SURE ENERGY ANNOUNCES THIRD QUARTER 2010 FINANCIAL AND OPERATING RESULTS
CALGARY, Nov. 10 /CNW/ - Sure Energy Inc. ("Sure Energy" or the "Company") today announced its financial and operating results for the quarter ended September 30, 2010.
The Company's MD&A, Financial Statements and Notes, and AIF can be viewed or downloaded at www.sureenergyinc.com or www.sedar.com.
During the third quarter of 2010, Sure Energy accomplished the following:
- Announced the discovery of three horizontal oil wells at Redwater and
Queensdale that will add over 500 barrels of oil per day of net oil
production to the Company
- Increased 2010 Capital Budget to $15 MM and announced the promotion
of Chris Baker to President & COO
- Signed a $20 million Secured Note Facility with Deans Knight Capital
Management and increased our bank credit facility to $20 million
- Funds Flow from operations for the third quarter was $558,000
($0.01/share)
- Production averaged 762 BOE/d for the third quarter 2010 (13% oil)
but current production is over 1,250 BOE/d (46% oil)
HIGHLIGHTS Three Months Ended Nine Months Ended
September 30, September 30,
2010 2009 2010 2009
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($000 except share and per share amounts)
Financial
Petroleum and
Natural Gas Revenues 2,012 1,439 7,250 4,572
Funds Flow from
Operations(1) 558 408 2,705 1,094
Per Share, Basic
and Diluted 0.01 0.01 0.06 0.03
Loss (1,277) (1,284) (2,947) (2,932)
Per Share, Basic
and Diluted (0.03) (0.03) (0.06) (0.07)
Capital Expenditures 4,026 8,600 8,461 9,767
Total Assets 41,036 36,959
Net Debt(1) (10,228) (3,664)
Shareholders' Equity 27,503 30,824
Common Shares Outstanding
Basic 46,849,464 46,873,962
Diluted 51,154,464 50,020,963
Fully Diluted with
Performance Rights 54,659,464 53,525,962
Weighted Average Common
Shares Outstanding
Basic and Diluted 46,849,464 42,166,425 46,848,678 39,178,123
Share Trading
High 1.32 0.47 1.37 0.47
Low 0.67 0.30 0.57 0.21
Close 1.34 0.46 1.34 0.46
Trading Volume 5,527,047 1,841,585 12,268,409 4,618,930
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HIGHLIGHTS Three Months Ended Nine Months Ended
September 30, September 30,
2010 2009 2010 2009
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Operations
Production
Natural Gas (Mcf/d) 3,972 3,453 4,307 3,505
Oil (bbls/d) 64 53 68 34
NGLs (bbls/d) 36 28 40 28
BOE/d 762 657 825 646
Average Selling Price
Natural Gas ($/Mcf) 3.73 3.07 4.40 3.86
Oil ($/bbl) 80.05 70.11 77.45 60.74
NGLs ($/bbl) 53.33 47.34 59.57 41.61
BOE ($/BOE) 28.68 23.83 32.17 25.93
Operating Netback
($/BOE)(1) 13.05 11.29 16.76 11.52
Funds Flow Netback
($/BOE)(1) 7.93 6.73 12.00 6.20
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(1) Please refer to Management's Discussion and Analysis for definition
of Non-GAAP measures.
OPERATIONAL REVIEW
Cash expenditures for the period were as follows:
Three Months Ended Nine Months Ended
September 30, September 30,
Capital Program Summary 2010 2009 2010 2009
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($000s)
Land 27 292 729 437
Geological and geophysical 200 502 503 869
Drilling 2,508 90 4,212 138
Completions 273 (9) 856 41
Recompletions and
workovers 22 342 816 613
Production equipment and
facilities 853 86 1,304 189
Capitalized exploration G&A 92 145 275 328
Drilling credits (1) - (451) -
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3,974 1,448 8,244 2,615
Corporate acquisition - 7,152 - 7,152
Asset acquisition 14 - 155 -
Asset retirement
obligation 38 - 62 -
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4,026 8,600 8,461 9,767
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Drilling activity for the three and nine months is summarized as follows:
Three Months Ended September 30, 2010
Dry and
Gas Oil Abandoned Total
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Gross Net Gross Net Gross Net Gross Net
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Exploration - - - - - - - -
Development - - 2 2.0 - - 2 2.0
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Total - - 2 2.0 - - 2 2.0
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Nine Months Ended September 30, 2010
Dry and
Gas Oil Abandoned Total
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Gross Net Gross Net Gross Net Gross Net
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Exploration 1 1.0 - - 2 2.0 3 3.0
Development 1 1.0 4 2.8 - - 5 3.8
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Total 2 2.0 4 2.8 2 2.0 8 6.8
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Areas of Activity
Plains (Redwater)
The Company owns 7,495 net acres of land on the Lower Viking light oil trend at Redwater, just north of Edmonton. The Lower Viking in the area is a shaley sand sequence over 26 miles long and 8 miles wide at 750 metre depth. The sequence is easily mappable and hydrocarbon bearing throughout, with a large gas cap to the northeast. Originally the trend was drilled vertically. These wells had low production rates but long producing lives indicating that they were accessing large reserves. Recent exploitation of the reservoir by horizontal wells has increased initial production rates to 80 - 275 barrels of oil per day, causing a flurry of activity in the area.
