Crocotta had a highly successful 2012 with respect to many aspects of the business. Great strides were made in building long term value by proving up material inventory in the Cardium at Edson, starting to build infrastructure for liquids recovery at Sunrise-Dawson in the Montney, and reducing operating costs to below $6 per boe.
The Cardium opened the year with one successful horizontal oil well producing at Edson and ended with 11 wells onstream and 35 additional net locations added to the drilling inventory.
Successful well tests in the Montney proved up a liquids-rich play at Sunrise-Dawson that will provide high growth and large returns for Crocotta in 2013 and beyond. Crocotta signed an agreement with a third party entity and will be constructing facilities in Q213 to extract a large portion of the natural gas liquids while materially reducing operating costs. This play, given liquids yield and high initial rates, will rival most liquids-rich plays in North America.
The last but certainly not the least play is the Bluesky at Edson. The 22 horizontal Bluesky wells drilled by Crocotta over the last two and half years provided a large portion of the growth from 2,200 boepd in 2010 to the 2012 exit rate of 8,500 boepd. While significantly delineated and de-risked, the Bluesky still has very material production upside with over 40 net locations in drilling inventory.
In 2013, Crocotta expects to further all three of its major plays which will contribute to our budgeted exit rate of 10,500 boepd. Crocotta also intends to drill two oil exploration plays and continues to pursue acquisitions in its core areas.
We look forward to updating our shareholders throughout the year as we execute our plan for 2013.
Rob Zakresky, President & Chief Executive Officer
MANAGEMENT'S DISCUSSION AND ANALYSIS ("MD&A")
March 25, 2013
The MD&A should be read in conjunction with the audited consolidated financial statements and related notes for the years ended December 31, 2012 and 2011. The audited consolidated financial statements and financial data contained in the MD&A have been prepared in accordance with International Financial Reporting Standards ("IFRS") in Canadian currency (except where noted as being in another currency).
DESCRIPTION OF BUSINESS
Crocotta Energy Inc. ("Crocotta" or the "Company") is an oil and natural gas company, actively engaged in the acquisition, development, exploration, and production of oil and natural gas reserves in Western Canada. The Company trades on the Toronto Stock Exchange under the symbol "CTA".
FREQUENTLY RECURRING TERMS
The Company uses the following frequently recurring industry terms in the MD&A: "bbls" refers to barrels, "mcf" refers to thousand cubic feet, and "boe" refers to barrel of oil equivalent. Disclosure provided herein in respect of a boe may be misleading, particularly if used in isolation. A boe conversion rate of six thousand cubic feet of natural gas to one barrel of oil equivalent has been used for the calculation of boe amounts in the MD&A. This boe conversion rate is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.
This MD&A refers to certain financial measures that are not determined in accordance with IFRS (or "GAAP"). This MD&A contains the terms "funds from operations", "funds from operations per share", "net debt", and "operating netback" which do not have any standardized meaning prescribed by GAAP and therefore may not be comparable to similar measures used by other companies. The Company uses these measures to help evaluate its performance.
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