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 provide shareholders with an update on corporate
developments and the Company's third quarter 2010 financial and operational
results.
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SELECTED INFORMATION
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Financial ($000's except per Q3 Q3 % YTD YTD %
share amounts) 2010 2009 Change 2010 2009 Change
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Petroleum and natural gas
sales $7,213 $8,664 (17%) $27,529 $23,127 19%
Funds flow from operations (1) 4,451 4,110 8% 13,333 10,096 32%
Basic and diluted per share
(2) 0.07 0.06 17% 0.20 0.18 11%
Net loss (634) (2,907) 78% (2,139) (7,241) 70%
Basic and diluted per share
(2) (0.01) (0.04) 75% (0.03) (0.13) 77%
Capital expenditures (3) 5,619 3,931 43% 18,515 37,814 (51%)
Property disposition - - - (33,090) - 100%
Net debt to funds flow from
operations ratio 0.70 2.71 (74%) 0.70 2.71 (74%)
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Shares Outstanding at period end (000's)
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Class A 65,489 65,419 - 65,489 65,419 -
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) 13,299 12,486 7% 15,630 10,653 47%
Light oil and NGLs (bbl/d) 322 432 (25%) 391 408 (4%)
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Total production (boe/d) 2,538 2,513 1% 2,996 2,183 37%
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Average realized sales price
(net of risk management
gains)
Natural gas (per mcf) $ 4.34 $ 5.43 (20%) $ 4.70 $ 5.81 (19%)
Light oil and NGL (per bbl) 64.46 61.03 6% 69.92 55.98 25%
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Netback per boe (1)
Sales price $27.77 $27.83 - $32.32 $30.59 6%
Realized risk management
gains 3.12 9.64 (68%) 1.34 8.21 (84%)
Sales price (net of realized
risk management gains) 30.89 37.47 (18%) 33.66 38.80 (13%)
Royalties 2.14 3.50 (39%) 4.45 5.06 (12%)
Operating expenses 5.12 11.34 (55%) 8.31 11.48 (28%)
Transportation 1.48 1.35 10% 1.38 1.50 (8%)
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Operating netback (1) $22.15 $21.28 4% $19.52 $20.76 (6%)
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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 terms are 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 terms are used to evaluate performance
and in capital allocation decisions.
2. Weighted average diluted shares outstanding for all periods exclude both
the impact of the conversion of the Class B shares and the effect of the
granted options as they would have been anti-dilutive.
3. Capital expenditures include only the cash additions for the period and
capitalized G&A expense.
HIGHLIGHTS OF THE THIRD QUARTER 2010
-- Funds flow from operations for Q3 2010 increased 8% to $4.5 million from
$4.1 million in Q3 2009. Funds flow from operations increased 17% per
basic weighted average share over the same period;
-- Funds flow from operations for the first nine months of 2010 increased
32% to $13.3 million from $10.1 million over the same nine month period
in 2009. Funds flow from operations increased 11% per basic weighted
average share over the same period;
-- Average production for Q3 2010 of 2,538 boe/d was negatively impacted by
approximately 200 boe/d for the quarter due to unscheduled plant
maintenance and 150 boe/d due to delayed project start-ups as a result
of wet weather conditions;
-- Seaview's current production capacity, based on field estimates, is
2,800 boe/d with an additional 350 boe/d behind pipe production
currently being tied in at Wapiti and Boundary Lake;
-- Achieved operating costs of $5.12 per boe in Q3 2010 representing a 55%
reduction in operating costs per boe compared to Q3 2009. The
significant reduction is a result of selling the high operating cost
Saskatchewan assets as well as high grading the current production base
to high deliverability, low operating cost assets in the Peace River
Arch. In addition, in Q3 2010, the Company received a 13th month
recovery related to non-operated working interest facilities amounting
to $2.60 per boe in the quarter;
-- Net debt at the end of Q3 2010 was $12.4 million, compared to $36.1
million at Q3 2009 representing a 66% reduction over the past year.
