(TSX: LNV)
CALGARY, Dec. 12, 2012 /CNW/ - Longview Oil Corp. ("Longview" or the "Company") is pleased to announce that the Board of Directors has approved operational guidance and a capital budget of $36 million for the year ending December 31, 2013.
Consistent with our business strategy, we have developed a sustainable and balanced 2013 budget that will preserve a strong balance sheet while utilizing funds from operations to maintain our current dividend policy and fund substantially all of our capital expenditures while maintaining production at 2012 levels. Longview has a base decline rate of approximately 19% which allows the Company to maintain production with a modest level of capital expenditures.
Budget and Guidance
The following table summarizes operational and financial guidance for Longview for the year ending December 31, 2013 as compared to the first 3 quarters of 2012:
|
|
|
2013 Guidance |
|
|
Q1 - Q3 2012 |
| Production |
|
|
6,200 boe/d to 6,300 boe/d |
|
|
6,211 boe/d |
| % oil |
|
|
71% |
|
|
66% |
| % liquids |
|
|
8% |
|
|
9% |
| % gas |
|
|
21% |
|
|
25% |
| Royalty rate |
|
|
19% to 21% |
|
|
19.3% |
| Operating expenses |
|
|
$19.00/boe to $20.00/boe |
|
|
$20.11/boe |
| Capital expenditures |
|
|
$36 million |
|
|
$32.7 million |
- Although production levels are forecast to remain consistent with Q1 - Q3 2012 the percentage related to crude oil is expected to grow by 7% to 71% of total production as the 2013 capital budget is entirely focused on oil weighted projects. Production from crude oil and NGLs are expected to increase to 79% of total production in 2013 up from 75% in 2012.
- Based on the mid-range of guidance, funds from operations for 2013 are estimated at approximately $59 million. Commodity price assumptions include: WTI crude oil price of $89.50 US/bbl, a crude oil price differential (WTI to Edmonton light) of $7.50/bbl, a Cdn/U.S. exchange rate of $1.00 and a Nymex natural gas price of $3.98 US/mmbtu ($3.58/mcf Cdn @ AECO).
- Given the current volatility in crude oil pricing conditions, we will continue to closely monitor our funds from operations as compared to our dividend policy and capital expenditure commitments to ensure they are substantially balanced.
2013 Capital Program
- Our 2013 capital program will be comprised of low-risk crude oil drilling and recompletion activities in areas with high netbacks where Longview operates existing infrastructure. Drilling operations will focus on areas where recent activity has demonstrated strong economics that result in a quick and positive impact on funds from operations while limiting facility and other infrastructure expenditures to a minimum.
SE Saskatchewan
- Longview's 2013 capital drilling program is primarily focused on further development of our Midale and Frobisher plays within S.E. Saskatchewan where we have an extensive undeveloped land base of 106 gross (87 net) sections, high working interests, fee title ownership and existing infrastructure. Our drilling activities in S.E. Saskatchewan were limited in 2011 due to extremely wet weather conditions but drilling results through 2012 have demonstrated strong results with potential for scalability in six different project areas.
- Our recent horizontal drilling programs in the Mississippian Midale and Frobisher formations have yielded 30 day initial oil production rates ranging between 60 and 160 bbls/d with all in well costs of $1.1 to $1.4 million.
- Approximately 60% of the capital budget is allocated to SE Saskatchewan targeting 6 different project areas where Longview has existing infrastructure in place which will result in lower operating costs for new production. These are lower risk locations primarily targeting the Midale formation which are offset by nearby production where successful results will lead to additional drilling in future years.
Waterflood Projects
- Our existing waterflood projects have demonstrated positive results due to capital expenditures incurred in the last several years which were undertaken to enhance water injection rates and flood patterns.
- Funds will be allocated in 2013 to further enhance existing waterflood projects at Nevis, Sunset and Pembina in Alberta and Eyehill in Saskatchewan. These enhancements will set up future drilling opportunities as voidage replacement and reservoir pressures reach certain levels in each property. In addition horizontal wells are planned for each of Nevis and Sunset in areas of these pools where pressure has been increased to levels sufficient to warrant offset drilling. Successful results in these programs may lead to additional drilling in future years.
- Our 2013 capital budget is focused entirely on crude oil projects in the following areas:
| Area |
Target Formation |
Type
of
Well |
# of Wells |
| Gross |
Net |
| S.E. Saskatchewan |
Midale |
Hz |
17 |
13.1 |
| S.E. Saskatchewan |
Shaunavon/Frobisher |
Hz |
2 |
2.0 |
| Sunset, AB |
Montney |
Hz |
1 |
0.7 |
|
Montney water injector |
Vt |
1 |
0.7 |
| Nevis, AB |
Wabamun |
Hz |
1 |
1.0 |
| Other |
Various |
Vt |
6 |
4.4 |
| Total |
|
|
28 |
21.9 |
Hedging Update
- Longview has typically hedged production in order to stabilize cash flow and enhance our ability to fund dividend payments and capital expenditures during periods of commodity price volatility.
- Although Longview currently has no commodity price hedging positions for 2013, we plan on adding additional hedges should the market present suitable opportunities.