Aurora Oil & Gas Limited - Quarterly activities summary for the quarter ended September 30, 2013

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PERTH , Western Australia , Oct. 31, 2013 /CNW/ - Aurora Oil & Gas Ltd ("Aurora") (AUT.AX) (AEF.TO) is pleased to provide an update on corporate activities and progress with the development program of its Eagle Ford assets in the Sugarkane Field in South Texas .

On a quarter-on-quarter basis Aurora is pleased to report:

  • a 7% increase in revenue from Q2 2013 (68% increase from Q3 2012)
  • a 6% increase in production volume (71% increase from Q3 2012)
  • 10 new net wells were placed on production
  • the first two Aurora operated wells were placed on production in late September 2013
  • 13 net wells were spudded which includes 7 wells on Aurora operated acreage

Corporate, operational and production highlights for the third quarter 2013:

  • Revenue:  Revenue from oil and gas sales was US$144 million for the quarter ( US$105 million after royalties), comprising 86% oil and condensate sales, 8% natural-gas liquids (NGLs) , and 6% natural gas.
  • Total production:  Aurora's gross quarterly production was 1.97 mmboe (80% liquids on a boe basis). Net to Aurora, after royalties, production was 1.45 mmboe. This represented an increase of 6% on the previous quarter and approximately 71% on the corresponding quarter in 2012.
  • Average production:  Aurora's average gross production rate during the quarter was approximately 21,400 boe/d. Net to Aurora, after royalties, average production was approximately 15,800 boe/d, an increase of 9% on the previous quarter.
  • Cash and funding:  The cash balance at the end of the quarter was US$106 million , with a further US$300 million available from the existing undrawn revolving credit facility.
  • Capital expenditure:  Total development capital expenditure, including accruals, for the quarter totalled US$140 million representing development undertaken at both operated and non-operated acreage during the quarter.
  • Well activity:  37 gross wells (10 net) were placed on production. 38 gross wells (13.1 net) were spudded during the quarter, which includes 7 wells on Aurora operated acreage. In total, there were 332 gross wells (87.5 net wells to Aurora) on production at quarter end.
  • Drilling status:  At the end of the quarter, drilling operations were underway on 12 gross wells, 21 gross wells were awaiting fracture stimulation and 10 gross wells were being stimulated or were being prepared for test.
  • Operated acreage:  First production commenced from two Heard Ranch wells in late September on Aurora operated acreage. During October, production from these two wells posted a 30 day average rate of 821 boe/d per well. An additional two Axle Tree wells were drilled and multi-stage zipper fracced in the third quarter. During October these two wells were placed on production.

Sugarkane Field - Eagle Ford Shale

Aurora's primary asset is its interest in the Sugarkane Field in South Texas , which is located in the core area of the Eagle Ford shale. Aurora participates in approximately 80,300 highly contiguous gross acres that make up the field. Marathon Oil EF LLC, a wholly-owned subsidiary of Marathon Oil Corporation (MRO) ("Marathon"), operates approximately 77,600 gross acres and Aurora is the largest non-operating working interest partner in this area. In addition, Aurora has a 100% working interest and is the operator of 2,700 acres within the two areas, Axle Tree Ranch and Heard Ranch, located in the Sugarkane Field as shown in Figure 1.

At the end of the reporting period, Aurora had a net position of approximately 22,100 acres within four adjacent non-operated Areas of Mutual Interest ("AMIs") and two operated areas in the Sugarkane Field. The varying levels of participation are outlined in the table below and the AMIs are shown in Figure 1 above.

AMI Working Interest Gross Acreage Net Acreage
Sugarloaf 28.0% 24,000 6,750
Longhorn 31.9% 28,700 9,100
Ipanema 36.4% 4,800 1,750
Excelsior 9.1% 20,100 1,800
Operated acreage 100.0% 2,700 2,700
Total   80,300 22,100

Operations

There were between 7 and 11 rigs drilling at any one time on Aurora's non-operated Sugarkane acreage during the reporting quarter and up to two rigs on Aurora's operated acreage. A total of 38 gross (13.1 net) wells were spudded, 7 of which were on the operated acreage.

During the reporting quarter 37 gross (10 net) wells were placed on production including Aurora's first two operated wells. Aurora had an inventory of 31 gross wells at the end of the quarter awaiting commencement of fracture and stimulation operations.

The following table details activity status within the Sugarkane Field as at September 30, 2013 :

  Sugarloaf Longhorn Ipanema Excelsior Axle Tree Heard Ranch Total
Producing 82 154 7 76 6 7 332
Workover - - - - - - -
Fracture Stimulation 1 4 - 3 2 - 10
Completions 11 6 - 4 - - 21
Drilling - 4 - 3 1 1 9
Suspended Drilling - - - - 1 2 3
*Total 94 168 7 86 10 10 375

* Not including 5 farmout wells

A variety of well intervention operations have taken place across a number of wells in which Aurora has an interest. Artificial lift installations took place in 68 wells across Aurora's non-operated acreage. These are routine planned operations which are implemented as individual well reservoir pressures drop.

