Here's your NewsCALGARY, ALBERTA--(Marketwired - Nov. 12, 2013) - Anderson Energy Ltd. ("Anderson" or the "Company") (TSX:AXL) announces its operating and financial results for the third quarter ended September 30, 2013.
HIGHLIGHTS
- Funds from operations in the third quarter of 2013 were $1.4 million. Production was 3,449 BOED. Oil and NGL production averaged 1,263 bpd in the third quarter of 2013. Oil represented 983 bpd of total production. Funds from operations for the first nine months of 2013 were $11.6 million.
- The Company's average oil price was $100.81 per bbl in the third quarter of 2013 ($83.09 per bbl after the loss on derivative contracts).
- Oil and NGL revenue represented 79% of Anderson's total oil and gas revenue in the third quarter of 2013.
- The operating netback was $17.77 per BOE in the third quarter of 2013 compared to $20.54 per BOE in the third quarter of 2012. The operating netback for the Cardium properties averaged $49.73 per BOE in the third quarter of 2013. The realized loss on derivative contracts reduced the third quarter netback by $5.05 per BOE in 2013. All outstanding derivative contracts expire by the end of 2013.
- In October 2013, the Company closed the sale of its Garrington and Ferrier Cardium oil and natural gas properties, repaid its bank debt, finalized a new revolving production loan facility for $28 million, and concluded its strategic alternatives review process. At the end of October 2013, the Company had approximately $24 million in cash deposits after repaying the bank debt.
- The Company's business plan is to grow its BOED production and the percentage of production derived from oil and NGL with light oil production from Cardium horizontal drilling using slickwater frac technology and the Company's industry leading capital cost solution in the Cardium horizontal light oil play.
- A seven gross well Cardium horizontal light oil winter drilling program has recently commenced. All seven wells are planned to be on production by the second quarter of 2014. The Company estimates it will spend approximately $33 million in field capital expenditures from now to the end of 2014, with approximately 90% spent on the drilling, completion and well tie-in of approximately 11 net Cardium wells. Based on this capital program, the Company currently estimates that 2014 average production will increase to approximately 2,600 BOED (33% oil and NGL) from the current post-asset disposition production of approximately 2,200 BOED (22% oil and NGL). The Company will update its business plan for 2014 at the end of the first quarter and provide updated 2014 capital and production guidance at that time.
FINANCIAL AND OPERATING HIGHLIGHTS
|
Three months ended September 30 |
|
Nine months ended September 30 |
|
| (thousands of dollars, unless otherwise stated) |
2013 |
|
2012 |
|
%
Change |
|
2013 |
|
2012 |
|
%
Change |
|
| Oil and gas sales* |
$ |
13,287 |
|
$ |
17,013 |
|
(22 |
%) |
$ |
45,766 |
|
$ |
62,532 |
|
(27 |
%) |
| Revenue, net of royalties* |
$ |
11,949 |
|
$ |
15,284 |
|
(22 |
%) |
$ |
41,562 |
|
$ |
56,019 |
|
(26 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Funds from operations |
$ |
1,408 |
|
$ |
5,725 |
|
(75 |
%) |
$ |
11,595 |
|
$ |
23,947 |
|
(52 |
%) |
| Funds from operations per share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted |
$ |
0.01 |
|
$ |
0.03 |
|
(67 |
%) |
$ |
0.07 |
|
$ |
0.14 |
|
(50 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Earning (loss) before effect of impairment loss and deferred tax adjustment |
$ |
(4,156 |
) |
$ |
94 |
|
N/A |
|
$ |
(12,941 |
) |
$ |
(7,598 |
) |
(70 |
%) |
| Earnings (loss) per share before effect of impairment loss and deferred tax adjustment, basic and diluted |
$ |
(0.02 |
) |
$ |
- |
|
N/A |
|
$ |
(0.07 |
) |
$ |
(0.04 |
) |
(75 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Earnings (loss) |
$ |
(48,737 |
) |
$ |
94 |
|
N/A |
|
$ |
(103,156 |
) |
$ |
(22,598 |
) |
(356 |
%) |
| Earnings (loss) per share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted |
$ |
(0.28 |
) |
$ |
- |
|
N/A |
|
$ |
(0.60 |
) |
$ |
(0.13 |
) |
(362 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Capital expenditures, net of proceeds on dispositions |
$ |
229 |
|
$ |
(28,986 |
) |
101 |
% |
$ |
8,077 |
|
$ |
(12,110 |
) |
167 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Bank loans |
|
