NuVista Energy Ltd. Announces First Quarter 2013 Results
NuVista Energy Ltd. Announces First Quarter 2013 Results
CALGARY, ALBERTA -- (Marketwired) -- 05/08/13 -- NuVista Energy Ltd. ("NuVista") (TSX:NVA) is pleased to announce results for the three months ended March 31, 2013 and provide an update on its plans for the remainder of 2013. We have accelerated the advancement of our condensate-rich Wapiti Montney natural gas play in early 2013 and are pleased with the results in addition to the recent improvement in natural gas prices. We had committed to deliver a focused and repeatable 2013 Montney program, focusing on four key themes: Montney production growth, continuing improvement in capital and operating efficiencies, long term processing infrastructure commitments, and further delineation of the significant resource. We are also targeting divestitures of non-core assets in the range of $25 million - $50 million. We are very pleased to report that delivery of all these targets remains on or ahead of schedule as shown in the highlights below.
Significant highlights for the first quarter of 2013 include:
-- Achieved an average production rate of 14,903 Boe/d. First quarter 2013 production is on track with our first half guidance despite an unscheduled third party facility outage that limited Montney production by approximately 450 Boe/d for the quarter. We continue to forecast first half production of 15,250 Boe/d - 16,250 Boe/d as previously announced. As a point of reference, NuVista April full month production based on preliminary field estimates was 15,500 Boe/d despite Wapiti production restored online only mid month; -- Achieved funds from operations of $11.6 million compared to $24.1 million for the same period in 2012 and $16.3 million for the three months ended December 31, 2012. First quarter 2013 funds from operations reflect the significant dispositions in the fourth quarter of 2012 and the challenging first quarter natural gas and liquids pricing; -- Successfully executed a first quarter capital program of $68.8 million. Drilled 9 (6.6 net) wells during the first quarter for a success rate of 100%. First quarter wells included 4 (3.92 net) Wapiti Montney horizontal wells, 1 (1.0 net) Wapiti Montney vertical well, and 1 (1.0 net) Wapiti Falher horizontal well; -- Tied-in 2 (1.92 net) Montney wells and 1 (1.0 net) Wapiti Falher well; -- Divested gross overriding royalty interests and undeveloped land for proceeds of approximately $13 million; and -- Net debt was $79.6 million at the end of the quarter and debt to forecast 2013 cashflow from operations was 1.0x. Subsequent to the end of the first quarter, NuVista's credit facility was renewed at the existing maximum borrowing amount of $240 million.
Wapiti Montney Play Set to Grow
We are very pleased to report that all Wapiti Montney drilling, completion, and tie-in activities that were forecast to be completed prior to spring breakup, have been completed. In addition to the two wells which have just started up in the first quarter, we now have two wells which have started up subsequent to the quarter for a cumulative total of nine Montney wells on production, five in the North and four in the South. We also have three recently drilled wells waiting on completion post spring breakup.
In the first quarter, NuVista achieved significant improvements in drilling and completion execution and costs:
-- Speed: Due to recent penetration rate improvements in drilling the lateral section of our horizontal wells, the last four wells were drilled to total depth in an average of 32 days, more than seven days faster than even the fastest well drilled in the past; -- Cycle time: due to these drilling improvements, and the efficiencies of a continuous and consistent 2 rig drilling program, we have recently brought on two wells with cycle times under 90 days. The programmed cycle times of spud-to-production have decreased by 40% to a current average of only four months; -- Drilling cost: With these penetration rate improvements, we are now budgeting $4.5 million per well. The last five wells have averaged the previous "best well" cost of $4.8 million per well despite bearing an added $0.3 million per well for winter drilling costs; -- Rig count: As a result of the progress noted above, we now forecast that we can achieve our previously budgeted growth goals in the near term drilling with two rigs for the most part, as opposed to moving to a three rig drilling program. We will still look to add additional rigs at a prudent pace in the longer term depending on future drilling results and commodity prices; and -- As discussed in previous disclosure, we have begun to implement larger slickwater fracture stimulations on three wells, with promising results thus far. Fracture operations went smoothly and we look forward to providing full production results as they unfold.
