DeeThree Exploration Ltd.

DeeThree Exploration Ltd.

November 14, 2012 08:00 ET

DeeThree Announces Third Quarter Results and Approaches Year End Exit Rate of 6,000 boe/d

CALGARY, ALBERTA--(Marketwire - Nov. 14, 2012) -


DeeThree Exploration Ltd. ("DeeThree" or the "Company") (TSX:DTX) (OTCQX:DTHRF) is pleased to announce its financial and operational results for the three and nine months ended September 30, 2012. DeeThree continued to deliver impressive financial and operating results during the three months ended September 30, 2012.

Company Highlights:
  • Production over the past two weeks averaged 5,750 boe/d (71% oil and NGLs) based on field estimates with an additional 7.0 (6.9 net) wells to be brought on-stream prior to year end.
  • The Company achieved record production for the third quarter averaging 4,692 boe/d (68% oil and NGLs and 32% natural gas), an increase of 120% over the same quarter of 2011 and a 23% increase over the second quarter of 2012.
  • Increased oil and NGL production to 3,212 bbls/d, a 315% increase over the same period last year and a 36% increase over the previous quarter.
  • Funds flow from operations grew to $14.3 million, representing a 276% increase from the third quarter of 2011 and a 45% improvement from the second quarter of 2012.
  • Funds from operations on a per share basis increased to $0.21, up 250% from the same quarter last year and 40% from the previous quarter of this year.
  • Decreased operating costs to $9.83/boe from $15.26/boe in the same quarter last year and $10.95/boe last quarter.
  • Increased operating netback to $35.18/boe from $22.36/boe in the same quarter last year and $30.86/boe in the second quarter of 2012,an increase of 57% and 14%, respectively.
  • Invested $33.2 million in capital expenditures which included the drilling of 5 (5.0 net) wells, achieving 100% success rate.
  • Finalized the new credit facility with a syndicate of two new banks for $90 million, an increase of $30 million.
  • Exited the quarter with total net debt of $70.0 million. This represents a debt to annualized cash flow ratio of 1.2:1.
Three Months Ended
September 30,
Nine Months Ended
September 30,
2012 2011 Change 2012 2011 Change
(000s, except per share amounts) ($ ) ($ ) ( %) ($ ) ($ ) ( %)
Oil and natural gas revenues 24,020 9,440 154 56,734 20,874 172
Funds from operations (1) 14,265 3,795 276 29,858 7,739 286
Per share - basic 0.21 0.06 250 0.45 0.14 221
Per share - diluted 0.20 0.06 233 0.42 0.14 200
Cash flow from operating activities 12,555 8,910 41 31,315 6,346 393
Net income (loss) 1,294 (353 ) 467 3,698 (3,243 ) 214
Per share - basic 0.02 (0.01 ) 300 0.06 (0.06 ) 200
Per share - diluted 0.02 (0.01 ) 300 0.05 (0.06 ) 183
Capital expenditures (2) 33,205 25,009 33 99,619 167,028 (40 )
Working capital deficit (3) 69,698 3,356 1,977 69,698 3,356 1,977
Shareholders' equity 187,308 176,346 6 187,308 176,346 6
(000s) (# ) (# ) ( %) (# ) (# ) ( %)
Share Data
At period-end 67,036 63,152 6 67,036 63,152 6
Weighted average - basic 66,995 63,064 6 65,772 54,134 22
Weighted average - diluted 72,792 63,064 15 70,591 54,134 30
(000s, except per share amounts) ($ ) ($ ) ( %) ($ ) ($ ) ( %)
Natural gas (mcf/d) 8,883 8,167 9 8,743 6,724 30
Crude oil (bbls/d) 2,953 597 395 2,123 427 397
NGLs (bbls/d) 259 177 46 269 129 109
Total (boe/d) 4,692 2,135 120 3,849 1,677 130
Average wellhead prices
Natural gas ($/mcf) 2.38 3.82 (38 ) 2.20 3.82 (42 )
Crude oil and NGLs ($/bbl) 74.62 91.49 (18 ) 78.36 90.90 (14 )
Total ($/boe) 55.65 48.05 16 53.79 45.59 18
Operating netback ($/boe) 35.18 22.36 57 30.98 23.76 30
Funds flow netback ($/boe) 32.98 19.21 72 28.23 16.84 68
( %) ( %)
Gross (net) wells drilled
Oil (#) 5 (5.0 ) 3 (2.8 ) 67 (79 ) 20 (18.9 ) 7 (6.8 ) 186 (178 )
Standing (#) -- 5 (3.8 ) -- 2 (2.0 ) 5 (3.8 ) -60 (-47 )
Dry and abandoned (#) -- 1 (1.0 ) -- -- 1 (1.0 ) --
Total (#) 5 (5.0 ) 9 (7.6 ) -44 (-34 ) 22 (20.9 ) 13 (11.6 ) 69 (80 )
Average working interest (%) 100 84 19 95 89 7
(1) Funds from operations and funds from operations per share are not recognized measures under International Financial Reporting Standards ("IFRS"). Refer to the commentary in the Management's Discussion and Analysis under the heading "Non-IFRS 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 the heading "Capital Expenditures and Acquisitions" for further information.
(3) Current assets less current liabilities, excluding current derivative financial instruments.
(4) For a description of the boe conversion ratio, refer to the commentary in the Management's Discussion and Analysis under the heading "Other Measurements".

