CALGARY, Jan. 12, 2015 /CNW/ - Seven Generations Energy Ltd. ("7G", "Seven Generations" or the "Company") (TSX: VII) is pleased to provide an update to its shareholders through a management interview. The following is the transcript of interviews conducted by Brian Newmarch ("BN"), the Company's Manager of Investor Relations, with Pat Carlson ("PC"), CEO, Marty Proctor ("MP"), President and COO and Chris Law ("CL"), Vice President, Corporate Planning.
BN: Seven Generations had seen impressive growth throughout the first three quarters of 2014. How did fourth quarter 2014 production look?
MP: Based on estimated daily sales, fourth quarter 2014 production averaged approximately 43,500 boe/d. This estimate represents a 275% increase over fourth quarter 2013 and a 21% increase over third quarter 2014 production volumes. The average annual production rate for 2014 was approximately 30,800 boe/d, which compares favourably to our guidance of 27,000 - 30,000 boe/d and is approximately 300% higher than the average annual production rate in 2013. As a reminder, fourth quarter 2014 production figures are preliminary estimates that are subject to adjustments.
BN: Seven Generations was able to complete a very successful IPO as oil prices started to fall. As the sell-off has continued further than most had expected, has this new price environment affected your plans?
PC: Brian, the simple answer is no. We planned the Company right from inception with the anticipation that oversupply would lead to low prices. While we are closely watching commodity prices and carefully re-examining discretionary capital investments on a case by case basis, we are proceeding with the business plan that we presented to the market with the IPO.
When we financed the Company in 2008 the industry's first shale and tight gas reservoir developments occupied much of the news. A couple of well-known CEOs each proclaimed that, thanks to tight and shale gas, North America, or at least the US, had by then established more than a century of supply. These gentlemen represented big companies who were pioneers in shale gas and, combined, they had properties from northern British Columbia to southern Texas. None of us at Seven Generations had the knowledge of the entire continent that these CEOs had been able to call upon, but we had no reason to doubt their assertions. What it meant to us was that there was a new recovery technology that was novel enough to lead to significant upside in finding the optimum application for each resource deposit. Most importantly, the oversupply meant the industry was positioning for a price war that would lead to competition between producers to supply a limited market that would result in downward spiralling prices. We entered the business knowing that to compete in an oversupplied environment, we would need to have low supply costs. Low supply costs would come from selecting a superior asset and positioning to be among the leaders in applying and developing the technologies needed to develop it.
So, right from our beginning we anticipated competing for market share in a low price environment. We did not know that the low price environment was going to come upon us in the autumn of 2014, and we did not know if it would be oil or gas that would be the first oversupply dam to break. We built the Company around the notion that we would need to be competitive and financeable in the type of energy price environment that we have recently experienced.
BN: In the current environment of $45-$60 USD/bbl WTI what are the major risks you see facing the North American oil and gas business?
PC: Oversupply is the main risk for North American gas producers. Producers are going to have to compete for market share within a North American market that has relatively stagnant demand growth. There are really two aspects to that competition - having a chance to compete for markets and having market access infrastructure that enables producers to deliver their gas to consumer markets. At Seven Generations, access to regional and transcontinental pipelines for the products that we produce, particularly gas, is our largest concern.
BN: How is Seven Generations addressing these risks?
PC: We see our lands as having the potential production capacity to underpin a major market access project - a few examples could be a pipeline to the US Midwest, a pipeline connected LNG terminal on the Pacific coast or maybe even a rich gas pipeline with LNG and LPG terminals on the Pacific coast. Right now, we don't have enough confidence in the ultimate recovery and supply cost to contract all of our resources, but we have contracted 500 MMcf/d of rich gas transportation on Alliance and the processing of that gas with Aux Sable in Chicago. This commitment is underpinned by what we saw, with considerable confidence, to be recoverable from just a small part of our land base and mostly early stage information. Right now, continued delineation drilling and production activities are increasing our confidence and we are looking for opportunities to contract more gas as we gain confidence in our supply.
