Crew Energy Inc. Announces Fourth Quarter 2013 Financial and
Operating Results
CALGARY, ALBERTA--(Marketwired - Mar 7, 2014) - Crew Energy Inc.
("Crew" or the "Company") (TSX:CR) of Calgary, Alberta is pleased
to present its operating and financial results for the three month
period and year ended December 31, 2013.
Highlights
- Funds from operations in the fourth quarter increased 14% over
the prior quarter to $48.1 million or $0.40 per share;
- Fourth quarter production averaged 28,682 boe per day which was
a 6% increase over the same quarter in 2012 and 2% higher than the
prior quarter;
- Crew increased its land position in the Montney to 377 net
sections and its Montney production to 10,500 boe per day
representing a 70% increase over the year;
- Crew's previously released 2013 year-end reserve report
resulted in finding, development and acquisition costs of $9.65 per
boe leading to a recycle ratio of 2.3x while increasing reserves
per share by 28%;
- Increased heavy oil production at Lloydminster by 20% to 6,800
boe per day at the end of 2013;
- Crew (100%) drilled and completed a well in the volatile oil
window of the Montney at Tower, British Columbia producing at an
average rate of 865 boe per day (615 bbl per day of 46° API light
oil) over a 13 day production test;
- Reduced operating costs by 5% to $10.62 per boe from the third
quarter of 2013 which was a reduction of 7% over the same period in
2012;
- Completed a $150 million offering of senior unsecured notes
with an 8.375% coupon and a seven year term which provides the
Company with $570 million of available debt capacity with total net
debt of $383 million at year-end;
- Improved 2013 onstream capital efficiency to $21,300 per
producing boe.
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Financial ($ thousands, except per share amounts) |
Three months ended December 31, 2013 |
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Three months ended December 31, 2012 |
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Year ended December 31, 2013 |
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Year ended December 31, 2012 |
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Petroleum and natural gas sales |
110,394 |
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102,473 |
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430,627 |
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417,763 |
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Funds from operations (note 1) |
48,128 |
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47,110 |
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172,438 |
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186,604 |
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Per share - basic |
0.40 |
|
0.39 |
|
1.42 |
|
1.54 |
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diluted |
0.40 |
|
0.39 |
|
1.42 |
|
1.54 |
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Net income/(loss) |
(58,429 |
) |
21,812 |
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(79,311 |
) |
21,542 |
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Per share - basic |
(0.48 |
) |
0.18 |
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(0.65 |
) |
0.18 |
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diluted |
(0.48 |
) |
0.18 |
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(0.65 |
) |
0.18 |
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Exploration and Development expenditures |
55,996 |
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55,173 |
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220,031 |
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258,791 |
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Property acquisitions (net of dispositions) |
(1,931 |
) |
(86,395 |
) |
40,218 |
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(96,557 |
) |
Net capital expenditures |
54,065 |
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(31,222 |
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260,249 |
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162,234 |
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Capital Structure ($ thousands) |
As at December 31, 2013 |
As at December 31, 2012 |
Working capital deficiency (note 2) |
40,098 |
48,522 |
Bank loan |
197,688 |
242,834 |
Total bank loan and working capital deficiency |
237,786 |
291,356 |
Bank facility |
420,000 |
400,000 |
Senior unsecured notes |
145,623 |
- |
Total net debt |
383,409 |
291,356 |
Common Shares Outstanding (thousands) |
121,635 |
121,620 |
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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 accretion of
deferred financing charges. 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.
