Spartan Energy Corp. Announces First Quarter 2014 Operating and
Financial Results and Upward Revision to Guidance
CALGARY, ALBERTA--(Marketwired - May 15, 2014) - Spartan Energy
Corp. ("Spartan" or the "Company") (TSX-VENTURE:SPE) is pleased to
report its financial and operating results for the three months
ended March 31, 2014. Selected financial and operational
information is outlined below and should be read in conjunction
with Spartan's interim financial statements and the related
management discussion and analysis which are available for review
at www.sedar.com.
FINANCIAL AND OPERATING SUMMARY |
(dollar amounts are in thousands) |
|
Three Months Ended March 31, 2013 |
Three Months Ended March 31, 2014 |
|
|
|
|
|
|
|
Financial ($ 000's) |
|
|
|
|
|
|
|
|
|
|
|
Petroleum and natural gas sales |
$ |
3,647 |
$ |
5,853 |
|
|
|
|
|
|
|
Funds flow from operations(1),(2) |
$ |
1,802 |
$ |
3,095 |
|
|
per
share - basic(5) |
$ |
0.12 |
$ |
0.03 |
|
|
per
share - diluted(5) |
$ |
0.11 |
$ |
0.03 |
|
|
|
|
|
|
|
Net earnings |
$ |
22 |
$ |
15,000 |
|
|
per
share - basic(5) |
$ |
0.00 |
$ |
0.15 |
|
|
per
share - diluted(5) |
$ |
0.00 |
$ |
0.12 |
|
|
|
|
|
|
|
Capital expenditures |
$ |
1,497 |
$ |
36,506 |
|
|
|
|
|
|
|
Net Debt(4) |
$ |
12,042 |
$ |
107,431 |
|
|
|
|
|
|
|
Shareholders' capital |
$ |
25,054 |
$ |
491,016 |
|
|
|
|
|
|
|
Weighted average shares outstanding(5) |
|
|
|
|
|
|
Basic |
|
15,560 |
|
97,683 |
|
|
Diluted |
|
16,298 |
|
115,876 |
|
|
|
|
|
|
|
Shares outstanding, end of period(5) |
|
|
|
|
|
|
Basic |
|
15,560 |
|
221,355 |
|
|
Diluted |
|
16,298 |
|
258,771 |
|
|
|
|
|
|
|
Operating (6:1 boe conversion) |
|
|
|
|
|
|
|
|
|
|
|
Average daily production |
|
|
|
|
|
|
Crude
oil (bbls/d) |
|
452 |
|
649 |
|
|
NGL's
(bbls/d) |
|
- |
|
14 |
|
|
Natural gas (mcf/d) |
|
2,688 |
|
1,120 |
|
Barrels of oil equivalent (boe/d)(3) |
|
900 |
|
850 |
|
|
|
|
|
|
|
Average selling price ($CDN per boe) |
|
|
|
|
|
|
Crude
oil NGL's (bbls/d) |
$ |
70.54 |
$ |
87.18 |
|
|
NGL's(bbls/d) |
|
- |
|
56.12 |
|
|
Natural gas (mcf/d) |
$ |
3.22 |
$ |
6.84 |
|
Barrels of oil equivalent (boe/d)(3) |
$ |
45.02 |
$ |
76.52 |
|
|
|
|
|
|
|
Netbacks ($/boe) |
|
|
|
|
|
|
Petroleum and natural gas revenue |
$ |
45.05 |
$ |
78.22 |
|
|
Royalties |
$ |
6.40 |
$ |
14.95 |
|
|
Operating expenses |
$ |
12.61 |
$ |
15.04 |
|
|
Transportation expenses |
$ |
- |
$ |
0.34 |
|
|
Field
netback |
$ |
26.04 |
$ |
47.89 |
|
|
Realized gain (loss) on derivatives |
$ |
1.63 |
$ |
(1.55 |
) |
|
Operating netback |
$ |
27.67 |
$ |
46.34 |
|
|
General and administrative expense |
$ |
3.68 |
$ |
5.78 |
|
|
Financing charges |
$ |
1.73 |
|
0.09 |
|
Corporate netback |
$ |
22.26 |
$ |
40.47 |
|
|
|
(1) |
Excluding transaction costs of $2,910,509 associated with the
purchase of certain oil and gas properties in southeast
Saskatchewan and the acquisition of Renegade during the
quarter. |
(2) |
See "Non-IFRS Measures" |
(3) |
Boe conversion ratio for natural gas of 1 Boe: 6 Mcf has been
used, which is based on an energy equivalency conversion method
primarily applicable at the burner tip and does not necessarily
represent a value equivalency at the wellhead. As the value ratio
between natural gas and crude oil based on the current prices of
natural gas and crude oil is significantly different from the
energy equivalency of 6:1, utilizing a conversion on a 6:1 basis
may be misleading as an indication of value. |
(4) |
Excludes unrealized risk management contracts. |
(5) |
The 2013 weighted average shares outstanding and the
per share amounts have been restated to reflect the 4 to 1
share consolidation which occurred in February 2014 |
FIRST QUARTER 2014 HIGHLIGHTS
- Raised $77.5 million through the completion of a private
placement of 158.2 million shares (39.5 million post consolidation)
at a price of $0.49 per share ($1.96 post-consolidation).