On the north end of the trend Sure Energy owns 5,280 acres of 100 percent working interest prospective land (8.25 sections). In August the Company drilled its first successful well on these lands, a well that flowed at 315 barrels of oil per day over the last 24 hours of a three day test (press release - August 18, 2010). The well was a dual lateral open hole horizontal well. The Company identified 20 additional horizontal dual lateral wells on the contiguous land block and has subsequently drilled a follow-up location which tested at over 200 barrels of oil per day (press release October 27, 2010). Both these wells came on production in early November after the construction of wellsite facilities and pipelines to tie in the associated solution gas were completed. The Company plans to drill an additional five horizontal wells in the northern area in the fourth quarter of 2010 and the first quarter of 2011, four of which will delineate the contiguous productive land block and one of which will evaluate a three section land block further to the northeast. Should this land block prove to be productive the Company would add an additional 23 wells to its development portfolio on these lands. Sure Energy also owns an additional 2 1/2 sections of prospective lands in the northern area.
On the southern part of the trend the Company owns 2,215 acres of land. In the first quarter of 2010 it drilled two 40 percent working interest wells on this land. One well came on stream at approximately 70 barrels of oil per day and the other came on stream late in October after facilities to tie in associated solution gas were constructed. These wells are single leg cased horizontals which were completed using Packers Plus multi-fracturing technology. The Company has identified 23 gross (12 net) additional single leg low risk development horizontal wells on its southern acreage, as well as up to 21 additional locations on less proven land blocks. The Company has budgeted to drill four wells in the southern area in 2011.
SE Saskatchewan
The Company owns 1,725 acres of land at Queensdale in SE Saskatchewan. Queensdale is an area of prolific light oil production from the Alida formation, a subcropping carbonate reservoir of Mississippian age. In the third quarter of 2010 a single leg horizontal well drilled into the Alida formation by Sure Energy (100 percent working interest) flowed at 500 barrels of oil per day during a 42.5 hour production test. The well came on production on October 2, 2010 at a restricted rate of approximately 150 barrels of oil per day. Typically Alida wells produce at high fluid rates with rapidly increasing watercuts. The prospect was identified on a proprietary 3D seismic program 100 percent owned by Sure Energy and the Company has identified three additional development locations, one of which it intends to drill in the first quarter of 2011. The Company also intends to shoot additional 3D seismic in the area with the aim of identifying similar potential in the Alida formation, and evaluating a secondary play-type.
Peace River Arch
The Company produced 241 BOE/d on the Peace River Arch in the period. Production was low to budget because of high line pressures and plant modifications which restricted gas production at the Gordondale well. Because of depressed gas prices Sure Energy has elected not to add field compression to circumvent this problem at this time.
The Company has an inventory of five additional locations on the Peace River Arch, two of which are targeting new pools. These prospects are currently on hold pending gas price recovery.
Southern Plains (Chinook)
The Company produced 216 BOE/d of gas in the Chinook area in the quarter. The Chinook assets are three high working interest, operated high netback wells which were drilled by Sure Energy.
Using the knowledge gained from the success at Chinook the Company mapped the producing reservoir regionally and has identified a heavy oil prospect. This prospect will target a resource of cold flow heavy oil.
Tweedie
Sure Energy produced 144 BOE/d of shallow, sweet Cretaceous gas at its Tweedie property in the third quarter of 2010. The production is from 36 wells and declines at low rates. The Company has an inventory of 18 locations at Tweedie, all defined by geology and 2D seismic but has no plans to drill in the area at current gas prices.
