Crew Energy Inc. ("Crew" or the "Company") (TSX:CR) of Calgary,
Alberta is pleased to present its operating and financial results
for the three and six month period ended June 30, 2013.
Highlights
-- Funds from operations were $48.1 million or $0.40 per share, a 43%
increase over the first quarter of 2013;
-- Second quarter production averaged 27,109 boe per day or 4% higher than
the 25,961 boe per day produced in the first quarter of 2013;
-- Reduced net debt by $23.2 million to $315.7 million or 1.6x annualized
second quarter funds from operations;
-- Reduced operating costs by 11% over the first quarter of 2013 to $10.76
per boe;
-- Recently completed three Septimus, British Columbia Montney wells which
were drilled during the second quarter in the new Montney "A" zone which
have seven day production tests of 7.6 mmcf per day and 205 bbls per day
of ngls, 6.5 mmcf per day and 182 bbls per day of ngls and 6.2 mmcf per
day and 170 bbls per day of ngls;
-- Subsequent to the quarter-end, closed the acquisition of 81 additional
Montney sections bringing Crew's aggregate holdings to 373 net sections
of Montney rights in northeast British Columbia and adding 15 TCFE of
Total Petroleum Initially in Place ("TPIIP") for a total of 91 TCFE of
TPIIP. The Company's July 9, 2013 press release has complete details of
the independently completed Montney Resource Evaluation;
-- Crew continues with its front-end engineering work to significantly
increase natural gas processing capacity in the Septimus area with plans
to increase its takeaway capacity from its present capacity of 45 mmcf
per day to up to 180 mmcf per day.
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Three Three
months months Six months Six months
Financial ended ended ended ended
($ thousands, except per June 30, June 30, June 30, June 30,
share amounts) 2013 2012 2013 2012
----------------------------------------------------------------------------
Petroleum and natural gas
sales 110,793 99,946 202,060 223,021
Funds from operations (note
1) 48,087 52,027 82,275 100,084
Per share - basic 0.40 0.43 0.68 0.83
- diluted 0.40 0.43 0.68 0.83
Net income (loss) 2,007 24,107 (20,040) 17,677
Per share - basic 0.02 0.20 (0.16) 0.15
- diluted 0.02 0.20 (0.16) 0.15
Exploration and Development
expenditures 30,348 30,432 95,600 159,175
Property acquisitions (net
of dispositions) (5,717) (4,290) 8,946 (4,290)
Net capital expenditures 24,631 26,142 104,546 154,885
----------------------------------------------------------------------------
----------------------------------------------------------------------------
------------------------------------- ------------- -----------------
------------------------------------- ------------- -----------------
As at As at
Capital Structure June 30, 2013 December 31, 2012
------------- -----------------
($ thousands)
-------------------------------------
Working capital deficiency (note 2) 27,991 48,522
Bank loan 287,687 242,834
Net debt 315,678 291,356
Current bank facility 430,000 400,000
Common Shares Outstanding (thousands) 121,635 121,620
------------------------------------- ------------- -----------------
------------------------------------- ------------- -----------------
Notes:
(1) Funds from operations is calculated as cash provided by operating
activities, adding the change in non-cash working capital,
decommissioning obligation expenditures and the transportation
liability charge. Funds from operations is used to analyze the
Company's operating performance and leverage. Funds from operations
does not have a standardized measure prescribed by International
Financial Reporting Standards and therefore may not be comparable
with the calculations of similar measures for other companies.
(2) Working capital deficiency includes only accounts receivable less
accounts payable and accrued liabilities.
