ENP Newswire -
Release date- 13022014 -
All financial amounts referred to in this press release are management's best estimates and information from the year-end financial statements has not yet been audited. We are pleased to report that Birchcliff has achieved record production, funds flow and net earnings; reduced operating costs; added a significant amount of undeveloped land in its core area and added material reserves and resources.
Current production is approximately 33,000 boe per day. To date in 2014, Birchcliff has produced an average of approximately 31,400 boe per day. Birchcliff is receiving high natural gas prices for its current production as it is unhedged for the winter months of 2014.
PRESS RELEASE HIGHLIGHTS
2013 Fourth Quarter Results
Fourth quarter production averaged 28,391 boe per day, a 15.1% increase over production of 24,662 boe per day in the third quarter of 2013 and a 6.5% increase from 26,655 boe per day in the fourth quarter of 2012.
Record quarterly funds flow of
Net income of
Operating costs of
Drilled 12 (11.5 net) wells in the fourth quarter of 2013, comprising of 7 (7.0 net)
2013 Year-End Financial and Operational Results
2013 average production of 25,829 boe per day, a 13.3% increase over 2012 average production of 22,802 boe per day.
Record funds flow of
Net income of
Long-term bank debt of
Operating costs of
General and administrative costs of
Top tier operating performance at Pouce Coupe South Natural Gas Plant ('PCS Gas Plant').
Capital expenditures in 2013 was
Drilled a total of 43 (41.67 net) wells in 2013, consisting of:
26 (26.0 net) wells on our
13 (13.0 net) wells on our Worsley Charlie Lake Light Oil Resource Play, all of which were horizontal wells and
4 (2.67 net) wells on our Halfway Light Oil Play, all of which were horizontal wells.
Undeveloped land base of 576,893 (544,917 net) acres at
Added 90,645.3 (90,325.3 net) acres or 141.3 (141.1 net) sections of undeveloped land in 2013, substantially all at 100% working interest, and all within Birchcliff's core area of the Peace River Arch of
2013 Independent Reserves Evaluation
Proved plus probable reserves of 370.1 MMboe, a 16.5% increase from
Added 6.9 boe of proved plus probable reserves for each boe that was produced and sold in 2013.
Proved reserves of 220.0 MMboe, an 18.3% increase from
Proved developed producing reserves of 62.0 MMboe, a 13.6% increase. This a net increase of 7.4 MMboe from 54.6 MMboe at
After taking into account 2013 production of 9.4 MMboe and 2013 dispositions of 1.1 MMboe, Birchcliff added 17.9 MMboe of proved developed producing reserves, which is 32.9% of Birchcliff's proved developed producing reserves at
Increased potential net future
2013 Finding and Development Costs and Recycle Ratios
Finding, development and acquisition ('FD&A') costs on a proved plus probable basis of
2013 Independent Montney/Doig Natural Gas Resource Assessment
Assessment of Birchcliff's land that have potential for the
Total petroleum initially-in-place of 52.0 Tcfe, a 31% increase from
Prospective resources of 15.8 Tcfe, a 22% increase from
Contingent resources of 6.5 Tcfe, a 35% increase from
2014 Budget and Guidance
2014 capital budget of
2014 exit production expected to be between 37,500 and 39,500 boe per day, ahead of the 2014 exit estimate in our current 2018 Five Year Plan.
2014 Production and Operational Update
Current production is approximately 33,000 boe per day. To date in 2014, Birchcliff has produced an average of approximately 31,400 boe per day (83% natural gas and 17% crude oil and natural gas liquids).
Drilling results to date of 6 (6.0 net) successful wells, consisting of 4 (4.0 net)
Four drilling rigs currently working: three in the
Initiated a hedging program in 2014, with Birchcliff contracting forward physical sales of 65,000 GJ's per day, representing 35% of its estimated gas volumes during the summer months,
2014 Strategic Acquisition
Strategic acquisition completed on
2013 FOURTH QUARTER RESULTS
Fourth quarter production averaged 28,391 boe per day, which is a 15.1% increase over production of 24,662 boe per day in the third quarter of 2013 and a 6.5% increase from 26,655 boe per day in the fourth quarter of 2012. Funds flow was
Net income available to common shareholders increased to
Operating costs per boe (excluding transportation and marketing costs) were
Capital expenditures in the fourth quarter were
2013 YEAR-END FINANCIAL AND OPERATIONAL RESULTS
All financial and operating information in this press release for the year ended
Production in 2013 averaged 25,829 boe per day, which is a 13.3% increase over 2012 average production of 22,802 boe per day. Production per common share increased 9.0% from 2012. This increase was achieved through the success of Birchcliff's capital drilling program and increased incremental production from new horizontal natural gas wells on the
Production consisted of approximately 81% natural gas and 19% crude oil and natural gas liquids in 2013. Approximately 73% of Birchcliff's natural gas production and 61% of corporate production was processed at the PCS Gas Plant during 2013.
