Northern Blizzard Resources Inc. Announces Third Quarter 2014 Results

CALGARY, Nov. 10, 2014 /CNW/ - Northern Blizzard Resources Inc. ("Northern Blizzard" or the "Company") (TSX: NBZ) is pleased to announce its operating and financial results for the three and nine months ended September 30, 2014. 

Northern Blizzard's unaudited financial statements and management's discussion and analysis ("MD&A") for the three and nine months ended September 30, 2014 are available on SEDAR at www.sedar.com and on Northern Blizzard's website at www.northernblizzard.com.

FINANCIAL AND OPERATING HIGHLIGHTS

		Three months ended  September 30,		Nine months ended  September 30,
		2014	2013	2014	2013
Financial  ($000s,except as otherwise noted)
Oil and natural gas sales		170,471	166,329	528,941	416,224
Funds from operations^(1)		60,046	72,992	167,301	164,093
	Per share – diluted	0.64	0.93	1.98	2.08
Net income (loss)		(53,734)	36,498	(70,130)	25,193
	Per share – basic	(0.59)	0.47	(0.85)	0.32
	Per share – diluted	(0.59)	0.26	(0.85)	0.11
Net debt^(1)		394,363	408,178	394,363	408,178
Dividends declared		14,171	-	14,171	-
	Per share	0.139	-	0.139	-
Capital expenditures		81,794	86,126	208,736	193,272
Weighted average shares outstanding
	Basic	91,729,217	77,645,278	82,583,845	77,738,234
	Diluted	93,547,977	78,621,305	84,402,605	78,714,261
Shares outstanding at period end		102,053,287	77,935,369	102,053,287	77,935,369
Operating
Average daily production
	Heavy oil (bbl/d)	18,819	18,232	18,607	17,154
	Light oil & NGL (bbl/d)	259	24	228	15
	Natural gas (mcf/d)	7,203	8,553	7,116	7,499
	Total (boe/d)	20,279	19,682	20,021	18,419
Average realized price
	Heavy oil ($/bbl)^(2)	81.45	89.00	81.95	73.01
	Light oil & NGL ($/bbl)	93.47	96.42	96.84	91.26
	Oil & NGL ($/bbl)	81.61	89.01	82.13	73.03
	Natural gas ($/mcf)	4.00	2.44	4.75	2.94
	Combined ($/boe)	78.21	83.40	78.95	69.21
Netbacks ($/boe)
	Average realized price	78.21	83.40	78.95	69.21
	Royalties	(11.58)	(14.07)	(11.34)	(11.01)
	Production and operating expenses	(21.32)	(17.67)	(21.05)	(19.04)
	Transportation expenses	(2.03)	(1.95)	(1.91)	(1.98)
	Operating netback^(1)	43.28	49.71	44.65	37.18
	Realized gains (losses) on financial derivative contracts	(5.44)	(1.95)	(6.73)	1.43
	General and administrative expenses	(2.76)	(3.04)	(2.98)	(3.11)
	Cash finance costs	(4.86)	(2.67)	(5.16)	(2.69)
	Other	1.91	(0.10)	0.74	0.31
	Funds from operations^(1)	32.13	41.95	30.52	33.12

Notes:
(1)	Funds from operations, net debt and operating netback do not have any standardized meaning prescribed by International Financial Reporting Standards. See "Non-IFRS Financial Measures" and "Additional IFRS Measures" in the MD&A for the three and nine months ended September 30, 2014 and 2013.
(2)	Average heavy oil prices received are net of blending expenses and include the impact of physical delivery contracts (when applicable).

OPERATIONS REVIEW

Corporate Production

Production for the third quarter of 2014 was 20,279 boe/d (94% oil), an increase of 3% from second quarter 2014 production of 19,665 boe/d and 3% from third quarter 2013 production of 19,682 boe/d.  The increase in production reflects initial positive results from the Plover Lake steam-assisted gravity drainage ("SAGD") project, production from the Viking light oil development at Smiley and other new oil wells drilled.  Increases were partially offset by natural declines and lower gas production mainly due to natural declines in gas-to-oil ratios.  Since the end of the quarter, production has reached our target exit production rate of 24,000 boe/d.

Cactus Lake

Capital spending at Cactus Lake for the first nine months of 2014 was $62.0 million.  This included the drilling of 86 (86.0 net) wells and the construction and commissioning of a new polymer mixing facility.  We continue to see encouraging signs in the Bakken polymer flood and production response from Phase 1 of the flood is anticipated in mid-2015.  Northern Blizzard has completed its Phase 2 expansion of the Bakken polymer flood, with 109 producers and 48 injectors added to the existing operation.  The new polymer facility will provide infrastructure capacity for future polymer flood expansion across the remainder of the field.  Production at Cactus Lake has reached 7,800 boe/d since the end of the quarter.

