CALGARY, Feb. 14, 2012 /CNW/ - Cequence Energy Ltd. ("Cequence" or the
"Company") (TSX: CQE) is pleased to provide an operational update and
guidance on its 2012 capital budget.
The first half 2012 segment of Cequence's winter drilling program was
designed to further delineate the Company's core Montney assets at
Simonette and to preserve otherwise expiring acreage. Five gross (3.0
net) horizontal wells are budgeted to be drilled in the first six
months of 2012 with initial results as follows:
A 50 percent working interest Montney horizontal well at 1-34-61-26W5
has tested for 4 days at a final rate of 1,950 boepd (11.0 mmcf/d of
natural gas and 120 bbls/d of free condensate) at a flowing casing
pressure of 640 psi;
A 50 percent working interest Montney horizontal well at 1-11-61-27W5
has tested for 7 days at a final rate of 1,520 boepd (8.9 mmcf/d of
natural gas and 40 bbls/d of free condensate) at a flowing casing
pressure of 325 psi;
A 50 percent working interest Montney horizontal well at 13-9-62-26W5
has tested for 5 days at a final rate of 675 boepd (3.2 mmcf/d of
natural gas and 140 bbls/d of free condensate) at a flowing casing
pressure of 175 psi; and
Cequence is currently drilling 2.0 gross (1.5 net) Montney horizontal
wells that are expected to be completed in the first quarter of 2012.
A 100 percent working interest Montney horizontal well at 4-4-62-26W5
drilled late in 2011 was on stream in January 2012 and has produced for
45 days at an average rate of 900 boepd (4.4 mmcf/d of natural gas and
an estimated 40 bbls/mmcf of natural gas liquids and condensate).
The Company believes the success of its Montney horizontal drilling
program, in addition to existing vertical well control in the area,
serves to de-risk approximately 36 net sections of land at Simonette
for Montney liquids-rich gas development. As of the date of this press
release, Cequence has internally estimated that there is approximately
1.4 tcf of Discovered Petroleum Initially In Place ("DPIIP") in the
Montney underlying these lands (1). The Company has an additional 34 net sections of land at Simonette
that are considered highly prospective for the Montney. Cequence is
continuing to evaluate two Montney horizontal wells completed in the
fourth quarter of 2011 which appear prospective for light oil.
(1) Discovered Petroleum Initially in Place (DPIIP) is defined as the
quantity of hydrocarbons that are estimated to be in place within a
known accumulation, plus those estimated quantities in accumulations
yet to be discovered. There is no certainty that it will be
economically viable or technically feasible to produce any portion of
this DPIIP except for those, which may, in the future, be identified as
proved or probable reserves. There is no certainty that it will be
commercially viable to produce any portion of the resources. A recovery
project cannot be defined for this volume of DPIIP at this time, and as
such, it cannot be further sub-categorized.
In response to the current low gas price environment, Cequence has taken
steps to prudently manage its assets and preserve its balance sheet.
Capital expenditures will be limited to capital projects critical to
land retention, delineation of the Company's extensive Montney resource
base at Simonette, and to capturing new liquids-weighted opportunities.
Cequence previously announced a first half 2012 capital budget of $100
million, including 15 gross (13.5 net) horizontal wells. This previous
budget was based on an average 2012 gas price of $3.50 CAD per GJ and
an average 2012 crude oil price of $88 USD per bbl WTI and was expected
to yield average production of approximately 12,000 boepd for the first
half of 2012.
Cequence's revised first half 2012 capital budget has been reduced to
$36 million, or $25 million net of planned dispositions and land
acquisitions. Cequence expects to drill 5 gross (3.0 net) horizontal
wells in the first half of 2012 targeting the Montney at Simonette.
Cequence does not currently expect to drill through spring break-up.
Capital expenditures for the full year 2012 are budgeted to be $81
million, net of planned dispositions of non-producing properties of
approximately $17 million and expenditures on undeveloped land of $6
million. The capital budget includes the drilling of 13 gross (9.8 net)
horizontal wells at Simonette. Planned drilling activities will focus
on the Montney as it is expected to yield a high liquids content and
represents the core of Cequence's resource base at Simonette. In
addition, new prospects are expected to be tested in the Dunvegan and
Falher in the third quarter of 2012.
