ENP Newswire -
Release date- 14052014 -
Operational and financial highlights for the three months ended
First Quarter 2014 Highlights
Drilled and completed our first
Increased first quarter 2014 cash flow by 41% over the fourth quarter of 2013 and by 32% compared to first quarter 2013.
Improved first quarter 2014 operating netback by 39% over the fourth quarter of 2013 to
Recorded highest Canadian crude oil production volumes since first quarter of 2012 at 2,084 bbl/d and highest percentage of liquids in commodity mix at 47%.
Executed a capital program which was 61% greater than first quarter 2013 and participated in six (4.38 net) wells in
First Quarter 2014 Financial Results
Production in the first quarter of 2014 averaged 9,761 boe per day, down 10% from the same period in 2013 and up 1% from the fourth quarter of 2013. Despite the decrease in volumes, consolidated revenue was up 44% from the first quarter of 2013 as a result of increased commodity prices and a continued devaluation of the Canadian dollar. Cash flow for the quarter increased by 32% to
Canadian production in the first quarter of 2014 averaged 7,928 boe per day. Our focus on shifting capital development to more liquids-based plays has resulted in a measurable shift in our commodity mix with liquids comprising 38% of our production for the quarter, as compared to just over 29% for the same period in 2013. Our realized sales prices increased for all commodities as the benchmark pricings in
Royalties increased with higher realized prices, however, royalties as percentage of revenue remained consistent with the comparative quarter in 2013 being 11% of revenues. We have experienced upward pressure on our production and operating expenses associated with the shift to increased crude oil production due to higher transportation costs associated with oil production.
Tunisian production in the first quarter of 2014 averaged 1,833 boe per day, compared to 2,227 boe per day for the same quarter in 2013. Sales volumes in excess of production volumes in the first quarter coupled with a higher realized oil price, despite a decreased Brent benchmark price which was more than offset by the continued devaluation of the Canadian dollar against the US dollar, resulted in an almost 44% increase in reported revenues for the period.
Overall production and operating costs in the first quarter of 2014 increased from the comparable period in 2013 mainly due to higher costs related to equipment rentals. This was partially offset by decreases in trucking costs as a result of the contract negotiated in late 2013.
First Quarter 2014 Operational Results and Update
At our non-operated Karr property we participated in the drilling of five (1.41 net) new horizontal
There are two (0.63 net) more wells budgeted at Karr in 2014, with up to 19 (6.7 net) additional locations identified on our working interest lands. Construction of a central oil battery (25% working interest) on the property is over half completed, and is expected to be operational in the second quarter of 2014, which central oil battery should further improve well run times and reduce operating costs going forward.
At Albright, three (3.0 net) wells were drilled in the first quarter and two were completed and brought on production during the quarter. In the 16 months since acquiring this property, we have drilled ten (8.0 net) horizontal
During the first quarter, we drilled and completed horizontal wells on two separate, potentially significant,
Total fluid flow rates at the end of the test period were approximately 3,500 barrels of fluid per day with only 25% of total fracture load fluid being recovered. We suspended operations as spring breakup conditions made trucking of the fluids an expensive logistical challenge due to lengthy wait times and delays at several fluid disposal facilities. While the preliminary results are encouraging, predicting well performance is not possible until testing of the well is completed post-breakup. We own over 50 sections of
Our capital activity at our BBT Concession in the first quarter of 2014 consisted of drilling four (3.44 net) and completing three (2.58 net) of our planned six well program for 2014. Fifteen wells were on production at the end of the quarter with total gross production of 2,495 bopd (1,345 bopd net). The balance of our 2014 drilling program will be completed in the second quarter.
After the successful injection test on the TT12 horizontal well, a workover was performed to change out the completion system with a coated completion better suited to long term water injection. Equipment was ordered for the surface injection facilities and permanent water injection is slated to resume in the second quarter of 2014.
As a result of increased commodity prices and the continued devaluation of the Canadian dollar, we are increasing our guidance for 2014 initially announced in our news release dated
Our evaluation of the
Chinook is a
President and Chief Executive Officer
Tel: (403) 261-6883
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 particular, this news release contains, without limitation, forward-looking statements pertaining to: the anticipated timing that the central oil battery on the BBT Concession is expected to be operational and the anticipated improvement in well run times and reduced operating costs as a result thereof; wells budgeted for the remainder of the year; large scale development of Chinook's contiguous 35 section
With respect to the forward-looking statements contained in this news release, Chinook has made assumptions regarding, among other things: that Chinook will continue to conduct its operations in a manner consistent with past operations, the ability of Chinook to continue to operate in
Although Chinook believes that the expectations reflected in the forward-looking statements contained in this news release, and the assumptions on which such forward-looking statements are made, are reasonable, there can be no assurance that such expectations will prove to be correct. Readers are cautioned not to place undue reliance on forward-looking statements included in this news release, as there can be no assurance that the plans, intentions or expectations upon which the forward-looking statements are based will occur.
By their nature, forward-looking statements involve numerous assumptions, known and unknown risks and uncertainties that contribute to the possibility that predictions, forecasts, projections and other forward-looking statements will not occur, which may cause Chinook's actual performance and financial results in future periods to differ materially from any estimates or projections of future performance or results expressed or implied by such forward-looking statements.
