Hyperion Exploration Corp.
TSX VENTURE : HYX

Hyperion Exploration Corp.

May 02, 2011 09:00 ET

Hyperion Exploration Corp. Announces Increased 2011 Capital Expenditure Program and Guidance, Year End Financial and Operating Results and Provides Operations Update

CALGARY, ALBERTA--(Marketwire - May 2, 2011) - Hyperion Exploration Corp. ("Hyperion" or the "Company") (TSX VENTURE:HYX) is pleased to announce increased 2011 capital expenditure program and guidance, 2010 highlights, 2011 operations update, and financial and operating results for the year ended December 31, 2010. Selected financial and operational information is outlined below and should be read in conjunction with Hyperion's audited financial statements and related management discussion and analysis which will be available for review under Hyperion's SEDAR profile at www.sedar.com. In addition, the Company will file its annual information form for the year ended December 31, 2010, which includes the Company's reserve data and other oil and gas information as evaluated by McDaniel & Associates Consultants Ltd. in accordance with National Instrument 51- 101 – Standards for Disclosure for Oil and Gas Activities of the Canadian Securities Administrators.

OUTLOOK

Hyperion has achieved significant growth since the recapitalization transaction of Triple 8 Energy Ltd. ("Triple 8") in July 2010. Having closed three equity financings for gross proceeds of approximately $76.5 million together with acquisitions in both the second half of 2010 and the first quarter of 2011, Hyperion is well positioned with a drilling inventory of 63 net locations (51 targeting light oil). Current production, at restricted rates, is approximately 950 boe per day (503 bbls/day light oil and NGLs; 2,680 mcf/day gas).

Hyperion is focused on per share growth through the execution of a repeatable light oil focused drilling program. The 2011 drilling program includes 9 gross (6 net) Cardium wells and 3 gross (3 net) Charlie Lake wells. Of the 6.0 net Cardium wells, 2.8 net wells are forecast to have an initial 30 day production rate (IP30) of 275 boe/day and 3.2 net wells are forecast to have an initial 30 day production rate (IP30) of 175 boe/day. Exit production for 2011 is forecast at 1,500 boe/d comprised of greater than 65% light oil/NGL's. Hyperion will continue to pursue growth through the drill bit and execute its strategy of acquiring assets that compliment and grow our repeatable development drilling inventory.

INCREASED 2011 CAPITAL EXPENDITURE PROGRAM AND GUIDANCE

Hyperion's Board of Directors has approved an increase in the fiscal 2011 capital budget, excluding acquisitions, from $18.7 million to $33.0 million. The upward revision reflects the following:

  • The opportunity to accelerate development of Hyperion's low risk light oil asset base substantiated by excellent internal and offsetting competitor results;
  • The ability to fund these expenditures through a combination of:
    • Strong working capital position of $7 million;
    • 2011 operating cash flow;
    • Undrawn existing credit facilities of $13 million; and
    • Anticipated increase in available credit facilities reflecting interim 2011 drilling results together with the $35 million equity financing and $22 million Garrington asset acquisition completed in Q1 2011;
  • Maintaining financial flexibility with a December 2011 pro forma debt to annualized cash flow of less than 1:1.

The increased 2011 Capital Budget includes a total of $33.0 million for capital expenditures in 2011. These capital expenditures are allocated to the following:

  • Drilling of 9 gross (6 net) Cardium horizontal wells at Pembina and Buck Lake;
  • Drilling of 3 gross (3 net) wells at Paradise, British Columbia; and
  • Funding of $7.7 million for land acquisitions, satisfaction of CEE flow through obligations, construction of oil battery facilities, optimizations, maintenance, and contingencies.

To date in 2011, 2 gross (0.8 net) Cardium horizontal wells have been drilled as have the 3 gross (3 net) wells at Paradise. The balance of the 2011 drilling program will commence after spring breakup.