Operations |
Three months ended December 31, 2013 |
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Three months ended December 31, 2012 |
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Year ended December 31, 2013 |
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Year ended December 31, 2012 |
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Daily production (note 1) |
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Princess and other oil (bbl/d) |
4,009 |
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5,258 |
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4,350 |
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5,792 |
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Lloydminster oil (bbl/d) |
6,647 |
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5,644 |
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6,028 |
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5,765 |
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Natural gas liquids (bbl/d) |
3,105 |
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3,294 |
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3,022 |
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3,091 |
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Natural gas (mcf/d) |
89,528 |
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76,983 |
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84,306 |
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79,889 |
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Oil equivalent (boe/d @ 6:1) |
28,682 |
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27,027 |
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27,451 |
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27,963 |
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Average prices (notes 1 & 2) |
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Princess and other oil ($/bbl) |
67.92 |
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68.46 |
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73.83 |
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72.66 |
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Lloydminster oil ($/bbl) |
60.49 |
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60.00 |
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65.90 |
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62.93 |
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Natural gas liquids ($/bbl) |
59.03 |
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47.14 |
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55.97 |
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50.06 |
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Natural gas ($/mcf) |
3.82 |
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3.38 |
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3.47 |
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2.54 |
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Oil equivalent ($/boe) |
41.84 |
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41.21 |
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42.98 |
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40.82 |
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Netback ($/boe) |
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Revenue |
41.84 |
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41.21 |
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42.98 |
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40.82 |
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Realized commodity hedging gain (loss) |
(0.11 |
) |
1.37 |
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(1.54 |
) |
2.32 |
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Royalties |
(7.78 |
) |
(7.66 |
) |
(8.53 |
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(8.87 |
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Operating costs |
(10.62 |
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(11.41 |
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(11.14 |
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(11.54 |
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Transportation costs |
(1.21 |
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(1.37 |
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(1.25 |
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(1.38 |
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Operating netback (note 3) |
22.12 |
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22.14 |
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20.52 |
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21.35 |
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G&A |
(1.87 |
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(1.83 |
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(1.86 |
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(1.79 |
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Interest on long-term debt |
(1.99 |
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(1.38 |
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(1.45 |
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(1.31 |
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Funds from operations |
18.26 |
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18.93 |
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17.21 |
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18.25 |
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Drilling Activity |
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Gross wells |
16 |
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24 |
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95 |
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112 |
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Working interest wells |
15.6 |
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24.0 |
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91.8 |
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107.2 |
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Success rate, net wells |
100% |
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98% |
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99% |
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98% |
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Notes:
(1) Princess, Alberta oil (20° to 26° 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
Fourth quarter production averaged 28,682 boe per day including
the impact of approximately 450 boe per day of pipeline
apportionment and third party processing restrictions in the Deep
Basin, consistent with budget expectations. Crew's activity in the
fourth quarter was focused on optimizing the results of the
Company's capital programs in Lloydminster and Septimus, where Crew
drilled a total of 15 (15.0 net) wells out of a total of 16 (15.6
net) wells in the quarter. Crew's fourth quarter exploration and
development capital expenditures were $56 million including
infrastructure enhancements in our Septimus area in preparation for
the construction of our second gas processing facility in
2014/2015. Total 2013 exploration and development expenditures of
$220 million were consistent with the Company's budget.
Crew's efficiencies have continued to excel with finding and
development costs in 2013 of $9.05 per boe generating a recycle
ratio of 2.4 times. The focus of our capital expenditures will
continue to be in the Montney formation in northeast British
Columbia where we were able to achieve proved plus probable finding
and development costs of $6.38 per boe generating a recycle ratio
of 3.1 times while increasing reserves by 82% and production by 70%
over the year. Onstream efficiencies have continued to improve with
an average 2013 efficiency of $21,300 per flowing boe assuming a
fourth quarter 2012 average production rate of 27,027 boe per day,
an average fourth quarter 2013 production rate of 28,682 boe per
day, $220 million of exploration and development capital
expenditures and a 32% average decline rate. We continue to build
value with a year-end net asset value of $13.99 per share
increasing proved plus probable reserves to 197.3 million boe
representing a 28% increase in reserves per share.
FINANCIAL
Crew's fourth quarter 2013 funds from operations increased 14%
over the third quarter and 2% over the fourth quarter of 2012 to
$48.1 million or $0.40 per share. Fourth quarter funds flow
benefited from stronger natural gas pricing, reduced operating
costs and royalties and increased production from the Company's
Septimus Montney development. Crew's fourth quarter earnings and
full year 2013 earnings were impacted by losses incurred on the
Company's risk management program and a write-down on the Company's
property, plant and equipment partially offset by a reversal of a
previous write-down as described in the annual 2013 Management's
Discussion and Analysis.
A cold fall and early start to winter in the major natural gas
consuming regions of North America was supportive for pricing as
the Company's realized gas price increased 35% over the third
quarter to $3.82 per mcf. Pricing in the Company's oil markets
remained volatile. While the price for West Texas Intermediate
("WTI") oil, denominated in Canadian dollars, only decreased 7% to
average $102.30 for the quarter, prices for Canadian crude
continued to see significant volatility due to refinery outages and
transportation bottlenecks. The average fourth quarter price for
the Company's benchmark Western Canadian Select ("WCS") decreased
25% from the third quarter to average $68.41 per barrel in the
fourth quarter. The Company's operating costs and royalties
benefited from a 27% increase in Septimus production from the third
to the fourth quarter of 2013. Septimus' operating costs and
royalties are significantly lower than the Crew's average per unit
costs and hence as Septimus production becomes a larger part of the
overall production mix, overall corporate operating costs per boe
and royalties per boe are expected to decline.
