Donnycreek Energy Inc.

TSX VENTURE : DCK


Donnycreek Energy Inc.

March 28, 2014 20:21 ET

Donnycreek Announces Second Quarter Results & Provides Kakwa and Wapiti Field Operations Update

CALGARY, ALBERTA--(Marketwired - March 28, 2014) - Donnycreek Energy Inc. ("Donnycreek" or the "Company") (TSX VENTURE:DCK) reports that it has filed its condensed interim financial statements and related Management's Discussion and Analysis ("MD&A") for the three and six months ended January 31, 2014 with 2013 comparatives on SEDAR. Selected financial and operational information is outlined below and should be read in conjunction with Donnycreek's condensed interim financial statements for the three and six months ended January 31, 2014 and its audited financial statements and related MD&A for the year ended July 31, 2013 which are available for review at www.sedar.com and on our website at www.donnycreekenergy.com.

FINANCIAL AND OPERATING HIGHLIGHTS
Three Months Ended Six Months Ended
31-Jan-14 31-Jan-13 31-Jan-14 31-Jan-13
Petroleum and natural gas sales $ 1,547,336 $ 825,575 $ 3,995,105 $ 903,416
Funds flow from operations(1) $ 445,762 $ 393,472 $ 1,991,263 $ 344,503
Basic ($/share) $ 0.01 $ 0.01 $ 0.04 $ 0.01
Diluted ($/share) $ 0.01 $ 0.01 $ 0.04 $ 0.01
Net income (loss) $ 451,141 $ (805,822 ) $ 847,365 $ (807,742 )
Basic ($/share) $ 0.01 $ (0.02 ) $ 0.01 $ (0.02 )
Diluted ($/share) $ 0.01 $ (0.02 ) $ 0.01 $ (0.02 )
Capital expenditures $ 14,841,844 $ 3,615,259 $ 22,132,373 $ 16,771,548
Working capital $ 16,625,738 $ 19,061,674 $ 16,625,738 $ 19,061,674
Total assets $ 85,137,373 $ 47,160,122 $ 85,137,373 $ 47,160,122
Operating
Average daily production (sales)
Crude oil (bbls/d) 0.6 0.1 5.4 0.8
Natural gas (mcf/d) 931.1 500.3 1,181.4 352.1
NGLs (bbls/d)(2) 138.0 76.1 180.6 38.6
Total (boe/d) 293.8 159.6 382.9 98.1
Average realized price
Crude oil ($/bbls) $ 79.50 $ 81.55 $ 89.35 $ 79.04
Natural gas ($/mcf) $ 4.49 $ 3.16 $ 3.53 $ 2.94
NGLs ($/bbls)(2) $ 90.37 $ 71.99 $ 93.78 $ 71.88
Netback ($/boe)
Petroleum and natural gas sales $ 57.25 $ 56.24 $ 56.71 $ 50.07
Royalties $ (2.98 ) $ (1.37 ) $ (2.98 ) $ (1.69 )
Operating expenses (incl. transportation) $ (13.00 ) $ (8.49 ) $ (12.75 ) $ (8.49 )
Operating netbacks(3) $ 41.27 $ 46.38 $ 40.98 $ 39.89
Share Information
Common shares outstanding 54,660,530 41,360,530 54,660,530 41,360,530
Weighted average common shares outstanding 52,985,530 41,267,492 52,148,030 32,717,636

Notes:

(1) Funds flow from operations are petroleum and natural gas revenue and interest income less producing and operating expenses, royalties, exploration and evaluation expenditures and general and administrative expenses.
(2) References to NGLs include condensate.
(3) Operating netbacks are determined by deducting royalties, production expenses and transportation and selling expenses from petroleum and natural gas revenue.

Operations Update - Kakwa

Current production from five of the six middle Montney horizontal gas wells tied into and producing through the Company's 16-07 Kakwa gas compression and condensate handling facility is approximately 6.75 mmcf per day (net 3.2 mmcf per day) and 1,106 bbls per day (net 530 bbls per day) of lease condensate; 1,063 boe per day net. The sixth well, Hz 14- 30-63-5 W6M Well (the "14-30 Well") is shut in (150 boe per day net) while completion operations are underway on the Hz 102/14- 30-63-5 W6M (the "102/14-30 Well") upper Montney horizontal well.