2013 Funds Flow and Earnings
2013 funds flow was approximately
Birchcliff recorded net income available to common shareholders of
2013 Debt and Capitalization
Birchcliff expects that as a result of significant reserve additions in 2013, its bank credit facilities will be increased during its normal credit review in
2013 Operating and G&A Costs
Operating costs in 2013 were
2013 Capital Expenditure
During the year ended
2013 PCS Gas Plant Netbacks
Processing increased volumes of natural gas at the PCS Gas Plant has materially improved Birchcliff's funds flow and net earnings. In 2013, net operating costs for natural gas processed at the PCS Gas Plant was
2013 Drilling Program
Birchcliff's 2013 drilling program was focused on our two proven resource plays, the
During 2013, Birchcliff drilled 43 (41.67 net) wells, consisting of 26 (26.0 net) natural gas wells and 17 (15.67 net) oil wells. The natural gas wells included 25 (25.0 net)
Birchcliff's undeveloped land base at
The undeveloped land acquired during 2013 includes 12.5 (12.5 net) sections right in the middle of our
Birchcliff's land base primarily consists of large contiguous blocks of high working interest acreage located near facilities owned and/or operated by Birchcliff or near third party infrastructure. Substantially all of the new land has been purchased without partners at 100% working interest.
2013 INDEPENDENT RESERVES EVALUATION
The 2013 Reserves Evaluation and the prior reserves evaluations have been prepared in accordance with the standards contained in the Canadian Oil and Gas Evaluation Handbook ('COGE Handbook') and National Instrument 51-101 - Standards of Disclosure for Oil and Gas Activities ('NI 51-101'). At
Net Present Value of Future Net Revenue
The net present value of future net revenue attributable to the Corporation's reserves is based on
The natural gas price forecast used by
From the 2013 Reserves Evaluation to the 2012 Reserves Evaluation, Birchcliff had:
190% reserve replacement on a proved developed producing basis. Birchcliff added 1.90 boe of proved developed producing reserves for each boe that was produced and sold during the year (calculated by dividing 2013 proved developed producing reserves additions before production, acquisition and dispositions by total production in 2013).
486% reserve replacement on a proved basis. Birchcliff added 4.86 boe of proved reserves for each boe that was produced or sold during the year (calculated by dividing 2013 proved reserves additions before production, acquisition and dispositions by total production in 2013).
692% reserve replacement on a proved plus probable basis. Birchcliff added 6.92 boe of proved plus probable reserves for each boe that was produced or sold during the year (calculated by dividing 2013 proved plus probable reserves additions before production, acquisition and dispositions by total production in 2013).
Reserves on the
Drilling success during 2013 in the Middle/Lower Montney Play has resulted in significant reserve assignments by
Management believes that the ultimate recovery from the Corporation's
Reserves on the Worsley Charlie Lake Light Oil Resource Play
2013 FINDING AND DEVELOPMENT COSTS
During 2013, Birchcliff's finding and development ('F&D') costs were
Both the 2013 Reserves Evaluation and the 2012 Reserves Evaluation included, on average,
2013 RECYCLE RATIOS
During 2013, the average WTI price of crude oil was US
Resource estimates stated herein as at
Compared to the 2012 Resource Assessment, the best estimate of total PIIP has grown from 39.7 Tcfe to 52.0 Tcfe, a 31% increase. Additionally, Birchcliff was very successful with its strategy to promote resources from undiscovered to discovered in 2013 through its exploration program. Discovered PIIP increased 31.5% from the 2012 Resource Assessment, from 13.4 Tcfe to 17.6 Tcfe. Compared to the 2012 Resource Assessment, the best estimate of contingent resources has grown from 4.9 Tcfe to 6.5 Tcfe, a 35% increase. These increases are a result of land acquisitions and drilling.
Background to the
Birchcliff holds significant high working interest acreage in large contiguous blocks on the
The Study Area assessed by
328.0 (306.0 net) sections, with a 93.3% working interest, which have potential for the Middle/Lower Montney Play and
307.25 (283.9 net) sections, with a 92.4% working interest, which have potential for the Basal Doig/Upper Montney Play.
