Seaview Energy Inc. Releases Financial and Operating Results for the Three and Six Months Ended June 30, 2011 and Operations ...
August 17 2011 - 3:00PM
Marketwired Canada
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UNITED STATES. ANY FAILURE TO COMPLY WITH THIS RESTRICTION MAY CONSTITUTE A
VIOLATION OF U.S. SECURITIES LAWS.
Seaview Energy Inc. (TSX VENTURE:CVU.A) (TSX VENTURE:CVU.B) ("Seaview" or the
"Company") releases an update on the Company's financial and operational results
for the three and six months ended June 30, 2011 and an update of recent
operations.
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SELECTED INFORMATION
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Financial ($000's except per share
amounts) Q2 2011 Q1 2011 % Change
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Petroleum and natural gas sales $ 8,478 $ 6,382 33%
Funds flow from operations (1) 4,297 2,947 46%
Basic and diluted per share (2) 0.07 0.05 40%
Net income (loss) (1,650) (2,778) 41%
Basic and diluted per share (2) (0.03) (0.04) 25%
Capital expenditures (3) 3,712 12,967 (71%)
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Shares Outstanding at period end
(000's)
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Class A 65,553 65,553 -
Class B 1,054 1,054 -
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Operations
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Daily production
Natural gas (mcf/d) 13,810 12,286 12%
Light oil and NGLs (bbl/d) 437 277 58%
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Total production (boe/d) 2,739 2,325 18%
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Average realized sales price (net
of risk management gains)
Natural gas (per mcf) $ 4.56 $ 4.38 4%
Light oil and NGL (per bbl) 75.97 71.78 6%
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Netback per boe (1)
Sales price $ 34.01 $ 30.50 12%
Realized risk management gains 1.10 1.20 (8%)
Sales price (net of realized risk
management gains) 35.11 31.70 11%
Royalties (4.90) (3.65) 34%
Operating expenses (8.39) (8.36) -
Transportation (1.37) (1.43) (4%)
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Operating netback (1) $ 20.45 $ 18.26 12%
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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 IFRS. 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 IFRS. 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.
FINANCIAL AND OPERATIONS OVERVIEW OF SECOND QUARTER 2011
-- Average production for Q2 2011 was up 18% to 2,739 boe per day compared
to Q1 2011 volumes of 2,325 boe per day;
-- Liquids production increased by 58% and natural gas increased by 12%
compared to Q1 2011, as a result of the Cardium wells brought on stream;
-- Operating netbacks increased by 12% to $20.45 per boe compared to $18.26
per boe in Q1 2011;
-- Funds flow from operations for Q2 2011 increased 46% to $4.3 million
compared to Q1 2011 funds flow of $2.9 million. The increase in funds
flow is primarily attributed to the combination of the 18% production
increase and 11% increase in realized prices;
-- Subsequent to the quarter end, on August 3, 2011, the Company disposed
of a minor natural gas asset in the Sinclair area of the Peace River
Arch, for net proceeds of $4.34 million. The proceeds have been used,
initially, to reduce net debt, and will be redirected towards the Wapiti
Cardium capital program.
Wapiti Operations Update
The Company's strategic focus shifted to light oil and liquids rich natural gas
opportunities in 2010. Seaview continues to evaluate its extensive land position
in Wapiti through exploration drilling to earn lands through farm-in agreements.
Seaview has accumulated a large, contiguous land position with exposure of up to
42.5 sections (22.8 net) of prospective Cardium rights targeting a potential
light oil and liquids rich natural gas resource play in the Cardium fairway. The
oil is 40 degrees API and the natural gas has associated liquids (C3+) of 105
bbls/mmcf of sales gas which significantly enhances the economics of the play.
Since Seaview's initial exploration success at 100/01-09-066-07W6 (The "1-9
well") in Q1 2010, a variety of completion techniques have been utilized to
optimize the production potential and ultimate reserves of the Company's Wapiti
property. Seaview has drilled 8 Cardium horizontal wells (5.0 net) to date and
industry activity in Wapiti has increased substantially with a total of 25
horizontal locations targeting the Cardium having been drilled or licensed.
Throughout the initial exploration phase, Seaview and other operators have
experimented with various completion designs demonstrating continued improvement
in initial production rates.
In Q2 2011, Seaview focused on the equip and tie-in of 3 Cardium horizontal
wells (1.9 net), which were completed using liquid propane gas ("LPG")
fracturing technology during Q1 2011. With the tie-in of these wells, Seaview
was able to increase total production by 18% relative to Q1 2011 average and
increase liquids production by 58% in Q2 2011, averaging 437 bbl/d of crude oil
and NGL's. Crude oil and natural gas liquids accounted for 16% of Q2 2011
production, as compared to 12% during Q1 2011.
Seaview is currently executing a LPG based fracture treatment at
100/16-12-066-08W6 (54% working interest) with initial test results expected
later in Q3 2011, subject to weather conditions, surface and equipment access.
