CALGARY, Alberta, Aug. 9, 2012 /PRNewswire/ - Equal Energy Ltd.
("Equal", "the Company", "We" or "Our") (TSX: EQU) (NYSE: EQU) is
pleased to announce its financial and operating results for the
second quarter ended June 30,
2012.
Don Klapko,
President and Chief Executive Officer commented, "I am pleased to
report on a strong operational second quarter and first half 2012
for Equal. So far in 2012 we have delivered some key
results."
- Increased production
- Lower debt
- Lower unit cost structure
- 100% successful drilling programs
- A complete re-direction of our portfolio to oil-focused
drilling in June 2012
- Initiation of our exciting Mississippian co-venture
drilling
Our accomplishments have been achieved in an
environment of deteriorating commodity prices that has persisted
for the better part of an entire year. As always, we have
applied our fiscal discipline to our activities - working
diligently to deploy our spending wisely and adjust our programs to
maintain or improve debt levels. Further details on these
themes are provided below.
Strong Operational Results
Production was up 9% year on year, averaging
well over 10,000 boe per day. Operating and interest expenses
were lower on a unit basis as a result of a continued focus on our
cost management. Capital spending has approximated cash flow
for the first six months of the year as we continue to be
disciplined on matching spending with cash flow.
Improved Balance Sheet and Renewed Credit
Facility
We've executed on an ongoing balance sheet
re-structuring and a strategy of improving our financial
flexibility since early 2011. Overall debt including working
capital levels are down 13 percent from December 31, 2011 with proceeds from the asset
sales in the first quarter and the sale of Mississippian acreage in
the second quarter both reducing debt. Our banking syndicate
re-confirmed our $200 million credit
facility in May. Equal has only drawn US$110 million leaving us significant financial
flexibility.
Mississippian Oil Venture
In the second quarter we partially monetized our
Mississippian asset base in Oklahoma for proceeds of US$18.1 million. This had been part of our
plan for some time and we are especially pleased to have achieved
this with a solid joint venture partner in Atlas Energy. We
retained a 50% interest and are now focused on oil development in
this play.
Our first Mississippian well in the joint
venture with Atlas was spud on June 17,
2012. The well has been cased and completion is
underway. A second well is currently being drilled. The
venture intends to drill a minimum of six horizontal wells in 2012
and is on track to meet this objective. We expect this oil
resource play to deliver strong future value growth for Equal.
Successful Drilling Programs
In the first half of 2012, Equal drilled eight
wells with a 100 percent success rate. Four vertical wells
were put down in our northern Oklahoma Hunton play in the first
quarter. Three horizontal wells were drilled in our core Twin
Cities Central Dolomite (TCCD) play also in Oklahoma. All of the Oklahoma wells were on production by the end
of the second quarter and in aggregate are performing above
expectations.
In Canada, one
Cardium horizontal oil well was drilled in the second
quarter. It was completed subsequent to the end of the
quarter and tested 890 barrels of oil per day over an initial 9 day
period and is currently shut-in for a pressure build up and
testing. This appears to be one of our strongest Cardium
wells to date and will be placed on production by the middle of
August. A second Cardium well has been drilled with the
completion expected by the middle of August with first production
by the end of August.
Commodity Prices and Cash Flow
There is no doubt that a strong pull back in
commodity prices is having a profound and growing impact on our
industry. While oil prices continue to be fairly strong,
natural gas and natural gas liquids have experienced severe
declines. Equal is especially affected by the drop in
mid-continent NGL prices which is driven primarily by an unusually
warm winter last year resulting in high storage levels. We
anticipate a gradual recovery over the next 6 to 12 months as
demand increases, industry infrastructure is built out, and
drilling activity is curtailed.
In the first half of 2012, we have seen a 26%
drop in funds from operations from the same period last year.
This is driven by a combination of falling commodity prices and
non-core asset dispositions to reduce debt which resulted in
Equal's production portfolio shifting away from high operating cost
oil assets towards low cost liquids-rich natural gas assets.
As I mentioned before, Equal's focus for the second half of 2012
will be in the light oil resource plays in Cardium (Alberta) and the Mississippian (Oklahoma). You can be confident that
Equal's management is monitoring cash flow continuously and
adjusting the capital programs to maintain a prudent balance
between spending and debt.
