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, 2013.
OPERATIONAL UPDATE
Throughout the first quarter of 2013, the Company invested $41.6
million principally directed at its winter drilling program.
Drilling activity included the rig release of 6.0 gross (5.9 net)
wells on the Brazeau Belly River property, one 100% working
interest well on the Ferguson Alberta Bakken property and 1.0 gross
(0.29 net) non-operated well in the Peace River Arch area of
northern Alberta.
The Company focused primarily on the Brazeau Belly River
property throughout the first quarter of 2013 taking advantage of
winter drilling conditions and access, available capacity in the
Company's facilities and favorable oil price differentials. The
highlight for the quarter was the drilling of a Brazeau Belly River
horizontal well that flowed at a final rate of 1,580 bbl/d of crude
oil at the conclusion of a four day test (refer to the April 8,
2013 news release for additional information). This well is
currently being tied-in and is expected to be on production by the
end of May, 2013. The results in the area are continually improving
and the Company plans to commence its summer drilling program in
July 2013.
DeeThree has been very active on the Ferguson Alberta Bakken
property since quarter end and currently has two rigs drilling on
the property. Subsequent to March 31, 2013, the Company has
drilled, completed and tested 2.0 (2.0 net) Bakken wells
highlighted by a significant step out well that flow tested at the
highest rate experienced to date from wells drilled on the
property. After fracture stimulation, the well continued to flow
for five days up the 4 1/2" frac string at an average rate of 1,560
bbls/d of 29 degrees API reservoir oil with a final rate of
approximately 1,360 bbls/d of oil (on a 3/4" choke at a wellhead
pressure of 150 psi). Final water cuts at the end of the test were
approximately 4%. The well was drilled to a planned total depth
with a horizontal lateral of approximately 3,200 metres. The
horizontal lateral was successfully fracture stimulated placing 400
tonnes of sand over 22 stages using an energized water based
system. The well was also significant in that it extended the edge
of the Company's existing Bakken pool by another two miles.
Outlook
On April 24, 2013 the Company announced an increase to its 2013
guidance due to first quarter successes combined with better than
expected, and generally improving drilling results. The Company has
increased its 2013 exit rate to be in the range of 9,600 - 10,000
boe/d (81% crude oil and NGLs) and its 2013 average production to
be in the range of 7,600 - 8,000 boe/d (76% crude oil and NGLs).
The Company continues to protect its future cash flow through the
use of financial hedges and year to date has hedged an additional
1,000 bbls/d of crude oil at a fixed price of WTI-NYMEX $97.43 CAD
for 500 bbl/d (May, 2013 - December, 2013) and WTI-NYMEX $95.03 CAD
for 500 bbl/d (June, 2013 - December, 2013). The Company also
locked in the crude oil differential on 500 bbls/d for May 2013 at
$2.65 CAD Edmonton Sweet.
With a strong balance sheet and the excellent results from its
Brazeau Belly River and Ferguson Alberta Bakken properties,
DeeThree is well positioned to achieve its 2013 objectives.
DeeThree's financial and operational accomplishments for the
period include:
-- Record average daily production of 5,926 boe/d, up 95% from the first
quarter of 2012 and 11% from the fourth quarter of 2012.
-- Average daily production of crude oil and liquids rose to 4,213 bbls/d
(71% crude oil and NGLs), representing a 163% increase over the first
quarter of 2012 and a 12% increase over the fourth quarter of 2012.
-- Funds flow from operations grew to $16.8 million, representing a 192%
increase over the first quarter of 2012 and 4% improvement over the
fourth quarter of 2012.
-- Invested $41.6 million in its capital program, including the drilling of
8 (7.19 net) wells, achieving an 88% success rate.
-- Increased the amount of funds available under its credit facility with
the existing syndicate of lenders from $90 million to $135 million.
-- Completed an underwritten common share offering at the issue price of
$6.80 per common share for total net proceeds of $32.2 million,
including funds received on the exercise of the over allotment option.
-- Exited the quarter with total net debt of $70.2 million. Debt to
annualized cash flow ratio at quarter end was 1.04:1.
FINANCIAL AND OPERATIONAL HIGHLIGHTS
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Three Months Ended March 31,
2013 2012 Change
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(000s, except per share amounts) ($) ($) (%)
Financial
Oil and natural gas revenues 30,490 14,277 114
Funds from operations (1) 16,788 5,741 192
Per share - basic and diluted 0.23 0.09 156
Cash flow from operating activities 18,000 4,064 343
Net loss (627) (3,199) 80
Per share - basic and diluted (0.01) (0.05) 80
Capital expenditures (2) 41,558 36,715 13
Working capital deficit (3) 70,174 30,898 127
Shareholders' equity 244,909 178,732 37
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(000s) (#) (#) (%)
Share Data
At period-end 76,168 66,986 14
Weighted average - basic and diluted 73,188 63,321 16
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(%)
Operating(4)
Production
Natural gas (mcf/d) 10,279 8,657 19
Crude oil (bbls/d) 3,924 1,316 198
NGLs (bbls/d) 289 283 2
Total (boe/d) 5,926 3,042 95
Average wellhead prices
Natural gas ($/mcf) 3.43 2.17 58
Crude oil and NGLs ($/bbl) 71.81 85.48 (16)
Combined average ($/boe) 57.17 51.58 11
Netbacks
Operating netback ($/boe) 35.15 24.59 43
Funds flow netback ($/boe) 31.45 20.64 52
Gross (net) wells drilled
Oil (#) 7 (6.22) 8 (7.1) -13(-13)
Standing (#) -- (--) 2 (2.0) -- (--)
Dry and abandoned (#) 1 (0.97) -- (--) -- (--)
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Total (#) 8 (7.19) 10 (9.1) -20(-21)
Average working interest (%) 90 91 (1)
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(1) Funds from operations and funds from operations per share
are not recognized measures under International Financial Reporting
Standards (IFRS). Refer to the commentary in the Management's
Discussion and Analysis for the quarter ended March 33, 2013 under
"Non-IFRS 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 for the quarter ended March
33, 2013 under "Capital Expenditures and Acquisitions" for further
information.
