CALGARY, ALBERTA–(Marketwired – March 24, 2014) – DEETHREE EXPLORATION LTD. (“DeeThree” or the “Company“) (TSX:DTX)(OTCQX:DTHRF) is pleased to announce that it has filed its audited financial statements for the year ended December 31, 2013 and related management’s discussion and analysis with Canadian securities regulatory authorities. DeeThree’s annual information form for the year ended December 31, 2013 has also been filed. The annual information form provides DeeThree’s reserve data and other oil and gas information as required by NI 51-101. These materials may be viewed in their entirety on www.sedar.com and on the Company’s website at www.deethree.ca.
FINANCIAL AND OPERATIONAL HIGHLIGHTS
Financial and operational highlights for the year ended December 31, 2013 with comparative data for 2012 are set out below and should be read in conjunction with the audited financial statements and related management’s discussion and analysis.
|Three Months Ended December 31||Year Ended December 31,|
|(000s, except per share amounts)||($)||($)||(%)||($)||($)||(%)|
|Oil and natural gas revenues||51,865||28,378||83||177,991||85,112||109|
|Funds from operations (1)||24,660||16,231||52||93,295||46,088||102|
|Per share – basic||0.32||0.23||39||1.23||0.69||78|
|Per share – diluted||0.31||0.22||41||1.18||0.68||74|
|Cash flow from operating activities||25,499||30,978||(17||)||97,448||62,292||56|
|Per share – basic||0.04||0.05||(20||)||0.24||0.11||118|
|Per share – diluted||0.04||0.05||(20||)||0.23||0.11||109|
|Capital expenditures (2)||56,072||45,134||24||211,885||144,753||46|
|Working capital deficit (3)||119,787||77,586||54||119,787||77,586||54|
|Weighted average – basic||77,872||70,266||11||76,009||66,902||14|
|Weighted average – diluted||81,060||72,600||12||78,892||68,130||16|
|Natural gas (mcf/d)||10,251||9,377||9||9,881||8,902||11|
|Crude oil (bbls/d)||6,547||3,511||86||5,205||2,472||111|
|Average wellhead prices|
|Natural gas ($/mcf)||4.00||3.38||18||3.42||2.51||36|
|Crude oil and NGLs ($/bbl)||75.55||73.24||3||81.81||76.59||7|
|Combined average ($/boe)||65.37||57.83||13||67.88||55.07||23|
|Operating netback ($/boe)||37.38||36.27||3||40.50||32.66||24|
|Funds flow netback ($/boe)||31.03||33.03||(6||)||35.51||29.75||19|
|Proved plus probable (mboe)||39,413||20,188||95||39,413||20,188||95|
|Total net present value – proved plus probable (10% discount, before taxes) ($000s)||703,716||373,009||89||703,716||373,009||89|
|Gross (net) wells drilled|
|Oil (#)||6 (6.0||)||8 (7.9||)||(25) (24||)||32 (31.19||)||28 (26.8||)||14 (16||)|
|Standing (#)||– (-||)||– (-||)||– (-||)||– (–||)||2 (2.0||)||– (-||)|
|Dry and abandoned (#)||1 (1.0||)||– (-||)||– (-||)||3 (2.97||)||– (-||)||– (-||)|
|Total (#)||7 (7.0||)||8 (7.9||)||(13) (11||)||35 (34.15||)||30 (28.8||)||17 (19||)|
|Average working interest (%)||100||100||–||98||96||2|
|(1) Funds from operations, funds from operations per share, operating netback and funds flow netback are not recognized measures under International Financial Reporting Standards (IFRS). Refer to the commentary below under “Reader Advisory – Non-IFRS Measurements”.|
|(2) Total capital expenditures, including acquisitions and excluding non-cash transactions. Refer to commentary in the Management’s Discussion and Analysis under “Capital Expenditures and Acquisitions” for further information.|
|(3) Current assets less current liabilities, excluding current derivative financial instruments.|
|(4) For a description of the boe conversion ratio, refer to the commentary below under “Reader Advisory – BOE Presentation”.|
2014 OPERATIONS UPDATE
DeeThree is pleased to announce that it is in the final stages of finishing the most active quarter in its history with a total of 12 (11.83 net) wells drilled in its two core oil resource plays, being 9 (8.83 net) Belly River oil producers, 2 (2.0 net) Alberta Bakken oil producers and 1 (1.0 net) Alberta Bakken gas injector. A total of 8 (7.83 net) wells have been completed year-to-date (7 oil producers and 1 gas re-injector) resulting in the Company achieving an average production record, based on field estimates, of 10,500 boe/day, to date for the month of March (80.5% oil and liquids).
Additionally 4 (4.0 net) lower risk “infill” wells 3 (3.0 net) Belly River and 1 (1.0 net) Alberta Bakken well) offsetting some of the best producers to date are planned to be completed in the coming days resulting in first quarter exit volumes forecasted to reach approximately 11,500 boe/day.
