Had to cut and paste, as Yahoo will not allow a message larger than 4,000 characters. (The cardium well is very bullish)
Improved Balance Sheet and Renewed Credit Facility
We've executed on an ongoing balance sheet re-structuring and a strategy of improving our financial flexibility since early 2011. Overall debt including working capital levels are down 13 percent from December 31, 2011 with proceeds from the asset sales in the first quarter and the sale of Mississippian acreage in the second quarter both reducing debt. Our banking syndicate re-confirmed our $200 million credit facility in May. Equal has only drawn US$110 million leaving us significant financial flexibility.
Mississippian Oil Venture
In the second quarter we partially monetized our Mississippian asset base in Oklahoma for proceeds of US$18.1 million. This had been part of our plan for some time and we are especially pleased to have achieved this with a solid joint venture partner in Atlas Energy. We retained a 50% interest and are now focused on oil development in this play.
Our first Mississippian well in the joint venture with Atlas was spud on June 17, 2012. The well has been cased and completion is underway. A second well is currently being drilled. The venture intends to drill a minimum of six horizontal wells in 2012 and is on track to meet this objective. We expect this oil resource play to deliver strong future value growth for Equal.
Successful Drilling Programs
In the first half of 2012, Equal drilled eight wells with a 100 percent success rate. Four vertical wells were put down in our northern Oklahoma Hunton play in the first quarter. Three horizontal wells were drilled in our core Twin Cities Central Dolomite (TCCD) play also in Oklahoma. All of the Oklahoma wells were on production by the end of the second quarter and in aggregate are performing above expectations.
In Canada, one Cardium horizontal oil well was drilled in the second quarter. It was completed subsequent to the end of the quarter and tested 890 barrels of oil per day over an initial 9 day period and is currently shut-in for a pressure build up and testing. This appears to be one of our strongest Cardium wells to date and will be placed on production by the middle of August. A second Cardium well has been drilled with the completion expected by the middle of August with first production by the end of August.
In the first half of 2012, we have seen a 26% drop in funds from operations from the same period last year. This is driven by a combination of falling commodity prices and non-core asset dispositions to reduce debt which resulted in Equal's production portfolio shifting away from high operating cost oil assets towards low cost liquids-rich natural gas assets. As I mentioned before, Equal's focus for the second half of 2012 will be in the light oil resource plays in Cardium (Alberta) and the Mississippian (Oklahoma). You can be confident that Equal's management is monitoring cash flow continuously and adjusting the capital programs to maintain a prudent balance between spending and debt.
In Q2 2012, the Company had net income of $2.3 million compared to net income of $6.5 million in Q2 2011. The decrease in net income in Q2 2012 compared to Q2 2011 is mainly due to the decrease in revenues from oil, NGLs and natural gas and impairment in PP&E which were partially offset by lower royalties, production expenses and gain on sale of assets.