Seaview Energy Inc. Releases Financial and Operating Results for the Three Months Ended March 31, 2011 and Provides Operations U
June 20 2011 - 7:59PM
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. ("Seaview" or the "Company") (TSX VENTURE:CVU.A) (TSX
VENTURE:CVU.B) releases an update on the Company's financial and operational
results for the three months ended March 31, 2011 and an update of recent
operations.
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SELECTED INFORMATION
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Financial ($000's except per
share amounts) Q1 2011 Q4 2010 % Change
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Petroleum and natural gas sales $ 6,382 $ 6,950 (8%)
Funds flow from operations (1) 2,947 3,938 (25%)
Basic and diluted per share(2) 0.05 0.06 (17%)
Net loss (2,778) (2,895) 4%
Basic and diluted per share(2) (0.04) (0.04) -
Capital expenditures (3) 12,967 11,517 13%
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Shares Outstanding at period
end (000's)
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Class A 65,553 65,537 -
Class B 1,054 1,054 -
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Operations
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Daily production
Natural gas (mcf/d) 12,286 14,016 (12%)
Light oil and NGLs (bbl/d) 277 305 (9%)
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Total production (boe/d) 2,325 2,641 (12%)
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Average realized sales price
(net of risk management gains)
Natural gas (per mcf) $ 4.38 $ 4.48 (2%)
Light oil and NGL (per bbl) 71.78 66.27 8%
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Netback per boe (1)
Sales price $ 30.50 $ 28.60 7%
Realized risk management gains 1.20 2.85 (58%)
Sales price (net of realized
risk management gains) 31.70 31.45 1%
Royalties (3.65) (3.02) 21%
Operating expenses (8.36) (5.44) 54%
Transportation (1.43) (1.63) (12%)
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Operating netback (1) $ 18.26 $ 21.36 (15%)
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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 FIRST QUARTER 2011
-- Funds flow from operations for Q1 2011 was $2.9 million compared to Q4
2010 funds flow of $3.9 million. The reduction in funds flow is
primarily attributed to the combination of natural production declines
and a reduction in hedging gains;
-- Average production for Q1 2011 was 2,325 boe per day compared to Q4 2010
volumes of 2,641 boe per day. The decrease in volumes is attributed to
natural declines as a result of minimal capital investment on the Peace
River Arch natural gas assets and delays in completions at Wapiti due to
service equipment constraints and weather related issues;
-- During the quarter, the Company successfully completed 2 Wapiti Cardium
horizontal wells (1.1 net) utilizing liquid propane gas ("LPG")
fracturing technology; the initial application of this technology. The
IP rates from these new wells are more than three times better than that
of the previous oil fractures completed by the Company in 2010 (see
table below). Advances in the initial production ("IP") rates in the
Cardium zone in the Wapiti area continue to be encouraging;
-- New production additions from 4 Cardium horizontal wells (2.4 net) were
brought on stream late in Q1 2011 or early Q2 2011. As a result, the
production from these wells had minimal impact on the average reported
production for Q1 2011;
-- During Q1 2011, Seaview completed the following operations:
-- Drilled 1 Wapiti Cardium horizontal well (0.7 net) located at 100/01-17-
066-08W6 ("1-17") which has subsequently been completed and placed on
production on March 19th with a 30 day IP rate of 361 boe per day (41%
crude oil and natural gas liquids);
-- Successfully completed 3 Wapiti Cardium horizontal wells (1.7 net),
which were drilled in Q4 2010, utilizing liquid propane gas ("LPG")
fracturing technology. Tie-in of each of these projects was completed
late in Q1 2011 and therefore had minimal impact on Q1 2011 production;
-- Initial 30-day production from the recent LPG fraced wells averaged 476
boe per day on a producing day basis and 306 boe per day on a calendar
day basis (61% crude oil and natural gas liquids); and
-- Completed installation of additional compression in Boundary Lake to
optimize the Company's 100% operated Kiskatinaw gas property, and also
completed the equip and tie-in of 1 natural gas well (1.0 net) adding
145 boe per day of production over Q1 2011.
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 37-42 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 Q1 2011, Seaview successfully drilled and completed 1 Cardium horizontal well
(0.7 net) and executed 2 Cardium horizontal completions wells (1.1 net) using
LPG fracturing technology, the initial application of this completion technology
in the Wapiti field. Seaview has significantly improved the initial production
rates through the application of this technology. The following information
outlines the initial 30 day production performance for the Wapiti Cardium wells
placed on production to date by Seaview and other regional operators:
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IP 30 Production (boe/d)
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Producing Calendar
Well Frac Fluid Day(3) Day(4) % Liquids Start date
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Phase 1 Completions: Early Exploration
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100/06-10-67-8W6(5) Water 53 52 93 Jun-2010
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100/01-09-66-8W6(1) Oil 179 95 76 Aug-2010
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100/04-17-66-7W6(1) Oil 100 72 94 Nov-2010
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100/04-22-66-8W6(1) Oil 54 48 82 Nov-2010
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Phase 1 Average 97 67 86
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Phase 2 Completions: Frac oil and Ball-drop
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100/16-35-66-8W6(5) Oil 160 84 89 Aug-2010
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100/08-19-66-7W6(5) Oil 136 136 89 Sep-2010
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100/12-14-67-9W6(1) Oil 161 121 54 Mar-2011
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100/01-03-66-8W6(1) Oil/LPG 166 82 63 Apr-2011
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Phase 2 Average 156 106 74
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Phase 3 Completions: LPG and Ball-drop
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100/01-17-66-8W6(1) LPG 414 361 41 Mar-2011
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100/14-28-67-8W6(2) LPG 538 250 81 Apr-2011
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Phase 3 Average 476 306 61
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(1) Denotes wells where Seaview is the operator and has a working interest
position.
(2) Denotes wells where Seaview is not the operator, but is a working
interest partner in the well.
(3) Producing day average is calculated by taking monthly production volumes
divided by producing days determined by calculating total monthly hours
divided by 24 hours.
(4) Calendar day average is calculated by taking monthly production volumes
divided by total days in the month.
(5) Denotes wells where Seaview has no working interest, production rates
are based on publically available data.
Seaview's two most recent horizontal wells, 100/01-17-066-08-W6 (67% WI) ("the
1-17 well") and 100/14-28-067-08-W6 (37.1% WI) ("the 14-28 well") were the
initial wells completed using LPG fracturing technology. Following an initial
clean-up period, the 1-17 well flowed an average 361 boe/d on a calendar day
basis (41% liquids) over the first 30 days on production. During the first two
weeks of June, the well averaged 225 boe/d on a calendar basis. Post initial
clean-up period, the 14-28 well flowed an average 250 boe/d on a calendar day
basis (81% liquids) over the first 30 days on production. The well has
experienced liquid loading issues and will be optimized by the installation of a
plunger lift system and modifications to the wellsite compressor.
Seaview is currently planning to execute an LPG based fracture treatment at
100/16-12-066-08W6 (54% working interest) in Q3 2011, subject to surface and
equipment access. In addition, Seaview is preparing for additional 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 (41 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
11% premium to the current calendar AECO 2011 futures strip of $3.76/GJ,
and a 13% premium to the current AECO strip price of $3.70/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 13.9 years based on Total Proven plus Probable
reserves and Q1 2011 production of 2,325 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 (41 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 March 31, 2011.
RELEASE OF FIRST QUARTER FINANCIALS
Seaview has filed its financial results for the period ended March 31, 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
a time and location to be announced.
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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