CALGARY, ALBERTA — (Marketwire) — 08/08/12 — Guide Exploration Ltd. (TSX: GO) (“Guide” or the “Corporation”) announces the financial results for the quarter ended June 30, 2012.
The unaudited consolidated financial statements of the Corporation for the periods ended June 30, 2012 and 2011 and the related management–s discussion and analysis can be accessed on-line on SEDAR at or on the Corporation–s website at .
Highlights
2012 Second Quarter Update
Average daily production for Q2 2012 was 15,044 BOE/day, 28% higher than the average production of 11,755 BOE/d in Q2 2011. This included 5,127 barrels per day of oil and NGLs (34% liquids weighting) in Q2 2012, as compared to 3,712 barrels per day of oil and NGLs in Q2 2011.
Natural gas production in Q2 2012 increased to 59.5 Mmcf per day from the 48.3 Mmcf per day produced in Q2 2011, reflecting the Boyer natural gas acquisition.
Q2 2012 production volumes by product increased over Q2 2011 as follows: light oil production by 54%, heavy oil production by 3%, natural gas liquids production by 9% and natural gas production by 23%.
In the second quarter of 2012, Guide drilled a total of 6.8 net oil wells (100% success rate), of which 5.8 net wells were drilled for Montney oil at Normandville to access capacity at the recently upgraded Normandville oil facility.
At Normandville, Guide successfully completed two horizontal Montney oil wells with 35 stage multi-frac treatments (increased from 20 stages). The two wells are currently on production and being evaluated.
During the remainder of 2012, Guide plans to drill up to an additional 20 wells (20 net) including 13 wells (13 net) planned in the Normandville/Girouxville Montney fairway. Construction of a 5,000 barrels per day capacity oil facility at Girouxville is currently underway, with startup expected in the fourth quarter of 2012.
During June 2012, Guide disposed of its Sawn properties for net proceeds of $15.6 million. Included in this disposition was the sale of approximately 200 Bbls/d which impacted Q2 2012 production, particularly with respect to light oil.
Work is continuing on our Duvernay prospect near Grande Prairie, Alberta. We anticipate spudding this well in the third quarter of 2012.
Prices realized in Q2 2012 were lower for all products than those realized in Q2 2011. Light oil prices decreased by 25%, heavy oil prices decreased by 21%, NGL prices decreased by 20%, and the average price received for natural gas decreased by 51%.
During the three months ended June 30, 2012 crude oil differentials continued to be wide and volatile. The average light oil price received by Guide was approximately $13.00/Bbl lower than the posted Edmonton light oil price. By comparison, during Q2 2011, the average light oil prices received by the Corporation were approximately $8.00/Bbl lower than the posted Edmonton light oil price. Heavy crude differentials were effectively flat at $25.00/Bbl in Q2 2012 as compared to $27.00/Bbl in Q2 2011.
Guide–s policy to hedge a portion of its crude oil and natural gas production impacted funds flow in Q2 2012. For natural gas, Guide–s financial contracts increased the average realized price by $1.78/Mcf from $2.00/Mcf to $3.78/Mcf. Guide–s crude oil hedges decreased the average realized price by $1.17/Bbl from $69.31 to $68.14 per barrel.
Subsequent to June 30, 2012 the Corporation entered into two additional financial derivative contracts for natural gas. These were a fixed price of CDN$3.50/GJ on 5,000 GJ/d for calendar year 2013, and a call swaption for calendar year 2014 on 10,000 GJ/d at a price of CDN$4.00/GJ.
Crude Oil Prices
Natural Gas Prices
NGL Prices
Production by Property
(1) Boyer was acquired on January 31, 2012.
Operations Update
Peace Area – Includes Normandville, Girouxville, and Eaglesham
Peace Area production averaged 3,525 Bbl/d of oil and NGLs in the second quarter of 2012. This represents an increase of 73% in average daily oil and NGL production from 2,036 Bbl/d in the second quarter of 2011. During the same period, natural gas production decreased 15% from 26.9 Mmcf/d to 22.9 Mmcf/d.
During the second quarter of 2012, 7 (6.8 net) wells were drilled in the Peace area, 6 (5.8 net) of these wells were horizontal Montney oil wells drilled at Normandville to access capacity in Guide–s recently upgraded oil facility in this field.
Up to a total of 13 (13.0 net) oil wells are planned in the Normandville/Girouxville Montney fairway during the remainder of the year. Construction of a 5,000 barrels per day capacity oil facility at Girouxville is underway, with startup expected early in the fourth quarter of 2012. This facility will allow Guide to expand development within this portion of the Montney oil fairway.
Boyer Area
The Boyer shallow gas property, acquired in the first quarter of 2012, continues to meet both Guide–s internal production forecast as well as the forecast provided by the independent engineering firm commissioned by Guide to evaluate this asset at December 31, 2011.
As previously disclosed, this independent evaluator determined that the reserves attributable to the property were approximately 67.5 Bcf of proven gross natural gas reserves and 85.0 Bcf of proven plus probable gross natural gas reserves, as of December 31, 2011.
