CALGARY, ALBERTA--(Marketwired - Sep 9, 2015) - Crew Energy Inc. (CR.TO) ("Crew" or the "Company") is pleased to announce that it has closed a $50 million disposition of a minor portion of its Lloydminster, Alberta heavy oil assets (the "Lloydminster Assets"). The Company also provides an operational update and an increase to our 2015 exit production guidance.
The Disposition
The Lloydminster Assets sold include:
- Current production of approximately 225 boe per day representing 6% of current heavy oil production;
- Total proved plus probable ("2P") reserves of 1.0 mmboe1; and
- 11,670 net acres (18.2 net sections) of petroleum and natural gas rights, representing 11.8% of Crew's total heavy oil acreage.
This transaction provides significant value for Crew with very minor impact to the Company's current production, reserves and cash flow. The proceeds from this transaction have initially been used to repay indebtedness outstanding on Crew's credit facility which enhances our financial flexibility, and supports our focus on the ongoing delineation and development of Crew's world-class northeast British Columbia ("NE BC") Montney assets. Crew's total net debt outstanding at year end 2015 is projected to be approximately $210 million, comprised of $150 million ($147 million net of deferred costs) of senior notes that mature in 2020 and $60 million of bank debt and working capital deficiency on a $260 million credit facility which would be 23% drawn.
Operations & Guidance Update
Crew brought our new West Septimus facility on-stream in early August as planned. The facility is currently operating at half capacity as budgeted, processing approximately 30 mmcf per day from only six of the 21 wells now drilled in the area. These wells are producing at choke rates of approximately 30% on average, and although they have been on-production for more than 30 days, the wells continue to produce at average casing pressures in excess of 1,500 psi. At Septimus, the LACT (lease automatic custody transfer) unit became operational on September 4th and is expected to add approximately $4 per bbl to our condensate netback.
Crew's full year 2015 net capital budget remains consistent with original guidance at $185 million. With continued optimization of drilling and production practices combined with realized efficiencies and cost savings, we have been able to significantly increase our drilling and completions activity. Crew originally anticipated drilling and completing a total of 10 Montney wells during the year, but we are now expecting to have 22 Montney horizontal wells drilled, 15 of which will be completed by the end of 2015. As a result of this expanded activity coupled with the outperformance of wells at West Septimus, Crew is increasing our exit production guidance to over 26,000 boe per day. Production restrictions in August and early September as described below under "Marketing Update" have resulted in our third quarter 2015 volumes being reduced and anticipated to average approximately 16,500 boe per day, with our annual production expected to be 19,000 to 21,000 boe per day.
1 Reflects gross reserves assigned by the Company's independent reserves evaluator, Sproule Associates Limited, effective December 31, 2014 in accordance with the definitions and provisions contained in the COGE Handbook.
Transportation & Marketing Update
On August 7, 2015 Crew announced that approximately 60 mmcf per day of natural gas and associated liquids of Crew's NE BC production had been suspended due to the shutdown of the Alliance pipeline system, which resumed operations on August 13th, 2015. Ongoing multiple pipeline service restrictions and curtailments have resulted in restricted access and severely depressed prices on the Spectra and Alliance pipeline systems. Crew has responded to these challenges by managing production levels to effectively match gas production to the approximately 50 mmcf per day of firm transportation and favorable fixed differential contracts currently in place.
The economics of deferring production in the current weak commodity price environment have led Crew to restrict flow at our Septimus gas plant to an operational minimum of 15 mmcf per day, or 25% of capacity. We have prudently elected to preserve value and shut-in approximately 8,000 boe per day until pipeline restrictions abate and pricing improves. Commencing December 1, 2015, Crew will have a total of 113 mmcf per day of long-term firm transportation capacity on the Alliance and Spectra pipeline systems, and we have concluded natural gas sales transactions on approximately 65% of the committed transportation capacity which will result in a sales price at or exceeding the then current AECO benchmark price.
