CALGARY,
May 8, 2014 /CNW/ - Athabasca Oil
Corporation (TSX: ATH) ("Athabasca" or "the Company") is pleased to
report its first quarter 2014 financial and operating results.
First quarter highlights:
- produced an average of 6,299 barrels of oil equivalent per day
("boe/d") with 47% liquids, in line with guidance of 6,000 to 6,500
boe/d;
- obtained initial results from two Duvernay wells, one well was brought on stream
with an established 30-day restricted rate of approximately 750
boe/d with a free condensate yield of 475 barrels per million cubic
feet ("bbl/mmcf") and a second well was tested over a four day
period with an average restricted rate of 1,400 boe/d with 284
bbl/mmcf (condensate) during the last 24 hours of the test;
- reached 80% completion on Hangingstone Project 1, Athabasca's 12,000 barrel per day ("bbl/d")
steam assisted gravity drainage ("SAGD") project;
- capital expenditures totaled $241
million including $77 million
in Light Oil and $158 million in
Thermal Oil.
Subsequent to the quarter, Athabasca received Alberta Environment's
approval of the Dover Commercial Project ("DCP") under the
Alberta Environment Protection and Enhancement Act.
Athabasca then exercised its
option to divest its 40% interest in the DCP on April 17, 2014 for cash consideration of
$1.32 billion gross, approximately
$1.23 billion net of closing
adjustments.
"This is an important milestone for Athabasca," says Sveinung Svarte, President
and CEO. "We have a high quality asset base and are now positioned
for profitable growth. Our focus remains on achieving first oil
from Hangingstone Project 1 and growing our Duvernay production."
Athabasca also
continues to enhance its liquidity position and on May 7, 2014, the Company entered into new credit
facilities providing for approximately $425
million of committed funding.
Athabasca has
filed its financial statements and management's discussion and
analysis for the three months ended March
31, 2014. These documents are available on the Company's
website www.atha.com and later this morning from SEDAR
www.sedar.com.
Operations Update
Light Oil
Athabasca's light oil production
averaged 6,299 boe/d with 47% liquids in the first quarter of 2014,
a 5% increase compared to 6,024 boe/d in the first quarter of 2013.
The Company recognized a netback of $36.95/boe in the first quarter of 2014 compared
to $33.27/boe in the first quarter of
2013 primarily due to higher commodity prices.
In the first quarter of 2014, Light Oil capital
expenditures totaled $77 million.
Athabasca continues to focus on
its Duvernay drilling program with
a goal of delineating and maintaining its high-graded land position
in the Kaybob region. Athabasca
drilled two and successfully completed four horizontal Duvernay wells in the quarter. The four
Duvernay wells were completed
using multi-stage fracturing techniques with all stages
successfully placed in each well.
At Kaybob West, one of the Duvernay wells at 1-7-64-20W5 was brought on
stream near the end of the first quarter. Average production for
this well in the first 30 days was approximately 750 boe/d (560
bbl/d of condensate, 1.2 mmcf/d of gas) with a free condensate
yield of 475 bbl/mmcf. This well has been flowing at a restricted
rate with a flowing pressure at the end of the 30 day period of
2,300 pounds per square inch ("psi"). Two additional wells located
at Kaybob West were successfully completed and were put on a
planned three month soak period. These wells will be tested
following the soak period and are expected on stream in July. The
Company's 2-34-62-20W5 well remains one of the top performing wells
in the play with cumulative production to date of 270 Mboe (57%
liquids).
At Simonette, a well located at 1-25-62-25W5 was
tested over a four day period after initial clean-up. During the
final 24 hours of the test period, this well was flowing at an
average rate of 1,400 boe/d (880 bbl/d of condensate, 3.1 mmcf/d of
gas) with a free condensate yield of 284 bbl/mmcf. This well was
flowing at a restricted rate with a flowing pressure of
approximately 5,400 psi at the end of the test period. This well is
expected on stream mid-May through a third party facility and the
Company remains encouraged by preliminary test data, reservoir
pressure and offsetting industry activity.