These risks and uncertainties include, without limitation, political and security risks associated with Chinook's Tunisian operations, risks associated with oil and gas exploration, development, exploitation, production, marketing and transportation, loss of markets, volatility of commodity prices, currency fluctuations, imprecision of reserve and resource estimates, environmental risks, competition from other producers, inability to retain drilling rigs and other services, unexpected capital expenditure costs, including drilling, completion and facilities costs, unexpected decline rates in wells, delays in projects and/or operations resulting from surface conditions, wells not performing as expected, delays resulting from or inability to obtain the required regulatory approvals and inability to access sufficient capital from internal and external sources.
As a consequence, actual results may differ materially from those anticipated in the forward-looking statements. Readers are cautioned that the forgoing list of factors is not exhaustive. Additional information on these and other factors that could affect Chinook's operations and financial results are included in reports on file with Canadian securities regulatory authorities and may be accessed through the SEDAR website (www.sedar.com) and at Chinook's website (www.chinookenergyinc.com).
Furthermore, the forward-looking statements contained in this news release are made as at the date of this news release and Chinook does not undertake any obligation to update publicly or to revise any of the forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by applicable securities laws.
Barrels of Oil Equivalent
Barrels of oil equivalent (boe) is calculated using the conversion factor of 6 mcf (thousand cubic feet) of natural gas being equivalent to one barrel of oil. Boes may be misleading, particularly if used in isolation. A boe conversion ratio of 6 mcf:1 bbl (barrel) is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. Given that the value ratio based on the current price of crude oil as compared to natural gas is significantly different from the energy equivalency of 6:1, utilizing a conversion on a 6:1 basis may be misleading as an indication of value.
The reader is cautioned that this news release contains the term netback, which is not a recognized measure under IFRS and is calculated as a period's sales of petroleum and natural gas, net of royalties less net production and operating expenses and cash G&A as divided by the period's sales volumes. Management uses this measure to assist them in understanding Chinook's profitability relative to current commodity prices and it provides an analysis tool to benchmark changes in operational performance against prior periods and to peers on a comparable basis.
Readers are cautioned, however, that this measure should not be construed as an alternative to other terms such as net income determined in accordance with IFRS as a measure of performance. Chinook's method of calculating this measure may differ from other companies, and accordingly, it may not be comparable to measures used by other companies.
The reader is cautioned that this news release contains the term operating netback, which is not a recognized measure under IFRS and is calculated as a period's sales of petroleum and natural gas, net of royalties less net production and operating expenses as divided by the period's sales volumes.
Management uses this measure to assist them in understanding Chinook's profitability relative to current commodity prices and it provides an analysis tool to benchmark changes in operational performance against prior periods and to peers on a comparable basis. Chinook's method of calculating this measure may differ from other companies, and accordingly, it may not be comparable to measures used by other companies.
Net Production Expense
The reader is cautioned that this news release contains the term net production expense, which is not a recognized measure under IFRS and is calculated as production and operating expense less processing and gathering income. Management uses net production expense to determine the current periods' cash cost of operating expenses. Chinook's method of calculating this measure may differ from other companies, and accordingly, it may not be comparable to measures used by other companies.
The reader is cautioned that this news release contains the term cash G&A, which is not a recognized measure under IFRS and is calculated as G&A less stock-based compensation and the amortization of the deferred lease liability.
The reader is cautioned that this news release contains the term cash flow, which is not a recognized measure under IFRS and is calculated from cash flow from continuing operations adjusted for changes in non-cash working capital. Management believes that cash flow is a key measure to assess the ability of Chinook to finance capital expenditures and debt repayments.
Readers are cautioned, however, that this measure should not be construed as an alternative to other terms such as cash flow from operating activities, net income or other measures of financial performance calculated in accordance with IFRS. Chinook's method of calculating this measure may differ from other companies, and accordingly, it may not be comparable to measures used by other companies.
The reader is also cautioned that this news release contains the term net debt, which is not a recognized measure under IFRS and is calculated as bank debt adjusted for working capital excluding mark-to-market derivative contracts.
Working capital excluding mark-to-market derivative contracts is calculated as current assets less current liabilities both of which exclude derivative contracts and current liabilities excludes any current portion of debt. Management uses net debt to assist them in understanding Chinook's liquidity at specific points in time. Mark-to-market derivative contracts are excluded from working capital, in addition to net debt, as management intends to hold each contract through to maturity of the contract's term as opposed to liquidating each contract's fair value or less.
Future Oriented Financial Information
This news release, in particular the information in respect of anticipated cash flows, may contain Future Oriented Financial Information ('FOFI') within the meaning of applicable securities laws. The FOFI has been prepared by management of Chinook to provide an outlook of Chinook's activities and results and may not be appropriate for other purposes. The FOFI has been prepared based on a number of assumptions including the assumptions discussed under the heading 'Forward-Looking Statements' and assumptions with respect to production rates and commodity prices.
The actual results of operations of Chinook and the resulting financial results may vary from the amounts set forth herein, and such variation may be material. Chinook and its management believe that the FOFI has been prepared on a reasonable basis, reflecting management's best estimates and judgments.
Initial Production Levels
Any references in this news release to initial, early and/or test production/performance rates are useful in confirming the presence of hydrocarbons, however, such rates are not determinative of the rates at which such wells will continue production and decline thereafter. Additionally, such rates may also include recovered 'load oil' fluids used in well completion stimulation. While encouraging, readers are cautioned not to place reliance on such rates in calculating the aggregate production for Chinook.
The initial production rate may be estimated based on other third party estimates or limited data available at this time. The initial production is generally estimated using boes. In all cases in this news release initial production or test rates are not necessarily indicative of long-term performance of the relevant well or fields or of ultimate recovery of hydrocarbons.
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