CALGARY, ALBERTA–(Marketwired – Aug. 13, 2015) – BOULDER ENERGY LTD. (“Boulder” or the “Company“) (TSX:BXO)(OTCQX:BLLDF) is pleased to release an operational update and its financial and operational results for the three and six months ended June 30, 2015.
On May 15, 2015, DeeThree Exploration Ltd. and Boulder Energy Ltd. completed a corporate reorganization pursuant to a Plan of Arrangement (the “Reorganization”). The Reorganization resulted in the acquisition by Boulder of DeeThree’s oil and natural gas properties located in the Brazeau and Peace River Arch areas of Northern Alberta, Canada (“Northern Assets”). In addition, each DeeThree shareholder received one half (0.5) of one share of Boulder for each share of DeeThree held. Boulder commenced active oil and natural gas operations with the transfer of the Northern Assets upon close of the Arrangement on May 15, 2015.
Since the shareholders of DeeThree and Boulder upon close of the Reorganization were the same, this transaction was deemed a common-control transaction. Financial and Operational Results present the historic financial position, results of operations and cash flows of DeeThree’s Northern Assets for all prior periods up to and including May 15, 2015 on a carve-out basis as if they had operated as a stand-alone entity subject to DeeThree’s control. In other words, for reporting purposes, it is assumed that Boulder held these assets prior to May 15th, 2015 and as such; information provided includes production for the entire second quarter of 2015 and the six months year to date as well as comparative periods.
The Company is pleased to report that as a result of its successful drilling efforts late in the second quarter and early in the third quarter, its current average production stands at approximately 7,700 boe per day (including 6,100 bbls of liquids) based on field estimates, with an additional two wells awaiting completion. Well results year to date have been in line with the Company’s budget assumptions with the average IP30 year to date standing at 541 boe/day. For the remainder of the year, Boulder plans to operate one drilling rig and drill an additional 5 to 7 wells which, when combined with the new well costs described below, should result in 2015 year end net debt being approximately equal to June 30, 2015 net debt of $141 million (assuming US$45 WTI). Boulder’s goal for the year is to maintain oil production volumes in an effort to reduce overall corporate decline closer to the 30% target level. The Company believes that this strategy will benefit its long term growth profile regardless of the commodity price environment all the while protecting Boulder’s strong balance sheet.
In the second quarter, the Company drilled and completed a total of 6 gross (6.0 net) wells. As this drilling began in the middle of May, the wells were brought onto production late in the second quarter, with the 6 wells only contributing a combined 87 producing days in the second quarter. As a result, the impact of Boulder’s second quarter capital expenditures is principally being seen in the Company’s current production.
The Company made the decision in February 2015 to temporarily suspend drilling on its Brazeau Belly River property in an effort to optimize its service costs with providers to reflect the new oil price reality. This, along with monobore drilling methods, has resulted in a 22% all-in well cost reduction from the $4.5 million per well planned in the Company’s long term budget and a 33% reduction from the $5.2 million per well averaged in 2014. The new well cost of $3.5 million per well is an important milestone for the Company as it allows for quicker payouts on its wells at current commodity prices, which in turn will have a positive impact on the Company’s growth rate for many years to come. Details of how this cost reduction could influence the Company’s long term plan can be seen in the charts on pages 22 and 23 of the Boulder presentation on the Company’s website at www.boulderenergy.ca (http://www.boulderenergy.ca/Investors/Events-and-Presentations/index.php).
Exploration and Delineation Efforts
Boulder continues to delineate its 97,635 net acre land position by drilling both step-out wells in existing zones as well as exploring new zones in new areas within its Brazeau Belly River property. The Company continues to push forward in this respect even in the current commodity price environment as it will de-risk areas and drilling locations that will allow for future growth when commodity prices become more favorable.
The Company drilled a 2.5 mile step-out in the “C sand” on the western portion of its Brazeau Belly River property early in the third quarter. The well had an IP21 rate of 490 boe/day (86% oil). The well was drilled with a 2,027 meter lateral and completed with a 22 stage cemented liner system at a total cost of $3.66 million. This successful delineation de-risks numerous development drilling opportunities in the area as well as providing confidence in further “C sand” step-out wells on the Western acreage defined by mapping of vertical wells.
The Company is currently drilling a “D sand” well in the northern portion of its lands. The well will be drilled off of an existing 5 well drilling pad that had previously targeted the “C sand”. Dependent on success, the well will open up numerous drilling opportunities that are 2 miles north of its current prolific “D sand” development drilling. Eventually this drilling pad could have a total of 10 development wells drilled on it, which speaks to the operational efficiencies to be gained in the future from this multi-zone light oil play.