The Company is planning to spend approximately $5.5 million to complete
the previously announced Aux Sable project. This infrastructure
spending will extend the Company's gathering system at Simonette and is
expected to be completed by April 1, 2012, pending regulatory approval.
Upon completion of the project, operating costs at Simonette are
expected to be approximately $4 per boe or $0.67 per mcfe.
Cash Flow and Net Debt
The Company has budgeted cash flow of $37 million for 2012 using an
average 2012 natural gas price of $2.50 CDN/GJ AECO and an average 2012
crude oil price of $101 USD per bbl WTI. An increase in average gas
prices of $1.00 per GJ results in an increase to budgeted cash flow of
approximately $17 million. Based on the Company's capital budget, net
debt at the end of the second quarter of 2012 is expected to be
approximately $55 million and year end 2012 net debt is budgeted to be
approximately $90 million. Cequence's current syndicated bank facility
is $110 million and is scheduled for review in May, 2012.
Production for the first half of 2012 is forecast to average 10,200
boepd, prior to any production curtailments, which represents an
increase of 18 percent over the first half of 2011. Production for the
full year 2012 is forecast to average 9,800 boepd, prior to any
production curtailments, an increase of 8 percent over budgeted 2011
production. In response to low natural gas prices, Cequence plans to
shut in approximately 1.8 mmcf/d of high cost natural gas production in
the Peace River Arch area of Northwest Alberta during the first quarter
Mr. Paul Wanklyn, President and Chief Executive Officer of Cequence,
said the following: "Maintaining our balance sheet while moderating our
growth profile in the current low natural gas price environment will
allow Cequence the flexibility to add to our existing asset base by
capitalizing on new opportunities as they arise. The stacked,
liquids-rich targets at Simonette remain an excellent source of
significant future production and reserves growth for Cequence, in an
improved natural gas price environment."
Management provides the following guidance for the 2012 fiscal year,
which was approved by the Cequence board of directors on February 13,
Average 2012 production, BOE/d (1)
Exit 2012 production, BOE/d (1)
Capital expenditures 2012 ($000's) (2)
Planned net dispositions ($000's)(3)
Operating costs ($ per boe)(4)
Royalties (% revenue)
Crude - WTI (US$/bbl)
Natural gas - AECO (Cdn$/GJ)
Funds flow ($)
December 31, 2012 Net debt ($)
Basic shares outstanding, Dec 31 2012
Production figures are presented without giving effect to any
anticipated production curtailments.
Excludes the planned $11 million in net dispositions of non-core assets
and undeveloped land discussed below.
Includes the planned disposition of non-core assets with no attributed
production for approximately $17 million and the planned acquisition of
undeveloped land for approximately $6 million.
Assumes that the AUX Sable project discussed above commences April 1,
Year End Results and Reserves
Cequence will release its year end financial and operating results and
oil and gas reserves on March 8, 2012, after market close.
Cequence is a publicly traded Canadian energy company involved in the
acquisition, exploitation, exploration, development and production of
natural gas and crude oil in western Canada. Further information about
Cequence may be found in its continuous disclosure documents filed with
Canadian securities regulators at www.sedar.com.
