NuVista Energy Ltd. ("NuVista") (TSX:NVA) is pleased to announce results for the
three months ended March 31, 2014 and provide an update on its future business
plans. The first quarter has been an active one with record exploration and
development spending for NuVista, and one where our key objectives have been
advanced materially. Our first quarter drilling was focused mainly upon
development of the condensate-rich Bilbo (South) block in preparation for the
upcoming production capacity ramp which will be created by the startup of our
new Bilbo block compressor station and the associated pipelines to the Keyera
Simonette plant. In addition, we have continued our successful delineation and
land expiry management program in the Wapiti area, improved corporate netbacks
and prudently managed our balance sheet. Financially, we also benefited
tremendously from strong natural gas and condensate prices during the quarter.
We have positioned the company to provide strong long-term profitable growth in
a $3.00 to $3.50/GJ AECO natural gas price environment due to the material and
growing high value condensate production and also due to the continuous
improvement of our capital and operating efficiencies. The fiscal environment
has improved significantly due to the recent gas price increase in late 2013 and
early 2014 and there is a reasonable probability this strength will continue
throughout 2014 due to very low gas storage levels driven by the cold winter
across North America. As a result of the recent price strength, we have
increased our commodity hedge positions to ensure a strong baseline price
underpinning our capital plans and economic threshold. For the remainder of 2014
approximately 60% of our gas production is hedged with floor prices above
$3.70/Mcf and approximately 50% of production has a ceiling price of C$3.82/Mcf.
For 2015, close to 30% of our gas production is hedged with floor prices above
$4.00/Mcf. Beyond 2014, we expect natural gas prices could moderate somewhat
over today's price but are confident there should be a higher base price
compared to the environment of 2012 and 2013. In this scenario, NuVista
continues to be in an excellent position to deliver growth and profitability.
Significant highlights for the first quarter of 2014 include:
-- Continued to reach IP30's on additional wells since our last
announcement on March 6, 2014 including a Northeast Wapiti Montney
delineation well and an uphole sweet cretaceous Falher horizontal well
as shown in the following table. We have seven additional Wapiti Montney
wells which have now been completed with results as expected. They are
ready for production but have yet to be brought on line to achieve
IP30's as they await the startup of our Bilbo block facilities;
New Well IP30 Results(i)
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Liquid CGR
Well Raw Gas Hydrocarbons Total Sales C5+/Raw
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(MMcf/d) (Bbls/d) (Boe/d) (Bbls/MMcf)
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Average Wapiti Montney 261
delineation well typecurve 5.8 Condensate 1,222 45
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Well 19 (Northeast
Delineation) 397
Location: 16-19-67-6 W6M 6.8 Condensate 1,527 58
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Average Falher horizontal 390
well typecurve 6.5 NGL's 1,330 N/A
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New 9-19-65-6W6 Falher well
(choked downhole for 385
restricted rate) 6.3(ii) NGL's 1,265 N/A
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(i) Well numbering for the Montney refers to the numbered wells in our
corporate presentation available on our website. They are effectively in
chronological order since our inception in the play. All numbers shown are
based on field estimate data.
(ii) This well has now entered month three of production at 7.7 MMcf/d raw
and 1,550 Boe/d after removal of the downhole choke.
