Delphi Energy Reports Financial and Operational Results for First Quarter 2013
CALGARY, ALBERTA--(Marketwired - May 15, 2013) - Delphi Energy Corp. ("Delphi" or the "Company") (DEE.TO) is pleased to announce its financial and operational results for the quarter ended March 31, 2013.
First Quarter 2013 Highlights
produced an average of 7,520 barrels of oil equivalent per day ("boe/d") despite production downtime at third-party facilities to the extent of approximately 700 boe/d;
increased funds from operations by 49 percent for the quarter ended March 31, 2013, compared to the previous quarter ended December 31, 2012;
increased its average corporate natural gas liquid ("NGL") and field condensate yield by 41 percent from Q1 2012 to 48 barrels per million cubic feet ("bbls/mmcf");
acquired 30 gross (26.8 net) sections of Montney rights in East Bigstone for $13.7 million;
successfully drilled two gross (two net) Montney wells as part of the Company's capital program; and
completed, tied-in and brought on production two net Montney wells in East Bigstone
| Three Months Ended March 31 | |||||||
2013 | 2012 | % Change | ||||||
Petroleum and natural gas sales | 21,763 | 24,143 | (10 | ) | ||||
Per boe | 32.15 | 29.50 | 9 | |||||
Funds from operations | 9,383 | 10,974 | (14 | ) | ||||
Per boe | 13.87 | 13.39 | 4 | |||||
Per share - Basic | 0.06 | 0.08 | (25 | ) | ||||
Per share - Diluted | 0.06 | 0.08 | (25 | ) | ||||
Net earnings (loss) | 56 | (15,915 | ) | - | ||||
Per boe | 0.08 | (19.46 | ) | - | ||||
Per share - Basic | 0.00 | (0.12 | ) | - | ||||
Per share - Diluted | 0.00 | (0.12 | ) | - | ||||
Capital invested | 23,956 | 53,283 | (55 | ) | ||||
Disposition of properties | (3,172 | ) | (11,585 | ) | (73 | ) | ||
Net capital invested | 20,784 | 41,698 | (50 | ) | ||||
Acquisition of undeveloped properties | 13,664 | - | - | |||||
Total capital invested | 34,448 | 41,698 | (17 | ) | ||||
March 31, | December 31, | % Change | ||||
Debt plus working capital deficiency (1) | 119,337 | 92,815 | 29 | |||
Total assets | 434,331 | 401,649 | 8 | |||
Shares outstanding (000's) | ||||||
Basic | 153,100 | 153,049 | - | |||
Diluted | 164,008 | 162,104 | 1 | |||
(1) | excludes the fair value of financial instruments. |
Operational Highlights
Three Months Ended March 31 | |||||
Production | 2013 | 2012 | % Change | ||
Crude oil (bbls/d) | 318 | 1,046 | (70 | ) | |
Field condensate (bbls/d) | 417 | 118 | 253 | ||
Natural gas liquids (bbls/d) | 1,189 | 1,244 | (4 | ) | |
Total crude oil and natural gas liquids | 1,924 | 2,408 | (20 | ) | |
Natural gas (mcf/d) | 33,574 | 39,510 | (15 | ) | |
Total (boe/d) | 7,520 | 8,993 | (16 | ) | |
MESSAGE TO SHAREHOLDERS
The Company continues to focus on its liquids-rich Montney development at Bigstone where the Company holds over 100 sections of land and on new completion techniques which have significantly enhanced the economics of the project.
Production volumes for the three months ended March 31, 2013 averaged 7,520 boe/d, a 16 percent decrease over the comparative period in 2012, however, a four percent increase from the three months ended December 31, 2012. Production volumes in the first quarter of 2013 were impacted by third-party pipeline and plant shutdowns in the Tower Creek and Bigstone areas (to the extent of approximately 700 boe/d), natural declines and the disposition of predominantly producing oil properties (450 boe/d) in the third quarter of 2012, partially offset by new production from the first quarter 2013 Montney drilling program which came on-stream in the latter half of the quarter. Production volumes during the month of March 2013 averaged 8,650 boe/d.
The Company's production portfolio for the first quarter of 2013 was weighted four percent to crude oil, six percent to field condensate, 16 percent to natural gas liquids and 74 percent to natural gas. This compares to a production portfolio for the fourth quarter of 2012 weighted six percent to crude oil, two percent to field condensate, 15 percent to natural gas liquids and 77 percent to natural gas.