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Three Three Six Six
months months months months
ended ended ended ended
June 30, June 30, June 30, June 30,
Operations 2013 2012 2013 2012
----------------------------------------------------------------------------
Daily production (note 1)
Princess and other oil (bbl/d) 4,561 5,940 4,748 6,355
Lloydminster oil (bbl/d) 5,981 6,040 5,712 6,101
Natural gas liquids (bbl/d) 3,085 2,809 3,035 2,957
Natural gas (mcf/d) 80,893 80,419 78,259 83,237
Oil equivalent (boe/d @ 6:1) 27,109 28,192 26,538 29,286
Average prices (notes 1 & 2)
Princess and other oil ($/bbl) 74.85 70.41 69.43 76.11
Lloydminster oil ($/bbl) 67.50 58.95 59.50 65.05
Natural gas liquids ($/bbl) 52.16 56.27 53.27 54.58
Natural gas ($/mcf) 3.85 2.06 3.64 2.20
Oil equivalent ($/boe) 44.91 38.96 42.07 41.84
Netback ($/boe)
Revenue 44.91 38.96 42.07 41.84
Realized commodity hedging gain
(loss) (1.74) 5.94 (1.16) 3.12
Royalties (8.52) (8.86) (7.98) (10.05)
Operating costs (10.76) (11.32) (11.38) (11.75)
Transportation costs (1.26) (1.39) (1.26) (1.38)
---------------------------------------
Operating netback (note 3) 22.63 23.33 20.29 21.78
G&A (1.93) (1.68) (1.96) (1.80)
Interest on bank debt (1.21) (1.37) (1.20) (1.21)
---------------------------------------
Funds from operations 19.49 20.28 17.13 18.77
Drilling Activity
Gross wells 3 3 42 63
Working interest wells 3.0 1.6 39.8 59.4
Success rate, net wells 100% 100% 100% 97%
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Notes:
(1) Princess, Alberta oil (20 degrees to 26 degrees API oil) has
historically been classified as medium or conventional oil. Effective
December 31, 2012 Crew's reserves attributable to its Princess
property have been classified as heavy oil to accord with definitions
in the royalty regulations in Alberta. Princess and other oil
production and pricing are shown separately from Lloydminster heavy
oil volumes for clarity and comparison with historical
classification.
(2) Average prices are before deduction of transportation costs and do
not include hedging gains and losses.
(3) Operating netback equals petroleum and natural gas sales including
realized hedging gains and losses on commodity contracts less
royalties, operating costs and transportation costs calculated on a
boe basis. Operating netback and funds from operations netback do not
have a standardized measure prescribed by International Financial
Reporting Standards and therefore may not be comparable with the
calculations of similar measures for other companies.
OVERVIEW
During the second quarter, operations and drilling activity were
reduced due to spring break-up. The Company continued to follow its
disciplined approach to exploration and development, spending $30.3
million or 13% less than originally budgeted. Drilling activity
during the quarter included three (3.0 net) wells at Septimus
resulting in three natural gas wells. The Company completed three
wells at Septimus and three wells at Lloydminster and also
recompleted 18 wells at Lloydminster. In addition, during the
quarter the Company exercised its option to purchase 81 additional
net sections of Montney acreage in northeastern British Columbia
for $35.2 million which closed in early July.
Unplanned third party facility outages in the Deep Basin area
impacted second quarter production by 650 boe per day while
production increased 4% over the first quarter of 2013 to average
27,109 boe per day. Production additions were the result of the
Company's successful first quarter drilling program at Septimus,
Princess and Lloydminster.
The June floods that caused major damage in southern Alberta
resulted in restricted access to downtown Calgary for the week
following the flood, including Crew's head office. The Company
activated its business continuity plan and all critical systems,
communications and business functions continued at remote or
disaster recovery sites and therefore Crew's operations were
minimally affected by the floods.
FINANCIAL
The Company's second quarter funds from operations increased 43%
over the first quarter 2013 to $48.1 million or $0.40 per share.
During the quarter, the Company's revenue benefited from stronger
oil prices, narrower West Texas Intermediate ("WTI") to Western
Canadian Select ("WCS") differentials and increased natural gas
prices. Crew also successfully decreased its operating,
transportation and general and administrative costs per boe by 9%
as compared to the prior quarter which enhanced its funds from
operations netback. After non-core property dispositions of $5.7
million, net capital expenditures were $24.6 million which allowed
the Company to decrease its net debt by 7% to $316 million.
Revenue was bolstered by stronger oil and gas prices during the
second quarter. Canadian dollar WTI averaged $96.43 per bbl for the
second quarter, slightly up from the $95.20 in the first quarter.
More importantly for the Company, the differential between WCS and
WTI narrowed substantially during the quarter resulting in a 22%
quarter over quarter increase in Crew's WCS oil benchmark price.
Crew's Lloydminster heavy oil pricing was further enhanced in the
second quarter by seasonally reduced blending costs. During the
second quarter, AECO natural gas prices continued to benefit from
an extended winter and decreased storage levels. The AECO benchmark
increased 11% over the first quarter to average $3.59 per mcf.
