First Quarter Financial Results DeeThree Exploration Ltd. Announces 2015 First Quarter Financial Results and Operational Update
Wednesday, May 13, 2015
DeeThree Exploration Ltd. Announces 2015 First Quarter Financial Results and Operational Update
21:28 EDT Wednesday, May 13, 2015
CALGARY, ALBERTA--(Marketwired - May 13, 2015) - DEETHREE EXPLORATION LTD. ("DeeThree" or the "Company") (TSX:DTX)(OTCQX:DTHRF) is pleased to release an operational update and its financial and operational results for the quarter ended March 31, 2015.
FINANCIAL AND OPERATIONAL HIGHLIGHTS
Financial and operational highlights for the interim period ended March 31, 2015 with comparative data for 2014 are set out below and should be read in conjunction with the financial statements and related management's discussion and analysis available for review at www.deethree.ca and www.sedar.com.
| Three Months Ended March 31, | | |
| | 2015 | | 2014 | | Change | |
| (000s, except per share amounts) | ($) | | ($) | | (%) | |
| Financial | | | | | | |
| Oil and natural gas revenues | 46,077 | | 65,643 | | (30 | ) |
| Funds from operations (1) | 27,623 | | 35,536 | | (22 | ) |
| | Per share - basic | 0.31 | | 0.43 | | (28 | ) |
| | Per share - diluted | 0.30 | | 0.42 | | (29 | ) |
| Cash flow from operating activities | 17,607 | | 23,607 | | (25 | ) |
| Net income | 1,761 | | 8,682 | | (80 | ) |
| | Per share - basic | 0.02 | | 0.11 | | (82 | ) |
| | Per share - diluted | 0.02 | | 0.10 | | (80 | ) |
| Capital expenditures (2) | 37,060 | | 72,312 | | (49 | ) |
| Working capital deficit (3) | 180,784 | | 155,517 | | 16 | |
| Shareholders' equity | 466,447 | | 321,640 | | 45 | |
(000s) | (#) | | (#) | | (%) | |
| Share Data | | | | | | |
| At period-end | 88,974 | | 82,065 | | 8 | |
| Weighted average - basic | 88,974 | | 81,932 | | 9 | |
| Weighted average - diluted | 90,687 | | 84,741 | | 7 | |
| | | | | | (%) | |
| Operating (4) | | | | | | |
| Production | | | | | | |
| | Natural gas (mcf/d) | 15,103 | | 12,381 | | 22 | |
| | Crude oil (bbls/d) | 9,188 | | 6,743 | | 36 | |
| | NGLs (bbls/d) | 591 | | 565 | | 5 | |
| | Total (boe/d) | 12,296 | | 9,372 | | 31 | |
| Average wellhead prices | | | | | | |
| | Natural gas ($/mcf) | 2.84 | | 6.00 | | (53 | ) |
| | Crude oil and NGLs ($/bbl) | 47.96 | | 89.60 | | (46 | ) |
| | Combined average ($/boe) | 41.63 | | 77.83 | | (47 | ) |
| Netbacks | | | | | | |
| | Operating netback ($/boe) | 22.00 | | 47.21 | | (53 | ) |
| | Funds flow netback ($/boe) | 24.92 | | 42.05 | | (41 | ) |
| Gross (net) wells drilled | | | | | | |
| | Gas (#) | -- (-- | ) | 1 (1.0 | ) | -- (-- | ) |
| | Oil (#) | 6 (6.0 | ) | 11 (10.97 | ) | -45 (-45 | ) |
| | Standing (#) | -- (-- | ) | 3 (3.0 | ) | -- (-- | ) |
| | Dry and abandoned (#) | -- (-- | ) | 2 (2.0 | ) | -- (-- | ) |
| | Total (#) | 6 (6.0 | ) | 17 (16.97 | ) | -65 (-65 | ) |
| Average working interest (%) | 100 | | 100 | | -- | |
| (1) | Funds from operations, funds from operations per share, operating netbacks and funds flow net back are not recognized measures under International Financial Reporting Standards (IFRS). Refer to the commentary below under "Reader Advisory - Non-GAAP Measurements" for further discussion. |
| (2) | Total capital expenditures, including acquisitions and excluding non-cash transactions. Refer to commentary in the Management's Discussion and Analysis under "Capital Expenditures and Acquisitions" for further information. |
| (3) | Working capital deficit, which is calculated as current liabilities (excluding derivative financial instruments) and bank debt less current assets (excluding derivative financial instruments), is not a recognized measure under IFRS. Please refer to the commentary in this news release under "Reader Advisory - Non-GAAP Measurements" for further discussion. |
| (4) | For a description of the boe conversion ratio, refer to the commentary below under "Reader Advisory - BOE Presentation". |
| | |
- Achieved record low operating costs of $7.37/boe during the quarter, a decrease of 28% from $10.18/boe in the same period of last year and a 1% decrease from the $7.45 achieved in the fourth quarter of 2014.
- Maintained quarter over quarter oil production volumes.
- Five Bakken gas injectors are now on-stream with almost all Bakken solution gas being re-injected into the Company's Alberta Bakken property through the gas re-injection EOR scheme.
