Update from I.R.
Thanks for reaching out. I’ll speak about our Second Quarter Financial and Operating results (released on August 11, 2014) as this is the most recent news we have issued.
CAPEX & Drilling
Operationally, things are going very well here at Parallel and, as at Q2-2014, our drilling program was exceeding our expectation. At the time of our second quarter release we had completed 10 of the 13 planned wells in our Carson operating area as well as one non-operated well in the Garfield County operating area with these wells recording and average 30 day initial production (IP30) rate of 55 barrels of oil equivalent (boe) per day. This exceeded our 2014 guidance for an IP30 rate of 35-40 boe/day and resulted in industry leading capital efficiencies (aka. the cost of adding one barrel of oil equivalent) of ~$14,000 per flowing boe/day. Note that the average capital efficiency for dividend-paying Oil and Gas producers in Canada is approximately $27,000 per flowing boe/day, which is nearly double the cost to add a barrel of oil equivalent compared to Parallel.
To-date in the Third Quarter of 2014 we have completed the remaining three wells in our Carson operating area and we expect to include the results of these wells, as well as our full year drilling results, in our next Press Release. Note that this signifies the end of our 2014 drilling program and we are now focusing on executing inexpensive workovers (aka. well cleanouts) for the remainder of the year to help mitigate our decline rates and support our average daily production levels.
Production Profile
As you know, our production was impacted by severe winter weather in the First Quarter of 2014. In the Second Quarter of 2014, we realized a strong recovery in our average daily production levels once we returned to normal operating conditions in May. This resulted in 6-month average daily production of approximately 6,900 boe/day, which was slightly behind our full year production guidance of 7,100 – 7,300 boe/day. However, at the time of our Q2-2014 Results Press Release, we announced that our operating areas had fully recovered from the impact of the weather-related events in the First Quarter of 2014 and we were also benefiting from our strong drilling results (mentioned above). This resulted in average daily production in July 2014 of approximately 7,400 boe/day, which we believe positions us to achieve our full year production guidance.
Sustainability
In addition to our operating and production results, our 2014 full year Cash Flow guidance of $46 million remains intact. This level of cash flow would sufficiently cover both our CAPEX (full year guidance costs of ~$13.5 million) as well as our $0.05 monthly Distribution (full year guidance for distribution payments to unitholders of ~$32.2 million). And would result in a total payout ratio of less than 100%, which signifies that Parallel is living within its cash flow. We also expect approximately 10-15% participation in our regular DRIP program which would further reduce / improve our total payout ratio and we intend to use any additional funds from the DRIP program to pay down debt and improve our balance sheet.
I hope that sufficiently covers how things have progressed here at Parallel over the first half of 2014. Our Q3-2014 Financial and Operating results are scheduled to be released on November 10, 2014. Keep an eye out for them and, of course, let me know if you have any additional questions or comments in advance.
Have a great week,
Curtis
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Curtis Pelletier
Manager, Investor Relations
P: (403) 781-7888 | F: (403) 781-7895 | Website:
www.parallelenergy.ca