In total, Athabasca has now drilled eight horizontal
Duvernay wells across the fairway,
with four wells on production at the end of the first quarter of
2014. These wells are within Athabasca's material land positions. The
Company currently holds 350,000 net acres of potential liquids-rich
Duvernay land, including 200,000
net acres which contain greater than 20 meters of shale pay and lie
in the heart of the Kaybob Duvernay fairway. Athabasca's Duvernay well costs continue to trend in line
with its budget ranging from $15 to $19
million per well to drill and complete on single well pads
including vertical strat and core work. As the play transitions
from appraisal to development, the Company expects costs to reduce
with pad drilling and completion refinements.
Athabasca also
completed and tied-in two Montney
wells in the first quarter of 2014 and continues the optimization
of existing Montney wells.
Athabasca's drilling to date has
extended 95% of the Montney lands
to the intermediate term.
Additionally, the Company initiated the
installation of a pipeline connecting Athabasca's Kaybob West facility to SemCAMS'
KA gas plant. This pipeline will allow the Company's facilities to
be connected to two large midstream plants thereby increasing
options for processing of Athabasca's production. Construction of the
pipeline is expected to be complete during the second quarter of
2014 and the cost of the pipeline is being borne by third parties
with Athabasca retaining a 10%
working interest.
Thermal Oil
In the first quarter of 2014, Thermal Oil capital expenditures
totaled $158 million including
$153 million on Hangingstone and
$5 million on Thermal Oil exploration
areas. This excludes $4 million of
capital expenditures associated with the Company's 40% interest in
the DCP.
Athabasca made
significant progress in its development of Hangingstone Project 1
including infrastructure and facilities construction. Substantial
progress was also made in drilling and completion of the SAGD wells
and all 25 producer laterals and 25 injector laterals have now been
drilled. The drilling program has delivered better than expected
cost and schedule performance and the reservoir quality is
consistent with expected results derived from Athabasca's extensive appraisal drilling and
reservoir modeling. The project was 80% complete at March 31, 2014 and approximately 90% of total
costs have now been contracted. Construction of Hangingstone
Project 1 is anticipated to be complete around year end 2014, with
first steam targeted towards the end of the first quarter 2015.
Credit Facility Refinancing
On May 7, 2014
Athabasca entered into new credit facilities providing for
approximately $425 million of
committed funding. The new credit facilities replace the Company's
existing $350 million credit facility
which had a maturity date of December 31,
2014.
The credit facilities consist of a US$225 million senior secured first lien term
loan maturing May 7, 2019 as well as
an additional US$50 million senior
secured first lien term loan from which Athabasca may draw at its option at any time
up until May 7, 2016, subject to
compliance with covenants. The maturity of the term loans will be
accelerated to May 19, 2017 if the
Company has not redeemed or refinanced its $550 million of senior secured second lien notes
prior to this date. The term loans bear interest at LIBOR plus
7.25%, with a LIBOR floor of 1.0%.
Concurrent with the term loans, Athabasca has also entered into an amended and
restated credit agreement with a syndicate of financial
institutions providing for a $125
million senior secured first lien revolver that matures on
May 7, 2017, and may be extended
annually.
The new term loan and revolving credit
facilities provide Athabasca with
a longer term source of committed financing as well as a more
flexible covenant structure than under its previous credit
facility.
Outlook
Updated 2014 Guidance
Athabasca's Board of Directors has
approved a $29 million increase to
its base 2014 capital budget of $480
million. The increase is allocated as follows:
- Light Oil - $15 million primarily
for long lead equipment and drilling commitments required in the
second quarter to support an expanded Duvernay drilling program in the second half
of the year once proceeds from the sale of the DCP are received.
The Light Oil budget now stands at $121
million.
- Thermal Oil - $6 million
primarily to advance preliminary engineering work for a future
Hangingstone Expansion. The Thermal Oil budget now stands at
$354 million.
- Corporate - $8 million for
leasehold improvements and other capital costs associated with
Athabasca's office relocation
which will be largely completed in late 2014. The total Corporate
budget now stands at $14
million.
Athabasca's
revised capital budget includes $20
million for the Dover Joint Venture, which remains
unchanged. The Company's total 2014 capital budget is now
$509 million, excluding approximately
$50 million of anticipated
capitalized general and administrative expenses.
