Arsenal Energy Inc. is pleased to announce that during December 2012, field production averaged approximately 4,100 boe/d. In addition, approximately 500 boe/d of North Dakota Bakken production was behind pipe and is expected to be placed on production in Q1 2013. Bakken differentials have narrowed to approximately $2.50 per barrel compared to WTI. In North Dakota, Arsenal plans to drill 2 (.33 net) wells in Q1 2013, 2 (1.25 net) wells in Q2 2013, and 3 (.23 net) wells in Q3 2013.
Arsenal’s initial well at Princess continues to produce in excess of 180 boe/d after 90 days. During Q4 2012 Arsenal shot additional 3D seismic and purchased additional acreage. The Company has now identified approximately 20 drilling locations on its Princess lands. Arsenal plans to drill 3 wells at Princess in Q1 2013, and 7 wells starting after spring breakup.
Arsenal expects its North Dakota properties to generate cash flow in excess of capital requirements starting in late 2013. In anticipation of that eventuality, the Company together with its advisors is analyzing efficient alternatives by which excess cash flow may be returned to shareholders.
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Management uses certain industry benchmarks such as field netback to analyze financial and operating performance. Field netback has been calculated by taking oil and gas revenue less royalties, operating costs and transportation costs. This benchmark does not have a standardized meaning prescribed by GAAP and may not be comparable to similar measures presented by other companies. Management considers field netback as an important measure to demonstrate profitability relative to commodity prices. (1)”Funds from operations”, “funds from operations per share”, “netbacks” and “netbacks per boe” are not defined by Generally Accepted Accounting Principles (“GAAP”) in Canada and are regarded as non-GAAP measures. Funds from operations and funds from operations per share are calculated as cash provided by operating activities before changes in non-cash working capital and decommissioning obligations settled. Funds from operations is used to analyze the Company”s operating performance, the ability of the business to generate the cash flow necessary to fund future growth through capital investment and to repay debt. Funds from operations does not have a standardized measure prescribed by GAAP and therefore may not be comparable with the calculations of similar measures for other companies. The Company also presents funds from operation per share whereby per share amounts are calculated using the weighted average number of common shares outstanding consistent with the calculation of net income or loss per share.
The term barrels of oil equivalent (“boe”) may be misleading, particularly if used in isolation. A boe conversion ratio of six thousand cubic feet of natural gas to one barrel of oil equivalence is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. All boe conversions in the report are derived from converting gas to oil in the ratio mix of six thousand cubic feet of gas to one barrel of oil.
Certain statements and information contained in this press release, including but not limited to management”s assessment of Arsenal”s future plans and operations (including any potential transaction with respect to the Company”s North Dakota properties), production, reserves, revenue, commodity prices, operating and administrative expenditures, funds from operations, capital expenditure programs and debt levels contain forward-looking statements. All statements other than statements of historical fact may be forward looking statements. These statements, by their nature, are subject to numerous risks and uncertainties, some of which are beyond Arsenal”s control including the effect of general economic conditions, industry conditions, changes in regulatory and taxation regimes, volatility of commodity prices, escalation of operating and capital costs, currency fluctuations, the availability of services, imprecision of reserve estimates, geological, technical, drilling an processing problems, environmental risks, weather, the lack of availability of qualified personnel or management, stock market volatility, the ability to access sufficient capital from internal and external sources and competition from other industry participants for, among other things, capital, services, acquisitions of reserves, undeveloped lands and skilled personnel that may cause actual results or events to differ materially from those anticipated in the forward looking statements. Such forward-looking statements although considered reasonable by management at the time of preparation, may prove to be incorrect and actual results may differ materially from those anticipated in the statements made (including, but not limited to, the Company determining not to proceed with any transaction) and should not unduly be relied on. These statements speak only as of the date of this press release. Arsenal does not intend and does not assume any obligation to update these forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law. Arsenal”s business is subject to various risks that are discussed in its filings on the System for Electronic Document Analysis and Retrieval (SEDAR).