Cequence Energy Announces Third Quarter Results and Operations Update

Cequence Energy Announces Third Quarter Results and Operations Update 
CALGARY, Nov. 12, 2013 /CNW/ - Cequence Energy Ltd. ("Cequence" or the 
"Company") (TSX: CQE) is pleased to announce the financial and operating 
results from the third quarter and provide an operations update. 
Financial and Operating Highlights 
The following are Cequence's financial and operating highlights for the third 
quarter of 2013: 


    --  Commenced the most active drilling program in the Company's
        history with 17 gross wells expected to be drilled prior to
        spring break-up;
    --  Successfully completed 3 Montney wells and 1 Wilrich well at
        Ansell;
    --  Increased average production by 16 percent from the prior year
        to 10,292 boepd;
    --  Increased funds flow from operations by 2 percent from the
        prior year to $11.0 million;

Subsequent to quarter end, completed $60 million unsecured five year note 
investment with CPPIB Credit Investments Inc. allowing for acceleration of 
Simonette development.

Financial and Operating

(000's except per         Three months ended        Nine months ended
share and per unit
amounts)                    September 30,             September 30,
                                             %                        %
                          2013     2012 Change     2013     2012 Change

Financial ($)                                                          

Production revenue   
((1))                   25,325   17,814     42   77,134   53,711     44

Comprehensive loss       (517)  (3,824)   (86)  (1,786) (18,339)   (90)

Per share, basic     
and diluted             (0.00)   (0.02)  (100)   (0.01)   (0.11)   (91)

Funds flow from      
operations,
excluding
termination fee(
(2))                    10,973    7,135     54   36,457   18,813     94

Funds flow from      
operations ((2))        10,973   10,803      2   36,457   22,121     65

Per share, basic     
and diluted               0.06     0.06      -     0.18     0.13     38

Production volumes                                                     

Natural gas (Mcf/d)     52,848   46,641     13   52,459   47,200     11

Crude oil (bbls/d)         844      606     39      776      636     22

Natural gas liquids  
(bbls/d)                   640      516     24      592      503     18

Total (boe/d)           10,292    8,895     16   10,112    9,006     12

Sales prices                                                           

Natural gas,         
including realized
hedges ($/Mcf)            3.08     2.61     18     3.49     2.39     46

Crude oil ($/bbl)        97.42    83.38     17    93.42    84.48     11

Natural gas liquids  
($/bbl)                  47.26    41.89     13    45.55    58.64   (22)

Total ($/boe)            26.75    21.77     23    27.94    21.77     28

Netback ($/boe)                                                        

Price                    26.75    21.77     23    27.94    21.77     28

Royalties               (2.44)   (1.13)    116   (2.48)   (1.30)     91

Transportation          (1.65)   (2.20)   (25)   (1.60)   (2.13)   (25)

Operating costs         (8.29)   (6.88)     20   (7.78)   (7.72)      1

Operating netback        14.37    11.56     24    16.08    10.62     51

General and          
administrative          (2.02)   (2.19)    (8)   (2.06)   (2.26)    (9)

Interest((5))           (0.69)   (0.60)     15   (0.63)   (0.65)    (3)

Cash netback             11.66     8.77     33    13.39     7.71     74

Capital              
Expenditures ($)                                                       

Capital              
expenditures            17,949   16,818      7   66,331   67,661    (2)

Net acquisitions     
(dispositions) (
(4))                       (5)       20  (125)  (2,628) (13,902)   (81)

Total capital        
expenditures            17,944   16,838      7   63,703   53,759     18

Net debt and         
working capital
(deficiency) ((3))    (72,984) (48,291)     51 (72,984) (48,291)     51

Weighted average     
shares outstanding                                                     

Basic and diluted      210,918  191,612     10  206,951  172,832     20

(1) Production revenue is presented gross of royalties and realized
    gain (loss) on commodity contracts.

(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. For the three and nine months ended September 30, 2012,
    funds flow from operations included a $3,668 and $3,308 termination
    fee (net of transaction costs) related to an unsuccessful
    acquisition.

(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) Represents the cash proceeds from the sale of assets and cash paid
    for the acquisition of assets, as applicable.

(5) Represents finance costs less accretion expense on provisions.
     

Funds flow from operations increased to $11.0 million for three months ended 
September 30, 2013 compared to $10.8 million for the three months ended 
September 30, 2012. Funds flow for the three months ended September 30, 2012 
included $3.7 million of net proceeds related to a termination fee from an 
unsuccessful acquisition. Excluding the termination fee, funds flow from 
operations increased by 54 percent from the prior year due to increased 
production volumes, improved commodity pricing and gains on natural gas 
hedging. Cequence recorded a comprehensive loss of $0.5 million for the third 
quarter of 2013 compared to a comprehensive loss of $3.8 million in the same 
period in 2012.