In order to make major new infrastructure development happen, producers, underpinning the proposed infrastructure, need to have enough supply of sufficient quality that they can contract the throughput rates required at market prices. For projects that include transcontinental pipelines and various types of terminalling, we, together with competitors that may want to participate in a market access expansion project, need to contribute enough gas so that the combined tariff can support the cost of the project. These projects need to be large enough to capture economies of scale. In order to commit gas supplies to such projects, producers need to be confident that the development and production of their resources will be profitable at future market prices. This means that producers, seeking to underpin projects, must have resources with both size and quality.
BN: How long do you think that depressed energy prices will last? What is your strategy to weather the storm of low prices?
PC: Our expertise is not in commodity price forecasting. To address low commodity prices we use our skills to accumulate and develop resources that have a low supply cost. Our objective is, and always has been, to be among the lowest cost suppliers in the market so that we preserve an investment opportunity regardless of the price.
For 7G, gas supplies and markets are largely captive to the North American continent where gas demand is relatively inelastic over periods of a few years. Gas trades in Canada and the United States in an efficient free market economy. We approach the gas market in the belief that over a reasonable period of time, perhaps several months, the market will pay an amount sufficient to encourage the addition of new supplies to make up for market growth and production declines. The price that the market will have to pay will be above the lowest cost of supply. We think that it is likely that low cost supplies will remain profitable to develop.
Oil is different than gas because it is not captive among free market economies - it trades globally. For several decades the price has been strongly influenced, if not set, by a group of exporting countries. This means that international political factors influence the oil price as much as supply and demand fundamentals. Even experts are caught off guard by major price fluctuations such as the decline in oil prices that recently occurred. In the final analysis, global oil producers have become accustomed to periodic price dips and build that risk into planning for their projects. Our strategy to mitigate the risk of oil price volatility has been to diversify our products to a balance of oil and gas. We also have a hedging program that softens the impact of shorter term price depressions.
BN: Does it make sense for 7G to deplete its drilling inventory, reserve and resource base in this depressed price environment?
PC: North America is going to continue to need incremental supplies of gas. We produce gas. If the gas market is efficient, as we believe it is, then we expect that, with some volatility, gas prices will find a price that attracts sufficient new development to meet market needs. From that point there should be upward pressure on prices as the continent's lowest cost supplies are fully developed and the next degree of quality is called upon. Overlying this simple supply and demand model are developments such as market expansion to add new demand and new infrastructure that will remove barriers to markets on a local basis. The bottom line is that fluctuating a bit to find the right level, the market will determine a long term gas price that encourages development of the lowest cost resources. Given the high quality of our Kakwa River Project, particularly the now well delineated region that we call the "Nest," we expect prices sufficient to encourage development. With 15 rigs, we believe that our lowest cost supply, "Nest 2", has approximately seven years of development inventory.
BN: How does 7G look at acquisition opportunities? Do potential acquisitions not dilute the current asset base?
PC: Infrastructure expansion projects require producers to commit large daily rates of gas over long periods. When it comes time for 7G's resources to be committed to a market access expansion project it would be ideal to see other developers commit supply to help reduce infrastructure tariffs. We believe that adequate market access for all of the gas in our region is a major risk and that, in order to reduce this risk, we need to have a high degree of assurance that we can motivate the development of the midstream infrastructure that will be required. We are approaching that challenge on two fronts: first, delineating our existing lands in search of the highest quality resources with the intent to optimize technology that we can apply in order to find more low cost gas supply, and second, acquiring, if we can at attractive prices, land which can contribute supply to a market access solution.
BN: Stakeholder relations seem to be very important to Seven Generations. Why?
PC: We define "stakeholders" as groups of people whose support or at least non-opposition is required for us to execute our business plan. There are many examples of companies in our industry that became so focused on addressing the needs of one stakeholder that they failed another. Business news is full of stories of companies that have gone offside with environmental groups, communities near their operations, regulators, employees, suppliers, service providers or shareholders. Whenever one stakeholder is alienated, the ability of a company to address the needs of the others can be compromised. In order to serve any one stakeholder, all stakeholders must be satisfied. We see ourselves as servants of our stakeholders. We seek to understand stakeholder needs and to address them.
BN: What is the long term goal of Seven Generations?
PC: We seek to serve our stakeholders in a way that enables us to be among the most desired companies in the energy business, now and for the long term.
