DeeThree Exploration Ltd.

DeeThree Exploration Ltd.

August 09, 2013 08:00 ET

DeeThree Exploration Ltd. Announces 2013 Second Quarter Financial and Operating Results

CALGARY, ALBERTA--(Marketwired - Aug. 9, 2013) - DEETHREE EXPLORATION LTD. ("DeeThree") ("Company") (TSX:DTX)(OTCQX:DTHRF) is pleased to announce its financial and operational results for the three and six months ended June 30, 2013. DeeThree continued to deliver impressive financial and operating results during the three months ended June 30, 2013.

Operational Update

Continued drilling success in DeeThree's Alberta Bakken and Belly River light oil resource plays resulted in substantial production growth in the second quarter. Throughout the quarter, the Company focused on the delineation of the oil resources of its Alberta Bakken and Belly River light oil resource plays and as a result, the well location inventory on these two plays has increased to 500. We also expanded our pipeline and facility infrastructure in order to accommodate anticipated future production increases.

At the end of the first half of 2013, DeeThree had realized production volumes from only 11 wells drilled in the period. The third quarter will be the most active in the Company's history with an additional 12 - 14 Alberta Bakken and Belly River horizontal wells anticipated to be placed on production during the quarter. Three drilling rigs are currently operating and a fourth drilling rig will commence operations in the coming days.

Alberta Bakken

DeeThree's efforts in the second quarter on its Alberta Bakken light oil resource play were focused primarily in the Ferguson area where we drilled eight 100% working interest wells (six horizontal wells, one vertical delineation well and one water disposal well). The Company is very pleased by the results of an ongoing test of a recently completed well which has averaged 1,550 bbls of oil per day over a six day period. This location offsets a previously announced DeeThree Alberta Bakken well that has produced 61,000 bbls of oil over the last 81 days.

As a result of minor weather delays during the quarter, only four of the six horizontal wells were completed and brought on-stream. The Company's third quarter results will see the benefit of having all six of these wells on-stream. The results of these wells, combined with data acquired from a recent seismic program, once again extending the edge of our Alberta Bakken oil pool by two miles to the east, for a total known length in excess of 14 miles encompassing approximately 60 sections.

The Company has been very active expanding its infrastructure throughout the eastern side of its land base during the quarter in order to accommodate anticipated production increases. In particular, we completed a significant oil pipeline extension to the east of Highway 4 in order to tie in recently completed eastern step-out oil wells. The 8,000 bbl/day oil battery at Ferguson remains under construction and is now anticipated to be operational in the latter part of August. A number of wells completed during the second quarter were produced as single well batteries awaiting pipeline construction and completion of the new battery, temporarily increasing operating costs in the area. The significant investment in expanding our infrastructure is expected to alleviate these increased costs on a go-forward basis.

The Company continues to expand its Alberta Bakken land holdings having recently acquired an additional 15.25 sections of land at Crown land sales that offset eastern step-out oil wells successfully drilled early in the third quarter.

Early in the second quarter, we initiated an enhanced oil recovery pilot project in the Ferguson Bakken field, converting the 8-19-3-16W4 producing oil well (production of 220 boe/day at time of conversion) into a solution gas injection well to help with long term pressure maintenance and ultimately increase oil recovery. Updates on the results of this pilot project will be announced as they become available.

Belly River

DeeThree re-commenced drilling operations on its Brazeau Belly River property in mid-June. Since that time, two wells have been drilled on the farm-in lands with one well being completed to date. The completed well was drilled into the "C" sand and completed with a 19 stage completion. This well produced up the 4 1/2" frac string at a stabilized rate of 500 boe/day (85% oil and NGLs) 15 days after completion. The well is currently shut in for pipelining and tie-in operations.

We are also extending our pipeline infrastructure to the farm-in lands in order to tie production into our owned and operated facilities. This infrastructure will allow for accelerated on- stream times on future locations drilled and is expected to lower operating costs in the area.


DeeThree is well positioned with a strong balance sheet and its Alberta Bakken and Belly River light oil resource plays to deliver accelerated growth for our investors in terms of production, cash flow and reserves over the remainder of the year. We remain confident that we will achieve our 2013 target exit production rate of 9,600 - 10,000 boe/d (81% crude oil & NGLs).

We are currently finalizing a resource study of our Belly River light oil resource play with our independent reserve evaluators. We look forward to sharing that information in the coming weeks.

Third Quarter Highlights

DeeThree delivered another quarter of strong results, including the seventh consecutive quarter of production growth. Highlights of the quarter include the following.

