Arsenal Energy Releases Q1 Results
15 Juni 2011 - 4:15AM
Marketwired Canada
Arsenal Energy Inc. ("Arsenal") (TSX:AEI) is pleased to release its 2011 Q1
results. During the first quarter, Arsenal completed drilling the Brenlee well
(80.15 %WI), a one mile horizontal, and spud the Amy Elizabeth well (62.49 %WI),
a two mile horizontal, both in North Dakota. Amy Elizabeth finished drilling and
was cased in Q2. Both wells had excellent oil shows during drilling and both
wells are waiting on frac. Arsenal has been negotiating with a group of
companies to contract a frac crew for its ongoing North Dakota Bakken program.
These negotiations are continuing but the contemplated start date has been
delayed to January, 2012. In the meantime, the fracs for Brenlee and Amy
Elizabeth are booked for windows. Arsenal anticipates fracing both wells in Q3.
Arsenal will initiate drilling the Gjoa Lynn (50%WI) as soon as the Brenlee is
fraced.
Full financial details are contained in the financial statements and MD&A filed
on SEDAR and on the Company's website.
SUMMARY OF FINANCIAL AND OPERATIONAL RESULTS
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Three Months Ended March 31
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2011 2010 % Change
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FINANCIAL
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Oil and gas revenue 11,619,144 11,586,513 -
Funds from operations(1) 5,105,635 5,189,404 (2)
Per share - basic 0.03 0.04 (18)
-diluted 0.03 0.04 (19)
Net loss (7,939,855) (69,068) 11,396
Per share - basic (0.05) nil -
-diluted (0.05) nil -
Total debt 6,871,378 20,318,893 (66)
Capital expenditures 7,648,414 4,878,052 57
Property dispositions (736,557) - -
Wells drilled (net)
Oil 1.03 1.84 (44)
Gas - - -
Dry 2.00 - -
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Total net wells drilled 3.03 1.84 65
Shares outstanding - end of period 163,314,306 134,773,390 21
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OPERATIONAL
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Daily production
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Heavy oil (bbl/d) 549 643 (15)
Light oil and NGLs (bbl/d) 1,099 925 19
Natural gas (mcf/d) 2,126 3,517 (40)
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Oil equivalent (boe @ 6:1) (2) 2,002 2,154 (7)
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Realized commodity prices ($Cdn.)
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Heavy oil (bbl) 67.64 69.47 (3)
Light oil and NGLs (bbl) 76.70 72.28 6
Natural gas (mcf) 3.63 4.91 (26)
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Oil equivalent (boe @ 6:1) 64.49 59.78 8
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Operating netback ($ per boe)
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Revenue 64.49 59.78 8
Royalty (11.19) (8.79) 27
Operating cost (15.83) (19.49) (19)
Transportation cost (1.27) (1.23) 3
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Operating netback per boe 36.20 30.26 20
General and administrative (5.88) (4.15) 42
Finance expenses (0.70) (1.33) (47)
Other 0.23 0.35 (35)
Realized hedging gains (losses) (1.50) 1.64 (192)
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Cash flow per Boe 28.34 26.77 6
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(1)"Funds from operations", "funds from operations per share", "operating
netbacks" and "cash flow per boe" are not defined by Generally Accepted
Accounting Principles ("GAAP") in Canada and are regarded as non-GAAP measures.
Funds from operations and funds from operations per share are calculated as cash
provided by operating activities before changes in non- cash working capital,
seismic expenses, and decommissioning obligations settled. Funds from operations
is used to analyze the Company's operating performance, the ability of the
business to generate the cash flow necessary to fund future growth through
capital investment and to repay debt. Funds from operations does not have a
standardized measure prescribed by GAAP and therefore may not be comparable with
the calculations of similar measures for other companies. The Company also
presents funds from operation per share whereby per share amounts are calculated
using the weighted average number of common shares outstanding consistent with
the calculation of net income or loss per share.
(2) The term barrels of oil equivalent ("boe") may be misleading, particularly
if used in isolation. A boe conversion ratio of six thousand cubic feet per
barrel (6 mcf/bbl) of natural gas to barrels of oil equivalence is based on an
energy equivalency conversion method primarily applicable at the burner tip and
does not represent a value equivalency at the wellhead. All boe conversions in
the report are derived from converting gas to oil in the ratio mix of six
thousand cubic feet of gas to one barrel of oil.
Financial
Funds from operations netback for Q1 2011 totaled $5.1 million or $28.34 per Boe
versus $5.2 million or $26.77 per Boe for Q1 2010. Net loss for Q2 was $7.9
million.