Plover Lake SAGD Project

Capital spending at Plover Lake SAGD for the first nine months of 2014 was $48.2 million.  This included completion of construction and commissioning of Northern Blizzard's first SAGD facility.  First steam injection began in mid-July.  First oil production was in August, and oil production averaged 1,012 bbl/d during the month of September.  Production at Plover Lake SAGD has exceeded 2,000 bbl/d since the end of the quarter.  We are pleased with the ramp up phase of this project and are confident that expected oil production rates of 2,400 bbl/d will be reached in 2014.

Smiley Viking

During the first quarter of 2014, Northern Blizzard drilled its first light oil wells in the Viking play at Smiley.  Capital spending during the first nine months of 2014 on the Viking development totalled $31.1 million, with 34 (34.0 net) wells drilled.  Our 2014 capital program includes the drilling of up to 46 (46.0 net) wells for the year, six of which will be completed in early 2015.  This is an increase of 26 wells in 2014 over our previous plans of 20 wells.  Results to date in the Viking program are meeting expectations. Northern Blizzard expects production from the Viking to reach 1,800 boe/d by the end of 2014. 

Wells Drilled

The following table summarizes Northern Blizzard's drilling program in the three and nine months ended September 30, 2014:

	Three months ended  September 30		Nine months ended  September 30
Field	Gross	Net	Gross	Net
Cactus Lake	50	50.0	86	86.0
Smiley	26	26.0	34	34.0
Winter	16	11.3	34	25.6
Cuthbert	1	1.0	15	15.0
Plover Lake	4	4.0	15	15.0
Court	3	3.0	10	10.0
Manitou Lake East	-	-	5	5.0
Other	2	2.0	5	3.8
Total	102	97.3	204	194.4

Notes:
(1)	Total wells drilled at Cactus Lake include 6 (6.0 net) and 6 (6.0 net) service wells for the three and nine months ended September 30, 2014, respectively.
(2)	Total wells drilled at Plover Lake include 4 (4.0 net) and 9 (9.0 net) service wells for the three and nine months ended September 30, 2014, respectively.

FINANCIAL REVIEW

• In August 2014, Northern Blizzard completed its initial public offering ("IPO") of 27,315,790 common shares at a price of $19.00 per common share for aggregate proceeds of $519.0 million (including the over-allotment option).  The offering consisted of a $350.0 million treasury offering by Northern Blizzard and a $169.0 million secondary offering by Northern Blizzard's two major shareholders.
•  In early September 2014, Northern Blizzard completed the redemption of 35% of the aggregate principal amount of the senior unsecured notes (US$148.8 million).  The redemption was completed at a price equal to 107.25% of the principal amount of the notes, plus accrued and unpaid interest.
• During the two months ended September 30, 2014, Northern Blizzard declared dividends totalling $14.2 million ($0.139 per common share).  Shareholders elected to receive stock dividends of $9.9 million and cash dividends of $4.3 million.
• Operating netback for the third quarter of 2014 was $43.28/boe, a decrease of 12% from the second quarter of 2014 and 13% from the third quarter of 2013.  The decrease in the netback was primarily due to a lower average realized price driven by lower crude oil prices in the third quarter of 2014.  Our average realized oil price in the third quarter of 2014 was $81.61/bbl compared to $86.28/bbl in the second quarter of 2014 and $89.01/bbl in the third quarter of 2013. 
• Funds from operations in the third quarter of 2014 were $60.0 million, representing a 7% increase from the second quarter of 2014 and an 18% decrease from the third quarter of 2013.  When comparing the third quarter to the second quarter of 2014, funds from operations were higher primarily as a result of a decrease in realized losses on financial derivative contracts, partially offset by lower operating netbacks.  Comparing the third quarter of 2014 to the same period in 2013, lower operating netbacks, higher realized losses on financial derivative contracts and increased finance costs contributed to lower funds from operations. 
• Capital expenditures for the third quarter of 2014 totalled $82.0 million.  Drilling, completions and equipping expenditures were the largest component of capital expenditures at $58.4 million with the drilling of 102 (97.3 net) wells during the quarter.  Spending on facilities and pipelines was $20.4 million, relating mainly to the Bakken polymer project at Cactus Lake, steam-assisted gravity drainage (SAGD) project at Plover Lake and the Viking development at Smiley.
• Net debt at September 30, 2014 was $394.4 million, which was $240.5 million lower than the end of the second quarter of 2014.  The decrease was due primarily to the net proceeds from the treasury offering, which were used to settle Northern Blizzard's pre-IPO option plan, redeem a portion of the senior unsecured notes and reduce indebtedness on the credit facility.  This decrease was partially offset by capital expenditures exceeding funds from operations in the third quarter of 2014.  At September 30, 2014, Northern Blizzard had $488.9 million available under its credit facility.