Delphi completed, tied-in and brought on production two net wells, one of which was drilled during the first quarter of 2013, the other drilled in the fourth quarter of 2012. Both wells were completed utilizing slickwater hybrid fracture stimulations, the first time this technique has been employed in the greater area. The wells are outperforming expectations with initial declines significantly less than the original Montney wells in the area. This production performance, coupled with plant NGL and field condensate yields averaging 114 bbls/mmcf sales over approximately two months of initial production (all C3+ of which 77 percent is field and plant recovered condensate), significantly improves operating netbacks and reduces the expected time to payout of the wells.
In March 2013, Delphi completed a strategic land acquisition adjacent to its existing Bigstone Montney acreage for $13.7 million. The land acquisition consists of 30 gross (26.8 net) sections of Montney rights directly offsetting Delphi's existing acreages and wells. As a result of this land acquisition, the Company's Bigstone Montney development increased by 54 locations to 140 net potential two-mile horizontal drilling locations. The acquisition was funded utilizing Delphi's syndicated credit facility.
Gross capital expenditures during the first quarter were $37.6 million, which primarily included the drill and completion of Montney wells, representing 56 percent of expenditures and the acquisition of undeveloped properties for additional Montney rights in the Bigstone area for $13.7 million, representing 36 percent of expenditures. Net capital expenditures for the first quarter were $34.4 million. At the end of the quarter, one Montney well drilled in the first quarter has yet to be completed.
Funds from operations in the first quarter of 2013 were $9.4 million or $0.06 per basic share and diluted share, compared to $11.0 million or $0.08 per basic share and diluted share in the comparative quarter in 2012. The decrease in funds from operations is primarily due to a decrease in natural gas and crude oil production, partially offset by an increase in field condensate production and improved natural gas and natural gas liquids prices. The liquids-rich nature of new production in the first quarter resulted in an improvement in both operating netbacks and cash netbacks relative to the fourth quarter of 2012. Operating netbacks improved to $17.79 per boe, an 18 percent increase and cash netbacks increased 47 percent to $13.87 per boe, resulting in a 49 percent improvement in cash flow to $9.4 million from $6.3 million in the fourth quarter of 2012.
As at March 31, 2013, the Company had net debt of $119.3 million, including the cash consideration for the strategic acquisition of additional Montney rights in Bigstone, on total credit facilities of $125.0 million. On an annualized first quarter funds from operations basis, Delphi's net debt to funds from operations ratio was 3.2:1. Net debt includes bank debt plus working capital deficiency excluding the fair value of financial instruments. The Company's syndicate of Lenders is currently undertaking their annual borrowing base review which is expected to be completed by the end of May.
Operations
Bigstone Montney
During the first quarter, Delphi successfully drilled, completed and brought on production two additional Montney horizontal wells and finished drilling operations on a third horizontal well at East Bigstone. The first two wells were stimulated utilizing slickwater hybrid frac techniques rather than the previously used smaller conventional gelled oil frac designs. The first well completed with the new frac technique and brought on production during the quarter was 15-10-60-23W5. Since this was the first well to be stimulated with the new slickwater hybrid technique as well as utilizing a new completion liner for execution of the new fracs, the Company drilled this well across one section and stimulated it with 20 stages to limit operational risk. After a successful completion at 15-10, the Company drilled its next well at 10-27-60-23W5 across 1.5 sections and installed a 30 stage liner. After a second successful completion, Delphi drilled the third well of the program at 16-23-60-23W5M across two full sections and will complete it with 30 slickwater hybrid fracs. The 16-23 well has been tied-in and completion operations are anticipated to commence in late May or early June.
Delphi remains very encouraged by the results of its first two slickwater hybrid stimulated wells at East Bigstone. Declines are less and field condensate production remains strong and well above the rates seen on the Company's first three wells in East Bigstone that were completed with gelled oil fracs.
At the time of shut-in in late April for the scheduled SemCAMS Kaybob Amalgamated Plant turnaround (scheduled for April 28 to May 26), the current gas rate from 10-27 and 15-10 were 2.0 and 1.3 times better respectively than the average rate of the first three wells at the same time period.
Field condensate production rate for 10-27 and 15-10 were 6.1 and 2.1 times better respectively leading to a total production rate (boe) of 2.5 and 1.4 times better respectively than the average rate of the first three wells at the same time period.
To view the chart, please visit the following link: http://media3.marketwire.com/docs/515dee_gph1.jpg
With the new completion techniques accomplishing the Company's goal of significantly reducing declines, the gap between the production rates of these two new wells compared to the first three wells continues to widen.
