Marquee Energy Ltd. Announces Second Quarter 2018 Financial and Operating Results, and Entered into an Agreement for the Disposition of Non-Core Assets for $6.6 Million
/NOT FOR DISTRIBUTION TO U.S. NEWS SERVICES OR FOR DISSEMINATION IN THE UNITED STATES/
CALGARY, Aug. 29, 2018 - Marquee Energy Ltd. ("Marquee" or the "Company") (TSXV: "MQX") reports its operational and financial results for the three months ended June 30, 2018. The Company's Financial Statements as well as the corresponding Management's Discussion and Analysis for the three months ended June 30, 2018 are available on its website www.marquee-energy.com as well as on SEDAR at www.sedar.com.
HIGHLIGHTS
- Production in Q2 averaged 3,159 boe per day (boe/d) (53% oil and liquids), a 4% increase to total boe per day production over Q2 2017, and a 9% absolute increase to oil and liquids weighting over Q2 2017. The increase in production rate and oil and liquids weighting is due to the addition of nine new Banff horizontal wells at Michichi since the end of Q2 2017.
- Revenue increased 25% from the second quarter 2017 to $11.5 million for the period due to an increase in the liquids weighting of Company production from new Banff horizontal well drilling, as well as an increase in realized oil prices.
- Signed a purchase and sale agreement on August 29, 2018 to divest approximately 195 boe/d of non-core assets for gross proceeds of $6.6 million.
FINANCIAL AND OPERATIONAL HIGHLIGHTS
| (thousands of Canadian dollars, | Three months ended June 30, | Six months ended June 30, | |||||||
| except per share and per boe amounts) | 2018 | 2017 | 2018 | 2017 | |||||
| Financial | |||||||||
| Oil and natural gas sales and processing fee income (1) | $ | 11,521 | $ | 9,187 | $ | 20,342 | $ | 16,790 | |
| Funds flow from operations (2) | $ | 1,646 | $ | 2,384 | $ | 2,353 | $ | 3,489 | |
| Per share - basic and diluted | $ | 0.00 | $ | 0.01 | $ | 0.01 | $ | 0.01 | |
| Per boe | $ | 5.73 | $ | 8.66 | $ | 7.39 | $ | 7.00 | |
| Cash flow from operating activities | $ | 2,835 | $ | 12 | $ | 4,098 | $ | 259 | |
| Net income (loss) | $ | (4,671) | $ | (1,956) | $ | (9,583) | $ | (5,618) | |
| Per share - basic and diluted | $ | (0.01) | $ | 0.00 | $ | (0.02) | $ | (0.01) | |
| Capital expenditures | $ | 276 | $ | 1,246 | $ | 11,321 | $ | 7,486 | |
| Net debt (2) | $ | 40,514 | $ | 22,914 | |||||
| Total Assets | $ | 166,319 | $ | 175,458 | |||||
| Weighted average basic shares outstanding | 435,772,196 | 435,772,196 | 435,772,196 | 435,772,196 | |||||
| Weighted average diluted shares outstanding | 435,772,196 | 435,772,196 | 435,772,196 | 435,772,196 | |||||
| Operational | |||||||||
| Net new wells on production | - | - | 5 | 3 | |||||
| Daily sales volumes | |||||||||
| Oil (bbls per day) | 1,521 | 1,174 | 1,398 | 1,088 | |||||
| NGL's (bbls per day) | 166 | 159 | 161 | 146 | |||||
| Natural Gas (mcf per day) | 8,835 | 10,141 | 8,434 | 9,117 | |||||
| Total (boe per day) | 3,159 | 3,024 | 2,964 | 2,754 | |||||
| % Oil and NGL's | 53% | 44% | 53% | 45% | |||||
| Average realized prices | |||||||||
| Light Oil ($/bbl) | $ | 68.87 | $ | 52.11 | $ | 62.77 | $ | 52.36 | |
| NGL's ($/bbl) | $ | 51.46 | $ | 40.71 | $ | 51.31 | $ | 41.02 | |
| Natural Gas ($/mcf) | $ | 1.27 | $ | 3.07 | $ | 1.75 | $ | 3.04 | |
| Netback | |||||||||
| Revenue ($/boe) | $ | 39.39 | $ | 32.66 | $ | 37.35 | $ | 32.93 | |
| Royalties ($/boe) | $ | (2.10) | $ | (1.90) | $ | (1.85) | $ | (2.24) | |
| Operating and transportation costs ($/boe) | $ | (21.52) | $ | (16.18) | $ | (21.48) | $ | (16.79) | |
