CALGARY, ALBERTA–(Marketwired – April 10, 2014) – Questfire Energy Corp. (the “Corporation” or “Questfire”) (TSX VENTURE:Q.A)(TSX VENTURE:Q.B) is pleased to announce that it has filed on SEDAR its audited financial statements, related management’s discussion and analysis (“MD&A”) and its Annual Information Form (“AIF”) for the year ended December 31, 2013. Included in the AIF is the Corporation’s reserves data and other oil and gas information for the year ended December 31, 2013 as mandated by National Instrument 51-101 Standards of Disclosure for Oil and Gas Activities.
Financial and Operating Highlights
|Three months ended December 31,||Year ended December 31,|
|Oil and natural gas sales||$||15,900,716||$||212,957||$||40,537,638||$||509,124|
|Funds flow from (used in) operations (1)||4,782,463||(2,097,289||)||11,919,693||(3,012,451||)|
|Per share, basic||0.37||(0.16||)||0.92||(0.24||)|
|Per share, diluted||0.08||(0.16||)||0.25||(0.24||)|
|Per share, basic and diluted||(0.15||)||(0.11||)||(0.17||)||(0.28||)|
|Working capital deficit (end of year)||47,554,483||1,531,123|
|Non-current debentures (end of year)||31,002,508||1,352,811|
|Shareholders’ deficiency (end of year)||4,023,402||2,073,926|
|Shares outstanding (end of year)|
|Options outstanding (end of year)||1,971,000||1,281,000|
|Warrants outstanding (end of year)||1,510,000||1,510,000|
|Weighted-average basic shares outstanding||12,963,001||12,813,001||12,910,809||12,813,001|
|Weighted-average diluted shares outstanding||12,963,001||12,813,001||12,910,809||12,813,001|
|Class A share trading price|
|Natural gas (Mcf/d)||24,630||411||16,998||366|
|Crude oil (bbls/d)||467||2||317||2|
|Edmonton par (Cdn$/bbl)||86.26||84.43||93.24||86.57|
|Average realized prices (3)|
|Natural gas (per Mcf)||3.66||3.70||3.24||2.61|
|Natural gas liquids (per bbl)||63.71||58.76||62.71||62.15|
|Crude oil (per bbl)||78.97||73.24||89.60||77.95|
|Operating netback (per boe)||12.98||19.25||13.19||11.02|
|Funds flow netback (per boe)||9.83||(279.56||)||9.09||(121.71||)|
- See “Additional GAAP measures” in the MD&A.
- For a description of the boe conversion ratio, refer to the commentary in the MD&A under Basis of Barrel of Oil Equivalent.
- Before hedging.
2013 Corporate Highlights
- Achieved record average production of 3,591 boe per day for the year, with fourth quarter production of 5,290 boe per day, 78 percent natural gas.
- Achieved record quarterly sales in the fourth quarter of $15.9 million and funds flow from operations of $4.8 million ($0.37 per basic share).
- Achieved record annual sales of $40.5 million and funds flow from operations of $11.9 million for ($0.92 per basic share).
- Made capital expenditures of $8.2 million for the year, focused on drilling, well workovers, recompletions and facility maintenance and optimization.
- At year-end, corporate working interest reserves were 18.972 million boe for total proved and 25.687 million boe for proved plus probable.
- In the fourth quarter drilled a successful 100 percent working interest light oil well at Open Lake, and participated in a successful horizontal 14° API oil well in Auburndale (33 percent working interest). Combined, these projects added production of approximately 100 boe per day net (65 percent oil).
- In the fourth quarter participated at 50 percent working interest in a high-productivity Nisku liquids-rich natural gas recompletion in the Pembina field, expected to add 150 boe per day net production including 20 percent natural gas liquids.
- Subsequent to year-end, on March 26, 2014, Questfire repurchased $32.6 million of its 2013 Debentures, for a purchase price of $13.6 million. Concurrently, the Corporation agreed to purchase a minimum of 1.5 million Class B shares at $2.60 per share by way of an Issuer Bid open for acceptance until May 5, 2014.
Two-thousand thirteen was a momentous and transformative year for Questfire and may also mark a turning point for western Canada’s natural gas industry. Looking back to the fourth quarter of 2012 Questfire was a micro-cap junior natural gas company with three producing wells, 82 boe per day of production, six employees, negative funds flow from operations and very limited capital. A year later, in only Questfire’s second full quarter of operations following the Advantage asset acquisition in April, we produced 5,290 boe per day, generating $15.9 million in sales with $4.8 million of quarterly funds flow from operations. We have built a high-quality organization with 25 office staff and 26 full-time field staff and contractors, and have a large inventory of drilling prospects with a low-decline, stable cash flow base to fund them.
