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| August 10, 2010 |
| Open Range Energy Corp. Reports Record Quarterly Production and Cash Flow |
CALGARY, ALBERTA--(Marketwire - Aug. 10, 2010) - Open Range Energy Corp. (TSX:ONR) ("Open Range" or the "Company") is pleased to announce its financial and operating results for the three and six months ended June 30, 2010. The second quarter included record production of over 4,000 boe per day as a result of strong organic growth in the first half of the year, as well as continued declines in combined cash costs per boe, including record-low operating costs. Quarterly funds from operations were up slightly over the first quarter of 2010 and nearly triple the second-quarter 2009 level. The Company has filed a complete copy of its interim financial statements and related management's discussion and analysis for the three and six months ended June 30, 2010 on www.sedar.com and on the Company's website at www.openrangeenergy.com. The Company has subsequently commenced its second-half 2010 drilling program, which will include its first Wilrich horizontal well at Ansell/Sundance.
FINANCIAL AND OPERATING HIGHLIGHTS
(thousands except as noted) Three Three
months months Six months Six months
ended June ended June ended June ended June
30, 2010 30, 2009 30, 2010 30, 2009
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Petroleum and natural gas
revenue(1) $ 11,181 $ 5,727 $ 22,685 $ 13,048
Funds from operations 7,228 2,507 14,126 5,833
Per basic and diluted
share 0.12 0.09 0.23 0.22
Net loss (2,495) (1,927) (1,677) (3,231)
Per basic and diluted
share (0.04) (0.07) (0.03) (0.12)
Net debt 59,050 36,882 59,050 36,882
Capital expenditures, net $ 7,868 $ 1,576 $ 35,346 $ 14,652
Weighted average diluted
shares outstanding 60,934 26,534 60,934 26,555
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Production
Natural gas (mcf per day) 22,120 12,078 20,915 12,359
Oil and NGL (bbls per day) 366 232 341 240
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Total (@ 6:1) (boe per
day) 4,053 2,245 3,827 2,300
Realized average sales
prices
Natural gas ($ per mcf)(1) 4.48 4.29 4.89 4.96
Oil and NGL ($ per bbl) 64.97 48.13 67.61 45.26
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Combined average ($ per
boe) 30.32 28.03 32.75 31.34
Royalties ($ per boe) (2.79) (3.22) (3.33) (5.26)
Operating costs ($ per
boe) (4.86) (4.89) (5.26) (5.56)
Transportation costs ($
per boe) (0.84) (1.08) (0.83) (1.01)
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Operating netback ($ per
boe) 21.83 18.84 23.33 19.51
G&A costs ($ per boe) (2.03) (4.22) (2.17) (3.84)
Net interest expense ($
per boe) (1.11) (1.06) (1.25) (1.03)
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Corporate netback ($ per
boe) 18.69 13.56 19.91 14.64
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(1) Includes the realized gain or loss on commodity contracts.
CORPORATE HIGHLIGHTS
During the three months ended June 30, 2010, Open Range:
-- Had average production of 4,053 boe per day, a new quarterly record and
an increase of 13 percent from first-quarter 2010 production of 3,598
boe per day, exceeding the Company's guidance for first-half 2010
average volumes and on-track with full-year 2010 production guidance;
-- Generated funds from operations of $7.2 million ($0.12 per basic and
diluted share), a 5 percent increase over first quarter funds flow
thanks to higher average production and lower costs, bringing first-half
funds flow to $14.1 million ($0.23 per basic and diluted share);
-- Continued as a low-cost producer, with all-in cash costs (operating,
transportation, interest and G&A) declining to $8.84 per boe or $1.47
per mcfe of production, including an almost 15 percent decrease in
operating costs (including transportation) from the first quarter to
$5.70 per boe in the second quarter;
-- Tied-in and brought on-production one horizontal (100 percent working
interest) Notikewin well at Ansell/Sundance, part of the Company's six-
gross-well first-half drilling program, as discussed in the quarterly
report for the three months ended March 31, 2010; and
-- Brought on-production the Company's first horizontal Cardium oil well,
at Pembina in west central Alberta, as discussed in the most recent
quarterly report.
