CALGARY, Alberta, Nov. 8, 2012 /CNW/ - Equal Energy Ltd. ("Equal", "the Company", "We" or "Our") (TSX: EQU) (NYSE: EQU) is pleased to announce its financial and operating results for the third quarter ended September 30, 2012.
Don Klapko, President and Chief Executive Officer commented, "Management placed significant attention on our Strategic Review process during Q3 and subsequent to the end of the quarter, culminating in a number of announcements including:
| 1. Sale of Northern Oklahoma |
$40.0 million |
| 2. Sale of Halkirk/Alliance/Wainwright/Clair |
$15.4 million |
| 3. Sale of Lochend Cardium |
$62.0 million |
| Total |
$117.4 million |
| 4. Elimination of amounts outstanding on our bank credit facility with an estimated revised bank credit facility of $110.0 million. |
| 5. Net debt including convertible debentures of approximately $35.0 million subsequent to the Lochend Cardium sale. |
| 6. Continued commitment to development of our Central Oklahoma liquids-rich gas assets. |
During this time, the base business at Equal continued to deliver strong results in the areas of cost control, drilling success and production. During the quarter, we focused on our Lochend Cardium oil play in Alberta and brought on production two strong Lochend Cardium wells in the quarter which no doubt contributed to an excellent outcome for Equal on the sale of the Lochend Cardium announced on November 2."
Strong Operating Results
Production was down four percent year on year, averaging over 10,800 boe per day due to asset sales late in 2011 and earlier this year. Operating costs were lower on a unit basis as a result of a continued focus on our cost structure and a more cost advantage asset mix. Interest costs were also down with lower debt levels. Capital spending has approximated cash flow for the first nine months of the year as we continue to be disciplined on matching spending to cash flow and using the proceeds of asset sales to further improve our balance sheet. Funds from operations were down 38 percent in the third quarter of 2012 compared to the third quarter of 2011 mainly due to weak natural gas and natural gas liquids prices.
Successful Drilling Programs
In the first nine months of 2012, Equal drilled 11 (9.2 net) wells which were all successful. Nine of these wells were drilled in Oklahoma; six of which were sold with the Northern Oklahoma sale in late September and the remaining three wells were drilled in our core Twin Cities Central Dolomite (TCCD) play in Central Oklahoma. Our first 2012 Lochend Cardium horizontal oil well was drilled late in the second quarter and brought on stream early in the third quarter and a second Lochend Cardium well was drilled and placed on stream in the third quarter.
Strategic Review
Our remaining Canadian asset is represented by a royalty stream of payments from producing wells in Western Canada. Equal will continue to operate its Central Oklahoma assets consisting of approximately 7,800 boe/d of liquids-rich natural gas where we've had strong historical drilling success. We have identified a strong inventory of future drilling locations and have staff of experienced people in Oklahoma to manage these assets. Management believes that in addition to successful drilling, there is significant additional upside from natural gas and NGL commodity price recovery. We are currently planning to commence drilling in the Hunton early in the new year.
The Company is still conducting its Strategic Review process and is evaluating proposals for the sale of the remaining royalty assets which, if sold, will represent an exit from all Canadian operations. Equal's Special Committee of the Board of Directors and management are moving to the final step in the Strategic Review Process to finalize the go forward strategy for the Company. A Canadian Trust, U.S. Master Limited Partnership and an Exploration and Production Corporation are all being considered. The make-up of the Board of Directors and Executive Management team as well as an overall go forward manpower plan will follow the Company structure decision. Equal expects to conclude the Strategic Review process shortly after the conclusion of the evaluation of the royalty proposals, likely by late November 2012.
The following table is a summary of selected financial and operational information for the three and nine months ended September 30, 2012 with comparative 2011 figures.
