Cequence Energy provides operational update
CALGARY, Feb. 4, 2013 /CNW/ - Cequence Energy Ltd. ("Cequence" or the "Company") (TSX: CQE) is
pleased to provide the following operational update.
Montney, Simonette Area
Cequence's fall/winter drilling program includes four Montney wells at Simonette with initial results as
follows:
A 100 percent working interest well at 3-18-61-26W5 has tested for 2.5 days at a final flow rate of 12.9
mmcf/d of natural gas plus liquids at a flowing pressure of 1775 psi. The well is expected to be
producing into the Cequence gathering system by mid February 2013.
A 100 percent working interest horizontal well at 10-16-61-27-W5 has been on production for two
months and is currently producing 1.2 mmcf/d of natural gas and 40 bbls/d of free condensate. A 24
stage completion was planned for the 2,400 m horizontal wellbore. It is estimated that 15 stages were
completed successfully prior to a casing failure in the horizontal wellbore. Cequence believes that
current productivity is restricted by the failed casing. Cequence is reviewing alternatives to complete the
section of the horizontal wellbore that has not been stimulated.
A 100 percent working interest horizontal well at 8-21-61-26W5 was drilled to a total measured depth of
5,546 m. A 25 stage completion was planned for the 2500 m lateral section. Cequence successfully
executed two frac stages on the first day of the completion operation. The well was flowed back
overnight with promising initial test rates of approximately 4 mmcf/d at a pressure of 695 psi.
Subsequent frac stages 3 through 25 were compromised due to a downhole completion tool failure.
Completion operations were halted.
Cequence observed encouraging results from the two successful fracs and encountered high quality
reservoir and fast penetration rates while drilling. Based on management's evaluation of the
encouraging information of the first two fracs, the horizontal section of the wellbore is currently being
redrilled and is expected to be completed in February 2013.
An additional 100% working interest Montney horizontal well at 4-21-61-26W5 is expected to spud in
February and be completed before spring break up.
Dunvegan and Falher, Resthaven Area
Cequence is completing a Dunvegan horizontal well at 10-02-62-01W6. Initial completion results are
expected within the next week. Cequence is drilling a Falher horizontal well at 02-06-61-01W6 as a
follow up to the exploration success announced in September 2012. A 22 stage completion is planned
for February 2013. Both the Dunvegan and Falher wells are expected to be on production prior to the
end of March when the expansion of the Simonette field gathering system and compression station is
expected to be complete.
Both wells are part of a farm-in whereby Cequence pays 100 percent of the drill and complete costs to
earn a 65 percent working interest in the well and three sections of land. The Falher well is the third and
final earning well under this farm-in arrangement.
Wilrich, Ansell Area
Over the past two years Cequence has acquired 31 sections of 100% land in Ansell, Alberta. The primary
target zone is the Wilrich formation where significant discoveries have been recently announced by
other companies on adjacent lands.
Cequence completed a farmout agreement with an intermediate Canadian oil and gas company ("the
"Farmee") that will accelerate the development of this property (the "Farmout lands"). The Farmee has
committed to drill two horizontal wells targeting the Wilrich formation in the next 8 months. The
Farmee will pay 85% of the drilling, completion and tie-in capital to earn a 51% interest in three sections
of the Farmout Lands for each of the commitment wells. After the commitment wells are drilled, the
Farmee will have the continuing option to earn a 51% interest in the remaining 25 sections. The Farmee
will pay 85% of the drilling and completion capital to earn a 51% interest in 4 sections for each option
well drilled. For all Farmout Lands earned, the residual interest for Cequence will be 49%. The first
commitment well is currently drilling.
Guidance
Cequence provided updated 2012 guidance and first half 2013 guidance in November 2012. Based on
equipment availability and drilling performance, Cequence accelerated the drilling of the 10-02
Dunvegan well and the completion of the 8-21 well to the fourth quarter of 2012 from the first quarter
of 2013. As a result, net capital spending for 2012 is expected to increase to approximately $80 million
and year end net debt is expected to be approximately $48 million.
Cequence is in the process of redrilling the horizontal section of the 8-21 Montney well. This operation
is expected to increase first half 2013 capital spending by approximately $6 million. In addition,
Cequence intends to participate in a Wilrich well at Ansell in the first quarter and has adjusted the
winter drilling program to replace a 50% working interest Montney well with a 100% well. In total, first
half capital is expected to increase by $7 million to $49 million. Net debt at June 30, 2013 is forecast to
be $71 million.
Cequence has hedged approximately 40 percent of its 2013 natural gas production at an average price
of $3.62 per mcf ($3.12 per GJ).
Management provides the following updated guidance for the six months ending June 30, 2013:
Average production, BOE/d (1)
Capital expenditures ($)
Operating costs ($ per boe)
Royalties (% revenue)
Crude - WTI (US$/bbl)
Natural gas - AECO (Cdn$/GJ)
Funds flow from operations ($) (2)
Annualized funds flow from operations ($)
June 30, 2013 net debt and working capital deficiency ($) (3) (4)
Basic shares outstanding (4)
2013
10,000
$49 million
$6.75
8
$91.00
$3.00
$26 million
$52 million
$71 million
200.6 million
Notes:
(1) Comprised of 51.8 mmcf/d of natural gas and 1,370 boe/d of oil and liquids
(2) Funds flow from operations is calculated as cash flow from operating activities before adjustments for decommissioning liabilities
expenditures and net changes in non-cash working capital.
