CALGARY, ALBERTA–(Marketwired – Feb. 27, 2015) – Questerre Energy Corporation (“Questerre” or the “Company”) (TSX:QEC) (OSLO:QEC) reported today on its fourth quarter 2014 activities and preliminary financial and operating results for the year ended December 31, 2014.
Michael Binnion, President and Chief Executive Officer of Questerre, commented, “We ended 2014 with a strong fourth quarter with average production of 1,468 boe/d and cash flow from operations of $4.3 million. Our Montney-focused capital program delivered results with a 5.56 MMBoe increase in our proved plus probable reserves at Kakwa. With our first 1.5 mile wells drilled in the year and improving completion designs, we are making excellent progress. Notwithstanding, with the significant drop in commodity prices, we have cut our capital program for 2015 to focus on the completion and tie-in of wells drilled last year and associated infrastructure.”
- Corporate proved plus probable reserves increased from 9.04 MMBoe to 13.88 MMBoe with an NPV-10% of $231.6 million
- Best estimate of economic contingent resources for Company’s joint venture acreage alone was 14.3 MMBoe with an NPV-10% of $149.6 million
- Delineation of operated Montney acreage underway with success at Kakwa South although Kakwa North completion delayed with mechanical failure
- Red Leaf and Total joint venture secured final permit and began construction of commercial scale capsule
- Cash flow from operations of $15.4 million with average daily production of 1,076 boe/d
Commenting on its oil shale assets, Mr. Binnion noted, “Red Leaf and Total made tremendous progress in the year with the receipt of the final permits and the start of construction work for the first large scale capsule. The Company recently announced that while the project is still proceeding, it is slowing down construction in 2015 to give prices time to recover before it begins full commercial production. This will push back the completion and firing up of the capsule to the end of 2016.” He added, “Notwithstanding this progress, with no equity issued by Red Leaf since 2012, we have written down our investment in the company based on among other factors, current oil prices and the decline in market value for its peer group.”
For the year ended December 31, 2014, the Company reported cash flow from operations of $15.4 million (2013: $13.2 million) and $4.3 million for the fourth quarter (2013: $2.9 million). Production averaged 1,076 boe/d for the year, an increase of over 20% from 885 boe/d in 2013 with a 70% oil weighting (2013: 77%) and 1,468 boe/d for the fourth quarter (2013: 841 boe/d). As at December 31, 2014, the Company reported a working capital deficit of $9.3 million (2013: $31.9 million surplus).
For the year ended December 31, 2014, the Company reported a net loss of $40.5 million (2013: $19.4 million). The loss for 2014 includes an impairment charge of $47.6 million reflecting a $33.7 million writedown in the value of its investment in Red Leaf and a $22.1 million impairment in the carrying value of its oil assets based primarily on lower oil prices.
Questerre is leveraging its expertise gained through early exposure to shale and other non-conventional reservoirs. The Company has base production and reserves in the tight oil Bakken/Torquay of southeast Saskatchewan. It is bringing on production from its lands in the heart of the high-liquids Montney shale fairway. It is a leader on social license to operate issues for its Utica shale gas discovery in the St. Lawrence Lowlands, Quebec. In conjunction with a supermajor, it is at the leading edge of commercializing a proven process to unlock the massive resource potential of oil shale.
Questerre is a believer that the future success of the oil and gas industry depends on a balance of economics, environment and society. We are committed to being transparent and are respectful that the public must be part of making the important choices for our energy future.
Certain information set forth in this news release contains forward-looking statements or information (“forward-looking statements”), including the progress being made on its Montney acreage, the delineation of its operated acreage in the Kakwa Resthaven area and the anticipated timing for the completion of construction and the firing of the first commercial scale capsule by Red Leaf and Total. Statements relating to reserves and resources are by their nature forward-looking statements, as they involve the implied assessment, based on certain estimates and assumptions, that the reserves and certain portions of the reserves can be profitably produced in the future. It should not be assumed that the estimated net present value of future net revenue herein is representative of the fair market value of the Company’s properties. The recovery, reserve and resource figures provided herein are estimates only and there is no guarantee that the estimated reserves and resources will be recovered. Actual reserves and resources may be greater than or less than the estimates provided herein. For more information regarding the Company’s reserves and resources as of December 31, 2014, this press release should be read in conjunction with the Company’s press release issued on February 11, 2015.
An estimate of risked net present value of future net revenue of contingent resources is preliminary in nature and is provided to assist the reader in reaching an opinion on the merit and likelihood of the Company proceeding with the required investment. It includes contingent resources that are considered too uncertain with respect to the chance of commercial development to be classified as reserves. There is uncertainty that the risked net present value of future net revenue will be realized.