West Central
Sure Energy produced 87 BOE/d from its West Central properties in the third quarter of 2010. The West Central assets are non-operated, liquids rich gas assets.
Production
Production for the period by major property is as follows:
Three Months Ended September 30, 2010
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Gas Oil NGLs Total
Mcf/d Bbls/d Bbls/d BOE/d
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Peace River 1,293 13 13 241
Plains 95 42 - 57
Southern Plans 1,257 - 7 216
Tweedie 862 - - 144
West Central 465 9 16 104
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Total 3,972 64 36 762
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Nine Months Ended September 30, 2010
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Gas Oil NGLs Total
Mcf/d Bbls/d Bbls/d BOE/d
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Peace River 1,542 15 16 288
Plains 75 45 - 58
Southern Plans 1,333 - 9 231
Tweedie 865 - - 144
West Central 492 8 15 104
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Total 4,307 68 40 825
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New Production timing and netback guidance
In the third quarter of 2010 Sure Energy's production was 87 percent weighted to natural gas and resultant netbacks were $13.05/BOE. The Company drilled and announced the test results of two light oil wells in the third quarter of 2010 and has added another early in the fourth quarter. The Queensdale light oil well came on production on October 2, 2010, the first Redwater well on November 1, 2010 and the follow-up well on November 3, 2010. In addition the tie-in of another oil well in south Redwater was also completed early in the fourth quarter and the well came on production on October 24, 2010.
The production from these wells will significantly improve the Company's production mix and resultant netbacks. The Company's oil netback in the Redwater area in the third quarter was $56.00 per barrel from an average WTI price of $76.20. The two wells in northern Redwater will yield higher netbacks initially as they tested flowing oil with no water, which will lead to lower operating costs per BOE. They are also eligible for the horizontal oil new well royalty rate (5 percent on the first 24 months of production to a maximum of 60,000 barrels equivalent).
OUTLOOK
Jeff Boyce, Chief Executive Officer stated, "Things have never looked better for Sure Energy and its shareholders. The Company is ramping up production from the third quarter 2010 of 762 BOE/d (13% oil & liquids) to current production of over 1,250 BOE/d (46% oil & liquids). With that increased oil production from its recently announced oil wells in Redwater and Queensdale, Sure Energy's operating netbacks will be ramping up from $13.07 per BOE in the third quarter to more than $35.00 per BOE in 2011. The Company has an extensive inventory of over 45 locations of low risk light oil prospects at Redwater and Queensdale. Sure Energy's 2010 Capital Budget is increasing to $17.5 million and its 2011 Capital Budget is set at $15 million with substantial room for additional growth.
With the recently announced $20 million Deans Knight Note Facility and the increased bank facility of $20 million, the Company now has the capital resources to aggressively develop its inventory.
All these positive corporate events have seen our shareholders being rewarded with a significantly higher share price that is starting to reflect a higher growth profile and orientation to a larger light oil producer".
Sure Energy Inc. is a publicly traded oil and gas exploration and development company listed on the Toronto Stock Exchange under the symbol "SHR".
Forward-looking Information
Certain statements contained in this release constitute forward-looking information. These statements relate to future events or Sure Energy's future performance. The use of any of the words "could", "expect", "believe", "will", "projected", "estimated" and similar expressions and statements relating to matters that are not historical facts are intended to identify forward-looking information and are based on Sure Energy's current belief or assumptions as to the outcome and timing of such future events. Actual future results may differ materially. In particular, Sure Energy's stated intentions and expectations for drilling, development and production on its Redwater and Queensdale properties contain forward looking information. Sure Energy's Annual Information Form and other documents filed with securities regulatory authorities (accessible through the SEDAR website www.sedar.com) describe the risks, material assumptions and other factors that could influence actual results and which are incorporated herein by reference. Sure disclaims any intention or obligation to publicly update or revise any forward-looking information, whether as a result of new information, future events or otherwise, except as may be expressly required by applicable securities laws.
%SEDAR: 00024118E
For further information: please visit our website at www.sureenergyinc.com or contact: Mr. Jeff Boyce, Chairman and CEO; Mr. Chris Baker, President, COO & VP Exploration; Mr. Lance Wirth, VP Finance and CFO; Phone: (403) 410-3100, Fax: (403) 410-3111, Email: [email protected]
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