Hyperion Exploration Corp.
TSX VENTURE : HYX

Hyperion Exploration Corp.

November 28, 2011 04:00 ET

Hyperion Exploration Corp. Announces Financial and Operating Results for the Three Months Ended September 30, 2011

CALGARY, ALBERTA--(Marketwire - Nov. 28, 2011) - Hyperion Exploration Corp. ("Hyperion" or the "Company") (TSX VENTURE:HYX) is pleased to announce its financial and operating results for the three and nine months ended September 30, 2011. Selected financial and operational information is outlined below and should be read in conjunction with Hyperion's interim financial statements and related management discussion and analysis for the period ended September 30, 2011, which will be available for review under Hyperion's SEDAR profile at www.sedar.com.

Hyperion commenced operations in July 2010 with the recapitalization of Triple 8 Energy Ltd. ("Triple 8"). Hyperion has completed four acquisitions since the recapitalization, adding production, reserves and significant future upside to the corporate portfolio. The assets acquired pursuant to such acquisitions provide the platform to execute Hyperion's strategy of providing high growth through acquisitions which lead to lower risk, scalable and repeatable light oil development drilling.

OUTLOOK

Hyperion remains focussed on per share growth through the execution of the 2011 capital budget.

  • Hyperion plans to drill 3 gross (2.6 net) Cardium horizontal light oil wells in the fourth quarter 2011. The first 2 gross (2 net) wells are drilled, completed and are in the process of being equipped in the Pembina area, with the remaining Buck Lake well (0.6 net) scheduled to be drilled in December.
  • Hyperion has 64 net locations (56 targeting light oil) technically evaluated for future development. Of these locations over 84% are targeting light oil.
  • Hyperion remains confident that it will meet or exceed its 2011 operational guidance of:
    • Average production of 950 boe/day (33% light oil and 19% liquids);
    • Exit production of 1,500 boe/day (57% light oil and 10% liquids); and
    • Average operating cost of $12.20/boe.

Q3 2011 HIGHLIGHTS

  • Continued quarter over quarter increases in operating funds flows with a third quarter funds flow of $2.47 million or $0.05 per share compared with a second quarter funds flow of $2.17 million. The improved funds flow is due to production optimization and additional light oil volumes from new wells placed on production in late September.
  • Increased average quarterly production to 1,050 boe/day from 943 boe/day in Q2 representing an increase of 107 boe/day or 11%. The improved production was due to production optimization and additional light oil volumes from new wells placed on production in late September.
  • Hyperion executed a $11.4 million capital program in the third quarter for year to date capital expenditures of $43.7 million including the Garrington / Buck Lake property acquisitions, development drilling, land, seismic and other activities.
  • Hyperion drilled 3 gross (2.6 net) Cardium horizontal light oil wells in the third quarter for a year to date total of 5 gross (3.4 net) wells with a 100% success rate. Of the wells drilled during the third quarter, 2 gross (2.0 net) wells in the Garrington area commenced production in September with one gross (0.6 net) well in the Buck Lake area starting production during October.
  • Light oil and liquids production ratio in the quarter increased to 54% compared with 47% for the second quarter of 2011. It is anticipated this trend of higher liquids and light oil mix will continue in subsequent periods toward operational exit guidance of 67% light oil and liquids.
  • General and administrative expenses per boe reduced to $5.09 in Q3 2011 from $9.39 in Q2 2011. Increases in the corporate production base during 2011 will continue to improve administrative efficiencies.
  • Continued financial flexibility with existing bank facilities of $24 million remained fully undrawn at September 30, 2011. These bank facilities are due to be reviewed in January, 2012 as a result of Hyperion's growth in cashflow in the second half of 2011.
  • Achieved Q3 operating cost of $11.20/boe (includes transportation) which is below the Company's full year guidance of $12.20/boe (includes transportation). However, certain non-recurring operating expenses in the quarter added costs of $3.19/per boe and resulted in a total operating cost in the quarter of $14.39/boe (includes transportation).

