CDN NEWS | 
US NEWS 
FOR: CREW ENERGY INC.
TSX SYMBOL: CR
Date issue: May 08, 2017
Time in: 5:50 PM e
Attention:
CALGARY, ALBERTA--(Marketwired - May 8, 2017) - Crew Energy Inc. (TSX:CR) ("Crew" or the "Company") is pleased to announce our operating and financial results for the three month period ended March 31, 2017, along with an updated independent Montney Resource Evaluation. Our Financial Statements and Notes, as well as Management's Discussion and Analysis ("MD&A") for the three month period ended March 31, 2017 are available on Crew's website and filed on SEDAR.
Q1 HIGHLIGHTS
/T/
-- Production for the quarter averaged 23,231 boe per day, 4% higher than
the previous quarter primarily attributable to an 8% increase in liquids-rich natural gas production from northeast British Columbia ("NE BC").-- Funds from operations totaled $27.7 million in the first quarter, more
than double the same period in 2016, and increased 125% on a per share basis to $0.18 per share from $0.08 per share in Q1 2016.-- Benchmark prices increased for all products resulting in stronger
revenues, while our continued focus on cost control contributed to operating netbacks that averaged $17.16 per boe compared to $9.13 per boe in the first quarter of 2016.-- At our liquids-rich Septimus and West Septimus ("Greater Septimus")
area, operating costs were 25% lower than Q1 2016 at $3.34 per boe while transportation costs were 24% lower at $1.67 per boe, contributing to an operating netback of $19.41 per boe.-- Crew closed a $300 million senior debt financing in March, 2017 and
exited the quarter undrawn on our re-confirmed $235 million bank credit facility, affording the Company ample financial flexibility to execute on our longer-term, Montney-focused development strategy.-- In NE BC, drilled 11 wells and completed five wells, and at
Lloydminster, drilled four wells and completed two wells, and currently have an inventory of 20 drilled and uncompleted wells, 18 of which are in Greater Septimus and Groundbirch.-- Continued the advancement of Crew's Montney development plan with site
work on the West Septimus facility expansion to 120 mmcf per day and the acquisition of 10 contiguous sections of surface rights that will accommodate the planned Groundbirch facility and the drilling of a minimum of 150 wells.-- Subsequent to the end of the quarter, we entered into an Agreement of
Purchase and Sale for the disposition of non-core assets in the Goose area of NE BC comprised of approximately 18,400 net acres of undeveloped land with no production or assigned reserves for $49 million (subject to certain closing adjustments and costs). The transaction is expected to close prior to the end of the second quarter, subject to customary closing conditions.-- Updated Crew's independent Montney Resource Evaluation which reflected a
2% increase to the risked Best Estimate Economic Contingent Resource ("ECR") assessment to 9.2 TCFE and a modest increase to the Total Petroleum Initially In Place ("TPIIP") estimate to 112.2 TCFE (prior to the Goose disposition). Continued annual increases in our resource estimate demonstrates the value in Crew's ongoing Montney-focused drilling and development strategy to realize significant long-term value through reserves additions from this massive resource.FINANCIAL & OPERATING HIGHLIGHTS:
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Three months Three months FINANCIAL ended ended ($ thousands, except per share amounts) March 31, 2017 March 31, 2016 --------------------------------------------------------------------------- Petroleum and natural gas sales 57,298 36,343 Funds from operations(1) 27,719 11,714 Per share - basic 0.19 0.08 - diluted 0.18 0.08 Net income /(loss) 8,056 (6,795) Per share - basic 0.05 (0.05) - diluted 0.05 (0.05)Exploration and Development expenditures 75,164 17,763 Property acquisitions (net of dispositions) (352) 956 ------------------------------- Net capital expenditures 74,812 18,719
--------------------------------------------------------------------------- --------------------------------------------------------------------------- Capital Structure As at As at ($ thousands) March 31, 2017 Dec. 31, 2016 --------------------------------------------------------------------------- Working capital deficiency(2) 8,588 10,006 Bank loan - 88,036 ------------------------------- 8,588 98,042 Senior Unsecured Notes 293,046 147,329 ------------------------------- Total Net Debt 301,634 245,371 Current Debt Capacity(3) 535,000 385,000 Common Shares Outstanding (thousands) 147,127 146,812 --------------------------------------------------------------------------- --------------------------------------------------------------------------- Notes: (1) Funds from operations is calculated as cash provided by operating activities, adding the change in non-cash working capital, decommissioning obligation expenditures and accretion of deferred financing costs. Funds from operations is used to analyze the Company's operating performance and leverage. Funds from operations does not have a standardized measure prescribed by International Financial Reporting Standards and therefore may not be comparable with the calculations of similar measures for other companies. See "Non- IFRS Measures" contained within Crew's MD&A. (2) Working capital deficiency includes cash and cash equivalents plus accounts receivable less accounts payable and accrued liabilities. (3) Current Debt Capacity reflects the newly approved bank facility of $235 million plus $300 million in senior unsecured notes outstanding.