- Raised $1.3 million through the completion of a rights offering
of 8.6 million shares (2.2 million post consolidation) at a price
of $0.15 per share ($0.60 post-consolidation).
- Completed the acquisition of 370 boe/d of high quality, low
decline crude oil production in southeast Saskatchewan for a total
purchase price of $32.5 million.
- Completed the acquisition of Renegade Petroleum Ltd.
("Renegade"), consisting of approximately 5,200 boe/d (97% oil and
liquids) of production at an estimated purchase price (including
net debt) of $544 million.
- Changed the name of the Company to "Spartan Energy Corp." and
effected a consolidation of the Corporation's outstanding share
capital on a 1 for 4 basis.
OPERATIONS OVERVIEW
References to Spartan's operations in this section
include
first quarter operations of Renegade Petroleum Ltd., which was
acquired by Spartan on March 31, 2014.
The first quarter of 2014 was significant for the Company in
that it marks the first full quarter of operations since the
completion of the recapitalization of the Company in December,
2013. The quarter was highlighted by the acquisition of Renegade on
March 31, 2014. The Renegade acquisition provides the Company with
a solid foundation for growth and profitability.
Spartan was active in the field during the first quarter of
2014, drilling a total of 19 (17.5 net) wells. Of these, 3 (2.7
net) vertical wells were drilled in central Alberta targeting
Detrital oil, 10 (9.5 net) horizontal wells were drilled in West
Central Saskatchewan for Viking oil and 6 (5.3 net) horizontal
wells were drilled in southeast Saskatchewan targeting
Mississippian oil prospects.
Reference is made to the press release of the Company dated
April 16, 2014, in which certain aspects of the Company's first
quarter drilling program were discussed. For convenience, certain
portions of the April 16, 2014 news release are included
herein.
Central Alberta - Detrital Oil
During the first quarter, the Company drilled and completed 3
(2.7 net) Detrital vertical wells with a 100% success rate. Two of
the wells have been on production for a full month and achieved
average production over this period (IP30) of 100 bbl/d. The third
well has averaged 144 bbl/d over the first 25 days of production.
Spartan's 2014 capital program and production forecast assumes
first month average production (IP30) rates per well of 70 bbl/d
for our Detrital drilling program.
Southeast Saskatchewan - Mississippian Light Oil
In the first quarter, the Company drilled 6 (5.3 net) horizontal
wells targeting Mississppian light oil in our southeast
Saskatchewan core area. Included within this number are 4 (3.3 net)
wells that were drilled in our Queensdale property targeting the
Frobisher/Alida formation. In total, the Company has now drilled 10
(7.8 net) wells in the Queensdale area. First month average
production (IP30) rates across the 10 wells has been 195 bbl/d.
