Cequence Energy provides operational update

CALGARY, Feb. 4, 2013 /CNW/ - Cequence Energy Ltd. ("Cequence" or the 
"Company") (TSX: CQE) is pleased to provide the following operational update. 
Montney, Simonette Area 
Cequence's fall/winter drilling program includes four Montney wells at 
Simonette with initial results as follows: 


    --  A 100 percent working interest well at 3-18-61-26W5 has tested
        for 2.5 days at a final flow rate of  12.9 mmcf/d of natural
        gas plus liquids at a flowing pressure of 1775 psi.  The well
        is expected to be producing into the Cequence gathering system
        by mid February 2013.
    --  A 100 percent working interest horizontal well at
        10-16-61-27-W5 has been on production for two months and is
        currently producing 1.2 mmcf/d of natural gas and 40 bbls/d of
        free condensate.  A 24 stage completion was planned for the
        2,400 m horizontal wellbore. It is estimated that 15 stages
        were completed successfully prior to a casing failure in the
        horizontal wellbore. Cequence believes that current
        productivity is restricted by the failed casing. Cequence is
        reviewing alternatives to complete the section of the
        horizontal wellbore that has not been stimulated.
    --  A 100 percent working interest horizontal well at 8-21-61-26W5
        was drilled to a total measured depth of 5,546 m. A 25 stage
        completion was planned for the 2500 m lateral section. 
        Cequence successfully executed two frac stages on the first day
        of the completion operation. The well was flowed back overnight
        with promising initial test rates of approximately 4 mmcf/d at
        a pressure of 695 psi.  Subsequent frac stages 3 through 25
        were compromised due to a downhole completion tool failure.   
        Completion operations were halted.
        Cequence observed encouraging results from the two successful
        fracs and encountered high quality reservoir and fast
        penetration  rates while drilling.  Based on management's
        evaluation of the encouraging information of the first two
        fracs, the horizontal section of the wellbore is currently
        being redrilled and is expected to be completed in February
        2013.
    --  An additional 100% working interest Montney horizontal well at
        4-21-61-26W5 is expected to spud in February and be completed
        before spring break up.

Dunvegan and Falher, Resthaven Area

Cequence is completing a Dunvegan horizontal well at 10-02-62-01W6. Initial 
completion results are expected within the next week. Cequence is drilling a 
Falher horizontal well at 02-06-61-01W6 as a follow up to the exploration 
success announced in September 2012. A 22 stage completion is planned for 
February 2013. Both the Dunvegan and Falher wells are expected to be on 
production prior to the end of March when the expansion of the Simonette field 
gathering system and compression station is expected to be complete.

Both wells are part of a farm-in whereby Cequence pays 100 percent of the 
drill and complete costs to earn a 65 percent working interest in the well and 
three sections of land. The Falher well is the third and final earning well 
under this farm-in arrangement.

Wilrich, Ansell Area

Over the past two years Cequence has acquired 31 sections of 100% land in 
Ansell, Alberta. The primary target zone is the Wilrich formation where 
significant discoveries have been recently announced by other companies on 
adjacent lands.

Cequence completed a farmout agreement with an intermediate Canadian oil and 
gas company ("the "Farmee") that will accelerate the development of this 
property (the "Farmout lands"). The Farmee has committed to drill two 
horizontal wells targeting the Wilrich formation in the next 8 months. The 
Farmee will pay 85% of the drilling, completion and tie-in capital to earn a 
51% interest in three sections of the Farmout Lands for each of the commitment 
wells. After the commitment wells are drilled, the Farmee will have the 
continuing option to earn a 51% interest in the remaining 25 sections. The 
Farmee will pay 85% of the drilling and completion capital to earn a 51% 
interest in 4 sections for each option well drilled. For all Farmout Lands 
earned, the residual interest for Cequence will be 49%. The first commitment 
well is currently drilling.

Guidance

Cequence provided updated 2012 guidance and first half 2013 guidance in 
November 2012. Based on equipment availability and drilling performance, 
Cequence accelerated the drilling of the 10-02 Dunvegan well and the 
completion of the 8-21 well to the fourth quarter of 2012 from the first 
quarter of 2013. As a result, net capital spending for 2012 is expected to 
increase to approximately $80 million and year end net debt is expected to be 
approximately $48 million.

Cequence is in the process of redrilling the horizontal section of the 8-21 
Montney well. This operation is expected to increase first half 2013 capital 
spending by approximately $6 million. In addition, Cequence intends to 
participate in a Wilrich well at Ansell in the first quarter and has adjusted 
the winter drilling program to replace a 50% working interest Montney well 
with a 100% well. In total, first half capital is expected to increase by 
$7 million to $49 million. Net debt at June 30, 2013 is forecast to be $71 
million.

Cequence has hedged approximately 40 percent of its 2013 natural gas 
production at an average price of $3.62 per mcf ($3.12 per GJ).

Management provides the following updated guidance for the six months ending 
June 30, 2013:
                                                                   2013

Average production, BOE/d ((1))                                  10,000

Capital expenditures ($)                                    $49 million

Operating costs ($ per boe)                                       $6.75

Royalties (% revenue)                                                 8

Crude - WTI (US$/bbl)                                            $91.00

Natural gas - AECO (Cdn$/GJ)( )                                   $3.00

Funds flow from operations ($) ((2))                        $26 million

Annualized funds flow from operations                       $52 million
($)

June 30, 2013 net debt and working                          $71 million
capital deficiency ($) ((3) (4))

Basic shares outstanding ((4))                            200.6 million

Notes:
    (1) Comprised of 51.8 mmcf/d of natural gas and 1,370 boe/d of oil
        and liquids
    (2) Funds flow from operations is calculated as cash flow from
        operating activities before adjustments for decommissioning
        liabilities expenditures and net changes in non-cash working
        capital.
    (3) Net debt and working capital (deficiency) is calculated as
        cash and net working capital less commodity contract assets
        and liabilities and demand credit facilities and excluding
        other liabilities.
    (4) Net debt and common shares outstanding has been adjusted from
        previous guidance to include the flow through financing closed
        in December 2012.