|
|
|
|
|
|
Financial and Operations Summary
(in thousands except for volumes, percentages and per
share and boe amounts) |
Three months ended
September 30 |
|
Nine months ended
September 30 |
|
| 2012 |
2011 |
Change |
2012 |
2011 |
Change |
| FINANCIAL |
|
|
|
|
|
|
| NGL, natural gas and oil revenues including realized hedging |
29,129 |
44,452 |
(34%) |
88,333 |
121,354 |
(27%) |
| Funds from operations |
10,900 |
17,435 |
(37%) |
31,867 |
45,617 |
(30%) |
|
Per share - basic ($) |
0.31 |
0.50 |
(38%) |
0.91 |
1.47 |
(38%) |
|
Per share - diluted ($) |
0.28 |
0.50 |
(44%) |
0.82 |
1.43 |
(43%) |
| Net income |
14,006 |
(2,642) |
630% |
18,183 |
468 |
3785% |
|
Per share - basic($) |
0.40 |
(0.08) |
600% |
0.52 |
0.02 |
2500% |
|
Per share - diluted ($) |
0.35 |
(0.08) |
538% |
0.49 |
0.01 |
4800% |
| Total assets |
399,253 |
536,232 |
|
399,253 |
536,232 |
|
| Working capital (deficit) including long-term debt |
(63,855) |
(141,864) |
|
(63,855) |
(141,864) |
|
| Convertible debentures |
41,952 |
80,332 |
|
41,952 |
80,332 |
|
| Shareholders' equity |
232,218 |
243,810 |
|
232,218 |
243,810 |
|
| SHARES OUTSTANDING |
|
|
|
|
|
|
| Shares outstanding - basic (000s) |
35,077 |
34,667 |
|
35,031 |
31,124 |
|
| Shares outstanding - diluted (000s) |
41,653 |
34,667 |
|
41,399 |
31,849 |
|
| Shares outstanding at period end (000s) |
35,080 |
34,736 |
|
35,080 |
34,736 |
|
| OPERATIONS |
|
|
|
|
|
|
| Average daily production |
|
|
|
|
|
|
|
NGL (bbls per day) |
4,278 |
3,580 |
19% |
4,101 |
2,869 |
43% |
|
Gas (mcf per day) |
31,200 |
32,264 |
(3%) |
30,928 |
26,767 |
16% |
|
Oil (bbls per day) |
1,349 |
2,306 |
(42%) |
1,266 |
2,472 |
(49%) |
| Total (boe per day) |
10,827 |
11,263 |
(4%) |
10,522 |
9,802 |
7% |
| Average sales price |
|
|
|
|
|
|
|
NGL ($ per bbl) |
27.71 |
48.40 |
(43%) |
31.39 |
49.04 |
(36%) |
|
Gas ($ per mcf) |
2.67 |
3.73 |
(28%) |
2.72 |
3.80 |
(28%) |
|
Oil ($ per bbl) |
85.71 |
82.24 |
4% |
86.54 |
81.70 |
6% |
| Cash flow netback ($ per boe) |
|
|
|
|
|
|
|
Revenue |
29.24 |
42.90 |
(32%) |
30.64 |
45.35 |
(32%) |
|
Royalties |
5.90 |
8.82 |
(33%) |
5.91 |
9.17 |
(36%) |
|
Production expenses |
7.72 |
11.11 |
(31%) |
8.63 |
11.63 |
(26%) |
|
Transportation expenses |
0.18 |
0.39 |
(54%) |
0.22 |
0.49 |
(55%) |
|
Operating netback |
15.44 |
22.58 |
(32%) |
15.88 |
24.06 |
(34%) |
|
General and administrative |
2.87 |
2.67 |
7% |
2.91 |
3.62 |
(20%) |
|
Cash interest expense |
1.61 |
2.81 |
(43%) |
1.93 |
3.19 |
(39%) |
|
Other cash costs |
0.02 |
0.27 |
(93%) |
(0.01) |
0.20 |
(105%) |
|
Cash flow netback |
10.94 |
16.83 |
(35%) |
11.05 |
17.05 |
(35%) |
Equal Energy Ltd.'s complete unaudited, consolidated financial statements, accompanying notes and Management's Discussion and Analysis for the quarter ended September 30, 2012 will be available on Equal's website at www.equalenergy.ca, on SEDAR at www.sedar.com and on EDGAR at www.sec.gov/edgar.shtml.
About Equal Energy Ltd.
Equal is an exploration and production oil and gas company based in Calgary, Alberta, Canada with its United States operations office located in Oklahoma City, Oklahoma. Equal's shares and convertible debentures are listed on the Toronto Stock Exchange under the symbols (EQU, EQU.DB.B) and Equal's shares are listed on the New York Stock Exchange under the symbol (EQU). The oil and gas properties are Oklahoma. Equal has compiled a multi-year drilling inventory for its Hunton liquids rich natural gas property in Oklahoma.