Boulder Energy Ltd.

Boulder Energy Ltd.

November 10, 2015 20:50 ET

Boulder Energy Ltd. Announces 2015 Third Quarter Financial Results and Operational Update

CALGARY, ALBERTA--(Marketwired - Nov. 10, 2015) - BOULDER ENERGY LTD. ("Boulder" or the "Company") (TSX:BXO)(OTCQX:BLLDF) is pleased to release an operational update and its financial and operational results for the three and nine months ended September 30, 2015.


Since Boulder's inception in May of 2015, the Company has focused on creating a sustainable model in order to maximize returns in all commodity price environments, including the lower commodity price environment that the industry now faces. To achieve this, the Company has focused on:

  1. Mitigating overall corporate declines in order to minimize future maintenance capital requirements, including the implementation of an enhanced oil recovery ("EOR") scheme;
  2. Reducing well costs to maximize returns in a lower price environment;
  3. Avoiding over capitalization of its Brazeau Belly River property, a large original oil in place ("OOIP") asset including drilling fewer wells in a lower price environment;
  4. Implementing long term EOR initiatives to maximize oil recoveries;
  5. Continuing to advance the exploration initiatives in new sands and new areas that will create long term value when commodity prices recover; and
  6. Continuing to maintain a strong financial position.

The Company is pleased to report that these goals have either been met or advanced over the past six months, allowing Boulder the optionality in its future plans should commodity prices remain low.

Corporate Declines and Well Costs

One of Boulder's primary goals throughout 2015 has been to mitigate corporate declines. The Company has significantly reduced anticipated 2016 corporate declines to a rate of 30% from historical rates of over 40%. This has been achieved by controlling the pace of field development in 2015 and will continue in the future through pressure support and a strategy of gas injection continuing to stabilize well declines. This ensures future cash flow generation can meet or exceed maintenance capital requirements while continuing to strengthen the total decline profile on a corporate basis.

With estimated well costs of $3.5 million per well and associated capital efficiencies, Boulder believes that the current production capability of 7,000 boe/d would require maintenance capital of $30 - 35 million per year; a decrease of 65% from the $100 million of maintenance capital forecast at the beginning of 2015. Additional free cash flow generation over this maintenance capital will be used to pay down debt while focusing on creating value through EOR initiatives.

EOR Initiatives

Over the past four years, Boulder's team has been successful in defining and delineating a number of new productive zones in its Brazeau Belly River property. These new pool discoveries have shown to be arielly extensive and thick with large OOIP on a per section basis. The individual wells have exhibited conventional rock characteristics evidenced by their high productive capability. In these core areas, the Company is committed to maximizing future returns and ultimate recovery and, as such, will be implementing two gas re-injection EOR schemes in the coming months. The Company believes that these pools are ideal for gas reinjection because of the following characteristics:

  • High permeability rock (conventional reservoir)
  • Large OOIP per section (8-10 million barrels per section in the core)
  • Naturally under-pressured
  • Naturally occurring gas caps present
  • Large structural relief (50 meters of oil pay thickness)
  • Deep basin (no water)
  • Virgin pressure (new pool discoveries)
  • History of successful EOR schemes in vertical wells in the Basal C, F and Upper C zones by previous operators

Over the past few months, the Company has injected gas into two horizontal wells to test the injection capabilities of the rock, while storing gas to combat the TransCanada (TCPL) pipeline limitations which continue to persist. As a result of the favourable nature of the injection rate capability these wells have demonstrated, the Company is set to begin pilot operations into two wellbores into its prolific C and D pools that are considered to be ideal for EOR initiatives. Boulder's current technical team has experience in implementing a successful gas reinjection EOR project at a predecessor company and is excited about the potential for this project in Boulder's Brazeau Belly River property.

This crestal gas injection scheme will inject gas into two pre-existing gas caps in order to maintain overall pressure and voidage in the pool. As the Company already has ample gas compression capability in the field, the associated costs for both pilot projects is low at a total cost of approximately $1.5 million. Boulder anticipates that its first pilot injection well will be operational by the middle of December 2015 with the second injection well coming on in early 2016.

The C and D development pools have been defined by drilling and are estimated by Boulder to contain 156 million bbls of OOIP, with potential significant extensions yet to drill to increase these numbers even further. As the C and D development pools were both new pool discoveries, the total cumulative production to date is only 1.6% of the OOIP estimate with associated reserves booked at approximately 5.7%. With these low recovery factors to date, any success in the gas injection pilots could have material positive impacts on the Company's decline rates, reserves and ultimate recoveries as well as having field wide impacts on any subsequent future discoveries.

