Q2 Report is Out...looking to divest DM2
OUTLOOK
Arcan holds a multi-year inventory of low-risk drilling opportunities targeting light sweet oil in the Swan Hills area. The Corporation recently received approvals for waterflood expansion of the Ethel waterflood scheme. Ongoing waterflood operations in the Deer Mountain Unit #2 and Ethel areas continued to demonstrate expected waterflood response during the second quarter of 2013.
In order to pay down debt, Arcan has reduced its planned 2013 capital budget from $52.1 million to $40.8 million. The Corporation plans to drill two wells in the third quarter (1.2 net wells, one well is 100 percent Arcan and the other well is a joint venture in which Arcan pays 20 percent of the costs for 48 percent of the production). With the lower capital spending Arcan also expects lower production for the year, now anticipating full-year production to average 3,800 to 4,000 BOE per day.
Arcan is considering further joint ventures, farm-outs and similar arrangements in order to support the Corporation's strategy of operating within cash flow while creating shareholder value. Due to the significant hydrocarbon potential of our land base, sharing development costs with third parties enables Arcan to advance project development while reducing the required level of capital investment.
Arcan is also considering asset divestitures, including a potential sale of the Deer Mountain Unit #2 asset as it is a mature asset with a waterflood already implemented, as compared to the range of development stages of the other areas in Arcan's asset base.
"Reducing debt is paramount to Arcan," said President Doug Penner. "Although lower capital spending will impact production in the near term, our longer term vision is to ensure the Corporation has the stable financial position to be able to realize over time the full value of our long-life, high-quality light oil potential over our entire land base. We continue to review alternatives, including monetizing assets, that would strengthen the valuation of Arcan and provide access to the capital required to continue to develop our Swan Hills lands."