Adding Value Per Share
One of the most notable aspects of our corporate transformation is that the number of basic Class A shares outstanding has remained essentially unchanged at 13.0 million. This means that Questfire has avoided dilution of the Class A shares and thus added significant value per share. Our debt levels are manageable and the recent 2013 Debenture redemption, announced on March 26, 2014, again adds significant value to the Corporation and reduces our overall debt by approximately $19 million. Once the Class B Issuer Bid is completed it will greatly reduce the risk of future Class A share dilution resulting from conversion of Class B shares.
This dramatic set of changes was achieved thanks to the efforts and hard work of the Questfire team over the last year. We have been very fortunate to attract talented and experienced office staff and field personnel of top quality, creating one of the best teams I have worked with in my career.
Based on the independent 2013 year-end corporate reserve evaluation prepared by GLJ Petroleum Consultants Ltd. (“GLJ”) year-end working interest reserves stood at 18.972 million boe for total proved and 25.687 million boe for proved plus probable. The net present value of these reserves are significant and represent a large increase in value corporately and on a per share basis. The details of the GLJ reserve evaluation are contained in Questfire’s Annual Information Form (“AIF”) which has been filed on SEDAR.
We are very pleased with our asset base, which continues to produce as expected, with a relatively low annual production decline rate of approximately 12 percent. Our large land base is yielding several promising oil plays and numerous natural gas opportunities.
During the fourth quarter Questfire participated in a number of exciting and successful drilling and recompletion projects. Late in the quarter we drilled a 100 percent working interest vertical infill oil well at Open Lake, which was placed on-production in the middle of the first quarter of 2014. The results are promising with production expected to stabilize in the 75 boe per day range. This success may lead to a further 10 to 12, 100 percent working interest drilling locations in the Open Lake field.
Questfire also participated in a successful horizontal oil well (33 percent working interest) in the Auburndale field in East Central Alberta. It is currently producing in excess of 120 barrels per day gross of 14° API oil and has created significant further drilling potential. Questfire also participated (50 percent working interest) in the recompletion of a liquids-rich Nisku gas well in the Pembina field. This well is expected to be placed on-production in mid-2014 at approximately 150 boe per day net. These diverse successes, coming within months of closing the Advantage acquisition, begin to illustrate the broad range of opportunities that we expected to find in our new assets, which had been under-capitalized and under-worked for many years.
Commodity Price Improvement
The fourth quarter also saw the start of the winter heating season in North America, which turned into one of the coldest winters in decades. Looking back, this may be a turning point in the natural gas industry. The winter’s resulting high heating demand depleted natural gas storage to decade low weekly levels at the time of this report. Natural gas prices not only spiked in response to the winter’s various cold snaps around the continent, but also increased in overall terms, driving sharply improved cash flow and growing optimism amongst natural gas-weighted producers. In addition, real progress is occurring on numerous LNG export projects in North America, which bodes well for expanded natural gas demand and, in turn, longer-term natural gas prices.
First Quarter 2014 Developments
The first quarter of 2014 saw a number of exciting and important events that we believe will create significant value for Questfire. First, the cold winter held natural gas prices at higher than forecast levels and, with the drastic reduction in storage and delay in the seasonal “turn” to net natural gas injection, we believe prices could exceed industry forecasts for the remainder of 2014. Approximately 70 percent of our natural gas production in 2014 has no ceiling price restriction. The result so far has been higher than forecast funds flow from operations for the first quarter, currently estimated at $6-$7 million. This is significantly higher than our estimated capital expenditures of $3.3 million for the quarter.
Second, on the operations front, the two successful oil wells drilled late in the fourth quarter were placed on production and production results support follow-up drilling. In addition, a 657-metre-deep stratigraphic test well was drilled in February on our 100 percent working interest lands in the Mannville field in East Central Alberta. The well encountered approximately 14 metres of oil-bearing sands in three Mannville zones. A multi-well surface pad site is being acquired and the first horizontal well is being prepared, with a likely spud in May. With success, this 14° API oil play could support an additional 8 to 12, 100 percent working interest horizontal wells drilled by Questfire.
Third, as press-released on March 26, 2014, Questfire successfully negotiated and closed a deal to repurchase the $32.6 million of its convertible senior secured debentures due April 30, 2016 (the “2013 Debentures”) for a purchase price of $13.6 million, which reduced the Corporation’s debt by approximately $19 million. The Corporation also agreed to purchase by way of Issuer Bid a minimum of 1.5 million Class B shares at $2.60 per share. At this date, the Issuer Bid has been mailed to all Class B Shareholders and will be open for acceptance until May 5, 2014. The 2013 Debenture redemption and Class B Share purchase will simplify the overall capital structure and dramatically reduce future dilution risk to the Class A shareholders.
