CALGARY, ALBERTA--(Marketwire - Nov. 14, 2012) - Delphi Energy Corp. (TSX:DEE) ("Delphi" or the "Company") is pleased to announce its financial and operational results for the quarter ended September 30, 2012.
Third Quarter 2012 Highlights
- produced an average of 8,257 barrels of oil equivalent per day ("boe/d");
- increased its average corporate NGL yield by approximately 33 percent to a current 40 barrels per million cubic feet ("bbls/mmcf") from an average of 30 bbls/mmcf prior to the start-up of the Bigstone East Montney production;
- commenced drilling operations at the Bigstone East Montney 16-3 location; and
- closed the disposition of the Company's Cardium oil assets at Bigstone representing 450 boe/d for net proceeds of $22.4 million with proceeds applied against bank debt.
| Financial Information ($ thousands except per unit amounts) | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, | |
| | 2012 | | 2011 | | % Change | | 2012 | | 2011 | | % Change | |
| Petroleum and natural gas sales | 20,878 | | 32,194 | | (35 | ) | 66,896 | | 93,772 | | (29 | ) |
| | Per boe | 29.25 | | 40.78 | | (28 | ) | 29.65 | | 40.49 | | (27 | ) |
| Funds from operations | 7,881 | | 17,213 | | (54 | ) | 26,036 | | 49,791 | | (48 | ) |
| | Per boe | 10.37 | | 20.87 | | (50 | ) | 11.02 | | 20.92 | | (47 | ) |
| | Per share - Basic | 0.06 | | 0.15 | | (60 | ) | 0.20 | | 0.43 | | (53 | ) |
| | Per share - Diluted | 0.06 | | 0.14 | | (57 | ) | 0.20 | | 0.42 | | (52 | ) |
| Net earnings (loss) | (9,190 | ) | 4,058 | | (326 | ) | (28,636 | ) | 10,777 | | (366 | ) |
| | Per boe | (12.10 | ) | 4.92 | | (346 | ) | (12.11 | ) | 4.53 | | (367 | ) |
| | Per share - Basic | (0.07 | ) | 0.03 | | (333 | ) | (0.22 | ) | 0.09 | | (344 | ) |
| | Per share - Diluted | (0.07 | ) | 0.03 | | (333 | ) | (0.22 | ) | 0.09 | | (344 | ) |
| Capital invested | 7,516 | | 33,356 | | (77 | ) | 72,190 | | 77,195 | | (6 | ) |
| Disposition of properties | (23,045 | ) | (7,702 | ) | 199 | | (34,619 | ) | (8,038 | ) | 331 | |
| Net capital invested | (15,529 | ) | 25,654 | | (161 | ) | 37,571 | | 69,157 | | (46 | ) |
| Acquisition of properties | - | | 130 | | - | | - | | 217 | | - | |
| Total capital invested | (15,529 | ) | 25,784 | | (160 | ) | 37,571 | | 69,374 | | (46 | ) |
| Operational Information | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, | |
| Production | 2012 | | 2011 | | % Change | | 2012 | | 2011 | | % Change | |
| Crude oil (bbls/d) | 573 | | 1,262 | | (55 | ) | 796 | | 1,165 | | (32 | ) |
| Field condensate (bbls/d) | 257 | | 133 | | 93 | | 229 | | 117 | | 96 | |
| Natural gas liquids (bbls/d) | 1,069 | | 1,074 | | - | | 1,117 | | 1,154 | | (3 | ) |
| Total crude oil and natural gas liquids | 1,899 | | 2,469 | | (23 | ) | 2,142 | | 2,436 | | (12 | ) |
| Natural gas (mcf/d) | 38,148 | | 38,989 | | (2 | ) | 38,910 | | 37,662 | | 3 | |
| Total (boe/d) | 8,257 | | 8,967 | | (8 | ) | 8,627 | | 8,714 | | (1 | ) |
| | | | | | | | |
| | | September 30, 2012 | | December 31, 2011 | | % Change | |
| Debt plus working capital deficiency (1) | | 117,016 | | 95,632 | | 22 | |
| Total assets | | 425,998 | | 447,073 | | (5 | ) |
| Shares outstanding (000's) | | | | | | | |
| | Basic | | 131,235 | | 131,000 | | 1 | |
| | Diluted | | 142,910 | | 141,591 | | 1 | |
| | | | | | | | | | | | | |
(1) excludes the fair value of financial instruments.
MESSAGE TO SHAREHOLDERS
The third quarter of 2012 was highlighted by continued challenging natural gas prices due to ongoing strong production supply in the United States despite a significant reduction in drilling rigs focused on natural gas. Increased coal-to-gas switching for the purpose of generating electricity during a hot summer in the U.S. eroded a significant over supply of natural gas entering the summer injection season, however, only down to normal levels at the start of the winter heating season. Canadian AECO natural gas prices averaged 24 percent higher than the second quarter at $2.30 per thousand cubic feet ("mcf").
Production during the third quarter of 2012 averaged 8,257 boe/d, representing an eight percent decrease from the comparative quarter of 2011. The decrease in production was primarily due to the disposition of predominantly producing oil properties in the first and third quarter of 2012, resulting in crude oil production down 689 bbls/d or 55 percent compared to the third quarter of 2011. Field condensate production increased 93 percent over the same period as a result of the production growth from the Bigstone East Montney property. Field and plant recovered condensate now represents approximately 40 percent of the total NGL production volumes. Production volumes for the third quarter were also negatively impacted by approximately 380 boe/d (34 percent NGL's) due to maintenance outages at Wapiti.
