CALGARY, AB--(Marketwired - April 22, 2015) - Kicking Horse Energy Inc. ("Kicking Horse" or the "Company") (TSX VENTURE: KCK) reports its operating and financial results for the three and nine months ended December 31, 2014. The full audited consolidated financial statements and notes, as well as Management's Discussion and Analysis ("MD&A") for the nine months ended December 31, 2014 are available on Kicking Horse's website and have been filed on SEDAR.
The period ended December 31, 2014 was transformational for Kicking Horse. Near the end of the period, on December 19, 2014, Contact Exploration Inc. completed a strategic merger with Donnycreek Energy Inc. ("Donnycreek") to form Kicking Horse. The combined entity is both stronger and better positioned for continued growth and to manage the sharp downturn in commodity prices that we have recently seen. Kicking Horse now has a 75% working interest in East Kawka, operating 16.75 of the 20.75 sections. Furthermore, the Company now holds almost 500 gross (350 net) sections in the Deep Basin with Montney rights and more than 50 gross sections with shallow rights in the same region. With a significant development drilling inventory and an extensive exploratory position, Kicking Horse is well poised for growth.
Highlights for Nine Months Ended December 31, 2014
- Closed the strategic merger with Donnycreek to create Kicking Horse maintaining operatorship and increasing the Company's working interest in its core condensate rich property at East Kakwa;
- Increased total proved plus probable reserve value to $489 million (forecast price and costs, before tax, PV10);
- Increased total proved reserve value to $284 million (forecast price and costs, before tax, PV10);
- Total proved and probable reserves increased to 29.6 mmboe (58% oil and NGLs);
- Total proved reserves increased to 17.8 mmboe (56% oil and NGLs);
- Drilled and completed the Company's first 1.5 mile long wells which demonstrated improved economics with longer laterals;
- Tested a new fracing technology in 2014 that was used in Q1 2015 to set Canadian record for depths and number of stages completed;
- Drilled 10 gross (7.5 net to Kicking Horse) horizontal Montney wells with average vertical depth of 3,450 m and average measured depth of 5,540 m;
- At December 31, 2014, the Company had significant "behind pipe" production including: 2 (1.5 net) wells drilled and completed which will be brought on production in Q2 2015 and 4 (3 net) wells drilled awaiting completion (2 gross, 1.5 net, were completed in Q1 2015);
- Funds from operations for the nine months ended December 31, 2014 increased 85% to $5.1 million over the same period in 2013;
- Production for the three months ended December 31, 2014 increased 402% to 1,025 boe/d over the same period in 2013;
- Completed financings in June and November 2014 raising $33.1 million to fund the capital program while maintaining a strong balance sheet;
- Increased our credit capacity to $70 million with net debt of $23.4 million at December 31, 2014; and
- Changed year end for reporting purposes from March 31 to December 31.
Subsequent to the end of the period, the Company continued expansion operations on its central processing facility at 16-7, designed to effectively double the handling capacity of the facility from 15 mmcf/d to 30 mmcf/d of natural gas and to implement improved condensate separating technology. Commissioning of the facility has commenced and is anticipated to be fully operational by the beginning of May 2015. In conjunction with its facility expansion, the Company secured firm processing and transportation services to ensure the majority of its production will flow uninterrupted. The Company's natural gas production was sporadically curtailed through Q4 2014 and Q1 2015 due to a significant gas plant expansion, which was followed by a third-party liquids line (Peace Pipeline) expansion in Q1 2015. These expansions are now complete and the Company's condensate production is now pipeline connected to the Peace Pipeline system, allowing Kicking Horse to cost effectively transport increased volumes. The Company currently has 4 (3 net) wells that are completed and will be brought on production following commissioning of the expanded 16-7 facility. Three additional (2.5 net) wells have been drilled and are scheduled to be completed in Q2 and Q3 of 2015. In addition, the Company has entered into a farmout agreement with an operator to exploit shallow reservoirs, in project areas where the Company would not likely have deployed capital, with activity in the farmout areas expected to commence later in 2015.
Financial and Operating Highlights
| | | | | | | | | | | | | | | | | | | | |
Financial
(000s, except per share amounts) |
|
3 Months
Ended Dec.
31, 2014 |
| | |
3 Months
Ended Dec.
31, 2013 |
| | % Change |
| |
9 Months
Ended Dec.