Drilling activity during the quarter within the Sugarkane Field utilized multiple well pads, where between 2 to 6 wells were drilled from the same surface pad location. Such pad drilling offers cost and efficiency savings via sharing of infrastructure and avoiding lengthy rig and fracture stimulation equipment moves. Further efficiencies are expected with several pads undergoing batch drilling, whereby the vertical surface hole section of wells at a particular pad location are all drilled first, followed by all of the horizontal sections. This batch approach allows equipment and operations to be configured for a particular repeatable phase of operations resulting in efficiency gains.

Operated Acreage

On Heard Ranch, first production was established on Aurora operated acreage from two wells, the J.P. Bower-Heard 19H and 20H. Production from these two wells posted a 30 day average rate of 821 boe/d per well. These wells were pad drilled and cased at lateral lengths of 7,800'-7,900'. The wells were then zipper fracced using the Schlumberger HiWay frac system. The Nabors F08 rig then moved to a nearby pad and has spudded a three well pad program. These three wells are expected to be drilled and completed before year end.

At our Axle Tree Ranch, the Julie Beck #12H and #13H wells were drilled and multi-stage zipper fracced. After quarter end these two wells were placed on production.

In addition to drilling operations, installation of pipelines, central gathering infrastructure and facilities is well underway.

Down Spacing and Austin Chalk Update

Aurora continues to evaluate several pilot studies currently underway in both the Eagle Ford and Austin Chalk. Aurora anticipates developing its operated Eagle Ford acreage under a 40 acre development plan. On the non-operated acreage, more than 30% of the wells drilled to date have been on less than 80 acre spacing. Aurora plans to provide details of the planned density pattern in the Eagle Ford formation across the non-operated acreage prior to calendar year end.

Pilot programs continue to evaluate possible co-development of the Austin Chalk and the Eagle Ford. These pilot programs will consider multiple lateral placements within the two reservoirs.

Production

The following table provides details of the Aurora production during the quarter, which comprised 80% liquids on a boe basis.

3rd Quarter 2013 Production

  Non-operated Operated
Oil
(bbls)
Cond
(bbls)
Gas
(mscf)
NGL
(bbls)
BOE*
(bbls)
Oil
(bbls)
Gas
(mscf)
NGL
(bbls)
BOE*
(bbls)
WI
Production
732,501 400,751 2,261,530 374,281 1,884,454 69,590 70,730 6,503 87,881
Average
Daily Rate
7,962 4,356 24,582 4,068 20,483 756 769 71 955
NRI
Production
537,946 294,671 1,667,387 275,803 1,386,318 52,193 53,044 4,878 65,912
Average
Daily Rate
5,847 3,203 18,124 2,998 15,069 567 577 53 716

*The oil equivalent barrels per day production rate has been calculated on a 6:1 ratio of gas to oil.

Average daily production for the month of September 2013 from both non-operated and operated Sugarkane Field was 22,175 boe/d gross (16,310 boe/d net).  Monthly average  production rates will continue to be less linear as the majority of wells are now drilled in batches ("pad drilling") and are completed and placed on production in groups rather than individually.

The graph below shows the quarterly production profile for the past 5 quarters. The figures shown at the base of each production bar reflect the incremental net wells added during that period. As indicated in Aurora's 2013 guidance, activities will be weighted to the second half of the year and production is expected to increase accordingly.

*includes 11 existing producing wells acquired as part of the Heard Ranch/Axle Tree Acquisition in March, 2013

Regional Eagle Ford Shale activity

The Eagle Ford shale is recognised by the industry as the one of the premier shale plays in the US. High liquids content, strong well performance (particularly in the core of the trend) and significant regional infrastructure drive attractive economics.

As a result activity levels have remained high, with 234 rigs reportedly currently operating within the trend which has increasingly focused on the core areas. The Sugarkane Field lies within the core area. The Texas Railroad Commission reported 2013 average oil production rate through July of over 600,000 boe/d from the Eagle Ford.

Quarterly Revenue and Capital Expenditure

Aurora's revenue from oil and gas sales for the third quarter of 2013 totalled US$144 million ( US$105 million after royalties).

Total development capital expenditure, including accruals for the quarter totalled US$140 million representing development undertaken at the non-operated acreage within the Sugarkane Field and at the adjacent operated Axle Tree and Heard Ranches during the quarter.

At September 30, 2013 the cash balance was US$106 million . In addition, the Company has further liquidity available from its revolving credit facility. At the end of the third quarter, this debt facility was undrawn with a balance of US$300 million available.

Aurora anticipates the third quarter unaudited Interim Financial Report and Management's Discussion and Analysis, prepared in accordance with Canadian securities legislation requirements, will be filed on or about November 8, 2013 .

