Crew Energy Issues 2012 Third Quarter Financial and Operating

Crew Energy Issues 2012 Third Quarter Financial and Operating Results 
CALGARY, ALBERTA -- (Marketwire) -- 11/08/12 --  
Crew Energy Inc. (TSX:CR) of Calgary, Alberta is pleased to present
its operating and financial results for the three and nine month
periods ended September 30, 2012.  
Highlights  


 
--  Funds from operations were $39.4 million or $0.33 per share in the third
    quarter of 2012; 
--  Third quarter production of 26,281 boe per day was 4% lower than the
    27,510 boe per day produced in the same period of 2011 with
    approximately 1,100 boe per day of production shut-in during the first
    quarter and a further 2,500 boe per day of behind pipe production from
    deferred completions; 
--  Cash costs per boe including royalties, operating and transportation
    costs and general and administrative costs decreased $1.33 per boe or 6%
    over the second quarter of 2012; 
--  Crew now has four waterfloods at Princess exhibiting positive results.
    The two original waterfloods have increased production by 170% from the
    "K" pool and 110% from the "N" pool. The Pekisko "M" pool and the
    Pekisko "HH" pool have seen a reduction in gas oil ratios of over 70%
    and oil production increases of 158% and 38%, respectively, over pre-
    waterflood levels; 
--  Capital efficiencies at Princess continue to improve with results from
    the first quarter 2012 drilling program of $19,000 per producing boe.
    Recent drilling has been successful with three Pekisko wells testing at
    750, 453 and 190 bbls of oil per day; 
--  The Company's first horizontal Mannville oil well at Princess is now
    producing 350 bbls per day of oil; 
--  At Septimus, Crew completed two wells with initial seven day production
    rates of 5.9 mmcf per day with 170 bbls per day of liquids and 4.3 mmcf
    per day with 125 bbls per day of liquids.  The Company also optimized
    completion practices which has resulted in cost reductions of $1.6
    million per well increasing the rate of return from 30% to 50%; 
--  During the quarter, Crew purchased 17,800 net acres of prospective
    acreage in the Princess and Lloydminster oil areas all of which have
    multi-zone oil potential. 
 
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                      Three months  Three months  Nine months   Nine months 
Financial                    ended         ended        ended         ended 
($ thousands, except     September     September    September     September 
 per share amounts)       30, 2012      30, 2011     30, 2012      30, 2011 
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Petroleum and natural                                                       
 gas sales                  92,269       114,719      315,290       246,103 
Funds from operations                                                       
 (note 1)                   39,410        54,260      139,494       107,262 
 Per share - basic            0.33          0.45         1.16          1.12 
           - diluted          0.33          0.45         1.15          1.10 
Net income (loss)          (17,947)       12,232         (270)       18,367 
 Per share - basic           (0.15)         0.10        (0.00)         0.19 
           - diluted         (0.15)         0.10        (0.00)         0.19 
                                                                            
Capital expenditures        44,443       138,671      203,618       267,021 
Property acquisitions                                                       
 (net of dispositions)      (5,872)            -      (10,162)      (12,289)
Net capital                                                                 
 expenditures               38,571       138,671      193,456       254,732 
                                                                            
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                                                        As at         As at 
Capital Structure                                   September  December 31, 
($ thousands)                                        30, 2012          2011 
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Working capital deficiency (note 2)                    41,844        92,452 
Bank loan                                             330,858       230,676 
Net debt                                              372,702       323,128 
                                                                            
Current bank facility                                 430,000       430,000 
                                                                            
Common Shares Outstanding (thousands)                 120,832       119,993 
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Notes:                                                                      
(1) Funds from operations is calculated as cash provided by operating       
    activities, adding the change in non-cash working capital,              
    decommissioning obligation expenditures and the transportation liability
    charge. Funds from operations is used to analyze the Company's operating
    performance and leverage. Funds from operations does not have a         
    standardized measure prescribed by International Financial Reporting    
    Standards and therefore may not be comparable with the calculations of  
    similar measures for other companies.                                   
(2) Working capital deficiency includes only accounts receivable less       
    accounts payable and accrued liabilities.                               
                                                                            