Birchcliff's total land holdings on the two plays described above are 635.25 (589.9 net) sections. On full development of four horizontal wells per section per play, Birchcliff has 2,359.6 net horizontal drilling locations. With 117 (105.2 net) horizontal locations drilled at the end of 2013, there remain 2,254.4 net future horizontal drilling locations.
2014 STRATEGIC ACQUISITION OF PARTNER'S INTEREST
Birchcliff completed a strategic acquisition on
This transaction has allowed Birchcliff to consolidate lands it formerly held at a 70% working interest with lands it holds at 100% working interest, allowing for a contiguous development plan, eliminating holding buffers and increasing flexibility of capital allocation.
Reserve Life Index
Birchcliff's reserve life index is 34.1 years on a proved plus probable basis and 20.5 years on a proved basis, in each case using reserves estimates by
2014 BUDGET AND GUIDANCE
2014 Capital Budget and Guidance
Birchcliff is very pleased to announce its 2014 capital budget of
Birchcliff expects 2014 exit production to be between 37,500 and 39,500.
We expect to fund our 2014 capital program using internally generated funds flow and available credit facilities. We expect that the ratio of 2014 year-end debt to one year's forward funds flow will decrease from year-end 2013. These expectations are based on Birchcliff realizing Cdn.
2014 PRODUCTION AND OPERATIONAL UPDATE
Current production is approximately 33,000 boe per day. To date in 2014 Birchcliff has produced an average of approximately 31,400 boe per day. Birchcliff expects 2014 exit production to be between 37,500 and 39,500 boe per day.
The PCS Gas Plant is currently processing approximately 136 MMcf per day. The Phase IV expansion of the PCS Gas Plant, which will expand processing capacity to 180 MMcf per day by adding additional compression and sales pipeline capacity will start-up in the fall of 2014. The estimated cost of the Phase IV expansion is approximately
Birchcliff currently has four drilling rigs at work: three rigs are active in the
Hedging Birchcliff is receiving high natural gas prices for its current production as it is unhedged for the winter months of 2014.
The Corporation initiated a hedging program in 2014, with Birchcliff contracting forward physical sales of 65,000 GJ's per day, representing approximately 35% of its estimated natural gas volumes during the summer months,
2018 FIVE YEAR PLAN
Highlights of the 2018 Five Year Plan include exit production in 2018 of approximately 61,500 boe per day, made up of approximately 320 MMcf per day of natural gas and 8,000 barrels of oil and natural gas liquids.
Birchcliff expects to fund the 2018 Five Year Plan using internally generated funds flow and available credit facilities. Based on the forecast production rates and commodity prices contained in the 2018 Five Year Plan, the ratio of year-end debt to the next year's forward funds flow is expected to decrease each year, based on the assumptions set out in the advisories.
Birchcliff currently owns and controls the land base necessary to achieve this production growth profile, allowing it to execute the program without relying on land, asset or corporate acquisitions. We are confident that we have the asset base, the people, the capital and the defined strategy required to successfully execute our 2018 Five Year Plan.
We thank Mr.
We remain focused on our strategy - growth by the drill bit, in our core area of the Peace River Arch of
We are very pleased and excited with the current and future outlook for Birchcliff. Our production and opportunity portfolio continues to increase while our cost structure continues to decrease. Focus, low cost operations and financial flexibility has positioned Birchcliff to execute its long term strategy.
The recent strength in natural gas prices has provided material financial momentum to our low cost business. The gas hedges for approximately
We recently increased our exit production targets to 37,500 to 39,500 boe per day from 36,000 to 38,000 boe per day. With strong gas prices and increased production momentum, we look forward to a very strong 2014.
On behalf of our Management Team and Directors, I thank all of our staff for their hard work and dedication to the achievement of our corporate goals. Thank you to all of our shareholders for their continued support and trust in all of us at Birchcliff.
DEFINITIONS OF OIL AND GAS RESOURCES AND RESERVES
Uncertainty Ranges are described by the Canadian Oil and Gas Evaluation Handbook as low, best, and high estimates for reserves and resources as follows:
Low Estimate: This is considered to be a conservative estimate of the quantity that will actually be recovered. It is likely that the actual remaining quantities recovered will exceed the low estimate. If probabilistic methods are used, there should be at least a 90% probability (P90) that the quantities actually recovered will equal or exceed the low estimate.
Best Estimate: This is considered to be the best estimate of the quantity that will actually be recovered. It is equally likely that the actual remaining quantities recovered will be greater or less than the best estimate. If probabilistic methods are used, there should be at least a 50% probability (P50) that the quantities actually recovered will equal or exceed the best estimate.