The Company's hedging strategy is focused on partially
protecting against significant declines in commodity prices that
would negatively impact the cash flow needed to fund the Company's
on-going capital program. Crew currently has hedged approximately
49% of its forecasted 2013 natural gas production at a price of
approximately $3.22 per mcf. The Company also protects its liquids
production from a significant decline in WTI and WCS pricing. Crew
has approximately 43% of its forecasted 2013 liquids production
protected against a decline in WTI pricing with hedged prices fixed
at a floor of approximately $93.26 per barrel. The Company has
hedged the differential between WTI and WCS pricing on 4,200
barrels per day at a differential of $21.08 for the second quarter
of 2013, 5,329 barrels per day at $22.39 for the third quarter and
4,250 barrels per day at $22.67 for the fourth quarter. Crew has
begun building its hedge position to provide a base level of cash
flow for 2014. The Company currently has hedged approximately 16.6
mmcf per day of natural gas for 2014 at a price of approximately
$3.83 per mcf, 3,000 barrels per day of WTI oil hedged at an
average floor price of approximately $96.51 per barrel with
additional hedges fixing the differential between WTI and WCS
pricing on an average of 1,000 barrels per day at a differential of
$22.75 per barrel.
OPERATIONS UPDATE
Septimus/Tower, British Columbia
Septimus area production for the quarter averaged 7,480 boe per
day, up 21% from the first quarter and achieving yet another record
for the area. Current production is in the 7,500 to 8,000 boe per
day range based on field estimates with approximately 1,400 boe per
day behind pipe as we are now running at the current capacity of
the Septimus gas plant. Installation of the fourth compressor is on
track for commissioning and start-up in the fourth quarter which
will increase our processing capacity from the current level of
approximately 45 mmcf per day to approximately 65 mmcf per day.
Concurrent with the plant expansion, Crew is installing a 22.5
kilometer 10" pipeline from the western portion of the property to
the gas plant. The Company anticipates achieving full utilization
of this capacity by the end of the first quarter 2014.
The Company has been proving additional zones within the Montney
to be productive. Crew drilled three (3.0 net) wells in the top of
the Upper Montney (Montney "A" zone) with excellent results. The
three wells had seven day production tests of 7.6 mmcf per day and
205 bbls per day of ngls, 6.5 mmcf per day and 182 bbls per day of
ngls and 6.2 mmcf per day and 170 bbls per day of ngls. The Company
has 29 unbooked locations in the Montney "A" on a 15 section block
at Septimus. As the completion technology continues to evolve at
Septimus, it has become apparent that a number of wells drilled
early in the life of the project were not optimally completed. Crew
has undertaken one of the first workovers in the area by
successfully installing a frac port liner into an existing Montney
horizontal well competed in 2009 with a plug and perf completion.
The well was re-fractured and came on production at 2.2 mmcf per
day (428 boe per day), ten times greater than the well's average
production rate, in the first quarter of 2013 and four times
greater than the peak initial production of the well in December of
2009. The net workover cost was approximately $1.5 million. The
Company is in the process of identifying additional candidates
where this technique can be applied.
Deep Basin, Alberta
Deep Basin production in the second quarter was 5,410 boe per
day as unplanned third party plant outages and extended turnarounds
experienced in the first quarter continued into the second and
early third quarter, impacting production in the second quarter by
approximately 650 boe per day. No new wells were drilled in the
quarter, and two Cardium horizontal well completions at Elmworth
originally planned for second quarter were not undertaken until
early in the third quarter due to spring road bans being extended
into the third quarter. Current production in the Deep Basin is
6,000 to 6,500 boe per day based on field estimates with all third
party facilities operating as of the first week of August.
Princess, Alberta
Production for the second quarter averaged 5,500 boe per day
with no new wells drilled and no completions undertaken due to
spring break-up, high rainfall and approximately 150 boe per day of
third party facility downtime. Two additional waterfloods were
initiated in the quarter bringing the total to 11 pools currently
on injection (approximately 40% of the developed Pekisko resource
is now under waterflood). Crew is currently drilling the first of
two 100% working interest wells targeting oil from the Mannville.
Crew has 60 sections of Crown mineral rights that are prospective
for Mannville oil at Princess.