New well results continue to trend toward type curve expectations of 4.4 Bcf of raw natural gas and above liquid type curve expectations (59 Bbls/MMcf C3+ vs 50 Bbls/MMcf typecurve, including 45 Bbls/MMcf C5+ vs 35 Bbls/MMcf typecurve). We remain confident in our ability to improve, over time, the initial production rates and ultimate reserves of our play type curve. We expect all our pre-spring breakup wells to reach IP30 in mid-second quarter so we plan to provide an operational update by early June with updated type curve and IP30 results.
As announced on April 8, we now have secured firm transportation and processing through a 10 year arrangement with Keyera Corp. This capacity, coupled with one and five year arrangements with SemCAMS ULC at the K3 plant and current production to the CNRL Gold Creek plant, secures the space needed for several years of steady growth while reducing operating cost by 25% - 33% due to economies of scale. NuVista does not have to allocate any capital to transportation and processing infrastructure but will instead pay a capital and operating fee, allowing our capital to be focused on drilling incremental wells. In addition, processing reliability will improve due to the availability of multiple egress solutions. Finally, an additional and significant mutual synergy associated with this project is the transportation, fractionation and marketing of NuVista's natural gas liquids (NGLs). Keyera has material NGL marketing and fractionation capability, and this agreement provides for the fractionation and marketing of the associated NuVista liquids streams from the Wapiti Montney for the term of the agreement. NuVista is pleased to have the certainty of delivery and pricing that comes with this arrangement while being aligned with a vertically integrated growth oriented NGL midstream company.
Wapiti Sweet Uphole Cretaceous/Jurassic Update
NuVista has also been enjoying continued success in the uphole Cretaceous section at Wapiti. The focus has been primarily on the Wapiti Montney over the past 18 months, however we have continued to selectively execute low risk and low cost uphole opportunities to realize area synergies and value within available infrastructure. Recently, NuVista brought on production our fourth Falher horizontal well since January, 2012 at a restricted, raw gas, 30 day IP rate of 7.6 MMcf/d with 58 Bbls/MMcf of NGLs. This amounts to a 30 day IP over 1,500 Boe/d. To date, the four Falher wells combined have produced 8.1 Bcfe gross sales gas (4.3 net Bcfe) with a 73 Bbls/MMcf average liquid yield. These wells are currently producing at a combined net raw gas rate of 14 MMcf/d, restricted by facilities based on our "drill to fill" approach to the uphole Wapiti formations. Total production from the uphole at Wapiti is expected to remain essentially flat at 4,600 boe/d over the year and flat to fourth quarter 2012 production even though only $9 million of capital expenditures has been directed to the area for 2013.
The natural gas price environment continued to be challenging for all energy producers for most of the first quarter of 2013. AECO monthly index natural gas prices remained flat at $2.92/GJ during the quarter compared to $2.90/GJ in the fourth quarter of 2012. With strong natural gas withdrawals from storage due to a colder than normal spring, the AECO monthly index for the remainder of the year is now trading at a much improved level of $3.45/GJ. This price increase is very timely as our Montney volumes have just begun to increase substantially. During the first quarter, condensate and light oil prices remained strong although heavy oil and other natural gas liquids continued to experience price weakness. The average realized combined oil and liquids price in the first quarter of 2013 was $58.66/Bbl compared to $60.50/Bbl in the fourth quarter of 2012. With the significant condensate production associated with our now growing Wapiti Montney play the premium pricing of condensate will drive these values upwards.
We are pleased to reiterate our guidance for first half and full year 2013 despite the downtime experienced in the first quarter of 2013. We still expect to produce in the range of 15,250 Boe/d to 16,250 Boe/d in the first half of 2013, based on the actual production of 14,903 Boe/d in the first quarter of 2013 and a projected range of 16,000 Boe/d to 17,000 Boe/d in the second quarter of 2013. Growth in production from the Montney program will begin in earnest post spring breakup with fourth quarter 2013 guidance unchanged at 17,500 Boe/d to 18,500 Boe/d, for total year guidance in the range of 16,000 Boe/d - 17,000 Boe/d. We expect to average two rigs in the Montney formation for the remainder of 2013. Full year 2013 spending is anticipated to be between $210 million and $220 million, with 2013 cash flow estimated at $75 million - $85 million.
