CALGARY, ALBERTA--(Marketwire - Jan. 12, 2012) -
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Open Range Energy Corp. (TSX:ONR) ("Open Range" or the "Company") is pleased to provide an overview of its 2012 capital investment program and initial guidance for 2012 production and funds from operations.
Open Range's Board of Directors has approved an initial 2012 capital investment program totalling $45 million that shifts investment in the near term to the Company's organically generated, 100 percent working interest Montney light oil play at Waskahigan, which has been significantly de-risked by offsetting industry well results. Open Range's first horizontal well at Waskahigan was spud on January 3rd.
2012 Highlights:
- Planned drilling of six (5.7 net) wells, including four horizontal wells targeting Montney light oil, plus completion of three (2.6 net) horizontal wells drilled in late 2011 at Ansell/Sundance;
- Average production of approximately 6,200 boe per day, an increase of 38 percent over 2011 guidance;
- Targeted light oil production of approximately 700 bbls per day exiting 2012 and a corporate exit rate estimated at approximately 5,800 boe per day; and
- Estimated 2012 funds from operations of $40 million (
.54 per basic share), based on an average crude oil price of US$85 per barrel WTI and an average AECO natural gas price of Cdn$3.25 per GJ.
Current Company production is approximately 6,200 boe per day, with three (2.6 net) horizontal wells awaiting completion at Ansell/Sundance anticipated to add approximately 1,000 boe per day of initial net production in the coming weeks.
"Waskahigan creates a catalyst for light oil production growth and added value over the short term, while our principal asset at Ansell/Sundance provides a profitable, low-cost base of liquids-rich production with strong growth potential under improved gas pricing," said Scott Dawson, Open Range's President and Chief Executive Officer. "Our 2012 capital program reflects a prudent allocation based on commodity prices and the strong light oil opportunity that we have."
Montney Horizontal Light Oil Program
Open Range's primary focus for 2012 is to grow Montney light oil production at its 100 percent working interest Waskahigan property, increasing its corporate oil and liquids weighting. The Company views this as a catalyst for the initial balancing of its product mix and an increase to its corporate average netback, with Montney oil production anticipated to generate netbacks of approximately $50 per boe.
Open Range has identified an inventory of 20 horizontal locations at Waskahigan and the Company's initial plans are to drill four Montney wells at the property by year-end 2012. The Company's first Montney horizontal well was spud on January 3rd. The remaining program will commence after spring break-up.
Company lands are immediately offset by at least 17 drilled horizontal Montney wells, substantially de-risking the play. Highlights include:
- Known area wells to date have achieved an average 30-day IP rate of approximately 300 bbls per day of high-quality, 40° API oil;
- Several of these wells have been tested at rates exceeding 1,000 bbls of oil per day;
- One well located less than 600 metres from Open Range lands has produced 70,000 bbls of oil over its first 15 months on production, averaging 155 bbls of oil per day over that period; and
- An offsetting competitor has reported estimated netbacks of $60 per boe, operating costs below $7 per boe and recycle ratios of approximately 3 times.
These results suggest the high quality of the Company's opportunity at Waskahigan. Open Range is basing its initial program on the following current parameters:
- Per-well costs of approximately $4.8 million from spud to on-production;
- A type curve including an IP30 of 300 bbls per day with expected ultimate recovery of approximately 160,000 bbls of light oil per well.
The Montney siltstone at Waskahigan is at a depth of approximately 2,200 metres. The Company's landholdings contain a large resource with a best estimate, as of the date hereof, of six million bbls of total petroleum initially-in-place per section, with net pay of approximately six metres and average porosity of 10 percent.
Open Range's horizontal wells will have a planned total measured depth of approximately 3,600-3,800 metres and will be completed with an open-hole packer system. The fracturing treatment will incorporate at least 12 intervals and approximately 20 tonnes of proppant per interval. Engineering and procurement of equipment for a light oil battery and solution gas tie-in at Waskahigan is underway.
Duvernay Shale Opportunity
In addition to its highly prospective Montney light oil development program at Waskahigan, Open Range also controls the deeper Duvernay shale rights on eight sections of 100 percent-owned Waskahigan lands. Open Range's lands are mapped within the over-pressured, liquids-rich gas fairway of the Duvernay shale.
