Seaview Energy Inc. Releases Financial and Operating Results for the Three and Nine Months Ended September 30, 2011 and Opera...
November 23 2011 - 5:30AM
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) releases the Company's financial and operational results for the
three and nine months ended September 30, 2011 and strategic business
combination and reorganization transaction.
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SELECTED INFORMATION
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Financial ($000's except per share amounts) Q3 2011 Q2 2011 % Change
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Petroleum and natural gas sales $ 6,562 $ 8,478 (23%)
Funds flow from operations (1) 2,773 4,297 (35%)
Basic and diluted per share (2) 0.04 0.07 (43%)
Net loss (2,929) (1,650) (78%)
Basic and diluted per share (2) (0.04) (0.03) (33%)
Capital expenditures (3) 3,809 3,712 3%
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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) 11,121 13,810 (19%)
Light oil and NGLs (bbl/d) 410 437 (6%)
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Total production (boe/d) 2,263 2,739 (17%)
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Average realized sales price (net of risk
management gains)
Natural gas (per mcf) $ 4.41 $ 4.56 (3%)
Light oil and NGL (per bbl) 62.39 75.97 (18%)
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Netback per boe (1)
Sales price $ 31.51 $ 34.01 (7%)
Realized risk management gains 1.44 1.10 31%
Sales price (net of realized risk management
gains) 32.95 35.11 (6%)
Royalties (3.83) (4.90) (22%)
Operating expenses (8.91) (8.39) 6%
Transportation (1.50) (1.37) 9%
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Operating netback (1) $ 18.71 $ 20.45 (8%)
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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 THIRD QUARTER 2011
-- Average production for Q3 2011 was down 17% to 2,263 boe per day
compared to Q2 2011 volumes of 2,739 boe per day;
-- Production declines over Q3-2011 compared to Q2-2011 are primarily due
to flush production and declines from the Company's Wapiti Cardium
horizontal wells tied-in during early Q2-2011. In addition, the Sinclair
property disposition reduced Q3-2011 volumes by 66 boe/d over the
quarter;
-- Funds flow from operations for Q3 2011 decreased 35% to $2.8 million
compared to Q2 2011 funds flow of $4.3 million. The decrease in funds
flow is primarily attributed to the combination of the 17% production
decrease and 7% decrease in realized prices;
-- During the quarter, the Company executed the completion and testing of
the 100/16-12-066-08W6/00 ("16-12 well") Cardium horizontal location
using LPG fracing technology. The 16-12 well was placed on production on
October 30, 2011 and therefore had nominal impact on Q3-11 production
results;
-- Based on field estimates for the first 15 days of production, the 16-12
well averaged 145 boe/d consisting of 377 mcf/d of sales gas, 25 bbl/d
of Natural Gas Liquids and 81 bbl/d of crude oil while flowing up
tubing. Recently a pump-jack has been installed to optimize production;
-- During the quarter, 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.
Subsequent Event - Strategic Business Combination and Reorganization
On November 21, 2011, Seaview announced that it had entered into an Arrangement
Agreement (the "Arrangement Agreement") dated November 11, 2011 with Charger
Energy Corp ("Charger"), Silverback Energy Ltd. ("Silverback") and Sirius Energy
Inc. ("Sirius") to form a light oil focused, growth oriented junior exploration
and production company to be lead by the current Charger management team.
The transaction will be completed by way of a Plan of Arrangement (the
"Arrangement") whereby Charger, Silverback and Sirius will exchange all of their
issued and outstanding shares for class A shares of Seaview. Each of the
companies involved in the business combination is at arm's length with the
others. Once the Arrangement is completed, the resulting entity will be renamed
Charger Energy Inc.
Under the Arrangement, the share exchange will occur on the following basis:
-- Each common share of Charger ("Charger Share") will be exchanged for
3.6364 class A shares of Seaview ("Seaview Shares") for a deemed
aggregate acquisition cost of approximately $72.5 million, using the
November 11, 2011 closing price of $0.53 for each Seaview Share
-- Each common share of Silverback ("Silverback Share") will be exchanged
for 5.8182 Seaview Shares for a deemed aggregate acquisition cost of
approximately $54.4 million, using the November 11, 2011 closing price
of $0.53 for each Seaview Share
-- Each common share of Sirius ("Sirius Share") will be exchanged for 0.80
of a Seaview Share, for a deemed aggregate acquisition cost of
approximately $11.1 million, using the November 11, 2011 closing price
of $0.53 for each Seaview Share
As part of the Arrangement, each class B share of Seaview will, in accordance
with the articles of Seaview, be exchanged for 10.0 Seaview Shares (class A)
and, as a final step, all of the issued and outstanding Seaview Shares will be
consolidated on a one for five basis.
The current directors and management of Charger will form the directors and
management of the Resulting Entity upon closing, with a director nominee from
the existing board of directors of Seaview.
It is estimated that there will be approximately 67.3 million Class A shares
outstanding following completion of the Arrangement and the share consolidation,
with shareholders of Charger, Silverback, Sirius and Seaview holding
approximately 41%, 31%, 6% and 23% outstanding shares, on a non-diluted basis,
respectively. The common shares of the Resulting Issuer will be listed and
posted for trading on the TSX-V upon closing.
Michael Wuetherick, President and CEO of Seaview commented "This transaction
achieves several strategic long term goals which will immediately benefit the
shareholders of Seaview as well as Charger, Silverback and Sirius. Specifically,
this transaction creates an entity with greater financial flexibility to support
profitable growth from a portfolio of quality light oil resource plays. The
Charger management team has a proven track record of delivering growth and
shareholder value."