New Pools

Boulder controls a large land base with numerous development and exploration initiatives. In addition, the vast majority of its land base held by production. This allows the Company to manage the pace of development without having any negative impacts on the long term value of the asset. As such, the Company will continue to prudently deploy risk capital to these assets as oil prices allow. The Company expects that long term value creation for Boulder's shareholders will continue as a result of its large inventory of high impact exploration and step-out prospects on this large multi-zone light oil resource play. These prospects are defined by the numerous vertical well logs in the area and are part of the Belly River deep basin trend, making the Company confident in the presence of hydrocarbon.

The Company was successful in 2015 in defining a new development area in the C sand in Peco, which has been mapped to include a total of 10 sections and is estimated by Boulder to contain 50 million bbls undiscovered petroleum initially-in-place. This new development area will be a focus for development capital over the coming year.

Boulder's team was also successful in defining the presence of hydrocarbon in the upper B sand in the third quarter of 2015 through a recompletion of an existing well. The B sand was not evaluated by Sproule Associates Ltd. as part of its resource evaluation that was completed as of July 31, 2013 on Boulder's Brazeau Belly River assets (see Granite's news release of August 14, 2013). Although this particular well indicated the formation was filled with natural gas, the recompletion was completed at the top of a structure with numerous down dip oil opportunities present in a sand that is defined by vertical wellbores to be as thick as 16 meters and can be mapped over 12 sections. The Company will continue to de-risk this asset that is fully contained under its land base.


Boulder is still early in the exploration and development of its long life, high OOIP light oil resource play. Although the current oil price forecast presents temporary headwinds, the Company remains in a strong position with its high quality (44 to 45 degree API) light oil resource play and control of infrastructure, which provides significant cash flow even in this low price environment. The Company will continue to "right size" the business model to moderate declines and ensure that its maintenance capital can be financed through cash flow while keeping its financial position strong.

Boulder has control of a large land base with a large and well defined OOIP profile (estimated by Boulder to contain 880 million bbls OOIP and 468 million bbls undiscovered petroleum initially-in-place) that will provide many years of high return on capital. The team is excited about the EOR potential on the large conventional pools it has defined over the past four years that will have implications for the existing proved reserves. Besides the potential to significantly shallow declines, it also creates high impact EOR infill locations (40 additional locations @ 8 wells per section) once voidage replacement has been established through the gas injectors.

The Company will continue to optimize field operations and aggressively pursue gas injection pressure support, in turn improving its decline profile, while commodity prices recover. Boulder has drilled one well in the fourth quarter and will use remaining free cash flow to pay down debt, expecting to exit 2015 with net debt of approximately $139 million. Boulder will continue to focus on absolute returns as opposed to growth in the current commodity environment.


Financial and operational highlights for the interim period ended September 30, 2015 with comparative data for 2014 are set out below and should be read in conjunction with the financial statements and related management's discussion and analysis available for review at and