Third quarter AECO-C spot prices averaged $2.45 per mcf in 2013 compared to 
$2.30 in 2012. Despite low natural gas prices, Cequence was able to increase 
its average sales price by 23 percent through realized hedging gains and 
increased liquids revenue. In the third quarter, Cequence realized an 
average natural gas price of $3.08 per mcf. For the remainder of 2013, 
Cequence has hedged approximately 50 percent of its estimated natural gas 
production, net of expected royalties, at an average AECO price of $3.15 /GJ 
or $3.65 per mcf. Cequence has also hedged approximately 19.5 GJ/d or 30 
percent of estimated natural gas production for 2014 at an average price of 
$3.50/GJ or $4.06 per mcf.

For the three months ended September 30, 2013, operating costs increased to 
$8.29 per boe from $6.88 per boe in the comparative period in 2012. Operating 
costs for the nine months ended September 30, 2013 were $7.78 per boe compared 
or $7.72 per boe for the same period in 2012. The increase in third quarter 
operating costs on a per boe basis can be attributed to increased chemical 
costs and cost escalation in non-core properties due to plant turnarounds, 
workovers and declining production.

For the three and nine month periods ended September 30, 2013 operating costs 
in the Company's primary operating area of Simonette were significantly lower 
than corporate operating costs. For the nine months ended September 30, 
2013, Simonette operating costs were $4.95 per boe, a 25 percent improvement 
from the same period in 2012. Conversely, operating costs in the 
Company's other properties have increased on a per boe basis over the same 
period of comparison. Simonette currently comprises 66 percent of corporate 
production and has been the focus of the Company's capital expenditures and 
production growth for the past three years. Cequence forecasts corporate 
operating costs to decrease as Simonette production volumes comprise a greater 
percentage of the Company's total production.

Net capital expenditures in the second quarter were $17.9 million and $63.7 
million year to date. Third quarter capital expenditures included 3.0 
Montney wells spud at Simonette and 1.0 (0.15 net capital working interest) 
well at Ansell. Current budgeted capital expenditures for 2013 are $110 
million with $46 million planned for the fourth quarter.

Net debt and working capital deficiency at September 30, 2013 was $73.0 
million. On October 3, 2013, Cequence entered into a private transaction for 
the issuance of $60.0 million in unsecured five year notes ("Notes") with a 
further $60 million of notes available at a future date, subject to the 
approval by both parties. The initial investment of $60 million of notes 
were issued at par and carry a 9% coupon rate per annum. In addition, Cequence 
has granted, to the lender of the notes, 3.0 million warrants at an exercise 
price of $2.03 to purchase common shares. In conjunction with the issuance of 
the notes, the Company's credit facility borrowing base has been reduced to 
$120 million and was undrawn after giving effect to the issuance of the notes.

Operations Update

Cequence achieved Q3 2013 average production of 10,292 boepd, a 16% increase 
from the third quarter of 2012. During the quarter, the Simonette field 
experienced 4.5 days of downtime for the planned Allliance pipeline 
maintenance and the installation of a field condensate stabilization unit at 
the Cequence owned compressor facility. Quarterly production was reduced by 
approximately 200 boepd as a result of these outages. Production from the 
last Montney well of the winter drilling program at 9-21-61-26W5 commenced 
production in late July following the installation of surface equipment. The 
well has been producing for 90 days at an average rate of 5.8 mmcf/d of 
natural gas and 240 bbl/d of condensate. Cequence is drilling two offset 
wells to 9-21 in the fourth quarter of 2013.

Drilling operations commenced in July following spring break-up. The first 
five wells of the winter program at Simonette were drilled for an estimated 
average cost of $4.7 million to an average depth of 5,359 meters. The first 
three have been completed at an estimated average cost of$2.6 million. The 
first three wells flowed on initial clean-up at rates up to 8.0 mmcf/d and 
have been producing to sales for 10 days through test equipment at an average 
restricted rate of 5.5 mmcf/d plus liquids. Restrictions have been due to 
the installation of final surface equipment which is expected in the next few 
weeks. Cequence is pleased that these wells are on budget for costs and 
productivity. The remaining two wells are expected to be completed in the 
fourth quarter.

The most recent Montney well is the third consecutive well drilled from the 
7-29 padsite. It is the deepest measured depth (5,668 metres) and longest 
lateral (2,582 metres) to date and was drilled in 25 days which is the new 
pacesetter well performance in the field.

At Ansell, Cequence participated in one Wilrich well (49% working interest) in 
the third quarter. As disclosed by the operator, the well was completed in 
October with production test rates exceeding 15.0 mmcf/d. Production for 
this well will be restricted through a third-party gathering system.

