CALGARY, ALBERTA–(Marketwired – July 17, 2013) – Hyperion Exploration Corp. (“Hyperion” or the “Company”) (TSX VENTURE:HYX) announces the renewal of its banking facilities, operations update and 2013 guidance.
RENEWAL OF BANK FACILITIES
As a result of the scheduled lending review with its credit provider, the lending limits of its existing banking facilities have been revised to $46.0 million from $50.0 million. The Company’s revolving operating facility has been revised to a borrowing limit of $36.0 million from $40.0 million. The acquisition/development facility remains at a borrowing limit of $10.0 million.
The revised facilities focuses Hyperion’s 2013 drilling program to certain non-operated partner wells and the necessary farm-in earning wells in the Niton/McLeod area.
Hyperion plans to spud its next Cardium, light oil horizontal well, in late July 2013. This well will be the third earning well on the previously announced 8,000 acre farmin in the Niton/McLeod area and is expected to evaluate the productivity of some of the thickest net pay seen by the Company in the area.
In the second quarter, Hyperion’s technical team’s efforts were focused on reducing well costs through more efficient drilling, completion, and tie-in methods. Hyperion expects to reduce future capital costs per well by up to 10% from prior results. The first well on a new 4 well drilling pad is expected to cost $3.3 million versus $3.7 million as on previous wells. The first well carries the cost of the lease road, multi-well pad and solution gas sales pipeline.
Based on initial success achieved by industry with drilling extended reach Cardium horizontal wells, Hyperion believes the use of extended reach horizontal wells at Niton/McLeod has the potential to be a game changer for improving capital efficiency and project economics. Hyperion’s current total well length of approximately 3,000m (with 1,300m of horizontal pay) would initially be increased to approximately 4,000m (with 2,300 of horizontal pay) with the opportunity for longer wells based on success. Hyperion’s analysis of actual performance of similar long reach wells indicates a significant enhancement in production, reserves and capital efficiency. A long reach horizontal well in Hyperion’s tier one acreage at Niton/McLeod is expected to have a type curve with an IP30 of 220 boe/d (90 % light oil/NGL), reserves of 220 mboe (83 % light oil/NGL). The short horizontal wells have an IP30 of 160 boe/d (90 % light oil/NGL), reserves of 148 mboe (83 % light oil/NGL). On stream capital cost for the long reach horizontal on a full development basis are expected to average $3.8 million versus the comparable short horizontal well at $2.7 million.
The Company currently has an inventory in Niton/McLeod of up to 167 gross (151 net, unbooked) short horizontal locations. Management estimates that long reach horizontal drilling techniques could be applied to 45% of this existing Niton/McLeod inventory.
Hyperion’s inactivity in the field late in the first quarter and in the second quarter was a result of several factors. Hyperion executed the drilling of four Cardium horizontal light oil drills in its new area of Niton/McLeod between October 2012 and January 2013. The Company felt that it was critical to establish the productivity profile for these wells before committing to a subsequent drill program. Furthermore, challenging capital markets specific to junior oil and gas in Canada required Hyperion to be financially prudent with its use of debt. Finally, as a result of Hyperion’s ongoing objective to be a leader in capital efficiency, Hyperion specifically limited its operations during spring break up and into June to maintain base production levels. Despite these efforts, Hyperion’s second quarter production was negatively impacted by approximately 75 boe/d. This was directly the result of limited access to producing wells attributable to wet roads and third party facility maintenance/downtime.
Hyperion’s Board of Directors has approved the fiscal 2013 capital budget which is designed to continue delineation efforts within the emerging Niton/McLeod Cardium light oil play. Highlights are as follows:
- $9.5 million in capital spending;
- Average production guidance in 2013 of 1,100 to 1,200 boe/day;
- Production comprised of >60% light oil/NGLs;
- Exit 2013 production of 1,000 to 1,050 boe/day >58% light oil/NGLs;
- Operating costs of $12.50/boe including transportation; and
- Funding of 2013 capital expenditures through a combination of cash flow and bank debt.
