Post by
zenda on Jul 18, 2013 5:29am
update
CALGARY, ALBERTA--(Marketwired - July 17, 2013) - Hyperion Exploration Corp. ("Hyperion" or the "Company") (TSX VENTURE:HYX) announces the renewal of its banking facilities, operations update and 2013 guidance.
RENEWAL OF BANK FACILITIES
As a result of the scheduled lending review with its credit provider, the lending limits of its existing banking facilities have been revised to $46.0 million from $50.0 million. The Company's revolving operating facility has been revised to a borrowing limit of $36.0 million from $40.0 million. The acquisition/development facility remains at a borrowing limit of $10.0 million.
The revised facilities focuses Hyperion's 2013 drilling program to certain non-operated partner wells and the necessary farm-in earning wells in the Niton/McLeod area.
OPERATIONS UPDATE
Hyperion plans to spud its next Cardium, light oil horizontal well, in late July 2013. This well will be the third earning well on the previously announced 8,000 acre farmin in the Niton/McLeod area and is expected to evaluate the productivity of some of the thickest net pay seen by the Company in the area.
In the second quarter, Hyperion's technical team's efforts were focused on reducing well costs through more efficient drilling, completion, and tie-in methods. Hyperion expects to reduce future capital costs per well by up to 10% from prior results. The first well on a new 4 well drilling pad is expected to cost $3.3 million versus $3.7 million as on previous wells. The first well carries the cost of the lease road, multi-well pad and solution gas sales pipeline.
Based on initial success achieved by industry with drilling extended reach Cardium horizontal wells, Hyperion believes the use of extended reach horizontal wells at Niton/McLeod has the potential to be a game changer for improving capital efficiency and project economics. Hyperion's current total well length of approximately 3,000m (with 1,300m of horizontal pay) would initially be increased to approximately 4,000m (with 2,300 of horizontal pay) with the opportunity for longer wells based on success. Hyperion's analysis of actual performance of similar long reach wells indicates a significant enhancement in production, reserves and capital efficiency. A long reach horizontal well in Hyperion's tier one acreage at Niton/McLeod is expected to have a type curve with an IP30 of 220 boe/d (90 % light oil/NGL), reserves of 220 mboe (83 % light oil/NGL). The short horizontal wells have an IP30 of 160 boe/d (90 % light oil/NGL), reserves of 148 mboe (83 % light oil/NGL). On stream capital cost for the long reach horizontal on a full development basis are expected to average $3.8 million versus the comparable short horizontal well at $2.7 million.
The Company currently has an inventory in Niton/McLeod of up to 167 gross (151 net, unbooked) short horizontal locations. Management estimates that long reach horizontal drilling techniques could be applied to 45% of this existing Niton/McLeod inventory.
Hyperion's inactivity in the field late in the first quarter and in the second quarter was a result of several factors. Hyperion executed the drilling of four Cardium horizontal light oil drills in its new area of Niton/McLeod between October 2012 and January 2013. The Company felt that it was critical to establish the productivity profile for these wells before committing to a subsequent drill program. Furthermore, challenging capital markets specific to junior oil and gas in Canada required Hyperion to be financially prudent with its use of debt. Finally, as a result of Hyperion's ongoing objective to be a leader in capital efficiency, Hyperion specifically limited its operations during spring break up and into June to maintain base production levels. Despite these efforts, Hyperion's second quarter production was negatively impacted by approximately 75 boe/d. This was directly the result of limited access to producing wells attributable to wet roads and third party facility maintenance/downtime.
2013 GUIDANCE
Hyperion's Board of Directors has approved the fiscal 2013 capital budget which is designed to continue delineation efforts within the emerging Niton/McLeod Cardium light oil play. Highlights are as follows:
$9.5 million in capital spending;
Average production guidance in 2013 of 1,100 to 1,200 boe/day;
Production comprised of >60% light oil/NGLs;
Exit 2013 production of 1,000 to 1,050 boe/day >58% light oil/NGLs;
Operating costs of $12.50/boe including transportation; and
Funding of 2013 capital expenditures through a combination of cash flow and bank debt.
Using 2013 Oil/NGLs pricing at of US$88.00 WTI, C$83.00 Edmonton Light, 1.00 CAD/USD exchange rate, $3.00/mcf AECO natural gas price
Hyperion's board of directors and management team believes that the Company's shares trade at a significant discount to the value of its underlying assets, in particular given its high netback, low-decline production base at Pembina, Garrington, and Chip Lake and significant prospective Cardium horizontal oil drilling inventory of 167 net locations (151 unbooked) at Niton/McLeod. The Hyperion management team and board of directors continues to be disappointed with where the Company's shares trade in this challenging environment and, as a result, has formed a Special Committee of independent directors to identify, consider and evaluate all options to enhance value and liquidity for its shareholders. Management and the board of directors are committed to acting in the best interests of the Company and its shareholders and believe that the long term strategy of the Company will continue to provide value to shareholders. The independent directors appointed to the Special Committee have extensive public company, transactional and special committee expertise