CALGARY, Alberta, May 09, 2019 (GLOBE NEWSWIRE) — Cequence Energy Ltd. (“Cequence” or the “Company”) (TSX: CQE) is pleased to announce its operating and financial results for the three months ended March 31, 2019. The Company’s Management’s Discussion and Analysis (“MD&A”) and Condensed Consolidated Interim Financial Statements are available at cequence-energy.com and on SEDAR at www.sedar.com.
- Funds flow from operations(1) was $5.4 million for the three months ended March 31, 2019, $2.1 million higher than the same prior year period and $3.3 million higher than the fourth quarter 2018.
- Oil production for the three months ended March 31, 2019 increased by 274% to 916 bbl/d compared to the same prior year period.
- March 2019 production averaged 6,475 boe/d, 24% crude oil and liquids, as the two new Dunvegan horizontal oil wells produced steadily. Three net Montney wells were reactivated in February.
- Initial production in the first 90 days from the two Dunvegan horizontal oil wells was 444 boe/d and 369 boe/d, respectively, approximately 60% crude oil and liquids.
|(in thousands of dollars except production volumes, per share and $/boe amounts)||Three months
ended March 31,
|Net loss and comprehensive loss||(3,814||)||(3,725||)|
|Per share – basic and diluted(i)||(0.16||)||(0.30||)|
|Funds flow from operations(1)||5,364||3,236|
|Per share – basic and diluted(i)||0.22||0.26|
|Capital expenditures, before acquisitions (dispositions)||2,184||7,454|
|Natural gas (Mcf/d)||26,689||34,828|
|Crude oil (bbls/d)||916||245|
|Natural gas liquids (bbls/d)||183||274|
|Price, including realized hedges||31.00||23.02|
|(i) Prior period common share, stock options, warrants, restricted share units and per share amounts have been restated to reflect the 2018 share consolidation where one post-consolidation common share was equal to 20 pre-consolidation common shares.|
|(1) Refer to “Non-IFRS Measures” section for further information.|
|Three months ended March 31,|
|($ thousands)||($/boe)||($ thousands)||($/boe)|
|Sales of natural gas, oil and condensate||15,651||29.16||13,678||21.80|
|Realized gain on commodity contracts||986||1.84||765||1.22|
|General and administrative expense||1,156||2.15||1,250||1.99|
|Unrealized loss on commodity contracts||2,790||1,646|
|Depletion and depreciation expense||6,076||4,829|
|Share-based payment expense||135||65|
|Net loss and comprehensive loss||(3,814||)||(3,725||)|
Production for the three months ended March 31, 2019 averaged 5,964 boe/d compared to 6,970 boe/d for the same prior year period. Crude oil production increased by 274% percent to 916 bbl/d for the three months ended March 31, 2019 compared to the first quarter 2018. The increase was due to 3.0 gross (2.0 net) and 2.0 gross (2.0 net) Dunvegan horizontal oil wells that were completed in each of the first quarter 2018 and 2019, respectively, and tied into permanent facilities. Operating costs per boe increased for the three months ended March 31, 2019 compared to the same prior year period due to workover, swabbing and chemical expenses incurred to optimize and reactivate production. Optimization of the new Dunvegan horizontal oil wells and reactivation of 3.0 gross (3.0 net) Montney wells resulted in March 2019 production of 6,475 boe/d. Operating costs are expected to trend between $9.50 per boe and $10.50 be boe for the remainder of 2019.
Operating netback(1) was $13.56 per boe for the three months ended March 31, 2019 compared to $9.36 per boe for the same prior year period. The increase was due to higher realized natural gas prices and increased oil production from the new Dunvegan horizontal oil wells. Higher realized natural gas prices were due to AECO prices supported by cold weather during the first quarter 2019 and the marketing arrangement that the Company entered into for fixed natural gas transportation effective April 1, 2018, where the Company has been selling 10,850 GJ/d of natural gas to the Dawn, Ontario market. The arrangement increased transportation costs by approximately $1.75 per boe for the three months ended March 31, 2019 compared to the same prior year period. It provides diversification and price improvement away from the volatile AECO market with the Company selling approximately 40% of its natural gas to the Dawn, Ontario market.
|Three months ended
|(in thousands of dollars)||2019||2018|
|Geological & geophysical and capitalized overhead||191||169|
|Drilling, completions and workovers||1,433||5,827|
|Equipment, facilities and tie-ins||404||1,260|
|Office furniture & equipment||3||–|
|Property dispositions (i)||1||4|
|Total capital expenditures||2,185||7,458|
|(i) Represent the net cash proceeds from the sale of assets.|
Capital expenditures for the three months ended March 31, 2019 focused at Simonette where the Company completed and tied in the 2.0 gross (2.0 net) Dunvegan horizontal oil wells drilled in the fourth quarter of 2018 and completed in early 2019.
Cequence’s 2019 capital budget is approximately $13.0 million comprised primarily of costs to drill and complete 2.0 gross (2.0 net) Dunvegan horizontal oil wells in the second half of 2019. The capital budget will be funded from funds flow from operations(1).
ABANDONMENT AND RECLAMATION WORK
For the three months ended March 31, 2019 Cequence completed abandonment and reclamation work incurring approximately $2.5 million remediating well sites and removing equipment from the Company’s Silver British Columbia properties. The compressors and power generation equipment removed will be redeployed at Simonette supporting optimization projects to increase production. Management expects decommissioning costs for the remainder of 2019 to be approximately $0.5 million.
Cequence continues to monitor commodity price volatility and plans to spend within funds flow from operations(1) in executing its 2019 capital program and meeting its debt maintenance requirements. The Company plans to drill and bring on to production 2.0 gross (2.0 net) Dunvegan horizontal oil wells in the second half of 2019.
Key guidance metrics for 2019 remain as follows:
|(in thousands of dollars, except per boe, per GJ and percentages)||Guidance
December 31, 2019
December 31, 2018
|Average production, boe/d(i)||5,800||6,507|
|Funds flow from operations(1)($)||17,000||13,087|
|Development expenditures ($)||13,000||23,800|
|Operating and transportation costs ($/boe)||15.00||13.15|
|Royalties (% revenue)||10||7|
|Crude – WTI (US$/bbl)||61.62||65.20|
|Natural gas – AECO (CDN$/GJ)||1.59||1.44|
|(i) Average production estimates on a per BOE basis are comprised of approximately 75% natural gas and 25% oil, condensate and natural gas liquids in 2019.|