CALGARY, Alberta, Aug. 02, 2018 (GLOBE NEWSWIRE) — (TSX: VII)
SECOND QUARTER HIGHLIGHTS
- Funds from operations of $434 million or $1.19 per share, up 62 percent and 63 percent respectively compared to the same periods in 2017. Cash provided by operating activities of $425.2 million, up 119 percent from the same period in 2017.
- 7G’s realized pricing increased 26 percent compared to the first quarter of 2018. Increasing condensate production, coupled with higher commodity prices, drove the corporate netback to $25.49 per boe, representing an increase of 43 percent from the second quarter in 2017.
- Condensate production of 69,000 bbls/d and total liquids production of 110,200 bbls/d, up 17 percent and 14 percent respectively from the second quarter of 2017. Natural gas production was 461 MMcf/d, an increase of 13 percent compared to the second quarter of 2017.
- 7G’s long-term focus on diversified market access saw realized natural gas pricing at $3.79 per Mcf, more than $2.50 per Mcf higher than AECO pricing during the quarter.
- A trailing 12-month return on capital employed of 12.1 percent and a cash return on invested capital of 18.8 percent.
- Continued financial strength with a trailing 12-month ratio of net debt to funds from operations of 1.5x.
“Our second quarter results highlight the cash flow generating capacity of our business. We continue to see our production mix tilting towards the highest value production stream in Canada – condensate. With higher than expected condensate production and pricing, we are earning higher rates of return and generating more cash flow than anticipated. This accelerated free cash flow profile provides us with significant optionality as we head into our annual budgeting process,” said Marty Proctor, 7G’s President & Chief Executive Officer.
OPERATIONAL AND FINANCIAL HIGHLIGHTS
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|($ millions, except boe and per share amounts)(1)||2018||2017||%
|Natural gas (MMcf/d)||461.3||409.6||13||473.3||(3||)||467.3||397.1||18|
|Total Production (mboe/d)(4)||187.1||165.2||13||187.7||0||187.4||159.2||18|
|Natural gas ($/Mcf)||3.79||4.09||(7||)||3.54||7||3.73||4.22||(12||)|
|Royalty expense ($/boe)||(0.96||)||(0.62||)||55||(1.12||)||(14||)||(1.04||)||(0.91||)||14|
|Operating expenses ($/boe)||(6.00||)||(6.24||)||(4||)||(5.73||)||5||(5.87||)||(5.65||)||4|
|Transportation, processing and other ($/boe)||(6.93||)||(5.88||)||18||(6.24||)||11||(6.72||)||(5.66||)||19|
|Operating netback before the following(4)||28.53||20.84||37||25.10||14||26.83||22.28||20|
|Realized hedging gains (losses) ($/boe)||(1.04||)||0.12||nm||(0.78||)||33||(0.91||)||(0.19||)||379|
|Marketing income ($/boe)(1)||0.53||0.43||23||0.62||(15||)||0.57||0.30||90|
|Operating netback ($/boe)(1)(3)||28.02||21.39||31||24.94||12||26.49||22.39||18|
|G&A per boe ($/boe)||(0.82||)||(0.82||)||0||(0.65||)||26||(0.73||)||(0.80||)||(9||)|
|Finance expense and other ($/boe)||(1.71||)||(2.74||)||(38||)||(1.75||)||(2||)||(1.74||)||(2.84||)||(39||)|
|Corporate netback ($/boe)(1)||25.49||17.83||43||22.54||13||24.02||18.75||28|
|Liquids and natural gas sales ($)(4)||722.2||504.8||43||645.2||12||1,372.5||994.1||38|
|Operating income ($)(1)||169.6||59.5||185||129.4||31||299.0||133.6||124|
|Per share – diluted ($)||0.47||0.16||194||0.36||31||0.82||0.37||122|
|Net income (loss) ($)||(24.6||)||178.1||nm||22.7||nm||(1.9||)||393.3||nm|
|Per share – diluted ($)||(0.07||)||0.49||nm||0.06||nm||(0.01||)||1.08||nm|
|Funds from operations ($)(1)||434.0||268.1||62||380.8||14||814.8||540.4||51|
|Per share – diluted ($)||1.19||0.73||63||1.05||13||2.24||1.48||51|
|Cash provided by operating activities ($)||425.2||193.9||119||424.1||—||849.3||529.6||60|
|Capital investments ($)||562.6||512.5||10||582.6||(3||)||1,145.2||874.8||31|
|Available funding ($)(1)||1,210.3||1,587.1||(24||)||1,312.6||(8||)||1,210.3||1,587.1||(24||)|
|Net debt ($)(1)||2,263.6||1,797.2||26||2,118.2||7||2,263.6||1,797.2||26|
|Weighted average shares – basic||358.4||353.4||1||354.9||1||356.7||352.0||1|
|Weighted average shares – diluted||364.7||365.1||—||363.5||—||364.1||364.8||—|
- See “Non-IFRS Financial Measures” in the “Reader Advisory” at the end of the news release. Certain comparative figures have been adjusted to confirm to current period presentation.
- Represents the total of liquids and natural gas sales, net of royalties, gains (losses) on risk management contracts and other income.
- Starting in 2018, Seven Generations began presenting C5+ in the NGL mix as a condensate volume (previously reported as an NGL volume). 2017 liquids and natural gas sales have been adjusted to conform to this current period presentation.
- Excludes the purchase and resale of condensate and natural gas in respect of the company’s transportation commitment optimization and marketing activities.
