Delphi Energy Corp.
TSX: DEE
November 8, 2010
Delphi Energy Reports Record Production and 100 Percent Success on an Active Light Oil and NGL Focused Drilling Program
CALGARY, ALBERTA - Delphi Energy Corp. ("Delphi" or the "Company") is pleased to announce its results for the third quarter ended September 30, 2010.
Third Quarter 2010 Highlights
- achieved record quarterly production in the third quarter of 2010 with average daily volumes of 8,114 barrels of oil equivalent per day (boe/d), an increase of 20 percent compared to the third quarter of 2009;
- increased oil and natural gas liquids production by 32 percent to 1,541 bbls/d compared to 1,168 bbls/d in the third quarter of 2009, maintaining the production mix at approximately 19 percent crude oil and natural gas liquids in the third quarter of 2010;
- achieved production growth in the third quarter consistent with the Company's market guidance for average annual production in 2010 of 7,900 to 8,200 boe/d which was established in early 2010;
- generated funds from operations (cash flow) of $15.1 million, an increase of 20 percent from the comparative quarter of 2009;
- reduced operating costs by 21 percent to $7.45 per boe in the third quarter of 2010 from $9.46 per boe in the third quarter of 2009;
- maintained an operating netback in the $22.00 to $24.00 per boe range and a cash netback of $20.25 per boe in the third quarter;
- realized $4.9 million in hedging gains on crude oil and natural gas commodity contracts and executed additional natural gas hedging contracts to approximately 20 percent of expected 2011 natural gas production at a price of $6.04 per mcf providing stability to cash flow and balance sheet strength; and
- drilled 12.0 gross (8.3 net) wells in the third quarter with a 100 percent success rate.
Operational Highlights
Three Months Ended Nine Months Ended
September 30 September 30
Production 2010 2009 % Change 2010 2009 % Change
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Natural gas (mcf/d) 39,439 33,628 17 38,780 34,690 12
Crude oil (bbls/d) 831 624 33 884 490 80
Natural gas liquids
(bbls/d) 710 544 31 586 509 15
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Total (boe/d) 8,114 6,773 20 7,933 6,781 17
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Financial Highlights ($ thousands except per unit amounts)
Three Months Ended Nine Months Ended
September 30 September 30
2010 2009 % Change 2010 2009 % Change
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Petroleum and natural
gas sales 28,080 24,433 15 86,724 71,867 21
Per boe 37.62 39.21 (4) 40.04 38.82 3
Funds from operations 15,120 12,635 20 43,265 35,023 24
Per boe 20.25 20.28 - 19.98 18.91 6
Per share - Basic 0.13 0.16 (19) 0.40 0.44 (9)
Per share - Diluted 0.13 0.16 (19) 0.40 0.44 (9)
Net earnings (loss) (1,566) (3,278) (52) (1,048) (9,415) (89)
Per boe (2.11) (5.26) (60) (0.49) (5.10) (91)
Per share - Basic (0.01) (0.04) (75) (0.01) (0.12) (92)
Per share - Diluted (0.01) (0.04) (75) (0.01) (0.12) (92)
Capital invested 43,912 7,810 462 87,477 25,504 243
Disposition of
properties 4 (9,728) - (247) (9,953) (98)
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Net capital invested 43,916 (1,918) - 87,230 15,551 461
Acquisition of
properties 2 19,669 (100) 387 19,451 (98)
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Total capital 43,918 17,751 147 87,617 35,002 150
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Sept. 30 Dec. 31
2010 2009 % Change
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Debt plus working capital deficiency (1) 107,933 92,538 17
Total assets 404,645 361,698 12
Shares outstanding (000's)
Basic 112,698 101,166 11
Diluted 120,462 108,594 11
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(1) excludes risk management asset and the related current future income
taxes.
MESSAGE TO SHAREHOLDERS
Production during the third quarter of 2010 averaged 8,114 boe/d, an increase of 20 percent compared to 6,773 boe/d in the third quarter of 2009. The increased light oil production at Hythe and Bigstone changed the production mix in the quarter to 19 percent liquids (81 percent natural gas) from 17 percent liquids (83 percent natural gas) in the third quarter of 2009.
Delphi's natural gas production continued to receive a premium to AECO, $1.74 per mcf in the quarter, due to marketing arrangements, heating content and natural gas hedges. Approximately 53 percent of the Company's natural gas production was hedged at an average price of $6.00 per mcf in the third quarter, resulting in a gain on natural gas contracts of $4.7 million. These pricing premiums resulted in a realized natural gas price of $5.28 per mcf representing a premium of 49 percent to average AECO pricing during the third quarter.
Delphi continues to improve operating efficiencies as a result of production growth and owned infrastructure within the Company's concentrated core areas. In the third quarter of 2010, operating costs were $7.45 per boe, compared to $9.46 per boe in the third quarter of 2009 and $8.71 per boe in the first quarter of 2010. The third quarter of 2010 also benefitted from the disposition of the Company's high operating cost East Central Alberta properties late in the second quarter.