|
|
|
|
|
|
|
$ |
53,945 |
|
$ |
88,922 |
|
(39 |
%) |
| Other working capital deficiency (surplus) ** |
|
|
|
|
|
|
|
|
$ |
(70,444 |
) |
$ |
8,069 |
|
973 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Convertible debentures |
|
|
|
|
|
|
|
|
$ |
88,361 |
|
$ |
86,247 |
|
2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Shareholders' equity |
|
|
|
|
|
|
|
|
$ |
30,466 |
|
$ |
141,751 |
|
(79 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Average shares outstanding (thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic & Diluted |
|
172,550 |
|
|
172,550 |
|
- |
|
|
172,550 |
|
|
172,550 |
|
- |
|
| Ending shares outstanding (thousands) |
|
172,550 |
|
|
172,550 |
|
- |
|
|
172,550 |
|
|
172,550 |
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Average daily sales: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil (bpd) |
|
983 |
|
|
1,274 |
|
(23 |
%) |
|
1,235 |
|
|
1,632 |
|
(24 |
%) |
|
NGL (bpd) |
|
280 |
|
|
576 |
|
(51 |
%) |
|
260 |
|
|
676 |
|
(62 |
%) |
|
Natural gas (Mcfd) |
|
13,119 |
|
|
23,519 |
|
(44 |
%) |
|
14,157 |
|
|
25,799 |
|
(45 |
%) |
|
Barrels of oil equivalent (BOED) |
|
3,449 |
|
|
5,770 |
|
(40 |
%) |
|
3,854 |
|
|
6,607 |
|
(42 |
%) |
| Average prices: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil ($/bbl) |
$ |
100.81 |
|
$ |
80.44 |
|
25 |
% |
$ |
90.71 |
|
$ |
84.03 |
|
8 |
% |
|
NGL ($/bbl) |
$ |
52.97 |
|
$ |
51.59 |
|
3 |
% |
$ |
53.62 |
|
$ |
58.06 |
|
(8 |
%) |
|
Natural gas ($/Mcf) |
$ |
2.27 |
|
$ |
2.24 |
|
1 |
% |
$ |
2.86 |
|
$ |
1.98 |
|
44 |
% |
|
Barrels of oil equivalent ($/BOE)* |
$ |
41.87 |
|
$ |
32.05 |
|
31 |
% |
$ |
43.49 |
|
$ |
34.54 |
|
26 |
% |
| Realized gain (loss) on derivative contracts ($/BOE) |
$ |
(5.05 |
) |
$ |
3.16 |
|
(260 |
%) |
$ |
(2.71 |
) |
$ |
1.77 |
|
(253 |
%) |
| Royalties ($/BOE) |
$ |
4.22 |
|
$ |
3.26 |
|
29 |
% |
$ |
3.99 |
|
$ |
3.60 |
|
11 |
% |
| Operating costs ($/BOE) |
$ |
14.47 |
|
$ |
11.28 |
|
28 |
% |
$ |
13.01 |
|
$ |
10.62 |
|
23 |
% |
| Transportation costs ($/BOE) |
$ |
0.36 |
|
$ |
0.13 |
|
177 |
% |
$ |
0.32 |
|
$ |
0.25 |
|
28 |
% |
| Operating netback ($/BOE) |
$ |
17.77 |
|
$ |
20.54 |
|
(13 |
%) |
$ |
23.46 |
|
$ |
21.84 |
|
7 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Wells drilled (gross) |
|
- |
|
|
- |
|
- |
|
|
2 |
|
|
3 |
|
(33 |
%) |
* Includes royalty and other income classified with oil and gas sales, but excludes realized and unrealized gains or losses on derivative contracts. Barrels of oil equivalent ("BOE") may be misleading, particularly if used in isolation. A BOE conversion ratio of 6 MCF:1 bbl is based on a energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.
**Excludes unrealized gains or losses on derivative contracts. 2013 includes assets held for sale and decommissioning obligations held for sale.
SLICKWATER FRAC TECHNOLOGY
The average initial production ("IP") performance for various calendar day averages of the wells drilled by the Company that were completed using slick water frac technology is shown below:
| Average gross initial production (initial production days) |
IP 30 |
IP 60 |
IP 90 |
IP 180 |
IP 270 |
| Number of wells in average |
7 |
7 |
7 |
7 |
6 |
| Barrels of oil per day (BOPD) |
301 |
225 |
184 |
116 |
101 |
| Barrels of oil and NGL per day (BPD) |
329 |
250 |
208 |
142 |
116 |
| Barrels of oil equivalent per day (BOED)* |
453 |
362 |
309 |
225 |
178 |
* Barrels of oil equivalent ("BOE") may be misleading, particularly if used in isolation. A BOE conversion ratio of 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.
PRODUCTION
Production in the third quarter of 2013 was 3,449 BOED, of which 1,263 bpd (37%) was derived from oil and natural gas liquids production. Overall production was lower in the third quarter of 2013 compared to the same period in 2012 due to property dispositions completed in 2012 and natural declines in other properties.
At various times during 2012 and 2013, as a result of fluctuating natural gas prices, certain natural gas production has been shut in. At the end of the third quarter, approximately 1.4 MMcfd of natural gas was still shut in. Natural gas pricing in the third quarter of 2013 was negatively impacted by changes in third party pipeline interruptible tolling practices in the quarter which compromised the export of Alberta gas and reduced natural gas pricing in the quarter.