Forward looking Statements or Information
Certain statements included or incorporated by reference in this press
release constitute forward-looking statements or forward-looking
information under applicable securities legislation. Such
forward-looking statements or information are provided for the purpose
of providing information about management's current expectations and
plans relating to the future. Readers are cautioned that reliance on
such information may not be appropriate for other purposes, such as
making investment decisions. Forward-looking statements or information
typically contain statements with words such as "anticipate",
"believe", "expect", "plan", "intend", "estimate", "propose", "project"
or similar words suggesting future outcomes or statements regarding an
outlook. Forward-looking statements or information in this press
release may include, but are not limited to, statements or information
with respect to the Company's future production levels and rates and
oil and NGL yields; business strategy and objectives; development and
exploration plans and the anticipated results, risk profile and timing
of such activities; commodity pricing; the timing and operational
capacity of the Alliance/Aux Sable Deep Cut facility; anticipated
capital expenditures (including, anticipated proceeds of dispositions
and expenditures on acquisitions); and the Company's anticipated
operating costs, cash flow and debt levels. 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, however, 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 press
release, assumptions have been made regarding, among other things:
field production rates and decline rates; future acquisition costs and
disposition proceeds; the impact of increasing competition; the timely
receipt of any required regulatory approvals; the ability of the
Company to obtain qualified staff, equipment and services in a timely
and cost efficient manner; 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; the ability of the Company to obtain
financing on acceptable terms; the ability to replace and expand oil
and natural gas reserves through acquisition, development or
exploration; the timing and costs of pipeline, storage and facility
construction and expansion and the ability of the Company to secure
adequate product transportation; future oil and natural gas prices;
currency, exchange and interest rates; the regulatory framework
regarding royalties, taxes and environmental matters; and the ability
of the Company to successfully market its oil and natural gas products.
Readers are cautioned that the foregoing list is not exhaustive of all
factors and assumptions which have been used.
Forward-looking statements or information are 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 statements or information. These risks and
uncertainties may cause actual results to differ materially from the
forward-looking statements or information. The material risk factors
affecting the Company and its business are contained in the Company's
Annual Information Form which is available at SEDAR at www.sedar.com.
The forward-looking statements or information contained in this press
release are made as of the date hereof and the Company undertakes no
obligation to update publicly or revise any forward-looking statements
or information, whether as a result of new information, future events
or otherwise unless required by applicable securities laws. The forward
looking statements or information contained in this press release are
expressly qualified by this cautionary statement.
Non- GAAP Measures
The press release contains references to terms commonly used in the oil
and gas industry. These measures include "funds flow from operations".
This measure is not defined under IFRS and should not be considered in
isolation or as an alternative to conventional IFRS measures. This
measure is not necessarily comparable to a similarly titled measure of
another company. When this measure is used, it has been footnoted and
the footnote to the applicable measure notes that the measure is
"non-GAAP" and contains a description of how to reconcile the measure
to the applicable financial statements. This measure should be given
careful consideration by the investor.
Specifically, management of Cequence uses funds flow from operations as
it is a non-GAAP measure used extensively in the Canadian energy sector
for comparative purposes. Cequence defines the term "funds flow from
operations" as cash flow from operating activities before adjustments
for asset retirement expenditures, proceeds from sale of commodity
contracts and net changes in non-cash working capital. Cequence
evaluates its performance based on earnings and funds flow from
operations. Cequence considers funds flow from operations a key measure
as it demonstrates Cequence's ability to generate the cash flow
necessary to fund future growth through capital investment and to repay
debt. Cequence's calculation of funds flow from operations may not be
comparable to that reported by other companies.
Non-GAAP measures do not have a standardized meaning prescribed by IFRS
and are therefore unlikely to be comparable to similar measures
presented by other issuers.
BOEs are presented on the basis of one BOE for six Mcf of natural gas.
Disclosure provided herein in respect of BOEs 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.
For fiscal 2011, the ratio between the average price of West Texas
Intermediate ("WTI") crude oil at Cushing and NYMEX natural gas was approximately 24:1 ("Value Ratio"). The Value Ratio is obtained using the 2011 WTI average price of
$95.11 (US$/Bbl) for crude oil and the 2011 NYMEX average price of
$4.03 (US$/MMbtu) for natural gas. This Value Ratio is significantly
different from the energy equivalency ratio of 6:1 and using a 6:1
ratio would be misleading as an indication of value.
The TSX has neither approved nor disapproved the contents of this news
SOURCE Cequence Energy Ltd.
For further information:
Paul Wanklyn, Chief Executive Officer, (403) 218-8850, firstname.lastname@example.org
David Gillis, Chief Financial Officer, (403) 806-4041, email@example.com