Although IP30 rates for the Queensdale wells have been very
positive, we are especially encouraged by the continued strong
performance of the Queensdale wells beyond the initial 30 day
rates. IP60 rates have averaged 171 bbl/d (10 wells) and IP90 rates
have averaged 143 bbl/d (7 wells). This compares to Spartan's 2014
capital program and production forecast which assumes IP30 rates
(per well) of 60 bbl/d, IP60 rates of 58 bbl/d and IP90 rates of 56
bbl/d.
Based on these results, our average well in Queensdale achieves
payout in under 5 months. The average cost to drill, complete and
equip our Frobisher/Alida wells in southeast Saskatchewan is
budgeted at $1.1 million per well.
In Mair, during the first quarter of 2014 the Company drilled
one (100% WI) well targeting the Lodgepole formation. The well
encountered high quality oil reservoir, however, the well path
intersected natural fractures which appear to communicate with
adjacent wet zones. A decision was made to put the well on
production and evaluate. The well is currently producing 20bbl/d
oil (after 50 days of production) with a high water cut and a high
fluid level. It is Spartan's intention re-enter the well after
break-up and install a liner to attempt to isolate the fractures.
With success, oil production should improve as a result of lower
water cuts and optimized inflow.
Finally, at Wordsworth, during the first quarter of 2014 the
Company drilled one (100% WI) well targeting the Frobisher/Alida
formation. The well produced at a restricted rate of 134 bbl/d
during the first 30 days of production. The well is still at a
restricted rate due to break up conditions and is currently
producing at approximately 165 bbl/d.
OUTLOOK
Operations have been limited since late March due to spring
break-up. Break-up conditions in southeast Saskatchewan are
proceeding as anticipated and the Company expects to recommence
drilling and completions operations in late May.
During 2014, the Company expects to spend a total of $66 million
to drill 58 (53 net) wells. The focus of Spartan's remaining 2014
capital program will be on the Company's Mississippian assets in
southeast Saskatchewan and, to a lesser extent, on the Company's
Viking prospects in the Dodsland area of west central Saskatchewan.
Spartan expects to drill up to 44 (40 net) horizontal wells in
southeast Saskatchewan, including 35 wells targeting the
Frobisher/Alida and 9 wells targeting the Midale. Spartan also
anticipates spending an additional $8 million on land, seismic and
facility expenditures.
Spartan's stated business plan is to focus on light oil
opportunities in Western Canada, employing a targeted acquisition
and consolidation strategy, complemented by development and
exploration drilling. Our goal is to assemble a high quality asset
base which exhibits strong cash flow netbacks, attractive capital
efficiencies and manageable corporate declines.
As we progress through 2014 and into 2015, we anticipate that
the development of our extensive inventory of drilling locations in
Saskatchewan, with a focus on maintaining a sustainable corporate
decline rate and improving capital efficiencies, will allow us to
continue deliver growth in production and cash flow per share while
spending less than cash flow.
TORONTO STOCK EXCHANGE LISTING
The Toronto Stock Exchange (the "TSX") has approved the listing
of the common shares of the Company on the TSX. Listing will be
subject to the satisfaction of the conditions set forth in the
TSX's approval letter.
INCREASED 2014 GUIDANCE
Production volumes have exceeded our budgeted expectations on
the strength of a successful first quarter development drilling
program. Buoyed by these results, Spartan is revising upward the
Company's 2014 exit rate to 7,500 boe/d (94% oil and liquids)
(previously 7,300 boe/d) and its 2014 average production rate to
5,200 boe/d (previously 5,100 boe/d).
READER ADVISORY
FORWARD-LOOKING STATEMENTS: This press release contains
forward-looking statements. More particularly, this press release
contains statements concerning increased average production
guidance for 2014, anticipated exit production for 2014, Spartan's
drilling plans and timing thereof, the Company's expected 2014
capital budget, Spartan's expectations regarding break-up, the
plans for drilling and completions following break-up and Spartan's
growth strategy and anticipated growth plans for 2014 and beyond.
In addition, the use of any of the words "guidance", "initial,
"scheduled", "can", "will", "prior to", "estimate", "anticipate",
"believe", "potential", "should", "unaudited", "forecast",
"future", "continue", "may", "expect", "project", and similar
expressions are intended to identify forward-looking statements.
