Canada NewsWire
CALGARY, Nov. 10, 2016
/NOT FOR DISTRIBUTION TO UNITED STATES NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES/
CALGARY, Nov. 10, 2016 /CNW/ - Valeura Energy Inc. ("Valeura" or the "Corporation") (TSX: VLE) is pleased to report highlights of its unaudited financial and operating results for the three and nine month periods ended September 30, 2016 and an update on subsequent developments including progress towards closing a number of recently announced transactions including the Banarli Farm-in, TBNG Acquisition, West Thrace Deep Rights Sale and private placement financing (collectively, the "Transactions") (each as described below). The complete quarterly reporting package for the Corporation, including the unaudited financial statements and associated management's discussion and analysis ("MD&A"), has been filed on SEDAR at www.sedar.com and posted on the Corporation's website at www.valeuraenergy.com.
"We believe that the series of transactions announced by Valeura in the past few months will be transformational for the Corporation and highly attractive for shareholders. They pave the way for us to ramp up drilling and put the shallow gas business back on a growth path with a program that, for the first time, will be under our control", said Jim McFarland, President and Chief Executive Officer of Valeura. "We have a robust inventory of drillable prospects and exploration leads in the conventional shallow gas formations and normally-pressured tight gas formations on the TBNG JV lands and Banarli licences, which could support a one rig drilling program of up to 12 to 14 exploration development wells in 2017. Our standout operational netbacks and competitive cost structure in Turkey are expected to generate strong economic returns for this capital program."
"We are also thrilled that the two transactions completed with Statoil, with an expected total value of US$51 million, have validated the potential of a basin-centered gas play concept in the deep formations below 2,500 metres in parts of the Thrace Basin, which we had conceived and advanced with new 3D seismic and targeted deep drilling and testing programs in the past few years. By retaining a 50% and 31.5% participating interest in the deep formations on the Banarli licences and West Thrace lands, respectively, we have preserved significant option value for Valeura should the deep play prove successful.
"Average net sales of 680 boe/d in Q3 2016 and 801 boe/d in the first nine months of 2016 are at the low end of the range of previous guidance of 800 to 900 boe/d for annual average sales. The low production level in Q3 reflects the deferral of new drilling pending the closing of the Transactions and delays in first gas from the Bati Gurgen-2 well at Banarli. In contrast, and dependent on completing the Transactions, we are targeting to achieve average net sales of 2,000 to 2,200 boe/d in 2017 with a more aggressive, operated capital expenditure program in the higher working interest shallow gas business we will own at the closing of the TBNG Acquisition", adds McFarland.
Q3 2016 RESULTS AT A GLANCE
(See below for definitions and advisories)
TRANSACTION HIGHLIGHTS AND UPDATE
Farm-in With Statoil
TBNG Acquisition
West Thrace Deep Rights Sale
Underwritten Private Placement Offering
OPERATIONAL HIGHLIGHTS
Banarli Licences (Valeura 100% Working Interest)
TBNG JV Lands (Valeura 40% Working Interest Currently)
FINANCIAL HIGHLIGHTS
Table 1 Financial and Operating Results Summary (1)
(thousands of Canadian dollars, except |
Three Months September 30, |
Three Months June 30, |
Nine Months September 30, |
Three Months September 30, |
Nine Months September 30, | |
Financial |
||||||
Petroleum and natural gas revenues |
3,510 |
4,809 |
12,647 |
4,309 |
17,118 | |
Funds flow from operations (1) |
1,066 |
2,098 |
5,133 |
1,949 |
8,585 | |
Net loss from operations |
(1,263) |
(642) |
(2,897) |
(169) |
(849) | |
Capital expenditures |
3,080 |
3,215 |
8,999 |
741 |
7,092 | |
Net working capital surplus |
3,697 |
5,741 |
3,697 |
11,335 |
11,335 | |
Cash |
2,336 |
4,611 |
2,336 |
7,972 |
7,972 | |
Common shares outstanding |
||||||
Basic |
58,519,321 |
58,452,801 |
58,519,321 |
57,906,135 |
57,906,135 | |
Diluted |
63,433,821 |
63,367,301 |
63,433,821 |
76,352,352 |
76,352,352 | |
Share trading |
||||||
High |
1.25 |
1.44 |
1.44 |
0.57 |
0.71 | |
Low |
0.80 |
0.60 |
0.60 |
0.36 |
0.36 | |
Close |
0.85 |
1.24 |
0.85 |
0.42 |
0.42 | |
Operations |
||||||
Production |
||||||
Crude oil (bbl/d) |
10 |
7 |
8 |
7 |
8 | |
Natural Gas (Mcf/d) |
4,020 |
5,560 |
4,756 |
4,723 |
6,062 | |
boe/d (@ 6:1) |
680 |
933 |
801 |
794 |
1,019 | |
Average reference price |
||||||
Brent ($ per bbl) |
59.75 |
57.81 |
55.31 |
65.91 |
69.91 | |
BOTAS Reference ($ per Mcf) (2) |
9.67 |
9.78 |
9.90 |
10.07 |
10.40 | |
Average realized price |
||||||
Crude oil ($ per bbl) |
56.24 |
54.41 |
52.15 |
48.79 |
52.25 | |
Natural gas - Turkey ($ per Mcf) |
9.35 |
9.44 |
9.61 |
9.85 |
10.27 | |
Average Operating Netback |
||||||
($ per boe @ 6:1) (1) |
38.69 |
43.02 |
42.72 |
44.50 |
46.99 |
Notes: |
|
(1) |
The above table includes non-IFRS measures, which may not be comparable to other companies. Funds flow from operations is calculated as |
(2) |
Boru Hatlari ile Petrol Tasima Anonim Sirketi ("BOTAS") owns and operates the national crude oil and natural gas pipeline grids in Turkey and |
OUTLOOK
The Corporation currently expects to complete a capital expenditure program of approximately $10 million in 2016 focussed primarily on the Banarli licences. Capital expenditures in Q4 2016 are expected to include several recompletions on the TBNG JV lands. The current outlook for annual average net sales in 2016 is approximately 800 boe/d, which is at the low end of the most recent guidance range of 800 to 900 boe/d provided on August 11, 2016. The current net sales outlook for 2016 reflects delays in achieving first gas from the Bati Gurgen-2 well and deferral of new drilling pending the closing of the Transactions and the funds flow therefrom.