Athabasca
reconfirms its second quarter production guidance range of 5,500 to
6,000 boe/d. This production range includes the impact of Keyera's
Simonette plant shut-down that occurred in April 2014.
Mid-year Strategy Update
Upon receipt of the Dover put option proceeds, affirmation of the
productivity of Athabasca's new
Duvernay wells and confirmation of
its Duvernay development strategy,
Athabasca expects to provide an
updated 2014 capital budget early in the third quarter of 2014.
Athabasca will
continue to evaluate additional funding sources, including joint
ventures, to advance the development of its portfolio of Light Oil
and Thermal Oil opportunities. Athabasca remains committed to a disciplined
approach to growth and will only sanction development of projects
that are fully funded.
Updated 2014 Corporate Presentation
An updated presentation has been posted on the Company's website at
www.atha.com.
Conference Call, May
8, 2014
7:30 am Mountain Time
(9:30 am Eastern Time)
A conference call to discuss the first quarter
will be held for the investment community and media on May 8, 2014 at 7:30 a.m.
MT (9:30 a.m. ET). To
participate, please dial 888-231-8191 (toll-free in North America) or 647-427-7450 approximately
15 minutes prior to the conference call. An archived recording of
the call will be available from approximately 2:30 p.m. ET on May
8 until midnight on May 15,
2014 by dialing 855-859-2056 (toll-free in North America) or 416-849-0833 and entering
conference password 31148024.
An audio webcast of the conference call will also be available
on Athabasca's website,
www.atha.com or the following link below:
http://www.newswire.ca/en/webcast/detail/1339343/1480583.
Athabasca's
Annual General and Special Meeting of Shareholders will be held the
same day in Calgary at the Calgary
Marriott Downtown Hotel, Acadia Room A and B, 110 - 9th Avenue SE
at 10:00 am MT. Thomas Buchanan, Chairman of the Board, will
conduct the business of the meeting and Sveinung Svarte, President
and CEO, will provide an overview of 2013 and discuss the Company's
future outlook.
To view the video-stream webcast and presentation slides please
visit Athabasca's website,
www.atha.com or the link below:
http://event.on24.com/r.htm?e=753687&s=1&k=3DD31FEB6EB5179691952D2CDEF730E4.
About Athabasca Oil Corporation
Athabasca Oil Corporation is a dynamic, Canadian energy company
with a diverse portfolio of thermal and light oil assets. Situated
in Alberta's Western Canadian
Sedimentary Basin, the Company has amassed a significant land base
of extensive, high quality resources. Athabasca's common shares trade on the TSX
under the symbol "ATH". For more information, visit
www.atha.com.
Reader Advisory:
This News Release contains forward-looking
information that involves various risks, uncertainties and other
factors. All information other than statements of historical fact
is forward-looking information. The use of any of the words
"anticipate," "plan," "continue," "estimate," "expect," "may,"
"will," "project," "should," "believe," "predict," "pursue" and
"potential" and similar expressions are intended to identify
forward-looking information. The forward-looking information is not
historical fact, but rather is based on the Company's current
plans, objectives, goals, strategies, estimates, assumptions and
projections about the Company's industry, business and future
financial results. This information involves known and unknown
risks, uncertainties and other factors that may cause actual
results or events to differ materially from those anticipated in
such forward-looking information. No assurance can be given that
these expectations will prove to be correct and such
forward-looking information included in this News Release should
not be unduly relied upon. This information speaks only as of the
date of this News Release. In particular, this News Release may
contain forward-looking information pertaining to the following:
the timing of the completion of the construction of Hangingstone
Project 1 and of first steam for Hangingstone Project 1; expected
production from the light oil division in second quarter of 2014;
the receipt of sale proceeds from the sale of the Company's Dover
interests; the Company's drilling plans, in particular, with
respect to the Duvernay and
Montney formations; the Company's
plans for, and results of, exploration and development activities;
the Company's estimated future commitments; the Company's business
and financing plans; the Company's business and financing
strategies; the timing of the completion of construction of the
pipeline connecting the Company's Kaybob West facility to SemCAM's
KA gas plant and the result expected therefrom; expectations
regarding the review and revision of the 2014 capital budget; the
evaluation of funding sources, potential joint ventures and the
future allocation of capital.