| Operating netback prior to hedging (2) | $ | 15.77 | $ | 14.58 | $ | 14.02 | $ | 13.90 | |
| Realized hedging gain (loss) ($/boe) | $ | (3.21) | $ | 1.21 | $ | (2.38) | $ | 0.67 | |
| Operating netback ($/boe) (2) | $ | 12.56 | $ | 15.79 | $ | 11.64 | $ | 14.57 | |
| (1) | Before royalties |
| (2) | Non-IFRS Measure. See Non-IFRS Measures advisory. |
OPERATIONAL UPDATE
Current corporate average daily production is approximately 3,000 boe/d (52% oil and liquids). As part of the continued focus on completion optimization, the five first quarter 2018 wells received more frac stages and total proppant than previous horizontal wells at Michichi. Production results from the wells to date indicate that the increased fracture density may be contributing to a lower decline than the previous wells drilled at Michichi. Management will continue to evaluate these results and incorporate the learnings into future frac designs.
| IP60 Producing Day | IP90 Producing Day | IP120 Producing Day | ||||
| BOE/D | Oil Weighting | BOE/D | Oil Weighting | BOE/D | Oil Weighting | |
| 2018 Five Well Average | 159 | 78% | 155 | 76% | 151 | 75% |
The production rates and volumes shown are producing day field estimates and over a short time period, therefore, are not necessarily indicative of average daily production, long-term performance or the ultimate recovery from the wells.
Due to water disposal restrictions at the Company's oil battery, the increased fluid volumes generated from the larger completions were handled at third party facilities. This increased trucking, water disposal and emulsion treating costs, translating into higher corporate operating expenses in the first six months of the year. The Company performed a cleanout operation on its water disposal well in May 2018, and as a result, the incremental operating costs have been eliminated. Prior to the end of 2018, the Company has plans to increase the injection capacity of its water disposal system to handle any additional volumes that may be added to the system from future drilling.
NON-CORE ASSET SALE
Marquee announces that it has entered into a purchase and sale agreement for the sale of non-core Mannville assets for total cash consideration of $6.6 million, prior to customary closing adjustments (the "Transaction"). The Transaction is expected to close on or about October 1, 2018, and is subject to applicable regulatory approvals and additional environmental due diligence.
The asset includes approximately 70 gross / 69 net wells and averaged approximately 195 boe/d (62% oil and liquids) in the first six months of 2018. The Company expects the disposition to have a positive impact on the Company's asset retirement obligations, while maintaining all of the current upside and flexibility in the extensive land base in the Banff formation at Michichi. In the short term, the proceeds from the sale of the assets will be used to reduce the Company's current debt and improve financial flexibility. The disposition is consistent with Marquee's strategy to divest of the Company's non-core assets to further focus the Company on its Banff oil play at Michichi.
CORPORATE UPDATE
Marquee holds a significant land position at Michichi, and with the near-term focus of the Company remaining on debt reduction, is working towards various sources of funding to monetize the extensive high-quality drilling inventory. Data from the Q4 2017 and Q1 2018 drilling program, which incorporated increased frac sizes, will be invaluable as we continue to evaluate and adopt technical applications to enhance economic results for new Michichi Banff horizontal wells.