The following is a summary of Hyperion's upward revised 2011 Budget:

Previous GuidanceRevised Guidance (1)
Average production830 boe/d >55% Light Oil/NGLs950 boe/d >50% Light Oil/NGLs
Exit production1,000 boe/d >65% Light Oil/NGLs1,500 boe/d >65% Light Oil/NGLs
Capital expenditures$18.7 million$33 million
Operating costs 2011 average$11.39$12.20
Royalty rate 2011 average 16%15%
Using Oil/NGLs pricing at April 13th, 2011 forward Strip, US$108.80 WTI front month, 1.04 CAD/USD exchange rate, $3.60/mcf AECO natural gas price held flat for 2011.

2010 HIGHLIGHTS

Hyperion commenced operations in July 2010 with the recapitalization of Triple 8. Triple 8's assets were comprised of approximately $1.4 million in cash and less than 10 boe/d of production, and the entity was an excellent vehicle to execute Hyperion's strategy of providing high growth through acquisitions which lead to lower risk, scalable and repeatable light oil development drilling. The following represents the highlights of Hyperion's first six months of operations since the completion of the recapitalization (all prices and share amounts are displayed post the 20:1 share consolidation which was effective in November 2010):

  • In July 2010, Hyperion completed a non-brokered equity financing for gross proceeds of $9.8 million. The financing consisted of 2,575,000 units priced at $1.20 per unit (each unit consisted of 1 common share and 1 common share purchase warrant, exercisable for a period of 5 years at $2.00 per share) and 5,639,286 common shares issued at $1.20 per share.
  • In July 2010, Hyperion closed its first property acquisition at Paradise, British Columbia for a cost of $4.3 million. Paradise added 68 boe/d (50% light oil) of low decline production to Hyperion and is highlighted by a repeatable, Charlie Lake, light oil development drilling opportunity. As part of the acquisition, Hyperion also acquired 10,000 net acres of undeveloped land, a 50% operated working interest in a gas processing facility, 39 square kilometers of proprietary 3D seismic and secondary development drilling opportunity in up to 8 different formations. Paradise was acquired for $63,235 per flowing boe and $24.18 per boe of Proved plus Probable Reserves ("P+P"). Hyperion's average upside working interest is 80%.
  • In November 2010, Hyperion closed its second property acquisition at Pembina/Niton, Alberta, including 480 boe per day of production (42% light oil and NGLs) for total consideration of $30 million. The Pembina/Niton acquisition added 18,674 net acres of repeatable, Cardium, light oil development drilling opportunity which has quickly become the Company's primary focus. The Company has also identified a liquids rich, Wilrich gas development opportunity that will be inventoried for the future. Pembina/Niton was acquired for $62,500 per flowing boe and $13.31 per boe of P+P reserves. Hyperion's average upside working interest is 71%.
  • In November 2010, Hyperion closed a bought deal equity financing for total proceeds of $31.75 million. The financing consisted of 19,166,700 units price at $1.50 per unit (each unit consisted of one common share and one-half of one common share purchase warrant exercisable for a period of 2.5 years following the closing of the financing at $2.00 per share) and 1,764,750 common shares issued on a "flow-through" basis at $1.70 per share.
  • Hyperion participated in the drilling of 1 gross (0.43 net) Cardium horizontal well. The 30 day initial production ("IP30") results for this well and subsequent drilling validated Hyperion's internal Cardium, light oil type curve in the area of 275 boe/day.

2011 OPERATIONS UPDATE

Hyperion increased its Cardium light oil focus in the first quarter of 2011 through two asset acquisitions, Garrington and Buck Lake, for total cash consideration of $26.25 million. Both of these areas are the focus of intense industry activity, specifically in the Cardium, where other producers continue to de-risk and validate Hyperion's land base. Highlights of each transaction are as follows:

  • The Garrington asset was purchased for total cash consideration of $22 million and includes 350 boe/d of production (56% light oil and NGLs), 20 net horizontal drilling locations, 14.9 square kilometers of 3D seismic and 2,560 net acres of undeveloped land. Hyperion has identified 11 gross (9 net) Cardium light oil development locations, with the secondary development drilling opportunity identified in the Glauconite, Ellerslie, and Elkton formations. Garrington was acquired for $62,857 per flowing boe and $21.69 per boe of P+P reserves. Hyperion's average upside working interest is 90%.
  • The Buck Lake asset was purchased for total cash consideration of $4.25 million and consists of 1,664 net acres of undeveloped land highly prospective for Cardium light oil development. The Buck Lake asset does not have reserves associated with it, but does include Company owned solution gas gathering infrastructure that will ensure timely optimization of future Cardium oil development. Hyperion has identified more than 14 net, Cardium horizontal light oil drilling locations. The average Cardium upside working interest is 65%.