The Corporation is targeting to close the Banarli Farm-in, TBNG Acquisition and West Thrace Deep Rights Sale, and to complete the Offering, by year-end 2016. Applications have been submitted to the Turkish government for the various approvals required to close the Banarli Farm-in, TBNG Acquisition and the West Thrace Deep Rights Sale. Closing of the Subsequent West Thrace Deep Rights Sale is expected in early 2017, which first requires Turkish government approval of the TBNG Acquisition and the subsequent licence interest transfer.
Based on completing the Banarli Farm-in, TBNG Acquisition, West Thrace Deep Rights Sale and Offering by year-end 2016, the Corporation is planning a capital expenditure program of up to $30 to 33 million (net) in 2017 focussed entirely on the shallow gas business. This program is expected to include a significant ramp-up in drilling in the shallow formations (less than 2,500 metres) on the TBNG JV lands and Banarli licences targeting corporate average sales volumes in the range of 2,000 to 2,200 boe/d. The 2017 work program and expenditures, and the timing thereof, are dependent on closing of the Transactions and receipt of the funds flow therefrom.
The Corporation also expects that the Banarli Farm-in program, fully funded by Statoil and operated by Valeura, will commence by early 2017 with the spudding of a deep exploration well.
(See advisories below regarding outlook disclosures)
ABOUT THE CORPORATION
Valeura Energy Inc. is a Canada-based public company currently engaged in the exploration, development and production of petroleum and natural gas in Turkey.
OIL AND GAS ADVISORIES
When used herein, the term "boe" means barrels of oil equivalent on the basis of one boe being equal to one barrel of oil or natural gas liquids, or 6,000 cubic feet of natural gas. Barrel of oil equivalent may be misleading, particularly if used in isolation. A boe conversion ratio of 6.0 Mcf to 1.0 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.
The reserve estimates provided herein are estimates only and there is no guarantee that the estimated reserves will be recovered. Actual reserves may be greater than or less than the estimates provided herein.
RESERVE DEFINITIONS
"Reserves" are estimated remaining quantities of oil and natural gas and related substances anticipated to be recoverable from known accumulations, from a given date forward, based on: (a) analysis of drilling, geological, geophysical, and engineering data; (b) the use of established technology; and (c) specified economic conditions, which are generally accepted as being reasonable and shall be disclosed. Reserves are classified according to the degree of certainty associated with the estimates.
"Corporation gross reserves" are the Corporation's working interest (operating or non-operating) share before deducting royalties and without including any royalty interests of the Corporation.
"Proved" or "1P" reserves are those reserves that can be estimated with a high degree of certainty to be recoverable. It is likely that the actual remaining quantities recovered will exceed the estimated proved reserves.
"Probable" reserves are those additional reserves that are less certain to be recovered than proved reserves. It is equally likely that the actual remaining quantities recovered will be greater or less than the sum of the estimated proved plus probable ("2P") reserves.