Net Income
In Q2 2012, the Company had net income of
$2.3 million compared to net income
of $6.5 million in Q2 2011. The
decrease in net income in Q2 2012 compared to Q2 2011 is mainly due
to the decrease in revenues from oil, NGLs and natural gas and
impairment in PP&E which were partially offset by lower
royalties, production expenses and gain on sale of assets.
Strategic Review
On May
3rd, Equal's Board of Directors announced the
initiation of a strategic review process to be managed by a special
committee of independent board members with the assistance of
Scotiabank as strategic advisors. The board and management
are responding to a perceived significant gap between the value of
the Company's underlying assets, and the value being recognized in
the Company's stock price. As of the date of this report, the
strategic review has resulted in a number of proposals being
delivered to the Company. The Company will not disclose
developments with respect to the strategic review process until the
Board of Directors has approved a specific transaction, action plan
or otherwise determines that disclosure is necessary or
appropriate.
The following table is
a summary of selected financial and operational information for the
three and six months ended
June 30, 2012 with comparative 2011 figures. |
Financial and Operations
Summary
(in thousands except for volumes, percentages and
per
share and boe amounts) |
Three months
ended
June 30 |
|
Six months ended
June 30 |
|
2012 |
2011 |
Change |
2012 |
2011 |
Change |
FINANCIAL |
|
|
|
|
|
|
Oil, NGL and natural
gas revenues including
realized hedging |
26,142 |
41,824 |
(37%) |
59,204 |
76,902 |
(23%) |
Funds from
operations |
7,994 |
16,602 |
(52%) |
20,967 |
28,182 |
(26%) |
|
Per share - basic ($) |
0.23 |
0.54 |
(57%) |
0.60 |
0.96 |
(38%) |
|
Per share - diluted ($) |
0.22 |
0.47 |
(53%) |
0.58 |
0.94 |
(38%) |
Net income |
2,340 |
6,492 |
(64%) |
4,177 |
3,110 |
34% |
|
Per share - basic ($) |
0.07 |
0.21 |
(67%) |
0.12 |
0.11 |
9% |
|
Per share - diluted ($) |
0.06 |
0.19 |
(68%) |
0.11 |
0.10 |
10% |
Total assets |
444,120 |
483,765 |
|
444,120 |
483,765 |
|
Working capital
(deficit) including
long-term debt |
(107,729) |
(124,296) |
|
(107,729) |
(124,296) |
|
Convertible
debentures |
41,743 |
80,495 |
|
41,743 |
80,495 |
|
Shareholders'
equity |
227,535 |
219,319 |
|
227,535 |
219,319 |
|
SHARES
OUTSTANDING |
|
|
|
|
|
|
Shares outstanding -
basic (000s) |
35,046 |
30,981 |
|
35,007 |
29,323 |
|
Shares outstanding -
diluted (000s) |
36,578 |
36,796 |
|
36,324 |
29,956 |
|
Shares outstanding at
period end (000s) |
35,069 |
34,659 |
|
35,069 |
34,659 |
|
OPERATIONS |
|
|
|
|
|
|
Average daily
production |
|
|
|
|
|
|
|
Oil (bbls per day) |
1,093 |
2,547 |
(57%) |
1,223 |
2,557 |
(52%) |
|
NGL (bbls per day) |
4,114 |
2,689 |
53% |
4,011 |
2,508 |
60% |
|
Gas (mcf per day) |
30,852 |
25,385 |
22% |
30,791 |
23,971 |
28% |
|
Total (boe per day) |
10,349 |
9,467 |
9% |
10,366 |
9,060 |
14% |
Average sales
price |
|
|
|
|
|
|
|
Oil ($ per bbl) |
84.83 |
87.48 |
(3%) |
87.01 |
81.46 |
7% |
|
NGL ($ per bbl) |
28.22 |
51.20 |
(45%) |
33.49 |
49.50 |
(32%) |
|
Gas ($ per mcf) |
2.54 |
3.90 |
(35%) |
2.75 |
3.86 |
(29%) |
Cash flow
netback ($ per boe) |
|
|
|
|
|
|
|
Revenue |
27.76 |
48.55 |
(43%) |
31.38 |
46.90 |
(33%) |
|
Royalties |
5.30 |
9.45 |
(44%) |
5.92 |
9.40 |
(37%) |
|
Production expenses |
8.48 |
12.49 |
(32%) |
9.11 |
11.96 |
(24%) |
|
Transportation expenses |
0.18 |
0.57 |
(68%) |
0.25 |
0.56 |
(55%) |
|
Operating netback |
13.80 |
26.04 |
(47%) |
16.10 |
24.98 |
(36%) |
|
General and administrative |
3.27 |
3.11 |
5% |
2.93 |
4.23 |
(31%) |
|
Cash interest expense |
1.95 |
3.04 |
(36%) |
2.10 |
3.42 |
(39%) |
|
Other cash costs |
0.09 |
0.62 |
(85%) |
(0.04) |
0.14 |
(129%) |
|
Cash flow netback |
8.49 |
19.27 |
(56%) |
11.11 |
17.19 |
(35%) |
Equal Energy Ltd.'s complete unaudited,
consolidated financial statements, accompanying notes and
Management's Discussion and Analysis for the quarter ended
June 30, 2012 will be available on
Equal's website at www.equalenergy.ca, on SEDAR at www.sedar.com
and on EDGAR at www.sec.gov/edgar.shtml.