Seaview expects 2010 year end net debt to be approximately $18 - $19
million;
-- Seaview's credit facility has been confirmed, by the lenders, at $52
million with the next interim review set for February 2011, providing
for approximately $40 million of available credit facilities at quarter
end to fund the Company's capital program in the Wapiti Cardium light
oil resource play;
-- Achieved operating net backs of $22.15 per boe representing a 21%
increase compared to Q2 2010 netbacks of $18.29 per boe while natural
gas prices declined by 9% over the same period;
-- Results to date in the Wapiti area continue to support the Company's
strategic focus on accumulating a large, contiguous position targeting
light oil in the Wapiti Cardium fairway. Seaview continues to show
positive preliminary results highlighted by the following achievements:
-- The successful drilling and completion of three multi stage fracture
stimulated horizontal wells each testing light oil (41 degree API)
from the Cardium formation at rates of more than 200 boe/d;
-- Increased initial well productivity through continued enhancement of
completion techniques;
-- Achieved operational efficiencies on the 1-9-66-7W6 discovery well
during its initial three month production period;
-- Subsequent to quarter end, Seaview's second horizontal well at 4-17-
66-7W6 was placed on production averaging over 260 bbl/d of crude
oil (producing day average basis) over the first 7 days on
production;
-- Increased land position to 42.5 sections (22.8 net) of prospective
Cardium light oil rights; and
-- Subsequent to quarter end, Seaview initiated a 6 well (3.5 net)
drilling program to further define the resource potential, earn
additional land and delineate the initial discovery. To date, 2 of
the Cardium wells (1.1 net) have been successfully drilled and cased
with completions expected to commence in early December.
OPERATIONS UPDATE
As at the end of Q3 2010, Seaview had drilled 3 Cardium horizontal wells (2.2
net) to date, with a 100% success rate, all completed with multi-stage
fracturing technology. In addition, the Company has recently commenced its
winter drilling program which will include up to 6 Cardium horizontal wells (3.5
net) to be drilled over the next two quarters, with 3 wells (1.6 net) to be
drilled prior to the end of 2010. Subsequent to the end of Q3 2010, the Company
has successfully drilled and cased 2 Cardium horizontal wells (1.1 net) with
completion expected to commence in early December.
Seaview's second horizontal well at 100/04-17-066-07-W6 (78.3% WI) ("the 4-17
well") and third horizontal well 100/04-22-066-08W6 (76% WI) ("the 4-22 well")
have been successfully completed using multi-stage fracturing technology. Based
on experience from the Company's first completion at 100/01-09-066-08W6 ("the
1-9 well"), the inter-fracture spacing was reduced to 75 meters from 100 meters
and the sand tonnage per stage was increased from 15 to 20 tonnes per interval.
Following an initial clean-up period, the 4-17 well tested at an average flow
rate of 220 bbl/d of crude plus an estimated 100 mcf/d of solution gas (235
boe/d gross) over the last 7 days of the test period. The 4-17 well was placed
on production on November 10, 2010 and over the first 7 days has averaged 260
bbl/d on a producing day average basis, with minimal solution gas at this point.
Following an initial clean-up period, the 4-22 well tested at an average flow
rate of 192 bbl/d of crude plus an estimated 140 mcf/d of solution gas (215
boe/d gross) over the last 7 days of the test period. The 4-22 well is expected
to be on production before the end of November, with anticipated initial
production rates to be in the range of 125 - 150 bbl/d of crude oil plus
solution gas per well (170 boe/d).
The 4-17 and 4-22 wells qualify for the Alberta Government's Horizontal Oil New
Well Royalty Rate of 5% for 24 months, to a maximum of 60,000 barrels of
production. The 1-9 well was drilled prior to the announcement of the Horizontal
Oil New Well Royalty Rate program and qualifies for the 5% royalty rate for 12
months to a maximum of 50,000 barrels of production.
Seaview's first horizontal well, the 1-9 well (at 68.0% WI, drilled during the
first quarter of 2010) has been on production since early August. The 1-9 well
has averaged 133 boe/d (68% oil and liquids) on a producing day average basis
over the first 3 months of production.
Subsequent to the end of the quarter, 2 wells (1.1 net) have been drilled and
cased. Seaview plans to drill 1 additional horizontal well (0.5 net) in Wapiti
prior to year end. Additionally, the Company successfully closed an acquisition
of 1.5 sections of prospective land in Wapiti at a cost of $0.90 million.
Wapiti Exploration Program
The successful Cardium oil tests at these three locations validate the presence
of a significant light oil resource play in the Wapiti area. Seaview has
successfully extended this play area 8 kilometres to the southwest and 2
kilometres to the southeast from the existing conventional Cardium A pool.
Management is encouraged by the initial oil rates and is confident that the
Wapiti Cardium light oil resource play offers a sizeable and repeatable
opportunity. Management also expects that economics of the play and initial
production rates will continue to improve through the optimization of completion
technology during this initial phase of exploration. Industry activity in Wapiti
continues to rapidly accelerate with a total of 9 locations licensed in 2010
with 7 being drilled to date and 5 wells on production.
Seaview's opportunity base within the prospective Wapiti Cardium light oil
resource fairway now has the following characteristics:
-- Exposure to earn up to 42.5 sections (22.8 net) of prospective Cardium
light oil rights;
-- An extensive drilling inventory with over 170 horizontal development
locations (91 net); and
-- Excellent operational focus featuring a large contiguous land position
directly offsetting the Company's recent successful Cardium exploration
activities.