ADVISORY AND CAUTION REGARDING FORWARD-LOOKING INFORMATION
This news release contains certain forward-looking statements and information (collectively referred to herein as "forward-looking information") including, but not limited to: the current outlook for capital expenditures and net sales in 2016 and 2017; operational activities and drilling plans on the Banarli licences and TBNG JV lands; the ability to satisfy the conditions for closing the Banarli Farm-in, the TBNG Acquisition and the West Thrace Deep Rights Sale and the Subsequent West Thrace Deep Rights Sale, including securing Turkish government approvals for the TBNG Acquisition and the transfer of various licence interests; the ability to close the TBNG Acquisition and the West Thrace Deep Rights Sale and the expected timing; the ability to close the Subsequent West Thrace Deep Rights Sale and the expected timing; the cash consideration for the TBNG Acquisition after final closing adjustments; the ability to fund the TBNG Acquisition with the proceeds from Statoil under the West Thrace Deep Rights Sale and the Offering; the expected US$6 million payment on the closing of the Banarli Farm-in, the expected payment of US$12 million on the closing of the West Thrace Deep Rights Sale and the expected payment of US$3 million on the closing of the Subsequent West Thrace Deep Rights Sale; the key benefits of the TBNG Acquisition, the West Thrace Deep Rights Sale and the Subsequent West Thrace Deep Rights Sale; the ability to satisfy the conditions for completion of the Offering and the expected timing; the ability to ramp-up the drilling program in the shallow formations on the TBNG JV lands and Banarli licences; the prospectivity of the shallow formations on the TBNG JV lands and Banarli licences; the Corporation's 2017 work program, operational plans (drilling), expected capital expenditures, target production volumes, expected price realizations and expected operating netbacks; the ability to fulfill the commitment program of spudding four shallow wells on the West Thrace lands by late June 2017; the planned drilling and seismic program in 2017 for the Banarli Farm-in and the work program for the shallow gas business, and the timing thereof; and the potential for a BCGA play in the deep formations on the Banarli licences and West Thrace lands. Forward-looking information typically contains statements with words such as "anticipate", estimate", "expect", "target", "potential", "could", "should", "would" or similar words suggesting future outcomes. The Corporation cautions readers and prospective investors in the Corporation's securities to not place undue reliance on forward-looking information, as by its nature, it is based on current expectations regarding future events that involve a number of assumptions, inherent risks and uncertainties, which could cause actual results to differ materially from those anticipated by the Corporation.
Forward-looking information is based on management's current expectations and assumptions regarding, among other things: political stability of the areas in which the Corporation is operating and completing transactions, and in particular the aftermath of the July 2016 failed coup attempt in Turkey; continued safety of operations and ability to proceed in a timely manner; the ability to close the Banarli Farm-in, the TBNG Acquisition, the West Thrace Deep Rights Sale and the Subsequent West Thrace Deep Rights Sale and to complete the Offering; continued operations of and approvals forthcoming from the Turkish government in a manner consistent with past conduct; future seismic and drilling activity on the expected timelines; the prospectivity of the TBNG JV lands and Banarli licences, including the deep potential; the continued favourable pricing and operating netbacks in Turkey; future production rates and associated operating netbacks and cash flow; future economic conditions; future currency exchange rates; the ability to meet drilling deadlines and other requirements under licences and leases; and the Corporation's continued ability to obtain and retain qualified staff and equipment in a timely and cost efficient manner. Although the Corporation believes the expectations and assumptions reflected in such forward-looking information are reasonable, they may prove to be incorrect.
Forward-looking information involves significant known and unknown risks and uncertainties. Exploration, appraisal, and development of oil and natural gas reserves are speculative activities and involve a significant degree of risk. A number of factors could cause actual results to differ materially from those anticipated by the Corporation including, but not limited to: the risks of delay or not obtaining Turkish government approvals in a timely manner for the transfer of licence interests and the TBNG Acquisition in light of the July 2016 failed coup attempt in Turkey and its aftermath, or satisfying other conditions for closing the Banarli farm-in, the TBNG Acquisition, the West Thrace Deep Rights Sale or the Subsequent West Thrace Deep Rights Sale; failure to complete the Offering; failure to realize the key benefits of the TBNG Acquisition, the West Thrace Deep Rights Sale and the Subsequent West Thrace Deep Rights Sale; the risks of currency fluctuations; changes in gas prices and netbacks in Turkey; uncertainty regarding the availability of drilling rigs and associated equipment on the contemplated timelines for shallow drilling and deep drilling; the risks of disruption to operations and access to worksites, threats to security and safety of personnel and potential property damage related to political issues, terrorist attacks, insurgencies or civil unrest in Turkey; political stability in Turkey, including potential changes in political leaders or parties or a resurgence of a coup or other political turmoil; the uncertainty regarding government and other approvals; potential changes in laws and regulations; risks associated with weather delays and natural disasters; the risk associated with international activity; and, the uncertainty regarding the ability to fulfill the drilling commitments on the West Thrace lands. The forward-looking information included in this news release is expressly qualified in its entirety by this cautionary statement. The forward-looking information included herein is made as of the date hereof and Valeura assumes no obligation to update or revise any forward-looking information to reflect new events or circumstances, except as required by law. See Valeura's 2015 AIF for a detailed discussion of the risk factors.
Any financial outlook or future oriented financial information in this news release, as defined by applicable securities legislation, has been approved by management of Valeura, including, but not limited to, the expected acquisition metrics of the TBNG Acquisition. Such financial outlook or future oriented financial information is provided for the purpose of providing information about management's current expectations and plans relating to the future. Readers are cautioned that reliance on such information may not be appropriate for other purposes.
Additional information relating to Valeura is also available on SEDAR at www.sedar.com
Neither the Toronto Stock Exchange nor its Regulation Services Provider (as that term is defined in the policies of the Toronto Stock Exchange) accepts responsibility for the adequacy or accuracy of this news release.
SOURCE Valeura Energy Inc.