Production. Average production volumes in the fourth quarter of 2012compared to the third quarter of 2012 were as follows: Three months Three months ended ended December 31, September 30, 2012 2012Natural gas (Mcfd) 18,159 23,519Oil (bpd) 1,135 1,274NGL (bpd) 338 576 -----------------------------Total (BOED) 4,500 5,770----------------------------------------------------------------------------
Approximately 1,534 BOED of total production was sold in the fourth quarter of 2012, contributing to the decline in production from 5,770 BOED in the third quarter to 4,500 BOED in the fourth quarter of 2012. As the properties were sold part way through the quarter, there was still 645 BOED of production from these properties reported in the fourth quarter of 2012.
The Company estimates first quarter 2013 production to be approximately 3,900 to 4,200 BOED of which 43% is estimated to be from oil and natural gas liquids production.
Prices. For the 2012 financial year, natural gas prices fell to near historic lows, and the Company benefitted from the change in focus to oil beginning in 2010 as oil and natural gas liquids production volumes represented 35% of total BOED production (2011 - 31%), partially mitigating the impact of low natural gas prices. In the fourth quarter of 2012, oil and natural gas liquids production volumes represented 33% of total BOED production (fourth quarter of 2011 - 36%).
World and North American benchmark prices for oil remain volatile and as described below, the Company has entered into certain derivative contracts to partially hedge oil prices. Differentials between WTI oil prices and prices received in Alberta are affected by factors including refining demand and pipeline capacity. Light, sweet oil differentials between Cushing, Oklahoma and Edmonton, Alberta were adversely affected by transportation and market factors beginning late in 2011 and continuing into 2012. These differentials averaged $10.53 US per bbl discount in the first quarter of 2012, and improved to $10.25, $7.21 and $3.49 US per bbl in the second, third and fourth quarter of 2012 respectively. The average differential for the year ended December 31, 2012 was a $7.87 US per bbl discount, compared to an average $1.46 US per bbl premium as recently as the fourth quarter of 2011. Going into 2013, light, sweet oil differentials are expected to be comparable to the annual average rate during 2012 and may remain volatile in the future depending on supply, transportation alternatives and refining demand.
Natural gas prices were low throughout 2011. Market conditions, including high supply and low demand due to a warm winter in North America, resulted in the reduction in natural gas prices during the first six months of 2012. However, the increased demand for natural gas for electrical power generation during the hot summer throughout North America contributed to modest price gains in the last half of the year.
The above noted oil price in 2012 does not include a realized gain on derivative contracts of $5.4 million (December 31, 2011 - $0.6 million loss). The realized oil price including this gain was $101.08 per barrel for the fourth quarter of 2012 and $93.06 per barrel for the year, compared to $94.94 per barrel for the fourth quarter of 2011 and $92.06 for the year ended December 31, 2011.