Seaview believes the Wapiti Cardium light oil resource play contains the
essential elements of a profitable resource play including:
-- Large areal extent, supported by numerous logs and tests validating the
reservoir continuity;
-- Contiguous resource potential including an average of 10 m of vertical
pay exceeding 6% porosity providing for significant accumulation of
light oil, and a high degree of repeatability;
-- Ability to improve drilling and completion techniques leading to lower
capital costs and higher productivity over time; and
-- Scalable project targeting high quality light oil (41 degree API).
Continued success in developing the Wapiti Cardium light oil play could add
significant incremental upside to Seaview's current asset base. The Company will
continue to focus capital towards proving up the commerciality of this play, and
begin moving towards development, offsetting the initial exploration successes.
Given the extensive inventory of Cardium horizontal well targets, Wapiti will
remain a focus for the Company over the balance of 2010 and into 2011.
Peace River Arch
Due to low commodity prices for natural gas, the Company has elected to defer
drilling gas projects originally planned for Q3 and Q4 2010, with capital
re-allocated to higher net back, oil focused drilling in Wapiti and optimization
projects in the Peace River Arch. Capital expenditures in the Peace River Arch
will be limited to high net-back, low risk production additions. Risked capital
directed towards drilling has been deferred contingent on a recovery in natural
gas prices.
Boundary Lake is Seaview's largest producing region which features high
deliverability wells with operating costs of less than $6.00 per boe. For
September 2010, Seaview realized field level netbacks of over $23.00 per boe in
the Boundary Lake area despite the current low prices for natural gas. The
Company recently completed the tie-in of 1 gas well (1.0 net) in the Boundary
Lake area, which added over 250 boe/d net sales average for October 2010.
Activity for the balance of 2010 includes the tie-in of 1 additional gas well
(1.0 net) and installation of a compressor to further optimize production in
Boundary Lake. The Company expects to add over 200 boe/d before year end from
these projects.
STRATEGICLY POSITIONED FOR LONG-TERM GROWTH
Management has successfully completed several strategic initiatives during 2010
to position the Company for long term sustainability and growth. The combined
impacts of significantly reducing debt, high grading operations towards higher
net back production and a continued strong hedging program has provided for a
solid financial footing for the Company.
During 2010, the Company has dramatically improved the balance sheet flexibility
with the strategic disposition of the Southeast Saskatchewan assets for $33
million, which closed in Q2 2010. With current unutilized credit facilities of
approximately $40 million, Seaview is well positioned to finance its capital
program, targeting further exploration and development of the Wapiti Cardium
light oil resource play.
In addition, the Company continues to dramatically improve operating netbacks
through a focused effort on reducing operating costs and improving operating
efficiency of its core assets. Operating costs of $7.72 per boe in Q3 2010
(excluding the impact of the one time 13th month recovery) represents a 4%
reduction relative to Q2 2010 costs of $8.07 per boe, and a 30% reduction
compared to Q1 2010 operating expenses of $11.10 per boe.
Seaview has achieved significant improvements in operating netbacks with Q3 2010
netbacks of $22.15 per boe representing a 21% increase over Q2 2010, despite
natural gas prices having declined by 9% over the same period.
In comparison to Q3 2009, Seaview has successfully improved the financial
flexibility of the Company and established early exploration success in the
Wapiti Cardium light oil resource play. As a result Seaview is poised to
capitalize on its strong asset base and financial flexibility to deliver long
term growth for shareholders over the remainder of 2010 and into 2011.
GUIDANCE
Similar to most operators working in Western Canada, unseasonably wet weather
conditions led to delays in timely completion of all operations including
drilling, completions and construction of production facilities. While the
delays impacted the start-up dates of projects and the quarterly average
production, Seaview continues to work on completing several planned capital
projects with potential to add over 350 boe/d (net) of new production by year
end.
Overall, the Company now plans to reduce field capital spending by $2.7 million
in 2010, which will result in 2010 capital spending of $25.6 million compared to
previous capital guidance of $28.3 million. Deferral of the scheduled gas
projects will impact the forecasted exit rate by 200 boe/d. Seaview now expects
2010 year end net debt to be approximately $18 - $19 million.
Due to a combination of deferred capital projects, weather related project
delays, and unscheduled plant maintenance, management has revised production
guidance for 2010. Average production for 2010 is expected to be approximately
3,000 boe/d. Forecast exit rate production is anticipated to be 3,100 - 3,300
boe/d, contingent on completion of recently drilled Wapiti Cardium oil wells.
With the recent drilling success in Wapiti, the Company plans to continue
focusing on its Wapiti Cardium light oil resource play. Seaview has accumulated
a sizeable land position with exposure to 42.5 sections of highly prospective
lands (22.5 net) with over 170 potential Cardium horizontal drilling locations
(91 net).
