Marquee Energy (MQL-V)
www.marquee-energy.com
54.7 million o/s
Insiders own 7.2%
Key people
Mr. Richard Thompson - Director, President and CEO
Mr. Thompson geophysicist with over 30 years in the oil and gas industry.
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Marquee Energy Ltd. has released its first quarter 2013 operating and financial results.
May 15, 2013 - News Release
Achievements and highlights
The company achieved significant increases in both production and the oil and liquids proportion of production in the quarter. The company's core Michichi and Lloydminster areas now represent 65 per cent of total production and 77 per cent of total oil and liquids production, compared with 10 per cent and 16 per cent, respectively, in the first quarter of 2012.
First quarter highlights:
- Increased average production in the quarter to 2,266 barrels of oil equivalent per day, a gain of 28 per cent over the same period in 2012 and 12 per cent over the fourth quarter 2012 after exclusion of the fourth quarter production from the Willesden Green assets, which were sold in mid-November, 2012;
- Increased the oil and liquids proportion of production to 63 per cent in the quarter, compared with 46 per cent in the first quarter of 2012 and 56 per cent in the fourth quarter of 2012;
- Increased field operating netbacks to $24.47 per barrel of oil equivalent, which represents a gain of 21 per cent over the first quarter of 2012 and 35 per cent over the fourth quarter of 2012, a direct result of the company's growth in oil and liquids weighting:
- Michichi field operating netbacks averaged $31.34 in the first quarter of 2013;
- Increased funds flow from operations to $3-million, a gain of $1.8-million over the first quarter of 2012 and $1-million over the fourth quarter of 2012 without adjusting for the sale of the Willesden Green assets in mid-November, 2012;
- Drilled two Michichi light oil wells:
- The first well was on production mid-February, and the second in mid-April;
- The latest round of drilling started in the fourth quarter of 2012 demonstrates the significant advancement in the company's geologic understanding of the area, improvements in drilling and completion practices, and the resulting well productivity;
- Invested $8.5-million in capital expenditures in the quarter, including the two Michichi wells, completion and tie-in of the last Michichi horizontal well drilled in the fourth quarter of 2012, completion of the gas plant upgrade at Michichi, expansion of the company's seismic data at Michichi, and acquisition of additional land at Michichi and Lloydminster.
Operations update
The company's activity in the first quarter of 2013 was focused on drilling, completion and tie-in operations at Michichi, along with the completion of the upgrade and expansion of the Michichi-area gas plant and gathering system.
Michichi
Marquee drilled two horizontal wells at Michichi in the first quarter of 2013. The first of these wells was put on production in mid-February, and the second in mid-April. The company also completed a horizontal well drilled in December, 2012, and put it on production in mid-February.
Early in the fourth quarter of 2012, Marquee initiated a detailed geologic and seismic mapping evaluation of the area. At the same time, a review of the drilling, completion and production practices of the first seven horizontal wells drilled by Marquee at Michichi was undertaken. The four wells drilled at Michichi in late 2012 and early 2013 incorporated the results of this work, and have been completed as Banff or Detrital oil wells. All of these wells are now on production, and, based on testing and early production, are expected to meet or exceed Marquee's type curve expectations for Michichi.
In particular, initial production for the second well of this four-well program, drilled at 13-29, is significantly better than the best horizontal well drilled to date by industry at Michichi. This well was completed as a dual-zone Banff and Detrital oil well, and has averaged 280 barrels of oil equivalent per day (67 per cent oil and natural gas liquids (NGL)) over the first 78 days.
Production over the last 30 days for the first three wells of this program has averaged 185 barrels of oil equivalent per day (75 per cent oil and NGL). The fourth well has less than 30 days of production, with the associated gas production being flared until tie-in operations are completed. Optimization of production from all four wells continues.
Marquee expects to drill six additional horizontal wells in the area in 2013.
The Michichi gas plant now handles over half of Marquee's natural gas and NGL production in the Michichi area. Approximately two-thirds of the production from the company's remaining 2013 capital program at Michichi is expected to be tied into this facility. The facility is expected to continue to produce significant operating cost savings and production efficiencies.