(3) Current assets less current liabilities, excluding current
derivative financial instruments.
(4) For a description of the boe conversion ratio, refer to the
commentary below under "Reader Advisory - BOE Presentation".
Reader Advisory
Forward-Looking Statements. Certain statements contained in this
press release may constitute forward-looking statements. These
statements relate to future events or DeeThree's future
performance. All statements other than statements of historical
fact may be forward-looking statements. Forward-looking statements
are often, but not always, identified by the use of words such as
"seek", "anticipate", "plan", "continue", "estimate", "expect",
"may", "will", "project", "predict", "potential", "targeting",
"intend", "could", "might", "should", "believe" and similar
expressions. These statements involve known and unknown risks,
uncertainties and other factors that may cause actual results or
events to differ materially from those anticipated in such
forward-looking statements. DeeThree believes that the expectations
reflected in those forward-looking statements are reasonable, but
no assurance can be given that these expectations will prove to be
correct and such forward-looking statements included in this press
release should not be unduly relied upon by investors. These
statements speak only as of the date of this press release and are
expressly qualified, in their entirety, by this cautionary
statement.
In particular, this press release contains forward-looking
statements, pertaining to the following: projections of market
prices and costs, supply and demand for oil and natural gas, the
quantity of reserves, oil and natural gas production levels,
capital expenditure programs, treatment under governmental
regulatory and taxation regimes, expectations regarding DeeThree's
ability to raise capital and to continually add to reserves through
acquisitions and development, and projections of market prices and
costs.
With respect to forward-looking statements contained in this
press release, DeeThree has made assumptions regarding, among other
things: the legislative and regulatory environments of the
jurisdictions where DeeThree carries on business or has operations,
the impact of increasing competition, and DeeThree's ability to
obtain additional financing on satisfactory terms.
DeeThree's actual results could differ materially from those
anticipated in these forward-looking statements as a result of risk
factors that may include, but are not limited to: volatility in the
market prices for oil and natural gas; uncertainties associated
with estimating reserves; uncertainties associated with DeeThree's
ability to obtain additional financing on satisfactory terms;
geological, technical, drilling and processing problems;
liabilities and risks, including environmental liabilities and
risks, inherent in oil and natural gas operations; incorrect
assessments of the value of acquisitions; competition for, among
other things, capital, acquisitions of reserves, undeveloped lands
and skilled personnel. Readers are cautioned that the foregoing
list of factors is not exhaustive. Additional information on these
and other factors that could effect DeeThree's operations and
financial results are included in reports on file with Canadian
securities regulatory authorities and may be accessed through the
SEDAR website (www.sedar.com).
This forward-looking information represents DeeThree's views as
of the date of this document and such information should not be
relied upon as representing its views as of any date subsequent to
the date of this document. DeeThree has attempted to identify
important factors that could cause actual results, performance or
achievements to vary from those current expectations or estimates
expressed or implied by the forward-looking information. However,
there may be other factors that cause results, performance or
achievements not to be as expected or estimated and that could
cause actual results, performance or achievements to differ
materially from current expectations. There can be no assurance
that forward-looking information will prove to be accurate, as
results and future events could differ materially from those
expected or estimated in such statements. Accordingly, readers
should not place undue reliance on forward-looking information. .
Except as required by law, the Company undertakes no obligation to
publicly update or revise any forward-looking statements.
Test Rates. Test rates are not necessarily indicative of
long-term performance or of ultimate recovery. Neither a pressure
transient analysis nor a well-test interpretation has been carried
out and the data should be considered to be preliminary until such
analysis or interpretation has been done.
BOE Presentation. References herein to "boe" mean barrels of oil
equivalent derived by converting gas to oil in the ratio of six
thousand cubic feet (Mcf) of gas to one barrel (bbl) of oil. Boe
may be misleading, particularly if used in isolation. A boe
conversion ratio of 6 Mcf: 1 bbl is based on an energy conversion
method primarily applicable at the burner tip and does not
represent a value equivalency at the wellhead.
Contacts: DeeThree Exploration Ltd. Martin Cheyne President and
Chief Executive Officer (403) 263-9130
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