  • Record production for the second quarter averaging 6,578 boe/d (74% oil and NGLs and 26% natural gas), an increase of 73% over the same quarter of 2012 and an 11% increase over the first quarter of 2013.

  • Record oil and NGL production for the second quarter averaging 4,896 bbls/day representing a 108% increase over the same period last year and a 16% or 683 bbl/day increase from the first quarter of 2013.

  • Increased operating netback to $40.57/boe from $30.86/boe in the same quarter last year and $35.15/boe in the first quarter of 2013, an increase of 31% and 15%, respectively.

  • Funds flow from operations increased to $22.4 million, representing a 128% increase from the second quarter of 2012 and a 33% improvement from the first quarter of 2013.

  • Funds from operations on a fully diluted per share basis increased to $0.28, up 100% from the same quarter last year and 22% from the first quarter of 2013.

  • Invested $39 million in capital expenditures which included the drilling of 8 (8.0 net) wells, achieving 88% success rate.

  • Exited the quarter with total net debt of $86.3 million, representing a debt to annualized cash flow ratio of 0.96:1.


Three Months Ended June 30, Six Months Ended June 30,
2013 2012 Change 2013 2012 Change
(000s, except per share amounts) ($) ($) (%) ($) ($) (%)
Oil and natural gas revenues 39,882 18,437 116 70,372 32,714 115
Funds from operations (1) 22,437 9,852 128 39,225 15,593 151
Per share - basic 0.29 0.15 93 0.52 0.24 117
Per share - diluted 0.28 0.14 100 0.51 0.22 132
Cash flow from operating activities 21,876 14,696 49 39,876 18,760 113
Net income 6,800 5,603 21 6,173 2,404 157
Per share - basic 0.09 0.08 13 0.08 0.04 100
Per share - diluted 0.09 0.08 13 0.08 0.03 167
Capital expenditures (2) 39,286 29,699 32 80,844 66,414 22
Working capital deficit (3) 86,338 50,803 70 86,338 50,803 70
Shareholders' equity 253,336 185,207 37 253,336 185,207 37
(000s) (#) (#) (%) (#) (#) (%)
Share Data
At period-end 76,474 66,986 14 76,474 66,986 14
Weighted average - basic 76,363 66,986 14 74,784 65,153 15
Weighted average - diluted 79,049 70,161 13 77,355 69,484 11
(%) (%)
Natural gas (mcf/d) 10,093 8,687 16 10,186 8,672 17
Crude oil (bbls/d) 4,550 2,091 118 4,239 1,704 149
NGLs (bbls/d) 346 266 30 317 274 16
Total (boe/d) 6,578 3,805 73 6,254 3,423 83
Average wellhead prices
Natural gas ($/mcf) 3.79 2.06 84 3.61 2.11 71
Crude oil and NGLs ($/bbl) 81.34 78.67 3 76.96 81.42 (5)
Combined average ($/boe) 66.62 53.25 25 62.17 52.51 18
Operating netback ($/boe) 40.57 30.86 31 38.01 28.08 35
Funds flow netback ($/boe) 37.40 28.36 32 34.59 24.94 39
Gross (net) wells drilled
Oil (#) 5 (5.0) 7 (6.8) -29 (-26) 12 (11.22) 15 (13.9) -20 (-19)
Standing (#) 2 (2.0) -- -- 2 (2.0) 2 (2.0) --
Dry and abandoned (#) 1 (1.0) -- -- 2 (1.97) -- --
Total (#) 8 (8.0) 7 (6.8) 14 (18) 16 (15.19) 17 (15.9) -6 (-4)
Average working interest (%) 100 97 3 95 94 1

(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 for the quarter ended June 30, 2013 under "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 for the quarter ended June 30, 2013 under "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 below under "Reader Advisory - BOE Presentation".

Reader Advisory

Forward-Looking Statements. Certain statements contained in this press release may constitute forward-looking statements. These statements relate to future events or 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.

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.

Non-GAAP Measures. The term cash flow does not have any standardized meaning as prescribed by GAAP and, therefore, is considered non-GAAP measures. Cash flow is calculated based on cash flow from continuing operating activities before changes in non-cash working capital. Management believes that cash flow is a supplemental measure and utilizes it as a key measure to assess the ability of the Company to finance operating activities, capital expenditures and debt repayments. Cash flow as presented is not intended to represent cash flow from operating activities, net earnings or other measures of financial performance calculated in accordance with GAAP and should not be construed as an alternative to cash flow from operations.

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.

Contact Information

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