Lloydminster
The company holds seven sections of undeveloped land in the area, and has a portfolio of over 30 low- to medium-risk drilling locations, with an additional 20 or more opportunities. The company expects to drill three wells at Lloydminster in the second half of 2013.
Based on field estimates, current production from the area is 525 barrels of oil per day, compared with 532 barrels of oil per day in the first quarter of 2013 and 510 in the fourth quarter of 2012.
The company is continuing an arrangement to ship a portion of its Lloydminster heavy oil production by rail. The first volumes were shipped in February, 2013, and the company has increased deliveries to approximately one-third of its total area production. The company is realizing an additional netback of approximately $6 per barrel on these volumes.
Bank facility
The company's lending facility was renewed in May, 2013. The company has available a $70-million facility, comprising a $54-million revolving demand loan and an acquisition/development (A&D) demand loan of up to $16-million. At March 31, 2013, the company had drawn $41.5-million against the operating loan and $3.7-million against the A&D loan.
Outlook
Marquee has selected locations for its next round of drilling at Michichi, which will begin in the third quarter of 2013. These locations were established with the knowledge gained from the 11 horizontal wells drilled to date at Michichi, along with other public well data, in conjunction with an analysis of 2-D and 3-D seismic data.
Marquee's capital plan for the balance of 2013 includes:
- Drill and tie in six additional horizontal wells in the area;
- Drill three wells at Lloydminster;
- Acquire additional land and seismic data.
Marquee confirms its previously disclosed production guidance for 2013 based on this capital program:
- Average 2,400 barrels of oil equivalent per day, weighted 64 per cent oil and NGL;
- Exit 2,700 barrels of oil equivalent per day, weighted 65 per cent oil and NGL.
Management intends to continue to strengthen Marquee's balance sheet. Subsequent to the end of the quarter, Marquee sold a non-core property for $700,000, and will continue to monitor opportunities to monetize additional non-core assets. In this regard, Marquee recently engaged Sayer Energy Advisors to assist in the disposition of its non-core assets. The company has hedged approximately half its forecast 2013 oil production with WTI (West Texas Intermediate) basis swaps at an average price of $91.76, and 33 per cent of its forecast 2013 natural gas production with a $3.40-per-gigajoule AECO basis swap contract. The company has started to hedge its 2014 production with an AECO basis swap contract at $3.87 per gigajoule ($4.06 per thousand cubic feet) for 2,000 gigajoules per day for the first quarter of 2014.
Upcoming events
- Annual general meeting, June 12, 2013, 3 p.m., Calgary Petroleum Club;
- EPAC presentation -- the company will be presenting at the Explorers and Producers Association of Canada Investor Showcase on June 12, 2013, at the Metropolitan Conference Centre, Calgary;
- The event is open to the public and there is no cost to attend;
- Quarterly financial releases:
- Second quarter -- Aug. 22, 2013.
Normal course issuer bid
Marquee has filed with the TSX Venture Exchange a notice of intention to purchase its common shares from time to time in accordance with the normal course issuer bid procedures under Canadian securities laws.
Pursuant to the issuer bid, Marquee may purchase for cancellation up to 2,733,057 of its common shares, representing 5 per cent of the issued and outstanding common shares of the company, during the 12-month period commencing May 21, 2013. The price that Marquee will pay for any shares under the normal course issuer bid will be the market price at the time of purchase. The purchases will be made through the TSX Venture Exchange. The brokerage firm conducting the normal course issuer bid on behalf of Marquee is Acumen Capital Partners. Subject to regulatory approval, the normal course issuer bid will commence on May 21, 2013, and terminate on May 21, 2014, or such earlier time when the bid is completed or terminated by Marquee.
The company believes that the purchase of its shares at recent market prices is an appropriate use of available cash, as management believes recent market prices of its shares do not fully reflect the underlying value of its assets and business. To the extent that the company purchases for cancellation such shares in accordance with the normal course issuer bid, the holdings of remaining shareholders would represent an increased proportion of the shares outstanding and, all other things remaining equal, are expected to result in an increased net asset value per share.
We seek Safe Harbor.
Company presentation
marquee-energy.com |