Arsenal completed a $21.1 million equity financing in Q1 and reduced debt and
working capital at quarter end to $6.9 million. Based on the 2010 year end
reserve report, Arsenal's banking syndicate has increased the credit facility of
the Company from $40 million to $60 million. Arsenal's balance sheet has
positioned the company to execute the capital program and to act on
opportunistic acquisitions.
Operations
Average production of 2002 boe/d during the first quarter was flat compared to
the first quarter of 2010. Noncore property sales and drilling delays due to
equipment availability in North Dakota offset production additions from the
company's capital program. Arsenal's Q1 production mix was 82% oil and 18%
natural gas. Operating costs decreased to $15.83/boe in Q1 2011 compared to
$19.49/boe for the same period in 2010. The decrease is due to the sale of
higher cost properties and the addition of low operating cost Bakken production
in North Dakota.
Outlook
With the recent strengthening of oil prices, Arsenal's field revenue should
continue to be strong. Volumes in the second quarter will be negatively impacted
by weather conditions in North Dakota where localized flooding and power outages
have resulted in significant production downtime for all operators, including
Arsenal. Volumes should return to full capacity in Q3. Operating costs in Q2
will be higher than Q1 due to the production issues in North Dakota and to a
pipeline break in northern Alberta that has forced Arsenal to truck sales oil at
Evi.
Small operators like Arsenal generally rely on windows to execute programs. The
tight equipment environment in North Dakota has been exacerbated by bad weather.
Fracs for Arsenal's Brenlee and Amy Elizabeth wells are in line for a window but
bad weather continues to delay the scheduled dates. As soon as the Brenlee well
is fraced, Arsenal will schedule the drilling of the Gjoa Lynn well. In addition
to Arsenal's operated wells, before yearend Arsenal anticipates participating in
4 non- operated wells in North Dakota with an average WI of approximately 15%.
At Rennie Lake, North Dakota, Arsenal has approximately 2500 net acres
prospective for the Bakken. Industry has drilled a number of wells surrounding
Arsenal's block. Area operators have formed drilling spacing units including
lands in which Arsenal has an interest. Arsenal anticipates receiving operating
notices on these lands over the next twelve months.
Arsenal has a drilling program planned for eastern Alberta in Q3. Four vertical
Mannville wells are planned at Provost, two horizontal wells in the Leduc are
planned at Chauvin and Edgerton, and one horizontal is planned in the Glauconite
at Princess. The drills at Chauvin, Edgerton and Princess have the potential, if
successful, to open up larger development programs.
Arsenal has acquired 13440 net acres of land on the Wilrich play in the deep
basin of Alberta. Wells drilled by other operators in the play are coming on
stream at approximately 4mmcf/d of gas with 25bbls/mmcf of liquids. Arsenal is
planning to test its acreage in early 2012.
To receive company news releases via e-mail, please advise
info@arsenalenergy.com and specify "Arsenal Press Releases" in the subject line.
Advisory
Certain statements and information contained in this press release, including
but not limited to management's assessment of Arsenal's future plans and
operations, production, reserves, revenue, commodity prices, operating and
administrative expenditures, funds from operations, capital expenditure programs
and debt levels contain forward-looking statements. All statements other than
statements of historical fact may be forward looking statements. These
statements, by their nature, are subject to numerous risks and uncertainties,
some of which are beyond Arsenal's control including the effect of general
economic conditions, industry conditions, changes in regulatory and taxation
regimes, volatility of commodity prices, escalation of operating and capital
costs, currency fluctuations, the availability of services, imprecision of
reserve estimates, geological, technical, drilling an processing problems,
environmental risks, weather, the lack of availability of qualified personnel or
management, stock market volatility, the ability to access sufficient capital
from internal and external sources and competition from other industry
participants for, among other things, capital, services, acquisitions of
reserves, undeveloped lands and skilled personnel that may cause actual results
or events to differ materially from those anticipated in the forward looking
statements. Such forward-looking statements although considered reasonable by
management at the time of preparation, may prove to be incorrect and actual
results may differ materially from those anticipated in the statements made and
should not unduly be relied on. These statements speak only as of the date of
this press release. Arsenal does not intend and does not assume any obligation
to update these forward-looking statements, whether as a result of new
information, future events or otherwise, except as required by applicable law.
Arsenal's business is subject to various risks that are discussed in its filings
on the System for Electronic Document Analysis and Retrieval (SEDAR).