Over the past two to three years the area has seen multiple deep rights mineral purchases and drilling or licensing of approximately 20 Duvernay test wells. Duvernay activity around Open Range's lands continues to accelerate, with an additional six known wells recently licensed by several operators to further test and refine the play.
Open Range's lands directly offset this activity and recently announced nearby competitor results indicate the play has progressed significantly with increased per-well deliverability, reduced costs and exceptional total liquid recoveries of over 100 bbls per mmcf, including a high ratio of condensate.
Ansell/Sundance
Open Range's primary liquids-rich Deep Basin natural gas asset at Ansell/Sundance continues to perform well. Three (2.6 net) horizontal wells targeting the Wilrich and Cardium formations are awaiting completion and are expected to add approximately 1,000 boe per day net to the Company's production.
The Company is currently completing its 100 percent working interest 12-31 deep cut gas processing facility. It will be commissioned later in the first quarter, increasing liquids recovery to approximately 18 bbls per mmcf on a portion of current production and providing increased capacity for the Company's extensive horizontal inventory on its northeastern land base.
Open Range's excellent recent horizontal drilling results in the Notikewin and Wilrich formations at Ansell/Sundance, plus further tie-ins scheduled in the following weeks, and the improving decline profile associated with horizontal wells at Ansell/Sundance, will sustain 2012 production at a level significantly above the Company's average rate in 2011. In addition, two multi-zone vertical wells will be drilled and completed in the first half of 2012 for production and land retention, as well as to further increase the Company's high-quality horizontal drilling inventory.
Thanks to the efficiency of its operations, Open Range expects that its operating costs at Ansell/Sundance will average approximately $4.00 per boe or
.67 per mcfe of production in 2012. This advantage will enable Open Range to sustain a corporate average operating netback of approximately $19.40 per boe at an AECO gas price of $3.25 per GJ, and $15.00 per boe at $2.50 per GJ.
With over 100 horizontal drilling locations and a track record of success, Ansell/Sundance continues to provide a material, liquids-rich natural gas growth opportunity for the longer term. The Company plans to return to its aggressive drilling profile as natural gas prices recover.
Guidance
The Company's fast-tracked capital expenditures in the fourth quarter of 2011 accelerated a portion of spending previously planned for 2012 into 2011, contributing to strong horizontal drilling and production success at Ansell/Sundance, and funding additional strategic land purchases plus construction of the Company's second gas processing facility.
The Company has a $75 million bank line with a three-bank syndicate and approximately 35 percent of its bank line available based on 2011 year-end net debt of approximately $49 million. With its planned capital investment program of $45 million in 2012, Open Range's exit 2012 debt is forecast at approximately $54 million.
Open Range's production is forecast to average 6,200 boe per day in 2012, an increase of 38 percent over 2011 guidance. The Company is forecasting a 2012 exit production rate of approximately 5,800 boe per day, with an increased light oil component. Open Range anticipates approximately 700 bbls per day of light oil production exiting 2012 plus 350 bbls per day of natural gas liquids, resulting in approximately 18 percent corporate liquids weighting generating an estimated 35 percent of Open Range's revenues and increasing operating netbacks to approximately $22.00 per boe.
Funds from operations in 2012 are forecast at approximately $40 million, based on an average crude oil price of $85 per bbl WTI and an AECO natural gas price of $3.25 per GJ.
OPEN RANGE ENERGY CORP. IS A PUBLICLY TRADED CANADIAN ENERGY COMPANY WITH FOCUSED OPERATIONS IN THE DEEP BASIN REGION OF ALBERTA. OPEN RANGE HAS APPROXIMATELY 74.7 MILLION COMMON SHARES ISSUED AND OUTSTANDING, WHICH TRADE ON THE TSX UNDER THE SYMBOL "ONR".
Reader Advisory
This news release contains the term "funds from operations" which is defined as cash provided by (used in) operating activities before the change in non-cash working capital related to operating activities and decommissioning expenditures incurred. Funds from operations does not have any standardized meaning prescribed by international financial reporting standards (IFRS) and therefore it may not be comparable with the calculation of similar measures for other entities. Management uses funds from operations to analyze the operating performance of the business. Funds from operations as presented is not intended to represent cash flow from operations or operating profits for the period nor should it be viewed as an alternative to cash provided by operating activities, net earnings or other measures of financial performance calculated in accordance with IFRS.