-- Achieved first quarter 2014 production of 17,823 Boe/d after entering
2014 at approximately 16,500 Boe/d, an increase of over 8%. This
compares to 14,903 Boe/d for the first quarter of 2013, an increase of
20% before taking account of the 2013 divestitures of 2,300 Boe/d. After
accounting for the effect of divestitures the growth rate is 41%;
-- Increased our Wapiti Montney production to 8,057 Boe/d in the first
quarter of 2014 compared to 6,292 Boe/d in the fourth quarter of 2013
and 1,830 Boe/d in the first quarter of 2013;
-- Our recently announced well in the North block (well 16) which had an
IP30 of 2,115 Boe/d has now been on production for just over 4 months
and has already achieved impressive cumulative raw gas production of 1
Bcf, a record initial cumulative rate for NuVista. The well will reach
payout this month, achieving a total payout period of less than 6
months;
-- Achieved funds from operations of $30.9 million ($0.23/share, basic) for
the three months ended March 31, 2014, a 166% increase from $11.6
million ($0.10/share, basic) for the three months ended March 31, 2013
despite fourth quarter 2013 dispositions. The increase in funds from
operations is largely due to an increased contribution of higher netback
Wapiti Montney volumes and stronger commodity pricing;
-- Achieved corporate netbacks for the three months ended March 31, 2014 of
$19.26/Boe as compared to $8.67/Boe for the same period in 2013, and
$12.99/Boe for the preceding quarter. Montney operating netbacks
achieved in the first quarter of 2014 were $38.28/Boe. Corporate
netbacks are expected to continue to rise assuming a flat commodity
price environment as the higher netback Wapiti Montney production
increasingly dominates our corporate production;
-- Successfully executed a total capital program of $126.6 million in the
quarter. Drilled 9 wells (9 net), 8 in our Montney condensate rich
resource play and one sweet Falher zone horizontal cretaceous well for
100% success rate while completing spending on our Bilbo (South) block
compressor station and trunk pipelines;
-- Managed net debt to $146.5 million, including working capital deficiency
for a ratio of net debt to annualized first quarter funds from
operations of 1.2x; and
-- Updated the Borrowing Base under our credit facility to $240 million
versus bank debt at the close of the first quarter of 2014 of $87
million.
Wapiti Montney Progress
NuVista's Wapiti Montney play and key corporate goals were progressed
significantly through the first quarter of 2014. In addition to exceeding our
original internal targets for first quarter production and cash flow, we have
added seven wells to date which are now behind pipe awaiting the startup of our
new Bilbo (South) compressor station and the downstream third party facilities.
Our policy is to release only IP30 data and not test rates but all wells that
were tested performed at least as anticipated and as such we are confident that
our production rates will meet or exceed original internal expectations upon
startup of these facilities. Drilling activity has continued through spring
breakup for two of our three rigs as a result of proactive pad drilling and
nearby access to high-grade roads. Completions for wells drilled in April and
May will resume post break-up. In addition, we are pleased with the gradual
continuation of our land consolidation and swap process in the Wapiti area.
The newest IP30 (Well #19) is another exciting result for NuVista given the
significant distance from existing development. Gas rates and liquid yields met
our typecurve expectations. The well, which is located between the Bilbo and
Elmworth development blocks, provides continued encouragement toward material
expansion of development drilling areas which will underpin even longer-term
development certainty than we currently have. We plan to follow this delineation
success with another horizontal test in 2014.
Our new Bilbo (South) compressor station continues on budget and on schedule for
startup late in the second quarter of 2014. The Keyera liquids and gas pipelines
to Simonette Gas Plant are behind schedule due to contractor and spring breakup
related weather issues, with startup now anticipated in the third quarter
depending on weather conditions. However, we still anticipate startup of our new
Bilbo compressor station on time due to the benefit of various third party
pipeline interconnections and the availability of processing capacity at other
gas plants in the area.
2014 Production Guidance Re-Affirmed
The second quarter of 2014 brings facility outages for work previously planned
at the Keyera Simonette and SemCams K3 plants and pipelines, and an unplanned
outage at Pembina Pipelines. During this period, we will continue to build new
volumes behind pipe to be brought on-stream upon the resumption of facility
capacity being available. Due to uncertainty in the outages noted above, we
anticipate a production range of 13,000 to 14,000 Boe/d after accounting for an
expected total outage impact of 5,000 to 6,000 Boe/d in the quarter. Production
will ramp up considerably in the third quarter following the startup of these
facilities. Since the majority of the 2014 facility outages were anticipated, we
remain confident in our previously released annual production and cash flow
guidance of 17,500 to 18,500 Boe/d for the full year of 2014 with cash flow of
approximately $130 to $140 million. Based on our confidence in recent well
results, production for the fourth quarter of 2014 is still anticipated to
average 20,000 to 21,000 Boe/d despite the minor delay in the major pipeline
construction.
2014 Capital Guidance and 2015 Production Guidance Increased
As a result of our successful first quarter drilling program and favorable
commodity pricing through spring breakup thus far, we are modestly increasing
our capital spending for 2014 to a range of $300 to $315 million, increasing our
expected new well count by three wells including two additional delineation/land
expiry locations. Within this range we have also made provisions for an
increased land budget and the pre-ordering of long lead facility equipment
targeting additional future projects. We currently have 19 Montney wells on
production, and we anticipate having approximately 35 total wells on production
by the end of 2014. All facets of our Bilbo compressor station and the Keyera
Simonette projects are expected to be operational by 2015, and as a result we
are increasing our prior guidance from 23,000 to a range of 23,500 to 25,000
Boe/d for 2015.