Delphi's financial position remains strong at the end of the third quarter of 2010. At September 30, 2010, Delphi had net debt of $107.9 million. The Company has a credit facility of $135.0 million which is currently being reviewed by its lenders as part of its scheduled semi-annual review. On a nine month annualized funds from operations basis, Delphi's net debt to cash flow ratio was 1.9:1. Net debt includes bank debt plus working capital deficiency excluding the risk management asset/liability and the related current future income taxes.
For the full release, please visit the Delphi website at: www.delphienergy.ca
Forward-Looking Statements. This management discussion and analysis contains forward-looking statements and forward-looking information within the meaning of applicable securities laws. The use of any of the words "expect", "anticipate", "continue", "estimate", may", "will", "should", believe", "intends", "forecast", "plans", "guidance" and similar expressions are intended to identify forward-looking statements or information.
More particularly and without limitation, this management discussion and analysis contains forward looking statements and information relating to the Company's risk management program, petroleum and natural gas production, future funds from operations, capital programs, commodity prices, costs and debt levels. The forward-looking statements and information are based on certain key expectations and assumptions made by Delphi, including expectations and assumptions relating to prevailing commodity prices and exchange rates, applicable royalty rates and tax laws, future well production rates, the performance of existing wells, the success of drilling new wells, the capital availability to undertake planned activities and the availability and cost of labour and services.
Although the Company believes that the expectations reflected in such forward-looking statements and information are reasonable, it can give no assurance that such expectations will prove to be correct. Since forward-looking statements and information address future events and conditions, by their very nature they involve inherent risks and uncertainties. Actual results may differ materially from those currently anticipated due to a number of factors and risks. These include, but are not limited to, the risks associated with the oil and gas industry in general such as operational risks in development, exploration and production, delays or changes in plans with respect to exploration or development projects or capital expenditures, the uncertainty of estimates and projections relating to production rates, costs and expenses, commodity price and exchange rate fluctuations, marketing and transportation, environmental risks, competition, the ability to access sufficient capital from internal and external sources and changes in tax, royalty and environmental legislation. Additional information on these and other factors that could affect the Company's operations or financial results are included in reports on file with the applicable securities regulatory authorities and may be accessed through the SEDAR website (www.sedar.com). The forward-looking statements and information contained in this press release are made as of the date hereof for the purpose of providing the readers with the Company's expectations for the coming year. The forward-looking statements and information may not be appropriate for other purposes. Delphi undertakes no obligation to update publicly or revise any forward-looking statements or information, whether as a result of new information, future events or otherwise, unless so required by applicable securities laws.
Basis of Presentation. For the purpose of reporting production information, reserves and calculating unit prices and costs, natural gas volumes have been converted to a barrel of oil equivalent (boe) using six thousand cubic feet equal to one barrel. A boe conversion ratio of 6:1 is based upon an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. This conversion conforms with the Canadian Securities Administrators' National Instrument 51-101 when boes are disclosed. Boes may be misleading, particularly if used in isolation.
Non-GAAP Measures. The MD&A contains the terms "funds from operations", "funds from operations per share", "net debt" and "netbacks" which are not recognized measures under Canadian generally accepted accounting principles. The Company uses these measures to help evaluate its performance. Management considers netbacks an important measure as it demonstrates its profitability relative to current commodity prices. Management uses funds from operations to analyze performance and considers it a key measure as it demonstrates the Company's ability to generate the cash necessary to fund future capital investments and to repay debt. Funds from operations is a non-GAAP measure and has been defined by the Company as net earnings plus the addback of non-cash items (depletion, depreciation and accretion, stock-based compensation, future income taxes and unrealized gain/(loss) on risk management activities) and excludes the change in non-cash working capital related to operating activities and expenditures on asset retirement obligations and reclamation. The Company also presents funds from operations per share whereby amounts per share are calculated using weighted average shares outstanding consistent with the calculation of earnings per share. Delphi's determination of funds from operations may not be comparable to that reported by other companies nor should it be viewed as an alternative to cash flow from operating activities, net earnings or other measures of financial performance calculated in accordance with Canadian GAAP. The Company has defined net debt as the sum of long term debt plus working capital excluding the current portion of future income taxes and risk management asset/liability. Net debt is used by management to monitor remaining availability under its credit facilities.
For more information, please contact:
Delphi Energy Corp.
David J. Reid
President & CEO
(403) 265-6171
or
Delphi Energy Corp.
Brian Kohlhammer
V.P. Finance & CFO
(403) 265-6171
Delphi Energy Corp.
300, 500 - 4 Avenue S.W
Calgary, Alberta
T2P 2V6
Fax: (403) 265-6207
Email: info@delphienergy.ca
Website: www.delphienergy.ca
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