As previously reported, Donnycreek's 50% working interest middle Montney horizontal gas well at Hz 16-17-63-5 W6M (the "16-17 Well") commenced production in mid-February 2014. The 16-17 Well averaged approximately 2.6 mmcf per day (gross) natural gas production during its first 30 days of production with an average field condensate production estimate of 460 bbls per day (gross).

Subsequent to the end of the Q2 2014 reporting period, the Company has drilled and cased a 50% working interest upper Montney horizontal well, the 102/14-30 Well, where completion operations are currently underway. Also following the end of Q2 2014, a ninth Kakwa Montney horizontal well is drilling at 08-20-63-5 W6M (the "08-20 Well"). The 08-20 Well is the first of three Montney horizontal wells planned to be drilled consecutively from the same surface lease pad which should result in an overall reduction in well costs.

On January 7, 2014, the Company's 50% working interest Kakwa gas compression and condensate handling facility became operational. With a design capacity to handle 15 mmcf per day of natural gas and 3,000 bbls per day of lease condensate, the facility is currently handling approximately 8 mmcf per day of natural gas including third party gas volumes.

Operations Update - Wapiti

Donnycreek received regulatory approval and the permit to flare the reservoir natural gas at the Company's middle Montney horizontal well at Hz 1-26-64-8 W6M (the "1-26 Well"). Testing operations have resumed following a 15 stage hydraulic fracture stimulation of the well and load fluid flow back. Initial flow results indicate the reservoir natural gas contains up to 10% hydrogen sulfide (H2S). The natural gas flow rate after the first 48 hours of flow back is approximately 1.7 mmcf per day against 1,600 kPa wellhead pressure. No lease condensate has been recovered to date.

Donnycreek holds a 75% working interest in 328 gross (246 net) sections of Montney P&NG rights at Wapiti.

Potential Transportation Disruptions

Donnycreek produces natural gas that is delivered to the Cutbank River receipt point which the Company has been advised is expected to be affected by the National Energy Board's order SG-N081-001-2014 issued on March 4, 2014 (the "Order") to Nova Gas Transmission Ltd., a wholly owned subsidiary of TransCanada PipeLines Limited.

At this time, Donnycreek is unaware of volumes or timing of any disruption to its production. Future drilling and completion operations budgeted in fiscal 2014 are not anticipated to be affected as a result of the Order.

Donnycreek is a Calgary based public oil and gas company which holds approximately 438 gross (313 net) sections of petroleum and natural gas rights, with an average working interest of approximately 70%, prospective primarily for Montney liquid rich natural gas resource development all of which are located in the Deep Basin area of west-central Alberta.

Further information relating to Donnycreek is also available on its website at www.donnycreekenergy.com.

ON BEHALF OF THE BOARD OF DONNYCREEK ENERGY INC.

Malcolm F.W. Todd, President and Chief Executive Officer

ADVISORY ON FORWARD-LOOKING STATEMENTS: This news release contains certain forward–looking information and statements ("forward-looking statements") within the meaning of applicable securities laws. The use of any of the words "expect", "anticipate", "continue", "estimate", "may", "will", "project", "should", "believe", "plans", "intends" and similar expressions are intended to identify forward-looking statements. In particular, but without limiting the foregoing, this news release contains statements concerning the drilling of the 08-20 Well and subsequent Kakwa Montney horizontal wells and their impact on resulting well costs and the impact of the Order on the Company's production and drilling and completion operations budgeted in fiscal 2014.