BN: Marty, you joined Seven Generations in late May. What were your first impressions of the Company?
MP: My first impressions were very positive. I saw a company with an incredible asset base and a competent and energetic team. I was impressed with the bold, courageous leadership that the company had shown by committing to substantial take-away capacity at a relatively early stage of project development. When I joined the company, Seven Generations had contracts in place to deliver 250 MMcf/d of liquids rich gas through the Alliance Pipeline to Aux Sable, by December 2015. We subsequently increased the commitment, and now plan to deliver 500 MMcf/d by 2018. Seven Generations has demonstrated that our project has one of the lowest supply costs in the industry, which was a key factor in enabling our leadership team to make long term commitments for take-away capacity.
BN: The Company has been growing very rapidly. You came in as President and Chief Operating Officer. What were the biggest challenges associated with that?
MP: The Company had an excellent team in place and was executing very well before I arrived. I knew several people within the company from previous work relationships, and in fact this is the fourth time I have worked with Pat Carlson, the CEO of Seven Generations. Pat hired me as COO at Seven Generations to handle day-to-day operational issues and implement systems for setting goals and measuring performance so Pat could focus his efforts on the bigger picture strategic opportunities. Pat also wanted to add my public company experience to the team to support the IPO marketing and subsequent public company reporting requirements. Pat and I have worked very well together in the past and I believe we have already demonstrated good synergies at Seven Generations. I think my biggest challenge has been to implement operational improvements without disrupting the aspects of operational performance that were already working well.
BN: Do you feel that you have been able to add your personal touch to the leadership and direction of the Company? What are the kinds of things that you have focused on?
MP: Efficient operational execution requires collaboration among a multi-disciplined team. Critical pieces include First Nations consultation and application for resource development permits, road and lease construction, drilling, completions, well tie-ins, facility construction, and production operations. I have focussed on improving communication between the departments to streamline our planning and execution activities while placing a strong emphasis on health, safety and environmental performance. We have implemented regular meetings to improve communication between departments and between Calgary based and Grande Prairie based teams to ensure efficient integration of every aspect of our planning and execution.
The incredible growth that Seven Generations has demonstrated requires intense focus on cost control. The operations team has been focussed on setting targets and measuring performance associated with operating and transportation costs, completion costs, drilling costs, tie-in costs, and facility capital. We are also focused on optimizing production which requires monitoring and improving on-time performance. Finally, I am focused on establishing and improving relationships with key vendors who are aligned with our values and commitment to a safe workplace, and whose personnel and equipment can be relied upon to make a positive contribution to the success of our program.
BN: Having its operating headquarters in Grande Prairie, as opposed to Calgary, is unique for a Canadian petroleum developer. Why is Seven Generations doing that? How is it working out?
MP: Our production team, our completion team, and many members of our facilities construction team are based in Grande Prairie, which is about a one hour drive from our project. This proximity makes it easy for staff to get to site to respond to challenges and develop solutions. We have at least two completion engineers on location during fracing operations. These frac specialists are able to direct and observe all aspects of the stimulation and are on hand to quickly respond to treatment anomalies and adjust treatment parameters in real-time. This is very unique in the industry and I am confident that Seven Generations gets better well results because of this hands-on approach.
With the majority of the operations staff based in Grande Prairie, Seven Generations is recognized as part of the community. Our staff are actively involved in local events and our company is a strong supporter of initiatives that are important to the community. For example, Seven Generations hosts an annual golf tournament which, thanks to the generosity of friends, neighbors, employees, bankers, competitors, partners, suppliers and service providers, raised over $300,000 for the benefit of Grande Prairie's Queen Elizabeth II Hospital Foundation last September.
BN: How much of your time do you spend in Grande Prairie or on the Kakwa River Project site? How is that helping you to do your job?
MP: Since I joined Seven Generations in May, more than half of my work time has been spent in the Grande Prairie area. My presence in the Grande Prairie office and on the project site has enabled me to communicate effectively with key staff and contractors in the region and to work shoulder to shoulder with the team to set production and cost targets and develop the tools we need to monitor performance. When I am on location, I am able to convey Seven Generations' strong conviction to providing a positive and respectful workplace where we value industry leading safety and environmental performance.