OPERATIONS UPDATE

Initial results have exceeded the Company's original estimates for Cardium horizontal wells completed with multi- stage fracture stimulations and on production. At Garrington two gross (2 net) wells are now on production and at Buck Lake one gross (0.6 net) well is currently on production. In addition, Hyperion has drilled two gross (2 net) wells in the fourth quarter and is currently conducting completion and equipping operations with production start- up forecast for mid-December. Also, Hyperion plans to spud the second Buck Lake well (0.6 net) in late December, 2011 or early January, 2012 and anticipates commencement of production in the first quarter of 2012.

Hyperion previously reported positive initial production results from its operated Cardium light oil development on October 6, 2011 with IP7 and IP14 production above type curve expectations. The Company is pleased to provide updated IP30 production (average gross boe's produced in the first 30 days), with continued results consistently above type curve expectations.

Over time the Company expects production rates to decline based on typical Cardium decline characteristics. Although initial results are encouraging, longer term production results are required to determine production performance relative to area type well performance.

Operating Results - New Cardium Horizontal Light Oil Wells

(all production figures in gross volumes)

Area Well Status IP7 IP14 IP30 IP30
(WI% ) Average(1 ) Average(1 ) Average(1 ) Type Curve(2 )
Garrington
8-27 (100%
)
Producing

413 boe/d
86% oil

310 boe/d
89% oil

282 boe/d
89% oil

194 boe/d


9-27 (100%
)
Producing

1,008 boe/d
88% oil

744 boe/d
89% oil

498 boe/d
89% oil

84% oil

Buck Lake
4-16 (60%
)
Testing

595 boe/d
66% oil

483 boe/d
65% oil

374 boe/d
58% oil

176 boe/d

5-16 (60% ) Spud in
Q4 2011
-
-
-
92% oil



Pembina

4-24 (100%

)

Currently
Completing/
Equipping


-


-


-


275 boe/d




5-24 (100%

)

Currently
Completing/
Equipping


-


-


-


92% oil



Notes:
  1. In gross volumes at 6:1 barrels equivalent; average for periods based on field data after first new oil produced.
  2. Hyperion's estimated production type curve in each area based on actual performance of local and relevant wells. IP 7, IP 14 and IP 30 is the average gross boe's produced in the first 7, 14 and 30 days, respectively.

Garrington

The first Cardium horizontal light oil well in Hyperion's 2011 program, 9-27, was stimulated with 20 frac's at 20 tonnes per frac using slick water. The IP14 rate (average gross boe's produced in the first 14 days) was previously reported at 744 boe/d (89% liquids). The well continues to perform above the type curve with an IP30 rate of 498 boe/d (89% liquids).

The second Cardium horizontal light oil well in our 2011 program, 8-27, was stimulated with 20 frac's at 20 tonnes per frac using a water-based foam system. The IP7 (average gross boe's produced in the first 7 days) was previously reported at 413 boe/d (86% liquids). The well continues to perform above the type curve with a IP30 rate of 282 boe/d (89% liquids).

Based on the updated production rates, both wells continue to outperform Hyperion's internal type curve. The 9- 27 well, which was frac'd with slick water, has significantly exceeded the performance of the adjacent 08-27 well which was completed with a water-based foam stimulation. Based on these results, Hyperion expects to use slick water frac's for future well stimulation at Garrington.

Hyperion has 18 additional net drilling locations at Garrington, including 7 Cardium light oil and 11 locations targeting Glauconite light oil, Elkton liquids rich gas, and Ellerslie light oil.

Buck Lake

Included in the 2011 capital program is the drilling of two gross (1.2 net) Cardium horizontal light oil wells in the Buck Lake area. The first well at Buck Lake, 4-16, has been drilled and fracture stimulated with 18 frac's at 20 tonnes per frac using slick water. The IP3 rate (average gross boe's produced in the first 3 days) was previously reported at 624 boe/d (64% liquids). The well continues to perform above the type curve with a IP30 rate of 374 boe/d (58% liquids).