Subsequent to the end of the quarter, Open Range:
-- Drilled one 100 percent vertical exploration well in the southern
portion of Ansell/Sundance, which encountered seven natural gas pay
zones. The well will be completed and tested in the second half of 2010;
-- Brought on-production one (0.2 net) horizontal Glauconitic Deep Basin
liquids-rich natural gas well in the Hoadley trend at Ferrier at an
initial gross rate of 5.1 mmcf per day plus estimated natural gas
liquids of 40 bbls per mmcf;
-- Drilled two (0.45 net) Cardium horizontal oil wells at Pembina, with
completion operations scheduled to commence in late August; and
-- Advanced plans for the remainder of the Company's second-half capital
program, which will include one horizontal well at Ansell/Sundance
targeting the Wilrich Formation expected to spud before the end of
August.
MESSAGE TO SHAREHOLDERS
Open Range delivered record quarterly production of 4,053 boe per day in the second quarter of 2010 as a result of the organic growth achieved through our first-half capital program that added nearly 1,000 boe per day of net volumes of liquids-rich natural gas. The second-quarter production level brought the Company's first-half 2010 daily average production to 3,827 boe per day, exceeding our first-half guidance of 3,600 boe per day.
Limited field activities during the second quarter's spring break-up period centred on tying in two recently drilled wells, our second Notikewin horizontal multi-stage fractured Deep Basin well at Ansell/Sundance and our first horizontal Cardium light oil well at Pembina, as well as acquiring additional strategic lands. Capital expenditures for the quarter were $7.9 million, bringing our first-half capital program to $35.3 million.
Financial Results
Open Range's enlarged base of high-quality, liquids-rich production and control of critical facilities extended the Company's track record of low cash costs, an essential advantage during prolonged low natural gas prices. Second-quarter G&A costs per boe were down by more than 10 percent to $2.03 per boe from $2.33 per boe in the first quarter, while operating costs including transportation declined by almost 15 percent from $6.54 per boe in the first quarter to $5.70 per boe in the second quarter, the Company's best quarterly performance. Operating costs at Ansell/Sundance were under $5 per boe, demonstrating the benefits of our high-quality Deep Basin production and the investments made in the Company-operated Ansell/Sundance gas plant. The recently expanded gas plant produces a stabilized condensate stream with separate NGL bullets, enabling us to capture premium pricing. Along with interest costs of $1.10 per boe, combined cash costs were only $8.84 per boe, down from $10.28 per boe in the first quarter and our best quarterly performance to date.
Royalties remained low at under 10 percent of revenue. Consequently, Open Range's operating netback averaged $21.83 per boe or $3.64 per mcfe in the second quarter ($23.33 per boe or $3.89 per mcfe for the first half) despite an average second-quarter AECO gas price below $4 per mcf. Operating netbacks per boe in both periods were up by 15-20 percent over the comparable 2009 periods, while corporate netbacks per boe increased by more than 35 percent in the second quarter and first half over the comparable 2009 periods. Crude oil and natural gas liquids sales, which make up 9 percent of overall corporate volume, generated 21 percent of second-quarter revenue. Open Range's hedging program, which includes a combination of put options, costless collars and fixed price swaps, generated almost $700,000 in hedging gains for the quarter, or 33 cents per mcf of natural gas sales. About 50 percent of second-half production is hedged at an average floor price of $4.60 per mcf.
These positives resulted in solid quarterly funds flow of $7.2 million or $0.12 per share, bringing the first-half total to $14.1 million or $0.23 per share.
Operational Update
The three horizontal natural gas wells on-production at Ansell/Sundance continue to perform well. Following nearly 12 months on production, our first Bluesky horizontal well continues to generate 1.3 mmcf per day plus natural gas liquids. Its cumulative production is now 0.6 bcf and its low first-year decline rate of 30-35 percent is encouraging and suggests the well will meet its reserve target of 3 bcf. The horizontal well's rate is six to eight times that of typical production from the Bluesky zone in a vertical wellbore.