Management is pleased with the results in Wapiti to date including continuous
improvements in both reducing capital costs and improving well productivity with
each subsequent operation. To date, Seaview has drilled 5 Cardium horizontal
light oil wells (3.3 net), with 100% success, resulting in 3 producing oil wells
(2.2 net) and 2 potential oil wells (1.1 net) awaiting completion in early
December.
Following completion results on the latest 2 Wapiti Cardium wells (1.1 net), the
Company plans to provide 2011 capital and production guidance in the short term.
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 1,359 boe/d (approximately 45% of estimated
current production) hedged for the remainder of 2010, as follows:
-- 7,337 GJ/d of natural gas hedged in puts and fixed contracts providing
for a "net of cost" floor of $4.69/GJ ($4.95/mcf), which is a 46%
premium to the current AECO 2010 strip of $3.48/GJ;
-- 200 bbl/d of crude oil hedged in put contracts for 2010 with a "net of
cost" floor of CDN$75.00/bbl;
-- On a combined basis, Seaview has 8,152 mcfe/d, hedged at a "net of cost"
floor price of $6.06/mcfe, which will provide for minimum revenue of
$4.5 million for the fourth quarter of 2010.
In addition, Seaview currently has approximately 1,485 boe/d hedged for 2011, as
follows:
-- 8,140 GJ/d of natural gas hedged in put contracts providing for a "net
of cost" floor of $4.18/GJ ($4.42/mcf), which is a 17% premium to the
current calendar AECO 2011 futures strip of $3.56/GJ, and a 20% premium
to the current AECO strip price of $3.48/GJ;
-- 200 bbl/d of crude oil hedged in put contracts for 2011 with a "net of
cost" floor of CDN$75.00/bbl;
-- On a combined basis, Seaview has 8,913 mcfe/d, hedged at a "net of cost"
floor price of $5.50/mcfe, which will provide for minimum revenue of
$17.9 million for 2011.
OUTLOOK AND 2010 GUIDANCE
Including the impact of the recent Wapiti oil success, Seaview is well
positioned to continue its growth strategy for 2010 and 2011. Seaview's Peace
River Arch core area, featuring high quality, long-life reserves, combined with
the emerging Cardium light oil resource play, provide the Company with a
significant drilling inventory.
As a result of recent corporate successes, Seaview provides the following
guidance for 2010:
-- Forecast 2010 average daily production estimate of approximately 3,000
boe/d compared to 2009 annual average production of 2,321 boe/d
resulting in an estimated forecast production growth of 29% per share
(based on 65.49 million Class A shares outstanding);
-- 2010 estimated exit production of 3,100 - 3,300 boe/d, contingent on
completion of recently drilled Wapiti Cardium oil wells;
-- Forecasted 2010 capital budget of $25.6 million, resulting in 2010 year
end net debt of approximately $18 - $19 million;
-- Seaview's credit facility has been confirmed by the lenders at $52
million. The next interim review is set for February 2011. As at quarter
end, Seaview had approximately $40 million of available credit capacity
to pursue strategic opportunities;
-- Seaview has established significant positions in resource plays
providing for longer-term growth potential in a diverse portfolio of
assets targeting both light oil and natural gas plays, including:
-- In Wapiti, the Company has assembled a sizable land position with
exposure to 42.5 sections of land (22.8 net) targeting a Cardium
light oil resource play. Seaview plans to spend $17.6 million total
in 2010 to drill a total of 6 horizontal multi-fracture wells (4.4
net).
-- In Pouce Coupe, the Company holds interests in 21 sections of land
(4.5 net) targeting a Doig-Montney natural gas resource play.
Seaview's land position is on trend with successful industry
development activities further reducing the risk of full development
when economics are more viable; and
-- In Harlech, Seaview holds a 25% working interest in 9 contiguous
sections of land (2.25 net) targeting multi-zone Cretaceous and
Nordegg gas resource potential. The Harlech area offers exposure to
liquids rich natural gas reservoirs.
-- Strong commodity hedging program providing for downside protection on
45% of 2010 forecasted average production generating a minimum $4.5
million gross revenue for the fourth quarter of 2010, and $17.9 million
gross revenue in 2011;
-- 65.49 million Class A shares and 1.0 million Class B shares outstanding;
and
-- Following completion results on the latest 2 Wapiti Cardium wells (1.1
net), the Company plans to provide 2011 capital and production guidance
in the short term.
RELEASE OF THIRD QUARTER FINANCIALS
Seaview has filed its financial results for the period ended September 30, 2010
including the unaudited interim consolidated financial statements and related
management's discussion and analysis ("MD&A"). These filings will be available
in their entirety at www.seaviewenergy.com and www.sedar.com or by contacting
the Company directly.
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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