About Equal Energy Ltd.
Equal is an exploration and production oil and gas company based in
Calgary, Alberta, Canada with its
United States operations office
located in Oklahoma City,
Oklahoma. Equal's shares and debentures are listed on the
Toronto Stock Exchange under the symbols (EQU, EQU.DB.B) and
Equal's shares are listed on the New York Stock Exchange under the
symbol (EQU). The portfolio of oil and gas properties is
geographically diversified with producing properties located in
Alberta and Oklahoma. Current production is comprised of
approximately 11% crude oil, 39% NGLs and 50% natural gas. Equal
has compiled a multi-year drilling inventory for its properties
including its new oil play opportunities in the Cardium and Viking
in central Alberta in addition to
its extensive inventory of drilling locations in the Hunton
liquids-rich natural gas play and the Mississippian light oil play
in Oklahoma.
Forward-Looking
Statements
Certain information in this press release constitutes
forward-looking statements under applicable securities law
including ongoing drilling plans and cost of capital. Any
statements that are contained in this press release that are not
statements of historical fact may be deemed to be forward-looking
statements. Forward-looking statements are often identified by
terms such as "may," "should," "anticipate," "expects," "seeks" and
similar expressions. Forward-looking statements necessarily involve
known and unknown risks, including the commencement and
continuation of joint venture operations on the Mississippian play
with Atlas, the repayment of debt, the availability of funds under
Equal's credit facility and the use of Equal; risks associated with
oil and gas production; marketing and transportation; loss of
markets; volatility of commodity prices; currency and interest rate
fluctuations; imprecision of reserve estimates; environmental
risks; competition; incorrect assessment of the value of
acquisitions; failure to realize the anticipated benefits of
acquisitions, dispositions or the strategic review process;
inability to access sufficient capital from internal and external
sources; changes in legislation, including but not limited to
income tax, environmental laws and regulatory matters. Readers are
cautioned that the foregoing list of factors is not
exhaustive.
Readers are cautioned not to place undue
reliance on forward-looking statements as there can be no assurance
that the plans, intentions or expectations upon which they are
placed will occur. Such information, although considered reasonable
by management at the time of preparation, may prove to be incorrect
and actual results may differ materially from those anticipated
forward-looking statements contained in this press release are
expressly qualified by this cautionary statement.
Natural gas volumes recorded in thousand
cubic feet ("mcf") are converted to barrels of oil equivalent
("boe") using the ratio of six (6) thousand cubic feet to one (1)
barrel of oil ("bbl"). Boe's may be misleading, particularly
if used in isolation. A boe conversion ratio of 6 mcf: 1 bbl
is based on an energy equivalent conversion method primarily
applicable at the burner tip and does not represent a value
equivalent at the wellhead.
Additional information on these and other
factors that could affect Equal's operations or financial results
are included in Equal's reports on file with Canadian and U.S.
securities regulatory authorities and may be accessed through the
SEDAR website (www.sedar.com), the SEC's website (www.sec.gov),
Equal's website (www.equalenergy.ca) or by contacting Equal.
Furthermore, the forward looking statements contained in this news
release are made as of the date of this news release, and Equal
does not undertake any obligation to update publicly or to revise
any of the included forward-looking statements, whether as a result
of new information, future events or otherwise, except as expressly
required by securities law.
SOURCE Equal Energy Ltd.