The Company improved its financial flexibility with the October
issuance of $150 million of senior unsecured notes issued at an
interest rate of 8.375%. The notes have a fixed term of seven years
and are not callable by the Company for three years without penalty
and thereafter at a set early payment premium. The Company's
revised credit facility of $420 million combined with the term debt
provides the Company with borrowing capacity of $570 million and
the flexibility to move forward with its growth plan.
The Company had a successful fourth quarter exploration and
development program which saw the Company spend $56 million
focusing on development of liquids rich natural gas from the
Montney formation at Septimus and heavy oil in the Lloydminster
area. Quarter-end net debt totaled $383 million which represented a
67% drawing on the Company's $570 million borrowing capacity and a
net debt to annualized fourth quarter funds from operations of 2 to
1.
The Company's hedging strategy is focused on protecting against
significant declines in commodity prices that would negatively
impact the funds from operations needed to fund the Company's
on-going capital program. Fluctuating prices have caused
significant swings in Crew's realized gains and losses from its
risk management program over the past year. In the fourth quarter
the Company incurred a realized hedging loss of $0.3 million or
$0.11 per boe. This compared to a third quarter loss of $9.6
million ($3.71 per boe) and a $3.4 million gain ($1.37 per boe) in
the fourth quarter of 2012.
Crew has now built a hedge position to provide a base level of
cash flow for 2014. The Company currently has hedged approximately
45.9 mmcf per day of natural gas for 2014 at a price of
approximately $3.82 per mcf. The Company also protects against
volatile oil prices with contracts in place on 5,020 barrels per
day of WTI oil hedged at an average floor price of approximately
$98.68 per barrel and additional contracts that fix the
differential between WTI and WCS pricing on an average of 3,853
barrels per day at a differential of $23.44 per barrel.
OPERATIONS
UPDATE
Septimus/Tower, British Columbia
Crew achieved record Montney production for the fourth quarter
of 9,800 boe per day, up 27% from the third quarter as Crew was
able to fill the Septimus gas plant expansion five months ahead of
schedule. December average production achieved the milestone of
10,500 boe per day which represents full utilization of the
facility as well as the positive contribution of a recent Montney
oil exploration well that was completed and tested in the quarter.
Operating costs continued their downward trend to average $5.23 per
boe down another 7% from the third quarter which translated to a
strong December operating netback for Septimus of $22.72 per
boe.
Crew drilled four (4.0 net) wells in the quarter including a
Montney oil exploratory well located 11 kilometers along trend from
the Company's established Tower oil production. Crew has now
confirmed the existence of the oil hydrocarbon window and the
production potential at three key points along the Company's 138
section oil fairway. The well was drilled to a total length of
3,550 meters with a horizontal section of 1,470 meters. Over a 13
day production test, the well produced 7,968 bbls of 46° API oil
and 19.5 mmcf of natural gas for an average production rate of 612
bbls per day of oil and 1.5 mmcf per day of gas. We expect the well
to be tied-in and on production in the third quarter. Crew is
encouraged by this result and continues to monitor industry
drilling and completion practices and how they relate to production
rates to better understand and evaluate the economics of this play.
We believe that drilling and completion practices will continue to
be refined leading to improving results as we develop the Company's
large resource of 7.8 billion bbls of oil TPIIP. Crew plans on
drilling six (6.0 net) wells targeting oil at Tower in 2014.
The Company continues to advance the design of the new Septimus
facility and will be in a position to order major equipment in the
first quarter of 2014 remaining on track to have the plant
operational by mid-2015 with the surveying of new drilling pad
sites in progress. Crew completed the installation of a 22.5
kilometer 10" pipeline from the western edge of the Septimus field
that will reduce overall field pressures and will be utilized as
the first leg of the gathering system to supply sales gas from the
new Septimus plant.
In the first quarter of 2014, Crew has drilled one well at
Attachie, three wells at Septimus and is currently drilling the
Company's first horizontal well at Groundbirch and the first of a
six well pad at Septimus. Four wells drilled and brought on
production in the fourth quarter continue their strong performance
with a 60 day average gross raw gas rate of 6.7 mmcf per day plus
250 bbls per day of liquids (1,290 boe per day with a 7% gas
shrinkage factor). Crew's independent evaluators assigned gross
Expected Ultimate Recoverable ("EUR") reserves of 5 bcf average per
well plus 135 mbbls of liquids.