The Company's two Notikewin wells have cumulative production of approximately 0.25 bcf each plus an estimated 4,000 barrels of natural gas liquids after producing for four and five months, respectively. The second Notikewin well is producing at 2 mmcf per day, while the initial Notikewin horizontal well is at 1.2 mmcf per day. With this level of performance, the Notikewin wells show every sign of generating strong economics even at today's commodity prices.
We're highly encouraged by the initial Notikewin results and believe we can improve future well performance through continual fine-tuning of the completions approach. Competitors have achieved strong results using the open hole or Packers method with eight to 12 individual 60-80-tonne fracs, as opposed to limited-entry fracturing using a cased and perforated wellbore. We will continue to strive for better results with each successive Notikewin well, including higher initial productivity and lower costs to drill, complete and tie-in, in order to gain the maximum economic returns. Current costs to drill and complete, net of drilling credits but not including royalty incentives, are approximately $5.0 million per well and we expect to improve on this. The Company's extensive Notikewin vertical well control has enabled mapping of the prospective Notikewin lands, generating a 21-well inventory spaced at just one well per section. Over time the Notikewin is likely to require two to three wells per section for effective reservoir drainage.
We remain strong believers in the technical and economic merits of multi-zone vertical well exploration and development at Ansell/Sundance and we have 150 vertical well locations in our current inventory. The 100 percent working interest multi-zone vertical well drilled in the first quarter continues to perform very well and in early August was flowing at 1.7 mmcf per day plus natural gas liquids from six zones after more than four months on-production, having produced more than 0.3 bcf cumulative plus 4,500 barrels of natural gas liquids. This step-out well has generated several vertical offset locations as well as strong indications for horizontal development in the Notikewin and Wilrich formations.
Early in the third quarter Open Range drilled a 100 percent vertical exploration well in the southern region of Ansell/Sundance. The well tested an undrilled four-section block and met our remaining flow-through share commitments. It was drilled down to the Cadomin Formation at 3,125 metres total depth and encountered seven pay zones, including two Falher zones and the best Viking pay so far at Ansell/Sundance. We intend to complete and tie-in the well to the Ansell/Sundance gas plant in the second half. Also in early August our partner tied-in the Glauconitic horizontal well drilled into the Hoadley trend at Ferrier in the first quarter, bringing it on-stream at an initial gross rate of 5.1 mmcf per day plus natural gas liquids of 40 bbls per mmcf (210 boe per day net) with a flowing tubing pressure of 2,350 psi. We are evaluating a follow-up location to this initial horizontal success at Ferrier.
Levering Technology
We've repeatedly discussed the need to continually foster and apply technology innovations to keep driving improved well results and reduce drilling and completions costs, in order to maximize per-well economics. One innovation pioneered by Open Range is a new and unique type of tank to hold fracturing fluids during well completions. This innovative tank system, which has a patent pending, holds much more fluid than the standard tank and reduces transportation and fluid heating costs. We have used it successfully on three Open Range wells at Ansell/Sundance to date and have generated incremental cash flow of over $300,000 for the second quarter through subsequent tank rentals.
Second Half Operations and Outlook
Open Range's second-half capital spending is expected to be $10-$12 million, funded by cash flow from operations. Overall debt exiting Q2 was $59 million on bank lines of $80 million. The main second-half activities will be drilling our first Wilrich horizontal well at Ansell/Sundance, completing and tying-in the recently drilled vertical exploration well at Ansell/Sundance and completing two additional Cardium oil wells.
Following the success of our first Pembina Cardium horizontal light oil well, which has produced at an average gross rate of 75 bbls per day over the first three months on production, two additional wells were drilled early in the second quarter and are scheduled to be completed later this month. Both are at 22.5 percent working interest. With continued success the Company expects to drill up to four gross horizontal Cardium light oil wells per section on this currently three-section play.