31, 2014 |
| | | 9 Months Ended
Dec. 31, 2013 |
| | % Change |
| Petroleum and natural gas sales |
$ |
4,459 |
| | $ |
1,341 |
| | 233% |
| $ |
10,092 |
| | $ |
5,310 |
| | 90% |
| Net income (loss) |
$ |
(2,759 |
) | | $ |
391 |
| | -806% |
| $ |
(1,156 |
) | | $ |
1,334 |
| | -187% |
| | Per share- Basic |
|
(0.10 |
) | | |
0.02 |
| | -564% |
| |
(0.05 |
) | | |
0.07 |
| | -170% |
| | Per share- Diluted |
|
(0.10 |
) | | |
0.02 |
| | -573% |
| |
(0.05 |
) | | |
0.07 |
| | -171% |
| Funds from operations |
$ |
1,943 |
| | $ |
683 |
| | 184% |
| $ |
5,145 |
| | $ |
2,781 |
| | 85% |
| | Per share- Basic |
|
0.07 |
| | |
0.04 |
| | 87% |
| |
0.22 |
| | |
0.15 |
| | 50% |
| Capital expenditures |
$ |
10,775 |
| | $ |
6,639 |
| | 62% |
| $ |
24,678 |
| | $ |
11,181 |
| | 121% |
| Shares outstanding (000s) |
|
59,761 |
| | |
19,165 |
| | 212% |
| |
59,761 |
| | |
19,165 |
| | 212% |
| Operations |
|
|
| | |
|
| | |
| |
|
| | |
|
| | |
| Average daily production |
|
|
| | |
|
| | |
| |
|
| | |
|
| | |
| | Oil (bbls/d) |
|
42 |
| | |
63 |
| | -32% |
| |
43 |
| | |
53 |
| | -18% |
| | NGLs (bbls/d) |
|
520 |
| | |
79 |
| | 562% |
| |
307 |
| | |
126 |
| | 143% |
| | Natural gas (mcf/d) |
|
2,774 |
| | |
379 |
| | 633% |
| |
1,655 |
| | |
667 |
| | 148% |
| Combined (boe/d) |
|
1,025 |
| | |
204 |
| | 402% |
| |
626 |
| | |
290 |
| | 116% |
| Average prices received |
|
|
| | |
|
| | |
| |
|
| | |
|
| | |
| | Oil ($/bbl) |
$ |
75.86 |
| | $ |
109.04 |
| | -30% |
| $ |
98.61 |
| | $ |
105.02 |
| | -6% |
| | NGLs ($/bbl) |
|
65.01 |
| | |
82.68 |
| | -21% |
| |
80.75 |
| | |
92.23 |
| | -12% |
| | Natural gas ($/mcf) |
|
4.11 |
| | |
3.33 |
| | 23% |
| |
4.64 |
| | |
3.21 |
| | 45% |
| Combined ($/boe) |
$ |
47.28 |
| | $ |
71.37 |
| | -34% |
| $ |
58.64 |
| | $ |
66.59 |
| | -12% |
| | Royalties |
|
(3.06 |
) | | |
(5.75 |
) | | -47% |
| |
(4.36 |
) | | |
(6.23 |
) | | -30% |
| | Operating expense |
|
(8.09 |
) | | |
(14.80 |
) | | -45% |
| |
(9.86 |
) | | |
(11.90 |
) | | -17% |
| | Transportation expense |
|
(6.39 |
) | | |
(1.92 |
) | | 233% |
| |
(5.39 |
) | | |
(2.51 |
) | | 115% |
| Operating netback ($/boe) |
$ |
29.74 |
| | $ |
48.90 |
| | -39% |
| $ |
39.03 |
| | $ |
45.95 |
| | -15% |
| | | | | | | | | | | | | | | | | | | | |
Notes:
(1) Funds from operations is a non-IFRS measure. The comparable IFRS measure is cash flow from operating activities. A reconciliation of the two measures can be found in the table on page 4 of the MD&A.
(2) Netback is a non-IFRS measure. Netback per boe is calculated by dividing the revenue and costs in total for the Company by the total production of the Company measured in boe.
Outlook
The Company is maintaining its previously announced guidance for 2015 and remains optimistic about its future prospects. Given production delays experienced in Q1 2015, the Company expects its 2015 production to average between 3,200 to 3,700 boe/d and 2015 exit production to be approximately 3,600 to 3,900 boe/d. The Company's capital program for the first half of 2015 will be $20 - $25 million, with the Company currently planning for a capital budget of $12 - $17 million for the second half of 2015. Capital spending by the Company in 2015, and in particular the second half of the year, will remain subject to the ongoing monitoring of oil and natural gas prices, along with a continued focus on maintaining financial flexibility.
About Kicking Horse Energy Inc.
Kicking Horse Energy Inc. is a public oil and gas company which is focused on the development of Alberta's liquids-rich Montney Formation tight gas play. For more information, please see the Company's website: www.kickinghorseenergy.com
ADVISORY ON FORWARD-LOOKING STATEMENTS: This press release contains certain forward-looking information and statements within the meaning of applicable securities laws. The use of any of the words "expect", "continue", "anticipate", "estimate", "may", "will", "should", "believe", "plans", "cautions" and similar expressions are intended to identify forward-looking information or statements. In particular, but without limiting the foregoing, this press release contains statements concerning the Company's potential for growth; the Company's current wells which are awaiting completion; the anticipated timing for completion of the infrastructure expansion at the Company's central processing facility at 16-7 and the anticipated benefits of the expansion, including anticipated increased handling capacity and advanced technology; the anticipated benefits of the Company's condensate production being pipeline connected to the Peace Pipeline system; the anticipated timing for completing new wells and bringing additional wells on production; expected activity on the Company's properties that are subject to the farmout arrangements; and the Company's guidance for 2015 and specific guidance for the second half of 2015, including production rates, Kicking Horse's capital program and capital budget for 2015.