The Company is well positioned to continue with its strong production growth in the second quarter. Two rigs will drill 7 to 8 Alberta Bakken wells on the Company’s Lethbridge property and, as a result of its highly successful first quarter drilling program, the Company has elected to drill an additional two wells on its Brazeau Belly River property in early April. With an active second quarter drilling program and little impact on tie-in operations due to breakup DeeThree is expecting to continually add production throughout the quarter.
Brazeau Belly River
The Company is pleased to announce the test result of its latest three Brazeau Belly River horizontal light oil wells. These results continue to demonstrate both the high quality of the reservoir and repeatability of drilling results.
Horizontal well 5-20-47-15 W5M tested at a final rate of approximately 1080 bbls/d of light oil and 500 mscf/d of gas at a flowing pressure of 120 psi from a Belly River C interval after a seven day test. Horizontal well 12-26-47-14 W5M tested at a final rate of 1,050 bbls/d of light oil and approximately 1.3 mmscf/d of gas at a flowing pressure of 100 psi from a Belly River D interval after a five day test. Horizontal well 1-9-47-15 W5M tested at a final rate of approximately 960 bbls/d of light oil and 1.1 mmscf/d of gas at a flowing pressure of 120 psi from a Belly River D interval after a six day test. This well was additionally significant in that it was the first well drilled by the Company on lands subject to a 9 section farm-in agreement recently entered into further extending the Company’s Brazeau Belly River property to 84 net sections.
Lethbridge Alberta Bakken
The Company has drilled and completed 2 (2.0 net) Bakken wells in the Lethbridge area to date in 2014, including another gas re-injection well to further expand the Company’s ongoing gas re-injection enhanced oil recovery scheme project. The Company’s first pilot with one injector has continued to exceed its expectations for increasing ultimate recovery in offsetting wells and as a result the Company has now drilled a total of three gas re-injectors in different areas of its extensive Bakken pool. The second well, horizontal well 9-22-3-16 W4M tested at a final rate of approximately 950 bbls/d of oil and 330 mscf/d of gas at a flowing pressure of 80 psi after a six day test.
DeeThree is very pleased with its 2013 year end results, having achieved significant organic production growth while significantly increasing the oil and gas reserves and potential of its two extensive resource plays. DeeThree has continued its record of rapid production growth in the first quarter of 2014 and, with repeatable drilling results, strong production gains are expected for the balance of 2014 as the focus of DeeThree’s drilling program transitions from delineation to development.
Advance Notice By-law
DeeThree also announces that its Board of Directors has approved the adoption of an advance notice by-law (the “By-law”), which requires advance notice to the Corporation in circumstances where nominations of persons for election as a director of the Corporation are made by shareholders other than pursuant to: (i) a requisition of a meeting made pursuant to the provisions of the Business Corporations Act (Alberta) (the “ABCA”); or (ii) a shareholder proposal made pursuant to the provisions of the ABCA.
Among other things, the By-law fixes a deadline by which shareholders must submit a notice of director nominations to the Corporation prior to any annual or special meeting of shareholders where directors are to be elected and sets forth the information that a shareholder must include in the notice for it to be valid.
In the case of an annual meeting of shareholders, notice to the Corporation must be made not less than 30 nor more than 65 days prior to the date of the annual meeting; provided, however, that in the event that the annual meeting is to be held on a date that is less than 50 days after the date on which the first public announcement of the date of the annual meeting was made, notice may be made not later than the close of business on the 10th day following such public announcement.
In the case of a special meeting of shareholders (which is not also an annual meeting), notice to the Corporation must be made not later than the close of business on the 15th day following the day on which the first public announcement of the date of the special meeting was made.
Shareholders will be asked to confirm and ratify the By-law at the Corporation’s Annual General and Special Meeting on May 15, 2014 (the “Meeting”). A copy of the By-law has been filed and is available under the Company’s profile at www.sedar.com. The By-Laws is effective immediately and will remain in effect until they are confirmed, confirmed as amended or rejected by shareholders at the Meeting.
The Corporation believes that adopting the By-law is considered to be good corporate governance as it provides a clear and transparent process for all shareholders to follow if they intend to nominate directors and it ensures that all shareholders receive adequate notice of director nominations with sufficient information with respect to all nominees. This allows the Corporation and its shareholders to evaluate the proposed nominees’ qualifications and suitability as directors, which further allows shareholders to cast an informed vote for the election of directors.
Forward-Looking Statements. Certain statements contained in this press release may constitute forward-looking statements. These statements relate to future events or the DeeThree’s future performance. All statements other than statements of historical fact may be forward-looking statements. Forward-looking statements are often, but not always, identified by the use of words such as “seek”, “anticipate”, “plan”, “continue”, “estimate”, “expect”, “may”, “will”, “project”, “predict”, “potential”, “targeting”, “intend”, “could”, “might”, “should”, “believe” and similar expressions. These statements involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking statements. DeeThree believes that the expectations reflected in those forward-looking statements are reasonable, but no assurance can be given that these expectations will prove to be correct and such forward-looking statements included in this press release should not be unduly relied upon by investors. These statements speak only as of the date of this press release and are expressly qualified, in their entirety, by this cautionary statement.
