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Crew Energy Announces Third Quarter 2013 Financial and Operating Results

Crew Energy Announces Third Quarter 2013 Financial and Operating Results 
CALGARY, ALBERTA -- (Marketwired) -- 11/12/13 -- Crew Energy Inc.
("Crew" or the "Company") (TSX:CR) of Calgary, Alberta is pleased to
present its operating and financial results for the three and nine
month periods ended September 30, 2013. 
Highlights  


 
--  Funds from operations were $42.0 million or $0.35 per share, a 6%
    increase over the third quarter of 2012. Excluding the impact of the
    Company's hedging program, funds from operations were $51.6 million or
    $0.42 per share; 
--  Third quarter production was 28,016 boe per day or 7% higher than the
    third quarter of 2012 and 3% higher than the second quarter of 2013; 
--  The Company closed the acquisition of 81 sections of Montney rights in
    northeast British Columbia increasing the Company's land position to 377
    net sections adding 15 TCFE of Total Petroleum Initially in Place
    ("TPIIP") bringing the Company's total independently evaluated Montney
    resource to 91 TCFE as previously reported in the Company's July 9, 2013
    press release; 
--  Crew extended the condensate rich window of the Montney formation with
    its last four wells drilled, which, after three to nine day in line
    production test periods, produced at an average rate per well of 8.8
    mmcf per day with 334 bbls per day of condensate at an average flowing
    casing pressure of 2,168 psi; 
--  We completed the expansion of the Septimus gas plant ahead of schedule
    and on budget with the Company continuing the front-end engineering work
    on realizing 180 mmcf per day of processing capacity from the area over
    the next four years; 
--  An active third quarter drilling program has allowed the Company to ramp
    up production at Lloydminster to over 6,500 boe per day and at Septimus,
    from 6,000 boe per day in January to over 9,000 boe per day currently; 
--  Subsequent to the end of the quarter, Crew completed a $150 million
    senior unsecured note offering. 
 
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                        Three months Three months  Nine months  Nine months 
Financial                      ended        ended        ended        ended 
($ thousands, except per   September    September    September    September 
 share amounts)             30, 2013     30, 2012     30, 2013     30, 2012 
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Petroleum and natural                                                       
 gas sales                   118,173       92,269      320,233      315,290 
Funds from operations                                                       
 (note 1)                     42,035       39,410      124,310      139,494 
  Per share - basic             0.35         0.33         1.02         1.16 
            - diluted           0.35         0.33         1.02         1.15 
Net loss                        (843)     (17,947)     (20,882)        (270)
  Per share - basic            (0.01)       (0.15)       (0.17)       (0.00)
            - diluted          (0.01)       (0.15)       (0.17)       (0.00)
                                                                            
Exploration and                                                             
 Development                                                                
 expenditures                 68,435       44,443      164,035      203,618 
Property acquisitions                                                       
 (net of dispositions)        33,203       (5,872)      42,149      (10,162)
                        ----------------------------------------------------
Net capital expenditures     101,638       38,571      206,184      193,456 
                                                                            
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                                                         As at        As at 
Capital Structure($                                  September December 31, 
 thousands)                                           30, 2013         2012 
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Working capital                                                             
 deficiency (note 2)                                    38,185       48,522 
Bank loan                                              338,908      242,834 
                                                  --------------------------
Net debt                                               377,093      291,356 
Bank facility                                          430,000      400,000 
Common Shares                                                               
 Outstanding (thousands)                               121,635      121,620 
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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               Nine months              
                               ended Three months        ended  Nine months 
                           September        ended    September        ended 
                                 30,    September          30,    September 
Operations                      2013     30, 2012         2013     30, 2012 
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Daily production (note                                                      
 1)                                                                         
  Princess and other oil                                                    
   (bbl/d)                     3,910        5,210        4,465        5,971 
  Lloydminster oil                                                          
   (bbl/d)                     6,030        5,223        5,819        5,806 
  Natural gas liquids                                                       
   (bbl/d)                     2,912        3,153        2,993        3,023 
  Natural gas (mcf/d)         90,981       76,169       82,547       80,865 
  Oil equivalent (boe/d                                                     
   @ 6:1)                     28,016       26,281       27,035       28,277 
Average prices (notes 1                                                     
 & 2)                                                                       
  Princess and other oil                                                    
   ($/bbl)                     90.40        68.58        75.62        73.90 
