Spartan Exploration Ltd.
TSX : SPE

Spartan Exploration Ltd.

February 04, 2010 08:30 ET

Spartan Exploration Ltd. Provides Operations Update and Announces 2010 Capital Budget and Public Guidance

CALGARY, ALBERTA--(Marketwire - Feb. 4, 2010) - Spartan Exploration Ltd. ("Spartan" or the "Company") (TSX:SPE), is pleased to provide an operations update and to announce its capital and operating budget and associated public guidance for 2010.

Operations Update

Spartan recently drilled and completed a Bakken horizontal well (0.42 net) in southeast Saskatchewan at its Midale/Viewfield property. The well flowed at rates in excess of 500 bbls/day (210 bbls/day net) of oil on the initial completion test following a 12 stage water based frac. Management expects to produce the well at initial rates in excess of 200 bbls/day (84 bbls/day net) of oil. Spartan has 20 additional development drilling locations at its Midale/Viewfield property at an average working interest of 55 percent.

2010 Capital Budget

Spartan's Board of Directors has approved a capital budget for 2010. Key components of the budget include:

  • Capital investment of approximately $31 million. Approximately 80% ($25 million) of this amount will be spent on drilling and completions, with a further $2.6 million allocated to facilities and tie-in expenditures and $3.4 million to land, seismic and other expenditures. The program will be funded entirely by available cash on hand, cash flow and some debt. Based upon a capital budget of $31 million, Spartan is budgeting to exit 2010 with debt of approximately $4.7 million.
  • The drilling of up to 15 gross (11.7 net) wells targeting high quality light oil, including 8 (net) horizontal Cardium wells on our Pembina acreage; 5 (2.2 net) Bakken wells in southeast Saskatchewan and 2 (1.5 net) Shaunavon wells in southwest Saskatchewan. From a capital investment perspective, approximately 85% of our 2010 capital budget is allocated to the Company's Pembina area.
  • Spartan expects to spud its first Cardium horizontal well in early March.
  • Due to spring break-up and the time required to obtain necessary regulatory approvals for drilling horizontal wells in Alberta, approximately 85% of Spartan's 2010 capital budget will be invested during the second half of the year.
  • 2010 average production in excess of 650 boe/d (82% oil) and exit production, based on estimated production for the fourth quarter, in excess of 1,200 boe/d (81% oil).
  • For 2010, the Company used a WTI US $75.00 price for oil, AECO $5.50 for gas and an exchange rate of $0.95.
  • Operating costs are forecast at approximately $10.00 per boe (including transportation) and general and administrative costs will approximate $3.00 per boe. The average corporate royalty rate is estimated to be 15%.

Spartan has access to over 13.5 net sections in the Pembina area (owned and farmin) and has identified 57 net horizontal drilling locations on these lands. There has been a significant amount of recent activity in proximity to the Company's lands at West Pembina, with 17 horizontal Cardium wells currently either drilled or licensed offsetting Spartan's lands.

No capital has been budgeted for acquisitions, although the Company continues to evaluate new opportunities in the Bakken, the Lower Shaunavon and the Cardium.

Spartan Exploration Ltd.

Spartan, based in Calgary, Alberta, has been engaged in the business of acquiring crude oil and natural gas properties and exploring for, developing and producing oil and natural gas in western Canada since mid 2008. Spartan is uniquely positioned with a significant position in three leading oil resource plays in western Canada, being the Bakken light oil resource play in southeast Saskatchewan, the Lower Shaunavon medium gravity oil resource play in southwest Saskatchewan and the Cardium light oil play in central Alberta.

READER ADVISORY

This press release contains certain forward-looking statements (forecasts) under applicable securities laws relating to future events or future performance. Forward-looking statements are necessarily based upon assumptions and judgements with respect to the future including, but not limited to, the outlook for commodity markets and capital markets, the performance of producing wells and reservoirs, well development and operating performance, general economic and business conditions, weather, the regulatory and legal environment and other risks associated with oil and gas operations. In some cases, forward-looking statements can be identified by terminology such as "may", "will", "should", "expect", "projects", "plans", "anticipates" and similar expressions. These statements represent management's expectations or beliefs concerning, among other things, future operating results and various components thereof affecting the economic performance of Spartan. Undue reliance should not be placed on these forward-looking statements which are based upon management's assumptions and are subject to known and unknown risks and uncertainties, including the business risks discussed above, which may cause actual performance and financial results in future periods to differ materially from any projections of future performance or results expressed or implied by such forward-looking statements. Accordingly, readers are cautioned that events or circumstances could cause results to differ materially from those predicted.

