Seaview Energy Inc. Releases Financial and Operating Results for the Three and Nine Month Periods Ended September 30, 2009
November 16 2009 - 3:58PM
Marketwired Canada
NOT FOR DISTRIBUTION TO U.S. NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE
UNITED STATES. ANY FAILURE TO COMPLY WITH THIS RESTRICTION MAY CONSTITUTE A
VIOLATION OF U.S. SECURITIES LAWS.
Seaview Energy Inc. ("Seaview" or the "Company") (TSX VENTURE:CVU.A) (TSX
VENTURE:CVU.B) is pleased to announce its financial and operating results for
the three and nine months ended September 30, 2009.
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SELECTED INFORMATION
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Financial ($000's
except per share % %
amounts) Q3 2009 Q3 2008 Change YTD 2009 YTD 2008 Change
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Petroleum and natural
gas sales $ 8,664 $ 8,491 2% $ 23,127 $ 14,772 57%
Funds flow from
operations (1) 4,023 4,319 (7%) 9,989 7,298 37%
Basic per share (2) 0.06 0.09 (33%) 0.18 0.23 (22%)
Diluted per share (2) 0.06 0.09 (33%) 0.18 0.21 (14%)
Net loss (2,907) 2,874 (201%) (7,241) 1,921 (477%)
Basic per share (2) (0.04) 0.06 (167%) (0.13) 0.06 (317%)
Diluted per share (2) (0.04) 0.06 (167%) (0.13) 0.05 (360%)
Capital expenditures(3) 3,931 13,597 (71%) 37,814 26,045 45%
Corporate acquisitions - 36,929 - - 60,927 -
Net debt 35,705 22,672 57% 35,705 22,672 57%
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Shares Outstanding at
period end (000's)
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Class A 65,419 47,005 39% 65,419 47,005 39%
Class B 1,054 1,054 - 1,054 1,054 -
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Operations
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Daily production
Natural gas (mcf/d) 12,486 6,602 89% 10,653 4,177 155%
Light oil and NGLs
(bbl/d) 432 322 34% 408 141 189%
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Total production(boe/d) 2,513 1,422 77% 2,183 837 161%
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Average realized
sales price (net of
risk management gains
or losses)
Natural gas (per mcf) $ 5.43 $ 8.18 (34%) $ 5.81 $ 8.99 (35%)
Light oil and NGL
(per bbl) 61.03 119.10 (49%) 55.98 116.21 (52%)
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Netback per boe (1)
Sales price (net of
risk management
gains or losses) $ 37.47 $ 64.92 (42%) $ 38.80 $ 64.42 (40%)
Royalties 3.50 16.85 (79%) 5.06 15.34 (67%)
Operating expenses 11.34 7.78 46% 11.48 9.16 25%
Transportation 1.35 1.32 2% 1.50 1.20 25%
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Operating netback (1) $ 21.28 $ 38.97 (45%) $ 20.76 $ 38.72 (46%)
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(1) The Company uses "funds flow from operations" and "funds flow from
operations per share" which do not have any standardized meaning
prescribed by Canadian GAAP. The term is used to analyze operating
performance and leverage. The Company uses "Netback per boe" and
"Operating Netback" which do not have any standardized meaning
prescribed by Canadian GAAP. The term is used to evaluate performance
and in capital allocation decisions.
(2) Weighted average diluted shares outstanding for all periods exclude the
granted options as these would have been anti-dilutive. The impact of
the conversion of the Class B shares has been included as dilutive in
the three and nine months ended September 30, 2008 while the impact has
been excluded from the three and nine months ended September 30, 2009 as
it would have been anti-dilutive.
(3) Capital expenditures include the cash additions for the period and
capitalized G&A expense.
HIGHLIGHTS OF Q3 2009
Seaview continued to execute its balanced strategy of acquiring, exploiting and
exploring for high quality natural gas and light oil assets in Western Canada.
Highlights in the third quarter included the successful integration of the
property acquisition completed on June 30, 2009 and a highly successful drilling
program in which the Company drilled 6 (5.6 net) wells at an 82% success rate.
HIGHLIGHTS OF Q3 2009
- Average production for the third quarter of 2009 was 2,513 boe per day, an
increase of 77% relative to Q3 2008 production of 1,422 boe per day (23% per
share increase) and a 22% increase compared to Q2 2009 production of 2,066 boe
per day;
- Funds flow from operations for Q3 2009 increased 32% to $4.0 million from $3.1
million in Q2 2009;
- Since commencing operations on October 17, 2007, record production levels in
the third quarter of 2009 mark the Company's eighth consecutive quarter of
growth;
- Acquired approximately 730 boe per day of high quality, long life assets in
the Peace River Arch area from a senior public oil and gas producer for total
consideration of $26.6 million on June 30, 2009. The Q3 2009 results include
cash flow and operational impact of this acquisition from that date;
- During Q3 2009, 6 new wells (5.6 net) were drilled in the Peace River Arch
area with an 82% success rate. Of these wells, 5 (4.6 net) have been completed
with cumulative production test rates at 9.3 mmcf per day (8.6 mmcf per day net
or 1,433 boe per day net). Each of these wells qualify for the 5% royalty rate
under the Alberta Government's Royalty Incentive Program ("2009 RIP") announced
on March 3, 2009;
-- Subsequent to the end of Q3 2009, 2 of the new wells (2.0 net) in the Peace
River Arch area were brought on production at combined net rate of 4.2 mmcf/d
(700 boe/d net);
-- Seaview is planning to equip and tie-in one well (1.0 net) located in the
Peace River Arch area with expected initial production rates of more than 2.0
mmcf/d net (333 boe/d) before year-end;
- Based on the strong fall drilling program results, the Company announced an
upward revision to 2009 exit production to more than 3,000 boe/d, representing a
9% increase from previous guidance provided in June 2009; and
- Expanded credit facility to $52 million representing a 53% increase relative
to December 31, 2008. Based on net debt of approximately $35.5 million at the
end of Q3 2009, Seaview has $16.5 million of available credit capacity to pursue
strategic opportunities.
