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
-- 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
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.
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
Cequence has hedged approximately 40 percent of its 2013 natural gas
production at an average price of $3.62 per mcf ($3.12 per GJ).
Management provides the following updated guidance for the six months ending
June 30, 2013:
Average production, BOE/d ((1)) 10,000
Capital expenditures ($) $49 million
Operating costs ($ 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
(1) Comprised of 51.8 mmcf/d of natural gas and 1,370 boe/d of oil
(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
(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
(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
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
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
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
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,email@example.com David Gillis, Chief Financial
Officer, (403) 806‐4041,firstname.lastname@example.org
SOURCE: Cequence Energy Ltd.
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