CALGARY, Aug. 12, 2014 /CNW/ – Cequence Energy Ltd. (“Cequence” or the “Company”) (TSX: CQE) is pleased to announce the financial and operating results for the second quarter of 2014.
The following are Cequence’s financial and operating highlights for the second quarter of 2014:
Financial and Operating
| (000’s except per share and per unit amounts) | Three months ended June 30, |
Six months ended June 30, |
||||||
| 2014 | 2013 | % Change | 2014 | 2013 | % Change | |||
| Financial ($) | ||||||||
| Production revenue (1) | 41,219 | 29,803 | 38 | 82,314 | 51,808 | 59 | ||
| Comprehensive income (loss) | 8,876 | 4,170 | 113 | 9,388 | (1,269) | 840 | ||
| Per share, basic and diluted | 0.04 | 0.02 | 100 | 0.04 | (0.01) | 500 | ||
| Funds flow from operations (2) | 20,235 | 14,831 | 36 | 43,317 | 25,484 | 70 | ||
| Per share, basic | 0.10 | 0.07 | 43 | 0.21 | 0.12 | 75 | ||
| Per share, diluted | 0.09 | 0.07 | 29 | 0.20 | 0.12 | 67 | ||
| Production volumes | ||||||||
| Natural gas (Mcf/d) | 64,810 | 58,153 | 11 | 62,368 | 52,262 | 19 | ||
| Crude oil (bbls/d) | 985 | 874 | 13 | 988 | 742 | 33 | ||
| Natural gas liquids (bbls/d) | 948 | 639 | 48 | 794 | 568 | 40 | ||
| Total (boe/d) | 12,735 | 11,205 | 14 | 12,177 | 10,020 | 22 | ||
| Sales prices | ||||||||
| Natural gas, including realized hedges ($/Mcf) | 4.60 | 3.85 | 19 | 4.92 | 3.70 | 33 | ||
| Crude oil ($/bbl) | 104.53 | 90.56 | 15 | 103.09 | 91.11 | 13 | ||
| Natural gas liquids ($/bbl) | 54.61 | 38.23 | 43 | 57.60 | 44.57 | 29 | ||
| Total ($/boe) | 35.57 | 29.23 | 22 | 37.35 | 28.57 | 31 | ||
| Netback ($/boe) | ||||||||
| Price | 35.57 | 29.23 | 22 | 37.35 | 28.57 | 31 | ||
| Royalties | (4.06) | (2.40) | 69 | (4.09) | (2.50) | 64 | ||
| Transportation | (1.47) | (1.56) | (6) | (1.49) | (1.57) | (5) | ||
| Operating costs | (8.55) | (7.71) | 11 | (8.00) | (7.51) | 7 | ||
| Operating netback | 21.49 | 17.56 | 22 | 23.77 | 16.99 | 40 | ||
| General and administrative | (2.12) | (2.14) | (1) | (2.23) | (2.09) | 7 | ||
| Interest(5) | (1.86) | (0.70) | 166 | (1.83) | (0.60) | 205 | ||
| Cash netback | 17.51 | 14.72 | 19 | 19.71 | 14.30 | 38 | ||
| Capital expenditures ($) | ||||||||
| Capital expenditures | 15,957 | 4,723 | 238 | 74,504 | 48,382 | 54 | ||
| Net acquisitions (dispositions) (4) | (3,138) | (2,641) | 19 | (6,367) | (2,623) | 143 | ||
| Total capital expenditures | 12,819 | 2,082 | 516 | 68,137 | 45,759 | 49 | ||
| Net debt and working capital (deficiency) (3) | (136,040) | (66,001) | 106 | (136,040) | (66,001) | 106 | ||
| Weighted average shares outstanding | ||||||||
| Basic | 210,986 | 209,213 | 1 | 210,952 | 204,935 | 3 | ||
| Diluted | 217,801 | 209,767 | 4 | 215,497 | 204,935 | 5 | ||
| Notes: | |
| (1) | Production revenue is presented gross of royalties and includes realized gains (loss) on commodity contracts. |
| (2) | Funds flow from operations is calculated as cash flow from operating activities before adjustments for decommissioning liabilities expenditures and net changes in non-cash working capital. |
| (3) | Net debt and working capital (deficiency) is calculated as cash and net working capital less commodity contract assets and liabilities, demand credit facilities, principal value of senior notes and excluding other liabilities. |
| (4) | Represents the cash proceeds from the sale of assets and cash paid for the acquisition of assets, as applicable. |
| (5) | Represents finance costs less amortization on transaction costs and accretion expense on senior notes and provisions. |
Financial Highlights
Second quarter funds flow from operations and net earnings increased from the prior year driven by the increase in production volumes of 14 percent and an increase in realized sales prices after hedging of 22 percent from the prior year. In the second quarter of 2014 AECO natural gas prices increased 32 percent compared to the second quarter of 2013. Funds flow from operations increased to $20.2 million for the three months ended June 30, 2014 compared to $14.8 million for the three months ended June 30, 2013. Cequence recorded comprehensive income of $8.9 million for the second quarter of 2014 compared to a comprehensive income of $4.2 million in the same period in 2013.
