CALGARY, AB–(Marketwired – August 29, 2016) – Marquee Energy Ltd. (“Marquee” or the “Company”) (TSX VENTURE: MQL) announces its second quarter financial and operational results for the three and six months ended June 30, 2016. The Company’s financial statements and Management’s Discussion and Analysis (“MD&A”) for the three and six months ended June 30, 2016 are available on SEDAR at www.sedar.com and on Marquee’s website at www.marquee-energy.com.
SECOND QUARTER OPERATIONAL AND FINANCIAL HIGHLIGHTS
- Realized operating netbacks before hedging of $2.3 million, a 300% increase compared to the first quarter of 2016; and
- Reduced quarterly production and operating costs by 34% to $4.4 million or $12.86 per boe from $6.8 million or $14.55 per boe in the second quarter of 2015; and
- Reduced G&A expenses by 34% to $1.2 million or $3.34 per boe from $1.7 million or $3.59 per boe in the second quarter of 2015; and
- Disposed of non-core shallow gas assets and heavy oil Lloydminster assets for net proceeds of $5.1 million, thereby reducing decommissioning liabilities by $31.5 million and eliminating a future capital commitment of approximately $22.3 million; and
- Reduced second quarter exit net debt to $44.3 million, a decrease of 9% compared to the second quarter of 2015; and
- Realized average production volumes of 3,806 boe/d (44% oil and NGLs) representing a decrease of 26% from the second quarter of 2015, primarily as a result of non-core asset sales in the second quarter of 2016.
On August 19, 2016, Marquee entered into an arrangement agreement (“Arrangement Agreement”) whereby Alberta Oilsands Inc. will acquire all of the issued and outstanding common shares of Marquee. Under the terms of the Arrangement Agreement, holders of common shares of Marquee will receive, for each Marquee share held, 1.67 common shares in the capital of Alberta Oilsands Inc. (“Alberta Oilsands”). On completion of the arrangement, Marquee shareholders will own approximately 49% of the common shares of the combined entity. The combined entity will be led by the current management team of Marquee, and the board of directors will include an equal number of the current directors of Marquee and of Alberta Oilsands, respectively. The continuing operations of the combined entity will be that of Marquee. The successful completion of the arrangement agreement would result in the injection of approximately $30.5 million of net cash (after expected transaction costs associated with the arrangement).
The completion of the arrangement is subject to receipt of the approval of the Alberta Court of Queen’s Bench, the receipt of all necessary regulatory and stock exchange approvals, the receipt of the requisite approval of Marquee shareholders, and the satisfaction or waiver of certain other closing conditions that are customary for a transaction of this nature. It is anticipated that a special meeting of Marquee’s shareholders will be held on September 21, 2016 and assuming receipt of the requisite approval of the arrangement by Marquee shareholders at the meeting, the arrangement is expected to close shortly following the meeting.
The combination of Marquee and Alberta Oilsands represents a significant recapitalization opportunity for Marquee Shareholders, and enables shareholders of Marquee and Alberta Oilsands to emerge from a volatile commodity price environment as a well-funded growth vehicle focused on the sustainable development of a top tier oil resource play.
The following benefits are anticipated to result from the completion of the Arrangement:
- Provides shareholders of Alberta Oilsands with exposure to a dominant land position containing a current light oil drilling inventory of greater than 300 horizontal locations in the Michichi oil fairway, with 2,600 boe/d of production and sustainable growth opportunities at current commodity prices; and
- Provides shareholders of Marquee with reduced operating leverage, continued exposure to a top tier oil resource play, and the financial flexibility to sustainably develop its resource base and focus on strategic acquisition opportunities within its core Michichi area; and
- The resulting company will be a well-capitalized company with a balance sheet that is in line with the best companies in its peer group; and
- Provides shareholders of Marquee and Alberta Oilsands with exposure to significant upside beyond the current drilling inventory over the longer term in the event of an improvement in commodity prices.