Down-spacing and Infill Drilling
As part of its long term strategy, Boulder is committed to prudently testing down-spacing opportunities that exist on its land base in existing oil pools. The results of these efforts over the coming quarters could have a material impact on both reserve bookings, by increasing the recovery factors, as well as increasing drilling opportunities on the Company’s Brazeau Belly River property beyond the 440+ locations already identified. None of these down-spacing locations were included in the Company’s previous reserve bookings.
To date, Boulder has drilled 3 infill wells on its Brazeau Belly River property in two separate development pools with positive results. The Company has not noted any increase in production declines from existing offsetting wells on any of the three infill wells. The Company will continue to monitor the data from these efforts before further development continues. Data from the three infill wells is listed below:
|Well Zone||Days on Production||Rate||Spacing|
|D||30 days||176 boe/d||200m|
|D||21 days||394 boe/d||200m|
|C||14 days||575 boe/d||300m|
Gas Re-injection and Storage Scheme
Beginning in May of 2015, the regional TCPL gas system began an unscheduled mandated maintenance program. This issue has caused continuous disruption in sales gas to both Boulder and the rest of the industry and is the first time a disruption to sales gas has occurred since purchasing the property in 2011. Sales gas remains at, or at times below, firm sales gas commitments that Boulder has on the order of 6mmcf/day. As a result of this and other regulatory issues, the Company was forced to shut in or flare gas and at times shut in oil volumes to comply with the outages. This issue negatively affected production on the order of 1,146 boe/day (30% liquids) in the second quarter. The Company reacted quickly to this issue by expediting government approval of a gas re-injection and storage scheme into an existing horizontal well. This gas re-injection scheme is now injecting approximately 2.5 mmcf/d of gas into the reservoir so that the gas may be stored and then sold at a later date. Boulder also recently received approval to re-inject gas into a second horizontal well which will allow the Company to inject more gas as the 2015 drilling program continues. As the length of the outages is not yet known, this makes it difficult to predict exact timing of this gas being sold; however, the Company has been creative in getting most of its oil to market. As Boulder’s oil volumes account for approximately 90% of its revenues, the Company does not expect this issue to influence its second half 2015 cash flow projections although it may affect its gas sales volumes depending on timing of the issue being resolved. Currently, the Company has approximately 1,900 boe/day (24% liquids) of behind pipe volumes as issues with TCPL persist.
During the second quarter of 2015, Keyera changed the deep cut process at their West Pembina Gas Plant. As a result, the sales liquids yield has dropped from 55 bbls/mmcf to approximately 25 bbls/mmcf with most of the reduction pertaining to propane. This is not a result of the liquids yields from the Belly River reservoir in which historical sales gas has been constant at 55 bbls/mmcf for the past twenty years. This change negatively impacted overall sales production by approximately 215 bbls/day in the second quarter; however, the Company continues to extract and get paid for its higher end liquids at the Keyera Gas plant while also selling a higher heat content gas into the TCPL system. These changes will not be impactful on future cash flow.
After a quiet first half of 2015 on the operations front pending completion of the Reorganization, Boulder is positioned to deliver on its long term plan to shareholders. Although the Company is facing some temporary headwinds in getting its gas to market, it has reacted quickly to deal with the issue, allowing oil volumes to get to sales to maintain cash flow for the second half of 2015 in line with expectations and beyond. The Company has diligently focused and succeeded in reducing capital expenditures on a per well basis to maximize profitability and growth in the new oil price reality. Assuming US$45 WTI for the second half of the year, the Company plans to incur approximately $45 million of capital expenditures which, when combined with the new well costs of $3.5 million per well, should result in 2015 year end net debt being approximately equal to June 30, 2015 net debt of $141 million. Prudently continuing the exploration and delineation of its long term light oil resource play is expected to provide a healthy inventory of de-risked locations to exploit when oil prices become more favorable. In the meantime, the Company is committed to maintain oil volumes while lowering overall corporate declines, with a focus on operational efficiencies and preserving a strong balance sheet.
FINANCIAL AND OPERATIONAL HIGHLIGHTS
Financial and operational highlights for the interim period ended June 30, 2015 with comparative data for 2014 are set out below and should be read in conjunction with the financial statements and related management’s discussion and analysis available for review at www.boulderenergy.ca and www.sedar.com.
