Liquidity - Borrowing Base Increases
The Company has a $50 million reducing revolving line of credit. Effective December 31, 2012, the line of credit had a $24 million borrowing base of which $19.9 million was outstanding. As a result of applying a portion of the proceeds of the BreitBurn Sale, there is currently $10.5 million drawn on the line of credit. The Company is seeking a further upward revision of the borrowing base.
The Company anticipates financing the majority of its Wolfberry Project capital expenditures through operating revenues and upward borrowing base revisions on the line of credit.
While the Company continues to have a working capital deficit at December 31, 2012, it is the Company's view that the value of its P&NG holdings is increasing at a rate significantly greater than the working capital deficit. It is the Company's objective to sell portions of its proven acreage in order to manage its working capital position and to redeploy funds to its unproven acreage, where the Company believes it can achieve the best returns for shareholders.
The Wolfberry Project
The Company is currently carrying out a rapid oil and gas development program on its Wolfberry Project, where the Company now has 46 gross (19.30 net) wells tied-in and producing. As a result of the BreitBurn Sale, during the three months ended December 31, 2012 there was a net decrease of 1 gross (0.57 net) well tied into production. At December 31, 2012, the Company had 3 gross (1.23 net) wells spud or drilled awaiting completion and/or tie-in.
The Company's current plans call for 25 gross (10.61 net) Wolfberry Project wells to spud in the balance of fiscal 2013 (January 1 to June 30, 2013) at an estimated cost to the Company of $25.5 million. The Company's funding amount for the 10.61 net wells is equivalent to 12.13 wells. The gross cost of a Wolfberry well is currently approximately $2.1 million.
The Company's capital budget is subject to change depending upon a number of factors, including economic and industry conditions at the time of drilling, prevailing and anticipated prices for oil and gas, the availability of sufficient capital resources for drilling prospects, the Company's financial results and the availability of lease extensions and renewals on reasonable terms.
The Company anticipates significant increases in daily production volumes as development of the Wolfberry Project continues. The Company is targeting a June 30, 2013 net production exit rate, after royalties, of 1,200 boe/day. This guidance is forward-looking information that is subject to a number of risks and uncertainties, many of which are beyond the Company's control.
Mitchell Ranch Project
The Company's Mitchell Ranch project covers approximately 103,400 acres of P&NG leases located primarily in Mitchell County, West Texas where the Company has a 50% working interest in approximately 67,400 acres, and a 1.25% overriding royalty interest on approximately 36,000 acres subject to a term assignment with a large, independent exploration and production company.
The Company currently has one (0.5 net) producing well, the Spade 17#1, where several rounds of completions have been carried out. During the Current Period, the Company received $56,234 of net revenue from sales from the Spade 17#1 well. The Mitchell Ranch Project is in the exploration and evaluation stage and as such, the net revenues have been credited to capitalized costs.
As a result of significant new drilling activity in the general area around the Mitchell Ranch Project, the timing of the new wells has been pushed out in order to best incorporate the results of other operators into the development plan on the Mitchell Ranch Project. The Company anticipates participating in a seismic shoot over a portion of the ranch in fiscal 2013 as a preparatory step for a new well program.
Lynden Energy Corp. is in the business of acquiring, exploring and developing petroleum and natural gas rights and properties. The Company has various working interests in the Wolfberry Project and Mitchell Ranch Project, located in the Permian Basin in West Texas, USA and in the Paradox Basin Project, located in the State of Utah, USA.
NI 51-101 requires that we make the following disclosure: we use oil equivalents (boe) to express quantities of natural gas and crude oil in a common unit. A conversion ratio of 6 mcf of natural gas to 1 barrel of oil is used. Boe may be misleading, particularly if used in isolation. The conversion ratio is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.
FORWARD-LOOKING STATEMENTS DISCLAIMER: This news release contains forward-looking statements. The reader is cautioned that assumptions used in the preparation of such statements, although considered accurate at the time of preparation, may prove incorrect, and the actual results may vary materially from the statements made herein. Expectations of spudding 25 gross (10.61 net) Wolfberry Project wells from January 1, 2013 to June 30, 2013, participating in a seismic shoot over a portion of the ranch in fiscal 2013, and expected timelines relating to oil and gas operations are subject to the customary risks of the oil and gas industry, and are subject to the company having sufficient cash to fund the drilling and completion of these wells. Expectations of obtaining upward borrowing base revisions on the line of credit are subject to the customary risks of the oil and gas industry, and are subject to drilling and completing successful wells, and prevailing and anticipated prices for oil and gas. Achieving a June 30, 2013 net production exit rate, after royalties, of 1,200 boe/day, is subject to the customary risks of the oil and gas industry and is subject to the Company drilling and completing successful wells. For a more detailed description of these risks, and others, see www.lyndenenergy.com/riskfactors.html.
ON BEHALF OF THE BOARD OF DIRECTORS
LYNDEN ENERGY CORP.
Colin Watt, President and CEO
Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this news release.
Lynden Energy Corp.
President and CEO
(604) 602-9311 (FAX)
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