Orion Announces Its Second Quarter Results Continuing Strong Growth in Its Production
CALGARY, ALBERTA--(Marketwire - Aug. 5, 2010) - Orion Oil & Gas Corporation (TSX:OIP) ("Orion" or the "Company") announces that it has filed its second quarter financial statements and the related Management Discussion and Analysis ("MD&A") for the period ended June 30, 2010 on SEDAR at www.SEDAR.com and on the Company's website at www.orionoilandgas.ca.
The second quarter was once again highly successful, as the Company continued to execute on the first element of its strategy, which is to increase production and funds flow from operations from Canadian assets through an aggressive development program. Highlights for the second quarter of 2010 are as follows:
* Increased average daily production by 34% to 4,424 barrels of oil equivalent ("boe") per day, up from 3,314 boe/d in the first quarter of 2010.
* Achieved second quarter exit production of approximately 4,500 boe/d, up 13% over the first quarter exit level, and up 80% over the exit production level on December 31, 2009. We are currently maintaining this production level pending our summer drilling program.
* Generated $7.8 million in funds flow from operations during the three months ended June 30, 2010. The fact that our funds flow from operations was substantially unchanged from first quarter levels despite increased production was due in large part to non-recurring business development expenses incurred during the second quarter.
* Realized an operating netback of $28.47 per boe, down 12% from $32.34 realized during the first quarter.
Concurrently with our aggressive development program, we continued to evaluate strategic transactions in international jurisdictions with stable, equitable, and predictable fiscal and regulatory environments, with the immediate focus being in South America. Chief Executive Officer Gary S. Guidry observed: "We have explored several strategic acquisitions in the first half of 2010 involving assets in various South American countries of interest to us, as well as in North America. We are, however, highly selective in what opportunities we advance to the valuation stage, and have yet to come to a transaction."
Looking forward to the remainder of 2010, we are fully on track for production levels within our guidance range of 4,050 to 4,900 boe/d, and operating costs in our guidance range of $10-$12 per boe. We expect our exit production to be in the range of 6,000 to 7,000 boe/d, and to maintain that production level from our existing assets for three to five years to provide funds for additional growth opportunities.
We have resumed drilling at both Kaybob and Redwater now that we can access the areas following spring break-up conditions and wet weather. We are planning six to eight wells at Kaybob, and eight to ten wells at Redwater including two horizontal wells. We have also scheduled workover and re-completions programs to further optimize production. We expect our total capital program for 2010 to be $75 to $85 million, of which we have spent $24.9 million during the first two quarters ($21.3 million, net of drilling royalty incentives). Based upon the current commodity price environment, we expect that our second half cash flow and availability under our recently increased $60 million credit facility will be sufficient to fund our program.
Summary Information Relating to Orion
Orion is engaged in the exploration for and development of oil and natural gas interests located primarily in the Kaybob, Redwater and Bigstone areas of Alberta. Orion's current production is 4,500 boe/d, which is comprised of approximately 51% light oil and natural gas liquids and 49% natural gas. At its Kaybob property, a natural gas condensate field, Orion has a 91% working interest in 25,600 gross acres. Orion N.A. has drilled 8 wells at Kaybob, with a 100% success rate. At its Redwater property, a light oil field, Orion operates and has an 82% average working interest in approximately 8,800 gross acres. At its Bigstone property, a natural gas field, Orion operates and has a 100% working interest in 1,900 acres. Orion is operator is operator at its Kaybob, Redwater and Bigstone properties and has sufficient capital to fully fund the development of its properties.
MEANING OF BOE: When used in this press release, boe means a barrel of oil equivalent on the basis of 1 boe to 6 thousand cubic feet of natural gas. Boe/d means a barrel of oil equivalent per day. Boe's may be misleading, particularly if used in isolation. A boe conversion ratio of 1 boe for 6 thousand cubic feet of natural gas is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.
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