                                                                            
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                  Three months   Three months    Nine months    Nine months 
                         ended          ended          ended          ended 
                 September 30,  September 30,  September 30,  September 30, 
Operations                2012           2011           2012           2011 
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Daily production                                                            
 Conventional oil                                                           
  (bbl/d)                5,210          4,910          5,971          5,384 
 Heavy oil                                                                  
  (bbl/d)                5,223          6,633          5,806          2,235 
 Natural gas                                                                
  liquids (bbl/d)        3,153          2,621          3,023          1,712 
 Natural gas                                                                
  (mcf/d)               76,169         80,078         80,865         63,398 
 Oil equivalent                                                             
  (boe/d @ 6:1)         26,281         27,510         28,277 
        19,897 
Average prices                                                              
 (note 1)                                                                   
 Conventional oil                                                           
  ($/bbl)                68.58          71.36          73.90          74.53 
 Heavy oil                                                                  
  ($/bbl)                61.20          63.66          63.89          63.66 
 Natural gas                                                                
  liquids ($/bbl)        44.73          61.69          51.13          61.81 
 Natural gas                                                                
  ($/mcf)                 2.43           3.90           2.27           3.98 
 Oil equivalent                                                             
  ($/boe)                38.16          45.33          40.69          45.31 
Netback ($/boe)                                                             
 Operating                                                                  
  netback (note                                                             
  2)                     19.53          23.75          21.08          22.36 
 G&A                      1.76           1.50           1.78           1.73 
 Interest on bank                                                           
  debt                    1.48           0.81           1.29           0.88 
 Funds from                                                                 
  operations             16.29          21.44          18.01          19.75 
                                                                            
Drilling Activity                                                           
 Gross wells                26             66             89            121 
 Working interest                                                           
  wells                   24.0           65.2           83.4          119.5 
 Success rate,                                                              
  net wells                100%            98%            99%            99%
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Notes:                                                                      
(1) Average prices are before deduction of transportation costs and do not  
    include hedging gains and losses.                                       
(2) Operating netback equals petroleum and natural gas sales including      
    realized hedging gains and losses on commodity contracts less royalties,
    operating costs and transportation costs calculated on a boe basis.     
    Operating netback and funds from operations netback do not have a       
    standardized measure prescribed by International Financial Reporting    
    Standards and therefore may not be comparable with the calculations of  
    similar measures for other companies.                                   

