Elkwater Resources Ltd.
TSX VENTURE : ELW

January 05, 2015 18:05 ET

Elkwater Resources Ltd. Provides an Operations Update and Announces First Quarter 2015 Capital Budget

CALGARY, ALBERTA--(Marketwired - Jan. 5, 2015) - Elkwater Resources Ltd. ("Elkwater" or the "Company") (TSX VENTURE:ELW) is pleased to provide an operations update and announce details of its first quarter 2015 capital budget.

OPERATIONS UPDATE

During the fourth quarter of 2014, the Company invested approximately $7.0 million in the drilling and development of its newly acquired properties in Drayton Valley and Killam, targeting light oil from the Cardium and Belly River zones, and medium oil from the Lloydminster zone, respectively.

Highlights from the fourth quarter of 2014 include:

  • Drayton Valley: Drilled and completed 2.0 gross (1.8 net) Cardium horizontal oil wells;
  • Killam: Drilled 3.0 gross (3.0 net) Lloydminster horizontal oil wells; and
  • Brazeau: Tied-in 1.0 gross (1.0 net) Belly River horizontal oil well.

The Brazeau Belly River horizontal oil well averaged 430 boe/d (65% oil and NGLs) in its first 30 days based on field production reports. Management intends to restrict production in order to gather additional pressure and production data, and continue to interpret the characteristics of the reservoir.

The Drayton Valley Cardium wells have undergone preliminary production testing and are scheduled to be equipped, tied in and on production in January, 2015.

FIRST QUARTER 2015 CAPITAL BUDGET

In light of recent market volatility and weakening in commodity prices, Elkwater's management team and Board of Directors are taking a disciplined and conservative approach to the 2015 budget. The Board of Directors has approved a capital expenditure budget for the first quarter of 2015 and intends on approving the full-year 2015 capital budget prior to the end of the first quarter.

During the first quarter of 2015, Elkwater intends on investing approximately $4.5 million on the following activities:

  • Drayton Valley: Equip and tie-in the 2.0 gross (1.8 net) Cardium horizontal oil wells that were drilled and completed in the fourth quarter of 2014; and
  • Killam: Complete, equip, and tie-in the 3.0 gross (3.0 net) Lloydminster horizontal oil wells that were drilled in the fourth quarter of 2014.

Despite significant uncertainty in commodity prices, the Company is well positioned to execute on its growth strategy, while maintaining a strong balance sheet and financial flexibility.

FIRST QUARTER GUIDANCE

Elkwater's first quarter 2015 financial and operating guidance and assumptions are as follows:

Average daily production Q1 2015(1)
Light/medium oil (bbls/d) 1,650
NGLs (bbls/d) 100
Natural gas (mcf/d) 6,300
Oil equivalent (boe/d) 2,800
Capital expenditures(1) $ 4.5 million
Funds flow from operations(2) $ 4.5 million
March 31, 2015 net debt(1) $ 9.0 million
Net debt to funds flow from operations(1) (2) 0.5x
Bank facilities - borrowing limit (3) $ 55.0 million
Assumptions:
WTI (US$/bbl) $ 55.00
Exchange rate (US$/C$) 0.86
Light sweet oil differential to WTI (US$/bbl) $ (7.00 )
Average corporate oil quality discount (C$/bbl) $ (4.00 )
AECO gas (C$/mcf) $ 3.50
(1) Excludes any future acquisitions and dispositions.
(2) Funds flow from operations and net debt do not have any standardized meaning prescribed by International Financial Reporting Standards ("IFRS"). Refer to the Reader Advisories at the end of the news release.
(3) The bank facilities are due to be reviewed by the Company's banking syndicate on or before May 31, 2015.

Supported by its strong balance sheet, Elkwater will continue its pursuit of value-driven acquisitions, including consolidation of land positions within the Company's existing project areas, in addition to targeting new potential opportunities in complementary shallow, light oil horizons within its Central Alberta core region. The Company is highly focused on adding to its inventory of high quality drilling locations to sustain longer-term growth.

