Second Wave Petroleum Inc. Announces Filing of First Quarter 2012 Financials Results

Toronto Stock Exchange: SCS
Common Shares: 83,989,631

CALGARY, May 15, 2012 /CNW/ - Second Wave Petroleum Inc. ("Second Wave" or the "Company") announced today the filing of its interim financial statements and management's discussion and analysis for the quarter ended March 31, 2012, which have been filed on SEDAR at www.sedar.com

Quarterly and Year to Date Highlights

• Increased production in 2012 with monthly sales rates in January, February and March of 1,517 boe/d, 2,346 boe/d and 2,530 boe/d, respectively, with April monthly and current production rates estimated at approximately 3,000 boe/d and 3,500 boe/d, respectively, based on field data.
  
  
• Drilled and cased 10 gross (5.2 net) Beaverhill Lake horizontal light oil wells in the first quarter with an additional 3 gross (1.2 net) wells cased during the first week of April. The Company is currently drilling its 17^th gross (8.0 net) Beaverhill Lake well for 2012 and has completed 16 gross (7.6 net) wells with 4 gross (1.6 net) wells standing waiting on completion operations.
  
  
• Successfully delineated its south east Judy Creek Beaverhill Lake land block with 7 gross (2.8 net) wells having peak daily gross rates ranging from 2,400 to 5,400 boe/d based on field estimates and ten day average rates estimated at 1,000 boe/d.
  
  
• The Company now has 31 gross (14.8 net) Beaverhill Lake wells producing with 28 gross (13.6 net) wells currently pumping and 3 gross (1.2 net) wells flowing during their initial test period and has grown its Beaverhill Lake production in Judy Creek from zero in the first quarter of 2011 to approximately 2,800 boe/d (90% light oil) currently.
  
  
• Increased bank line from $80 million in the fourth quarter to $90 million in the first quarter and agreed to a $15 million secured development drilling facility with its major shareholder to bring total credit facilities to $105 million. Closing of the development facility is subject to customary conditions and definitive documentation.

Selected First Quarter Financial Information
		Three months ended March 31,			Three months ended December 31,
($000s, except per share and per boe amounts)		2012	2011	% Change	2011	% Change *
	Petroleum and natural gas sales	12,898	6,342	103	15,366	(16)
	Royalties	(887)	(657)	35	(713)	24
	Lease operating costs	(4,864)	(3,193)	52	(4,628)	5
	Transportation	(450)	(228)	97	(77)	484
Operating netback		6,697	2,264	196	9,948	(33)
Operating netback per boe		34.60	17.68	96	49.42	(30)
Net capital expenditures		34,316	1,276	-	16,604	107
Net loss		(2,039)	(2,495)	18	(8,734)	(77)
Cash from operating activities per share		0.06	-	-	0.07	(14)
Net loss per share		(0.02)	(0.03)	(33)	(0.11)	(82)
Sales volumes
	Oil (bbl/d)	1,559	724	115	1,570	(1)
	Natural gas liquids (bbl/d)	84	92	(9)	94	(11)
	Natural gas (mcf/d)	2,904	3,641	(20)	3,142	(8)
Combined (boe/d) (6:1)		2,126	1,423	49	2,188	(3)
Crude oil and liquids weighting (%)		77	57	35	76	1
*  Percentage change from Q4, 2011 to Q1, 2012

First Quarter Review

The Company remained active in the first quarter of 2012 with 10 gross (5.2 net) wells drilled and rig released with an additional 3 gross (1.2 net) wells rig released during the first week of April 2012. A total of 13 gross (6.4 net) wells were completed and brought on production in the quarter with 4 gross (1.6 net) wells standing waiting on completion operations at the end of the quarter. The timing of the Company's production additions were weighted to the end of the first quarter with March production averaging 2,530 boe/d versus a quarterly average rate of 2,126 boe/d and April monthly production increasing further to an estimated 3,000 boe/d based on field data.

The Company has continued to execute its Beaverhill Lake development program in the second quarter. Net Beaverhill Lake production has grown from zero in the first quarter of 2011 to a current rate of approximately 2,800 boe/d (90% light oil) from 28 gross (13.6 net) pumping wells and 3 gross (1.2 net) flowing wells. Total Corporate production is estimated to have reached approximately 3,500 boe/d in May of 2012 based on field estimates.

Through continued optimization of its Beaverhill Lake drilling program Second Wave was able to reduce its average drilling cycle time from spud to rig release by 18% to 23 days on its last ten Beaverhill Lake horizontal wells from its original budgeted cycle time of 28 days. This reduction in drilling cycle times facilitated the Company drilling and completing 13 gross (6.4 net) wells in the first 14 weeks of the year, which exceeded the first quarter budgeted drilling program by 4 gross (2.2 net) wells. The incremental first quarter investment added to considerable production growth coming into the second quarter with estimated net production reaching approximately 3,500 boe/d in May with an additional 4 gross (1.6 net) wells standing waiting on completion operations. Exiting the first quarter Second Wave and its joint venture partners have elected to reduce the Beaverhill Lake drilling program to two rigs from three rigs to better match its drilling pace with its ongoing facility projects and its expected cash flow from the property. The Company expects its quarterly drilling pace will be reduced as previously disclosed from 13 gross (6.4 net) wells down to 8 gross (3.2 net) wells per quarter for the remainder of 2012.