The forward-looking statements contained herein are based on
certain key expectations and assumptions made by the Company,
including but not limited to expectations and assumptions
concerning the success of optimization and efficiency improvement
projects, the availability of capital, current legislation, receipt
of required regulatory approval, the success of future drilling and
development activities, the performance of existing wells, the
performance of new wells, Spartan's growth strategy, general
economic conditions, availability of required equipment and
services and prevailing commodity prices. Although the Company
believes that the expectations and assumptions on which the
forward-looking statements are based are reasonable, undue reliance
should not be placed on the forward-looking statements because the
Company can give no assurance that they will prove to be correct.
Since forward-looking statements address future events and
conditions, by their very nature they involve inherent risks and
uncertainties. Actual results could differ materially from those
currently anticipated due to a number of factors and risks. These
include, but are not limited to, risks associated with the oil and
gas industry in general (e.g., operational risks in development,
exploration and production; delays or changes in plans with respect
to exploration or development projects or capital expenditures; as
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 fluctuations, changes in legislation affecting the
oil and gas industry and uncertainties resulting from potential
delays or changes in plans with respect to exploration or
development projects or capital expenditures. Refer to Spartan's
most recent Annual Information Form dated April 30, 2014, on Sedar
at www.sedar.com, and the risk factors contained therein.
The forward-looking statements contained in this press
release are made as of the date hereof and the Company undertakes
no obligation 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.
ADVISORY ON PRODUCTION INFORMATION: Unless otherwise
indicated herein, all production information presented herein has
presented on a gross basis, which is the Company's working interest
prior to deduction of royalties and without including any royalty
interests.
NON-IFRS MEASURES: This document contains the terms "funds
from operations" (or "cash flow"), "net debt", "field netback" and
"operating netback", which do not have a standardized meaning
prescribed by International Financial Reporting Standards ("IFRS")
and therefore may not be comparable with the calculation of similar
measures by other companies. Management uses funds from operations
to analyze operating performance and leverage. Management believes
"net debt" is a useful supplemental measure of the total amount of
current and long-term debt of the Company. Mark-to-market risk
management contracts are excluded from the net debt calculation.
Management believes "field netback" and "operating netback" are
useful supplemental measures of firstly, the amount of revenues
received after royalties and operating and transportation costs,
secondly, the amount of revenues received after royalties,
operating, transportation costs and realized gain (loss) on
derivatives, and thirdly, the amount of revenues received after
royalties, operating, transportation costs, realized gain (loss) on
derivatives, general and administrative costs, financial charges,
current taxes and asset retirement obligations. Additional
information relating to certain of these non-IFRS measures,
including the reconciliation between funds from operations and cash
flow from operating activities, can be found in the
MD&A.
BARRELS OF OIL EQUIVALENT: The term "boe" or barrels of oil
equivalent may be misleading, particularly if used in isolation. A
boe conversion ratio of six thousand cubic feet of natural gas to
one barrel of oil equivalent (6 Mcf: 1 bbl) is based on an energy
equivalency conversion method primarily applicable at the burner
tip and does not represent a value equivalency at the wellhead.
Additionally, given that the value ratio based on the current price
of crude oil, as compared to natural gas, is significantly
different from the energy equivalency of 6:1; utilizing a
conversion ratio of 6:1 may be misleading as an indication of
value.
INITIAL PRODUCTION RATES: Any references in this press
release to initial production rates are useful in confirming the
presence of hydrocarbons, however, such rates are not determinative
of the rates at which such wells will continue production and
decline thereafter. Additionally, such rates may also include
recovered "load oil" fluids used in well completion stimulation.
While encouraging, readers are cautioned not to place reliance on
such rates in calculating the aggregate production for the
Company.
Neither the TSX Venture Exchange nor its Regulation Services
Provider (as that term is defined in the policies of the TSX
Venture Exchange) accepts responsibility for the adequacy or
accuracy of this news release.
Spartan Energy Corp.Richard (Rick) McHardyPresident &
CEO(403) 355-8920(403) 355-2779Spartan Energy Corp.Michelle
WigginsVice President Finance & CFO(403) 355-8920(403)
355-2779
Spartan Energy Corp (TSXV:SPE)
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