Forward-looking statements are based on a number of material factors, expectations or assumptions of Donnycreek which have been used to develop such statements and information but which may prove to be incorrect. Although Donnycreek believes that the expectations reflected in these forward-looking statements are reasonable, undue reliance should not be placed on them because Donnycreek can give no assurance that they will prove to be correct. Since forward-looking statements address future events and conditions, by their very nature they involve inherent risks and uncertainties.
Further, events or circumstances may cause actual results to differ materially from those predicted as a result of numerous known and unknown risks, uncertainties, and other factors, many of which are beyond the control of the Company, including, without limitation: whether the Company's exploration and development activities respecting its prospects will be successful or that material volumes of petroleum and natural gas reserves will be encountered, or if encountered can be produced on a commercial basis; the ultimate size and scope of any hydrocarbon bearing formations on its lands; that drilling operations on its lands will be successful such that further development activities in these areas are warranted; that Donnycreek will continue to conduct its operations in a manner consistent with past operations; results from drilling and development activities will be consistent with past operations; the general stability of the economic and political environment in which Donnycreek operates; drilling results; field production rates and decline rates; the general continuance of current industry conditions; the timing and cost of pipeline, storage and facility construction and expansion and the ability of Donnycreek to secure adequate product transportation; future commodity prices; currency, exchange and interest rates; regulatory framework regarding royalties, taxes and environmental matters in the jurisdictions in which Donnycreek operates; and the ability of Donnycreek to successfully market its oil and natural gas products; changes in commodity prices; changes in the demand for or supply of the Company's products; unanticipated operating results or production declines; changes in tax or environmental laws, changes in development plans of Donnycreek or by third party operators of Donnycreek's properties, increased debt levels or debt service requirements; inaccurate estimation of Donnycreek's oil and gas reserve and resource volumes; limited, unfavourable or a lack of access to capital markets; increased costs; a lack of adequate insurance coverage; the impact of competitors; and certain other risks detailed from time-to-time in Donnycreek's public disclosure documents. Additional information regarding some of these risks, expectations or assumptions and other factors may be found under in the Company's Annual Information Form for the year ended July 31, 2013 and the Company's Management's Discussion and Analysis prepared for the year ended July 31, 2013. The reader is cautioned not to place undue reliance on these forward-looking statements. The forward-looking statements contained in this news release are made as of the date hereof and Donnycreek undertakes no obligations to update publicly or revise any forward-looking statements, whether as a result of new information, future events or otherwise, unless so required by applicable securities laws.

In this news release the calculation of barrels of oil equivalent (boe) is calculated at a conversion rate of six thousand cubic feet (6 mcf) of natural gas for one barrel (bbl) of oil based on an energy equivalency conversion method. Boes may be misleading particularly if used in isolation. A boe conversion ratio of 6 mcf: 1 bbl is based on an energy equivalency conversion method primarily applicable to the burner tip and does not represent a value equivalency at the wellhead. Given that the value ratio based on the current price of crude oil as compared to natural gas is significantly different from the energy equivalency of 6:1, utilizing a conversion on a 6:1 basis may be misleading as an indication of value.

NON-GAAP MEASURES

In this document "Funds flow from operations" and "Operating Netbacks", collectively the "Non-GAAP measures", are used and do not have any standardized meanings as prescribed by IFRS. They are used to assist management in measuring the Company's ability to finance capital programs and meet financial obligations. Funds flow from operations refers to cash flows from operating activities before net changes in operating working capital.

Non-GAAP measures should not be considered in isolation or construed as alternatives to their most directly comparable measure calculated in accordance with IFRS, or other measures of financial performance calculated in accordance with IFRS. The Non-GAAP measures are unlikely to be comparable to similar measures presented by other issuers.

NEITHER THE TSX VENTURE EXCHANGE NOR ITS REGULATION SERVICES PROVIDER (AS THAT TERM IS DEFINED IN THE POLICIES OF THE TSX VENTURE EXCHANGE) ACCEPTS RESPONSIBILITY FOR THE ADEQUACY OR ACCURACY OF THIS NEWS RELEASE.

Contact Information

  • Donnycreek Energy Inc.
    Malcolm Todd
    President and Chief Executive Officer
    (604) 684-2356
    (604) 684-4265 (FAX)
    www.donnycreekenergy.com