The adjacent charts show the performance of the two new wells compared to the first three wells the Company drilled. Production data has been normalized and days during which the wells were shut-in have been removed from the plots to appropriately compare gas flow rates and field produced condensate to gas ratio.
To view the chart, please visit the following link: http://media3.marketwire.com/docs/515dee_gph2.jpg
The 10-27 well that was brought on-stream in early March is expected to payout in November of this year. For illustrative purposes, a cumulative revenue plot is shown to compare the relative cash generating capability of the new wells to the first three wells.
The Company is preparing to commence completion operations, consisting of a 30 stage slickwater hybrid frac program, at its third horizontal Montney well of the winter program at 16-23. As part of the completion program, Delphi is also planning to record micro-seismic to assist in further understanding and optimizing its fracture stimulation program. The well was drilled to a final total depth of 5,753 metres with a horizontal lateral length of 2,809 metres making it the second longest horizontal well the Company has drilled. The well has been tied-in to the Company's Montney facility in order to bring the volumes to market as soon as completion operations conclude.
To view the chart, please visit the following link: http://media3.marketwire.com/docs/515dee_gph3.jpg
Outlook
Delphi's successful efforts at growing the Bigstone Montney land base from four sections to 108 sections in a relatively short period of time and refining the drilling and completion techniques used for our recent wells is delivering robust economic returns with accelerated payouts and is positioning the Company for long term self-funded growth.
The Company now has a current project inventory that will provide economic growth beyond a 10-year horizon. Delphi's detailed 5-year growth plan contemplates production growth to 20,000 boe/d by 2017, with targeted annual production per share growth of 25 percent and annual cash flow per share growth of 45 percent. Capital spending over the next five years to achieve that result under the plan is projected to be $560 million funded 90 percent from cash flow to drill 50 Montney horizontal wells and fund the expansion of Delphi's 100 percent owned facility.
The production performance of the two new wells along our plans for the second half of 2013 should provide a visible inflexion point in our operational and financial results as the more capital efficient Montney production becomes a greater portion of the Company's overall production base throughout the year.
The production profile of the two new wells, with lower initial declines and greater condensate yields resulting in materially greater present value of the reserves and significantly reduced payout times, is expected to have a favourable impact to the Company's cash generating capability and underlying asset value.
Delphi continues to explore its options to further accelerate its Montney drilling program, through additional non-core asset dispositions, potential joint venture relationships and alternate non-dilutive financing structures.
On behalf of the Board of Directors and all the employees of Delphi, we would like to thank our shareholders for their continued support.
CONFERENCE CALL AND WEBCAST
A conference call and webcast to review Q1, 2013 results is scheduled for 9:00 a.m. Mountain Time (11:00 a.m. Eastern Time) on Thursday, May 16, 2013. The conference call number is 1-866-226-1792 or 416-340-2216. A brief presentation by David Reid, President and CEO and Brian Kohlhammer, Senior VP Finance & CFO, will be followed by a question and answer period. The conference call will also be broadcast live on the internet and may be accessed through the Delphi Energy website at www.delphienergy.ca
A taped rebroadcast will be available until 6:00 p.m. Mountain Time, Thursday, May 23, 2013. To access the rebroadcast, dial 1-800-408-3053 or 905-694-9451. The passcode is 5249625. It will also be available on Delphi's website. Delphi's first quarter 2013 financial statements and management's discussion and analysis are available on Delphi's website at www.delphienergy.ca and SEDAR at www.sedar.com.
Delphi Energy is a Calgary-based company that explores, develops and produces oil and natural gas in Western Canada. The Company is managed by a proven technical team. Delphi trades on the Toronto Stock Exchange under the symbol DEE.
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.
As per CSA Staff Notice 51-327 initial production test results should be considered preliminary data and such data is not necessarily indicative of long-term performance or of ultimate recovery.
Non-IFRS Measures. The release contains the terms "funds from operations", "funds from operations per share", "net debt", "cash operating costs" and "netbacks" which are not recognized measures under IFRS. 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-IFRS measure and has been defined by the Company as net earnings plus the add back of non-cash items (depletion and depletion, accretion, stock-based compensation, deferred income taxes and unrealized gain/(loss) on financial instruments) and excludes the change in non-cash working capital related to operating activities and expenditures on decommissioning obligations. 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 IFRS. The Company has defined net debt as the sum of long term debt plus/minus working capital excluding the current portion of deferred income taxes and fair value of financial instruments. Net debt is used by management to monitor remaining availability under its credit facilities. Cash operating costs have been defined as the sum of operating expenses, transportation expense, general and administrative expenses and cash finance costs.