With respect to forward-looking information
contained in this News Release, assumptions have been made
regarding, among other things: future capital expenditures to be
made by the Company; future sources of funding for the Company's
capital programs; the Company's future debt levels; the geography
of the areas in which the Company is conducting exploration and
development activities; the Company's ability to obtain equipment
in a timely and cost-efficient manner; the regulatory framework
governing royalties, taxes and environmental matters in the
jurisdictions in which the Company conducts and will conduct its
business; the impact that the agreements relating to the PetroChina
transaction (the "PetroChina Transaction Agreements") will have on
the Company, including on the Company's financial condition and
results of operations.
Actual results could differ materially from
those anticipated in this forward-looking information as a result
of the risk factors set forth in the Company's Annual Information
Form dated March 18, 2014 that is
available on SEDAR at www.sedar.com including, but not limited to:
the substantial capital requirements of Athabasca's projects and the ability to obtain
financing for Athabasca's capital
requirements; the potential for adverse consequences in the event
that Athabasca defaults under
certain of the PetroChina Transaction Agreements; failure by
counterparties (including, without limitation, PetroChina
International and Phoenix Energy
Holdings Limited ("Phoenix")) to make payments or perform their
operational or other obligations to Athabasca in compliance with the terms of
contractual arrangements between Athabasca and such counterparties, including
in compliance with the time schedules set out in such contractual
arrangements, and the possible consequences thereof; failure to
meet the conditions precedent to the closing of the Dover put
transaction; risks arising from future joint venture activities;
risk of failing to complete a joint venture arrangement; aboriginal
claims; fluctuations in market prices for crude oil, natural gas
and bitumen blend; general economic, market and business conditions
in Canada, the United States and globally; failure to
obtain regulatory approvals or maintain compliance with regulatory
requirements; dependence on Phoenix as the joint venture participant in
the Dover Oil Sands Project, until such time as Athabasca's interests in the Dover assets have
been sold to Phoenix; failure to
meet development schedules and potential cost overruns; variations
in foreign exchange and interest rates; factors affecting potential
profitability; risks related to future acquisition and joint
venture activities; reliance on, competition for, loss of, and
failure to attract key personnel; global financial uncertainty;
uncertainties inherent in estimating quantities of reserves and
resources; changes to Athabasca's
status given the current stage of development; uncertainties
inherent in SAGD and other bitumen recovery processes; risks
related to hydraulic fracturing; expiration of leases and permits;
risks inherent in Athabasca's
operations, including those related to exploration, development and
production of petroleum, natural gas and oil sands reserves and
resources; risks related to gathering and processing facilities and
pipeline systems; availability of drilling and related equipment
and limitations on access to Athabasca's assets; increases in costs could
make Athabasca's projects
uneconomic; the effect of diluent and natural gas supply
constraints and increases in the costs thereof; environmental risks
and hazards; failure to accurately estimate abandonment and
reclamation costs; the potential for management estimates and
assumptions to be inaccurate; long term reliance on third parties;
reliance on third party infrastructure; seasonality; hedging risks;
risks associated with maintaining systems of internal controls;
insurance risks; claims made in respect of Athabasca's operations, properties or assets;
competition for, among other things, capital, export pipeline
capacity and skilled personnel; the failure of Athabasca or the holder of certain licenses,
leases or permits to meet specific requirements of such licenses,
leases or permits; risks related to the Athabasca's amended credit facilities; senior
secured notes and term loans; and risks related to the Athabasca's common shares.
The forward-looking statements included in this
News Release are expressly qualified by this cautionary statement.
Athabasca does not undertake any
obligation to publicly update or revise any forward-looking
statements except as required by applicable securities laws.
Oil and Gas Information:
"BOEs" may be misleading, particularly if used in isolation.
A BOE conversion ratio of six thousand cubic feet of natural gas to
one barrel of oil equivalent (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. As
the value ratio between natural gas and crude oil based on the
current prices of natural gas and crude oil 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.
Test Results and Initial Production Rates:
The well test results and initial production rates provided in this
News Release should be considered to be preliminary. Test results
and initial production rates disclosed herein may not necessarily
be indicative of long term performance or of ultimate recovery.
SOURCE Athabasca Oil Corporation