Arsenal Energy Inc. Announces 2012 Third Quarter Results
CALGARY, ALBERTA, Nov 6, 2012 (Menafn - Marketwire via COMTEX) --Arsenal Energy Inc. ("Arsenal") (otc pink:AEYIF) is pleased to release its 2012 Q3 results. During the quarter, Arsenal drilled and tested the first two wells in its Glauconite play at Princess, Alberta. Initial results are promising. The Company also received good initial production results from the first two of a twelve well non-operated Bakken program in North Dakota.
Full financial details are contained in the financial statements and MD&A filed on SEDAR and on the Company website
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SUMMARY OF FINANCIAL AND
OPERATIONAL RESULTS
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Three Months EndedNine Months Ended
September 30September 30
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(000'S Cdn. except
per share amounts)20122011 % Change20122011 % Change
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FINANCIAL
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Oil and gas revenue20,17515,0283459,81739,37752
Funds from operations7,78211,426(32)21,11920,8331
Per share - basic0.050.07(30)0.140.133
- diluted0.050.07(30)0.130.13-
Net income (loss)(1,474)6,434(123)7841,506(48)
Per share - basic
and diluted(0.01)0.04-0.010.01-
Total debt65,0749,24060465,0749,240604
Capital expenditures13,3308,6375431,93226,89219
Proceeds on property
dispositions(32)(24)33(1,928)(622)210
Shares outstanding -
end of period156,414159,366(2) 156,414159,366(2)
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OPERATIONAL
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Wells drilled (net)
Oil3.103.59(14)4.984.628
Gas------
Dry-1.00--3.00-
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Total net wells
drilled3.104.59(32)4.987.62(35)
Daily production
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Heavy oil (bbl/d)81166(52)126185(32)
Light oil and NGLs
(bbl/d)2,7271,760552,5641,50970
Natural gas (mcf/d)5,3191,5522435,7681,860210
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Oil equivalent (boe @
6:1)3,6942,185693,6522,00582
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Realized commodity
prices (Cdn.)
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Heavy oil (bbl)67.5266.57170.5368.363
Light oil and NGLs
(bbl)74.0282.88(11)76.9582.39(7)
Natural gas (mcf)2.264.13(45)2.093.87(46)
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Oil equivalent (boe @
6:1)59.3774.76(21)59.7871.95(17)
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Operating netback (
per boe)
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Revenue59.3774.76(21)59.7871.95(17)
Royalty(11.00)(15.14)(27)(12.62)(13.93)(9)
Operating cost(21.20)(19.14)11(20.72)(19.57)6
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Operating netback per
boe27.1740.48(33)26.4438.45(31)
General and
administrative(3.26)(4.57)(29)(3.13)(5.89)(47)
Finance expenses(1.75)(0.51)241(1.69)(1.01)67
Realized gains
(losses) on risk
management contracts0.7022.2697(0.54)6.77(108)
Other0.04(0.82)1040.03(0.25)(110)
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Funds flow per Boe22.9056.84(60)21.1138.06(45)
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Operations
Average production of 3,694 boe/d during the third quarter was up 69% compared to the third quarter of 2011. Light oil production increased by 55% compared to Q3 2011, to 2,727 bbls/d due to an acquisition in late 2011 and from new Bakken wells in North Dakota. Gas production was up 243% year over year due to the acquisition of the Desan, British Columbia property in late 2011.
Operating costs increased to 21.20/boe in Q3 2012 compared to 19.14/boe for the same period in 2011. The increase is due to the acquisition of higher cost production in late 2011 offset by additions of low operating cost Bakken production in North Dakota.
At Princess, in eastern Alberta, Arsenal drilled two horizontal Glauconite oil wells. Each well was completed with multistage fracture stimulations. The first well has been on production for approximately six weeks. Current production is 220 bbls/d of oil and 450 mcf/d of gas. The second well is being equipped and should be on continuous production within the next few days. The second well is expected to produce at approximately 60 bbls/d. Arsenal has 100% WI in both wells.