Based on these results, the well has outperformed Hyperion's internal 30 day, average initial production type curve of 175 boe/d (92% oil). Drilling of the Company's second Buck Lake Cardium horizontal light oil well, 5-16 (0.6 net), is expected to commence in Q4 2011. Hyperion has 12 additional net Cardium horizontal light oil drilling locations at Buck Lake identified to-date.

Pembina

Included in the 2011 capital program is the drilling of two gross (2 net) operated Cardium horizontal light oil wells in the Pembina area. Hyperion has now drilled both wells and is currently conducting completion and equipping operations at the 4-24 and 5-24 wells. Both wells were completed with 20 stage slick water frac's and are expected to be on production in mid-December.

Further updates will be provided as the 4-24 and 5-24 wells produce at reliable and indicative rates.

In early 2011, Hyperion participated in the drilling and slick water stimulation of 2 gross (0.8 net) Cardium horizontal light oil wells on its Pembina lands. These wells went on production in late March 2011 and have each produced in excess of 40,000 bbls (gross) of oil. Both wells continue to produce at rates above Hyperion's type curve for the area which at month 8, is 104 boe/d (92% oil). For reference, the 30 day average initial production type curve rate is 275 boe/d (92% oil).

Hyperion has over 7 additional net Cardium locations at Pembina identified to-date.

FINANCIAL HIGHLIGHTS

3 Months Ended September 30 9 Months Ended September 30
2011 2010 % Change 2011 2010 % Change
Financial ($000's except per share amounts)
Oil and NGL sales 4,456 179 2,389 % 10,014 221 4,431 %
Natural gas sales 1,025 34 2,915 % 2,963 41 7,127 %
Total oil, NG, & oil 5,481 213 2,473 % 12,977 262 4,853 %
Funds inflow (outflow) from operations 2,465 (497 ) nm 5,451 (668 ) nm
Per common share basic ($) 0.05 (0.06 ) nm 0.12 (0.18 ) nm
Net comprehensive loss2 (2,400 ) (815 ) 194 % (3,580 ) (990 ) 262 %
Per common share basic ($)2 (0.04 ) (0.10 ) (56 )% (0.08 ) (0.27 ) (70 )%
Capital expenditures including deposits 11,393 4,805 137 % 43,703 4,846 802 %
Working capital exit2,3 (613 ) 5,772 (111 )% (613 ) 5,772 (111 )%
Bank debt - - nm - - nm
Unused bank facilities 24,000 - nm 24,000 - nm
Production
Oil & NGL (bbls per day) 572 28 1,943 % 432 12 3,500 %
Natural gas (mcf per day) 2,866 123 2,230 % 2,670 49 5,349 %
Total (boe per day) (6:1) 1,050 49 2,064 % 877 20 4,249 %
Average realized price ($'s - production weighted)
Oil & NGL ($ per bbl) 84.68 69.59 22 % 84.90 67.58 26 %
Natural gas ($ per mcf) 3.89 2.99 30 % 4.06 3.03 34 %
Average ($ per boe) 56.76 47.60 19 % 54.20 47.51 14 %
Netback ($'s per boe)
Oil, natural gas and NGL sales 56.76 47.60 19 % 54.20 47.51 14 %
Royalties (12.05 ) (1.88 ) 541 % (9.11 ) (2.49 ) 266 %
Operating and transportation expenses (14.39 ) (37.75 ) (62 )% (12.40 ) (37.09 ) (67 )%
Operating netback 30.32 7.97 280 % 32.69 7.93 312 %
Common Shares (pre-consol./post-split1)
Common shares o/s, end of period 54,190,359 10,054,683 439 % 54,190,359 10,054,683 439 %
Weighted average basic common shares o/s 54,190,359 8,074,548 571 % 44,851,596 3,735,020 1,101 %
  1. On February 23, 2010, the Company completed a 1 for 3 share split. On November 24, 2010, the Company completed a 20 for 1 share consolidation. The June 30, 2010 and June 30, 2011 share amounts are shown with the effect of the split and consolidation.
  2. 2010 figures have been restated from previously reported amounts resulting from the application of IFRS. Includes $3,219 of non-cash charges related to an impairment of a non-core producing asset.
  3. Working capital is calculated as current assets (excluding derivative assets) less current liabilities as presented on the interim financial statements.