We have the flexibility to increase or decrease rig count subject to drilling results, dispositions, and the commodity price environment. We will also continue to focus on opportunistic asset divestitures, with a full year 2013 target of $25 million to $50 million in divestiture proceeds. We will also be carefully managing the balance sheet to ensure maximum flexibility is maintained going forward.
We are growing increasingly excited about the tremendous condensate-rich potential of our Montney play at Wapiti, the continued growth, and the exceptional value that will be created as we build our scale and the efficiencies that come with it. We have the people, we have the assets, and now we also have the processing capacity to deliver. We look forward to updating you further in early June.
Corporate Highlights ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Three months ended March 31, 2013 2012 ---------------------------------------------------------------------------- Financial ($ thousands, except per share) Oil and natural gas revenue 41,748 73,856 Funds from operations(1) 11,629 24,124 Per basic share 0.10 0.24 Per diluted share 0.10 0.24 Net earnings (loss) (4,061) (3,147) Per basic share (0.03) (0.03) Per diluted share (0.03) (0.03) Adjusted net earnings (loss)(1) (8,621) (10,898) Per basic share (0.07) (0.11) Per diluted share (0.07) (0.11) Total assets 926,852 1,377,819 Long-term debt, net of adjusted working capital(1) 79,556 337,053 Capital expenditures, before dispositions 68,789 52,863 Dispositions 12,597 9,163 Weighted average common shares outstanding (thousands): Basic 118,620 99,513 Diluted 118,620 99,513 ---------------------------------------------------------------------------- Operating Production Natural gas (MMcf/d) 62.8 105.5 Oil (Bbls/d) 1,732 4,477 Natural gas liquids, excluding condensate (Bbls/d) 1,716 2,000 Condensate (Bbls/d) 990 1,196 Total oil equivalent (Boe/d) 14,903 25,250 Average product prices(2) Natural gas ($/Mcf) 3.24 2.47 Oil ($/Bbl) 66.65 75.74 Natural gas liquids, excluding condensate ($/Bbl) 24.88 39.91 Condensate ($/Bbl) 103.28 110.07 Operating expenses Natural gas and natural gas liquids ($/Mcfe) 1.86 1.73 Oil ($/Bbl) 20.12 16.75 Total oil equivalent ($/Boe) 12.20 11.50 Operating netback ($/Boe) 14.02 14.25 Funds from operations netback ($/Boe)(1) 8.67 10.50 ---------------------------------------------------------------------------- Share trading statistics High 6.75 5.90 Low 5.16 3.45 Close 6.50 3.69 Average daily volume 212,310 239,721 ---------------------------------------------------------------------------- ----------------------------------------------------------------------------
(1) Funds from operations, funds from operations per share, funds from operations netback, operating netback, adjusted net earnings and adjusted working capital are not defined by GAAP in Canada and are referred to as non-GAAP measures. Funds from operations are based on cash flow from operating activities as per the statement of cash flows before changes in non-cash working capital and asset retirement expenditures. Funds from operations per share is calculated based on the weighted average number of common shares outstanding consistent with the calculation of net earnings (loss) per share. Funds from operations netback equals the total of revenues including realized commodity derivative gains/losses less royalties, transportation, operating, general and administrative, restricted stock units, interest expenses and cash taxes calculated on a Boe basis. Adjusted net earnings equals net earnings excluding after tax unrealized gains (losses) on commodity derivatives, impairments and gains (losses) on property divestments. Operating netback equals the total of revenues including realized commodity derivative gains/losses less royalties, transportation and operating expenses calculated on a Boe basis. Adjusted working capital excludes the current portions of the commodity derivative asset or liability. Total Boe is calculated by multiplying the daily production by the number of days in the period. For more details on non-GAAP measures, refer to NuVista's "Management's Discussion and Analysis". (2) Product prices include realized gains/losses on commodity derivatives.