High Estimate: This is considered to be an optimistic estimate of the quantity that will actually be recovered. It is unlikely that the actual remaining quantities recovered will exceed the high estimate. If probabilistic methods are used, there should be at least a 10% probability (P10) that the quantities actually recovered will equal or exceed the high estimate.
Reserves are estimated remaining quantities of oil and natural gas and related substances anticipated to be recoverable from known accumulations, as of a given date, based on the analysis of drilling, geological, geophysical and engineering data; the use of established technology and specified economic conditions, which are generally accepted as being reasonable.
Reserves are classified according to the degree of certainty associated with the estimates: Proved Reserves are those reserves that can be estimated with a high degree of certainty to be recoverable. It is likely that the actual remaining quantities recovered will exceed the estimated proved reserves.
Probable Reserves are those additional reserves that are less certain to be recovered than proved reserves. It is equally likely that the actual remaining quantities recovered will be greater or less than the sum of the estimated proved plus probable reserves. Possible Reserves are those additional reserves that are less certain to be recovered than probable reserves. It is unlikely that the actual remaining quantities recovered will exceed the sum of the estimated proved plus probable plus possible reserves.
Resources encompasses all petroleum quantities that originally existed on or within the earth's crust in naturally occurring accumulations, including Discovered and Undiscovered (recoverable and unrecoverable) plus quantities already produced. 'Total resources' is equivalent to 'total Petroleum Initially-In-Place'. Resources are classified in the following categories:
Total Petroleum Initially-In-Place ('PIIP') is that quantity of petroleum that is estimated to exist originally in naturally occurring accumulations. It includes that quantity of petroleum that is estimated, as of a given date, to be contained in known accumulations, prior to production, plus those estimated quantities in accumulations yet to be discovered.
Discovered Petroleum Initially-In-Place is that quantity of petroleum that is estimated, as of a given date, to be contained in known accumulations prior to production. The recoverable portion of discovered petroleum initially in place includes production, reserves, and contingent resources; the remainder is unrecoverable.
Contingent Resources are those quantities of petroleum estimated, as of a given date, to be potentially recoverable from known accumulations using established technology or technology under development but which are not currently considered to be commercially recoverable due to one or more contingencies.
Undiscovered Petroleum Initially-In-Place is that quantity of petroleum that is estimated, on a given date, to be contained in accumulations yet to be discovered. The recoverable portion of undiscovered petroleum initially in place is referred to as 'prospective resources' and the remainder as 'unrecoverable.'
Prospective Resources are those quantities of petroleum estimated, as of a given date, to be potentially recoverable from undiscovered accumulations by application of future development projects.
Unrecoverable is that portion of Discovered and Undiscovered PIIP quantities which is estimated, as of a given date, not to be recoverable by future development projects. A portion of these quantities may become recoverable in the future as commercial circumstances change or technological developments occur; the remaining portion may never be recovered due to the physical/chemical constraints represented by subsurface interaction of fluids and reservoir rocks. Production is the cumulative quantity of petroleum that has been recovered at a given date.
Unaudited Numbers: The Corporation's annual audit of its financial statements is not yet complete and accordingly, all financial amounts referred to in this Press Release are management's best estimates and are unaudited.
This Press Release uses 'funds flow', 'funds flow from operations', 'funds flow netback', 'funds flow per common share', 'netback', 'operating netback', 'estimated operating netback' and 'operating margin', which do not have standardized meanings prescribed by generally accepted accounting principles ('GAAP') and therefore may not be comparable measures to other companies where similar terminology is used. Netback or operating netback denotes petroleum and natural gas revenue less royalties, less operating expenses and less transportation and marketing expenses.
Estimated operating netback is based upon certain cost allocations and accruals directly related to the PCS Gas Plant and related wells and infrastructure on a production month basis. Funds flow, funds flow netback or funds flow from operations denotes cash flow from operating activities as it appears on the Corporation's Condensed Statements of Cash Flows before decommissioning expenditures and changes in non-working capital.
Funds flow, funds flow netback or funds flow from operations is also derived from net income plus income tax expense, depletion and depreciation expense, accretion expense, stock-based compensation expense, amortization of deferred financing fees and gains on divestitures. Funds flow per common share denotes funds flow divided by the weighted average number of common shares. Operating margin is calculated by dividing the estimated operating netback for the period by the petroleum and natural gas revenue for the period.
Boe Conversions: Barrel of oil equivalent ('boe') amounts have been calculated by using the conversion ratio of six thousand cubic feet (6 Mcf) of natural gas to one barrel of oil (1 bbl). Boe amounts may be misleading, particularly if used in isolation. A boe conversion ratio of 6 Mcf to 1 bbl is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.