Forward Looking and Cautionary Statements

This press release contains certain forward-looking statements (forecasts) under applicable securities laws relating to future events or future performance. Forward-looking statements are necessarily based upon assumptions and judgements with respect to the future including, but not limited to, the outlook for commodity markets and capital markets, the performance of producing wells and reservoirs, well development and operating performance, general economic and business conditions, weather, the regulatory and legal environment and other risks associated with oil and gas operations. In some cases, forward-looking statements can be identified by terminology such as "may", "will", "should", "expect", "projects", "plans", "anticipates" and similar expressions. These statements represent management's expectations or beliefs concerning, among other things, future operating results and various components thereof affecting the economic performance of Hyperion. Undue reliance should not be placed on these forward-looking statements which are based upon management's assumptions and are subject to known and unknown risks and uncertainties, including the business risks discussed above, which may cause actual performance and financial results in future periods to differ materially from any projections of future performance or results expressed or implied by such forward-looking statements. Accordingly, readers are cautioned that events or circumstances could cause results to differ materially from those predicted.

In the interest of providing Hyperion shareholders and potential investors with information regarding the Company, including management's assessment of Hyperion's future plans and operation, certain statements throughout this press release constitute forward looking statements. All forward-looking statements are based on the Company's beliefs and assumptions based on information available at the time the assumption was made. The use of any of the words "anticipate", "continue", "estimate", "expect", "may", "will", "project", "should", "believe" and similar expressions are intended to identify forward looking statements. By its nature, such forward-looking information involves 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. Hyperion believes 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 contained throughout this press release should not be unduly relied upon. These statements speak only as of the date specified in the statements.

In particular, this press release may contain forward looking statements pertaining to the following:

  • the performance characteristics of the Company's oil and natural gas properties;
  • oil and natural gas production levels;
  • capital expenditure programs;
  • the quantity of the Company's oil and natural gas reserves and anticipated future cash flows from such reserves;
  • projections of commodity prices and costs;
  • supply and demand for oil and natural gas;
  • expectations regarding the ability to raise capital and to continually add to reserves through acquisitions and development; and
  • treatment under governmental regulatory regimes.

The material assumptions in making these forward-looking statements include certain assumptions disclosed in the Company's most recent management's discussion and analysis included in the material available on this press release.

The Company's actual results could differ materially from those anticipated in the forward looking statements contained throughout this press release as a result of the material risk factors set forth below, and elsewhere in this press release:

  • volatility in market prices for oil and natural gas;
  • liabilities inherent in oil and natural gas operations;
  • uncertainties associated with estimating oil and natural gas reserves;
  • competition for, among other things, capital, acquisitions of reserves, undeveloped lands and skilled personnel;
  • incorrect assessments of the value of acquisitions and exploration and development programs;
  • geological, technical, drilling and processing problems;
  • fluctuations in foreign exchange or interest rates and stock market volatility;
  • failure to realize the anticipated benefits of acquisitions;
  • general business and market conditions; and
  • changes in income tax laws or changes in tax laws and incentive programs relating to the oil and gas industry.

These factors should not be construed as exhaustive. Unless required by law, Hyperion does not undertake any obligation to publicly update or revise any forward looking statements, whether as a result of new information, future events or otherwise.

Barrels of oil equivalent (boe) may be misleading, particularly if used in isolation. A boe conversion ratio of six thousand cubic feet (mcf) of natural gas to one barrel (bbl) of oil is based on an energy conversion method primarily applicable at the burner tip and is not intended to represent a value equivalency at the wellhead. All boe conversions in this press release are derived by converting natural gas to oil in the ratio of six thousand cubic feet of natural gas to one barrel of oil. Certain financial amounts are presented on a per boe basis, such measurements may not be consistent with those used by other companies.

Estimated values contained in this press release do not represent fair market value.

Neither the TSX Venture Exchange nor its Regulation Services Provider (as the term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

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