FINANCIAL AND OPERATING HIGHLIGHTS
|Three months ended
|Six months ended
|Financial(000’s except per share and per boe amounts)|
|Oil and natural gas sales (1)||$||8,344||$||16,082||$||16,093||$||30,192|
|Funds flow from operations (2)||$||470||$||6,316||$||1,862||$||13,320|
|Per share – basic and diluted||$||–||$||0.05||$||0.02||$||0.11|
|Net income (loss)||$||1,043||$||(4,750||)||$||(6,875||)||$||(8,881||)|
|Per share – basic and diluted||$||0.01||$||(0.04||)||$||(0.06||)||$||(0.07||)|
|Net debt (2)||$||44,275||$||48,829||$||44,275||$||48,829|
|Weighted average basic and diluted shares outstanding||123,165,652||120,340,685||123,165,652||120,340,685|
|Net wells drilled||–||–||–||2.0|
|Daily sales volumes|
|Oil (bbls per day)||1,265||1,711||1,361||1,730|
|Heavy Oil (bbls per day)||261||622||334||696|
|NGL’s (bbls per day)||136||185||147||206|
|Natural Gas (mcf per day)||12,864||15,599||13,657||16,163|
|Total (boe per day)||3,806||5,118||4,118||5,326|
|% Oil and NGL’s||44||%||49||%||45||%||49||%|
|Average realized prices|
|Light Oil ($/bbl)||$||46.92||$||56.18||$||38.45||$||49.42|
|Heavy Oil ($/bbl)||$||35.03||$||51.23||$||24.43||$||41.61|
|Natural Gas ($/mcf)||$||1.42||$||2.72||$||1.72||$||2.88|
|Operating and transportation costs ($/boe)||$||(14.21||)||$||(15.94||)||$||(15.41||)||$||(15.43||)|
|Operating netback prior to hedging (2)||$||6.61||$||13.26||$||3.83||$||12.22|
|Realized hedging gain (loss) ($/boe)||$||(0.13||)||$||4.86||$||3.11||$||6.01|
|Operating netback ($/boe) (2)||$||6.48||$||18.12||$||6.94||$||18.23|
|(2)||Defined under the Non-GAAP Measures section of this MD&A|
|(3)||Proceeds on dispositions|
Over the past 24 months, Marquee has drilled and placed on production 18 horizontal wells in the Michichi area of Alberta. Based on the expected well production profiles and cost structure of its recent wells, Marquee estimates a 1.4 year payout for a typical Michichi horizontal well based on current strip pricing. Michichi wells finding and development costs rank in the top quartile relative to competing resource plays.
In the first eight months of 2016, the oil industry has faced significant headwinds due to the prolonged downward pressure on oil and gas prices resulting from an oversupply of world oil markets. Marquee is fortunate to own a low-cost oil focused asset base which allows the Company to mitigate some of its exposure to volatility in commodity prices, while also positioning it for strong growth as commodity pricing improves.
Marquee continues to evaluate and prudently manage its 2016 capital program, and remain focused on balance sheet preservation and long-term value creation. The Company will also look to maintain its hedging program as opportunities present themselves to provide a base level of revenue to protect short-term capital programs.
With the current uncertainty in oil and natural gas prices, Marquee believes the most prudent course of action is to limit capital spending to free corporate cashflow, evaluate its production on a regular basis and shut-in non-economic wells where warranted. The Company currently expects to spend between $3.5 and $5.0 million on capital costs in 2016.
As demonstrated by the sale of non-core shallow gas assets and its heavy oil assets at Lloydminster, the Company has pursued opportunities to monetize non-core assets as a means to further reduce indebtedness and future liabilities. Through this focus on sustainability, Marquee expects to be well positioned to realize the potential value that has been delineated at Michichi as commodity prices improve.
Management believes the Company strengths at Michichi include large oil in place, extensive drilling inventory, strong economics at current oil prices, ownership and control of infrastructure, high working interest ownership and an improving cost structure. The Company has identified more than 300 horizontal drilling locations within its multi-zone light oil fairway and recently received government approval for its Michichi water flood pilot which may be ready for implementation in the third quarter of 2016.
The Directors and management of Marquee continue to monitor changes to commodity pricing and the current economic environment, as it affects both the Company’s business and that of its suppliers.
Marquee Energy Ltd. is a Calgary based, junior energy company focused on high rate of return light oil development and production. Marquee is committed to growing the company through exploitation of existing opportunities and continued consolidation within its core area at Michichi. The Company’s shares are traded on the TSX Venture Exchange under the trading symbol “MQL” and on the OTCQX marketplace under the symbol “MQLXF”. An updated presentation and additional information about Marquee may be found on its website www.marquee-energy.com and in its continuous disclosure documents filed with Canadian securities regulators on the System for Electronic Document Analysis and Retrieval (SEDAR) at www.sedar.com.