In conjunction with the Garrington and Buck Lake acquisitions, Hyperion successfully completed its third financing in March 2011, for gross proceeds of $35 million. The financing resulted in the issuance of 22.0 million common shares issued at $1.50 per share and 1,111,150 million common shares issued on a "flow-through" basis at $1.80 per share.

Hyperion was also an active driller in the first quarter of 2011. The Company participated in the drilling of 2 gross (0.8 net) Cardium horizontal oil wells and operated the drilling of 3 gross (3 net) Charlie Lake vertical wells. The following are additional details of each drilling program:

  • The Cardium wells, drilled in the Pembina area, were placed on production at the end of Q1 2011. Production continues to be restricted until such time as the solution gas tie in is completed (post spring break up), but based on early performance, Hyperion expects both wells will follow Hyperion's area type curve profile with an initial 30 day production rate (IP30) of 275 boe/day.
  • At Paradise, Hyperion drilled for Charlie Lake light oil. All three wells encountered Charlie Lake reservoir, two of which encountered light oil and the third discovered natural gas. Hyperion fracture stimulated one of the oil wells prior to spring breakup with encouraging test rates after all frac oil was recovered. The Company will be equipping this well for further productivity evaluation prior to post break up stimulation of the second oil well. The Charlie Lake natural gas well is shut in awaiting further post breakup stimulation and tie in operations.

Hyperion's acquisitions and field operations have had a significant impact on production, increasing from less than 10 boe per day in June 2010 to a 2010 exit rate of 550 boe per day (229 bbl/day light oil and NGLs; 1,924 mcf/day gas). Production continued to accelerate through the first quarter of 2011 to Hyperion's current rate of approximately 950 boe per day (503 bbls/day light oil and NGLs; 2,680 mcf/day gas).

FINANCIAL HIGHLIGHTS

3 Months Ended December 3112 Months Ended December 31
20102009% Change20102009% Change
Financial ($000's except per share amounts)
Oil and NGL sales1,026263846%1,247119948%
Natural gas sales536317767%576115136%
Total oil, NG, & oil1,562295286%1,8231301302%
Funds inflow (outflow) from operations417(63)nm(248)(188)32%
Per common share basic ($)0.01(0.08)nm(0.01)(0.24)(97)%
Net earnings (loss)(625)(64)877%(1,678)(220)663%
Per common share basic ($)(0.02)(0.08)(75)%(0.05)(0.28)(81)%
Capital expenditures including deposits30,645-nm35,493-nm
Working capital exit5,1311,035396%5,1311,035396%
Unused credit facilities13,00013,000
Production
Oil & NGL (bbls per day)15143675%476683%
Natural gas (mcf per day)1,409817513%39257740%
Total (boe per day) (6:1)38657620%11271500%
Exit (boe per day) (6:1)550550
Average realized price ($'s - production weighted)
Oil & NGL ($ per bbl)73.7971.713%72.5746.8055%
Natural gas ($ per mcf)4.134.071%4.032.9338%
Average ($ per boe)43.9859.72(26)%44.4645.78(3)%
Netback ($'s per boe)
Oil, natural gas and NGL sales43.9859.72(26)%44.4645.78(3)%
Royalties(6.72)(3.30)104%(6.15)(3.90)58%
Operating and transportation expenses(12.91)(19.15)(33)%(16.16)(40.03)(60)%
Operating netback24.3537.27(35)%22.151.851097%
Common Shares (pre-consol./post-split1)
Common shares o/s, end of period31,064,209793,7693814%31,064,209793,7693814%
Weighted average basic common shares o/s19,123,912793,7692309%7,613,769793,769859%
Fully diluted common shares o/s, end of period47,412,3451,155,8694002%47,412,3451,115,8694002%
1On 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 December 31, 2010 and December 31, 2009 share amounts are shown with the effect of the split and consolidation.

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.

Contact Information