Net debt and working capital deficiency at June 30, 2014 was $136.0 million comprised of $60 million in senior notes carrying a five year term, $53 million drawn on the Company’s credit facility and a $22.8 million working capital deficiency. Cequence received gross proceeds of $141 million on the disposition of the Ansell property in July 2014 and applied the proceeds to repay indebtedness under the credit facility.
Operations Update
In the second quarter, production averaged 12,735 boepd, a 10 percent increase from the first quarter of 2014 and a new record for the Company. Higher production was a result of new wells onstream at Ansell following the completion of production facilities and new wells brought on production at Simonette late in the first quarter.
Capital expenditures in the second quarter were $12.8 million and were directed to the commencement of the two rig drilling program in early June, the completion of the Ansell drilling program and facilities, and the completion and tie-in of the first quarter drilling program at Simonette.
Cequence recently announced its capital budget of $160 million, prior to dispositions, for the remainder of 2014 and the first quarter of 2015. The program is focused on Montney pad development drilling that is expected to increase capital efficiencies but will also result in longer cycle times as multiple wells are drilled on single pads prior to being completed. In total 17 gross wells are expected to be drilled including 15 Montney wells, one Dunvegan well and one Falher well. Cequence expects production to grow to 15,000 boe/d to exit the first quarter of 2015.
Drilling commenced on the Company’s first Montney pad in early June as dry spring conditions allowed for the mobilization of equipment earlier than anticipated. Two Montney wells have now been drilled and the third well was spud on August 10th. Drilling is on schedule and it is estimated the first three wells will be completed and producing in early October.
The Company’s second drilling rig was activated in June and recently finished drilling a Dunvegan well that is expected to be completed and on production by the end of August. The well is the third Dunvegan well to be drilled in the Company’s liquids rich acreage at Simonette. The first two wells drilled into this pool are two of the most economic wells that the Company has drilled to date. The second rig will drill a Falher development well prior to commencing a second Montney pad program.
This pad-style drilling in the Montney represents a significant shift in the Company’s operating strategy and is the logical progression in the development of the Simonette Montney play.
About Cequence
Cequence is a publicly traded Canadian energy company involved in the exploration, exploitation, acquisition, development and production of natural gas and crude oil in western Canada. Further information about Cequence may be found in its continuous disclosure documents filed with Canadian securities regulators at www.sedar.com.
