DeeThree Exploration Ltd.

DeeThree Exploration Ltd.

November 09, 2011 19:14 ET

DeeThree Exploration Ltd. Announces 2011 Third Quarter Results

CALGARY, ALBERTA--(Marketwire - Nov. 9, 2011) -

Not for distribution to U.S. news wire services or dissemination in the United States

DeeThree Exploration Ltd. ("DeeThree" or the "Company") (TSX:DTX) is pleased to announce its financial and operational results for the three and nine months ended September 30, 2011 as follows.

The three-month period ending September 30, 2011 was the most active quarter operationally in DeeThree Exploration Ltd.'s four-year history. Highlights for the period include:

  • Drilling 9 gross (7.6 net) wells for an 89% success rate.

  • Averaging 2,135 boe/d production (64% natural gas, 36% crude oil and NGLs) and exiting the quarter at 2,800 boe/d (58% natural gas, 42% crude oil and NGLs).

  • Generating funds from operations of $3.8 million or $0.06 per share.

  • Investing $25.0 million in capital expenditures.

  • Maintaining a strong financial position with net debt of $3.5 million at September 30, 2011 on a bank line of $20.0 million.

Operational Review

Third quarter production was essentially flat, averaging 2,135 boe/d versus 2,167 boe/d in the second quarter. July production was adversely affected by a ten-day shut-in of 90 boe/d due to a pipeline curtailment on the TransCanada Pipeline system and a two-day shut-in of 350 boe/d due to a third party plant turnaround. During the three-month period, DeeThree embarked on an aggressive drilling program that focused entirely on oil projects and included 9 gross (7.6 net) wells with initial production from these wells not realized until the latter part of the quarter. As a result, the exit rate at September 30 rose to approximately 2,800 boe/d.

Quarter-over-quarter operating costs increased to $15.26/boe from $10.73/boe due primarily to adjustments relating to the Brazeau/West Pembina and Peace River Arch area assets that were acquired late in the first quarter. Operating costs for the nine months ended September 30, 2011 averaged $12.61/boe, which was in line with corporate expectations. We are actively looking for ways to reduce operating costs on our newly acquired properties.

During the three-month period, DeeThree invested $25.0 million in capital activities primarily in the Brazeau and Lethbridge areas. This represented 44% of our planned 2011 capital expenditure budget, which was increased by $15.0 million to $57.0 million (released September 28, 2011).

In the Lethbridge area of southern Alberta, the Company drilled two follow up horizontal oil wells to its previously announced Sunburst discovery. We expect to have these two wells on-stream in the coming weeks. We are extremely pleased with the results of this play to date, which have exceeded expectations. DeeThree has an extensive land base of approximately 100 sections on the Sunburst play with 3-D seismic coverage. Numerous follow up locations have been identified and the Company is actively licencing a number of wells in the area. Horizontal technology is showing significant promise in reviving this decades-old oil play with large oil in place numbers. The Company will continue to explore the Alberta Bakken throughout the final quarter of 2011 with its joint venture partners. Drilling operations are currently underway on the first well on the northern joint venture and one additional joint venture well is planned prior to year-end with results expected in the first quarter of 2012.

In the Brazeau area of west central Alberta, the Company is actively drilling its third well in the Belly River light oil resource play and anticipates keeping one rig active in the area for the remainder of the year. We have successfully increased area production by 30% to a current rate of 1,200 boe/d since acquiring this property in March 2011.

We are also pleased to announce a successful Montney horizontal oil well in the Peace River Arch area of northern Alberta. The well is currently producing at 300 boe/d (50% crude oil and NGLs). We are satisfied with the results of this well, and consequently, have plans for a vertical offset well to be tested by year-end.


The recent drilling successes in the Brazeau and Lethbridge areas have opened up significantly more opportunities for the Company, and as a result, DeeThree now expects to drill a total of 20 gross (17.8 net) wells in 2011 that includes 13 gross (11.2 net) wells in the Lethbridge area, 4 gross (3.6 net) wells in the Brazeau area and 3 gross (3.0 net) wells in the Peace River Arch area. The Company's balance sheet remains strong with projected net debt at December 31, 2011 of approximately $13.0 million. DeeThree's lender approved an increase to the Company's credit facility to $40.0 million during the first quarter of 2011 (of which DeeThree elected an increase to only $20.0 million in order to reduce standby fees associated with the unutilized balance) with the next review of the facility expected to commence within the coming weeks. It is anticipated that the facility will be further increased by year-end.


Three Months Ended September 30, Nine Months Ended September 30,
2011 2010(5) Change 2011 2010(5) Change
(000s, except per share amounts)
($) ($) (%) ($) ($) (%)
Oil and natural gas revenues 9,440 1,618 483 20,874 5,590 273
Funds from operations(1) 3,795 462 721 7,739 1,681 360
Per share(1) - basic and diluted 0.06 0.02 200 0.14 0.08 75
Cash flow from operating activities 8,910 687 1,197 6,346 1,752 262
Net loss (353 ) (6,664 ) (95 ) (3,243 ) (9,332 ) (65 )
Per share- basic and diluted (0.01 ) (0.29 ) (97 ) (0.06 ) (0.46 ) (87 )
Capital expenditures(2) 25,009 3,574 600 167,028 14,744 1,033
Total assets 206,885 52,336 295 206,885 52,336 295
Working capital (deficit)(3) (3,356 ) 20,668 (116 ) (3,356 ) 20,668 (116 )
Shareholders' equity 176,346 47,479 271 176,346 47,479 271
(#) (#) (%) (#) (#) (%)
Share Data
At period-end 63,152 29,311 115 63,152 29,311 115
Weighted average - basic and diluted 63,064 23,117 173 54,134 20,452 165
(%) (%)
Natural gas (mcf/d) 8,167 3,958 106 6,724 4,449 51
Crude oil and NGLs (bbls/d) 774 18 4,200 556 16 3,375
Total (boe/d) 2,135 678 215 1,677 758 121
Average wellhead prices
Natural gas ($/mcf) 3.82 4.12 (7 ) 3.82 4.33 (12 )
Crude oil and NGLs ($/bbl) 91.49 71.24 28 90.90 72.74 25
Total ($/boe) 48.05 25.95 85 45.59 27.01 69
Operating netback ($/boe) 22.36 12.93 73 23.76 13.33 78
Funds flow netback(1)($/boe) 19.21 7.42 159 16.84 8.12 107
Gross (net) wells drilled
Gas (#) -- 1 (1.0 ) -- -- 5 (5.0 ) --
Oil (#) 3 (2.8 ) -- (-- ) -- 7 (6.8 ) -- (-- ) --
Standing (#) 5 (3.8 ) 1 (1.0 ) 400 (280 ) 5 (3.8 ) 1 (1.0 ) 500 (80 )
Dry and abandoned (#) 1 (1.0 ) 3 (3.0 ) -67 (-67 ) 1 (1.0 ) 6 (6.0 ) -83 (-83 )
Total (#) 9 (7.6 ) 5 (5.0 ) 80 (52 ) 13 (11.6 ) 12 (12.0 ) 8 (-3 )
Average working interest (%) 84 100 (16 ) 89 100 (11 )

(1) Funds from operations, funds from operations per share and funds flow netback 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.

(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".

(5) Amounts presented for the three and nine months ended September 30, 2010 have been restated for the effect of the adoption of IFRS.

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.

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