CALGARY, ALBERTA–(Marketwired – Aug. 13, 2014) – Delphi Energy Corp. (TSX:DEE) (“Delphi” or the “Company”) is pleased to announce its operational and financial results for the quarter ended June 30, 2014.
Second Quarter 2014 Highlights
- Increased production to an average of 10,397 barrels of oil equivalent per day (“boe/d”) in the second quarter of 2014, an increase of 36 percent over the comparative quarter in 2013 and higher than production of 10,302 boe/d in the first quarter of 2014;
- Improved cash netbacks per barrels of oil equivalent (“boe”) in the second quarter of 2014 by 28 percent to $15.50 per boe over the comparative quarter of 2013, resulting in funds from operations of $14.7 million, a 74 percent increase over the second quarter of 2013;
- Increased average field condensate production by 101 percent to 1,364 barrels per day (“bbls/d”) in comparison to the second quarter of 2013;
- Increased the average natural gas liquid (“NGL”) and field condensate yield by 39 percent to 75 barrels per million cubic feet (“bbls/mmcf”) compared to the second quarter of 2013. Field and plant condensate yield was 44 bbls/mmcf or 58 percent of the total 75 bbls/mmcf;
- Increased average Montney production from 2,350 boe/d in the second quarter of 2013 to 6,318 boe/d in the second quarter of 2014, an increase of 169 percent. The Bigstone Montney project contributed 61 percent of the Company’s production during the second quarter of 2014 compared to 31 percent during the comparative quarter of 2013;
- Montney liquids yield was 101 bbls/mmcf in the second quarter of 2014 with field and plant condensate representing 68 percent of the liquids yield and the balance of the liquids yield split between butane at 14 percent and propane at 18 percent;
- Successfully drilled, completed and tied-in 1.0 net Montney well as part of the Company’s capital program and completed and tied-in 1.0 net Montney well which was drilled during the first quarter in East Bigstone. Both these wells were brought on production early in the third quarter; and
- Executed a three year natural gas processing agreement with SemCAMS ULC for transportation and processing of raw natural gas at the SemCAMS K3 plant from the Company’s condensate rich Montney play in the Bigstone area of Alberta.
|Three Months Ended June 30||Six Months Ended June 30|
|Production||2014||2013||% Change||2014||2013||% Change|
|Field condensate (bbls/d)||1,364||677||101||1,409||548||157|
|Natural gas liquids (bbls/d)||1,807||1,115||62||1,651||1,152||43|
|Crude oil (bbls/d)||219||311||(30)||230||315||(27)|
|Total crude oil and natural gas liquids||3,390||2,103||61||3,290||2,015||63|
|Natural gas (mcf/d)||42,040||33,189||27||42,355||33,380||27|
Financial Highlights ($ thousands except per unit amounts)
|Three Months Ended June 30||Six Months Ended June 30|
|2014||2013||% Change||2014||2013||% Change|
|Crude oil and natural gas sales||44,173||23,541||88||93,219||45,304||106|
|Realized sales price per boe||42.09||33.67||25||44.75||32.86||36|
|Funds from operations||14,660||8,408||74||35,069||17,791||97|
|Per share – Basic||0.09||0.05||80||0.23||0.11||109|
|Per share – Diluted||0.09||0.05||80||0.22||0.11||100|
|Per share – Basic||0.04||0.02||100||0.04||0.02||100|
|Per share – Diluted||0.03||0.02||50||0.04||0.02||100|
|Disposition of properties||–||(105)||–||–||(3,277)||–|
|Net capital invested||17,239||7,256||138||54,649||28,040||95|
|Acquisition of undeveloped properties||–||–||–||–||13,664||–|
|Total capital invested||17,239||7,256||138||54,649||41,704||31|
|June 30, 2014||December 31, 2013||% Change|
|Net debt (1)||156,997||138,340||13|
|Shares outstanding (000’s)|
(1) Defined as the sum of long term and subordinated debt plus (minus) the working capital deficit (surplus) excluding the current portion of the fair value of the financial instruments.
MESSAGE TO SHAREHOLDERS
Delphi continues to focus its capital program for 2014 on its Montney development at Bigstone, increasing the Company’s cash generating capability through the growth of its liquids-rich production, towards a self-funded drilling program.
Revenue generated during the second quarter of 2014 was $44.2 million, an 88 percent increase over the comparative quarter of 2013 which had revenues of $23.5 million. In the second quarter of 2014, sales of crude oil, field condensate and natural gas liquids production represented 55 percent of revenue and sales of natural gas production represented 45 percent of revenue. Funds from operations in the second quarter of 2014 were $14.7 million or $0.09 per basic and diluted share compared to $8.4 million or $0.05 per basic and diluted share in the comparative quarter of 2013. The increase in funds from operations is primarily due to an increase in field condensate, natural gas liquids and natural gas production and an improvement in the price received for these commodities in the second quarter of 2014. Funds from operations per boe in the second quarter of 2014 was reduced by a cash expense of $1.96 per boe related to the payout of restricted share units.