With corporate netbacks and production rising quickly, and efficiencies
continuing to build in every aspect of our Wapiti Montney play, NuVista is
confident to continue accelerating the pace of activity in the future. We will
continue to work with area midstream companies to provide incremental facility
capacity to underpin long-term profitable growth. We would like to thank our
shareholders for their continued support, and our dedicated and talented staff
for their significant contributions to the bright future we are delivering
together.
Please refer to the corporate presentation on our website which will be updated
on or before May 14, 2014 to include further details and context regarding the
information in this press release.
Corporate Highlights Three months ended March 31
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($ thousands, except per share) 2014 2013
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Financial
Oil and natural gas revenue 68,897 41,748
Funds from operations(1) 30,893 11,629
Per basic share 0.23 0.10
Per diluted share 0.23 0.10
Net earnings (loss) (4,358) (4,061)
Per basic share (0.03) (0.03)
Per diluted share (0.03) (0.03)
Adjusted net earnings (loss)(1) 2,667 (8,621)
Per basic share 0.02 (0.07)
Per diluted share 0.02 (0.07)
Total assets 1,017,837 926,852
Long-term debt, net of adjusted working
capital(1) 146,503 79,556
Capital expenditures 126,569 68,789
Dispositions - 12,596
Weighted average common shares outstanding
(thousands):
Basic 135,135 118,620
Diluted 135,135 118,620
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Operating
Production
Natural gas (MMcf/d) 70.4 62.8
Condensate (Bbls/d) 2,803 990
Butane (Bbls/d) 577 370
Propane (Bbls/d) 983 586
Ethane (Bbls/d) 859 760
Oil (Bbls/d) 866 1,732
Total oil equivalent (Boe/d) 17,823 14,903
Average product prices (2)
Natural gas ($/Mcf) 4.50 3.24
Condensate ($/Bbl) 95.29 103.28
Butane ($/Bbl) 59.54 63.19
Propane ($/Bbl) 57.46 25.07
Ethane ($/Bbl) 15.61 5.59
Oil ($/Bbl) 89.28 66.65
Operating expenses
Natural gas and natural gas liquids ($/Mcfe) 1.74 1.86
Oil ($/Bbl) 19.48 20.12
Total oil equivalent ($/Boe) 10.87 12.20
Operating netback ($/Boe) 24.60 14.02
Funds from operations netback ($/Boe)(1) 19.26 8.67
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NOTES:
(1) Funds from operations, revenue, funds from operations per share, funds
from operations netback, operating netback, adjusted net earnings,
adjusted net earnings per share and adjusted working capital are not
defined by GAAP in Canada and are referred to as non-GAAP measures.
Funds from operations are based on cash flow from operating activities
as per the statement of cash flows before changes in non-cash working
capital and asset retirement expenditures. Funds from operations per
share is calculated based on the weighted average number of common
shares outstanding consistent with the calculation of net earnings
(loss) per share. Funds from operations netback equals the total of
revenues including realized commodity derivative gains/losses less
royalties, transportation, operating, general and administrative,
restricted stock units, interest expenses and cash taxes calculated on
a Boe basis. Adjusted net earnings equals net earnings excluding after
tax unrealized gains (losses) on commodity derivatives, impairments,
impairment reversals, goodwill impairments and gains (losses) on
property divestments. Operating netback equals the total of revenues
including realized commodity derivative gains/losses less royalties,
transportation and operating expenses calculated on a Boe basis.
Adjusted working capital excludes the current portions of the
commodity derivative asset or liability. Total Boe is calculated by
multiplying the daily production by the number of days in the period.
For more details on non-GAAP measures, including reconciliation to
GAAP measures refer to NuVista's "Management's Discussion and
Analysis".
(2) Product prices exclude realized gains/losses on commodity derivatives.