Forward-looking statements or information are based on a number of material factors, expectations or assumptions of Kicking Horse which have been used to develop such statements and information but which may prove to be incorrect. Although Kicking Horse believes that the expectations reflected in these forward-looking statements are reasonable, undue reliance should not be placed on them because Kicking Horse can give no assurance that they will prove to be correct. Since forward-looking statements address future events and conditions, by their very nature they involve inherent risks and uncertainties. In particular, in addition to other factors and assumptions which may be identified herein, no assurances can be given respecting: whether the Company's exploration and development activities respecting the Deep Basin project will be successful or that material volumes of petroleum and natural gas reserves will be encountered, or if encountered can be produced on a commercial basis; that the results of production tests will be indicative of the long-term performance of the recently drilled wells or of ultimate recovery from the recently drilled wells; the ultimate size and scope of any hydrocarbon bearing formations at the Deep Basin project; that additional drilling operations in the Deep Basin project, including on the farmout areas, will be successful such that further development activities in this area is warranted; that Kicking Horse's efforts to raise additional capital will be successful; that Kicking Horse will continue to conduct its operations in a manner consistent with past operations; results from drilling and development activities will be consistent with past operations; the accuracy of the estimates of Kicking Horse's reserve volumes; the general stability of the economic and political environment in which Kicking Horse operates; drilling results; field production rates and decline rates; the general continuance of current industry conditions; the timing and cost of pipeline, storage and facility construction and expansion and the ability of Kicking Horse to secure adequate product transportation; future commodity prices; currency, exchange and interest rates; regulatory framework regarding royalties, taxes and environmental matters in the jurisdictions in which Kicking Horse operates; and the ability of Kicking Horse to successfully market its oil and natural gas products.
Further, events or circumstances may cause actual results to differ materially from those predicted as a result of numerous known and unknown risks, uncertainties, and other factors, many of which are beyond the control of the Company, including, without limitation: changes in commodity prices; changes in the demand for or supply of the Company's products; unanticipated operating results or production declines; changes in tax or environmental laws, royalty rates or other regulatory matters; changes in development plans of Kicking Horse or by third party operators of Kicking Horse's properties, increased debt levels or debt service requirements; inaccurate estimation of Kicking Horse's oil and gas reserve and resource volumes; limited, unfavourable or a lack of access to capital markets; increased costs; a lack of adequate insurance coverage; the impact of competitors; and certain other risks detailed from time-to-time in Kicking Horse's public disclosure documents. Additional information regarding some of these risk factors may be found under "Risk Factors" in the MD&A. The reader is cautioned not to place undue reliance on these forward-looking statements. The forward-looking statements contained in this press release are made as of the date hereof and Kicking Horse undertakes no obligations to update publicly or revise any forward-looking statements or information, whether as a result of new information, future events or otherwise, unless so required by applicable securities laws.
Certain Defined Terms
boe - barrels of oil equivalent
boe/d - barrels of oil equivalent per day
mmboe - million barrels of oil equivalent
bbl - barrel
bbls/d - barrels per day
mcf - thousand cubic feet
mcf/d - thousand cubic feet per day
mmcf - million cubic feet
mmcf/d - million cubic feet per day
ADVISORY ON USE OF "boes": "boes" may be misleading, particularly if used in isolation. A boe conversion ratio of six thousand cubic feet of natural gas to one barrel of oil equivalent (6 mcf: 1 bbl) is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. Given that the value ratio based on the current price of crude oil as compared to natural gas is significantly different from the energy equivalency of 6:1, utilizing a conversion on a 6:1 basis may be misleading as an indication of value.
Non-IFRS Measurements: Within this release references are made to terms commonly used in the oil and gas industry. Funds from operations, funds from operations per share and netbacks do not have any standardized meaning under IFRS and are referred to as non-IFRS measures. Funds from operations per share is calculated based on the weighted average number of common shares outstanding consistent with the calculation of net income per share. Operating netbacks equal total petroleum and natural gas sales net of royalties less operating and transportation expenses calculated on a boe basis. Management utilizes these measures to analyze operating performance. The Company's calculation of the non-IFRS measures included herein may differ from the calculation of similar measures by other issuers. Therefore, the Company's non-IFRS measures may not be comparable to other similar measures used by other issuers. Funds from operations is not intended to represent operating profit for the period nor should it be viewed as an alternative to operating profit, net income, cash flow from operating activities or other measures of financial performance calculated in accordance with IFRS. Non-IFRS measures should only be read in conjunction with the Company's annual audited and interim financial statements. A reconciliation of these measures can be found in the table on page 4 of the MD&A.
Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.