In the interest of providing Spartan shareholders and potential investors with information regarding the Company, including management's assessment of Spartan's future plans and operation, certain statements throughout this press release constitute forward looking statements. All forward-looking statements are based on the Company's beliefs and assumptions based on information available at the time the assumption was made. The use of any of the words "anticipate", "continue", "estimate", "expect", "may", "will", "project", "should", "believe" and similar expressions are intended to identify forward looking statements. By its nature, such forward-looking 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 statements. Spartan believes the expectations reflected in those forward looking statements are reasonable but no assurance can be given that these expectations will prove to be correct and such forward looking statements contained throughout this press release should not be unduly relied upon. These statements speak only as of the date specified in the statements. 

In particular, this press release may contain forward looking statements pertaining to the following:

  • the performance characteristics of the Company's oil and natural gas properties;
  • oil and natural gas production levels;
  • capital expenditure programs;
  • the quantity of the Company's oil and natural gas reserves and anticipated future cash flows from such reserves;
  • projections of commodity prices and costs;
  • supply and demand for oil and natural gas;
  • expectations regarding the ability to raise capital and to continually add to reserves through acquisitions and development; and
  • treatment under governmental regulatory regimes.

The material assumptions in making these forward-looking statements include certain assumptions disclosed in the Company's most recent management's discussion and analysis included in the material available on this press release.

The Company's actual results could differ materially from those anticipated in the forward looking statements contained throughout this press release as a result of the material risk factors set forth below, and elsewhere in this press release:

  • volatility in market prices for oil and natural gas;
  • liabilities inherent in oil and natural gas operations;
  • uncertainties associated with estimating oil and natural gas reserves;
  • competition for, among other things, capital, acquisitions of reserves, undeveloped lands and skilled personnel;
  • incorrect assessments of the value of acquisitions and exploration and development programs;
  • geological, technical, drilling and processing problems;
  • fluctuations in foreign exchange or interest rates and stock market volatility;
  • failure to realize the anticipated benefits of acquisitions;
  • general business and market conditions; and
  • changes in income tax laws or changes in tax laws and incentive programs relating to the oil and gas industry.

These factors should not be construed as exhaustive. Unless required by law, Spartan does not undertake any obligation to publicly update or revise any forward looking statements, whether as a result of new information, future events or otherwise.

Barrels of oil equivalent (boe) may be misleading, particularly if used in isolation. A boe conversion ratio of six thousand cubic feet (mcf) of natural gas to one barrel (bbl) of oil is based on an energy conversion method primarily applicable at the burner tip and is not intended to represent a value equivalency at the wellhead. All boe conversions in this press release are derived by converting natural gas to oil in the ratio of six thousand cubic feet of natural gas to one barrel of oil. Certain financial amounts are presented on a per boe basis, such measurements may not be consistent with those used by other companies.

Readers are further cautioned that the preparation of financial statements in accordance with Canadian generally accepted accounting principles ("GAAP") requires management to make certain judgements and estimates that affect the reported amounts of assets, liabilities, revenues and expenses. Estimating reserves is also critical to several accounting estimates and requires judgments and decisions based upon available geological, geophysical, engineering and economic data. These estimates may change, having either a negative or positive effect on net earnings as further information becomes available, and as the economic environment changes.

Cash flow from operations and operating netbacks are not recognized measures under GAAP. Management of Spartan believe that in addition to net income, cash flow from operations and operating netbacks are useful supplemental measures as they demonstrate an ability to generate the cash necessary to repay debt or fund future growth through capital investment. Readers are cautioned, however, that these measures should not be construed as an alternative to net income determined in accordance with GAAP as an indication of Spartan's performance. Spartan's method of calculating these measures may differ from other companies and, accordingly, they may not be comparable to measures used by other companies. For these purposes, Spartan defines cash flow from operations as cash provided by operations before changes in non-cash operating working capital and defines operating netbacks as revenue less royalties and operating expenses.

Readers are also cautioned that this press release may contain the term reserve life index, which is not a recognized measure under GAAP. Management believes that this measure is a useful supplemental measure of the length of time the reserves would be produced over at the rate used in the calculation. Readers are cautioned, however, that this measure should not be construed as an alternative to other terms determined in accordance with GAAP as a measure of performance. The method of calculating this measure may differ from other companies, and accordingly, they may not be comparable to measures used by other companies.

Contact Information

  • Spartan Exploration Ltd.
    Richard F. McHardy
    President & CEO
    (403) 294-9196
    (403) 294-9126 (FAX)
    or
    Spartan Exploration Ltd.
    1000, 606 - 4th Street SW
    Calgary, Alberta