Three Months Ended
September 30,
Nine Months Ended
September 30,
2015 2014 Change 2015 2014 Change
(000s, except per share amounts) ($) ($) (%) ($) ($) (%)
Oil and natural gas revenues 29,152 50,711 (43 ) 94,323 136,165 (31 )
Funds from operations (1) 15,256 32,323 (53 ) 51,658 83,499 (38 )
Per share - basic 0.33 0.71 (54 ) 1.13 1.83 (38 )
Per share - diluted 0.33 0.71 (54 ) 1.13 1.83 (38 )
Cash flow from operating activities 8,472 37,477 (77 ) 43,501 87,720 (50 )
Net income (loss) (28,322 ) 11,692 (342 ) (28,184 ) 30,376 (193 )
Per share - basic (0.61 ) 0.26 (335 ) (0.61 ) 0.67 (193 )
Per share - diluted (0.61 ) 0.26 (335 ) (0.61 ) 0.67 (193 )
Capital expenditures (2) 26,721 62,503 (57 ) 71,432 151,818 (53 )
Net debt (3) 142,612 98,993 44 142,612 98,993 44
Shareholders' equity 231,435 246,595 (6 ) 231,435 246,595 (6 )
(000s) (# ) (# ) (% ) (# ) (# ) (% )
Share Data
At period-end 46,468 45,517 2 46,468 45,517 2
Weighted average - basic 46,447 45,517 2 45,831 45,517 1
Weighted average - diluted 46,447 45,517 2 45,831 45,517 1
Natural gas (mcf/d) 9,226 11,150 (17 ) 10,905 10,182 7
Crude oil (bbls/d) 5,215 4,975 5 5,374 4,276 26
NGLs (bbls/d) 221 582 (62 ) 324 479 (32 )
Total (boe/d) 6,974 7,415 (6 ) 7,516 6,452 16
Average wellhead prices
Natural gas ($/mcf) 3.10 4.38 (29 ) 2.91 5.12 (43 )
Crude oil and NGLs ($/bbl) 52.98 90.35 (41 ) 55.04 93.86 (41 )
Combined average ($/boe) 45.44 74.34 (39 ) 45.98 77.31 (41 )
Netbacks (1)
Operating netback ($/boe) 22.06 50.44 (56 ) 24.02 52.41 (54 )
Funds flow netback ($/boe) 23.77 47.38 (50 ) 25.24 47.41 (47 )
Gross (net) wells drilled
Gas (#) -- (-- ) -- ( -- ) -- (-- ) -- (-- ) 1 (1.0 ) -100 (-100 )
Oil (#) 4 (4.0 ) 7 (6.97 ) -43 (-43 ) 13 (13.0 ) 17 (16.97 ) -23 (-23 )
Standing (#) 2 (2.0 ) -- (-- ) -- (-- ) 2 (2.0 ) -- (-- ) -- (-- )
Total (#) 6 (6.0 ) 7 (6.97 ) -14 (-14 ) 15 (15.0 ) 18 (17.97 ) -17 (-17 )
Average working interest (%) 100 100 -- 100 100 --
(1) Funds from operations, funds from operations per share, operating netbacks and funds flow net back are not recognized measures under International Financial Reporting Standards (IFRS). Refer to the commentary below under "Reader Advisory - Non-GAAP Measurements" for further discussion.
(2) Total capital expenditures, including acquisitions and excluding non-cash transactions. Refer to commentary in the Management's Discussion and Analysis under "Capital Expenditures and Acquisitions" for further information.
(3) Net debt, which is calculated as current liabilities (excluding derivative financial instruments) and bank debt less current assets (excluding derivative financial instruments), is not a recognized measure under IFRS. Please refer to the commentary in this news release under "Reader Advisory - Non-GAAP Measurements" for further discussion.
(4) For a description of the boe conversion ratio, refer to the commentary below under "Reader Advisory - BOE Presentation".
  • Increased liquids production to 5,436 bbls/d in the third quarter, a 9% increase from 5,001 bbls/d in the second quarter of 2015.
  • Generated funds flow from operations of $15.2 million ($0.33/share) in the third quarter of 2015, driven by funds flow netbacks of $23.77/boe.
  • Reduced G&A costs by 17% to $1.67/boe when compared $2.02/boe in the second quarter of 2015. Subsequent to quarter end, the Company has implemented additional cost saving measures related to G&A including a 10% salary decrease to all staff (in addition to the management salary cuts implemented in the spring).
  • Continued to average drilling and completion costs of $3.5 million per well, down from $4.5 million per well, through the use of monobore drilling.
  • Continue to have 2,000 bbls/d of oil production hedged for the remainder of 2015 at approximately US$60.00.
  • Continued to inject approximately 500 boe/d of gas throughout the third quarter as part of a gas re-injection and storage scheme. These volumes are subject to regular operating costs but are not considered in the Company's production volumes for the period as they are not sold - the all-in operating costs for the period including these injected volumes would be $9.88/boe.
  • Maintained balance sheet strength with debt to cash flow of 2.34x.
  • Reported a net loss of $28.3 million for the quarter, which included a $42.8 million pre-tax impairment charge resulting from lower than forecasted commodity prices at September 30, 2015. This non-cash charge does not impact the Company's funds flow from operations. Under IFRS, these impairment charges can be reversed in future periods if commodity prices recover.
  • Spent $26.7 million on capital expenditures in the quarter to complete 3 (3.0) prior period drills, drill and complete 4 (4.0) wells and drill 2 (2.0) wells which were then completed subsequent to the quarter end.
  • As part of the normal process, Boulder is currently working with lenders through the course of a semi-annual review of its syndicated revolving credit facility. The semi-annual review is to be completed by November 30, 2015, after which time the Company will provide an update along with its guidance for 2016.
  • Issued 485,000 flow-through shares at a price of $9.55 per flow-through share and 466,000 flow-through shares at a price of $11.25 per flow-through share for total gross proceeds of $9.87 million through private placement on July 2, 2015.

Reader Advisory

Forward-Looking Statements. Certain statements contained in this press release may constitute forward-looking statements. These statements relate to future events or Boulder's future performance. All statements other than statements of historical fact may be forward-looking statements. Forward-looking statements are often, but not always, identified by the use of words such as "seek", "anticipate", "plan", "continue", "estimate", "expect", "may", "will", "project", "predict", "potential", "targeting", "intend", "could", "might", "should", "believe" and similar expressions. These statements involve 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. Boulder believes that 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 included in this press release should not be unduly relied upon by investors. These statements speak only as of the date of this press release and are expressly qualified, in their entirety, by this cautionary statement.