 
OVERVIEW  
Crew remained committed to capital discipline during the third
quarter as activity levels remained well below those of the same
period of 2011. The Company spent $44.4 million during the quarter
which included the drilling of 26 (24.0 net) oil wells, completing 25
(24.5 net) wells at Princess, Lloydminster and Septimus and
recompleting 20 (19.3 net) wells exclusively in the Company's oil
focused areas of Princess and Lloydminster. This was a significant
decline from the third quarter 2011 activity which saw the Company
drill 66 wells and spend over $138 million. During the quarter, Crew
also completed certain non-core asset dispositions of lands in
central Alberta for net proceeds of approximately $5.9 million.  
Production for the third quarter of 2012 decreased 4%, as compared
with the same period in 2011, to average 26,281 boe per day due to
shut-in and deferred natural gas production as well as production
declines. During the third quarter, the Company also implemented
three waterfloods at Princess and one at Low Lake in Saskatchewan
bringing the total number of waterfloods in operation to eight.  
FINANCIAL  
The third quarter continued the trend of market volatility that was
experienced over the first half of 2012. Economic uncertainty
resulting from the European debt crisis, lower forecasted growth in
China and uncertainty surrounding the U.S. economy have created
uncertainty in both the equity and commodity markets resulting in
dramatic price movements. During this period, Crew remained focused
on maintaining financial strength through capital discipline and cost
reduction. During the quarter, the Company executed a successful
capital program which approximated cash flow, reduced operating costs
and added to our hedge positions for both 2012 and 2013.  
The Company's third quarter funds from operations declined, as
compared to the second quarter, to $39.4 million or $0.33 per share
as lower production resulted from reduced capital spending and funds
from operations was further challenged by lower overall commodity
prices and lower hedging gains. The Company's revenue per boe,
including hedging gains, decreased to average $39.69 per boe in the
third quarter compared to $44.90 in the second quarter. This decrease
resulted mainly from a reduction in the hedging gains realized during
the quarter as the second quarter hedging gain was bolstered by a
one-time $12.1 million gain on the monetization of certain 2013
related contracts.  
The Company's price received (excluding hedging gains) for its
production decreased 2% while total cash costs per boe including
royalties, operating costs, transportation and general and
administrative costs decreased 6% during the third quarter of 2012 as
compared with the prior quarter. This reduction in costs was led by a
decrease in royalties in the Princess area and increased gas cost
allowance credits combined with continuing operating cost
efficiencies.  
Prices received for the Company's liquids production including
conventional oil, heavy oil and natural gas liquids decreased 5% over
the second quarter as the price for West Texas Intermediate ("WTI")
oil decreased 3% during the quarter compared to the second quarter of
2012. The prices received for the Company's conventional and heavy
oil sales correlate closely to the price of Western Canadian Select
("WCS"), which traditionally trades at a discount to WTI. During the
third quarter the differential between WTI and WCS remained at 24%,
consistent with the previous quarter. The largest reduction in the
Company's liquids pricing was experienced in the prices received for
natural gas liquids. A glut of ethane and propane in North America
resulted in a sharp decline in the prices received for these products
which make up approximately 40% of Crew natural gas liquids
production. This combined with lower prices received for condensate
contributed to a 21% reduction in the prices Crew received for its
natural gas liquids. 
Crew's revenue from natural gas was positively impacted by pricing
that outperformed the market's expectation as above average
temperatures experienced in the highly populated eastern regions of
Canada and the U.S. resulted in above average power generation demand
for natural gas. The price for natural gas 
delivered at the Canadian
AECO hub during the third quarter averaged $2.32 per mcf, an increase
of 20% over the second quarter of 2012. The average price received
for Crew's natural gas sales during the third quarter averaged $2.43
per mcf, an 18% increase over the second quarter. 
The Company continues to actively protect its cash flow by hedging a
portion of its future production. Crew currently has hedged
approximately 23.3 mmcf per day of natural gas for the period of
October through December 2012 at a price of approximately $2.00 per
mcf and has an additional 30.0 mmcf per day of natural gas hedged for
2013 with an average floor price of $3.19 per mcf. The Company also
has hedges to protect from a significant decline in oil prices with
an average of 6,500 barrels per day of WTI oil hedged at an average
floor price of $94.04 per barrel for the period October through
December 2012 and 3,750 barrels per day of WTI oil hedged at an
average floor price of $91.71 per barrel for 2013. In additio
n, the
Company currently has hedges that fix the differential between WTI
and WCS pricing on an average of 5,000 barrels per day for the period
September to December 2012 at a differential of $15.88 per barrel.  
OPERATIONS UPDATE 
Pekisko Play, Princess, Alberta 
At Princess, activity levels for the majority of the third quarter
were focused on optimizing existing wells and implementing our
waterflood schemes. Production for the quarter averaged 6,000 boe per
day as no new wells were brought on production and a number of single
well batteries were impacted by wet weather. Two additional
waterfloods were implemented in the Alderson and West Tide Lake areas
during the quarter bringing the total to seven waterfloods that are
now on injection. Of particular note, the Pekisko "M" pool and the
Pekisko "HH" pool which started injection in June 2012, have seen a
reduction in the gas oil ratio of 78% and 71%, respectively, and an
oil production increase of 158% and 38%, respectively, over
pre-waterflood levels. One additional waterflood is expected to be
ready for injection by the middle of the fourth quarter which had