Lloydminster, Saskatchewan
Production for the Lloydminster area averaged 6,015 boe per day
for the quarter as the impact of spring break-up was not as
significant as initially expected. However, the spring conditions
did limit rig activity as no new wells were drilled, only three
wells were completed and 18 wells recompleted. Current production
levels are between 6,000 and 6,500 boe per day based on field
estimates.
OUTLOOK
Crew is maintaining annual guidance to average 27,500 to 28,500
boe per day, exploration and development capital budget at $219
million as well as exit guidance of 29,000 to 30,000 boe per day as
production is forecasted to steadily increase through the remainder
of the year. Funds from operations was markedly improved over the
first quarter as a result of higher production and higher realized
product prices. Funds from operations increased to $48.1 million or
$0.40 per share up 43% from $0.28 per share in the first quarter.
Crew maintained its capital discipline in the second quarter
spending $30.3 million on exploration and development activities,
13% less than budgeted while reducing net debt by $22.5 million to
1.6 times annualized second quarter funds from operations.
The Company's move to capture resource continued in northeastern
British Columbia by closing the third tranche of our Montney
acquisition in July for $35.2 million which added 15 TCFE of TPIIP
to Crew's resource inventory. Crew now has 91 TCFE of TPIIP
resource in the Montney formation comprised of 44.6 TCF of natural
gas and 7.8 billion barrels of oil. We plan to continue to increase
production from the current 8,000 boe per day to an estimated
10,000 boe per day in the first quarter of 2014 once the Septimus
gas plant has been expanded to 65 mmcf per day of capacity. We will
also advance the de-risking of our land base through the planned
drilling of five exploratory horizontal wells over the next six
months. Crew now has five drilling rigs running and expects to
drill over 50 wells in the last half of 2013 as well as
recompleting over 40 wells.
The Company will continue to divest of non-core assets to fund
production growth in its core areas as well as actively engage in
asset swaps to further concentrate our asset base. Crew's capital
program will be funded by funds from operations, long-term debt and
minor asset dispositions.
Oil prices have continued to strengthen as the WTI/Brent and
WTI/WCS differentials have narrowed significantly over the first
half of the year resulting in much improved price realizations.
This has been partially offset by an approximate $0.50 per mcf
reduction in realized natural gas prices. We are currently
forecasting realized oil prices to be approximately $6 per bbl
higher and natural gas prices to be $0.50 per mcf lower in the
third quarter. When combined with higher forecasted production,
funds from operations is expected to again be strong in the third
quarter. Crew has a very active third quarter planned which we look
forward to reporting in November.
Our thoughts are with those who were affected by the floods in
southern Alberta. We would like to commend our staff and the people
of southern Alberta for their resolve and community spirit in
helping in this time of need.
Cautionary Statements
Forward-Looking Information and Statements
This news release contains certain forward-looking information
and statements within the meaning of applicable securities laws.
The use of any of the words "expect", "anticipate", "continue",
"estimate", "may", "will", "project", "should", "believe", "plans",
"intends" "forecast" and similar expressions are intended to
identify forward-looking information or statements. In particular,
but without limiting the foregoing, this news release contains
forward-looking information and statements pertaining to the
following: the volume and product mix of Crew's oil and gas
production; production estimates including 2013 forecast average
and exit production and first quarter 2014 production estimates at
Septimus; future oil and natural gas prices and Crew's commodity
risk management programs; future liquidity and financial capacity;
future results from operations and operating metrics; anticipated
reductions in operating costs; future costs, expenses and royalty
rates; future interest costs; the exchange rate between the $US and
$Cdn; future development, exploration, acquisition and development
activities and related capital expenditures and the timing thereof;
the number of wells to be drilled, completed and tied-in and the
timing thereof; the amount and timing of capital projects;
increased processing capacity at Septimus; the total future capital
associated with development of reserves and resources; and methods
of funding our capital program, including possible non-core asset
divestitures and asset swaps.