Questfire’s Board of Directors has approved a conservative capital budget for 2014 of approximately $20 million, of which $13 million is to be allocated for drilling and completions. Drilling will be focused on infill vertical wells on our 100 percent working interest Open Lake light oil property and our emerging heavier oil horizontal plays in the Wildmere, Mannville and Auburndale fields in East Central Alberta, which have Questfire working interests ranging from 25 to 100 percent. These drilling projects impose relatively modest gross capital costs of approximately $1.5 million total cost per vertical well and $1.25 million per horizontal well. The horizontal wells are relatively shallow at 700-900 metres true vertical depth and do not require hydraulic fracturing. Facility and well optimization projects will continue to be pursued on our natural gas properties with the goal of reducing or eliminating gas production declines. Our original goal for the year had been to increase funds flow without adding to debt. Current commodity prices are already providing added flexibility.
Our current production forecast for 2014 is an average of 5,200-5,300 boe per day, with forecast funds flow from operations of approximately $25-$28 million. We expect to exit 2014 with production of approximately 5,500 boe per day with an oil and NGL weighting of 28 percent, an increase from the current 22 percent. An operations update will likely be issued in June with further drilling and production results and updated forecasts.
Questfire Energy Corp. is an Alberta-based company formed to participate in oil and gas exploration, development and acquisitions focusing in the W4 and W5 regions of Alberta. The Corporation’s shares trade on the TSX Venture exchange under the symbols Q.A and Q.B. The Corporation currently has 13,013,001 Class A shares and 2,055,840 Class B shares outstanding.
To view a full copy of the Corporation’s audited financial results for the year ended December 31, 2013, including the Corporation’s audited financial statements and accompanying MD&A, please refer to the SEDAR website at www.sedar.com or contact the Corporation at Questfire Energy Corp., 500, 400 – 3rd Ave S.W., Calgary, Alberta, T2P 4H2.
This news release contains certain forward-looking statements, including management’s assessment of future plans and operations, and capital expenditures and the timing thereof, that involve substantial known and unknown risks, uncertainties, and assumptions certain of which are beyond Questfire’s control. Such risks, uncertainties, and assumptions include, without limitation, risks associated with oil and gas exploration, development, exploitation, production, marketing and transportation, loss of markets, volatility of commodity prices, currency fluctuations, imprecision of reserve estimates, environmental risks, competition from other producers, inability to retain drilling rigs and other services, delays resulting from or inability to obtain required regulatory approvals and ability to access sufficient capital from internal and external sources, the impact of general economic conditions in Canada, the United States and overseas, industry conditions, changes in laws and regulations (including the adoption of new environmental laws and regulations) and changes in how they are interpreted and enforced, increased competition, the lack of availability of qualified personnel or management, fluctuations in foreign exchange or interest rates, stock market volatility and market valuations of companies with respect to announced transactions and the final valuations thereof, and obtaining required approvals of regulatory authorities. Questfire’s actual results, performance or achievements could differ materially from those expressed in, or implied by, these forward-looking statements and, accordingly, no assurances can be given that any of the events anticipated by the forward-looking statements will transpire or occur, or if any of them do so, what benefits, including the amount of proceeds, that Questfire will derive therefrom. Readers are cautioned that the foregoing list of factors is not exhaustive. All subsequent forward-looking statements, whether written or oral, attributable to Questfire or persons acting on its behalf are expressly qualified in their entirety by these cautionary statements. Furthermore, the forward-looking statements contained in this news release are made as at the date of this news release and Questfire does not undertake any obligation to update publicly or to revise any of the included forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by applicable securities laws.
Petroleum and natural gas volumes are converted to an equivalent measurement basis referred to as a “barrel of oil equivalent” (boe) on the basis of 6 thousand cubic feet of natural gas equalling 1 barrel of oil. This is based on an energy equivalency conversion method applicable at the burner tip and does not necessarily represent a value equivalency at the wellhead, which under current commodity price conditions is in the range of 20-25 Mcf to 1 bbl. Readers are cautioned that boe figures may be misleading, particularly if used in isolation.
To request a free copy of Questfire’s financial report or if you would like to be put on Questfire’s mailing list please contact Ronald Williams, Vice President, Finance and CFO at email@example.com.
Neither 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.
Questfire Energy Corp.
Mr. Richard Dahl
President and CEO
(403) 263-6683 (FAX)
Questfire Energy Corp.
Mr. Ronald Williams
Vice President, Finance and CFO
(403) 263-6683 (FAX)