Our operational and financial highlights for the three and six months ended June 30, 2018 are noted below and should be read in conjunction with our unaudited condensed consolidated financial statements for the three and six months ended June 30, 2018 and 2017 and our related management’s discussion and analysis which have been posted on the SEDAR website (www.sedar.com) and our website (www.chinookenergyinc.com).
Second Quarter of 2018 Financial and Operating Highlights
|Three months ended
||Six months ended
|June 30||June 30
|Natural gas liquids (boe/d)||680||441||575||461|
|Natural gas (mcf/d)||22,253||19,065||18,053||18,546|
|Crude oil (bbl/d)||23||19||21||24|
|Average daily production (boe/d) (1)||4,413||3,638||3,605||3,576|
|Average natural gas liquids price ($/boe)||$||66.65||$||44.48||$||63.29||$||48.07|
|Average natural gas price ($/mcf)||$||1.40||$||2.77||$||1.87||$||2.74|
|Average oil price ($/bbl)||$||75.11||$||59.55||$||72.09||$||60.01|
|Average commodity pricing ($/boe)||$||17.75||$||20.22||$||19.90||$||20.81|
|Royalty (expense) recovery ($/boe)||$||(0.07||)||$||(0.33||)||$||(0.11||)||$||(0.07||)|
|Realized (loss) gain on commodity price contracts ($/boe)||$||0.17||$||1.01||$||(0.35||)||$||1.19|
|Net production expense ($/boe) (2)||$||(10.17||)||$||(11.82||)||$||(11.96||)||$||(11.55||)|
|Operating Netback ($/boe) (1) (2)||$||7.68||$||9.08||$||7.48||$||10.38|
|Exploratory wells (net)||–||–||2.00||–|
|Natural gas wells (net)||–||3.63||–||3.63|
|Three months ended
||Six months ended
|June 30||June 30
|FINANCIAL ($ thousands, except per share amounts)|
|Petroleum & natural gas revenues, net of royalties||$||7,098||$||6,583||$||12,913||$||13,421|
|Adjusted funds flow (2)||$||1,836||$||1,195||$||2,307||$||3,231|
|Per share – basic and diluted ($/share)||$||0.01||$||0.01||$||0.01||$||0.01|
|Net (loss) income||$||(2,471||)||$||(2,253||)||$||(4,569||)||$||8,169|
|Per share – basic and diluted ($/share)||$||(0.01||)||$||(0.01||)||$||(0.02||)||$||0.04|
|Net (debt) surplus (2)||$||(2,654||)||$||18,294||$||(2,654||)||$||18,294|
|Common Shares (thousands)|
|Weighted average during period|
|Outstanding at period end||223,605||217,115||223,605||217,115|
|(1)||Amounts may not be additive due to rounding.|
|(2)||Adjusted funds flow, adjusted funds flow per share, net (debt) surplus, operating netback and net production expense are non-GAAP measures. These terms do not have any standardized meanings as prescribed by IFRS and, therefore, may not be comparable with the calculations of similar measures presented by other companies. See headings entitled “Adjusted Funds Flow”, “Net (Debt) Surplus”, “Operational Netback” and “Net Production Expense” in the Reader Advisory below for further information on such terms.|
Highlights for the three months ended June 30, 2018
- During the second quarter of 2018 (“second quarter”) corporate production increased by 21%, or 775 boe/d, compared to the same quarter of 2017.
- During the month of June, our production volumes were restricted due to maintenance issues on Enbridge’s Oak 16” gathering line as well as other third party pipeline capacity constraints. Had these restrictions not occurred, our second quarter production volumes would have been approximately 20% higher at 5,300 boe/d. These issues were all resolved in early July. Since then, we have averaged approximately 5,000 boe/d.
- Second quarter production volumes increased by 58% compared to 2,788 boe/d reported during the first quarter.
- Net production expenses dropped by 31%, or $4.67/boe, in the second quarter compared to the first quarter.
- During the quarter we entered into commodity price costless collar contracts for the second and third quarters of 2019 which essentially fix our Alliance natural gas sales to Chicago City Gate index prices. See our management’s discussion and analysis for details. Combined with our other commodity price contracts, we have now secured pricing on approximately 30% of our forecasted production volumes.
- As at June 30, 2018, we amended our demand credit facility agreement with a Canadian chartered bank with an availability of $10.0 million. We forecast our 2018 year end net debt will be approximately $0.5 million.
We believe that our capital program during the last few years which saw us drill and complete 13 (11.23 net) wells on our Birley/Umbach property as well as our on-time completion of our Birley facility expansion to 50 mmcf/d puts us in an excellent position to accelerate activity when commodity prices recover. Notwithstanding our minimal capital spending for 2018, we expect our 2018 annual average production to be approximately 18% higher than our 2017 annual production. With over 550 locations on our Birley/Umbach property and only 13 drilled to date, we have confirmed the resources are there and our objective is to extract them efficiently and profitably. Our additional delineation work in the first quarter has expanded the boundaries of the Montney resource in the area. Although we are encouraged with the results to date we remain cautious on making further significant capital expenditures until such time as commodity prices improve to a more constructive level. To date, commodity prices in 2018 have been higher than our internal forecasts and will serve to strengthen our balance sheet and facilitate future drilling activity.
We continue to prudently manage our production volumes and will continue to monitor commodity prices throughout the year and shut-in production where warranted.
Considering the above and in the absence of further unforeseen third party pipeline restrictions, we are announcing the following guidance for the second half and full year of 2018:
|($ millions, except boe/d)||2018 H2
|Average production (boe/d)||4,450||4,000|
|Exit production (boe/d)||4,100||4,100|
|Abandonment and reclamation expenditures||$||0.3||$||0.7|
|Net debt as at December 31, 2018||$||0.5||$||0.5|
(1) H2 2018 guidance assumptions: $1.44/GJ Station 2 and $3.50/mmbtu Chicago Alliance natural gas pricing.
Please see our related management’s discussion and analysis for the three and six months ended June 30, 2018 and 2017 for details of our operational and financial results
About Chinook Energy Inc.
Chinook is a Calgary-based public oil and natural gas exploration and development company which is focused on realizing per share growth from its large contiguous Montney liquids-rich natural gas position at Birley/Umbach, British Columbia.
|For further information please contact:|
|Walter Vrataric||Jason Dranchuk|
|President and Chief Executive Officer||Vice President, Finance and Chief Financial Officer|
|Chinook Energy Inc.||Chinook Energy Inc.|
|Telephone: (403) 261-6883||Telephone: (403) 261-6883|