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Altura Energy Inc. Announces Second Quarter 2018 Results, Operational Update and Two Leduc-Woodbend Light Oil Acquisitions


CALGARY, Alberta, Aug. 09, 2018 (GLOBE NEWSWIRE) — Altura Energy Inc. (“Altura” or the “Corporation”) (TSXV: ATU) is pleased to announce its financial and operating results for the three and six months ended June 30, 2018 and an operational update on its eight-well drilling program in the Corporation’s Upper Mannville oil play at Leduc-Woodbend (“LWB”).  In addition, the Corporation has closed an agreement (the “First Transaction”) to acquire highly prospective Upper Mannville lands at LWB including a 40 percent working interest (“WI”) in the LWB Glauconitic D Unit No.1 (the “Assets”) for $2.7 million and has signed an agreement with a second party (the “Second Transaction”) to purchase an additional 20 percent WI in the Assets for $1.1 million.

Operational and Financial Summary

  Three months ended Six months ended
June 30,
2018
March 31,
2018
June 30,
2017
June 30,
2018
June 30,
2017
Operating       
Average daily production      
Medium oil (Bbls/d) 271 408 652 339 595
Heavy oil (Bbls/d) 478 547 346 513 327
Natural gas ­(Mcf/d) 1,309 1,336 1,098 1,323 1,004
NGLs (Bbls/d) 23 37 25 30 20
Total (Boe/d) 991 1,215 1,205 1,102 1,110
Total Boe/d per million shares – diluted 9.0 11.1 11.0 10.0 10.2
Average realized prices
Medium oil ($/Bbl) 67.64 51.06 50.64 57.72 51.91
Heavy oil ($/Bbl) 58.83 45.58 44.90 51.80 45.35
Natural gas ($/Mcf) 1.32 2.14 3.03 1.74 3.00
NGLs ($/Bbl) 51.68 50.44 36.44 50.92 38.02
Total ($/Boe) 49.87 41.58 43.77 45.32 44.61
Netback ($/Boe)  
Petroleum and natural gas sales 49.87 41.58 43.77 45.32 44.61
Royalties (4.69 ) (4.54 ) (4.41 ) (4.60 ) (4.31 )
Operating (12.26 ) (11.01 ) (10.52 ) (11.58 ) (10.27 )
Transportation (1.70 ) (1.65 ) (2.55 ) (1.67 ) (2.36 )
Operating netback(1) 31.22 24.38 26.29 27.47 27.67
General and administrative (5.17 ) (4.05 ) (3.28 ) (4.56 ) (3.53 )
Interest and financing expense (0.88 ) (0.51 ) (0.27 ) (0.67 ) (0.18 )
Interest income 0.18 0.03 0.08 0.09
Corporate netback(1) 25.35 19.82 22.77 22.32 24.05
Financial ($000, except per share amounts)  
Petroleum and natural gas sales 4,497 4,547 4,800 9,044 8,965
Adjusted funds flow(1) 2,285 2,168 2,496 4,453 4,833
Per share – diluted(1) 0.02 0.02 0.02 0.04 0.04
Cash flow from operating activities 2,313 2,443 2,269 4,756 5,063
Per share – diluted 0.02 0.02 0.02 0.04 0.05
Net income 2,750 177 594 2,927 607
Per share – diluted 0.02 0.01 0.03 0.01
Capital expenditures 6,344 7,345 3,828 13,689 12,780
Property dispositions (27,712 ) (750 ) (27,712 ) (750 )
Net debt (working capital surplus)(1) (14,761 ) 8,561 1,156 (14,761 ) 1,156
Common shares outstanding (000)  
End of period – basic 108,921 108,921 108,921 108,921 108,921
Weighted average for the period – basic 108,921 108,921 108,921 108,921 108,921
Weighted average for the period – diluted 110,546 109,133 109,082 109,947 109,191

(1) Adjusted funds flow, adjusted funds flow per share, net debt, corporate netback, and operating netback do not have standardized meanings prescribed by generally accepted accounting principles and therefore should not be considered in isolation.  These reported amounts and their underlying calculations are not necessarily comparable or calculated in an identical manner to a similarly titled measure of other companies where similar terminology is used.  Where these measures are used they should be given careful consideration by the reader. Refer to the Non-GAAP Measures paragraph in this news release.

SECOND QUARTER 2018 HIGHLIGHTS

Corporate

  • Closed the sale of the Corporation’s east central Alberta and Saskatchewan assets (the “Disposition”) for $28.4 million ($27.7 million net of post-closing adjustments) on May 31, 2018.  The second quarter includes operational and financial contribution from the Disposition up to the closing date of May 31, 2018.
  • Corporate netback was $25.35 per Boe, up 11 percent from the second quarter of 2017 and up 28 percent from the first quarter of 2018.
  • Net income was $2.8 million, which includes a gain on disposition of assets of $2.2 million, net of deferred tax expense.
  • Ended the quarter with a $14.8 million working capital surplus and no debt.

Leduc-Woodbend

  • Production volumes averaged 521 Boe per day (75 percent oil and liquids), an increase of 42 percent from the second quarter of 2017.
  • Operating and transportation costs were $11.75 per Boe, down 17 percent from the second quarter of 2017.
  • Operating netback was $31.66 per Boe, up 46 percent from the second quarter of 2017 and up 18 percent from the first quarter of 2018.
  • The Corporation drilled two and completed one 1.5-mile extended reach horizontal (“ERH”) well of the eight-well summer drilling program.
  • Altura commenced the construction of its 3,000 to 3,500 barrel of oil per day multi-well oil battery which was completed and commissioned on-time and on-budget in late July.