About Aurora

Aurora is an Australian and Toronto listed oil and gas company active in the over pressured liquids rich region of the Eagle Ford shale in Texas , United States .  Aurora is engaged in the development and production of oil, condensate and natural gas in Karnes , Live Oak and Atascosa counties in South Texas . Aurora participates in approximately 80,300 highly contiguous gross acres in the heart of the trend, including approximately 22,100 net acres within the Sugarkane Field in the over-pressured and liquids core of the Eagle Ford.

Technical information contained in this report in relation to the Sugarkane Field was compiled by both Aurora and its operating partner and was reviewed by Michael L. Verm, Chief Operating Officer and a Director of Aurora USA Oil and Gas, Inc. Mr. Verm has more than 30 years' experience in the practice of petroleum engineering. Mr. Verm consents to the inclusion in this report of the information in the form and context in which it appears.

Cautionary and Forward Looking Statements

Aurora may present petroleum and natural gas production and reserve volumes in barrel of oil equivalent ("BOE") amounts. For purposes of computing such units, a conversion rate of 6,000 cubic feet of natural gas to one barrel of oil equivalent (6:1) is used. The conversion ratio of 6:1 is based on an energy equivalency conversion method which is primarily applicable at the burner tip and does not represent value equivalence at the wellhead. Readers are cautioned that BOE figures may be misleading, particularly if used in isolation.

Numbers in the tables above may not add due to rounding.

References herein to "Sugarkane" or the "Sugarkane Field" are references to the Sugarkane natural gas and condensate field within the Eagle Ford and includes the two contiguous fields designated by the Texas Railroad Commission as the Sugarkane and Eagleville Fields.

Statements in this press release which reflect management's expectations relating to, among other things, target dates, Aurora's expected drilling program and the ability to fund development are forward-looking statements, and can generally be identified by words such as "will", "expects", "intends", "believes", "estimates", "anticipates" or similar expressions. In addition, any statements that refer to expectations, projections or other characterizations of future events or circumstances are forward-looking statements. Statements relating to "reserves" are deemed to be forward-looking statements as they involve the implied assessment, based on certain estimates and assumptions that some or all of the reserves described can be profitably produced in the future. These statements are not historical facts but instead represent management's expectations, estimates and projections regarding future events.

Although management believes the expectations reflected in such forward-looking statements are reasonable, forward-looking statements are based on the opinions, assumptions and estimates of management at the date the statements are made, and are subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ materially from those projected in the forward-looking statements. These factors include risks related to: exploration, development and production; oil and gas prices, markets and marketing; acquisitions and dispositions; competition; additional funding requirements; reserve estimates being inherently uncertain; incorrect assessments of the value of acquisitions and exploration and development programs; environmental concerns; availability of, and access to, drilling equipment; reliance on key personnel; title to assets; expiration of licences and leases; credit risk; hedging activities; litigation; government policy and legislative changes; unforeseen expenses; negative operating cash flow; contractual risk; and management of growth. In addition, if any of the assumptions or estimates made by management prove to be incorrect, actual results and developments are likely to differ, and may differ materially, from those expressed or implied by the forward-looking statements contained in this document. Such assumptions include, but are not limited to, general economic, market and business conditions and corporate strategy. Accordingly, investors are cautioned not to place undue reliance on such statements.

All of the forward-looking information in this press release is expressly qualified by these cautionary statements. Forward-looking information contained herein is made as of the date of this document and Aurora disclaims any obligation to update any forward-looking information, whether as a result of new information, future events or results or otherwise, except as required by law.

 

SOURCE Aurora Oil & Gas Limited

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Aurora Quarterly Net and Gross Daily Production 2012 / 2013 (CNW Group/Aurora Oil & Gas Limited)

Image with caption: "Figure 1 (CNW Group/Aurora Oil & Gas Limited)". Image available at: http://photos.newswire.ca/images/download/20131030_C8457_PHOTO_EN_32741.jpg

Image with caption: "Aurora Quarterly Net and Gross Daily Production 2012 / 2013 (CNW Group/Aurora Oil & Gas Limited)". Image available at: http://photos.newswire.ca/images/download/20131030_C8457_PHOTO_EN_32742.jpg

Contact:


Jon Stewart
Aurora Executive Chairman
+61 8 9380 2700

Douglas E Brooks
Chief Executive Officer
+1 713 402 1920

Shaun Duffy
FTI Consulting
+61 8 9485 8888

Head Office
Level 1, 338 Barker Road, Subiaco, WA 6008, Australia
PO Box 20, Subiaco, WA 6904
T +61 8 9380 2700, f + 61 8 9380 2799, e info@auroraoag.com.au

Houston
Aurora USA Oil & Gas, Inc. a subsidiary of Aurora Oil & Gas Limited
1200 Smith Street, Suite 2300, Houston TX 77002-5500
T + 1 713 402 1920, f + 1 713 357 9674

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