BUSINESS STRATEGY
Although industry continues to experience volatile commodity prices and the
impact of the global financial crisis on capital markets, Seaview is well
positioned to execute its aggressive growth strategy. Through a disciplined
approach to capital management, the Company has several key characteristics that
support continued growth and value creation for shareholders despite the current
economic climate:
- High-quality, long reserve life assets, focused on natural gas in the Peace
River Arch and light oil in southeast Saskatchewan, both desirable areas within
the Western Canadian Sedimentary Basin;
- Strong financial position including a low cost structure, strong balance sheet
and $16.5 million of available credit capacity, providing Seaview with the
ability to capitalize on strategic opportunities;
- Attractive commodity risk management program to provide an enhanced cash flow
stream in order to maintain balance sheet strength, secure acquisition economics
and finance the Company's capital expenditures; and
- Strong management team, directors and technical professionals with significant
ownership positions, ensuring strong alignment to shareholders' interests.
OPERATIONS UPDATE
During the third quarter of 2009, the Company drilled 6 new wells (5.6 net) in
the Peace River Arch area with an 82% success rate. Of these wells, 5 (4.6 net)
have been completed with cumulative production test rates at 9.3 mmcf per day
(8.6 mmcf per day net or 1,433 boe per day net). Each of these wells qualify for
the 5% royalty rate under the Alberta Government's 2009 RIP announced on March
3, 2009.
Subsequent to the quarter end, the Company has focused on increasing production
by focusing on timely completion of the low-cost production adds as follows:
- 2 new wells (2.0 net) in the Peace River Arch area were brought on production
at a combined net rate of 4.2 mmcf per day (700 boe per day);
- Seaview is planning to equip and tie-in one well (1.0 net) located in the
Peace River Arch area with expected initial production rates of more than 2.0
mmcf per day net (333 boe per day) before year-end; and
- Based on cumulative net production additions of 1,433 boe per day and net
capital costs for the fall drilling program estimated at $4.3 million, Seaview's
cost of bringing new production online for the cumulative Q3-09 drilling program
is less than $5,000 per flowing boe.
The Company benefitted from significantly lower service costs to complete the
third quarter six well drilling program with average drill costs estimated to be
$340 per meter before Alberta Royalty Drilling Credits. Net drilling costs for
this program were approximately $1.24 million, after deducting the $1.76 million
in drilling credits earned by drilling a total of approximately 8,800 meters.
Seaview will continue to fund its exploration and development capital program
from cash flow, which is supported by its strong hedging program, and will use
its undrawn credit facility to fund strategic opportunities. Seaview's capital
program for the winter drilling season includes the tie-in of the recently
drilled wells and the drilling of up to six additional wells that will either
delineate recent discoveries or test new prospects. The planned capital program
will be aimed at maximizing value based on Alberta's 2009 RIP, and meeting the
Company's flow through share expenditure requirements.
Seaview is well positioned to capitalize on the 2009 RIP due to the Company's
solid balance sheet and inventory of low to medium risk drilling opportunities
within the Peace River Arch core area. The benefits of the 2009 RIP may be
significant to Seaview as the royalty credits earned through drilling offset
more than 50% of the capital cost to drill a typical well.
The 2009 RIP provides a one-time opportunity to maximize the net asset value of
the assets by adding new reserves while benefiting from the reduced royalty
rates on new production. Despite weak natural gas prices, the economics of
drilling Seaview's current inventory is significantly improved by the
combination of the reduced royalties on initial production, earning of drilling
credits as a reduction of capital costs and finally a significant reduction in
service costs for drilling and completing wells. Seaview remains well positioned
to capitalize on this opportunity during a period where the industry is
experiencing a pronounced slow period.
The Company continues to review several property and corporate acquisition
opportunities aimed at consolidating the existing Peace River Arch and southeast
Saskatchewan core areas, or adding a new focus area, for the Company. Seaview is
well positioned, financially, to fund the drilling program and capitalize on
acquisition opportunities that meet the investment criteria of quality reserves
with additional upside potential through drilling and optimization.