This news release contains certain forward-looking statements and other information (collectively "forward-looking information") about our current expectations, estimates and projections. Forward-looking information in this news release is identified by words such as "anticipate", "believe", "expect", "plan", "forecast", "target", "could", "focus", "vision", "goal", "proposed", "scheduled", "milestone", "outlook", "potential", "may", "looking forward to", or similar expressions and includes suggestions of future outcomes, including statements about our growth strategy and related milestones and schedules, forecast operating and financial results, planned capital expenditures, expected future production, including the timing, stability or growth thereof, expected resources estimates, forecasted commodity prices and projected increasing shareholder value. Readers are cautioned not to place undue reliance on forward-looking information as our actual results may differ materially from those expressed or implied. Developing forward-looking information involves reliance on a number of assumptions and consideration of certain risks and uncertainties, some of which are specific to Open Range and others that apply to the industry generally. The factors or assumptions on which the forward-looking information is based include: our projected capital investment levels, the flexibility of capital spending plans and the associated source of funding; estimates of quantities of oil, bitumen, natural gas and liquids from properties and other sources not currently classified as proved; the successful and timely implementation of capital projects; our ability to generate sufficient cash flow from operations to meet our current and future obligations; our expectations of the general activity of the oil and gas industry; and other risks and uncertainties described from time to time in the filings we make with securities regulatory authorities.
Actual results could differ materially from those currently anticipated due to a number of factors, risks and uncertainties. Such risks and uncertainties include, without limitation, risks associated with oil and natural gas exploration, development, exploitation, production, marketing and transportation, loss of markets, volatility of commodity prices, currency fluctuations, imprecision of reserve estimates, environmental risks, competition from other producers, inability to retain drilling rigs and other services, operating risk liability, delays resulting from or inability to obtain required regulatory approvals and ability to access sufficient capital from internal and external sources, the impact of general economic conditions in Canada and the United States, industry conditions, changes in laws and regulations (including the adoption of new environmental laws and regulations) and changes in how they are interpreted and enforced, increased competition, the lack of availability of qualified personnel or management, fluctuations in foreign exchange or interest rates, stock market volatility and market valuations of companies with respect to announced transactions and the final valuations thereof, and obtaining required approvals of regulatory authorities. Readers are cautioned that the foregoing list of factors is not exhaustive. All subsequent forward-looking statements, whether written or oral, attributable to Open Range or persons acting on its behalf are expressly qualified in their entirety by these cautionary statements. Additional information on the foregoing risks and other factors that could affect Open Range's operations and financial results are included in the Company's annual information form and other reports on file with Canadian securities regulatory authorities and may be accessed through the SEDAR website (www.sedar.com). Furthermore, the forward-looking statements contained in this news release are made as at the date of this news release and Open Range does not undertake any obligation to update publicly or to revise any of the included forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by applicable securities laws.
Certain natural gas volumes have been converted to barrels of oil equivalent ("boe") on the basis of six thousand cubic feet (mcf) too one barrel (bbl). Disclosure provided herein in respect of boe may be misleading, particularly if used in isolation. A boe conversion ratio of 6 mcf:1 barrel is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.
This news release contains "analogous information" as defined in National Instrument 51-101 Standards of Disclosure for Oil and Gas Activities ("NI 51-101"). Such information is based on public data disclosed by competitors with lands offsetting certain of the Company's lands in 2011 and it is not known whether such information was prepared independently for such competitors or by a qualified reserves evaluator.
This news release contains information regarding "resources" as defined in NI 51-101. The estimate of resources has been prepared internally by a qualified reserves evaluator. There is no certainty that any portion of the resources will be discovered. If discovered, there is no certainty that it will be commercially viable to produce any portion of the resources.
"Total petroleum initially-in-place" is that quantity of petroleum that is estimated to exist originally in naturally occurring accumulations. It includes that quantity of petroleum that is estimated, as of a given date, to be contained in known accumulations, prior to production, plus the estimated quantities in accumulations yet to be discovered.