FINANCIAL RESULTS
|
Average oil and NGL price
($/bbl) * |
Average wellhead natural gas price
($/Mcf) |
Revenue
($/BOE) |
Operating netback
($/BOE) * |
Funds from operations
($/BOE)* |
| 2011 |
86.53 |
3.60 |
42.13 |
25.89 |
19.40 |
| 2012 |
75.88 |
2.21 |
34.98 |
22.71 |
13.33 |
| Nine months ended September 30, 2013 |
84.26 |
2.86 |
43.49 |
23.46 |
11.02 |
* Average prices exclude gains and losses on derivative contracts. These gains and losses increased (reduced) operating netback and funds from operations by $(5.05) per BOE in 2013, $2.44 per BOE in 2012 and $(0.22) per BOE in 2011.
Anderson's funds from operations were $1.4 million in the third quarter of 2013 compared to $5.7 million in the third quarter of 2012. The Company's average crude oil and natural gas liquids sales prices in the third quarter of 2013 were $100.81 and $52.97 per bbl respectively compared to $80.44 and $51.59 per bbl in the third quarter of 2012. During the third quarter of 2013, oil and NGL revenue represented 79% of Anderson's total oil and gas revenue compared to 72% in the third quarter of 2012. The Company's average natural gas sales price was $2.27 per Mcf in the third quarter of 2013 compared to $2.24 per Mcf in third quarter of 2012. The Company recorded a loss of $48.7 million in the third quarter of 2013 due to the impairment of assets held for sale. The Company's operating netback was $17.77 per BOE in the third quarter of 2013 compared to $20.54 per BOE in the third quarter of 2012. The decrease in the operating netback was primarily due to higher operating costs resulting from increased transportation and equalization costs as well as the impact of fixed costs on lower sales volumes. Anderson's netback for its Cardium horizontal properties in the third quarter of 2013 was $49.73 per BOE (exclusive of hedging). The Company has fixed price swap contracts on 800 bpd of crude oil production at an average price of $90.56 WTI Canadian per bbl for October 2013 and 500 bbls per day for November and December 2013 at an average price of $90.63 WTI Canadian per bbl. The mark-to-market loss on derivative contracts was $1.0 million at September 30, 2013.
Capital expenditures were $0.2 million in the third quarter of 2013. This compares to capital expenditures before dispositions of $1.7 million in the third quarter of 2012.
LIGHT OIL HORIZONTAL DRILLING INVENTORY
The Company's undeveloped light oil horizontal drilling inventory (after the sale of Garrington and Ferrier properties that closed in October 2013) is outlined below:
Undeveloped drilling inventory as of October 31, 2013
(number of drilling locations) |
Gross |
Net * |
|
Willesden Green |
102 |
76 |
|
Pembina |
37 |
9 |
|
Total |
139 |
85 |
* Net is net revenue interest. The December 31, 2012 reserves report includes proved plus probable reserves for 20 net undeveloped locations related to these properties.
STRATEGY AND OUTLOOK
Over the course of the strategic alternatives process, which began in February 2012, the Company has:
- sold over $150 million in assets;
- reduced bank debt from $106.7 million at March 31, 2012 to nil at the date hereof;
- reduced total net debt (defined for this purpose as bank debt plus other working capital before unrealized gains and losses on derivative contracts, plus the face value of convertible debentures) from $230.4 million at March 31, 2012 to approximately $81 million at the end of October 2013;
- restructured all of its shallow gas and Cardium drilling commitments so that by the end of January 2013, the Company had completed all of its drilling commitments;
- demonstrated the improved production performance from slick water fracture stimulation; and
- continued to be an industry leader in low capital costs in the Cardium horizontal light oil play.
As a result, the Board of Directors concluded the strategic alternatives review process in October 2013 and the Company will commence a horizontal light oil development program with cash flow, available cash and credit facilities. Current post-asset disposition production is approximately 2,200 BOED (22% oil and NGL).
The Company's business plan is to grow its BOED production and the percentage of production derived from oil and NGL with light oil production from Cardium horizontal oil drilling. Accordingly, a seven gross well Cardium horizontal light oil winter drilling program commenced November 5, 2013, with all seven wells planned to be on production by the second quarter of 2014. The Company estimates that it will spend approximately $33 million in field capital expenditures from now to the end of 2014, with approximately 90% being spent on the drilling, completion and tie-in of approximately 11 net Cardium light oil wells. Based on this capital program, the Company estimates 2014 production will be approximately 2,600 BOED (33% oil and NGL). The Company has also embarked on a program to optimize, rationalize, consolidate and improve the profitability of its Edmonton Sands shallow gas assets. The Company will update its business plan for 2014 at the end of the first quarter and provide updated 2014 capital and production guidance at that time.
The disposition of the Garrington and Ferrier properties and the lack of drilling activity since the first quarter of 2013 will negatively impact funds from operations, particularly in the fourth quarter of 2013. However, the seven well drilling program will begin to contribute positively to increased oil production and funds from operations in the first and second quarters of 2014.
Further information is available on the Company's website at www.andersonenergy.ca.
Read more at
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