CALGARY, AB–(Marketwired – May 30, 2017) – Marquee Energy Ltd. (“Marquee” or the “Company”) (TSX VENTURE: MQX) announces its first quarter operational and financial results for the three months ended March 31, 2017. The Company’s financial statements and Management’s Discussion and Analysis (“MD&A”) for the three months ended March 31, 2017 are available on the System for Electronic Document Analysis and Retrieval (SEDAR) at www.sedar.com and on Marquee’s website at www.marquee-energy.com.
FIRST QUARTER 2017 FINANCIAL AND OPERATING HIGHLIGHTS
- Marquee successfully drilled, completed, and equipped three light oil horizontal Banff wells at Michichi on a single pad location at an average cost of $1.79 million per well. These are the first wells Marquee has drilled since the third quarter of 2015. The wells came on production in early April with higher than expected production rates;
- Production averaged 2,479 boe/d (46% liquids) in the first quarter of 2017, down 79 boe/d (3%) from the fourth quarter 2016. No new production was brought on line in the quarter with results reflecting the low- decline performance of production at Michichi;
- Funds flows from operations were $1.3 million in the first quarter, an increase of $2.2 million from the previous quarter;
- Revenue was $33.27/boe in the first quarter of 2017, down $0.78/boe from $34.05/boe realized in the previous quarter;
- Reduced quarterly production and transportation costs by 32% to $3.9 million or $17.56 per boe from $5.7 million or $24.30 per boe in the fourth quarter of 2016, primarily due to a number of one time only costs that occurred in Q4 2016;
- Operating netbacks prior to hedging averaged $13.06/boe in Q1 2017, a 60% increase from the previous quarter.
- Subsequent to March 31, 2017, the Company entered into a $30 million term loan with Crown Capital Fund IV, LP, an investment fund managed by Crown Capital Partners Inc.
- Subsequent to March 31, 2017, the Company signed a $12 million credit facility with a major Canadian bank, replacing the previous syndicated credit facility of $25 million;
- The Company’s Annual and Special Shareholders’ meeting will be held on June 26, 2017. At the meeting, shareholders will be asked to approve a Consolidation to effect a consolidation of the Common Shares of
Marquee on the basis of one (1) post-consolidation Common Share for every thirty (30) pre-consolidation Common Shares then issued and outstanding.
FINANCIAL AND OPERATIONAL RESULTS
|Three months ended March 31,|
|Financial (000’s except per share and per boe amounts)|
|Oil and natural gas sales (1)||$7,423||$7,749|
|Funds flow from operations (2)||$1,332||$1,392|
|Per share – basic and diluted||$-||$0.01|
|Net income (loss)||$(3,663||)||$(7,918||)|
|Per share – basic and diluted||$(0.01||)||$(0.04||)|
|Net debt (2)||$22,688||$49,058|
|Weighted average basic and diluted shares outstanding||435,772,196||205,686,639|
|Net wells drilled||3||–|
|Daily sales volumes|
|Oil (bbls per day)||1,000||1,457|
|Heavy Oil (bbls per day)||–||407|
|NGL’s (bbls per day)||132||157|
|Natural Gas (mcf per day)||8,082||14,451|
|Total (boe per day)||2,479||4,430|
|% Oil and NGL’s||46%||46%|
|Average realized prices|
|Light Oil ($/bbl)||$52.69||$31.11|
|Heavy Oil ($/bbl)||$-||$17.60|
|Natural Gas ($/mcf)||$3.00||$2.00|
|Operating and transportation costs ($/boe)||$(17.56||)||$(16.46||)|
|Operating netback prior to hedging (2)||$13.06||$1.42|
|Realized hedging gain (loss) ($/boe)||$-||$5.89|
|Operating netback ($/boe) (2)||$13.06||$7.31|
|(2)||Defined under the Non-GAAP Measures section of the Company’s MD&A for the three months ended March 31, 2017|
2017 CAPITAL BUDGET AND GUIDANCE
Further to its earlier press release also dated May 30, 2017, announcing the entering into of a term loan with Crown Capital Fund IV, LP, an investment fund managed by Crown Capital Partners Inc., and a new credit facility with a major Canadian bank (the “Credit Facility“), the Board of Directors of Marquee has approved a capital budget of approximately $15 million for the second half of 2017. The budgeting is based on an oil price of US$50WTI/barrel and a natural gas price of $2.75/GJ AECO. The capital program is expected to increase cashflow, production and reserves while leaving the Company undrawn on its Credit Facility at year-end.