Cautionary Statements and Advisories
Forward-Looking Information and Statements
This news release contains certain forward-looking information and statements within the meaning of applicable securities laws. The use of any of the words "expect", "anticipate", "continue", "estimate", "may", "will", "project", "should", "believe", "plans", "intends" "forecast" and similar expressions are intended to identify forward-looking information or statements. In particular, but without limiting the foregoing, this news release contains forward-looking information and statements pertaining to the following: estimates of 2015 year end total net debt and the percentage drawn on Crew's credit facility at year end 2015; the number of wells to be drilled, completed and tied-in and the timing thereof; anticipated additions to Crew's condensate netback; the expectation for an improved pricing; transportation and marketing environment certainty and capacity and improved realized commodity pricing as of December 1, 2015; production estimates including 2015 forecast average and exit productions; future oil and natural gas prices and Crew's commodity risk management programs; and future liquidity and financial capacity.
Forward-looking statements or information are based on a number of material factors, expectations or assumptions of Crew which have been used to develop such statements and information but which may prove to be incorrect. Although Crew believes that the expectations reflected in such forward-looking statements or information are reasonable, undue reliance should not be placed on forward-looking statements because Crew can give no assurance that such expectations will prove to be correct. In addition to other factors and assumptions which may be identified herein, assumptions have been made regarding, among other things: the impact of increasing competition; the general stability of the economic and political environment in which Crew operates; the timely receipt of any required regulatory approvals; the ability of Crew to obtain qualified staff, equipment and services in a timely and cost efficient manner; drilling results; the ability of the operator of the projects in which Crew has an interest in to operate the field in a safe, efficient and effective manner; the ability of Crew to obtain financing on acceptable terms and the adequacy of cash flow to fund its planned expenditures; field production rates and decline rates; the ability to replace and expand oil and natural gas reserves through acquisition, development and exploration; the timing and cost of pipeline, storage and facility construction and expansion and the ability of Crew to secure adequate product transportation; future commodity prices; currency, exchange and interest rates; regulatory framework regarding royalties, taxes and environmental matters in the jurisdictions in which Crew operates; the ability of Crew to successfully market its oil and natural gas products.
The forward-looking information and statements included in this news release are not guarantees of future performance and should not be unduly relied upon. Such information and statements, including the assumptions made in respect thereof, involve known and unknown risks, uncertainties and other factors that may cause actual results or events to defer materially from those anticipated in such forward-looking information or statements including, without limitation: changes in commodity prices; the potential for variation in the quality of the Montney formation; changes in the demand for or supply of Crew's products; unanticipated operating results or production declines; changes in tax or environmental laws, royalty rates or other regulatory matters; changes in development plans of Crew or by third party operators of Crew's properties, increased debt levels or debt service requirements; inaccurate estimation of Crew's oil and gas reserve and resource volumes; limited, unfavourable or a lack of access to capital markets; increased costs; a lack of adequate insurance coverage; the impact of competitors; and certain other risks detailed from time-to-time in Crew's public disclosure documents (including, without limitation, those risks identified in this news release and Crew's Annual Information Form).
The forward-looking information and statements contained in this news release speak only as of the date of this news release, and Crew does not assume any obligation to publicly update or revise any of the included forward-looking statements or information, whether as a result of new information, future events or otherwise, except as may be required by applicable securities laws.
BOE equivalent
Barrel of oil equivalents or 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. Given that the value ratio based on the current price of crude oil as compared to natural gas is significantly different than the energy equivalency of 6:1, utilizing a 6:1 conversion basis may be misleading as an indication of value.
Crew Energy Inc. is a dynamic, growth-oriented exploration and production company, focused on increasing long-term production, reserves and cash flow per share through the development of our world-class Montney resource. Crew is based in Calgary, Alberta and our shares are traded on The Toronto Stock Exchange under the symbol "CR".