  Lloydminster oil                                                          
   ($/bbl)                     83.80        61.20        67.99        63.89 
  Natural gas liquids                                                       
   ($/bbl)                     58.24        44.73        54.90        51.13 
  Natural gas ($/mcf)           2.82         2.43         3.34         2.27 
  Oil equivalent ($/boe)       45.85        38.16        43.39        40.69 
Netback ($/boe)                                                             
  Revenue                      45.85        38.16        43.39        40.69 
  Realized commodity                                                        
   hedging gain (loss)         (3.71)        1.53        (2.05)        2.62 
  Royalties                   (10.31)       (7.53)       (8.80)       (9.26)
  Operating costs             (11.21)      (11.22)      (11.32)      (11.58)
  Transportation costs         (1.29)       (1.41)       (1.27)       (1.39)
                        ----------------------------------------------------
  Operating netback                                                         
   (note 3)                    19.33        19.53        19.95        21.08 
  G&A                          (1.66)       (1.76)       (1.85)       (1.78)
  Interest on bank debt        (1.35)       (1.48)       (1.26)       (1.29)
                        ----------------------------------------------------
  Funds from operations        16.32        16.29        16.84        18.01 
                                                                            
Drilling Activity                                                           
  Gross wells                     37           26           79           89 
  Working interest wells        36.3         24.0         76.1         83.4 
  Success rate, net                                                         
   wells                          97%         100%          99%          99%
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Notes:  
(1) Princess, Alberta oil (20 degrees to 26 degrees API oil) has
historically been classified as medium or conventional oil. Effective
December 31, 2012 Crew's reserves attributable to its Princess
property have been classified as heavy oil to accord with definitions
in the royalty regulations in Alberta. Princess and other oil
production and pricing are shown separately from Lloydminster heavy
oil volumes for clarity and comparison with historical
classification.  
(2) Average prices are before deduction of transportation costs and
do not include hedging gains and losses.  
(3) 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 
Third quarter production averaged 28,016 boe per day slightly ahead
of Crew's 2013 budget plan and 3.3% over the second quarter. The
successful installation of the fourth compressor at Septimus late in
the third quarter combined with positive third quarter drilling
results in Septimus, Lloydminster and Princess has resulted in field
estimated production levels averaging 29,000 boe per day in the last
two weeks of October, on track with our long-term growth plan. 
Capital focus for the quarter was on exploiting the Company's heavy
oil asset base, continuing to grow the Company's drilled inventory of
Septimus wells to feed the gas plant expansion, continued refining of
the Company's Septimus well completion programs to reduce costs and
improve performance and increasing Crew's inventory of high quality
Montney land. Exploration and development expenditures were $68.4
million as the Company's drilling program kicked in after spring
breakup resulting in the drilling of 37 (36.3 net) wells at a 97%
success rate. Crew also previously announced the acquisition of the
third tranche of Montney acreage (81 net sections) in northeast
British Columbia for $35.2 million which closed in the third quarter,
to bring the Company's total net acreage position to 377 sections. 
The results of our most recent Septimus step-out wells further
supports the Company's longer term growth strategy primarily focused
on the large Montney oil and gas resource the Company has acquired
over the last six years. We recognize that despite having four
attractive operating areas, the size, scope, results, and growth
potential of the Company's Montney resource represents the clearest
path to building shareholder value over the long term. 
FINANCIAL 
The Company has improved its financial flexibility with the October
issuance of $150 million of senior unsecured notes issued at an
interest rate of 8.375%. The notes have a fixed term of seven years
and are not callable by the Company for three years without penalty
and thereafter at a set early payment premium. The Company's revised
credit facility of $420 million combined with the term debt provides
the Company with borrowing capacity of $570 million and the
flexibility to move forward with its plan. 
Crew's third quarter funds from operations increased 7% over the
third quarter of 2012 to $42 million or $0.35 per share. Excluding
the impact of the Company's hedging program, funds from operations
were $51.6 million or $0.43 per share. Third quarter funds flow
benefited from stronger oil prices including narrower West Texas
Intermediate ("WTI") to Western Canadian Select ("WCS")
differentials. This increase was offset by natural gas prices that
averaged $1.02 per mcf lower in the third quarter compared to the
second quarter. Funds from operations were negatively impacted by a
$9.6 million ($3.71 per boe) realized hedging loss resulting from
losses on the Company's WTI and WCS risk management program.  
Capital spending for the quarter included the $35.2 million final
tranche of Montney land acquisition in northeast British Columbia.
This was the third and final tranche of a total acquisition that saw
the Company acquire approximately 200 sections of Montney acreage
proximal to its core Montney development in the Septimus, British
Columbia area for total consideration of $77.2 million over a six
month period. This acquisition was complementary to a successful
third quarter exploration and development program that saw the
Company spend $68.4 million focusing on development of liquids rich
natural gas from the Montney formation at Septimus and heavy oil in
the Lloydminster area of Saskatchewan. Quarter-end net debt totaled
$377 million which would represent a 55% drawing on the Company's
bank facility pro-forma the issuance of the $150 million term debt.  