Earlier this year, Marquee commenced a review of strategic alternatives to enhance shareholder value. We would confirm that this process is ongoing as we continue to evaluate several viable alternatives. Given the nature of the process, the Company does not intend to provide updates with respect to the process until such time as the Board of Directors approves a definitive transaction or strategic alternatives, or otherwise determines that further disclosure is advisable. The Company cautions that there are no guarantees that the review of strategic alternatives will result in a transaction or if a transaction is undertaken, as to its terms or timing.
ABOUT MARQUEE
Marquee is a Calgary-based, junior energy company focused on light oil development and production in the Michichi area of eastern Alberta. Marquee's shares trade on the TSX Venture Exchange under the trading symbol "MQX". Additional information about Marquee may be found on its website www.marquee-energy.com and in its continuous disclosure documents filed with Canadian securities regulators on SEDAR at www.sedar.com.
Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
OIL AND GAS ADVISORIES
References to BOE
Barrels of oil equivalent ("boe") may be misleading, particularly if used in isolation. A boe conversion ratio of six thousand cubic feet ("Mcf") to one 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. Given that the value ratio based on the current price of oil as compared to natural gas is significantly different from the energy equivalency conversion ratio of six to one, utilizing a boe conversion ratio of six Mcf to one bbl may be misleading as an indication of value.
Initial Production Rates
Any references herein to production rates, test rates or initial production rates (including IP60, IP90 and IP120) are useful in confirming the presence of hydrocarbons, however, such rates are not determinative of the rates at which such wells will continue production and decline thereafter. Readers are cautioned not to place reliance on such rates in calculating the aggregate production for Marquee. Initial production or test rates may be estimated based on other third-party estimates or limited data available at this time. Well?flow test result data should be considered to be preliminary until a pressure transient analysis and/or well?test interpretation has been carried out. In all cases herein, initial production or test results are not necessarily indicative of long?term performance of the relevant well or fields or of ultimate recovery of hydrocarbons.
FORWARD?LOOKING STATEMENTS AND CAUTIONARY STATEMENTS
This press release contains forward?looking statements. Such forward?looking statements typically contain statements with words such as ""anticipate", "expect", "intend", "estimate", "propose", or similar words suggesting future outcomes or statements regarding an outlook. The forward?looking statements contained in this document, including statements related to anticipated well production, are based on certain key expectations and assumptions made by Marquee, all or any of which may prove incorrect, including without limitation the remaining forward?looking statements, expectations and assumptions concerning the timing and success of future drilling and development activities.
Although Marquee believes that the expectations and assumptions on which the forward?looking statements are based are reasonable, undue reliance should not be placed on the forward?looking statements because Marquee can give no assurance that they will prove to be correct. Since forward?looking statements address future events and conditions, by their very nature they involve inherent risks and uncertainties. Actual results could differ materially from those currently anticipated due to a number of factors and risks. These include, but are not limited to, the failure to complete the proposed wells in a timely manner, the failure to obtain necessary regulatory approvals, risks associated with the oil and gas industry in general (e.g. 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 reserves estimates; the uncertainty of estimates and projections relating to production, costs and expenses; and health, safety and environmental risks), uncertainty as to the availability of labour and services, commodity price and exchange rate fluctuations, unexpected adverse weather conditions and changes to existing laws and regulations. Certain of these risks are set out in more detail in Marquee's current Annual Information Form, which is available on Marquee's SEDAR profile at www.sedar.com.
Forward?looking information is based on estimates and opinions of management of Marquee at the time the information is presented. Marquee may, as considered necessary in the circumstances, update or revise such forward?looking information, whether as a result of new information, future events or otherwise, but Marquee undertakes no obligation to update or revise any forward?looking information, except as required by applicable securities laws.
SOURCE Marquee Energy Ltd.
Contact
Adam Jenkins, VP Corporate Development, (403) 817-0964, Ajenkins@marquee-energy.com; Howard Bolinger, Executive VP & Chief Financial Officer, (403) 817-5568, Hbolinger@marquee-energy.com; or visit the Company's website at www.marquee-energy.com