Lloydminster, Alberta/Saskatchewan
Successful execution of the Company's 2013 capital program
resulted in significant production growth in Crew's Lloydminster
heavy oil assets. Fourth quarter production averaged 6,680 boe per
day up 9% from the third quarter, and the Company achieved its
targeted exit production with a December average production rate of
6,800 boe per day. In the fourth quarter, Crew drilled 11 (11.0
net) wells comprised of three horizontal wells, one salt water
disposal well and seven vertical wells. Crew is expecting
Lloydminster production to average 6,000 to 6,500 boe per day in
2014 with capital expenditures of $36 million.
Deep Basin, Alberta
Fourth quarter production in the Deep Basin averaged 5,036 boe
per day as production was impacted by approximately 450 boe per day
of pipeline apportionment and third party processing restrictions
as noted in our third quarter release. Crew plans to drill one
Falher test well in this area in 2014.
Princess, Alberta
Princess production averaged 4,738 boe per day in the fourth
quarter, slightly ahead of the third quarter and driven by the
success of recent Mannville drilling activity as highlighted in our
third quarter release. This production level was achieved with
drilling only one (0.6 net) Mannville horizontal well in the
quarter. Crew will be focusing on Mannville development in 2014 and
plans to drill 16 horizontal wells targeting both the Sunburst and
Detrital formations as the relative economics of Mannville
development are superior to Pekisko development given the more
attractive Crown royalty scheme. In the first quarter, the Company
has drilled six (6.0 net) horizontal wells at Princess targeting
the Mannville with all six wells expected to be on production by
the end of the quarter. Crew will continue to optimize the
performance of the Pekisko waterfloods by converting an additional
four wells to water injection.
OUTLOOK
Crew is maintaining average 2014 production guidance of 29,500
to 30,500 boe per day with plans to exit the year at 31,500 to
32,500 boe per day. Exploration and development capital
expenditures are budgeted at $246 million and will be focused on
our Montney growth strategy in northeast British Columbia. The
Company has had an active first quarter with four rigs currently
drilling.
In 2014, Crew's plans include the following:
- Invest in our Montney resource of 91 TCFE of TPIIP where
drilling and completion technology continues to evolve generating
continuously improving returns;
- Invest in Montney production infrastructure estimated at $35
million in 2014 to accommodate future production growth targeting
corporate exit 2015 production of over 40,000 boe per day;
- Evaluate the Montney potential at Crew's Attachie and
Groundbirch, British Columbia properties;
- Further evaluate the Mannville potential at Princess;
- Maintain aggregate production levels at our Deep Basin,
Lloydminster and Princess properties with free funds from
operations to be distributed to our Montney growth
initiatives;
- Continue to high grade our asset base and consolidate acreage
in the Montney in northeast British Columbia;
- Funds from operations netbacks are expected to improve as
corporate operating costs are forecasted to decline, higher valued
oil production at Tower comes onstream, natural gas prices are
higher than originally forecasted and a greater number of wells are
planned to be drilled horizontally on Crown land at Lloydminster
and Princess which will attract lower royalty rates.
We would like to thank our employees and Board of Directors for
their steadfast commitment to Crew's success and our shareholders
for their continued support. We are excited about our prospects and
future and look forward to reporting our first quarter operating
and financial results in May.
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 2014
forecast average and exit productions and 2015 exit target; 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 including
anticipated timing of the new Septimus facility; 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 and the funding thereof,
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 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 independent resource evaluations effective
as at April 30, 2013 and May 31, 2013, respectively, 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.
BOE equivalent
Barrel of oil equivalents or BOEs may be misleading,
particularly if used in isolation. A BOE conversion ratio of 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 than the energy equivalency of 6:1,
utilizing a 6:1 conversion basis may be misleading as an indication
of value.
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 year ended December 31, 2013 and 2012 will be filed on
SEDAR at www.sedar.com and are available on the Company's website
at www.crewenergy.com.
Crew Energy Inc.Dale ShwedPresident and C.E.O.(403)
231-8850dale.shwed@crewenergy.comCrew Energy Inc.John LeachSenior
Vice President and C.F.O.(403)
231-8859john.leach@crewenergy.comCrew Energy Inc.Rob MorganSenior
Vice President and C.O.O.(403)
513-9628rob.morgan@crewenergy.comwww.crewenergy.com
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