The Company's hedging strategy is focused on protecting against
significant declines in commodity prices that would negatively impact
the cash flow needed to fund the Company's on-going capital program.
Crew currently has hedged approximately 35 mmcf per day of fourth
quarter 2013 natural gas production at a fixed average price of
approximately $3.24 per mcf. The Company also protects its liquids
production from a significant decline in WTI and WCS pricing. Crew
has approximately 6,750 bbl per day of fourth quarter 2013 liquids
production protected against a decline in WTI pricing at a fixed
price of approximately $94.70 per barrel. The Company has hedged the
differential between WTI and WCS pricing on 4,250 barrels per day at
differential price of $22.67 for the fourth quarter. Crew has begun
building its hedge position to provide a base level of cash flow for
2014. The Company currently has hedged approximately 22.5 mmcf per
day of natural gas for 2014 at a price of approximately $3.81 per
mcf, 3,374 barrels per day of WTI oil hedged at an average floor
price of approximately $97.25 per barrel with additional hedges
fixing the differential between WTI and WCS pricing on an average of
1,372 barrels per day at a differential of $23.18 per barrel. 
OPERATIONS UPDATE 
Septimus/Tower, British Columbia 
Crew successfully commissioned and started the fourth compressor at
the Company's operated Septimus gas plant late in the third quarter
which contributed to record average production for the quarter of
7,682 boe per day. Current production is approximately 9,000 boe per
day based on field estimates which represents an 84% utilization rate
of the 65 mmcf per day capacity of the Septimus plant. Construction
is underway on the 22.5 km 10" pipeline from the western edge of the
field that will allow the Company to utilize the full capacity of the
Septimus gas plant in the first quarter of 2014. With the increase in
volumes, operating costs have been reduced by 11% from $6.30/boe in
the first quarter to $5.60/boe for the third quarter and the Company
would expect this trend to continue as plant capacity is reached and
cost reduction initiatives are implemented through the first quarter
of 2014.  
Crew drilled four (3.3 net) wells in the quarter including two (1.3
net) Septimus Montney step-out wells located approximately five
kilometers from existing Crew production and one exploratory well at
Altares. The last four (3.3 net) wells Crew has drilled and completed
at Septimus have averaged 8.8 mmcf per day per well and have had very
high condensate rates averaging 334 bbls per day of condensate for an
average yield of 38 bbls per mmcf at an average flowing casing
pressure of 2,168 psi. These rates are more than two times the
current Crew Septimus Montney type well. The Montney exploratory well
at Altares was drilled to a total depth of 4,210m (2,301m horizontal
section) and is anticipated to be completed as part of the Company's
2014 budget. 
Lloydminster, Alberta/Saskatchewan 
Crew's Lloydminster area had its busiest quarter since the asset was
acquired in July 2011. The Company drilled 29 (29.0 net) wells
including 21 vertical and 8 horizontal wells. Highlights include the
four (4.0 net) Lloydminster zone horizontal wells which are producing
at an average rate of 90 bopd (20% above the assigned type curve),
and the six (6.0 net) vertical wells which are producing at an
average rate of 52 bopd (15% above the assigned type curve) from the
Colony formation. Production for the quarter averaged 6,080 boe per
day with approximately 640 boe per day behind pipe as of the end of
the quarter. Current production is approximately 6,500 boe per day
based on field estimates with ten wells to bring on production before
year-end.  
Deep Basin, Alberta 
Deep Basin average production for the third quarter was 6,940 boe per
day, an increase of 28% over the second quarter, as there were no
material outages at third party facilities and the Company continued
to benefit from the strong performance of a Falher horizontal well
drilled in the Kakwa area in the fourth quarter of 2012. Current
productive capacity is between 6,000 to 6,500 boe per day which will
be subject to pipeline apportionment and third party processing
restrictions of up to 1,500 boe per day throughout the fourth
quarter.  
Princess, Alberta 
Production for the third quarter averaged 4,600 boe per day. Crew had
a very modest capital program in the third quarter drilling three
(3.0 net) horizontal wells with two of the wells targeting the
Mannville and one targeting the Pekisko formation. After stabilizing,
production from two Mannville wells was approximately 610 boe per day
resulting in current Princess production between 5,000 and 5,200 boe
per day. The Company has identified 30 locations on Crown land
targeting the Mannville group. Optimization of Crew's 11 Pekisko
waterfloods (approximately 40% of the developed Pekisko resource) is
ongoing, with four of the floods showing marked response, four
requiring modifications to the injection schemes to optimize response
and three are in the early phase of injection and have not yet
responded to water injection. Crew is evaluating additional pools for
water injection in 2014.  