BN: In the third quarter report, Pat said, "Technology is part of our DNA." What benefits does a courtship with technology bring to the Company's stakeholders?
MP: We are at a relatively early stage of development at our Kakwa River Project, with only about 80 wells drilled and thousands of wells planned for the future. We have made considerable progress towards evolving efficient drilling and completion practices, but we think we can do more to improve our capital efficiencies and well productivity. We are focused on developing and executing a standard drilling and completion program, while continuing to perform controlled experiments designed to determine the optimal well spacing / frac spacing / frac size configuration. We have been testing various well spacings and are currently assuming that three layers of wells will be required to optimally exploit the Montney. The single layer well spacing that we have tried ranges from 160 metre inter-well spacing, which is equivalent to 10 wells per mile, to 400 metres which is equivalent to 4 wells per mile. All of these tests were done with 1.5 tonnes of proppant per metre of frac interval. We have also done some testing with larger sized fracs to determine whether further productivity gains may be achieved with larger frac sizes. At this stage we don't know whether we will get the best overall total value with a lot of wells with large fracs or less wells with very large fracs.
There are a lot of other technical choices to be optimized, including but not limited to frac fluid, frac design, proppant type, proppant concentration, liner design, pad size, well trajectories, a new friction reducing mechanical device that members of our drilling team designed, improved bit designs, improved drilling mud systems (including underbalanced drilling), larger drilling clusters to dilute the costs associated with rig moves and to minimize the amount of surface land use and more efficient surface equipment.
BN: In its Prospectus, Seven Generations revealed that it has contracted transportation that suggests a plan for ambitious growth. What are the components of the work that must be done? What do you think will be the biggest challenges in achieving that growth?
MP: When I joined the company, Seven Generations had contracts in place to deliver 250 MMcf/d of liquids rich gas through the Alliance Pipeline to Aux Sable by December 2015. We subsequently increased the commitment, and now plan to deliver 500 MMcf/d by 2018. Our budget and long range plan are designed to deliver these contracted volumes. The projected productivity per well was based on type curves statistically derived from the production profiles of the first 39 wells that Seven Generations drilled into the play while factoring in an expectation of 75% on-time performance. We are continually striving to improve productivity and on-time performance. We will also need to build additional gas gathering and gas processing infrastructure in order to achieve our growth commitments. This will include an expansion of the Lator gas plant to handle 250 MMcf/d and construction of a new 250 MMcf/d plant to the northwest of the project area, which we have designated the Cutbank plant. The Lator expansion will include additional compression, refrigeration, and a second de-ethanizer tower. The Cutbank plant will essentially duplicate the expanded Lator plant. Key challenges will be obtaining stakeholder consent and regulatory licenses in time to meet our construction schedule, and continuing to procure the equipment and services needed to supply and construct the facilities in a cost efficient manner.
BN: The economics of the Nest drilling inventory as described in the Prospectus appear to be very attractive and there seems to be considerable upside potential to the economics from reduced cost and / or increased recovery. Given the commodity price environment, are you still pursuing those improvements and, if so, are there any early indications that you can tell us about?
MP: The net present value (or NPV) of our project can be increased by both higher productivity and lower costs. We are very focused on improving capital efficiencies and reducing operating costs. At the same time, we see enormous potential to increase well productivity.
In the past year, we have increased our lateral length, increased our sand volumes per unit of lateral length, and implemented a 'slow-back' production method, all of which have contributed to substantial improvements in productivity. Our Prospectus and other recent investor relations materials include a case study of two wells on Pad 18, and demonstrates a huge improvement in productivity from the most recent well, which incorporated a longer lateral, higher proppant concentrations, and the slow-back production method. This provides strong encouragement to continue to pursue well construction and production practice optimization.
BN: What sort of upside do you see outside of your upper and middle Montney holdings?
MP: Although most of our 2P reserves are in the upper and middle Montney, we have exposure to significant upside potential in a number of secondary targets including the lower Montney, the Duvernay, and several Cretaceous targets such as the Falher, Wilrich, White Specks and others. In some circumstances, we may be able to access Cretaceous targets in the vertical section of our Montney horizontal wells and commingle production from the secondary targets with the Montney and produce both through the existing Montney infrastructure.