This strategic acquisition provides Guide with a low decline dry gas property that can be further developed when gas prices recover.
Capital Expenditures
Capital expenditures during the three months ended June 30, 2012 were $34.7 million. Drilling and completions expenditures comprised 46% of capital activity. The Corporation drilled 7 (6.8 net) oil wells during the quarter. The Corporation also spent $10.2 million on land during the second quarter of 2012.
During June 2012, the Corporation disposed of properties in the Sawn area of Alberta for net proceeds of $15.6 million, resulting in a gain on disposal of $12.6 million.
Liquidity and Capital Resources
(1) Excludes fair value of financial derivatives and other liability
(2) See “Non-GAAP Measurements”
Funding of Capital Program
(1) See “Non-GAAP Measurements”
(1) See “Non-GAAP Measurements”
During the quarter ended June 30, 2012, under the Normal Course Issuer Bid, the Corporation purchased 1,854,200 common shares for $3,694,000. All of the shares purchased were cancelled prior to June 30, 2012.
As at June 30, 2012, the Corporation had $250 million in credit facilities available, consisting of a $225 million extendible 366 day revolving term facility to May 28, 2013, and a $25 million non-revolving facility. The $25 million facility is available subject to mutual approval of the banking syndicate and the Corporation, including repayment terms. Collateral for the facilities consists of a demand debenture for $500 million collateralized by a first floating charge over all of the property, plant and equipment of the Corporation. At June 30, 2012, an amount of $198.7 million was drawn against the revolving credit facility (December 31, 2011 – $138.2 million).
Guide has approximately 102.2 million Common shares issued and outstanding which trade on the Toronto Stock Exchange under the symbol “GO”.
ADVISORIES
Forward Looking Statements:
Certain information regarding Guide in this news release including management–s assessment of future plans and operations, drilling plans, and facility construction plans and the timing and effect thereof, and anticipated spud dates of wells are forward looking statements. Since forward-looking statements address future events and conditions, by their very nature they involve inherent risks and uncertainties including, without limitation, risks associated with oil and gas exploration, development, exploitation, production, marketing and transportation, loss of markets, volatility of commodity prices, currency fluctuations, imprecision of reserve estimates, environmental risks, competition from other producers, inability to retain drilling rigs and other services, capital expenditure costs, including drilling, completion and facilities costs, unexpected decline rates in wells, wells not performing as expected, delays resulting from or inability to obtain required regulatory approvals and ability to access sufficient capital from internal and external sources. As a consequence, actual results may differ materially from those anticipated in the forward-looking statements.
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. Although the Corporation believes that the expectations reflected in such forward-looking statements or information are reasonable, undue reliance should not be placed on forward-looking statements because the Corporation 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 document, assumptions have been made regarding, among other things: the impact of increasing competition; the general stability of the economic and political environment in which the Corporation operates; the timely receipt of any required regulatory approvals; the ability of the Corporation 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 and exploration results; the timing and costs of pipeline, storage and facility construction and expansion and the ability of the Corporation 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 in the jurisdictions in which the Corporation operates; and the ability of the Corporation to successfully market its oil and natural gas products. Readers are cautioned that the foregoing list of factors and assumptions is not exhaustive. Additional information on these and other factors that could affect Guide–s operations and financial results are included in reports on file with Canadian securities regulatory authorities and may be accessed through the SEDAR website (), at Guide–s website (). Furthermore, the forward looking statements contained in this news release are made as at the date of this news release and Guide does not undertake any obligation to update publicly or to revise any of the included forward looking statements, whether as a result of new information, future events or otherwise, except as may be required by applicable securities laws.
Non-GAAP Measurements:
This news release contains terms commonly used in the oil and gas industry, such as funds flow from operations, funds flow from operations per share, and operating netback. These terms are not defined by Generally Accepted Accounting Principles (“GAAP”) and should not be considered an alternative to, or more meaningful than, cash provided by operating activities or net earnings as determined in accordance with GAAP as an indicator of Guide–s performance. Management believes that in addition to net earnings, funds flow from operations is a useful financial measurement which assists in demonstrating the Corporation–s ability to fund capital expenditures necessary for future growth or to repay debt. Guide–s determination of funds flow from operations may not be comparable to that reported by other companies. All references to funds flow from operations throughout this news release are based on cash flow from operating activities before changes in non-cash working capital and abandonment expenditures. The Corporation calculates funds flow from operations per share by dividing funds flow from operations by the weighted average number of Class A shares outstanding. Guide uses the term net debt. This measure does not have any standardized meaning prescribed by GAAP and therefore may not be comparable to similar measures presented by other companies.
BOES:
Disclosure provided herein in respect of barrels of oil equivalent (boe) may be misleading, particularly if used in isolation. A boe conversion ratio of 6 Mcf: 1 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 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.
Contacts:
Guide Exploration Ltd.
William E. Andrew
Chair, Chief Executive Officer
(403) 261-6012
Guide Exploration Ltd.
Dale A. Miller
President
(403) 261-6012
Guide Exploration Ltd.
Jennifer Livingston
Manager, Investor Relations
(403) 261-6012