|Three Months Ended June 30,||Six Months Ended June 30,|
|(000s, except per share amounts)||($)||($)||(%)||($)||($)||(%)|
|Oil and natural gas revenues||31,962||47,913||(33||)||65,171||85,454||(24||)|
|Funds from operations (1)||17,332||27,312||(37||)||36,402||51,176||(29||)|
|Per share – basic||0.38||0.60||(37||)||0.80||1.12||(29||)|
|Per share – diluted||0.38||0.60||(37||)||0.80||1.12||(29||)|
|Cash flow from operating activities||28,550||28,374||1||35,029||50,243||(30||)|
|Net income (loss)||(403||)||11,027||(104||)||138||18,682||(99||)|
|Per share – basic||(0.01||)||0.24||(104||)||—||0.41||(100||)|
|Per share – diluted||(0.01||)||0.24||(104||)||—||0.41||(100||)|
|Capital expenditures (2)||21,393||34,646||(38||)||44,711||89,315||(50||)|
|Net debt (3)||140,989||86,721||63||140,989||86,721||63|
|Weighted average – basic||45,517||45,517||—||45,517||45,517||—|
|Weighted average – diluted||45,637||45,517||—||45,637||45,517||—|
|Natural gas (mcf/d)||10,205||10,154||1||11,758||9,686||21|
|Crude oil (bbls/d)||4,783||4,437||8||5,455||3,921||39|
|Average wellhead prices|
|Natural gas ($/mcf)||2.70||5.07||(47||)||2.83||5.56||(49||)|
|Crude oil and NGLs ($/bbl)||64.67||97.66||(34||)||56.02||96.14||(42||)|
|Combined average ($/boe)||52.41||80.36||(35||)||46.22||79.18||(42||)|
|Operating netback ($/boe)||30.17||52.51||(43||)||24.91||53.65||(54||)|
|Funds flow netback ($/boe)||28.62||45.81||(38||)||25.90||47.42||(45||)|
|Gross (net) wells drilled|
|Gas (#)||— (–||)||—||—||—||1 (1.0||)||-100 (-100||)|
|Oil (#)||4 (4.0||)||3 (3.0||)||33 (33||)||7 (7.0||)||10 (10.0||)||-30 (-30||)|
|Standing (#)||2 (2.0||)||— (–||)||— (–||)||2 (2.0||)||(–) —||— (–||)|
|Total (#)||6 (6.0||)||3 (3.00||)||100 (100||)||9 (9.00||)||11 (11.00||)||-18 (-18||)|
|Average working interest (%)||100||100||—||100||100||—|
|(1)||Funds from operations, funds from operations per share, operating netbacks and funds flow net back are not recognized measures under International Financial Reporting Standards (IFRS). Refer to the commentary below under “Reader Advisory – Non-GAAP Measurements” for further discussion.|
|(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)||Net debt, which is calculated as current liabilities (excluding derivative financial instruments) and bank debt less current assets (excluding derivative financial instruments), is not a recognized measure under IFRS. Please refer to the commentary in this news release under “Reader Advisory – Non-GAAP Measurements” for further discussion.|
|(4)||For a description of the boe conversion ratio, refer to the commentary below under ” Reader Advisory – BOE Presentation”.|
- Completed the corporate reorganization pursuant to a Plan of Arrangement (the “Reorganization”) with DeeThree Exploration Ltd. and commenced active oil and natural gas operations upon close of the Arrangement on May 15, 2015.
- Operated two new heavy oil hauling trucks for the Q2 2015 period, contributing to transportation costs of $2.87/boe in the second quarter from $3.79/boe in the prior quarter, a decrease of $0.92/boe or 24%.
- Entered into two crude oil hedge contracts representing 2,000 barrels per day of production to the end of 2015 at an average price of US$60.68.
- Drilled and completed 6 gross (6.0 net) wells late in the second quarter. These volumes had minimal representation on the second quarter average production of 6,702 boe/d and will impact production volumes commencing in the third quarter.
- Reduced average drilling and completion costs from $4.5 million per well to $3.5 million per well through the use of monobore drilling.
- Issued 485,000 flow-through shares at a price of $9.55 per flow-through share and 466,000 flow-through shares at a price of $11.25 per flow-through share for total gross proceeds of $9.87 million through private placement on July 2, 2015, subsequent to the quarter end.
Forward-Looking Statements. Certain statements contained in this press release may constitute forward-looking statements. These statements relate to future events or Boulder’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. Boulder 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: pertaining to the following: projections of market prices and costs, supply and demand for oil and natural gas, the quantity of reserves, the availability of pipeline capacity to transport Boulder’s oil and gas, oil and natural gas production levels, capital expenditure programs, treatment under governmental regulatory and taxation regimes, expectations regarding Boulder’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 related to Boulder’s business and operations, Boulder has made assumptions regarding, among other things: the legislative and regulatory environments of the jurisdictions where Boulder carries on business or has operations, the impact of increasing competition, and Boulder’s ability to obtain additional financing on satisfactory terms.
Boulder’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 Boulder’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.
This forward-looking information represents Boulder’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. Boulder 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.
Non-GAAP 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. Boulder’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. Boulder 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 Boulder’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 “Non-GAAP Measurements – Funds from Operations” in the Company’s management’s discussion and analysis for the interim period ended June 30, 2015 filed on www.sedar.com for the netback calculations.
Net debt, 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 net debt.
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.
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.
Boulder Energy Ltd.
Boulder Energy Ltd.