In particular, this press release contains forward-looking statements, pertaining to the following: future cash flow meeting or exceeding required maintenance capital, estimated new well costs and capital efficiencies, maintenance capital, plans regarding future gas re-injection EOR schemes, how the Company expects to deploy risk capital and de-risk its assets, its operations, drilling plans, estimates of OOIP and undiscovered petroleum initially-in-place and expected exit 2015 net debt.

With respect to forward-looking statements contained in this press release related to Boulder's business and operations, Boulder has made assumptions regarding, among other things: the legislative and regulatory environments of the jurisdictions where Boulder carries on business or has operations, the impact of increasing competition, and Boulder's ability to obtain additional financing on satisfactory terms.

Boulder's actual results could differ materially from those anticipated in these forward-looking statements as a result of risk factors that may include, but are not limited to: volatility in the market prices for oil and natural gas; uncertainties associated with estimating reserves; uncertainties associated with Boulder's ability to obtain additional financing on satisfactory terms; geological, technical, drilling and processing problems; liabilities and risks, including environmental liabilities and risks, inherent in oil and natural gas operations; incorrect assessments of the value of acquisitions; competition for, among other things, capital, acquisitions of reserves, undeveloped lands and skilled personnel.

This forward-looking information represents Boulder's views as of the date of this document and such information should not be relied upon as representing its views as of any date subsequent to the date of this document. Boulder has attempted to identify important factors that could cause actual results, performance or achievements to vary from those current expectations or estimates expressed or implied by the forward-looking information. However, there may be other factors that cause results, performance or achievements not to be as expected or estimated and that could cause actual results, performance or achievements to differ materially from current expectations. There can be no assurance that forward-looking information will prove to be accurate, as results and future events could differ materially from those expected or estimated in such statements. Accordingly, readers should not place undue reliance on forward-looking information. . Except as required by law, the Company undertakes no obligation to publicly update or revise any forward-looking statements.

Non-GAAP Measurements. This news release contains the terms "funds from operations" and "funds from operations per share", which should not be considered an alternative to or more meaningful than cash flow from (used in) operating activities as determined in accordance with IFRS. These terms do not have any standardized meaning under IFRS. Boulder's determination of funds from operations and funds from operations per share may not be comparable to that reported by other companies. Management uses funds from operations to analyze operating performance and leverage, and considers funds from operations to be a key measure as it demonstrates the Company's ability to generate cash necessary to fund future capital investments and to repay debt, if applicable. Funds from operations is calculated using cash flow from operating activities as presented in the statement of cash flows, before changes in non-cash working capital. Boulder presents funds from operations per share whereby per share amounts are calculated using weighted-average shares outstanding, consistent with the calculation of earnings per share.

The Company considers corporate netbacks to be a key measure as they demonstrate Boulder's profitability relative to current commodity prices. Corporate netbacks are comprised of operating and funds flow netbacks. Operating netback is calculated as the average sales price of the Company's commodities, less royalties, operating costs and transportation expenses. Funds flow netback starts with the operating netback and further deducts general and administrative costs, finance expense and unrealized gains on financial instruments, and then adds any finance income and realized gains on financial instruments, if applicable. No IFRS measure is reasonably comparable to netbacks. See "Non-GAAP Measurements - Funds from Operations" in the Company's management's discussion and analysis for the interim period ended September 30, 2015 filed on for the netback calculations.

Net debt, which represent current assets less current liabilities, excluding current derivative financial instruments, is used to assess efficiency, liquidity and the Company's general financial strength. No IFRS measure is reasonably comparable to net debt.

BOE Presentation. References herein to "boe" mean barrels of oil equivalent derived by converting gas to oil in the ratio of six thousand cubic feet (Mcf) of gas to one barrel (bbl) of oil. Boe may be misleading, particularly if used in isolation. A boe conversion ratio of 6 Mcf: 1 bbl is based on an energy conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.

Original Oil in Place (OOIP). OOIP is the equivalent to Discovered Petroleum Initially In Place (DPIIP) for the purposes of this press release. DPIIP is defined as quantity of hydrocarbons that are estimated to be in place within a known accumulation, plus those estimated quantities in accumulations yet to be discovered. There is no certainty that it will be commercially viable to produce any portion of the resources. A recovery project cannot be defined for this volume of DPIIP at this time, and as such it cannot be further sub-categorized. The OOIP estimates included in this press release have an effective date of September 30, 2015.

Undiscovered Petroleum Initially-In-Place. There is no certainty that any portion of the undiscovered petroleum initially-in-place identified in this press release will be discovered. If discovered, there is no certainty that it will be commercially viable to produce any portion of the resources. The undiscovered petroleum initially-in-place estimates included in this press release have an effective date of September 30, 2015.

Contact Information

  • Boulder Energy Ltd.
    Martin Cheyne
    (403) 263-9130

    Boulder Energy Ltd.
    Clayton Thatcher
    (403) 263-6426