Recent Wilrich horizontal well results offsetting Open Range lands at Ansell/Sundance have been very encouraging, with eight known wells on-production, one of which was reported as coming on-stream at 9.1 mmcf per day. Competitors are achieving steadily improving well results with experience, fine-tuning and repetition. As previously discussed, using the well control from more than 20 producing vertical wellbores we have mapped extensive Wilrich potential on approximately 18 gross (15 net) sections of Open Range lands. Based on 3-D seismic, geological mapping and vertical well control the Company recently selected and licensed two horizontal locations, and we intend to spud the first of these before the end of August.
Open Range remains on-track to achieve its 2010 production guidance of 3,700 boe per day and execute its program of resource assessment through horizontal drilling combined with multi-stage fracturing. We intend to continue drilling from cash flow until natural gas price fundamentals improve, at which point we would accelerate development of our resource play and expanding 200-well inventory at Ansell/Sundance.
On behalf of the Board of Directors,
A. Scott Dawson, President, Chief Executive Officer and Director
OPEN RANGE ENERGY CORP. IS A PUBLICLY TRADED CANADIAN ENERGY COMPANY WITH FOCUSED OPERATIONS IN THE DEEP BASIN REGION OF ALBERTA.
OPEN RANGE HAS APPROXIMATELY 60.9 MILLION COMMON SHARES ISSUED AND OUTSTANDING, WHICH TRADE ON THE TSX UNDER THE SYMBOL "ONR".
For further information, please refer to the Company's website at www.openrangeenergy.com.
Reader Advisory
This news release contains certain forward-looking statements, which include assumptions with respect to (i) production; (ii) future capital expenditures; (iii) funds from operations; (iv) cash flow; and (v) debt levels. The reader is cautioned that assumptions used in the preparation of such information may prove to be incorrect. All such forward-looking statements involve substantial known and unknown risks and uncertainties, certain of which are beyond Open Range's control. Such risks and uncertainties include, without limitation, risks associated with oil and natural gas exploration, development, exploitation, production, marketing and transportation, loss of markets, volatility of commodity prices, currency fluctuations, imprecision of reserve estimates, environmental risks, competition from other producers, inability to retain drilling rigs and other services, delays resulting from or inability to obtain required regulatory approvals and ability to access sufficient capital from internal and external sources, the impact of general economic conditions in Canada and the United States, industry conditions, changes in laws and regulations (including the adoption of new environmental laws and regulations) and changes in how they are interpreted and enforced, increased competition, the lack of availability of qualified personnel or management, fluctuations in foreign exchange or interest rates, stock market volatility and market valuations of companies with respect to announced transactions and the final valuations thereof, and obtaining required approvals of regulatory authorities. Open Range's actual results, performance or achievements could differ materially from those expressed in, or implied by, these forward-looking statements and, accordingly, no assurances can be given that any of the events anticipated by the forward-looking statements will transpire or occur, or if any of them do, what benefits, including the amount of proceeds, Open Range will derive therefrom. Readers are cautioned that the foregoing list of factors is not exhaustive. All subsequent forward-looking statements, whether written or oral, attributable to Open Range or persons acting on its behalf are expressly qualified in their entirety by these cautionary statements. Furthermore, the forward-looking statements contained in this news release are made as at the date of this news release and Open Range does not undertake any obligation to update publicly or to revise any of the included forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by applicable securities laws.
Disclosure provided herein in respect of barrel(s) of oil equivalent (boe) may be misleading, particularly if used in isolation. A boe conversion ratio of 6 mcf:1 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.
THE TORONTO STOCK EXCHANGE HAS NEITHER APPROVED NOR DISAPPROVED OF THE INFORMATION CONTAINED HEREIN. | |
| CONTACT INFORMATION:
Open Range Energy Corp.
A. Scott Dawson, P.Eng.
President and Chief Executive Officer
403-205-3704
or
Open Range Energy Corp.
Lyle D. Michaluk, CA
Vice President, Finance and Chief Financial Officer
403-262-9280
www.openrangeenergy.com
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| INDUSTRY: Energy and Utilities - Oil and Gas | |
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