In the first quarter of 2012 the Company experienced substantial volatility in the price it received for its produced products relative to the fourth quarter of 2011 with the average price received per boe of $66.67 versus $76.33. First quarter gas prices reached 10 year lows and oil prices were substantially affected by short term pricing differentials related to pipeline and refining capacity constraints. Gas prices have remained weak in the second quarter and oil pricing and associated differentials are now returning to levels witnessed in the fourth quarter of 2011.

The Company's production was also negatively impacted in January and early February by approximately 900 boe/d of shut in or curtailed production resulting from regulatory constraints placed on its Beaverhill Lake testing program in Judy Creek. The loss of this production resulted in increased per unit operating costs on the Company's Judy Creek production in the first quarter in addition to the acceleration of certain pipeline and facility capital projects. Lower realized pricing and short term production curtailments experienced in the first quarter resulted in the Company's operating netbacks being reduced quarter-over-quarter by $14.82 per boe from $49.42 in the fourth quarter of 2011 to $34.60 in the first quarter of 2012. The Company has seen oil price differentials return to historic levels in the second quarter with operating costs returning to fourth quarter levels late in the first quarter. The Company does not expect any further material changes to its operating cost structure until its sales oil pipeline is completed in the fourth quarter of 2012.

Second Wave is in the unique position of assembling two distinct significant oil resource plays in Judy Creek, Alberta. Significant production growth has been realized in the second quarter of 2012 with its Beaverhill Lake production growing from zero in the first quarter of 2011 to approximately 2,800 boe/d currently based on field data estimates. The Beaverhill Lake and Pekisko formations in Judy Creek combined represent a total unrisked drilling inventory exceeding 700 net wells. Corporate production rates in May have reached record levels of approximately 3,500 boe/d (80% oil and natural gas liquids) based on field estimates and recent test results in the Company's southeast land block have exceeded expectations with field estimated peak daily gross rates ranging from 2,400 to 5,400 boe/d and ten-day average gross test rates estimated at 1,000 boe/d. The Company expects to drill and complete approximately 2.6 gross (1.0 net) Beaverhill Lake wells per month for the remainder of 2012 with the majority of these wells located within close proximity to successfully tested wells on the Company's land base. The Company may provide a further operational update later in the second quarter or as results dictate.

READER ADVISORIES

Barrels of Oil Equivalent (BOEs).  The term BOE refers to barrel of oil equivalent, with natural gas converted to crude oil equivalent at a ratio of six thousand cubic feet to one barrel.  BOEs may be misleading, particularly if used in isolation.  A BOE conversion ratio of six mcf (six thousand cubic feet) to one bbl (one barrel) is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.

Forward-Looking Statements.  This news release contains forward-looking statements as to the Company's internal projections, expectations and beliefs relating to future events or circumstances. Forward-looking statements are typically (but not necessarily) identified by words such as "anticipate", "believe", "budget", "estimate", "expect", "plan", "intend", "potential", "may", "will", "should" or similar words suggesting future outcomes. Although the Company believes that these forward-looking statements are reasonable, undue reliance should not be placed on them as they are subject to known and unknown risks and uncertainties, many of which are beyond the Company's control. Forward-looking statements are not guarantees of future outcomes. There can be no assurance that the plans, intentions or expectations contained in the forward-looking statements or upon which they are based will in fact occur or be realized, and actual results may differ from those expressed or implied in the forward-looking statements. The difference may be material.

Second Wave is subject to the inherent risks associated with the exploration, development, exploitation and production of oil and gas. More particularly, material risk factors that could cause actual results to differ materially from those expressed or implied in the forward-looking statements contained in this news release include: adverse changes in commodity prices, interest rates or currency exchange rates; accessibility of capital when required and on acceptable terms; lower than expected production of crude oil and natural gas; production delays; lower than expected reserve volumes on the Company's properties; increased operating costs; ability to attract and retain qualified personnel or to secure drilling rigs and other services on acceptable terms; competition for labour, equipment and materials necessary to advance the Company's projects; unforeseen engineering, environmental or geological problems; ability to obtain all required regulatory approvals on a timely basis and on satisfactory terms; and changes in laws and governmental regulations (including with respect to taxes and royalties). This list is not exhaustive. Readers should also review the risk factors described in other documents filed by the Company from time to time with securities regulatory authorities in Canada, including its most recent annual information form, copies of which are available electronically at www.sedar.com and at www.secondwavepetroleum.com.

Specific forward-looking statements contained in this news release include statements regarding: future growth in shareholder value generally; closing of the $15 million development drilling credit facility with Brookfield Bridge Lending Fund Inc.; the potential for accelerating the Beaverhill Lake drilling program; the scheduled number and pace of completions this month and for the remainder of 2012; expected increases in stable pumping volumes during 2012; the ability to increase rig count in the future; expectations regarding downward pressure on service costs for the remainder of 2012; the availability of acid and number of competing service providers in the Judy Creek area; expected increase in capital efficiencies in 2012.  In making such forward-looking statements, Second Wave has made various assumptions regarding, among other things: the accuracy of geological and geophysical data and interpretations of that data; future oil and natural gas prices; future capital requirements; future exchange rates; the accessibility and cost of capital (including credit); the Company's ability to economically produce oil and gas from its properties and the timing and cost to do so; and its ability to obtain qualified staff, equipment and supplies in a timely and cost-efficient manner.

The forward-looking statements included herein are made as of the date of this news release and Second Wave undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by securities laws.

 

 

Contact:

Colin B. Witwer, President and CEO

Second Wave Petroleum Inc.
Calgary, Alberta, Canada
Telephone: [phone]
Email: [email protected]
Web:  www.secondwavepetroleum.com