BN: Sounds good, but is Seven Generations focused on growth alone, or are there other plans to increase shareholder value?
MP: All of our efforts are directed to increasing shareholder value. The NPV of the project can be increased by both productivity improvements and cost reductions. We are intensely focused on improving capital efficiencies and reducing transportation and operating costs. Cost saving initiatives include flowlining instead of trucking condensate, and constructing frac water source and produced water disposal systems nearer to our operations.
BN: Marty, you've taken on a big job. What are your thoughts on the challenges and opportunities facing you?
MP: We have an excellent asset which is capable of generating industry leading capital efficiencies, and we have an excellent team in place. With continued hard work and a focus on developing and implementing appropriate technologies, we can solidify our position as the low cost supplier of gas and natural gas liquids.
BN: Changes in the commodity price environment, since you have joined Seven Generations, have been very disruptive. Any regrets?
MP: No. Lower commodity prices present a challenge to all producers. However, with our excellent asset base and strong team, Seven Generations is well positioned to succeed in this commodity price environment.
BN: The Montney is obviously an attractive play, what sort of competition are you seeing for services? For supplies? For staff?
MP: Seven Generations has been successful at cultivating excellent working relationships with safe, efficient, and cost effective vendors. We have a reputation for providing a safe and respectful work site, our project area is in the vicinity of the modern and industry friendly community of Grande Prairie, we are well financed, and we have a reputation for paying our suppliers promptly. The proximity of our project to Highway 40 near Grande Prairie, and the high quality all-season road network that we have constructed throughout our Nest area means that we can conduct our operating activities year-round with little impact due to spring break-up. These factors are important to vendors and make us an attractive industry partner. Late last summer, we entered into a one-year contract with Schlumberger for a nitrogen frac spread with crews capable of providing 24-hour pressure pumping services. The arrangement requires Seven Generations to have locations available in advance to keep the frac spread busy and requires us to plan our operations more diligently than ever. This improved project scheduling will also enable us to enter into long term arrangements with other vendors that are likely to provide high quality services with attractive pricing terms as a result of the certainty of schedule.
We have recently heard that some operators have reduced their activity levels as a result of the lower commodity price environment. We expect this decrease in activity will further improve our access to the best services at even more attractive pricing.
BN: What sort of production declines are you seeing? How do you intend on managing declines, especially as Seven Generations continues to grow?
MP: Our budget and long range plan provide a path to match the production growth dictated by our contractual commitments along with replacing production declines.
It should be noted that our 'slow back' production method has a significant impact on our corporate decline. We are deliberately restricting the initial production of our wells, which means we don't see as high an initial rate (and therefore don't need to size our facilities for a short-duration peak rate) but also means that our wells do not decline as rapidly. We believe that this production practice improves our liquid recovery rate profile. It is important to educate the investor community on this production practice and discourage them from comparing Seven Generations to other companies by peak production rate, which we have deliberately managed.
BN: Seven Generations has a relatively low percentage of 2P reserves classified as PDP, what is the strategy around converting reserves to the PDP reserves?
MP: As of July 1, 2014, 7G had approximately 17 MMboe of PDP reserves out of approximately 649 MMboe of 2P reserves. The Kakwa River project is at a very early stage of development and at the time of reserve evaluation, only about 40 nest locations had been drilled and put on production. However, the results of the first 40 wells were very positive, and the wells had been positioned throughout the nest such that productivity was demonstrated for a vast area that included more than 500 2P locations. Further, the contractual commitments to Alliance Pipeline and Aux Sable demonstrated a corporate will to develop the 2P reserves at an acceptable pace.
Since the first half of 2014, our pace of drilling has nearly doubled, with an average of 7 rigs drilling in the first half of 2014 compared to 14 drilling rigs drilling for much of December. We expect to have 15 drilling rigs operating by mid-year 2015. Over several years, these additional rigs will convert many of the 2P reserves to PDP reserves.
BN: What is the company's strategy on hedging? How much do you have hedged for 2015?