In particular, this press release contains forward-looking statements, pertaining to the following: projections of market prices and costs, supply and demand for oil and natural gas, the quantity of reserves, oil and natural gas production levels, capital expenditure programs, treatment under governmental regulatory and taxation regimes, expectations regarding DeeThree’s ability to raise capital and to continually add to reserves through acquisitions and development, and projections of market prices and costs.
With respect to forward-looking statements contained in this press release, DeeThree has made assumptions regarding, among other things: the legislative and regulatory environments of the jurisdictions where DeeThree carries on business or has operations, the impact of increasing competition, and DeeThree’s ability to obtain additional financing on satisfactory terms.
DeeThree’s actual results could differ materially from those anticipated in these forward-looking statements as a result of risk factors that may include, but are not limited to: volatility in the market prices for oil and natural gas; uncertainties associated with estimating reserves; uncertainties associated with DeeThree’s ability to obtain additional financing on satisfactory terms; geological, technical, drilling and processing problems; liabilities and risks, including environmental liabilities and risks, inherent in oil and natural gas operations; incorrect assessments of the value of acquisitions; competition for, among other things, capital, acquisitions of reserves, undeveloped lands and skilled personnel. Readers are cautioned that the foregoing list of factors is not exhaustive. Additional information on these and other factors that could affect DeeThree’s operations and financial results are included in reports on file with Canadian securities regulatory authorities and may be accessed through the SEDAR website (www.sedar.com).
This forward-looking information represents DeeThree’s views as of the date of this document and such information should not be relied upon as representing its views as of any date subsequent to the date of this document. DeeThree has attempted to identify important factors that could cause actual results, performance or achievements to vary from those current expectations or estimates expressed or implied by the forward-looking information. However, there may be other factors that cause results, performance or achievements not to be as expected or estimated and that could cause actual results, performance or achievements to differ materially from current expectations. There can be no assurance that forward-looking information will prove to be accurate, as results and future events could differ materially from those expected or estimated in such statements. Accordingly, readers should not place undue reliance on forward-looking information. Except as required by law, the Company undertakes no obligation to publicly update or revise any forward-looking statements.
Test Rates. Test rates are not necessarily indicative of long-term performance or of ultimate recovery. Neither a pressure transient analysis nor a well-test interpretation has been carried out and the data should be considered to be preliminary until such analysis or interpretation has been done.
Information Regarding Disclosure on Oil and Gas Reserves. The reserves data set forth above is based upon an independent reserves assessment and evaluation prepared by Sproule with an effective date of December 31, 2013 (the “Sproule Report”). The presentation summarizes the Company’s crude oil, natural gas liquids and natural gas reserves based on the Sproule Report. The Sproule Report has been prepared in accordance with the standards contained in the COGEH and the reserve definitions contained in NI 51-101. The recovery and reserve estimates of our crude oil, natural gas liquids and natural gas reserves provided herein are estimates only and there is no guarantee that the estimated reserves will be recovered. Actual crude oil, natural gas and natural gas liquids reserves may be greater than or less than the estimates provided herein. The reserve data provided in this release only represents a summary of the disclosure required under NI 51-101. Additional disclosure is provided in the Company’s annual information form filed on www.sedar.com.
Non-IFRS Measurements. This news release contains the terms “funds from operations” and “funds from operations per share”, which should not be considered an alternative to or more meaningful than cash flow from (used in) operating activities as determined in accordance with IFRS. These terms do not have any standardized meaning under IFRS. DeeThree’s determination of funds from operations and funds from operations per share may not be comparable to that reported by other companies. Management uses funds from operations to analyze operating performance and leverage, and considers funds 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, if applicable. Funds from operations is calculated using cash flow from operating activities as presented in the statement of cash flows, before changes in non-cash working capital. DeeThree presents funds from operations per share whereby per share amounts are calculated using weighted-average shares outstanding, consistent with the calculation of earnings per share.
The Company considers corporate netbacks to be a key measure as they demonstrate DeeThree’s profitability relative to current commodity prices. Corporate netbacks are comprised of operating and funds flow netbacks. Operating netback is calculated as the average sales price of the Company’s commodities, less royalties, operating costs and transportation expenses. Funds flow netback starts with the operating netback and further deducts general and administrative costs, finance expense and unrealized gains on financial instruments, and then adds any finance income and realized gains on financial instruments, if applicable. No IFRS measure is reasonably comparable to netbacks. See “Netbacks (per unit)” in the Company’s management’s discussion and analysis for the year ended December 31, 2013 filed on www.sedar.com for the netback calculations.
Working capital deficit, which represent current assets less current liabilities, excluding current derivative financial instruments, is used to assess efficiency, liquidity and the Company’s general financial strength. No IFRS measure is reasonably comparable to working capital deficit.
BOE Presentation. References herein to “boe” mean barrels of oil equivalent derived by converting gas to oil in the ratio of six thousand cubic feet (Mcf) of gas to one barrel (bbl) of oil. Boe may be misleading, particularly if used in isolation. A boe conversion ratio of 6 Mcf: 1 bbl is based on an energy conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. In addition, 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.
DeeThree Exploration Inc.
President and Chief Executive Officer