Toronto Stock Exchange: SCS
Common Shares: 83,989,631
CALGARY, March 30, 2012 /CNW/ - Second Wave Petroleum Inc. ("Second Wave" or the "Company") is pleased to announce the filing of its audited annual financial statements and management's discussion and analysis for the year ended December 31, 2011. The audited financial statements and MD&A have been filed on SEDAR at www.sedar.com and are also available on the Company's website at www.secondwavepetroleum.com. Second Wave's annual information form for the year ended December 31, 2011, which includes information regarding the Company's reserves data and other oil and gas information, will be similarly filed and available later today. Second Wave previously announced its year-end 2011 reserves on February 28, 2012.
- Corporate production increased to 2,188 boe/d (76% oil and natural gas liquids) for the fourth quarter and 1,684 boe/d for the year, representing increases of 46% and 21%, respectively, from the same periods in 2010 despite the Company's non-core disposition of 400 boe/d in January 2011.
- Beaverhill Lake volumes in the Company's Judy Creek core area increased to 1,251 boe/d (98% oil and natural gas liquids) in the fourth quarter from zero and 484 boe/d (92% oil and natural gas liquids) in the first and third quarters of 2011, respectively. The Company is forecasting its Beaverhill Lake volumes to increase further to 4,000 boe/d by year end 2012.
- Operating netbacks increased to $49.42 per boe for the fourth quarter and $33.54 per boe for the year, representing increases of 120% and 44%, respectively, from the same periods in 2010.
- Beaverhill Lake production results continue to meet the Company's expectations as the average gross light oil flow test rates for its 26 Beaverhill Lake horizontal oil wells in Judy Creek have exceeded 600 bbl/d over test periods ranging from 5 to 60 days.
- During the fourth quarter the Company drilled 10 gross (4.6 net) Beaverhill Lake horizontal light oil wells in Judy Creek and completed 7 gross (4.0 net) wells with 6 (2.4 net) wells standing waiting on completion operations at year-end. In the first quarter of 2012 the Company drilled and rig released an additional 10 gross (5.2 net) Beaverhill Lake wells and completed and placed on production 13 gross (6.4 net) wells. The Company has spud its 32nd gross (15.2 net) horizontal well on its Beaverhill Lake light oil play with 26 gross (12.8 net) wells on production or being equipped for production as of March 30, 2012.
Selected Fourth Quarter Financial Information
| Three months ended
| Three months ended
|($000s, except per share and per boe amounts)||2011||2010|| %
|Petroleum and natural gas sales||15,366||6,656||131||7,935||94|
|Lease operating costs||(4,628)||(2,634)||76||(3,521)||31|
|Operating netback per boe||49.42||22.45||120||25.94||91|
|Net capital expenditures||16,604||27,731||(40)||23,244||(29)|
|Net Income (loss)||(8,734)||(6,857)||27||899||-|
|Cash from operating activities per share||0.07||0.02||250||0.06||17|
|Net income (loss) per share||(0.11)||(0.08)||38||0.01||-|
|Natural gas liquids (bbl/d)||94||73||29||101||(7)|
|Natural gas (mcf/d)||3,142||3,452||(9)||2,992||5|
|Combined (boe/d) (6:1)||2,188||1,500||46||1,470||49|
|Crude oil and liquids weighting (%)||76||62||23||66||15|
* Percentage change from Q3, 2011 to Q4, 2011
2011 Operational Review
The Company's production increased to 2,188 boe/d (76% oil and natural gas liquids) for the fourth quarter of 2011 with annual 2011 production of 1,684 boe/d (66% oil and natural gas liquids), representing increases of 46% and 21% respectively, from the same periods in 2010. The Company exited the year with a reserve life index of 13.7 years based on its previously announced year-end 2011 proved plus probable reserves of 10,950 mboe (gross) and fourth quarter production rate of 2,188 boe/d. The Company's oil and natural gas liquids production weighting increased year-over-year by 23% with its light oil production weighting going from zero in the first quarter of 2011 to 57% of corporate production or 1,248 bbl/d in the fourth quarter of 2011.