CL: Currently, we aim to hedge approximately 55% of production (net of royalties) out over the next 4 quarters and 30% of net production for the following 4 quarters. We currently have on average 68,500 GJ/d of 2015 AECO gas production hedged at a price of approximately $3.85 CAD/GJ and an average of 8,200 bbl/d of 2015 liquids production hedged at a price of approximately $101.80 CAD/bbl. We hedge to provide cash flow to fund a portion of our capital program and to protect interest payments on debt.
BN: In context of the current forward strip, what sort of impact does this weak commodity price environment have on Seven Generation's cash flow?
CL: The lower price environment obviously reduces cash flow, however we are well hedged throughout 2015 which will enhance revenues. We continue to believe that strategically capturing market share in ways such as firm transportation commitments and strengthening supplier relationship is critical in an oversupplied market. We will continue to manage our balance sheet prudently to ensure we have the ability to execute our business plan while maintaining reasonable debt ratios.
BN: What oil and gas prices are required for Seven Generations' growth plans to be economic?
CL: Given our balanced production profile there is a trade-off between natural gas and liquids pricing - the lower the gas price, the higher the liquids price required to be 'economic'. If we define 'economic' as a pre-tax 15% IRR on drill, complete and tie-in capital with existing infrastructure, we can achieve this minimum return in a $45 USD WTI and $2.00 USD NYMEX price environment for our Nest 2 wells.
BN: We have discussed Seven Generations' marketing commitments. Do you feel that that these commitments limit your flexibility in how you invest capital?
CL: Our marketing commitments on Alliance and with Aux Sable provide 7G with a key strategic advantage in developing our liquids rich Montney play. We are well aware of the resource in place within the region and takeaway capacity is essential to bring production to market. So no, I do not feel that these commitments limit us, rather they enable us to develop a truly remarkable asset. This belief has been validated by recent inquiries that we have received from other producers that are seeking transportation capacity out of the region and are requesting assignment of a portion of our firm commitments.
BN: With the recent downturn in the commodity price environment how do you intend on financing 7G's continued expansion? What sources of capital do you think that 7G has access to?
CL: When we priced the IPO, we expected to only need to draw on our bank line and issue incremental long term debt in order to reach a position of cash flow self-sufficiency. Leading up to the IPO, benchmark commodity prices had begun to drop and in response the board decided to take the IPO overallotment which provided additional funds that were not previously included in the budget. We are well hedged heading into the first half of 2015 and will be closely monitoring our well performance and investment profile to ensure that we maintain reasonable debt to cash flow ratios. We presently have the majority of the IPO proceeds in cash and short term deposits, as well as an undrawn $480 million credit facility that we will most likely be looking to increase at some point during 2015. We have also issued long term debt previously and may look at doing so again in the future. A key factor in our capital investment decision making process is our expectation that our approximate 630 well Nest 2 drilling inventory is financeable in a very low commodity price environment.
BN: Walk us through 7G's forward looking economics of growth to meet the contract obligation, including facility costs.
CL: Including super pad construction costs, we believe we can add wells from our Nest 2 inventory to hold or grow production while earning 15% (before tax) on our incremental drill, complete and tie-in investment at a WTI price of $45 USD/bbl if Henry Hub natural gas is $2.00 USD/MMbtu or at $35 USD/bbl for WTI if Henry Hub is $3.00 USD/MMbtu (these numbers assume similar transportation and quality adjustments to the benchmark prices that we have experienced in recent months). The chart below provides a graphical representation of various benchmark oil and gas prices required for a 15% pre-tax rate of return in our Nest 1 and Nest 2 Upper Montney type curves, assuming a drilling cost of $12.0 million, an infrastructure burden of $1.5 million and 2200 metre horizontal lateral length.
See attached figure.
BN: A number of energy companies have recently made cuts to their 2015 capital budgets. Does Seven Generations intend to do the same? How much flexibility do you have within your $1.6B 2015 budget?