Subsequent to the end of the quarter, a workover of Seaview's initial Cardium
horizontal well at 1-9 has been completed and has recently been placed back on
production using plunger lift to minimize liquid loading. Production over the
first two weeks of August has averaged 99 mcf/d of natural gas and 36 bbl/d of
crude oil and natural gas liquids (52 boe/d) and remains a flowing oil well one
year after initial production with minimal decline.
The initial production performance of the latest generation completions
continues to outperform the earlier wells completed with frac oil. Additionally,
production rates from the LPG completions outperforms the oil based fracs by 2-3
times after more than 120 days of production. Combined with the stable, shallow
decline profile evident in the early wells such as the 1-9, management remains
confident that Wapiti offers a scaleable, repeatable resource play with
significant long life reserves.
In addition, Seaview is preparing for upcoming drilling with the surveying of
seven additional locations with 4 of the locations currently licensed. The
Company is confident that further cost reductions can also be achieved by
pre-building production facilities whenever possible to allow for shorter tie-in
cycle times and to allow for LPG recovery.
Wapiti Exploration Program
Results to date continue to validate the Company's strategy of accumulating a
large, contiguous position targeting light oil and liquids rich natural gas in
the Wapiti Cardium fairway. Throughout the initial exploration drilling phase,
Seaview has been able to continuously improve initial production rates and plans
to continue advancing the completion design based on the LPG fluid platform.
Management is encouraged by the exploration results to date and remains
confident that the Wapiti Cardium light oil resource play offers a sizeable and
repeatable opportunity.
The 8 wells drilled to date have all been earning wells and once the earning
phase of the project has been completed, Seaview will be able to high grade
drilling in development areas. Through pad based development drilling and
refinement of completion techniques, management expects to significantly improve
the economics of the play.
Seaview's opportunity base within the prospective Wapiti Cardium light oil
resource fairway has the following characteristics:
-- Exposure to earn up to 42.5 sections (22.8 net) of prospective Cardium
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 (40 degree API), and
natural gas with high liquid recovery NGL's.
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 1,485 boe/d hedged for 2011, as follows:
-- 8,140 GJ/d of natural gas hedged in put contracts for calendar 2011
providing for a "net of cost" floor of $4.18/GJ ($4.42/mcf), which is an
21% premium to the current calendar AECO 2011 futures strip of $3.46/GJ,
and a 24% premium to the current AECO strip price of $3.37/GJ;
-- 200 bbl/d of crude oil hedged in put contracts for calendar 2011 with a
"net of cost" floor of CDN$75.00/bbl; and
-- 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
The Company's focused long-life, low cost Peace River Arch assets and available
credit capacity provides a stable capital base to support continued
capitalization of Seaview's emerging Wapiti Cardium light oil resource play.
Management believes that continued improvement on the latest LPG based fracture
treatments has significantly enhanced the economic viability of Wapiti.
The drilling program over the remainder of 2011 will be financed through
available cash-flow and focus on completing earning on farm-in lands as first
priority and drilling development locations offsetting existing Cardium
horizontal producers offering the highest potential.
Seaview has the following characteristics:
-- Total Proven reserves of 6,578 Mboe (23% light oil and natural gas
liquids). Total Proven plus Probable reserves of 11,823 Mboe (26% light
oil and natural gas liquids), effective December 31, 2010, as evaluated
by Sproule Associates Ltd. using National Instrument 51-101 reserve
definitions;
-- Reserve life index is 11.8 years based on Total Proven plus Probable
reserves and Q2 2011 production of 2,739 boe per day;
-- 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
targeting a Cardium light oil resource play:
-- Exposure to earn up to 42.5 sections (22.8 net) of prospective
Cardium rights;
-- An extensive drilling inventory with over 170 horizontal
development locations (91 net);
-- Scalable project targeting high quality light oil (40 degree
API), and natural gas with high liquid recovery NGL's; and
-- Excellent operational focus featuring a large contiguous land
position directly offsetting the Company's recent successful
Cardium exploration activities.
-- In Pouce Coupe, the Company holds interests in 21 sections (4.5 net)
of land 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;
-- Commodity hedging program providing for downside protection on 8,913
mcfe per day for 2011 at a "net of cost" floor price of $5.50/mcfe,
providing minimum 2011 revenue of $17.9 million; and
-- 65.55 million Class A shares and 1.0 million Class B shares outstanding,
as at June 30, 2011.
RELEASE OF SECOND QUARTER FINANCIALS
Seaview has filed its financial results for the period ended June 30, 2011
including the unaudited condensed 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.
ANNUAL GENERAL MEETING
Seaview's Annual General Meeting is scheduled for Wednesday, August 24, 2011 at
2:30PM Calgary time in the Viking Rooms A/B, Calgary Petroleum Club, 319 5th Ave
SW Calgary, AB. The meeting is open to all shareholders and interested parties
and will be webcast for those unable to attend in person and can be accessed on
the internet through the Company's website at
http://www.seaviewenergy.com/events.php or directly by the provider at
http://www.gowebcasting.com/2543.
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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