REVISED GUIDANCE

2014 Guidance

Northern Blizzard operates and controls virtually all of its capital spending, much of which is spent on a high number of low cost wells. This provides flexibility in capital spending programs.  As a result of the positive results to date from the Viking development program at Smiley, Northern Blizzard's capital program for 2014 was increased to $269 million from previous guidance of $255 million.  The increase reflects an acceleration of the timing of the Viking development into 2014 from 2015.

Northern Blizzard expects average production for 2014 to be within the guidance range previously provided of 20,500 boe/d to 21,500 boe/d.

2015 Guidance

In light of the recent decline in oil prices, capital spending for 2015 has been revised to $215 million, $45 million less than previous guidance of $260 million. As a result of the revised capital program, we expect production to be at the lower end of the guidance range previously provided of 24,500 boe/d to 25,500 boe/d.  Funds from operations (including hedging) for 2015 is expected to be in the range of $300 million to $321 million.

Revised 2015 guidance and assumptions are as follows:  

		Prior	Revised
Production
	Oil & NGL (bbl/d)	23,300 – 24,300	23,300 – 24,300
	Natural gas (mcf/d)	7,500	7,500
	Total (boe/d)	24,500 – 25,500	24,500 – 25,500
Pricing
	WTI (US$/bbl)	94.00	80.00
	CAD/USD exchange rate	1.107	1.125
	WCS ($/bbl)	80.00	71.00
	AECO ($/mcf)	4.40	4.00
Expenses
	Average royalty rate (%)	13	12
	Operating ($/boe)	18.80 – 19.70	18.20 – 19.00
	Transportation ($/boe)	2.20 – 2.30	2.10 – 2.20
	Corporate costs ($/boe)	5.50 – 6.00	5.80 – 6.20
Excluding hedging
	Funds from operations ($ millions)	340 – 365	290 – 311
	Funds from operations per boe ($/boe)	38.00 – 39.00	32.50 – 33.50
Including hedging
	Funds from operations ($ millions)	322 – 347	300 – 321
	Funds from operations per boe ($/boe)	36.00 – 37.00	33.50 – 34.50
Capital expenditures ($ millions)		260	215

The guidance provided in the table above is based on a number of material assumptions and factors set out above and under the heading "Forward-Looking Statements" in this news release and in the MD&A.  This financial outlook is included to provide readers with an understanding of the Company's operations for 2015. Readers are cautioned that the information may not be appropriate for other purposes. The actual results of Northern Blizzard's operations will likely vary from the amounts set forth in the table above, and such variations may be material. See "Forward-Looking Statements" in this news release and in the MD&A for a discussion of the risks that could cause actual results to vary. The foregoing guidance has been approved by management as of the date of this news release.

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Conference Call Today
9:00am MT (11:00am ET)

Northern Blizzard will host a conference call today, November 10, 2014, starting at 9:00am MT (11:00am ET), to review the Company's third quarter 2014 results. Participants can access the conference call by dialing [phone] or toll-free (US & Canada) 1 [phone] and entering the passcode 98589.

A recording of the conference call will be available until February 9, 2015 and can be accessed by dialing 1 [phone] and entering the conference number 1167270 and passcode 98589.  The replay will be available approximately one hour following completion of the call.  The conference call will also be available on Northern Blizzard's website at www.northernblizzard.com.

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Advisories

BOE Conversion

In this news release, barrel of equivalent amounts have been calculated using a conversion rate of six thousand cubic feet of natural gas to one barrel of crude oil or natural gas liquids (6 mcf : 1 bbl), which represents an energy equivalency conversion method applicable at the burner tip and does not represent a value equivalency at the wellhead. While it is useful for comparative measures, it may not accurately reflect individual product values and may be misleading if used in isolation.

Forward-Looking Statements

This news release may contain certain forward-looking statements and forward-looking information (collectively referred to as "forward-looking statements") within the meaning of applicable Canadian securities laws. All statements other than statements of historical fact are forward-looking statements. Forward-looking statements contain words such as "anticipate", "believe", "plan", "continuous", "estimate", "expect", "may", "will", "project", "should", or similar words suggesting future outcomes.

