DeeThree Exploration Ltd.
TSX : DTX
OTCQX : DTHRF

DeeThree Exploration Ltd.

January 13, 2015 23:19 ET

DeeThree Exploration Ltd. Announces 2015 Budget and Provides Operational Update

CALGARY, ALBERTA--(Marketwired - Jan. 13, 2015) - DEETHREE EXPLORATION LTD. ("DeeThree") ("Company") (TSX:DTX)(OTCQX:DTHRF) is pleased to announce its 2015 capital budget and provide its financial and operating guidance for 2015.

The Company's Board of Directors has approved a 2015 capital budget of up to $160 million. This budget is structured to maintain DeeThree's strong balance sheet position and to provide maximum financial and operational flexibility. The budget targets average 2015 production of approximately 13,300 boe/d which represents 18% year over year growth, while maintaining financial strength.

DeeThree will consistently re-evaluate the capital budget in order to ensure that spending levels are appropriate in the context of prevailing commodity prices. DeeThree maintains a high degree of operational flexibility due to its strong balance sheet and quality of its two core properties.

The Company is approaching 2015 conservatively with plans to drill 13 wells and incur capital expenditures of approximately $68 million during the first half of the year. This responsible level of spending is offset with an estimated $55 million of cash flow based on WTI US$50/bbl and US$1.00/C$0.85 for the first half of the year. The Company will exit the second quarter with an estimated annualized debt to cash flow ratio of 1.6 to 1. An additional 16 wells are planned to be drilled during the second half of the year with total estimated capital expenditures of $92 million. The Company's debt to cash flow ratio at year end is forecast to be 1.1 to 1 based on its annualized projected cash flow for the fourth quarter of 2015. The Company's 2015 capital budget is based on the price of oil averaging WTI US$60/bbl for 2015.

The Company's 2015 drilling program is focused on the further development of the Company's two core properties with 23 gross (23.0 net) wells targeting the Brazeau Belly River play and 6 gross (6.0 net) wells targeting the Alberta Bakken play.

Throughout 2014, the Company invested significant capital in upgrades and expansions of its facilities in both core areas to accommodate future growth. As a result, approximately $147 million, or 93% of the Company's 2015 capital budget, is directed towards the drilling and completion of wells.

Operations Update

The Company achieved its exit guidance for 2014 averaging 13,000 boe/d in the month of December 2014. The Company had an average production of 12,700 boe/d for the fourth quarter of 2014.

Alberta Bakken

DeeThree continues to responsibly manage its 100% owned Alberta Bakken play. The focus of activity will be on building sustainability and maximizing the value and ultimate oil recovery of this very significant defined resource. Since the implementation of a single well pilot in July 2013, the Company has continued to observe increasingly positive results from its gas re-injection enhanced oil recovery ("EOR") scheme. Since the installation of a built for purpose gas re-injection compressor in September 2014, the Company has increased re-injection volumes and currently 70% of the total gas produced from its Alberta Bakken pool is re-injected through three injectors. The results of the expanded gas re-injection EOR scheme have been consistent with the results of the pilot project in improving production declines. The Company is committed to moving towards the implementation of a full scale gas re-injection EOR scheme for its Alberta Bakken pool in order to more fully exploit the large oil-in-place with an increased recovery factor. The Company has invested significant capital in the project to date and is well positioned to rapidly increase voidage replacement in the pool with minimal future net capital. The Company is planning to commission a fourth injector by the end of March 2015 and a fifth in the third quarter of 2015. By the end of the year DeeThree anticipates the re-injection of 100% of its produced Bakken gas with currently installed reinjection facilities capacity.

In addition, DeeThree has recently implemented a single injector waterflood pilot to complement the gas re-injection EOR scheme. Results to date have been encouraging and DeeThree will continue to monitor its effectiveness.

With the benefit of shallower declines the Company is positioned to maintain production levels with reduced capital. The enhanced recovery scheme will remain an integral part of the development of the pool with future drilling activity being closely matched with voidage replacement.

Brazeau Belly River

DeeThree continues to demonstrate the depth in its drilling inventory and repeatability of results from its Brazeau Belly River property. The first well completed in 2015, horizontal well 4-27-46-15 W5M, was a significant D interval step out which tested at a final rate of approximately 750 mscf/d of gas and 960 bbls/d of light oil at a flowing pressure of 180 psi after a four day test.

In prior years, DeeThree invested significant capital upgrading and expanding infrastructure, and increasing its land position and working interest and can now dedicate almost all of its budgeted capital into drilling and completions for 2015. With an identified drilling inventory now totaling in excess of 440 locations over a high working interest, contiguous land base supported by infrastructure, the Company is well positioned to generate and sustain production growth in the property despite lower commodity prices.

Hedging

The Company has 2,000 bbl/d of oil hedged for calendar 2015, including 1,500 bbl/d swapped at WTI C$99.20, and 500 bbl/d hedged with a costless collar WTI US$85.00 x WTI US$100.80.

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 for fourth quarter production, the amount of capital expenditures for 2015, wells anticipated to be drilled in 2015, the quantity of reserves and resources, expectations regarding secondary oil recovery schemes, expectations regarding DeeThree's ability to continually add to production and reserves through development, currency exchange rates 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. Readers are cautioned that the foregoing list of factors is not exhaustive. Additional information on these and other factors that could affect DeeThree's operations or financial results are included in reports on file with applicable securities regulatory authorities and may be accessed www.sedar.com.

This forward-looking information represents DeeThree's views as of the date of this news release 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.

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.

Contact Information

  • Jonathan Fleming
    V.P. Capital Markets
    (403) 984-6328

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