Production volumes for the three months ended June 30, 2014 averaged 10,397 boe/d, an increase of 36 percent over the comparative quarter in 2013. One Montney well was brought on-stream during the quarter with 1.0 net well drilled and 2.0 net wells completed in the second quarter coming on-stream early in the third quarter. Production from the Montney project at Bigstone increased to an average 6,318 boe/d in the second quarter of 2014, up 169 percent from 2,350 boe/d in the second quarter of 2013.
The Company’s production portfolio for the second quarter of 2014 was weighted two percent to crude oil, 13 percent to field condensate, 17 percent to natural gas liquids and 68 percent to natural gas. This compares to a production portfolio for the comparative quarter of 2013 weighted four percent to crude oil, nine percent to field condensate, 15 percent to natural gas liquids and 72 percent to natural gas. For the second quarter of 2014, Delphi’s field condensate production increased 101 percent to 1,364 bbls/d and NGL production increased 62 percent to 1,807 bbls/d compared to the second quarter of 2013. Plant and field condensate production increased from 990 bbls/d to 1,844 bbls/d over this same comparative period.
The liquids-rich nature of the Montney production continues to strengthen the Company’s cash generating capability, with Montney field operating netbacks (excluding risk management contracts) of $32.99 per boe during the second quarter of 2014 and $34.33 per boe for the first half of 2014. Production from the Montney in the second quarter represented 61 percent of total production while generating 77 percent of field operating income (excluding risk management contracts).
Favourable weather conditions and a shortened spring break-up period allowed for continuous drilling operations in Bigstone with two additional Montney horizontal wells being accelerated from the second half of the 2014 capital program. Net capital expenditures in the second quarter were $17.2 million, which primarily included the drilling of 1.0 net well and the completion and equipping operations of 2.0 gross (2.0 net) Montney horizontal wells. During the second quarter, the Company also incurred $2.1 million to tie-in 2.0 net wells and complete the pipeline connection to deliver its Montney natural gas and natural gas liquids to the SemCAMS K3 processing facility.
As at June 30, 2014, the Company had net debt of $157.0 million on total credit facilities of $190.0 million. Net debt includes long term and subordinated debt plus the working capital deficiency excluding the fair value of financial instruments.
Bigstone Montney Program
The following table has been updated to reflect new well production data since it was previously released and continues to illustrate the significant impact the slickwater hybrid fracturing technique has had on well performance at Bigstone in comparison to smaller conventional frac methods.
Numbers in bold in the table below indicate new data since it was previously released.
To view the table associated with this release titled “Initial Production (IP) Rate Well Performance”, please visit the following link: http://media3.marketwire.com/docs/962657.pdf
The Company is currently drilling its sixth horizontal Montney well (1.0 net) of the 2014 capital program at 3-26-59-23W5M. Completion operations have commenced at its fifth well (0.75 net) of the year at 16-15-60-23W5M and Delphi anticipates this well to be brought on production in September. In addition, the Company’s horizontal Montney exploration well at 12-17-59-22W5M (0.75 net) in the southern portion of East Bigstone, which had been completed with a 26 stage slickwater frac late in 2013, is planned to be tied-in and brought on production in September.
Delphi has signed a three year natural gas processing agreement with SemCAMS ULC (“SemCAMS”), a subsidiary of SemGroup Corporation (NYSE: SEMG) for transportation and processing raw natural gas from its condensate rich Montney play in the Bigstone area of Alberta. As a result of a pipeline connection completed by Delphi this past winter to SemCAMS K-west sour pipeline, Delphi will now be delivering its natural gas to the SemCAMS operated Kaybob South 3 (“K3”) gas processing facility effective late August 2014. Delphi has committed to delivering raw natural gas volumes of 30 million cubic feet per day (“mmcf/d”) in the first year and 40 mmcf/d in the second and third year with the ability to annually request additional processing capacity from SemCAMS if it is available.
The Company continues to work on numerous opportunities to ensure the transportation, processing and marketing capacity for its natural gas, field condensate and natural gas liquids production growth. These opportunities are anticipated to increase the Montney operating netback through lower operating and transportation costs and marketing arrangements yielding better NGL and condensate pricing. These projects include the construction of an amine sweetening facility with potential capacity of 60 – 100 mmcf/d and a water disposal facility. The amine sweetening facility, built to handle the slightly sour Montney production would allow the Company to process the sweetened Montney natural gas production through the Bigstone West Gas Plant in which Delphi has a 25.2 percent working interest or through other sweet processing facilities in the area. The Company is also pursuing water disposal opportunities, including the drilling of its own designated water disposal well, to handle frac load water recoveries rather than disposing through third party facilities. Disposal capacity may also allow for the handling of third party water volumes. The expected timeline for these projects is late 2015 – 2016. It is anticipated that processing arrangements and other operational efficiencies from these projects will result in a netback improvement for Montney production of $5.00 – $7.00 per boe.