Mcfe, MMcfe, Bcfe and Tcfe Conversions: Thousands of cubic feet of gas equivalent ('Mcfe'), millions of cubic feet of gas equivalent ('MMcfe'), billions of cubic feet of gas equivalent ('Bcfe') and trillions of cubic feet of gas equivalent ('Tcfe') amounts have been calculated by using the conversion ratio of one barrel of oil (1 bbl) to six thousand cubic feet (6 Mcf) of natural gas. Mcfe, MMcfe, Bcfe and Tcfe amounts may be misleading, particularly if used in isolation. A conversion ratio of 1 bbl to 6 Mcf is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.
MMbtu Pricing Conversion:
Reserves for Portion of Properties: With respect to the disclosure of reserves contained herein relating to portions of the Corporation's properties, the estimates of reserves and future net revenue for individual properties may not reflect the same confidence level as estimates of reserves and future net revenue for all properties due to the effects of aggregation.
Finding and Development Costs: With respect to disclosure of finding and development costs disclosed in this Press Release:
In calculating the amounts of finding and development and/or acquisition costs for a year, the changes during the year in estimated future development costs and in estimated reserves are based upon the evaluations of Birchcliff's reserves prepared by
The aggregate of the exploration and development costs incurred in the most recent financial year and any change during that year in estimated future development costs generally will not reflect total finding and development costs related to reserves additions for that year. Discovered Resources: With respect to the discovered resources (including contingent resources) described in this Press Release, there is no certainty that it will be commercially viable to produce any portion of the resources.
Undiscovered Resources: With respect to the undiscovered resources (including prospective resources) described in this Press Release, there is no certainty that any portion of the resources will be discovered. If discovered, there is no certainty that it will be commercially viable to produce any portion of the resources.
This Press Release contains forward-looking information within the meaning of applicable Canadian securities laws. Forward-looking information relates to future events or future performance and is based upon the Corporation's current internal expectations, estimates, projections, assumptions and beliefs. All information other than historical fact is forward-looking information. Information relating to reserves and resources is forward-looking as it involves the implied assessment, based on certain estimates and assumptions, that the reserves and resources exist in the quantities estimated and that they will be commercially viable to produce in the future.
Words such as 'plan', 'expect', 'project', 'intend', 'believe', 'anticipate', 'estimate', 'may', 'will', 'potential', 'proposed' and other similar words that convey certain events or conditions 'may' or 'will' occur are intended to identify forward-looking information. In particular, this Press Release contains forward looking information relating to estimates of recoverable reserves and resource volumes; planned production increases, planned 2014 capital spending and sources of funding and the intention to drill and complete future wells.
The forward-looking information is based upon assumptions as to future commodity prices, currency exchange rates, inflation rates, well production rates, well drainage areas, success rates for future drilling and availability of labour and services. With respect to estimates of reserves and resource volumes, a key assumption is the validity of the data used by
With respect to numbers of future wells to be drilled, a key assumption is that geological and other technical interpretations performed by the Corporation's technical staff which indicate that commercially economic volumes can be recovered from the Corporation's lands as a result of drilling future wells, are valid. Estimates as to 2014 average annual production rates assume that no unexpected outages occur in the infrastructure that the Corporation relies on to produce its wells, that existing wells continue to meet production expectations and any future wells, scheduled to come on production in 2014, meet timing and production expectations.
Undue reliance should not be placed on forward-looking information, as there can be no assurance that the plans, intentions or expectations upon which they are based will occur. Although the Corporation believes that the expectations reflected in the forward-looking statements are reasonable, there can be no assurance that such expectations will prove to be correct. As a consequence, actual results may differ materially from those anticipated.
Forward-looking information necessarily involves both known and unknown risks associated with oil and gas exploration, production, transportation and marketing such as uncertainty of geological and technical data, imprecision of reserves and resource estimates, operational risks, environmental risks, loss of market demand, general economic conditions affecting ability to access sufficient capital, changes in governmental regulation of the oil and gas industry and competition from others for scarce resources.
The foregoing list of risk factors is not exhaustive. Additional information on these and other risk factors that could affect operations or financial results are included in the Corporation's most recent Annual Information Form and in other reports filed with Canadian securities regulatory authorities. Forward looking information is based on estimates and opinions of management at the time the information is presented. The Corporation is not under any duty to update the forward-looking information after the date of this Press Release to conform such information to actual results or to changes in the Corporation's plans or expectations, except as otherwise required by applicable securities laws.
President and Chief Executive Officer
Vice-President and Chief Financial Officer
Tel: (403) 261-6401
Fax: (403) 261-6424
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