Marquee is planning to drill six light oil horizontal Banff wells in the second half of 2017, and expects a year end corporate exit rate of 3,000 boe/d – 3,300 boe/d (25-37% production growth exit to exit). The production growth in 2017 is expected to increase the Company’s oil and liquids weighting and reduce corporate unit operating costs generating an expected improvement of field netbacks by more than 40%.
The second half 2017 drilling program is anticipated to commence mid-June to early July, and expects to incorporate mono-bore drilling with increased frack stages to improve productivity and reserves recoveries while maintaining similar well costs as recent drilling. The capital spending also includes legacy horizontal well optimization, operating capital, normal course abandonment and reclamations costs as well as seismic and land acquisition expenditures.
Marquee’s latest well results were press released on May 23, 2017 and the wells continue to perform above expected rates. The wells demonstrate strong economics at current commodity prices and provide high rates of return and cash netbacks.
ANNUAL AND SPECIAL MEETING OF SHAREHOLDERS
The Company’s Annual and Special Meeting of Shareholders (the “Meeting”) is scheduled for 2:00 PM on Monday, June 26, 2017 in the Strand/Tivoli room at the Metropolitan Conference Centre in Calgary, Alberta. The record date for the meeting has been set at May 23, 2017.
At the Meeting, shareholders (“Shareholders”) of Marquee’s common shares (“Common Shares”) will be asked to approve a special resolution (the “Consolidation Resolution”) authorizing the Company to amend its Articles to effect a consolidation (the “Consolidation”) of the Common Shares on the basis of one (1) post-consolidation Common Share for every thirty (30) pre-consolidation Common Shares then issued and outstanding, or such other number of pre-consolidation Common Shares as may be determined by the Board in its sole discretion, subject to the requirements of the TSX Venture Exchange. As of the date hereof, the Company has 435,772,196 Common Shares outstanding. Notwithstanding approval of the proposed Consolidation by the Shareholders, the Board may, in its sole discretion, revoke the Consolidation Resolution, and abandon the Consolidation without further approval or action by, or prior notice to, the Shareholders.
The Company believes that, if implemented, the Consolidation will help attract a new investor base and potentially increase liquidity. The Board believes that the Consolidation is in the best interest of the Company, and that the Consolidation will more closely align the issued and outstanding share capital of the Company with its financial valuation.
If approved and implemented, the Consolidation will occur simultaneously for all of the Company’s issued and outstanding Common Shares and the consolidation ratio will be same for all such Common Shares. The Consolidation will affect all holders of Common Shares uniformly and will not affect any Shareholder’s percentage ownership interest in the Company, except to the extent that the Consolidation would otherwise result in a Shareholder owning a fractional Common Share. No fractional post-consolidation Common Shares will be issued and no cash will be paid in lieu of fractional post-consolidation Common Shares. Any fractional Common Shares resulting from the Consolidation will be rounded to the nearest whole Common Share.
Marquee is a Calgary-based, junior energy company focused on light oil development and production in the Michichi area of eastern Alberta. Marquee’s shares trade on the TSX Venture Exchange under the trading symbol “MQX”. Additional information about Marquee may be found on its website www.marquee-energy.com and in its continuous disclosure documents filed with Canadian securities regulators on SEDAR at www.sedar.com.
Neither the 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.