CL: That is a Board decision. The Board of Directors has authorized us to invest $1.6B in 2015 and we intend on executing our current business plan. As other energy companies pare their spending plans it should reduce competition in the region, which should lead to costs savings and the potential to execute our capital plan at lower than budgeted cost. As currently contemplated, we have approximately $80MM of our 2015 budget which has been allocated to land acquisitions and small scale M&A. Beyond that we have another approximately $150MM that has been earmarked for delineation and exploration of regions outside of the Nest. If we feel it prudent, we could potentially defer this investment.
BN: Pat, what I am hearing is that the plan is "business as usual, full steam ahead."
PC: Brian, I wouldn't use those words because investors might not be aware that "business as usual" for Seven Generations is the capture and development of the incremental Mcf that is at the industry's marginal cost of supply - the next Mcf that the market should call upon. At a recent Board of Directors strategy session we presented a series of slides dating back to 2008 which showed that we were planning the business to be among the lowest cost supplies in an over-supplied market. We have been in the capital markets several times in the last few years, including the recent IPO, raising funds required to execute that vision and are simply continuing to exercise our investor mandate.
Any "financial outlook" or "future oriented financial information' in this press release, as defined by applicable securities legislation, has been approved by management of the Company. Such financial outlook or future oriented financial information is 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.
Certain statements contained in this press release constitute "forward-looking statements" within the meaning of section 27A of the Securities Act of 1933 and section 21E of the Securities Exchange Act of 1934 and "forward looking information" for the purposes of Canadian securities regulation. Any statements included in this press release that address activities, events or developments that the Company "expects," "believes," "plans," "projects," "estimates" or "anticipates" will or may occur in the future are forward-looking statements. Statements relating to "reserves" and "resources" are also deemed to be forward looking statements, as they involve the implied assessment, based on certain estimates and assumptions, that the reserves and resources described exist in the quantities predicted or estimated and that the reserves and resources can be profitably produced in the future. Actual reserve and resource values may be greater than or less than the estimates provided herein. Actual results may differ materially due to a variety of important factors. Among other items, such factors might include: planned and unplanned capital expenditures; changes in general economic conditions; uncertainties in reserve, resource and production estimates; unanticipated recovery or production problems; weather-related interference with business operations; the effects of delays in completion of, or shut-ins of, natural gas and liquids gathering systems, pipelines and processing facilities; potential costs associated with complying with new or modified regulations; oil and natural gas prices and competition; the impact of derivative positions; production expense estimates; cash flow and cash flow estimates; drilling and operating risks; the Company's ability to replace oil and gas reserves; volatility in the financial and credit markets or in oil and natural gas prices; effects of regulation by governmental agencies including changes in environmental regulations, tax laws and royalties. Except as required by law, the Company undertakes no obligation to update forward-looking information if circumstances or management's estimates or opinions should change. Do not place undue reliance on forward-looking information. Additional factors are disclosed in the Company's Supplemented PREP Prospectus dated October 29, 2014 under the headings "Forward-Looking Statements" and "Risk Factors".
Seven Generations has adopted the standard of 6 Mcf:1 bbl when converting natural gas to oil equivalent. 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 the value ratio based on the current price of oil as compared to natural gas is significantly different from the energy equivalency of 6 Mcf: 1 bbl, utilizing a conversion ratio at 6 Mcf: 1 bbl may be misleading as an indication of value. Unless otherwise noted, "$" refers to Canadian dollars.
About Seven Generations
Seven Generations Energy Ltd. is an independent petroleum company focused on the acquisition, development and value optimization of high quality tight and shale hydrocarbon resource plays. Presently, the Company has a single focus area, the Kakwa River Project, a large-scale, tight, liquids-rich natural gas property located in the Kakwa area of northwest Alberta. 7G has a corporate headquarters in Calgary, Alberta and an operations headquarters in Grande Prairie, Alberta. Seven Generations shares are traded on the Toronto Stock Exchange under the symbol VII.
SOURCE Seven Generations Energy Ltd.
Image with caption: "Benchmark oil and gas prices required for a 15% pre-tax rate of return (CNW Group/Seven Generations Energy Ltd.)". Image available at: http://photos.newswire.ca/images/download/20150112_C9393_PHOTO_EN_43335.jpg
For further information:
Brian Newmarch, Manager Investor Relations or Chris Law, Vice President Corporate Planning
Phone: 403-718-0700, Email: [email protected]