- Production on wells recently drilled the Company's Alberta Bakken property within the area of the EOR scheme outperforming type curves and continue to flow while choked back.
- Wells drilled on the Company's Brazeau Belly River property during the first quarter of 2015 are outperforming 2014 results.
- Invested $1 million in two oil hauling trucks and trailer units in Brazeau to reduce future transportation costs.
- Purchased an additional 32,697 acres (32,697 net acres) exploratory land in the Ferguson area of southern Alberta for $2 million.
- Reduced drilling activity continues to positively impact corporate decline rates.
- Executed an additional 1,000 bbl/d hedge for the period May - December, 2015 at US $62.25/bbl. This hedge will be assigned to Boulder Energy Ltd. upon the completion of the Reorganization outlined in the "Outlook" section below.
- Executed an additional 500 bbl/d hedge for calendar 2016 (250 bbl/d at US WTI $62.75 and 250 bbl/d at US WTI $63.60). This hedge will remain with the Company upon the completion of the Reorganization.
OPERATIONAL UPDATE
DeeThree continued its operational momentum with a successful and capital efficient first quarter drilling program. The Company was able to maintain quarter over quarter oil production volumes while only drilling 6.0 gross (6.0 net) wells, being a 40% reduction from the originally planned 10 gross (10.0 net) well program announced in January, 2015. Additionally, the Company opted to defer the completion on the last Brazeau Belly River oil well drilled during the first quarter of 2015. The Company expects to complete this well in the coming weeks as weather permits, which is anticipated to provide a strong start to the second half of 2015.
Drilling activity was defined by commodity pricing through the first quarter and into the second quarter of 2015 thereby reducing corporate declines toward targeted rates of 30% on the Brazeau property and 22% on the Bakken property while preserving financial capacity. Drilling activity on both the Brazeau Belly River play and the Alberta Bakken play is set to resume in the latter half of the second quarter of 2015.
OUTLOOK
On April 7, 2015, the Company announced its intention to reorganize DeeThree (the "Reorganization") to create two, focused and independent, publicly traded energy companies - one, a sustainable growth-focused light-oil company centered around DeeThree's Belly River development in the Pembina-Brazeau area of Alberta, to be named Boulder Energy Ltd. ("Boulder"); and the other a sustainable dividend-and-growth focused oil company centered around DeeThree's Alberta Bakken enhanced oil recovery ("EOR") project in southern Alberta, to be the Company, renamed as Granite Oil Corp. ("Granite"). Under the proposed Reorganization, shareholders of DeeThree will receive 0.5 shares of Boulder, and 0.3333 shares of Granite for each share of DeeThree held.
The proposed Reorganization will be implemented through a court-approved Plan of Arrangement under the Business Corporations Act (Alberta) and will require approval by a minimum of 66 2/3% of the votes cast by DeeThree shareholders, voting in person or by proxy, at the annual general and special meeting of shareholders to be held in Calgary, Alberta on May 14, 2015. The Company anticipates that its shareholders will vote in favour of the proposed Reorganization and that the proposed reorganization will be completed on May 15, 2015.
Granite and Boulder will have the attributes set out in the following upon completion of the proposed Reorganization.
| | Granite | Boulder |
| Reserves - January 1, 2015 (1) | | |
| Proven Developed Producing (MMboe) | 5.3 | 10.7 |
| Total Proved (MMboe) | 10.4 | 24.9 |
| Total Proven + Probable (MMboe) | 17 | 34.7 |
| Current horizontal drilling inventory | 162 | 400+ |
| | | |
| Capital Structure | | |
| Opening debt ('000) | $45,000 | $128,000 |
| Credit Facility ('000) | $115,000 | $175,000 |
| Shares O/S ('000) (2) | 30,232 | 45,348 |
| Dividend | $0.03 per month | nil |
| | | |
| Guidance | | |
| 2H 2015 Capital Expenditures ('000) | $20,000 | $45,000 |
| 2H 2015 Production (boe/d) | 4,000 | 8,500 |
| 2H 2015 Cash Flow ('000) (3) | $28,000 | $33,000 |
| Exit 2015 Production (boe/d) | 4,100 | 9,000 |
| | | |
| December 31, 2014 Tax Pools ('000) | $195,000 | $295,000 |
| | | |
| (1) | Based on an evaluation by Sproule Associates Limited. |
| (2) | Assuming the cashless exercise of "in the money" vested options at current fair market price of $6.50. |
| (3) | Assuming WTI US$50.00. USD/CAD$1.25, Boulder: Edmonton Par Oil differentials US $7.00/B, Royalty 22.5%, Opex & Transport costs $11.50/BOE, Granite: Oil differentials US $14.00/B, Royalty 29%, Opex & Transport costs $9.70/BOE. |
The Board of Directors of DeeThree is confident that the Reorganization of DeeThree into Boulder and Granite is the best course to develop and exploit DeeThree's Brazeau Belly River and Alberta Bakken assets.
Additional information regarding the proposed Reorganization, Boulder and Granite is included in the Company information circular dated effective April 9, 2015, a copy of which is available for review at www.deethree.ca and www.sedar.com.