In particular, this news release may contain forward-looking statements pertaining to the following:

• Business plans and strategies;
• Capital expenditure and drilling programs;
• Methods and ability to finance operations and capital expenditure programs;
• Anticipated oil and natural gas production levels;
• Anticipated infrastructure capacity;
• Timing of production response from the Bakken polymer flood at Cactus Lake;
• Timing and success of development and exploitation activities;
• Future oil and natural gas prices;
• Future costs including operating and administrative costs and royalty rates;
• Future cash flows, funds from operations and net earnings;
• Estimated tax pools and the Company's tax horizon;
• Payment of dividends; and 
• Expectations regarding the Company's ability to add reserves through exploration and development.

In addition, statements relating to "reserves" or "resources" are deemed to be forward-looking statements as they involve the implied assessment, based on certain estimates and assumptions, that the reserves and resources described exist in the quantities predicted or estimated and can be profitably produced in the future.

Undue reliance should not be placed on forward-looking statements, which are inherently uncertain, are based on estimates and assumptions, and are subject to known and unknown risks and uncertainties (both general and specific) that contribute to the possibility that the future events or circumstances contemplated by the forward-looking statements will not occur. There can be no assurance that the plans, intentions or expectations upon which forward-looking statements are based will be realized. Actual results will differ, and the difference may be material and adverse to the Company and its shareholders.

With respect to forward-looking statements contained in this news release, management has made assumptions regarding future production levels; future oil and natural gas prices; future operating costs; timing and amount of capital expenditures; the ability to obtain financing on acceptable terms; availability of skilled labour and drilling and related equipment; general economic and financial market conditions; continuation of existing tax and regulatory regimes; and the ability to market oil and natural gas successfully to current and new customers.  Although management considers these assumptions to be reasonable based on information currently available to it, they may prove to be incorrect.

By their very nature, forward-looking statements involve inherent risks and uncertainties (both general and specific) and risks that the goals or figures contained in forward-looking statements will not be achieved. These factors include, but are not limited to, risks associated with fluctuations in market prices for crude oil, natural gas and diluent, general economic, market and business conditions, substantial capital requirements, uncertainties inherent in estimating quantities of reserves and resources, extent of, and cost of compliance with, government laws and regulations and the effect of changes in such laws and regulations from time to time, the need to obtain regulatory approvals on projects before development commences, environmental risks and hazards and the cost of compliance with environmental regulations, aboriginal claims, inherent risks and hazards with operations such as fire, explosion, blowouts, mechanical or pipe failure, cratering, oil spills, vandalism and other dangerous conditions, potential cost overruns, variations in foreign exchange rates, diluent supply shortages, competition for capital,  equipment, new leases, pipeline capacity and skilled personnel, credit risks associated with counterparties, the failure of the Company or the holder of licenses, leases and permits to meet requirements of such licenses, leases and permits, reliance on third parties for pipelines and other infrastructure, changes in royalty regimes, failure to accurately estimate decommissioning costs, inaccurate estimates and assumptions by management, effectiveness of internal controls, the potential lack of available drilling equipment and other restrictions, failure to obtain or keep key personnel, title deficiencies with the Company's assets, geo-political risks, risks that the Company does not have adequate insurance coverage, risk of litigation and risks arising from future acquisition activities. Further, the payment of dividends is dependent on the satisfaction of the applicable liquidity and solvency tests imposed by the Business Corporations Act (Alberta).  The foregoing risks and other risks are described in more detail in the Company's final prospectus dated July 31, 2014. Readers are cautioned that these factors and risks are difficult to predict and that the assumptions used in the preparation of such information, although considered reasonably accurate at the time of preparation, may prove to be incorrect. Accordingly, readers are cautioned that the actual results achieved may vary from the information provided herein and the variations could be material. Readers are also cautioned that the foregoing list of factors is not exhaustive. Consequently, there is no representation by the Company that actual results achieved will be the same in whole or in part as those set out in the forward-looking statements. Furthermore, the forward-looking statements contained in this news release are made as of the date hereof, and the Company does not undertake any obligation, except as required by applicable securities legislation, to update publicly or to revise any of the included forward-looking statements, whether as a result of new information, future events or otherwise. The forward-looking statements contained herein are expressly qualified by this cautionary statement.

SOURCE: Northern Blizzard Resources Inc.

For further information about Northern Blizzard Resources Inc., please visit our website at www.northernblizzard.com or contact: Northern Blizzard Resources Inc., Telephone: [phone]; John Rooney, Chairman & Chief Executive Officer, Michael Makinson, Vice President, Finance & Chief Financial Officer