Capital expenditures in the fourth quarter of 2013 are expected to be $46 
million and are expected to include the completion of the wells drilled in the 
third quarter along with five additional gross wells including 3.0 (3.0 net) 
Montney wells, 1 (0.65 net) Dunvegan well and 1 (0.15 net capital working 
interest) Wilrich well at Ansell.

Outlook

The financing with the CPPIB Credit Investment Inc. has given Cequence the 
liquidity and financial flexibility required to aggressively develop its 
liquids rich Simonette property in the Deep Basin of Alberta. With this firm 
financial footing, we are currently engaged in the most active winter capital 
program in the Company's history. Infrastructure spending is largely 
completed, allowing this capital program to be focused on drilling and 
completions in order to accomplish the 40 percent production growth we have 
forecast for 2014. Based on the initial drilling results, execution of the 
plan is proceeding as expected.

Amended By-Laws

Cequence also announces the approval and adoption by its board of directors 
(the "Board") of amended by-laws which include, among other things, advance 
notice provisions (the "Advance Notice Provisions"), the purpose of which is 
to require advance notice to be provided to the Company in circumstances where 
nominations of persons for election to the Board are made by shareholders of 
the Company other than pursuant to: (i) a requisition of a meeting of 
shareholders made pursuant to the provisions of the Business Corporations Act 
(Alberta); or (ii) a shareholder proposal made pursuant to the provisions of 
that Act.

The purpose of the Advance Notice Provision is to provide shareholders, 
directors and management of the Company with a clear framework for nominating 
directors. Among other things, the Advance Notice Provision fixes a deadline 
by which shareholders of the Company must submit nominations to the Company 
before any annual or special meeting of the shareholders and sets forth the 
minimum information that a shareholder must include in the notice to the 
Company for the notice to be in proper written form.

In the case of an annual meeting of the shareholders of the Company, notice to 
the Company must be made not less than 30 days and no more than 65 days before 
the date of the annual meeting; provided, however, in the event that the 
annual meeting is to be held on a date that is less than 50 days after the 
date on which the first public announcement of the date of the annual meeting 
was made, notice may be made not later than the close of business on the 10th 
day following such public announcement.

In the case of a special meeting of shareholders (which is not also an annual 
meeting), notice to the Company must be made not later than the close of 
business on the 15th day following the day on which the first public 
announcement of the date of the special meeting was made. The Board may 
waive any requirement in the Advance Notice Provision.

The amended by-laws, which includes the Advance Notice Provision, are 
effective immediately and will be placed before shareholders for ratification 
at the next meeting of shareholders of the Company. A copy of the amended 
by-laws will be available at www.sedar.com.

About Cequence

Cequence is a publicly traded Canadian energy company involved in the 
exploration, exploitation, acquisition, 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.

Forward looking Statements or Information

Certain statements included 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 in this press release may include, but are not limited to, 
statements or information with respect to its guidance and forecasts: expected 
capital expenditures, operating costs, business strategy and objectives; 
development, exploration, drilling, acquisition and disposition plans, 
including the anticipated benefits resulting therefrom and the timing thereof; 
and future production levels and facility capabilities. 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. Although 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 of exploration; the timing and costs 
of pipeline, storage and facility construction and expansion 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 on 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, proceeds from the sale of commodity contracts and changes in 
non-cash 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.

Non-GAAP measures do not have a standardized meaning prescribed by IFRS and 
are therefore unlikely to be comparable to similar measures presented by other 
issuers.

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 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.

For the first nine months of 2013, the ratio between the average price of West 
Texas Intermediate ("WTI") crude oil at Cushing and NYMEX natural gas was 
approximately 27:1 ("Value Ratio"). The Value Ratio is obtained using the 
first nine months 2013 WTI average price of $98.09 (US$/Bbl) for crude oil and 
the first nine months 2013 NYMEX average price of $3.69 (US$/MMbtu) for 
natural gas.This Value Ratio is significantly different from the energy 
equivalency ratio of 6:1 and using a 6:1 ratio would be misleading as an 
indication of value.

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. 
Readers are cautioned that the foregoing well test results are not necessarily 
indicative of long-term performance or of ultimate recovery.

The TSX has neither approved nor disapproved the contents of this news release.



SOURCE  Cequence Energy Ltd. 
Paul Wanklyn, President and Chief Executive Officer, (403) 
218-8850,pwanklyn@cequence-energy.com David Gillis, Vice President, Finance 
and Chief Financial Officer, (403)  806-4041,dgillis@cequence-energy.com 
To view this news release in HTML formatting, please use the following URL: 
http://www.newswire.ca/en/releases/archive/November2013/12/c6823.html 
CO: Cequence Energy Ltd.
ST: Alberta
NI: OIL ERN  
-0- Nov/12/2013 23:08 GMT
 
 
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