[expand title=”Advisories & Contact”]Forward looking Statements or Information
Certain statements included in this press release constitute forward-looking statements or forward-looking information under applicable securities legislation. Such forward-looking statements or information are provided for the purpose of providing information about management’s current expectations and plans relating to the future. Readers are cautioned that reliance on such information may not be appropriate for other purposes, such as making investment decisions. Forward-looking statements or information typically contain statements with words such as “anticipate”, “believe”, “expect”, “plan”, “intend”, “estimate”, “propose”, “project” or similar words suggesting future outcomes or statements regarding an outlook. Forward-looking statements or information in this press release may include, but are not limited to, statements or information with respect to: the Company’s guidance and forecasts; expected capital expenditures, business strategy and objectives; and future development, and drilling, plans, including the anticipated benefits resulting therefrom and the timing thereof. Forward-looking statements or information are based on a number of factors and assumptions which have been used to develop such statements and information but which may prove to be incorrect. Although the Company believes that the expectations reflected in such forward-looking statements or information are reasonable. Undue reliance should not be placed on forward-looking statements because the Company can give no assurance that such expectations will prove to be correct. In addition to other factors and assumptions which may be identified in this press release, assumptions have been made regarding, among other things: the impact of increasing competition; the timely receipt of any required regulatory approvals; the ability of the Company to obtain qualified staff, equipment and services in a timely and cost efficient manner; the ability of the operator of the projects which the Company has an interest in to operate the field in a safe, efficient and effective manner; the ability of the Company to obtain financing on acceptable terms; field production rates and decline rates; the timing and costs of pipeline, storage and facility construction and expansion and the ability of the Company to secure adequate product transportation; future oil and natural gas prices; currency, exchange and interest rates; the regulatory framework regarding royalties, taxes and environmental matters; and the ability of the Company to successfully market its oil and natural gas products. Readers are cautioned that the foregoing list is not exhaustive of all factors and assumptions which have been used.
Forward-looking statements or information are 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 statements or information. These risks and uncertainties may cause actual results to differ materially from the forward-looking statements or information. The material risk factors affecting the Company and its business are contained in the Company’s Annual Information Form which is available on SEDAR at www.sedar.com.
The forward-looking statements or information contained in this press release are made as of the date hereof and the Company undertakes no obligation to update publicly or revise any forward-looking statements or information, whether as a result of new information, future events or otherwise unless required by applicable securities laws. The forward looking statements or information contained in this press release are expressly qualified by this cautionary statement.
Additional Advisories
The press release contains references to terms commonly used in the oil and gas industry. Netback is not defined by IFRS in Canada and is referred to as a non-GAAP measure. Netbacks equal total revenue less royalties, operating costs and transportation costs. Management utilizes this measure to analyze operating performance.
Funds flow from operations is a non-GAAP term that represents cash flow from operating activities before adjustments for decommissioning liability expenditures, proceeds from the sale of commodity contracts and changes in non-cash working capital. The Company evaluates its performance based on earnings and funds flow from operations. The Company considers funds flow from operations to be a key measure as it demonstrates the Company’s ability to generate the cash flow necessary to fund future growth through capital investment and to repay debt. The Company’s calculation of funds flow from operations may not be comparable to that reported by other companies. Funds flow from operations per share is calculated using the same weighted average number of shares outstanding used in the calculation of income (loss) per share.
Non-GAAP measures do not have a standardized meaning prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other issuers.
BOEs are presented on the basis of one BOE for six Mcf of natural gas. Disclosure provided herein in respect of BOEs 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.
For the first six months of 2014, the ratio between the average price of West Texas Intermediate (“WTI”) crude oil at Cushing and NYMEX natural gas was approximately 22:1 (“Value Ratio”). The Value Ratio is obtained using the firstsix months 2014 WTI average price of $100.86 (US$/Bbl) for crude oil and the first six months 2014 NYMEX average price of $4.65 (US$/MMbtu) for natural gas. This Value Ratio is significantly different from the energy equivalency ratio of 6:1 and using a 6:1 ratio would be misleading as an indication of value.
The TSX has neither approved nor disapproved the contents of this news release.
SOURCE Cequence Energy Ltd.
Paul Wanklyn, President and Chief Executive Officer, (403) 218-8850, pwanklyn@cequence-energy.com
David Gillis, Vice President, Finance and Chief Financial Officer, (403) 806-4041, dgillis@cequence-energy.com[/expand]