Cequence Energy (CQE-T) earns $4.17-million in Q2
Aug 8, 2013 - News Release
Financial and Operating Highlights The following are Cequence's financial and operating highlights for the second quarter of 2013:
Increased average production by 29 percent from the prior year to 11,205 boepd and by 27 percent from Q1 2013;
Increased funds flow from operations by 225 percent from the prior year to $14.8 million;
Reduced total cash costs(5) from the prior year by 13 percent to $12.11 per boe;
Reduced operating costs by 7 percent to $7.71 per boe from the prior year;
Increased the operating netback by 80 percent from the prior year to $17.56 per boe;
Increased the credit facility to $125 million;
Increased its working interest from 50 percent to 100 percent in 33 net sections of contiguous Montney rights at Simonette; and
Maintained a strong balance sheet with trailing second quarter debt to cash flow ratio of 1.1 times.
Funds flow from operations increased to $14.8 million for three months ended June 30, 2013 compared to $4.6 million for the three months ended June 30, 2012. The increase in funds flow from operations, as defined above, is due largely to an 82 percent increase in natural gas prices and a 29 percent increase in production volumes compared to the second quarter of 2012. In addition, the Company benefitted from lower per unit costs for operating expenses, transportation and general and administrative expenses.
When compared to 2012, Cequence has reduced operating expenses by 7 percent to $7.71 per boe and total cash costs by 13 percent to $12.11 per boe. Second quarter operating costs of $7.71 per boe increased $0.47 from first quarter of 2013 due to costs associated with wet break-up conditions and plant turnaround costs.
Cequence recorded comprehensive income of $4.2 million for the second quarter of 2013 compared to a comprehensive loss of $6.6 million in the same period in 2012. The increase from prior year relates to higher natural gas revenue as a result of higher production volumes and natural gas prices.
Net capital expenditures in the second quarter were $2.1 million and $45.8 million year to date. Capital expenditures were minimal during the second quarter due to spring break-up conditions and included minor dispositions for proceeds of $2.8 million. Current budgeted capital expenditures for 2013 are $97 million with $51 million planned for the second half of the year.
Net debt and working capital deficiency at June 30, 2013 was $66.0 million compared to $43.9 million at June 30, 2012. The Company's credit facilities increased to $125 million effective May 31, 2013 by the Company's lenders. Based on second quarter annualized cash flow, the Company has a debt to cash flow ratio of 1.1 times.
For the remainder of 2013, Cequence has hedged approximately 50 percent of its estimated natural gas production, net of expected royalties, at an average price of $3.64 per mcf. Cequence has also hedged approximately 11.9 mmcfd of natural gas production for 2014 at an average price of $4.09 per mcf.
Operations Update
Cequence achieved record Q2 2013 average production of 11,205 boepd, a 27% increase quarter-over-quarter. In April 2013, Cequence completed pipeline work and the expansion of the Simonette compression and de-hydration facility at 13-11. Upon completion, the Company was able to add production from the successful winter drilling program at Simonette. The last Montney well of the winter program at 9-21-61-26W5 did not commence production until late July following the installation of surface equipment. Cequence expects to optimize the well within the next few weeks.
Drilling operations commenced in July following winter break-up. The first two wells of the program will target the Montney and be drilled and completed consecutively off the same pad site. Cequence anticipates that pad drilling will increase the efficiency of the Company's drilling operations and reduce per well costs as the Company shifts from an exploration emphasis to a development program. The wells are expected to be completed and on production in the fourth quarter of 2013. Cequence intends to keep this drilling rig active through winter with a Wilrich well and a Montney well at Simonette planned for the fourth quarter of 2013.
Cequence expects to add a second drilling rig for the winter in September 2013. The rig will drill a Montney well and a step out to the Company's highly successful Dunvegan well completed in Q1 2013. To date, the well has been producing for 130 days and has cumulative gross production of 1.6 bcf and is currently producing 8.0 mmcfd plus 200 bbls/d of NGLs.
At Edson, Cequence participated in one well (49% working interest) which shows encouraging performance at a first month restricted rate of 5.7 mmcfd of natural gas plus 82 bbls per day of natural gas liquids. Cequence expects to drill the first follow-up location to this discovery in the third quarter.
President's Message
Cequence is planning an active second half of 2013. The Company has maintained a strong balance sheet with a current debt to cash flow ratio of 1.1 times. The Company has shown a record increase in production and cash flow from historical levels. This coupled with a solid 2013 hedge position at an average gas price of $3.64 per mcf gives the management team confidence in planning the Company's capital program. Cequence has discovered a significant resource base at Simonette and is starting to shift some capital to pad-style development drilling in the Montney formation to demonstrate our ability to continue to increase production and cash flow. As the Company grows, we are confident that the Company will be able to maintain our position in the top quartile of low cost gas producers in Canada.
I want to thank our staff and board for showing their continued commitment to Cequence, and to building a top performing natural gas company in Canada.
We seek Safe Harbor. |