The Company's operating netbacks increased in the fourth quarter of 2011 to $49.42 per boe, representing a 120% improvement from the fourth quarter of 2010 as the Company's production weighting shifted significantly to light oil through the success of its Beaverhill Lake drilling program in Judy Creek. The Company expects that its operating netbacks will continue to improve in 2012 as its forecast production weighting to light oil is expected to increase further due to its Beaverhill Lake drilling program.
In 2011 the Company focused its efforts on its Beaverhill Lake light oil play in Judy Creek. The Company announced its strategic joint venture with Crescent Point Energy Corp. on February 22, 2011 and spud its first Beaverhill Lake horizontal oil well on March 3, 2011. By year-end 2011 the Company had drilled and cased 19 gross (8.8 net) Beaverhill Lake horizontal wells with 13 (6.4 net) wells completed and on production. Beaverhill Lake production in Judy Creek increased from zero in the first quarter of 2011 to 1,251 boe/d (98% oil and natural gas liquids) for the fourth quarter of 2011.
In 2011 the Company and its joint venture partners built a significant infrastructure footprint for future Beaverhill Lake light oil production, with three distinct Beaverhill Lake group batteries and one completion flow-back treating facility constructed by year-end. As the Company moves into a full drilling development program and a waterflood in the Beaverhill Lake formation these batteries and facilities can be expanded to accommodate the installation of additional emulsion treating and water handling equipment. The Company's operated gas plant in Judy Creek is processing all of the solution gas from the Judy Creek Beaverhill Lake and Pekisko oil batteries, creating substantial synergies between the two oil plays.
Corporate operating costs for the fourth quarter of 2011 were approximately $22.99 per boe with the Company's Judy Creek property having operating costs of approximately $20.81 per boe.
In 2012 Second Wave and its joint venture partners have proceeded with the electrification of its Judy Creek oil field and the tie-in of its oil batteries to a sales oil pipeline. Both projects are expected to be completed over the next 6 to 15 months and to improve operating costs following completion by substantially reducing the Company's oil trucking requirements and fuel consumption. For the fourth quarter of 2011 the costs in Judy Creek associated with oil trucking and fuel totaled approximately $4.91 per boe. Other operational benefits anticipated from these two projects include increased run time and lower operational costs on the Company's pumping oil wells and facilities through reduced maintenance on its combustion engines, generators, roads and leases.
Second Wave and its joint venture partners have continued their momentum on its Beaverhill Lake light oil play into 2012. In the first quarter of 2012 the Company drilled and rig released 10 gross (5.2 net) Beaverhill Lake horizontal oil wells and completed and brought on production 13 gross (6.4 net) Beaverhill Lake wells. The Company has now spud its 32nd gross (15.2 net) Beaverhill Lake horizontal well in Judy Creek and currently has 26.0 (12.8 net) wells on production or being equipped for production.
Beaverhill Lake production results continue to meet the Company's expectations as the average gross light oil flow test rates for its 26 Beaverhill Lake horizontal oil wells in Judy Creek have exceeded 600 bbl/d over test periods ranging from 5 to 60 days.
The Company cautions that test results are not necessarily indicative of long-term performance or ultimate recovery.
Second Wave and its joint venture partners are currently utilizing a three rig drilling program on its Beaverhill Lake play and the Company remains on pace to execute is previously disclosed 2012 capital program of 39.0 gross (16.8 net) horizontal Beaverhill Lake light oil wells in Judy Creek. For the remainder of the first half of 2012 the Company continues to expect its corporate production to fluctuate between a base level of 2,500 and 3,500 boe/d (approximately 80% oil and natural gas liquids) depending on a number of variables, including frac schedules, flow test lengths, pipeline construction and single well battery construction cycle times as well as general spring break-up related delays.
Strategic Alternatives Process
As previously disclosed on February 28, 2012, in response to certain unsolicited expressions of interest the Company's board of directors has initiated a process to identify, examine and consider strategic alternatives available to the Company with a view to enhancing shareholder value. Such alternatives may include, but are not limited to, a sale of all or a material portion of Second Wave's assets, whether in one transaction or a series of transactions, a sale of the Company, or a merger or other strategic transaction involving Second Wave and a third party, and will include continued execution of the Company's business plan.