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|Horizontal wells rig released||24||30||(20||)||27||(11||)||51||53||(4||)|
|Average measured depth (m)||5,683||5,867||(3||)||5,621||1||5,650||5,871||(4||)|
|Average horizontal length (m)||2,470||2,614||(6||)||2,459||—||2,464||2,630||(6||)|
|Average drilling days per well||25||36||(31||)||28||(11||)||27||35||(23||)|
|Average drill cost per lateral metre ($)(2)||1,399||1,642||(15||)||1,500||(7||)||1,452||1,555||(7||)|
|Average well cost ($ millions)(2)||3.4||4.2||(19||)||3.6||(6||)||3.5||4.0||(13||)|
|Average number of stages per well||45||38||18||39||15||43||39||10|
|Average tonnes pumped per well||5,504||5,961||(8||)||5,923||(7||)||5,679||6,135||(7||)|
|Average cost per tonne(2)||1,208||1,196||1||1,218||(1||)||1,212||1,234||(2||)|
|Average well cost ($ millions)(2)||6.6||7.8||(15||)||7.2||(8||)||6.9||7.6||(9||)|
|Total D&C cost per well ($ millions)(2)||10.0||12.0||(17||)||10.8||(7||)||10.4||11.6||(10||)|
- The drilling and completion counts include only horizontal Montney wells in the Nest. The drilling counts and metrics exclude wells that are re-drilled or abandoned.
- Information provided is based on field estimates and are subject to change.
Third-party processing plant maintenance impacted second quarter production by approximately 3,400 boe/d. 7G has recently expanded its diversion pipeline capacity, which will help mitigate processing facility outages. 7G is on track to complete its third owned and operated processing plant in the fourth quarter of 2018. The plant, located in the Gold Creek area, will have a capacity of 250 MMcf/d, which will increase the company’s processing capacity and further enhance 7G’s ability to mitigate outages. 7G’s 2018 second half production profile is consistent with expectations, with July corporate production averaging about 210,000 boe/d.
Drilling and completions continue to progress with reduced drilling time and lower total well costs that averaged $10 million per well during the second quarter. 7G’s completions continue to advance with the company implementing its tailored completions practice – with completions design reflecting each area’s condensate-to-gas ratio and geological characteristics. By varying stage count, proppant intensities and liner design, 7G intends to enhance well productivity and returns, and optimize full field recoveries.
Operating expenses were $6.00 per boe in the second quarter, which were impacted by facility maintenance. 7G drilled its second and third water disposal wells during the second quarter and now has capacity to handle more than half of its water disposal requirements internally. 7G is building an in-field water pipeline network that will connect its infrastructure to its disposal wells. This project is expected to reduce trucking and water handling costs during the second half of 2018.
7G continues to advance its area-specific artificial lift designs in order to optimize production in higher condensate-gas-ratio areas. As a result, 7G is seeing increasing condensate production from its Nest 1 wells, which were brought online in the first quarter of 2018. These wells each averaged 750 bbls/d of condensate during the first 120 producing days.
The company is also seeing strong results after implementing an enhanced lift design on its recently tied-in 12-well pad in the Nest 1 / Nest 2 transition zone. This pad continues to demonstrate better than anticipated condensate rates and economics, with wells averaging 1,000 bbls/d during the first 50 producing days.
7G continues to develop and delineate highly economic wells across its land base. With an increasing focus on returns and area-specific well design, 7G has segmented its Nest 2 holdings into four sub-regions defined by geological characteristics and condensate-to-gas ratios. In aggregate, 7G’s higher-resolution interpretation indicates increasing condensate production and lower natural gas production across the Nest 2 area relative to the company’s 2018 budget expectations and related 2019 outlooks, released in the fourth quarter of 2017. These Nest 2 sub-regions, identified as North, East, South and West, generate top-tier well economics that, at current commodity prices, are in-line with the company’s previous expectations. Through its enhanced area-specific well spacing and completions designs, 7G believes it will improve its capital efficiency, productivity and forecasting while driving higher returns. Additional details and sub-region economic forecasts are shown in the company’s August corporate presentation, posted on www.7genergy.com.
In Nest 3, 7G’s latest production results from two new wells brought on stream in January remain constructive. To date, the wells have each averaged more than 2,500 boe/d on a constrained basis during their first 2.5 months of production, with an average of 690 bbls/d of condensate per well.
The company also successfully drilled and completed a stacked well pad, which included three Upper Montney, three Middle Montney and one Lower Montney well. 7G anticipates tie-in of these wells during the second half of 2018.
As previously announced, 7G expects 2018 production to be at the lower end of its 200,000 to 210,000 boe/d guidance range, with higher than forecast condensate volumes. Capital investments are expected to remain within a range of $1.675 billion to $1.775 billion. Given the budgeted cycle times arising from 7G’s batch drill, complete and tie-in processes, the company’s first half weighted 2018 capital investments will drive production growth in the second half of the year.
Higher than forecast condensate and lower than forecast natural gas production, combined with an improved understanding of the Nest resource, will enable 7G to optimize its capital allocation, production growth and full cycle returns. The company is currently reviewing its capital allocation plans for 2019 and expects to announce its 2019 capital budget and updated production guidance in the fourth quarter of 2018.
7G management will hold a conference call to discuss results and address investor questions today, August 2, 2018 at 9 a.m. MT (11 a.m. ET).
|Participant Dial-In Numbers|
|Dial in – toll free:||(877) 390-7644|
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|Duration:||August 2, 2018 – August 9, 2018|
Seven Generations Energy
Seven Generations Energy is a low-supply cost, growth-oriented energy producer dedicated to stakeholder service, responsible development and generating strong returns from its liquids-rich Kakwa River Project in northwest Alberta. 7G’s corporate office is in Calgary, its operations headquarters is in Grande Prairie and its shares trade on the TSX under the symbol VII.