Capital expenditures during the third quarter were $7.5 million, which primarily included the completion and tie-in of its third Montney horizontal well in Bigstone East. Net capital expenditures in the third quarter of 2012 were negative $15.5 million as a result of net proceeds of $23.0 million from the disposition of its Cardium oil assets and working interests in North East British Columbia. For the nine months ending September 30, 2012 net capital expenditures were $37.6 million of which $22.9 million or 61 percent were for facilities and pipeline infrastructure at Bigstone East. Due to low natural gas prices during the first nine months of 2012, net capital expenditures in 2012 have been curtailed to just 54 percent of 2011 levels.
Funds from operations in the third quarter of 2012 were $7.9 million or $0.06 per basic share. Delphi's funds flow and cash netbacks were primarily negatively affected in the third quarter compared to the same quarter in 2011 by lower oil volumes and lower prices received primarily for its natural gas and natural gas liquids volumes.
For the quarter ended September 30, 2012, the Company recognized approximately $2.1 million in realized gains on financial and physical commodity risk management contracts. For the remainder of 2012, Delphi has approximately 66 percent of its daily natural gas production protected at an average price of $2.88 per mcf and approximately 90 percent of its daily light oil production fixed by financial contracts at an average WTI price of Cdn. $98.50 per barrel ("bbl"), providing significant stability to the Company's funds from operations.
Operations
Bigstone Montney
With the benefit of production history and ongoing reservoir characterization of the Montney formation, the Company continues to enhance its approach to drilling and completion operations with the goal of optimizing capital efficiencies and continued improvement in well results. Liquid yields continue to exceed the Company's expectations.
At Bigstone East, the Company has commenced drilling its forth horizontal Montney well at a surface location of 16-3-60-23W5. The Company looks forward to reporting results once the well has been completed in early 2013. After an ambitious start to developing the Montney play at Bigstone East through 2012, including construction of significant 100 percent owned infrastructure, the Company's capital program at Bigstone East will now be allocated primarily to the drilling of new wells and filling up the existing capacity.
The Company expects to spud a second Montney well at Bigstone East prior to year-end 2012.
The Company's first Montney horizontal well at Bigstone East (100 percent working interest), with a surface location of 1-19-60-22W5 has produced over its first 180 days at an average rate of 2.2 mmcf/d sales (561 boe/d). Current liquids yield, including shallow-cut gas plant NGL recoveries, is 80 bbls/mmcf sales, 59 percent of which is field and plant recovered condensate.
The Company's second Montney horizontal well at Bigstone East (75 percent working interest), with a surface location of 5-14-60-23W5 has produced over its first 150 days at an average gross rate of 2.2 mmcf/d sales (494 boe/d). Current liquids yield, including shallow-cut gas plant NGL recoveries, is 60 bbls/mmcf sales, 56 percent of which is field and plant recovered condensate.
The Company's third Montney horizontal well at Bigstone East (100 percent working interest), also with a surface location of 5-14-60-23W5 has produced over its first 90 days at an average rate of 4.4 mmcf/d sales (976 boe/d). Current liquids yield, including shallow-cut gas plant NGL recoveries, is 65 bbls/mmcf sales, 52 percent of which is field and plant recovered condensate.
Bigstone Gething
The Company remains encouraged by the results of its first Gething horizontal well at Bigstone with a surface location of 3-16-60-23W5 (65 percent working interest). The well was completed with a 10 stage fracture treatment over the 879 m horizontal lateral. The well has produced over its first 180 days at an average rate of 2.5 mmcf/d sales (485 boe/d). Current liquids yield, including shallow-cut gas plant NGL recoveries, is 25 bbls/mmcf sales, 63 percent of which is field and plant recovered condensate. The Company has identified approximately 57 gross locations over its existing land base.
Wapiti
After being delayed by wet weather conditions, the Company plans to commence completion operations in the next week on two deviated wells (2.0 net) drilled from the same surface location in early 2012. The wells will be completed in the Nikanassin and Gething formations and are expected to produce liquids at approximately 80 bbls/mmcf sales, including deep-cut plant NGL recoveries. Both wells are expected to be on production by mid-December.
Outlook
Delphi is optimistic on an improved natural gas price outlook through 2013, recognizing the price sensitivity to a much needed normal winter heating demand cycle. Natural gas prices have continued to recover from the lows of Cdn. $1.67 per mcf experienced in the second quarter to current price levels over $3.00 per mcf. The Company has approximately 40 percent of its natural gas volumes hedged for the first quarter of 2013 at $2.85 per mcf, falling to approximately 20 percent at $3.08 for the remainder of 2013. The Company plans to increase its 2013 hedge position to approximately 50 percent over the next several months.
Capital expenditures for the remainder of the year are expected to be in line with funds from operations to maintain the balance sheet strength and financial flexibility achieved through the disposition of the Company's Cardium assets in the Bigstone area for $23.0 million and the recent $33.0 million equity financing resulting in current net bank debt reduced to approximately $85.0 million.
The Company expects to release its first half 2013 drilling plans and capital budget with preliminary production guidance in early December, 2012. The winter capital program is expected to focus on development drilling activities as well as potential consolidation opportunities at Bigstone.
On behalf of the Board of Directors and all the employees of Delphi, we would like to thank our shareholders for their continued support as we remain focused on sustainable, capital efficient growth of the Company's production and reserve base while maintaining financial strength and flexibility in this challenging crude oil and natural gas pricing environment.