated 13-2 battery.

Since onset of production in early March of 2014, the Company's share of sales volume from the Nisku L2L pool was 1,700 boe. The Pembina Nisku producing wells are tied in to the Sinopec operated 13-2 battery and are contract operated by Sinopec. The two wells produced intermittently throughout the quarter due to insufficient blend gas at the battery site. The licensed maximum hydrogen sulphide (H2S) concentration of the pipeline leaving the 13-2 battery requires the solution gas from the two Nisku wells be reduced to 10% using a blend gas stream. Sinopec had indicated sufficient blend gas volumes would be available throughout the quarter from new wells being brought on production to the 13-2 battery.  However, the blend gas volumes producing to the 13-2 battery were not sufficient to reduce the H2S levels to the required pipeline specifications which resulted in the Pembina production being severely restricted.

An alternative source of blend gas was obtained which required construction and tie in of a gas pipeline to the Sinopec battery.   On July 17, 2014 the tie in for blend gas was completed and test production began. The Pembina 9-05 well was brought back on production for testing. The Pembina 9-05 well was tested for 11 days at an average of 600 gross bbls/d of oil (net 94 bbls/d), at a 16% choke rate (choked back 84%).  The 9-05 well was then shut in and the 14-05 commenced test at restricted rates. The flow rate, averaging 440 gross bbls/d of oil (net 69 bbls/d) and subsequent low flowing temperature, caused wax to form at surface, requiring the well to be shut-in. The 14-05 well has now been brought back on production to complete flow testing.  

Although sufficient blend gas is currently available to allow the producing rate of both Nisku wells to be increased, additional upgrades by Sinopec at the 13-2 battery are required in order for the wells to be produced at significantly higher rates. These upgrades include installation of a new separator, additional compression, and a vapour recovery unit. Battery upgrade plans are being reviewed and discussed with Sinopec.

During the quarter, the Company and its working partners received approval from the Alberta Energy Regulator (AER) for water injection and an Enhanced Recovery Application Scheme. The approval allows for immediate water injection and Good Production Practice (GPP) status.

SELECTED INFORMATION


For three months ended



June 30,

March 31,

June 30,

($ thousands except per share & unit amounts)


2014

2014

2013

Financial





Petroleum and natural gas revenues (1)


157

134

449

Funds from operations (2)


98

(44)

9

   Per share – basic and diluted


-

-

-

Net income (loss)


51

(82)

(209)

   Per share – basic and diluted


-

-

(0.01)

Capital expenditures (3)


-

636

44

Operation





Production





  Oil & NGL (bbl/d)


11

8

40

  Gas (mcf/d)


112

124

435

  Total (boe/d)


30

28

113

Petroleum and natural gas revenues ($/boe)


57.59

52.87

43.62

Royalties  ($/boe)


3.53

(10.85)

(10.97)

Operating expenses ($/boe)


(9.35)

(11.77)

(15.49)

Operating netback ($/boe)


51.77

30.25

17.16

(1)

 Petroleum and natural gas revenues are before royalty expense.

(2)

 Funds from operations and net debt are non-GAAP measures as defined in the Advisory section of the MD&A.

(3)

Capital expenditures are before acquisitions and dispositions.

 

Additional Information

Ironhorse's complete results for the three and six months ended June 30, 2014, including unaudited condensed financial statements and the management's discussion and analysis are available on SEDAR or the Company's web site at www.ihorse.ca

About Ironhorse:

Ironhorse Oil & Gas Inc. is a Calgary-based junior oil and natural gas production company trading on the TSX Venture Exchange under the symbol "IOG."

Forward-looking statements:

Statements throughout this release that are not historical facts may be considered to be "forward looking statements." These forward looking statements sometimes include words to the effect that management believes or expects a stated condition or result. All estimates and statements that describe the Company's objectives, goals, or future plans, including management's assessment of future plans and operations, drilling plans and timing thereof, expected production rates and additions and the expected levels of activities may constitute forward-looking statements under applicable securities laws and necessarily involve risks including, without limitation, risks associated with oil and gas exploration, development, exploitation, production, marketing and transportation, volatility of commodity prices, imprecision of reserve estimates, environmental risks, competition from other producers, incorrect assessment of the value of acquisitions, failure to complete and/or realize the anticipated benefits of acquisitions, delays resulting from or inability to obtain required regulatory approvals and ability to access sufficient capital from internal and external sources and changes in the regulatory and taxation environment. As a consequence, the Company's actual results may differ materially from those expressed in, or implied by, the forward-looking statements. Forward-looking statements or information are based on a number of factors and assumptions which have been used to develop such statements and information but which may prove to be incorrect. Although the Company believes that the expectations reflected in such forward-looking statements or information are reasonable, undue reliance should not be placed on forward-looking statements because the Company can give no assurance that such expectations will prove to be correct. In addition to other factors and assumptions which may be identified in this document, assumptions have been made regarding, among other things: the ability of the Company to obtain equipment and services in a timely and cost efficient manner; drilling results; the ability of the operator of the projects which the Company has an interest in to operate the field in a safe, efficient and effective manor; and field production rates and decline rates. Readers are cautioned that the foregoing list of factors is not exhaustive. Additional information on these and other factors that could affect the Company's operations and financial results are included elsewhere herein and in reports on file with Canadian securities regulatory authorities and may be accessed through the SEDAR website (www.sedar.com). Furthermore, the forward-looking statements contained in this release are made as at the date of this release.

Boe Conversion – Certain natural gas volumes have been converted to barrels of oil equivalent ("boe") whereby six thousand cubic feet (mcf) of natural gas is equal to one barrel (bbl) of oil. This conversion ratio is based on an energy equivalency conversion applicable at the burner tip and does not represent a value equivalency at the wellhead.

"Neither 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: Ironhorse Oil & Gas Inc.

For further information: Larry J. Parks, President & Chief Executive Officer, (403) 355-3620, lparks@ihorse.ca; Karen Hutson, VP Finance & Chief Financial Officer, (403) 355-3620, khutson@ihorse.ca

LIENS CONNEXES
www.ihorse.ca

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