CONSOLIDATED FINANCIAL STATEMENTS AND MD&A
First quarter 2014 condensed interim consolidated financial statements and notes
to the consolidated financial statements and Management's Discussion and
Analysis for NuVista Energy Ltd. have been filed on SEDAR (www.sedar.com) under
NuVista Energy Ltd. and can also be accessed on NuVista's website at
www.nuvistaenergy.com.
ADVISORY REGARDING OIL AND GAS INFORMATION
This news release contains the terms barrels of oil equivalent ("Boe"), millions
of barrels of oil equivalent ("MMBoe") and thousand cubic feet equivalent
("Mcfe") and trillion cubic feet equivalent ("Tcfe"). Natural gas is converted
to a Boe using six thousand cubic feet of gas to one barrel of oil. In certain
circumstances natural gas liquid volumes have been converted to a Mcfe on the
basis of one barrel of natural gas liquids to six thousand cubic feet of gas.
Boes, MMBoes, Mcfes and Tcfes may be misleading, particularly if used in
isolation. The foregoing conversion ratios are based on an energy equivalency
conversion method primarily applicable at the burner tip and does not represent
a value equivalency at the wellhead. As well, given than the value ratio based
on the current price of crude oil to natural gas is significantly different from
the 6:1 energy equivalency ratio, using a conversion ratio on a 6:1 basis may be
misleading as an indication of value.
ADVISORY REGARDING FORWARD-LOOKING INFORMATION AND STATEMENTS
This press release contains forward-looking statements and forward-looking
information (collectively, "forward-looking statements") within the meaning of
applicable securities laws. The use of any of the words "will", "expects",
"believe", "plans", "potential" and similar expressions are intended to identify
forward-looking statements. More particularly and without limitation, this press
release contains forward looking statements, including management's assessment
of: NuVista's future strategy, plans, focus, opportunities, growth initiatives
and operations; plans and expectations regarding facility construction and
infrastructure development, the timing thereof and the benefits to be obtained
therefrom; plans relating to future access to processing facilities,
transportation and markets; expectations of future results, including long-term
profitable growth, cash flow, production, production mix, netbacks, continued
improvement of our capital and operating efficiencies, drilling, development,
completion and tie-in plans, expectations regarding well performance and
economics; anticipated production capacity of a new compressor station; planned
and unplanned facility outages; the amount, timing, allocation and efficiency of
NuVista's capital program and the results therefrom; targeted debt levels.
NuVista's risk management strategy; expectations regarding future commodity
prices and netbacks; industry conditions and the timing of release of future
results. By their nature, forward-looking statements are based upon certain
assumptions and are subject to numerous risks and uncertainties, some of which
are beyond NuVista's control, including the impact of general economic
conditions, industry conditions, current and future commodity prices, currency
and interest rates, anticipated production rates, borrowing, operating and other
costs and funds from operations, the timing, allocation and amount of capital
expenditures and the results therefrom, anticipated reserves and the imprecision
of reserve estimates, the performance of existing wells, the success obtained in
drilling new wells, the sufficiency of budgeted capital expenditures in carrying
out planned activities, access to infrastructure and markets, competition from
other industry participants, availability of qualified personnel or services and
drilling and related equipment, stock market volatility, effects of regulation
by governmental agencies including changes in environmental regulations, tax
laws and royalties, the ability to access sufficient capital from internal
sources and bank and equity markets; and including, without limitation, those
risks considered under "Risk Factors" in our Annual Information Form. Readers
are cautioned that the assumptions used in the preparation of such information,
although considered reasonable at the time of preparation, may prove to be
imprecise and, as such, undue reliance should not be placed on forward-looking
statements. NuVista's actual results, performance or achievement could differ
materially from those expressed in, or implied by, these forward-looking
statements, or if any of them do so, what benefits NuVista will derive
therefrom. NuVista has included the forward-looking statements in this press
release in order to provide readers with a more complete perspective on
NuVista's future operations and such information may not be appropriate for
other purposes. NuVista disclaims any intention or obligation to update or
revise any forward-looking statements, whether as a result of new information,
future events or otherwise, except as required by law.
FOR FURTHER INFORMATION PLEASE CONTACT:
NuVista Energy Ltd.
Jonathan A. Wright
President and CEO
(403) 538-8501
NuVista Energy Ltd.
Robert F. Froese
VP, Finance and CFO
(403) 538-8530
www.nuvistaenergy.com
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