COMMODITY PRICE RISK MANAGEMENT
A key component to Seaview's balance sheet management is the Company's commodity
price risk program. The price risk management program is intended to reduce
price volatility in order to support cash flow, protect acquisition economics
and finance ongoing capital expenditures.
Seaview currently has approximately 1,285 boe/d (approximately 45% of forecasted
production) hedged for the remainder of 2009;
- 6,500 GJ/d of natural gas hedged in put and fixed contracts providing for a
"net of cost" floor of $6.89/GJ, which is a 51% premium to the current calendar
AECO 2009 futures strip of $4.55/GJ;
- 100 bbl/d of crude oil hedged in a fixed contract expiring December 31, 2009
at CDN$55.90/bbl; and
- Realized risk management gains for the nine months ended September 30, 2009
were $4.9 million.
Subsequent to the end of the third quarter of 2009, Seaview entered into
additional financial contracts for 2010 and 2011 providing for increased hedging
protection designed to minimize the impact of volatile commodity prices on
future capital expenditure plans. The 2010 hedging program currently has the
following characteristics:
- A total of 5,000 GJ/d of natural gas hedged in put and fixed contracts for
2010 providing for a "net of cost" floor of $4.72/GJ;
- A total of 200 bbl/d of crude oil hedged in put contracts for 2010 with a "net
of cost" floor of CDN$75.00/bbl; and
- On a combined basis, Seaview has 6,200 mcfe/d, hedged at a "net of cost" floor
price of $6.43/mcfe, which will provide for guaranteed revenue in 2010 of $14.1
million.
OUTLOOK; GUIDANCE
Seaview's core areas feature high-quality, long-life reserves with significant
identified upside potential through exploration and development drilling. The
Company is currently well positioned to continue its growth strategy despite the
current challenging economic climate, with the following characteristics:
- Forecast 2009 production exit rate target has now been revised up to more than
3,000 boe per day. The Company is currently reviewing the 2010 capital program
and its impact on 2010 production rate guidance. This guidance will be provided
to shareholders the near future;
- Expanded credit facility to $52 million representing a 53% increase relative
to December 31, 2008. Based on net debt of approximately $35 million at the end
of Q3 2009, Seaview has $17 million of available credit capacity to pursue
strategic opportunities;
- Commodity hedging program providing for downside protection on 43% of 2009
forecast average production generating a minimum gross revenue of $16.1 million
for 2009 and $14.1 million for 2010;
- Expanded drilling inventory of more than 80 opportunities, offering a
diversified portfolio of exploration, development and lower-risk optimization
projects in both the Peace River Arch and South East Saskatchewan core areas;
and
- 65.42 million Class A shares outstanding and 1.054 million Class B shares
outstanding.
FILING OF THIRD QUARTER 2009 FINANCIALS
Seaview has filed its financial results for the three and nine months period
ended September 30, 2009 including the unaudited interim consolidated financial
statements and related management's discussion and analysis ("MD&A").
These filings are available in their entirety at www.seaviewenergy.com and
www.sedar.com or by contacting the Company directly.
Seaview is a Calgary, Alberta based company engaged in the exploration,
development and production of conventional crude oil and natural gas reserves in
Canada. Seaview's strategy is to build shareholder value through a balance of
exploration and development drilling complemented by a focused acquisition
program.
Barrels of oil equivalent (boe) may be misleading, particularly if used in
isolation. A boe conversion ratio of six thousand cubic feet (mcf) of natural
gas to one barrel (bbl) of oil is based on an energy conversion method primarily
applicable at the burner tip and is not intended to represent a value
equivalency at the wellhead. All boe conversions in this press release are
derived by converting natural gas to oil in the ratio of six thousand cubic feet
of natural gas to one barrel of oil. Certain financial amounts are presented on
a per boe basis, such measurements may not be consistent with those used by
other companies.
Estimated values contained in this press release do not represent fair market value.
This press release may contain forward-looking statements within the meaning of
applicable securities laws. Forward-looking statements may include estimates,
plans, anticipations, expectations, opinions, forecasts, projections, guidance
or other similar statements that are not statements of fact. Although the
Company believes that the expectations reflected in such forward-looking
statements are reasonable, it can give no assurance that such expectations will
prove to be correct. These statements are subject to certain risks and
uncertainties and may be based on assumptions that could cause actual results to
differ materially from those anticipated or implied in the forward-looking
statements. These risks include, but are not limited to: the risks associated
with the oil and gas industry (e.g. operational risks in development,
exploration and production; delays or changes in plans with respect to
exploration or development projects or capital expenditures; the uncertainty of
reserve estimates; the uncertainty of estimates and projections relating to
production, costs and expenses and health, safety and environmental risks),
commodity price and exchange rate fluctuation and uncertainties resulting from
potential delays or changes in plans with respect to exploration or development
projects or capital expenditures. The Company's forward-looking statements are
expressly qualified in their entirety by this cautionary statement. The
forward-looking statements contained in this press release are made as of the
date hereof and the Company undertakes no obligations to update publicly or
revise any forward-looking statements or information, whether as a result of new
information, future events or otherwise, unless so required by applicable
securities laws.
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