CONSOLIDATED FINANCIAL STATEMENTS AND MD&A
First quarter 2013 interim consolidated financial statements and notes to the interim consolidated financial statements and Management's Discussion and Analysis for NuVista Energy Ltd. have been filed on SEDAR (www.sedar.com) under NuVista Energy Ltd. and can also be accessed on NuVista's website at www.nuvistaenergy.com.
ADVISORY REGARDING OIL AND GAS INFORMATION
This news release contains the terms barrels of oil equivalent ("Boe") and thousand cubic feet equivalent ("Mcfe") and million cubic feet equivalent ("Bcfe"). Natural gas is converted to a Boe using six thousand cubic feet of gas to one barrel of oil. In certain circumstances natural gas liquid volumes have been converted to a Mcfe on the basis of one barrel of natural gas liquids to six thousand cubic feet of gas. Boes and Mcfes may be misleading, particularly if used in isolation. The foregoing conversion ratios are based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. As well, given than the value ratio based on the current price of crude oil to natural gas is significantly different from the 6:1 energy equivalency ratio, using a conversion ratio on a 6:1 basis may be misleading as an indication of value.
Any references in this news release to initial or test production rates are useful in confirming the presence of hydrocarbons, however, such rates are not determinative of the rates at which such wells will continue production and decline thereafter. Additionally, such rates may also include recovered "load oil" fluids used in well completion stimulation. While encouraging, readers are cautioned not to place reliance on such rates in calculating the aggregate production for NuVista.
ADVISORY REGARDING FORWARD-LOOKING INFORMATION AND STATEMENTS
This press release contains forward-looking statements and forward-looking information (collectively, "forward-looking statements") within the meaning of applicable securities laws. The use of any of the words "will", "expects", "believe", "plans", "potential" and similar expressions are intended to identify forward-looking statements. More particularly and without limitation, this press release contains forward looking statements, including management's assessment of: NuVista's future strategy, plans, opportunities and operations; forecast production; production mix; drilling, development, completion and tie-in plans and results; ignore expectations of future results, including future production levels, type curves and well economics, NuVista's planned capital budget; expectations with respect to NuVista's disposition program and its effect on debt levels; the benefit to be obtained from NuVista's transportation, processing and marketing agreements; targeted debt level; the timing, allocation and efficiency of NuVista's capital program and the results therefrom; the anticipated potential of NuVista's asset base; forecast funds from operations and cash flow; the source of funding of capital expenditures; the objectives and focus of NuVista's capital program and the allocation thereof and results therefrom; NuVista's risk management strategy; expectations regarding future commodity prices and netbacks; and industry conditions.
By their nature, forward-looking statements are based upon certain assumptions and are subject to numerous risks and uncertainties, some of which are beyond NuVista's control, including the impact of general economic conditions, industry conditions, current and future commodity prices, currency and interest rates, anticipated production rates, borrowing, operating and other costs and funds from operations, the timing, allocation and amount of capital expenditures and the results therefrom, anticipated reserves and the imprecision of reserve estimates, the performance of existing wells, the success obtained in drilling new wells, the sufficiency of budgeted capital expenditures in carrying out planned activities, competition from other industry participants, availability of qualified personnel or services and drilling and related equipment, stock market volatility, effects of regulation by governmental agencies including changes in environmental regulations, tax laws and royalties; the ability to access sufficient capital from internal sources and bank and equity markets; and including, without limitation, those risks considered under "Risk Factors" in our Annual Information Form. Readers are cautioned that the assumptions used in the preparation of such information, although considered reasonable at the time of preparation, may prove to be imprecise and, as such, undue reliance should not be placed on forward-looking statements. NuVista's actual results, performance or achievement could differ materially from those expressed in, or implied by, these forward-looking statements, or if any of them do so, what benefits NuVista will derive therefrom. NuVista disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. Contacts: NuVista Energy Ltd. Jonathan A. Wright President and CEO (403) 538-8501
NuVista Energy Ltd. Robert F. Froese VP, Finance and CFO (403) 538-8530 www.nuvistaenergy.com