CALGARY, ALBERTA–(Marketwired – Dec. 19, 2013) – Chinook Energy Inc. (TSX:CKE) (“Chinook”, “we”, “our” or “us”) announced today its capital and operating budget and associated guidance for 2014. Our 2013 drilling success in the Beaverlodge, Albright and Karr areas added significant oil production volumes to our Canadian business which has a multi-year development drilling inventory and an expandable cash flow based 2014 budget. In Tunisia, we recently received approval to drill six (4.3 net) vertical wells on our BBT concession which generated an average operating netback of $75 per barrel of oil in 2013. Our guidance for 2013 remains unchanged from that provided with the release of our second quarter results on August 14, 2013.
Our Board of Directors has approved an initial 2014 capital budget of $85 million focused on light oil development to replace less profitable production from normal declines associated with our natural gas properties. Approximately $49 million is expected to be spent in Canada and $36 million in Tunisia allocated as follows:
| Canada | Tunisia | |||
| Drilling, Completions & Tie-Ins | $ | 30.0 million | $ | 23.6 million |
| Facilities | $ | 6.9 million | $ | 5.4 million |
| Land & Seismic | $ | 4.0 million | $ | 1.9 million |
| Other (1) | $ | 8.1 million | $ | 5.1 million |
| Note: | |
| (1) | Capitalized g&a, abandonment and reclamation, recompletions, optimizations and turnarounds. |
The majority of our budgeted 2014 Canadian capital expenditures ($35 million, representing 70% of budgeted Canadian capital expenditures) is expected to be allocated to our Karr, Beaverlodge, Albright and Gold Creek properties in the Grande Prairie area to drill 11 (7.0 net) wells in 2014, of which we will operate nine. The majority of the wells will be targeting high quality light oil from the Dunvegan (8 gross/5.6 net) and Montney (2 gross/0.9 net) formations. We have commenced drilling the first well of a six well Dunvegan program at Beaverlodge/Albright in mid-December. In January 2014, we anticipate spudding our first Montney horizontal well at Gold Creek upon receipt of the well licence. We have 50 gross (35 net) sections of Montney rights within the upper and middle Montney oil fairway at Gold Creek.
The balance of our budgeted 2014 Canadian capital expenditures ($8.3 million, representing 17% of budgeted Canadian capital expenditures) will be allocated to our Birley/Umbach and Gordondale properties in the Peace River Arch area to drill 2 (1.1 net) wells targeting liquids rich Montney, 1 (0.75 net) well at Birley/Umbach and 1 (0.37 net) well targeting Halfway oil at Gordondale. We have 35 gross (26 net) sections of Montney rights at Birley/Umbach and anticipate spudding our first well in late January 2014.
The majority of our budgeted 2014 Tunisian capital expenditures ($29 million, representing 80% of budgeted Tunisian capital expenditures) will be allocated to develop our BBT concession located within our one million acre Sud Remada Permit in the prolific Ghadames Basin. On December 18, 2013, we spud the TT15 well which is the first of a six well continuous drilling program targeting Ordovician oil in the Jeffara and Bir Ben Tartar formations. In addition, we expect to complete the construction of a central gathering facility and oil battery which will serve to reduce operating costs and improve an already strong operating netback.
We anticipate exiting 2013 with 7,600 barrels of oil equivalent per day in Canada and 1,700 barrels of oil equivalent per day in Tunisia. Our 2014 corporate average production is anticipated to be 9,500 to 10,250 barrels of oil equivalent per day with an oil and natural gas liquids weighting of approximately 46%. Our 2014 operating netbacks are anticipated to be $30 per barrel of oil equivalent. General and administrative costs for 2014 are forecasted to be $3.14 per barrel of oil equivalent for a corporate netback of approximately $26.86 per barrel of oil equivalent. Our 2014 cash flow is estimated to be $82 to $90 million and net debt at the end of 2014 is forecast to be $70 to $80 million, or approximately 0.8 times forecast 2014 cash flow. Our 2014 commodity price assumptions are as follows:
| Canadian Oil Price (WTI): | $87.89/barrel | |
| Tunisia Oil Price (Brent): | $103.47/barrel | |
| Canadian Nat Gas (Aeco): | $3.29/mcf | |
| Canadian Dollar (US$): | $0.97 |
We have entered into the following crude oil and natural gas hedges for 2014:
| Indexed Price |
Notional Volumes |
Company’s Received Price |
Remaining period |
||
| AECO | 5,000 GJ/d | $3.25/GJ to $3.50/GJ | January 1, 2014 to December 31, 2014 | ||
| AECO | 5,000 GJ/d | $3.68/GJ | January 1, 2014 to December 31, 2014 | ||
| AECO | 5,000 GJ/d | $3.5025/GJ | April 1, 2014 to October 31, 2014 | ||
| WTI | 500 bbl/d | $101.30/bbl | January 1, 2014 to December 31, 2014 | ||
| Brent | 500 bbl/d | $98.00 US/bbl to $108.00 US/bbl | January 1, 2014 to December 31, 2014 |
We have an exciting 2014 oil-focused capital program in Canada and Tunisia. We will test two material liquids-rich Montney prospects early in the year and will look to joint venture the accelerated evaluation of the considerable upside identified in our exploration portfolio in Tunisia. Approximately 55% of our Canadian program will be spent in the first quarter and is directed to continued development of our Dunvegan oil properties in the Grande Prairie area along with evaluating a significant Montney resource at Gold Creek and Birley/Umbach. With continued drilling success in the first quarter of 2014, we have the ability to expand and fully fund an increased Canadian program. In Tunisia, we have re-commenced our drilling program at BBT which we anticipate will continue to generate high netbacks in 2014. In 2014, we will continue to divest non-strategic assets and pursue acquisitions within our Grande Prairie and Peace River Arch focus areas.
About Chinook Energy Inc.
Chinook is a Calgary-based public oil and gas exploration and development company that combines high quality natural gas-weighted assets in Western Canada with an exciting high growth oil business onshore and offshore Tunisia in North Africa.
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Forward-Looking Statements
In the interest of providing shareholders and potential investors with information regarding Chinook, including management’s assessment of the future plans and operations of Chinook, certain statements contained in this news release constitute forward- looking statements or information (collectively “forward-looking statements”) within the meaning of applicable securities legislation. Forward-looking statements are typically identified by words such as “anticipate”, “continue”, “estimate”, “expect”, “forecast”, “may”, “will”, “project”, “could”, “plan”, “intend”, “should”, “believe”, “outlook”, “potential”, “target” and similar words suggesting future events or future performance. In addition, statements relating to “reserves” are deemed to be forward-looking statements as they involve the implied assessment, based on certain estimates and assumptions, that the reserves described exist in the quantities predicted or estimated and can be profitably produced in the future. In particular, this news release contains, without limitation,forward-looking