Forward-looking statements or information are based on a number
of material factors, expectations or assumptions of Crew which have
been used to develop such statements and information but which may
prove to be incorrect. Although Crew believes that the expectations
reflected in such forward-looking statements or information are
reasonable, undue reliance should not be placed on forward-looking
statements because Crew can give no assurance that such
expectations will prove to be correct. In addition to other factors
and assumptions which may be identified herein, assumptions have
been made regarding, among other things: the impact of increasing
competition; the general stability of the economic and political
environment in which Crew operates; the timely receipt of any
required regulatory approvals; the ability of Crew to obtain
qualified staff, equipment and services in a timely and cost
efficient manner; drilling results; the ability of the operator of
the projects in which Crew has an interest in to operate the field
in a safe, efficient and effective manner; the ability of Crew to
obtain financing on acceptable terms; field production rates and
decline rates; the ability to replace and expand oil and natural
gas reserves through acquisition, development and exploration; the
timing and cost of pipeline, storage and facility construction and
expansion and the ability of Crew 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 Crew operates;
the ability of Crew to successfully market its oil and natural gas
products. There are a number of assumptions associated with the
potential of resource volumes including the quality of the Montney
reservoir, future drilling programs, continued performance from
existing wells and performance of new wells, the growth of
infrastructure, well density per section, and recovery factors and
discovery and development necessarily involves known and unknown
risks and uncertainties, including those identified in this press
release.
The forward-looking information and statements included in this
news release are not guarantees of future performance and should
not be unduly relied upon. Such information and statements,
including the assumptions made in respect thereof, involve known
and unknown risks, uncertainties and other factors that may cause
actual results or events to defer materially from those anticipated
in such forward-looking information or statements including,
without limitation: changes in commodity prices; the early stage of
development of some areas in the Evaluated Areas; the potential for
variation in the quality of the Montney formation; changes in the
demand for or supply of Crew'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 Crew or by third party operators of Crew's
properties, increased debt levels or debt service requirements;
inaccurate estimation of Crew'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 Crew's public disclosure documents (including,
without limitation, those risks identified in this news release and
Crew's Annual Information Form).
The forward-looking information and statements contained in this
news release speak only as of the date of this news release, and
Crew does not assume any obligation to publicly update or revise
any of the included forward-looking statements or information,
whether as a result of new information, future events or otherwise,
except as may be required by applicable securities laws.
Test Results and Initial Production Rates
A pressure transient analysis or well-test interpretation has
not been carried out and thus certain of the test results provided
herein should be considered to be preliminary until such analysis
or interpretation has been completed. Test results and initial
production rates disclosed herein may not necessarily be indicative
of long term performance or of ultimate recovery.
Resource Estimates
This news release contains references to estimates of oil and
gas classified as Total Petroleum Initially In Place ("TPIIP") in
the Montney region in northeastern British Columbia which are not,
and should not be confused with, oil and gas reserves. Such
estimates are based upon an independent resource evaluation
effective as at May 1, 2013, prepared in accordance with the
Canadian Oil and Gas Evaluation Handbook. Such estimates are
subject to a number of cautionary statements, assumptions, risks,
positive and negative factors relevant to the estimates and
contingencies, the details of which were set forth in Crew's
previously disseminated press release dated July 9, 2013.
Accordingly, readers are referred to and encouraged to review the
sections entitled "Montney Resource Evaluation", "Definitions of
Oil and Gas Resources and Reserves" and "Information Regarding
Disclosure on Oil and Gas Reserves, Resources and Operational
Information" in the July 9, 2013 press release for applicable
definitions, cautionary language, explanations and discussion of
resources estimated herein, all of which is incorporated herein by
reference.
Crew is an oil and gas exploration and production company whose
shares are traded on The Toronto Stock Exchange under the trading
symbol "CR".
Financial statements and Management's Discussion and Analysis
for the three and six month periods ended June 30, 2013 and 2012
will be filed on SEDAR at www.sedar.com and are available on the
Company's website at www.crewenergy.com.
Contacts: Crew Energy Inc. Dale Shwed President and C.E.O. (403)
231-8850dale.shwed@crewenergy.com Crew Energy Inc. John Leach
Senior Vice President and C.F.O. (403)
231-8859john.leach@crewenergy.com Crew Energy Inc. Rob Morgan
Senior Vice President and C.O.O. (403)
513-9628rob.morgan@crewenergy.com www.crewenergy.com
Crew Energy (TSX:CR)
Historical Stock Chart
From May 2024 to Jun 2024
Crew Energy (TSX:CR)
Historical Stock Chart
From Jun 2023 to Jun 2024