With respect to discovered resources or any subcategory of discovered resources other than reserves, there is no certainty that it will be commercially viable to produce any portion of the resources. With respect to undiscovered resources, there is no certainty that any portion of the resources will be discovered. If discovered, there is no certainty that it will be commercially viable to produce any portion of the resources. The primary contingencies which prevent the classification of the economic contingent resources as reserves are classified as non-technical as follows: Market access, facility constraints, timing of development, and internal and external approvals for commitment to project development. Additional drilling, completion, and testing data will be required before Questerre can commit to the development of the economic contingent resources. Proven and Probable Reserves are assigned to areas in proximity to proven producing Montney wells. Economic contingent resources are assigned to areas that extend beyond the limits of Reserves and are interpreted to be less certain. As continued drilling occurs, more economic contingent resources are expected to be re-classified as reserves.
Forward-looking statements are based on a number of material factors, expectations or assumptions of Questerre which have been used to develop such statements and information but which may prove to be incorrect. Although Questerre believes that the expectations reflected in these forward-looking statements are reasonable, undue reliance should not be placed on them because Questerre can give no assurance that they will prove to be correct. Since forward-looking statements address future events and conditions, by their very nature they involve inherent risks and uncertainties. Further, events or circumstances may cause actual results to differ materially from those predicted as a result of numerous known and unknown risks, uncertainties, and other factors, many of which are beyond the control of the Company, including, without limitation: changes in commodity prices; changes in the demand for or supply of the Company’s products; unanticipated operating results or production declines; changes in tax or environmental laws, royalty rates or other regulatory matters; changes in development plans of Questerre or by third party operators of Questerre’s properties, increased debt levels or debt service requirements; inaccurate estimation of Questerre’s oil and gas reserve and resource volumes; limited, unfavourable or a lack of access to capital markets; increased costs; a lack of adequate insurance coverage; the impact of competitors; and certain other risks detailed from time-to-time in Questerre’s public disclosure documents. Additional information regarding some of the risks, uncertainties, material assumptions and other factors that could affect actual results are discussed in our Annual Information Form and other documents available at www.sedar.com. The reader is cautioned not to place undue reliance on these forward-looking statements. Furthermore, the forward-looking statements contained in this document are made as of the date of this document and, except as required by applicable law, Questerre does not undertake any obligation to publicly update or to revise any of the included forward-looking statements, whether as a result of new information, future events or otherwise. The forward-looking statements contained in this document are expressly qualified by this cautionary statement.
Certain information set out herein may be considered as “financial outlook” within the meaning of applicable securities laws. The purpose of this financial outlook is to provide readers with disclosure regarding the Company’s reasonable expectations as to the anticipated results of its proposed business activities for the periods indicated. Readers are cautioned that the financial outlook may not be appropriate for other purposes.
This news release is not an offer of securities for sale in the United States. Securities may not be offered or sold in the United States or to or for the account or benefit of US persons (as such terms are defined in Regulation S under the United States Securities Act of 1933, as amended (the “U.S. Securities Act”)), absent registration or an exemption from registration. The securities offered have not been and will not be registered under the U.S. Securities Act or any state securities laws and, therefore, may not be offered for sale in the United States, except in transactions exempt from registration under the U.S. Securities Act and applicable state securities laws. This news release shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of the securities in any State in which such offer, solicitation or sale would be unlawful.
Barrel of oil equivalent (“boe”) amounts may be misleading, particularly if used in isolation. A boe conversion ratio has been calculated using a conversion rate of six thousand cubic feet of natural gas to one barrel of oil and the conversion ratio of one barrel to six thousand cubic feet is based on an energy equivalent conversion method application at the burner tip and does not necessarily represent an economic value equivalent at the wellhead. Given that the value ratio based on the current price of crude oil as compared to natural gas is significantly different from the energy equivalent of 6:1, utilizing a conversion on a 6:1 basis may be misleading as an indication of value.
This press release contains the terms “cash flow from operations” and “working capital surplus/deficit” which are non-GAAP terms. Questerre uses these measures to help evaluate its performance.
As an indicator of Questerre’s performance, cash flow from operations should not be considered as an alternative to, or more meaningful than, cash flows from operating activities as determined in accordance with GAAP. Questerre’s determination of cash flow from operations may not be comparable to that reported by other companies. Questerre considers cash flow from operations to be a key measure as it demonstrates the Company’s ability to generate the cash necessary to fund operations and support activities related to its major assets.
|For the year ended December 31,||2014||2013|
|Cash flows from operating activities||$||14,248||$||14,406|
|Net change in non-cash operating working capital||1,146||(1,214||)|
|Cash flows from operations||$||15,394||$||13,192|
The Company also uses the term “working capital surplus/deficit”. Working capital surplus/deficit, as presented, does not have any standardized meaning prescribed by GAAP and may not be comparable with the calculation of similar measures for other entities. Working capital surplus/deficit, as used by the Company, is calculated as current assets less current liabilities excluding the current portions of the share based compensation liability and risk management contracts.
Questerre Energy Corporation
(403) 777-1578 (FAX)