(3) Net debt and working capital (deficiency) is calculated as cash and net working capital less commodity contract assets and
liabilities and demand credit facilities and excluding other liabilities.
(4) Net debt and common shares outstanding has been adjusted from previous guidance to include the flow through financing closed
inDecember 2012.
A new corporate presentation is available at cequence-energy.com.
Cequence is a publicly traded Canadian energy company involved in the acquisition, exploitation,
exploration, development and production of natural gas and crude oil in western Canada. Further
information about Cequence may be found in its continuous disclosure documents filed with Canadian
securities regulators at www.sedar.com.
The press release includes test rate information that management used to form an initial opinion as to
the future productivity of a well. Test rates disclose herein are of a short duration are not necessarily
indicative of future performance.
Forward Looking Statements or Information
Certain statements included or incorporated by reference in this press release constitute forwardlooking statements or forward-looking information under applicable securities legislation. Such forwardlooking statements or information are 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, such as making investment decisions.
Forward-looking statements or information typically contain statements with words such as
"anticipate", "believe", "expect", "plan", "intend", "estimate", "propose", "project" or similar words
suggesting future outcomes or statements regarding an outlook. Forward-looking statements or
information concerning Cequence in this press release may include, but are not limited to, statements or
information with respect to: guidance and forecasts; capital spending; hedging objectives; business
strategy and objectives; drilling, development, exploration, operational acquisition and disposition plans
and the timing, associated costs and results thereof; future net debt and fundsflow; commodity pricing
and expected royalties; future production levels, including the composition thereof. Forward-looking
statements or information are based on a number of factors and assumptions which have been used to
develop such statements and information but which may prove to be incorrect. The Company believes
that the expectations reflected in such forward-looking statements or information are reasonable,
however, undue reliance should not be placed on forward-looking statements because the Company can
give no assurance that such expectations will prove to be correct. In addition to other factors and
assumptions which may be identified in this press release, assumptions have been made regarding,
among other things: the impact of increasing competition; the timely receipt of any required regulatory
approvals; the ability of the Company to obtain qualified staff, equipment and services in a timely and
cost efficient manner; the ability of the operator of the projects which the Company has an interest in to
operate the field in a safe, efficient and effective manner; the ability of the Company to obtain financing
on acceptable terms; field production rates and decline rates; the ability to replace and expand oil and
natural gas reserves through acquisition, development or exploration; the timing and costs of operating
the Company's business; and the ability of the Company to secure adequate product transportation;
future oil and natural gas prices; currency, exchange and interest rates; the regulatory framework
regarding royalties, taxes and environmental matters; and the ability of the Company to successfully
market its oil and natural gas products. Readers are cautioned that the foregoing list is not exhaustive of
all factors and assumptions which have been used.
Forward-looking statements or information are based on current expectations, estimates and
projections that involve a number of risks and uncertainties which could cause actual results to differ
materially from those anticipated by the Company and described in the forward-looking statements or
information. These risks and uncertainties may cause actual results to differ materially from the
forward-looking statements or information. The material risk factors affecting the Company and its
business are contained in the Company's Annual Information Form which is available at SEDAR at
www.sedar.com.
The forward-looking statements or information contained in this press release are made as of the date
hereof and the Company 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
required by applicable securities laws. The forward looking statements or information contained in this
press release are expressly qualified by this cautionary statement.
Additional Advisories
The press release contains references to terms commonly used in the oil and gas industry. Netback is
not defined by IFRS in Canada and is referred to as a non-GAAP measure. Netbacks equal total revenue
less royalties, operating costs and transportation costs. Management utilizes this measure to analyze
operating performance.
Funds flow from operations is a non-GAAP term that represents cash flow from operating activities
before adjustments for decommissioning liability expenditures and changes in working capital. The
Company evaluates its performance based on earnings and funds flow from operations. The Company
considers funds flow from operations to be a key measure as it demonstrates the Company's ability to
generate the cash flow necessary to fund future growth through capital investment and to repay debt.
The Company's calculation of funds flow from operations may not be comparable to that reported by
other companies. Funds flow from operations per share is calculated using the same weighted average
number of shares outstanding used in the calculation of income (loss) per share.
The foregoing outlook and guidance has been provided to assist readers in analyzing the Company's
anticipated development strategies and prospects and it may not be appropriate for other purposes and
actual results could differ from the guidance provided above. Cequence refers to initial production rates
which may not be indicative of long term well performance.
Boes are presented on the basis of one Boe for six Mcf of natural gas. Disclosure provided herein in
respect of Boes may be misleading, particularly if used in isolation. A Boe conversion ratio of 6 Mcf:1
Boe 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 crude oil as compared to natural gas is significantly different from the energy equivalency of 6:1,
utilizing a conversion on a 6:1 basis may be misleading as an indication of value.
SOURCE: Cequence Energy Ltd.
For further information:
Paul Wanklyn, Chief Executive Officer, (403) 218‐8850, [email protected]
David Gillis, Chief Financial Officer, (403) 806‐4041, [email protected]