Operational update

Continued success in the Company's Alberta Bakken and Belly River light oil resource plays has driven another quarter of substantial production growth. Subsequent to quarter end, the Company tied in and brought on-stream 3.0 (3.0 net) wells. Production over the past two weeks averaged 5,750 boe/d (71% oil and NGLs) based on field estimates with an additional 7.0 (6.9 net) wells to be brought on-stream prior to year end. The Company is currently operating one drilling rig in each core area and is presently drilling the Company's sixteenth Alberta Bakken and eighth Belly River wells of 2012 substantially completing our planned capital drilling program.


The Company had a very active third quarter drilling program on its Ferguson Alberta Bakken property drilling 5.0 gross (5.0 net) wells. The quarter was highlighted by two wells testing 1,025 bbl/d and 743 bbl/d over a ten and nine day test, respectively with these two wells to come on-stream shortly. The Company is pleased to report that initial production and well declines continue to perform substantially better than the type curve used for internal budgeting purposes being an initial production rate of 300 boe/d with a 65% first year decline rate. The following chart illustrates the results of our Bakken drilling program to date and the initial production ("IP") rates versus our internally generated type curve. These results are based on hours on production and include sales from initial flow tests.

IP (# of days) DeeThree wells 300 bbl/d type curve # of wells
30 424 300 8
60 367 287 7
90 348 275 6

The Company has continued to evaluate the historical production and decline curves from its previously drilled wells to determine optimum drill and complete techniques. Early production results indicate that longer horizontal legs exhibit the following characteristics: higher flow rates, higher initial production and flatter decline curves. The Company plans to integrate these findings on a go forward development basis. We are pleased to report that drilling and completion costs have continued to trend downward throughout the year with three of the past four one mile long lateral wells costing approximately $3.0 million.

Belly River

DeeThree did not operate a drilling rig on its Belly River light oil property in the third quarter as it focused on drilling and delineating its Alberta Bakken play. Currently the Company has one drilling rig operating in the area drilling its second well of a planned two well fourth quarter program. This fourth quarter drilling program plans to test the fourth distinct sand in this multi-zone play before year end. The Company looks forward to updating these results in the future.


Subsequent to the quarter end, the Company successfully closed an equity issue raising net proceeds of approximately $21 million. With the completion of a significant increase to our credit facility and an equity financing in recent weeks, the Company is well positioned to deliver strong growth throughout the final quarter of 2012 and beyond. The Company intends to increase its 2012 capital budget by approximately $30 million to $140 million in total. By year end, the Company will have drilled 16.0 gross (16.0 net) Bakken wells, 8 gross (7.5 net) Belly River wells, 4.0 gross (4.0 net) Sunburst wells and one gross (0.3 net) non-operated well in the Rycroft area. The Company remains on target to reach its exit guidance of 6,000 boe/d by year end. We look forward to reporting the results of our final quarter of 2012.

Please see the latest corporate presentation at

Reader Advisory

Forward-Looking Statements. Certain statements contained in this press release may constitute forward-looking statements. These statements relate to future events or the DeeThree'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. DeeThree 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: projections of market prices and costs, supply and demand for oil and natural gas, the quantity of reserves, oil and natural gas production levels, capital expenditure programs, treatment under governmental regulatory and taxation regimes, expectations regarding DeeThree's ability to raise capital and to continually add to reserves through acquisitions and development, and projections of market prices and costs.

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

DeeThree'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 DeeThree'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 DeeThree'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. DeeThree 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.

Test Rates. Test rates are not necessarily indicative of long-term performance or of ultimate recovery. Neither a pressure transient analysis nor a well-test interpretation has been carried out and the data should be considered to be preliminary until such analysis or interpretation has been done.

Non-IFRS Measurements. This news release contains the terms "funds from other operations" and "funds from operations per share", which should not be considered an alternative to or more meaningful than cash flow from operating activities as determined in accordance with IFRS or previous GAAP. These terms do not have any standardized meaning as prescribed by IFRS or previous GAAP. DeeThree'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. 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 and settlement of retirement costs. DeeThree 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.

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.

This new release shall not constitute an offer to sell or the solicitation of an offer to buy any securities in any jurisdiction.

We seek Safe Harbor.

Contact Information

  • DeeThree Exploration Ltd.
    Martin Cheyne
    President and Chief Executive Officer
    (403) 263-9130