Second Wave has engaged RBC Capital Markets as its financial advisor to assist in this process.
Second Wave does not intend to disclose developments with respect to its strategic alternatives review process unless its board of directors approves a specific transaction or otherwise determines that disclosure is necessary in accordance with applicable regulations. The Company cautions that there are no assurances that the process will result in a transaction or, if a transaction is undertaken, its terms or timing.
Barrels of Oil Equivalent (BOEs). The term BOE refers to barrel of oil equivalent, with natural gas converted to crude oil equivalent at a ratio of six thousand cubic feet to one barrel. BOEs may be misleading, particularly if used in isolation. A BOE conversion ratio of six mcf (six thousand cubic feet) to one bbl (one barrel) is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.
Forward-Looking Statements. This news release contains forward-looking statements as to the Company's internal projections, expectations and beliefs relating to future events or circumstances. Forward-looking statements are typically (but not necessarily) identified by words such as "anticipate", "believe", "budget", "estimate", "expect", "plan", "intend", "potential", "may", "will", "should" or similar words suggesting future outcomes. Although the Company believes that these forward-looking statements are reasonable, undue reliance should not be placed on them as they are subject to known and unknown risks and uncertainties, many of which are beyond the Company's control. Forward-looking statements are not guarantees of future outcomes. There can be no assurance that the plans, intentions or expectations contained in the forward-looking statements or upon which they are based will in fact occur or be realized, and actual results may differ from those expressed or implied in the forward-looking statements. The difference may be material.
Second Wave is subject to the inherent risks associated with the exploration, development, exploitation and production of oil and gas. More particularly, material risk factors that could cause actual results to differ materially from those expressed or implied in the forward-looking statements contained in this news release include: adverse changes in commodity prices, interest rates or currency exchange rates; accessibility of capital when required and on acceptable terms; lower than expected production of crude oil and natural gas; production delays; lower than expected reserve volumes on the Company's properties; increased operating costs; ability to attract and retain qualified personnel or to secure drilling rigs and other services on acceptable terms; competition for labour, equipment and materials necessary to advance the Company's projects; unforeseen engineering, environmental or geological problems; ability to obtain all required regulatory approvals on a timely basis and on satisfactory terms; and changes in laws and governmental regulations (including with respect to taxes and royalties). This list is not exhaustive. Readers should also review the risk factors described in other documents filed by the Company from time to time with securities regulatory authorities in Canada, including its most recent annual information form, copies of which are available electronically at www.sedar.com and at www.secondwavepetroleum.com.
Specific forward-looking statements contained in this news release include statements regarding: the expected timing for completing the electrification of the Company's Judy Creek oil field and the tie-in of its oil batteries to a sales oil pipeline, and operating cost improvements and other operational benefits expected to result therefrom; the number of wells in the 2012 capital program; the Company's expected corporate production range for the remainder of the first half of 2012 and its forecasted Beaverhill Lake volumes by year end 2012. In making such forward-looking statements, Second Wave has made various assumptions regarding, among other things: the accuracy of geological and geophysical data and interpretations of that data; future oil and natural gas prices; future capital requirements; future exchange rates; the accessibility and cost of capital (including credit); the Company's ability to economically produce oil and gas from its properties and the timing and cost to do so; and its ability to obtain qualified staff, equipment and supplies in a timely and cost-efficient manner.
The forward-looking statements included herein are made as of the date of this news release and Second Wave undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by securities laws.
Reserve Life Index. Second Wave's estimated reserve life index of 13.7 years, as disclosed in this news release, was calculated by dividing the Company's estimated proved plus probable reserves of 10,950 mboe (gross) as of December 31, 2011, by 798.6 mboe (gross), which is the annualized sum of the Company's fourth quarter production rate of 2,188 boe/d.
For further information:
Colin B. Witwer, President and CEO
Randy Denecky, VP, Finance and CFO