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Three months Three months ended ended Operations March 31, 2017 March 31, 2016 ---------------------------------------------------------------------------- Daily production Light crude oil (bbl/d) 530 303 Heavy crude oil (bbl/d) 1,857 2,799 Natural gas liquids (bbl/d) 3,363 3,359 Natural gas (mcf/d) 104,887 104,224 -------------------------------- Total (boe/d @ 6:1) 23,231 23,832 Average prices (1) Light crude oil ($/bbl) 59.74 37.34 Heavy crude oil ($/bbl) 42.93 20.45 Natural gas liquids ($/bbl) 45.71 25.95 Natural gas ($/mcf) 3.54 2.34 Oil equivalent ($/boe) 27.40 16.76 ---------------------------------------------------------------------------- Notes: (1) Average prices are before deduction of transportation costs and do not include gains and losses on financial instruments.--------------------------------------------------------------------------- ---------------------------------------------------------------------------
Three months Three months ended ended March 31, 2017 March 31, 2016 --------------------------------------------------------------------------- Netback ($/boe) Revenue 27.40 16.76 Realized commodity hedging gain/(loss) (0.39) 2.21 Royalties (2.18) (0.88) Operating costs (5.38) (6.45) Transportation costs (2.29) (2.51) ------------------------------- Operating netback (1) 17.16 9.13 G&A (1.50) (1.76) Interest on long-term debt (2.41) (1.98) ------------------------------- Funds from operations 13.25 5.39Drilling Activity
Gross wells 15 4 Working interest wells 15.0 4.0 Success rate, net wells (%) 93% 100% --------------------------------------------------------------------------- --------------------------------------------------------------------------- Notes: (1) Operating netback equals petroleum and natural gas sales including realized hedging gains and losses on commodity contracts less royalties, operating costs and transportation costs calculated on a boe basis. Operating netback and funds from operations netback do not have a standardized measure prescribed by International Financial Reporting Standards and therefore may not be comparable with the calculations of similar measures for other companies. See "Non-IFRS Measures" contained within Crew's MD&A./T/
OVERVIEW
During the first three months of 2017, activity levels increased across the Western Canadian Sedimentary Basin in response to frozen ground conditions and an improved commodity price environment. This resulted in a tight supply-demand dynamic for field services, particularly reservoir stimulation. Crew was able to complete five of a planned ten wells in the quarter and as a result underspent our forecasted first quarter budget by deferring these operations until after spring break up. Our production of 23,231 boe per day was at the lower end of our guidance range for the quarter and is reflective of these service delays. Work on the expansion of our West Septimus facility to double throughput capacity continued in the quarter, and is currently ahead of schedule, with commissioning of the expanded facility currently planned for the fourth quarter of 2017.