During the third quarter, Arsenal participated in the drilling of 6 gross (1.1 net) Bakken horizontal wells in North Dakota. Two of the new drills and one old well were fracked and placed on production during the quarter. The Amundson well (20.31 %WI) has averaged 945 bbls/d over 20 days. The Sundts well (11.72% WI) has averaged 1,360 bbls/d over 6 days. The Moen well (20.31% WI) had produced for two years unstimulated. It was fracked in the third quarter and production increased from 100 bbls/d to 200 bbls/d. The remaining wells are in various stages of completion. All of the well results to date are indicative of type wells.
Financial
Funds from operations netback for Q3 2012 totaled 7.8 million or 22.90/boe. Excluding a onetime hedge crystallization in Q3 2011, cash flow in that quarter was 7.0 million or 34.58/boe. The higher cash flow in Q3 2012 (excluding the hedge crystallization in Q3 2011) is due to a 69% higher production rate offset by a 21% decrease in unit revenue. Unit revenue decreased from 74.76/boe in Q3 2011 to 59.37/boe in Q3 2012 due to lower oil prices and a gassier production mix.
Outlook
Arsenal currently has an interest in 9 gross (1.1 net) North Dakota Bakken wells in various stages of drilling or completing operations. It is anticipated that most of these wells will be on production by yearend. With those wells on production, Arsenal should exit the year at approximately 4,000 boe/d. At Princess, Arsenal has contracted a rig for a four well program starting in early December. Production volumes from the Princess wells should come on line starting at the end of January.
Oil price differentials have swung widely through 2012. Pipeline grid bottlenecks in Western Canada and North Dakota have been somewhat alleviated by growing rail transportation. Bakken differentials to WTI have narrowed from 25/bbl at their peak in May down to 2/bbl in October. In the short term, spikes in differentials due to refinery or pipeline issues should be expected.
Arsenal has 9,151 acres of undeveloped Bakken lands at Rennie Lake / Black Slough in North Dakota. Arsenal's lands are now completely surrounded by oil wells. Early results are highly variable, with 5 month average production rates ranging from 50 bbls/d/well to 250 bbls/d/well. Well costs in this area are estimated at 6 million/well. Arsenal has received a notice to drill the Los Gatos well (12.5% WI) at Rennie Lake in Q1 2013. Depending on how the sweet spot of the play maps out over time, this area has the potential to be a major new development area for Arsenal.
In the deep basin of Alberta, Arsenal has acquired 9,600 net acres of land on an emerging Cardium play. Wells drilled by other operators in the play are coming on stream at approximately 4 mmcf/d of gas with 50 bbls/mmcf of liquids. Most of the liquids are high netback condensates. Based on Arsenals predicted type well, the play requires a 3.60 AECO gas price to make a 10% rate of return. The potential resource is material for Arsenal.
To receive Company news releases via e-mail, please advise info@arsenalenergy.com and specify "Arsenal Press Releases" in the subject line.
Advisory
Management uses certain industry benchmarks such as field netback to analyze financial and operating performance. Field netback has been calculated by taking oil and gas revenue less royalties, operating costs and transportation costs. This benchmark does not have a standardized meaning prescribed by GAAP and may not be comparable to similar measures presented by other companies. Management considers field netback as an important measure to demonstrate profitability relative to commodity prices. (1)"Funds from operations", "funds from operations per share", "netbacks" and "netbacks 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 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.
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).
FOR FURTHER INFORMATION PLEASE CONTACT: Arsenal Energy Inc.Tony van WinkoopPresident and Chief Executive Officer(403) 262-4854(403) 265-6877 (FAX)
Arsenal Energy Inc.J. Paul LawrenceVice President, Finance and CFO(403) 262-4854(403) 265-6877 (FAX)
Arsenal Energy Inc. 1900, 639 - 5th Avenue S.W. Calgary, Alberta T2P 0M9 info@arsenalenergy.com www.arsenalenergy.com
SOURCE: Arsenal Energy Inc.
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