OUTLOOK 
Crew has had a very productive past nine months. We have added 200
sections to our British Columbia Montney land base and have refocused
the Company in a play that is exhibiting continuous improvements in
production rates and Expected Ultimate Recoveries ("EUR") as well as
lower costs. We have progressively increased corporate production
this year from 25,961 boe per day in the first quarter to 27,109 boe
per day in the second quarter and 28,016 boe per day in the third
quarter, expecting to average approximately 27,500 boe per day for
2013 and remain on track to exit the year producing more than 29,000
boe per day. Our efforts to focus on the development of the Montney
at Septimus have been rewarded with 50% growth in ten months from
6,000 boe per day to over 9,000 boe per day currently. We are
forecasting to increase production in the area to 10,000 to 11,000
boe per day in the first quarter of 2014.  
Natural gas prices have rebounded to around $3.40 per mcf from the
low $2.00 per mcf level during the third quarter. Oil prices on the
other hand have dropped to the US$94.00 per bbl level and the
differential between WTI and WCS prices has widened to approximately
$40 per bbl. Our hedging program has partially protected us from this
drop with 4,250 bbls per day of oil swapped at a $22.67 discount to
CDN$ WTI and 6,750 bbls per day of oil swapped at CDN $94.70 per bbl
allowing for an effective price of $72.03 per bbl on 4,250 bbls per
day in the fourth quarter. 
We will maintain our 2013 exploration and development budget of $219
million which will be funded by funds from operations, existing
credit facilities and non-core asset dispositions. Our capital
program is dynamic and will be monitored and adjusted to market
conditions.  
With the recently closed $150 million senior unsecured note offering,
Crew has a line of sight to continue to fund our Montney production
growth objectives through 2016 when we currently anticipate the
Montney asset to become free cash flow positive. Out of the 91 TCFE
of TPIIP assigned to Crew's lands, we only have 4.5% or 4.1 TCFE of
Best Estimate Contingent Resource assigned to the Montney play which
is comprised of over 900 estimated drilling locations. Despite having
four attractive operating areas, we view our Montney resource to be
truly "world class" and believe this asset has the size, scope and
growth visibility representing the clearest path to building
shareholder value over the long-term. 
We look forward to an active fourth quarter and first quarter of 2014
and to reporting our 2014 budget and objectives in January 2014. 
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 2013 forecast average and exit production and
first quarter 2014 production estimates at Septimus; future oil and
natural gas prices and Crew's commodity risk management programs;
future liquidity and financial capacity; future results from
operations and operating metrics; anticipated reductions in operating
costs; 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; increased processing
capacity at Septimus; estimates regarding drilling inventory on
Crew's Montney lands, forecast rates of return, five year drilling
plans and long range production targets in respect of Crew's Montney
resource; the total future capital associated with development of
reserves and resources; and methods of funding our capital program,
including possible non-core asset divestitures and asset swaps.  
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. There are a
number of assumptions associated with the potential of resource
volumes including the quality of the Montney reservoir, future
drilling programs and the funding thereof, continued performance from
existing wells and performance of new wells, the growth of
infrastructure, well density per section, and recovery factors and
discovery and development necessarily involves known and unknown
risks and uncertainties, including those identified in this press
release.  
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; the early stage of
development of some areas in the Evaluated Areas; the potential for
variation in the quality of the Montney formation; 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. 
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. 
Resource Estimates 
This news release contains references to estimates of oil and gas
classified as Total Petroleum Initially In Place ("TPIIP") in the
Montney region in northeastern British Columbia which are not, and
should not be confused with, oil and gas reserves. Such estimates are
based upon independent resource evaluations effective as at April 30,
2013 and May 31, 2013, respectively, prepared in accordance with the
Canadian Oil and Gas Evaluation Handbook. Such estimates are subject
to a number of cautionary statements, assumptions, risks, positive
and negative factors relevant to the estimates and contingencies, the
details of which were set forth in Crew's previously disseminated
press release dated July 9, 2013. Accordingly, readers are referred
to and encouraged to review the sections entitled "Montney Resource
Evaluation", "Definitions of Oil and Gas Resources and Reserves" and
"Information Regarding Disclosure on Oil and Gas Reserves, Resources
and Operational Information" in the July 9, 2013 press release for
applicable definitions, cautionary language, explanations and
discussion of resources estimated herein, all of which is
incorporated herein by reference.  
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, 2013 and 2012 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