We continued to move forward on Crew's long term growth plan by successfully closing a $300 million senior note financing, which has a 6.5% coupon and a term through March, 2024. This financing has positioned Crew with $535 million of total credit capacity and enhances our ability to manage through continued commodity price volatility for an extended period. Upon the closing of this financing, we repaid the balance on our $235 million credit facility, resulting in an undrawn bank facility, and after the end of the quarter, the credit facility was approved for extension at the same level. Subsequent to quarter end, we entered into an agreement to dispose of our non-core Goose property in NE BC for proceeds of approximately $49 million. Upon closing, which is expected prior to the end of the second quarter, we will have monetized a portion of our asset base that was not within Crew's long-term development horizon.
MONTNEY RESOURCE EVALUATION UPDATE
Crew is pleased to report the results of its annual updated independent Montney resource evaluation conducted by Sproule Associates Ltd. ("Sproule") on our principal NE BC Montney lands including Septimus, West Septimus, Groundbirch / Monias, Attachie and Tower as well as other minor NE BC Montney lands, effective December 31, 2016 (the "Resource Evaluation"). Sproule performed detailed mapping across the evaluated areas which included section by section estimates of reservoir parameters, such as pressure, temperature, porosity, and water saturation, which make up the TPIIP determination. At 112.2 TCFE, Crew's TPIIP estimate provides the Company with significant opportunities to continue increasing the current ECR estimates plus add reserves with further drilling. Crew's risked best estimate ECR on natural gas increased 3% to 7.7 Tcf, natural gas liquids ("ngl") risked best estimate ECR was 1% higher at 227 million barrels, while our crude oil risked best estimate ECR decreased by 2 million bbls to 21 million bbls. All numbers referenced from the Resource Evaluation are prior to the pending disposition of Crew's Goose asset.
The updated Resource Evaluation demonstrates the significant potential of our lands, offering multiple years of future running room and significant value creation opportunities. Although the play remains in its early stages of development, with new and enhanced drilling and completions techniques, Crew and other area operators continue to further delineate and de-risk the potential of this massive play and demonstrate results from the Montney that continue to improve.
FINANCIAL
Crew's first quarter funds from operations of $27.7 million was consistent with the previous quarter but 137% higher than the first quarter of 2016, reflecting stronger year over year commodity prices, and operating and transportation costs that were 17% and 9% lower, respectively. We continue to see compelling returns from Greater Septimus, where our first quarter operating netback from the area was $19.41 per boe compared to $17.16 per boe corporately, reflecting the strong economics and returns generated in our core Montney operating areas.
Crew's realized light oil price improved by 60% in the first quarter of 2017 over the first quarter of 2016, while our heavy oil price increased 110% and our ngl prices were 76% higher than the same period in 2016. Improved first quarter oil and ngl prices were the result of improved world oil prices prompted by OPEC's (Organization of Petroleum Exporting Countries) decision to limit production in the first half of 2017 in order to reduce global inventories. This action stabilized world oil prices late in 2016 resulting in a 50% improvement in Crew's Canadian dollar denominated WTI benchmark price. Higher oil prices also supported stronger demand and pricing for the condensate, propane and butane that make up Crew's ngl mix. Crew's realized natural gas price increased 51% over Q1 of 2016 as a result of stronger North American natural gas prices. Natural gas prices were supported by lower supply related to reduced capital investment and lower inventories resulting from warmer 2016 summer weather, liquefied natural gas exports from the U.S. gulf coast and increased U.S. exports to Mexico.
First quarter 2017 capital expenditures totaled $75 million which included the drilling of eleven Montney wells and four heavy oil wells. Operations during the quarter also included the completion of five Montney wells and two heavy oil wells. Drilling and completion expenditures for the quarter were $10 million lower than budgeted as a lack of available completion services restricted the first quarter program to five of a planned ten Montney completions. During the quarter we also continued with the expansion of our West Septimus facility from 60 mmcf per day to 120 mmcf per day. Major equipment fabrication was ahead of schedule resulting in $14.1 million charged to the expansion which represents an additional $5 million of capital accrual towards the project in the quarter.
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