Cequence expects to disseminate a press release describing its year end 
reserves and financial and operating results on March 7, 2012, after close of 
markets.

A new corporate presentation is available at cequence-energy.com.

Cequence is a publicly traded Canadian energy company involved in the 
acquisition, exploitation, exploration, development and production of natural 
gas and crude oil in western Canada. Further information about Cequence may be 
found in its continuous disclosure documents filed with Canadian securities 
regulators at www.sedar.com.

The press release includes test rate information that management used to form 
an initial opinion as to the future productivity of a well. Test rates 
disclose herein are of a short duration are not necessarily indicative of 
future performance.

Forward Looking Statements or Information

Certain statements included or incorporated by reference in this press release 
constitute forward-looking statements or forward-looking information under 
applicable securities legislation. Such forward-looking statements or 
information are provided for the purpose of providing information about 
management's current expectations and plans relating to the future. Readers 
are cautioned that reliance on such information may not be appropriate for 
other purposes, such as making investment decisions. Forward-looking 
statements or information typically contain statements with words such as 
"anticipate", "believe", "expect", "plan", "intend", "estimate", "propose", 
"project" or similar words suggesting future outcomes or statements regarding 
an outlook. Forward-looking statements or information concerning Cequence in 
this press release may include, but are not limited to, statements or 
information with respect to: guidance and forecasts; capital spending; hedging 
objectives; business strategy and objectives; drilling, development, 
exploration, operational acquisition and disposition plans and the timing, 
associated costs and results thereof; future net debt and fundsflow; commodity 
pricing and expected royalties; future production levels, including the 
composition thereof. Forward-looking statements or information are based on a 
number of factors and assumptions which have been used to develop such 
statements and information but which may prove to be incorrect. The Company 
believes that the expectations reflected in such forward-looking statements or 
information are reasonable, however, undue reliance should not be placed on 
forward-looking statements because the Company can give no assurance that such 
expectations will prove to be correct. In addition to other factors and 
assumptions which may be identified in this press release, assumptions have 
been made regarding, among other things: the impact of increasing competition; 
the timely receipt of any required regulatory approvals; the ability of the 
Company to obtain qualified staff, equipment and services in a timely and cost 
efficient manner; the ability of the operator of the projects which the 
Company has an interest in to operate the field in a safe, efficient and 
effective manner; the ability of the Company 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 or 
exploration; the timing and costs of operating the Company's business; and the 
ability of the Company to secure adequate product transportation; future oil 
and natural gas prices; currency, exchange and interest rates; the regulatory 
framework regarding royalties, taxes and environmental matters; and the 
ability of the Company to successfully market its oil and natural gas 
products. Readers are cautioned that the foregoing list is not exhaustive of 
all factors and assumptions which have been used.

Forward-looking statements or information are based on current expectations, 
estimates and projections that involve a number of risks and uncertainties 
which could cause actual results to differ materially from those anticipated 
by the Company and described in the forward-looking statements or information. 
These risks and uncertainties may cause actual results to differ materially 
from the forward-looking statements or information. The material risk factors 
affecting the Company and its business are contained in the Company's Annual 
Information Form which is available at SEDAR at www.sedar.com.

The forward-looking statements or information contained in this press release 
are made as of the date hereof and the Company undertakes no obligation to 
update publicly or revise any forward-looking statements or information, 
whether as a result of new information, future events or otherwise unless 
required by applicable securities laws. The forward looking statements or 
information contained in this press release are expressly qualified by this 
cautionary statement.

Additional Advisories

The press release contains references to terms commonly used in the oil and 
gas industry. Netback is not defined by IFRS in Canada and is referred to as 
a non-GAAP measure. Netbacks equal total revenue less royalties, operating 
costs and transportation costs. Management utilizes this measure to analyze 
operating performance.

Funds flow from operations is a non-GAAP term that represents cash flow from 
operating activities before adjustments for decommissioning liability 
expenditures and changes in working capital. The Company evaluates its 
performance based on earnings and funds flow from operations. The Company 
considers funds flow from operations to be a key measure as it demonstrates 
the Company's ability to generate the cash flow necessary to fund future 
growth through capital investment and to repay debt. The Company's calculation 
of funds flow from operations may not be comparable to that reported by other 
companies. Funds flow from operations per share is calculated using the same 
weighted average number of shares outstanding used in the calculation of 
income (loss) per share.

The foregoing outlook and guidance has been provided to assist readers in 
analyzing the Company's anticipated development strategies and prospects and 
it may not be appropriate for other purposes and actual results could differ 
from the guidance provided above. Cequence refers to initial production 
rates which may not be indicative of long term well performance.

Boes are presented on the basis of one Boe for six Mcf of natural gas. 
Disclosure provided herein in respect of Boes may be misleading, particularly 
if used in isolation. A Boe conversion ratio of 6 Mcf:1 Boe 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 from the energy equivalency of 6:1, utilizing a 
conversion on a 6:1 basis may be misleading as an indication of value.

Paul Wanklyn, Chief Executive Officer, (403) 
218‐8850,pwanklyn@cequence-energy.com David Gillis, Chief Financial 
Officer, (403) 806‐4041,dgillis@cequence-energy.com

SOURCE: Cequence Energy Ltd.

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CO: Cequence Energy Ltd.
ST: Alberta
NI: OIL FIELD 

-0- Feb/04/2013 11:00 GMT


 
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