The operational and financial transformation of the Company continued through the first half of 2014, with strong cash netbacks from a growing Montney production and reserve base at Bigstone. The Company maintains a large development inventory assembled on 130 sections of Montney lands together with ownership in strategic infrastructure.
Delphi’s disposition of its Wapiti assets is progressing with the purchaser’s due diligence review largely complete. Delphi and the purchaser are now working on a purchase and sale agreement with a targeted execution date in September and anticipated closing in October. The disposition continues to be subject to a number of conditions precedent and as such there is no assurance that a binding agreement will be achieved or that the prospective transaction will be consummated. Once contemplated A&D processes have concluded, the Company will be reviewing its remainder of 2014 and 2015 capital programs, as it would relate to an accelerated Montney drilling program and provide updated guidance at that time.
On behalf of the Board of Directors and all the employees of Delphi, we would like to thank our shareholders for their continued support.
CONFERENCE CALL AND WEBCAST
A conference call and webcast to review Q2, 2014 results is scheduled for 9:00 a.m. Mountain Time (11:00 a.m. Eastern Time) on Thursday, August 14, 2014. The conference call number is 1-800-769-8320 or 416-340-8530. A brief presentation by David Reid, President and CEO and Brian Kohlhammer, Senior VP Finance & CFO, will be followed by a question and answer period. The conference call will also be broadcast live on the internet and may be accessed through the Delphi Energy website at www.delphienergy.ca.
A taped rebroadcast will be available until 6:00 p.m. Mountain Time, Thursday, August 21, 2014. To access the rebroadcast, dial 1-800-408-3053 or 905-694-9451. The passcode is 6566544. It will also be available on Delphi’s website. Delphi’s second quarter 2014 financial statements and management’s discussion and analysis are available on Delphi’s website at www.delphienergy.ca and SEDAR at www.sedar.com.
Delphi Energy is a Calgary-based company that explores, develops and produces oil and natural gas in Western Canada. The Company is managed by a proven technical team. Delphi trades on the Toronto Stock Exchange under the symbol DEE.
More particularly and without limitation, this release contains forward-looking statements and information relating to petroleum and natural gas production estimates and weighting, projected crude oil and natural gas prices, future exchange rates, expectations as to royalty rates, expectations as to transportation and operating costs, expectations as to general and administrative costs and interest expense, expectations as to capital expenditures and net debt, planned capital spending, future liquidity and Delphi’s ability to fund ongoing capital requirements through operating cash flows and its credit facilities, supply and demand fundamentals for oil and gas commodities, timing and success of development and exploitation activities, cash availability for the financing of capital expenditures, access to third-party infrastructure, treatment under governmental regulatory regimes and tax laws and future environmental regulations.
Furthermore, statements relating to “reserves” are deemed to be forward-looking statements as they involve the implied assessment, based on certain estimates and assumptions that the reserves described can be profitable in the future.
The forward-looking statements and information contained in this release are based on certain key expectations and assumptions made by Delphi. The following are certain material assumptions on which the forward-looking statements and information contained in this release are based: the stability of the global and national economic environment, the stability of and commercial acceptability of tax, royalty and regulatory regimes applicable to Delphi, exploitation and development activities being consistent with management’s expectations, production levels of Delphi being consistent with management’s expectations, the absence of significant project delays, the stability of oil and gas prices, the absence of significant fluctuations in foreign exchange rates and interest rates, the stability of costs of oil and gas development and production in Western Canada, including operating costs, the timing and size of development plans and capital expenditures, availability of third party infrastructure for transportation, processing or marketing of oil and natural gas volumes, prices and availability of oilfield services and equipment being consistent with management’s expectations, the availability of, and competition for, among other things, pipeline capacity, skilled personnel and drilling and related services and equipment, results of development and exploitation activities that are consistent with management’s expectations, weather affecting Delphi’s ability to develop and produce as expected, contracted parties providing goods and services on the agreed timeframes, Delphi’s ability to manage environmental risks and hazards and the cost of complying with environmental regulations, the accuracy of operating cost estimates, the accurate estimation of oil and gas reserves, future exploitation, development and production results and Delphi’s ability to market oil and natural gas successfully to current and new customers. Additionally, estimates as to expected average annual production rates assume that no unexpected outages occur in the infrastructure that the Company relies on to produce its wells, that existing wells continue to meet production expectations and any future wells scheduled to come on in the coming year meet timing and production expectations.