previously been planned for 2013. Late in the third quarter, Crew
initiated its fall drilling program resulting in the drilling of
seven (7.0 net) vertical wells and two (2.0 net) horizontal wells.
Given the positive results of our first quarter drilling program
which saw the Company spend $29.5 million of capital to generate a 30
day initial production rate of 1,550 boe per day for a capital
efficiency of $19,000/boe per day, and the continuing strong
performance of our two existing Tilley waterfloods (production
increase of 170% and 110% respectively from pre-waterflood levels),
Crew plans to drill an additional 15 wells in the fourth quarter. 
Heavy Oil, Lloydminster, Saskatchewan 
At Lloydminster, Crew drilled 15 (14.5 net) vertical wells and two
(0.5 net) horizontal wells and also recompleted 16 wells. Capital
efficiencies for the first three quarters have averaged $15,500/boe
per day demonstrating the robust economics of this multi-zone heavy
oil play. In the fourth quarter, the Company is planning to drill an
additional nine wells including three horizontal wells. Since
acquiring this asset in July 2011, Crew has focused primarily on
drilling and recompletion opportunities. As an initial step in
pursuing the enhanced recovery potential on our heavy oil asset base,
Crew initiated a pressure maintenance scheme in the Waseca formation
at Low Lake. The Waseca has been a prolific producing formation in
the area and the pressure maintenance scheme is expected to improve
the ultimate recovery from this reservoir.  
Tower, British Columbia 
The tie-in of the initial non-operated Tower discovery well (0.33
net) was completed in the quarter and the operator is currently
modifying surface facilities to accommodate the expected production
levels. The well tested at 610 boe per day (342 bbls of oil and
liquids and 1.7 mmcf per day of natural gas) after a 23 day flow
test. The production results from this well combined with the second
Tower well (Q3 average 174 boe per day; 60% liquids) will be used to
determine the most appropriate completion technique for Montney oil
at Tower and to assess timing for Crew's development. Crew has been
active at Tower acquiring the necessary access and approvals to drill
up to nine (6.3 net) wells.  
Septimus/Kobes, British Columbia 
With strengthening natural gas prices and a substantial 2013 hedge
program in place, Crew has increased capital activity levels on its
Montney lands. At Septimus, during the third quarter, Crew completed
two first quarter drilled Montney horizontal wells which had been
previously deferred due to weak natural gas prices. As Crew's
completion practices continue to be optimized, the Company is seeing
evidence of increased well performance and reduced costs. The two
wells had gross initial seven day production rates of 5.9 mmcf per
day and 4.3 mmcf per day with 30 bbls/mmcf of liquids and are
currently producing 4.9 mmcf per day and 3.9 mmcf per day after 57
days indicating a much lower decline rate than historically observed.
Completion costs were down 29% from historical levels at $2.1 million
per well as a result of improved infrastructure and completion
efficiencies. Crew has accelerated the drilling of a land retention
horizontal well at Kobes to take advantage of some attractive
drilling rig day rates and will also accelerate the drilling of one
to two Septimus wells from our 2013 plan in the fourth quarter of
2012. 
2012 GUIDANCE  
Crew forecasts production to average between 28,000 and 29,000 boe
per day in 2012 which is consistent with previous guidance. Crew has
remained disciplined in its capital allocation and capital
expenditures. When natural gas prices dramatically declined, the
Company reduced its capital expenditure budget and has dedicated the
majority of capital to its oil plays while spending less than funds
from operations over the last six months. Average 2012 production is
forecasted to grow by 6,000 boe per day or 25% year over year
compared with 2011. Improved natural gas prices have allowed the
Company to place some shut-in or deferred production onstream and
Crew now has approximately 1,100 boe per day of natural gas
production shut-in awaiting higher natural gas prices. Fourth quarter
drilling momentum is expected to be carried over into 2013 resulting
in a forecast exit 2012 production rate of over 28,000 boe per day.  
Demand for services continues to be soft leading to equipment
availability and cost efficiencies. A number of projects that were
originally planned for the first quarter of 2013 have now been
expedited into the fourth quarter of 2012. The Company expects to
spend approximately $55 million in the fourth quarter with year-end
debt estimated at $380 million or 2.1 times estimated trailing funds
from operations.  
OUTLOOK  
Crew is committed to its strategy of investing in the highest return
and the most capital efficient projects with a long term goal of
consistent per share growth. Since Crew was founded in 2003, we have
grown our reserves and production per share 28% and 13%,
respectively, on a compounded annual basis. Our primary goal is to
maintain our capital discipline focusing on capital allocation to
specific assets providing our shareholders with oil production growth
from our Princess and Lloydminster producing areas while realizing
the significant upside in our resource base in the Montney and the
Deep Basin. The Company plans to continue to hedge the commodities
and foreign exchange to ensure a base level of cash flow to fund our
capital programs. We look forward to reporting our 2013 guidance in
early January and our 2012 results in March 2013. 
Cautionary Statements 
Forward-looking information and statements 
This news release contains certain forward-looking information and
statements within the meaning of applicable securities laws. The use
of any of the words "expect", "anticipate", "continue", "estimate",
"may", "will", "project", "should", "believe", "plans", "intends"
"forecast" and similar expressions are intended to identify
forward-looking information or statements. In particular, but without
limiting the foregoing, this news release contains forward-looking
information and statements pertaining to the following: the volume
and product mix of Crew's oil and gas production; production
estimates including 2012 forecast average and exit production; plans