THE ARRANGEMENT
The Arrangement is subject to the approval of 66 2/3 percent of the votes cast
by the respective shareholders of each of Seaview, Silverback and Sirius and the
securityholders of Charger. A joint information circular is expected to be
mailed in December 2011 and it is expected that the shareholder meetings for all
of the companies will occur in January 2012 with closing of the Arrangement
expected shortly thereafter.
The Arrangement will also require stock exchange, court and regulatory approvals
as is normally required for transactions of this nature. The Arrangement
Agreement contains a number of representations, warranties and conditions that
are customary for agreements of this type and also provides for non-solicitation
covenants, rights to match superior proposals and reciprocal non-completion fees
payable in certain circumstances. The complete Arrangement Agreement and the
Plan of Arrangement will be accessible in due course on Seaview's SEDAR profile
at www.sedar.com.
SEAVIEW BOARD OF DIRECTORS RECOMMENDATION
The Board of Directors of Seaview has unanimously determined that the
Arrangement is in the best interests of its shareholders and has recommended
that its shareholders approve the Arrangement, including the change of
management and the reconstitution of the Board of Directors of Seaview. The
members of the Board of Directors and Officers and other shareholders, who, in
the aggregate, control approximately 38 percent of the outstanding Seaview
Shares, have entered into support agreements pursuant to which they have agreed
to vote such shares in favour of the Arrangement.
OUTLOOK
Upon successful closing of the Arrangement, the combined entities will have the
following attributes:
Asset Base
The Arrangement will create a focused, growth-oriented junior energy company
with light oil development opportunities in the Viking and the Cardium resource
plays in Central and Northwest Alberta. The resulting entity will have access to
more than 350,000 net acres of land comprised of 120,000 net undeveloped acres
under lease and 230,000 net acres available through farm-in and option
agreements. These holdings represent an inventory of locations targeting light
oil through horizontal drilling and multi stage fracturing.
2012 Guidance
The management of the resulting entity is anticipating 2012 capital expenditures
of approximately $75 million for the resulting entity, subject to market
conditions, which will include drilling approximately 41 wells primarily
targeting Viking, Mannville, Cardium, Pekisko and Nisku light oil opportunities.
This light oil focused capital program is expected to result in 2012 average
daily production between 4,600 boe/d and 5,100 boe/d with oil and liquids
production increasing to represent approximately 41% to 45% of total production.
This increased weighting towards oil and liquids is also expected to improve
operating netbacks.
Key opportunities for growth in 2012 are:
-- Viking resource play: Access to approximately 600 sections of land in
the Halkirk/Provost area of Alberta targeting Viking and Ellerslie light
oil;
-- Multi-zone resource play: Access to approximately 95 sections of land in
the Ghost Pine area of Alberta targeting Viking, Manville and Pekisko
light oil; and
-- Cardium resource play: 42.5 sections (22.8 net) of land in the Wapiti
area of Alberta targeting Cardium light oil and liquids rich natural
gas.
Key Attributes of Pro Forma Resulting Entity
Following the Arrangement, the resulting entity will have, on a pro-forma basis,
the following key financial and operational attributes:
Financial Attributes (unaudited, as at November 1, 2011)
-- Consolidated Pro Forma common shares outstanding of approximately 67.3
million (basic) and approximately 77.3 million (fully diluted). Fully
diluted shares include approximately 8.0 million warrants and 2.0
million options of the resulting entity to be issued to the officers,
directors and employees of Charger (that will replace the existing
warrants and options of Charger to be cancelled pursuant to the
Arrangement) on an economically equivalent basis to the securities
cancelled under the Arrangement, at exercise prices ranging between
$1.38 and $2.41 on a post-consolidated basis;
-- Enterprise value of approximately $214 million reflecting the negotiated
exchange ratios, current estimated net debt and the closing price for
Seaview Shares on November 11, 2011 of $0.53;
-- Estimated pro forma net debt and working capital of approximately $36
million. Management has received an indicative proposal from a Canadian
Chartered Bank for a $65 million operating credit facility for the
resulting entity; and
-- Tax pools of approximately $150 million.
Operational Attributes
-- Estimated production for December 2011 of 3,500 to 3,800 boe/d (30 to
33% oil & NGL);
-- Increases Seaview's pro forma oil and liquids production weighting to
30% from 15% prior to the Arrangement;
-- Reserve weighting of combined entity reflects proved plus probable oil
and liquids reserves of 39%, up from 28% prior to the Arrangement;
-- As at September 30, 2011, proved plus probable reserves of 19.3 MMboe
(57% proved) consisting of 6.6 MMbbl of crude oil, 70,755 MMcf of
natural gas and 0.9 MMbbl of natural gas liquids. The reserves as
presented here reflect a reduction to the reserves to account for
property dispositions and a roll forward to back out production of the
respective entities reserve reports from differing reserve report
effective dates to September 30, 2011. Detailed reserve information will
be provided in the Information Circular;
-- Undeveloped land inventory of 120,000 net acres and 230,000 net acres of
farm-in or option lands;
-- Value attributed to undeveloped land of approximately $12 million
(excluding farm-in and option lands), based on a value of $100 per acre
(management estimate based on land sale results during 2011 from the
Plains area of Alberta, where the majority of the undeveloped land is
situated);
-- Total proved plus probable reserve life index of approximately 14 years
at current production levels; and
-- High working interest and operatorship in key growth areas.
RELEASE OF THIRD QUARTER FINANCIALS
Seaview has filed its financial results for the period ended September 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.
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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