Commodity prices used in the determination of forecast revenues are based upon general economic conditions, commodity supply and demand forecasts and publicly available price forecasts. The Company continually monitors its forecast assumptions to ensure the stakeholders are informed of material variances from previously communicated expectations.
Financial outlook information contained in this release about prospective results of operations, financial position or cash flows is based on assumptions about future events, including economic conditions and proposed courses of action, based on management’s assessment of the relevant information currently available. Readers are cautioned that such financial outlook information contained in this release should not be used for purposes other than for which it is disclosed.
Although the Company believes that the expectations reflected in such forward-looking statements and information are reasonable, it can give no assurance that such expectations will prove to be correct and such forward-looking statements should not be unduly relied upon. Since forward-looking statements and information address future events and conditions, by their very nature they involve inherent known and unknown risks and uncertainties. Delphi’s actual results, performance or achievements could differ materially from those expressed in, or implied by, these forward-looking statements and, accordingly, no assurance 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 Delphi will derive therefrom. Should one or more of these risks or uncertainties materialize, or should assumptions underlying forward-looking statements prove incorrect, actual results may vary materially from those currently anticipated due to a number of factors and risks. These include, but are not limited to, the risks associated with the oil and gas industry in general such as operational risks in development, exploration and production, delays or changes in plans with respect to exploration or development projects or capital expenditures, the uncertainty of estimates and projections relating to production rates, costs and expenses, commodity price and exchange rate fluctuations, marketing and transportation, environmental risks, competition from others for scarce resources, the ability to access sufficient capital from internal and external sources, changes in governmental regulation of the oil and gas industry and changes in tax, royalty and environmental legislation. Additional information on these and other factors that could affect the Company’s operations or financial results are included in the Company’s most recent Annual Information Form and other reports on file with the applicable securities regulatory authorities and may be accessed through the SEDAR website (www.sedar.com).
Readers are cautioned that the foregoing list of factors is not exhaustive. Furthermore, the forward-looking statements contained in this release are made as of the date of this release for the purpose of providing the readers with the Company’s expectations for the coming year. The forward-looking statements and information may not be appropriate for other purposes. Delphi 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 so required by applicable securities laws. The forward-looking statements contained in this release are expressly qualified in their entirety by this cautionary statement.
Basis of Presentation. For the purpose of reporting production information, reserves and calculating unit prices and costs, natural gas volumes have been converted to a barrel of oil equivalent (boe) using six thousand cubic feet equal to one barrel. A boe conversion ratio of 6:1 is based upon an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. This conversion conforms with the Canadian Securities Administrators’ National Instrument 51-101 when boes are disclosed. Boes may be misleading, particularly if used in isolation.
As per CSA Staff Notice 51-327 initial test results and initial production performance should be considered preliminary data and such data is not necessarily indicative of long-term performance or of ultimate recovery.
Non-IFRS Measures. The release contains the terms “funds from operations”, “funds from operations per share”, “net debt”, “operating netbacks”, “cash netbacks” and “netbacks” which are not recognized measures under IFRS. The Company uses these measures to help evaluate its performance. Management considers netbacks an important measure as it demonstrates its profitability relative to current commodity prices and costs of production. Management uses funds from operations to analyze performance and considers it a key measure as it demonstrates the Company’s ability to generate the cash necessary to fund future capital investments and to repay debt. Funds from operations is a non-IFRS measure and has been defined by the Company as cash flow from operating activities before accretion on long term and subordinated debt, decommissioning expenditures and changes in non-cash working capital from operating activities. The Company also presents funds from operations per share whereby amounts per share are calculated using weighted average shares outstanding consistent with the calculation of earnings per share. Delphi’s determination of funds from operations may not be comparable to that reported by other companies nor should it be viewed as an alternative to cash flow from operating activities, net earnings or other measures of financial performance calculated in accordance with IFRS. The Company has defined net debt as the sum of long term debt and subordinated debt plus/minus working capital excluding the current portion of the fair value of financial instruments. Net debt is used by management to monitor remaining availability under its credit facilities. Operating netbacks have been defined as revenue less royalties, transportation and operating costs. Cash netbacks have been defined as operating netbacks less interest and general and administrative costs. Netbacks are generally discussed and presented on a per boe basis.
For the calculation of finding, development and acquisition costs, recycle ratio and net asset value per share, refer to the Company’s press release of crude oil and natural gas reserves information dated February 12, 2014.
Delphi Energy Corp.
DAVID J. REID
President & CEO
(403) 265-6207 (FAX)
email@example.comDelphi Energy Corp.
BRIAN P. KOHLHAMMER
Senior V.P. Finance & CFO
(403) 265-6207 (FAX)