Using 2013 Oil/NGLs pricing at of US$88.00 WTI, C$83.00 Edmonton Light, 1.00 CAD/USD exchange rate, $3.00/mcf AECO natural gas price
Hyperion’s board of directors and management team believes that the Company’s shares trade at a significant discount to the value of its underlying assets, in particular given its high netback, low-decline production base at Pembina, Garrington, and Chip Lake and significant prospective Cardium horizontal oil drilling inventory of 167 net locations (151 unbooked) at Niton/McLeod. The Hyperion management team and board of directors continues to be disappointed with where the Company’s shares trade in this challenging environment and, as a result, has formed a Special Committee of independent directors to identify, consider and evaluate all options to enhance value and liquidity for its shareholders. Management and the board of directors are committed to acting in the best interests of the Company and its shareholders and believe that the long term strategy of the Company will continue to provide value to shareholders. The independent directors appointed to the Special Committee have extensive public company, transactional and special committee expertise.
Hyperion is a publicly traded, junior light oil and gas company with a strategy of growing through acquisitions which lead to lower risk, scalable and repeatable development drilling projects. Hyperion’s core Alberta operations are in the Niton/McLeod, Garrington, North Pembina, Buck Lake, and Chip Lake areas. The common shares of the Company trade on the TSX Venture Exchange under the trading symbol “HYX”.
Forward Looking and Cautionary Statements
This press release contains certain forward-looking statements (forecasts) under applicable securities laws relating to future events or future performance. Forward-looking statements are necessarily based upon assumptions and judgements with respect to the future including, but not limited to, the outlook for commodity markets and capital markets, the performance of producing wells and reservoirs, well development and operating performance, general economic and business conditions, weather, the regulatory and legal environment and other risks associated with oil and gas operations. In some cases, forward-looking statements can be identified by terminology such as “may”, “will”, “should”, “expect”, “projects”, “plans”, “anticipates” and similar expressions. These statements represent management’s expectations or beliefs concerning, among other things, future operating results and various components thereof affecting the economic performance of Hyperion. Undue reliance should not be placed on these forward-looking statements which are based upon management’s assumptions and are subject to known and unknown risks and uncertainties, including the business risks discussed above, which may cause actual performance and financial results in future periods to differ materially from any projections of future performance or results expressed or implied by such forward-looking statements. Accordingly, readers are cautioned that events or circumstances could cause results to differ materially from those predicted.
In particular, this press release may contain forward looking statements pertaining to the following:
- the performance characteristics of the Corporation’s oil and natural gas properties;
- oil and natural gas production levels;
- capital expenditure programs;
- the quantity of the Corporation’s oil and natural gas reserves and anticipated future cash flows from such reserves;
- projections of commodity prices and costs;
- supply and demand for oil and natural gas;
- expectations regarding the ability to raise capital and to continually add to reserves through acquisitions and development; and
- treatment under governmental regulatory regimes.
The Corporation’s actual results could differ materially from those anticipated in the forward looking statements contained throughout this press release as a result of the material risk factors set forth below, and elsewhere in this press release:
- volatility in market prices for oil and natural gas;
- liabilities inherent in oil and natural gas operations;
- uncertainties associated with estimating oil and natural gas reserves;
- competition for, among other things, capital, acquisitions of reserves, undeveloped lands and skilled personnel;
- incorrect assessments of the value of acquisitions and exploration and development programs;
- geological, technical, drilling and processing problems;
- fluctuations in foreign exchange or interest rates and stock market volatility;
- failure to realize the anticipated benefits of acquisitions;
- general business and market conditions; and
- changes in income tax laws or changes in tax laws and incentive programs relating to the oil and gas industry.
These factors should not be construed as exhaustive. Unless required by law, Hyperion does not undertake any obligation to publicly update or revise any forward looking statements, whether as a result of new information, future events or otherwise.
Barrels of oil equivalent (boe) may be misleading, particularly if used in isolation. A boe conversion ratio of six thousand cubic feet (mcf) of natural gas to one barrel (bbl) of oil is based on an energy conversion method primarily applicable at the burner tip and is not intended to represent a value equivalency at the wellhead. All boe conversions in this press release are derived by converting natural gas to oil in the ratio of six thousand cubic feet of natural gas to one barrel of oil. Certain financial amounts are presented on a per boe basis, such measurements may not be consistent with those used by other companies.
Estimated values contained in this press release do not represent fair market value.
Neither the TSX Venture Exchange nor its Regulation Services Provider (as the term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.