OPERATIONAL UPDATE

Since acquiring its initial lands in 2015, the Corporation has accumulated a total of 69 net sections of land in the Upper Mannville oil pool in the LWB area. Altura commenced its eight-well summer drilling program on June 9, 2018.  Six of the eight wells are now drilled, bringing the total horizontal well count in this Upper Mannville oil pool to 11.  One well commenced production on July 15th and five wells are in various stages of completion and frac fluid clean-up.

Drilling operations for the eight-well program are expected to be under budget and completed by the end of August, approximately four weeks ahead of schedule.  The Corporation plans to bring the remaining seven wells on production throughout the third and fourth quarters of 2018.  Operational efficiencies continue to improve on this play as illustrated by the increased drilling rate shown in the following table.

  August 2017-
January 2018
June 2018-
July 2018
Percent
 Change
ERH wells drilled (#) 3 6
Average spud to rig release (days) 11.0 8.5 23% reduction
Drilling rate (meters/day) 320 439 37% increase

Performance of Altura’s first three ERH wells drilled in the August 2017 to January 2018 period are meeting management’s expectations.  The Corporation continues to optimize completion design and is conducting a pilot on two of the eight wells in the current program to evaluate further improvement in well productivity and reserves.  On the pilot wells, the Corporation intends to increase the frac density by reducing the frac spacing to 30 meters from 45 meters and reducing the per interval sand tonnage from 20 tonnes to 15 tonnes.  This will result in a 50 percent increase in the number of fracs and a 20 percent increase in the overall sand tonnage.  Management expects that this will increase initial production rates and reserves, and yield a higher rate of return than current well expectations.

Altura has also completed the construction of a multi-well oil battery at 12-14-049-26W4 on-time and on-budget and commissioned the battery on July 30th.  The battery has a processing capacity of approximately 3,000 to 3,500 barrels of oil per day and enables Altura to haul clean oil, providing additional sales terminal options to maximize pricing and reduced oil treating expenses associated with hauling emulsion.

ASSET ACQUISITIONS SUBSEQUENT TO QUARTER-END

First Transaction

The First Transaction was closed on July 31, 2018 for cash consideration of $2,725,000, subject to customary post-closing adjustments.  Altura acquired 2.6 net sections of highly prospective lands in the Upper Mannville oil pool at LWB and a 40 percent WI in the Assets with approximately 80 Boe/d net (90 percent oil & liquids) of operated, low decline, Glauconite light oil (33° API) production.

Second Transaction

A purchase and sale agreement for the Second Transaction was signed on July 24, 2018 for cash consideration of $1,050,000, subject to customary post-closing adjustments.  The effective date is July 1, 2018 and closing is expected to occur on December 1, 2018, subject to customary closing conditions.  The Corporation will acquire 0.4 net sections of highly prospective lands in the Upper Mannville oil pool at LWB and a 20 percent WI in the Assets with approximately 40 Boe/d net (90 percent oil & liquids) of low decline, Glauconite light oil (33° API) production.

Acquisitions Summary

The combination of the highly prospective lands from the two transactions and Altura’s existing lands in the associated drilling spacing units will add eight Upper Mannville ERH drilling opportunities.  Additionally, the Assets include significant infrastructure including a 3,000 barrel of oil per day multi-well battery, water injection facility and gathering pipelines.  This infrastructure is under utilized and can potentially be leveraged through Altura’s Upper Mannville development to lower operating costs for Altura and the Glauconitic D Unit No.1 owners.

The First Transaction and Second Transaction are aggregated and summarized as follows:

Combined purchase price $3,775,000
Upper Mannville ERH drilling opportunities added(1) (#) 8
Combined current production volumes(2) (Boe/d) 120
Current operating netback(3) ($/Boe) $22.70
Annualized operating income(4) $870,000
 
Metrics
$/flowing Boe per day(5) ($/Boe/d) $31,500
Cash flow multiple(4)(6) (times) 4.3

(1) When combined with Altura’s existing lands in the associated drilling spacing units.
(2) Current net production from the two transactions is estimated at 120 Boe/d based on field estimates.
(3) Current operating netback is based on Altura’s forecast WTI of US$65.00/bbl, an exchange rate of $0.77 USD/CAD and $1.90/GJ for natural gas.  Operating netback is a non-GAAP measure.  Refer to the Non-GAAP Measures section of this press release.
(4) Annualized operating income equals forecasted 12-month production volumes of 105 Boe/d times current operating netback times days in the year (105 Boe/d x $22.70/Boe x 365 days).
(5) $/flowing Boe per day equals combined purchase price divided by combined current production volumes ($3,775,000/120 Boe/d).
(6) Cash flow multiple equals combined purchase price divided by annualized operating income ($3,775,000/$870,000).

OUTLOOK

Altura’s guidance provided on May 15, 2018 outlined a 7.7 net ERH well summer drilling program with total 2018 capital expenditures of $33 million and a 2018 exit rate of 1,900 Boe per day.  The Corporation now expects to drill 8.0 net ERH wells in the summer program which will include testing higher frac density while maintaining capital expenditures at $33 million.  The increase in net wells drilled and increased costs associated with testing higher frac density is expected to be offset by decreased drilling costs per well.

Production from the drilling program and the two acquisitions is forecast to offset base declines and grow overall production to exit 2018 at a rate of approximately 2,000 Boe per day.  Capital expenditures are expected to be funded from cash on hand, cash flow from operating activities and Altura’s $3 million credit facility.

ABOUT ALTURA ENERGY INC.

Altura is a junior oil and gas exploration, development and production company with operations in central Alberta.  Altura predominantly produces from the Rex member in the Upper Mannville group and is focused on delivering per share growth and attractive shareholder returns through a combination of organic growth and strategic acquisitions.

An updated corporate presentation is available on Altura’s website at www.alturaenergy.ca.



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