FORWARD-LOOKING STATEMENTS OR INFORMATION
Certain statements included or incorporated by reference in this news release may constitute forward-looking statements under applicable securities legislation. Such forward-looking statements or information typically contain statements with words such as “anticipate”, “believe”, “expect”, “plan”, “intend”, “estimate”, “propose”, or similar words suggesting future outcomes or statements regarding an outlook. Forward-looking statements or information in this news release may include, but are not limited to: reserves estimates and the net present value of the future net reserves related thereto; the number and quality of future potential drilling and development opportunities; anticipated capital budgets and expenditures; average production for 2017 and beyond; 2017 exit production rates; the Company’s development plan; the size and extent of the Michichi oil fairway; matters to be voted on at the Company’s annual and special meeting of shareholders, a consolidation of the Company’s shares, and the benefits to be derived therefrom; and the timing of disclosure of further 2017 guidance, capital expenditure plans and well performance.
Such forward-looking statements or information are based on a number of assumptions all or any of which may prove to be incorrect. In addition to any other assumptions identified in this document, assumptions have been made regarding, among other things: the ability of the Company to obtain equipment, services and supplies in a timely manner to carry out its activities; the ability of the Company to market crude oil, natural gas liquids and natural gas successfully to current and new customers; the ability to secure adequate product transportation; the timely receipt of required regulatory approvals; the ability of the Company to obtain financing on acceptable terms; interest rates; regulatory framework regarding taxes, royalties and environmental matters; future crude oil, natural gas liquids and natural gas prices; the ability to successfully integrate acquisitions into Marquee’s business and management’s expectations relating to the timing and results of development activities.
Forward-looking information is 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 information. Material risk factors affecting the Company and its business are contained in Marquee’s Annual Information Form for the year ended December 31, 2016, which is available under Marquee’s issuer profile on SEDAR at www.sedar.com.
The forward-looking information contained in this press release is made as of the date hereof and the Company undertakes no obligation to update publicly or revise any forward-looking information, whether as a result of new information, future events or otherwise, unless required by applicable securities laws. The forward -looking information contained in this press release is expressly qualified by this cautionary statement.
NON-GAAP FINANCIAL MEASURES
This press release contains the term “operating netbacks prior to hedging” and “operating netbacks” which do not have standardized meanings prescribed by IFRS and, therefore, may not be comparable with the calculation of similar measures presented by other companies. Marquee uses operating netbacks to analyze operating performance. Marquee believes this benchmark is a key measure of profitability and overall sustainability for the Company and this term is commonly used in the oil and natural gas industry. Operating netbacks are not intended to represent operating profits, net earnings or other measures of financial performance calculated in accordance with IFRS.
Operating netbacks prior to hedging are calculated by subtracting royalties, production, and operating and transportation expenses from revenues before other income/losses. Operating netbacks include realized hedging gain (loss).
This press release also contains the term “funds flow from operations” which should not be considered an alternative to, or more meaningful than “cash flow from operating activities”, as determined in accordance with IFRS, as an indicator of the Company’s performance. “Funds flow from operations” does not have any standardized meaning prescribed by IFRS and therefore reference to funds flow from operations or funds flow from operations per share may not be comparable with the calculation of similar measures presented by other entities. Management uses funds flow from operations to analyze operating performance and leverage and considers funds flow from operations to be a key measure as it demonstrates the Company’s ability to generate cash necessary to fund future capital investments and to repay debt. Funds flow from operations per share is calculated using the weighted average number of shares for the period.
In addition, the press release contains the term “net debt”, which does not have any standardized meaning under IFRS and therefore may not be comparable to similar measures presented by other issuers. Net debt is calculated as net debt, defined as current assets less current liabilities (excluding fair value of commodity contracts and flow-through share premiums). Management considers net debt as an important additional measure to monitor debt repayment requirements and track the financial viability of the Company.
Please see the Company’s MD&A for the year ended December 31, 2016 and the Company’s MD&A for the three months ended March 31, 2017 for a reconciliation of certain Non-GAAP financial measures used in this press release to their most directly comparable GAAP or IFRS measures.
Barrels of oil equivalent (boe) are presented on the basis of one boe for six Mcf of natural gas. Disclosure provided herein in respect of 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 that the value ratio based on the current price of crude oil as compared to natural gas is significantly different from the energy equivalency of 6:1, utilizing a conversion on a 6:1 basis may be misleading as an indication of value.
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