ABOUT ELKWATER

Elkwater (to be renamed "Striker Exploration Corp.") is a growth-oriented, light oil focused company operating predominantly in Alberta. Elkwater's full-cycle business plan provides an excellent opportunity to reposition Elkwater as a high-growth junior E&P company. With an experienced management team and a strong committed Board, growth will occur through timely strategic acquisitions and drilling. Elkwater currently trades on the TSX Venture Exchange under ticker "ELW".

READER ADVISORIES

FORWARD-LOOKING STATEMENTS: This press release contains forward-looking statements. More particularly, this press release contains statements concerning the Company's growth strategy, capital expenditures, the Company's drilling plans and timing thereof and the change of name of the Company to "Striker Exploration Corp.". In addition, the use of any of the words "anticipate", "believe", "expect", "plan", "intend", "estimate", "propose", "project", "can", "will", "should", "continue", "may", and similar expressions are intended to identify forward-looking statements. The forward-looking statements contained herein are based on certain key expectations and assumptions made by the Company, including but not limited to expectations and assumptions concerning the availability of capital, current legislation, receipt of required regulatory approval, the success of future drilling and development activities, the performance of existing wells, the performance of new wells, the Company's growth strategy, general economic conditions, availability of required equipment and services and prevailing commodity prices. Although the Company believes that the expectations and assumptions on which the forward-looking statements are based are reasonable, undue reliance should not be placed on the forward-looking statements because the Company 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. Actual results could differ materially from those currently anticipated due to a number of factors and risks. These include, but are not limited to, risks associated with the oil and gas industry in general (e.g., operational risks in development, exploration and production; delays or changes in plans with respect to exploration or development projects or capital expenditures; as the uncertainty of reserve estimates; the uncertainty of estimates and projections relating to production, costs and expenses, and health, safety and environmental risks), commodity price and exchange rate fluctuations, changes in legislation affecting the oil and gas industry and uncertainties resulting from potential delays or changes in plans with respect to exploration or development projects or capital expenditures. Please refer to the Company's most recent Annual Information Form dated July 25, 2014 for the year ended December 31, 2013, on SEDAR at www.sedar.com, and the risk factors contained therein.

The forward-looking statements contained in this press release are made as of the date hereof and the Company undertakes no obligation to update publicly or revise any forward-looking statements or information, whether as a result of new information, future events or otherwise, unless so required by applicable securities laws.

NON-IFRS MEASURES: This press release contains the terms "funds flow from operations" and "net debt", which do not have a standardized meaning prescribed by IFRS and therefore may not be comparable with the calculation of similar measures by other companies. Management uses funds flow from operations to analyze operating performance and leverage. Management believes "net debt" is a useful supplemental measure of the total amount of current and long-term debt of the Company. Mark-to-market risk management contracts are excluded from the net debt calculation. Additional information relating to these non-IFRS measures, including the reconciliation between funds flow from operations and cash flow from operating activities, can be found in the Company's most recent management's discussion and analysis MD&A, which may be accessed through the SEDAR website (www.sedar.com).

PRODUCTION RATES: Any references in this release to IP rates are useful in confirming the presence of hydrocarbons, however, such rates are not determinative of the rates at which such wells will continue to produce and decline thereafter and are not necessarily indicative of long-term performance or ultimate recovery. Readers are cautioned not to place reliance on such rates in calculating the aggregate production for the Company. Such rates are based on field estimates and may be based on limited data available at this time.

ADVISORY ON PRODUCTION INFORMATION: Unless otherwise indicated herein, all production information presented herein has presented on a gross basis, which is the Company's working interest prior to deduction of royalties and without including any royalty interests.

BARRELS OF OIL EQUIVALENT: The term "boe" or barrels of oil equivalent may be misleading, particularly if used in isolation. A boe conversion ratio of six thousand cubic feet of natural gas to one barrel of oil equivalent (6 Mcf: 1 bbl) is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. Additionally, 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 ratio of 6:1 may be misleading as an indication of value.

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

  • Elkwater Resources Ltd.
    Doug Bailey
    President and Chief Executive Officer
    (403) 262-0242

    Elkwater Resources Ltd.
    Neil Burrows
    Vice President, Finance and Chief Financial Officer
    (403) 262-0242