to place on production previously shut-in production; future oil and
natural gas prices and Crew's commodity risk management programs;
future liquidity and financial capacity; projected debt levels
including forecast 2012 year end net debt; future results from
operations and operating metrics; management's expectations in
regards to waterfloods at Princess; future costs, expenses and
royalty rates; future interest costs; the exchange rate between the
$US and $Cdn; future development, exploration, acquisition and
development activities and related capital expenditures and the
timing thereof; the number of wells to be drilled, completed and
tied-in and the timing thereof; the amount and timing of capital
projects; operating costs; the total future capital associated with
development of reserves and resources; and methods of funding our
capital program.  
Forward-looking statements or information are based on a number of
material factors, expectations or assumptions of Crew which have been
used to develop such statements and information but which may prove
to be incorrect. Although Crew believes that the expectations
reflected in such forward-looking statements or information are
reasonable, undue reliance should not be placed on forward-looking
statements because Crew can give no assurance that such expectations
will prove to be correct. In addition to other factors and
assumptions which may be identified herein, assumptions have been
made regarding, among other things: the impact of increasing
competition; the
 general stability of the economic and political
environment in which Crew operates; the timely receipt of any
required regulatory approvals; the ability of Crew to obtain
qualified staff, equipment and services in a timely and cost
efficient manner; drilling results; the ability of the operator of
the projects in which Crew has an interest in to operate the field in
a safe, efficient and effective manner; the ability of Crew to obtain
financing on acceptable terms; field production rates and decline
rates; the ability to replace and expand oil and natural gas reserves
through acquisition, development and exploration; the timing and cost
of pipeline, storage and facility construction and expansion and the
ability of Crew to secure adequate product transportation; future
commodity prices; currency, exchange and interest rates; regulatory
framework regarding royalties, taxes and environmental matters in the
jurisdictions in which Crew operates; the ability of Crew to
successfully market its oil and natural gas products. Included herein
is an estimate of Crew's year-end net debt based on assumptions as to
cash flow, capital spending in 2012 and the other assumptions
utilized in arriving at Crew's 2012 capital budget. To the extent
such estimate constitutes a financial outlook, it is included herein
to provide readers with an understanding of estimated capital
expenditures and the effect thereof on debt levels and readers are
cautioned that the information may not be appropriate for other
purposes.  
The forward-looking information and statements included in this news
release are not guarantees of future performance and should not be
unduly relied upon. Such information and statements, including the
assumptions made in respect thereof, involve known and unknown risks,
uncertainties and other factors that may cause actual results or
events to defer materially from those anticipated in such
forward-looking information or statements including, without
limitation: changes in commodity prices; changes in the demand for or
supply of Crew's products; unanticipated operating results or
production declines; changes in tax or environmental laws, royalty
rates or other regulatory matters; changes in development plans of
Crew or by third party operators of Crew's properties, increased debt
levels or debt service requirements; inaccurate estimation of Crew's
oil and gas reserve and resource volumes; limited, unfavourable or a
lack of access to capital markets; increased costs; a lack of
adequate insurance coverage; the impact of competitors; and certain
other risks detailed from time-to-time in Crew's public disclosure
documents (including, without limitation, those risks identified in
this news release and Crew's Annual Information Form). 
The forward-looking information and statements contained in this news
release speak only as of the date of this news release, and Crew does
not assume any obligation to publicly update or revise any of the
included forward-looking statements or information, whether as a
result of new information, future events or otherwise, except as may
be required by applicable securities laws. 
BOE equivalent 
Barrel of oil equivalents or BOEs may be misleading, particularly if
used in isolation. A BOE conversion ratio of 6 mcf: 1 bbl is based on
an energy equivalency conversion method primarily applicable at the
burner tip and does not represent a value equivalency at the
wellhead. Given that the value ratio based on the current price of
crude oil as compared to natural gas is significantly different than
the energy equivalency of 6:1, utilizing a 6:1 conversion basis may
be misleading as an indication of value. 
Test Results and Initial Production Rates 
A pressure transient analysis or well-test interpretation has not
been carried out and thus certain of the test results provided herein
should be considered to be preliminary until such analysis or
interpretation has been completed. Test results and initial
production rates disclosed herein may not necessarily be indicative
of long term performance or of ultimate recovery. 
Crew is an oil and gas exploration and production company whose
shares are traded on The Toronto Stock Exchange under the trading
symbol "CR". 
Financial statements and Management's Discussion and Analysis for the
three and nine month periods ended September 30, 2012 and 2011 will
be filed on SEDAR at www.sedar.com and are available on the Company's
website at www.crewenergy.com.
Contacts:
Crew Energy Inc.
Dale Shwed
President and C.E.O.
(403) 231-8850
dale.shwed@crewenergy.com 
Crew Energy Inc.
John Leach
Senior Vice President and C.F.O.
(403) 231-8859
john.leach@crewenergy.com 
Crew Energy Inc.
Rob Morgan
Senior Vice President and C.O.O.
(403) 513-9628
rob.morgan@crewenergy.com
www.crewenergy.com
 
 
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