Midway Energy Ltd.
TSX : MEL

Midway Energy Ltd.

August 03, 2011 17:42 ET

Midway Releases 2nd Quarter 2011 Results

CALGARY, ALBERTA--(Marketwire - Aug. 3, 2011) - Midway Energy Ltd. ("Midway" or the "Company") (TSX:MEL) is pleased to announce its financial and operating results for the first half ended June 30, 2011.

Highlights

  • Midway's light oil properties contributed to record revenue in the second quarter of $23.4 million and funds from operations of $14.8 million ($0.19 per share);

  • Acquired additional Beaverhill Lake lands in Swan Hills which give Midway an inventory of 140 horizontal drilling locations on approximately 40 net sections of land.

  • Acquired additional drillable Cardium lands in Garrington; year-to-date Midway has acquired lands which contain 23 net Cardium horizontal drilling locations, already replacing the 22 net Cardium drills the Company will complete in 2011;

  • Completed two equity financings raising $33.5 million in new equity in April and $2 million in flow through equity in June;

  • Completed the semi-annual review of the Company's reserves with its lenders resulting in an increase in Midway's bank line to $120 million.

Operations Update

Midway experienced a wet spring similar to most of the oil and gas companies in western Canada. In Swan Hills we did not have any operational activity from late April until late July due to forest fires and wet conditions. The Garrington area experienced some minor delays and disruptions but none that materially impacted operations in the quarter. Despite the inability to produce two of the three newly drilled Beaverhill Lake wells in Swan Hills, we are still able to maintain our previous production guidance of an average of 4,300 boepd for the year and an exit rate of 5,200 to 5,300 boepd, due to the strong performance of the recent Cardium drills in Garrington.

We have increased our capital expenditure program (the "budget") for 2011 with the bulk of the increase being allocated to Swan Hills. We have significantly increased our land position in this area and will continue to pursue the acquisition of additional lands. As of June 30th, Midway had spent approximately 75% of its budget for the year and expects to fund the balance of its capital requirements in 2011 from funds from operations.

Garrington

Midway's Garrington area, which is made up almost entirely of Cardium light oil production, averaged 3,045 boepd in the second quarter of 2011, accounting for 80% of the Company's production. In the second quarter we drilled 8.7 net Cardium horizontal wells and completed 9.0 net wells. Of the completed wells, 7.7 contributed to production in the second quarter.

As at June 30th, Midway had drilled 13.3 Cardium wells in 2011 with 8.7 contributing to production in the first six months of the year with the others coming on production in the third quarter.

We are continuing to see excellent well results in Garrington with the first 15 day rates on the last five wells in excess of 310 boepd.

Swan Hills

We are continuing to expand our knowledge of the Beaverhill Lake oil play in Swan Hills. This year's extremely long spring break up was not anticipated and Midway will plan for it more thoroughly next year. Our budget includes drilling and completing four net horizontal Beaverhill Lake wells in 2011. As at June 30th we were only able to drill, complete and produce one well which has been on production since April 25, 2011 at an average producing rate of 327 barrels of oil per day. We had completed drilling two additional horizontal wells and fraced and completed one of them before forest fires and extremely wet conditions suspended operations. We did not receive any damage from the forest fires and were able to resume activities in the last week of July. We are currently recovering load fluid from the second well and are preparing to frac the third. We have also commenced drilling a fourth well which was moved to a location with better access to a main highway.

We are pleased with the land position we have assembled in Swan Hills. Most of Midway's land has vertical well control with logs and core data showing the presence of the Beaverhill Lake zone.

Outlook

We will continue to follow our plan for quarterly growth and are on track to meet our quarterly production targets for the rest of the year. Our second quarter production of 3,817 boepd was a 98% increase over the second quarter of last year and average production for the month of July was approximately 4,300 boepd. We increased our budget to acquire additional lands in the Swan Hills area which will set the Company up with several years of drilling inventory in a proven play. With a current inventory of over 130 locations in the Cardium in Garrington and 140 locations for the Beaverhill Lake in Swan Hills we are well positioned for future growth.

Corporate Highlights
($ 000's, except operational, share and per share amounts)
Q2

Q2

Change

6 months

6 months

Change
2011 2010 (% ) 2011 2010 (% )
Petroleum and natural gas revenue 23,436 8,645 171 39,769 14,914 167
Funds from operations 14,750 3,915 277 23,823 6,446 270
Basic per share 0.19 0.06 198 0.33 0.10 216
Diluted per share 0.18 0.06 191 0.31 0.10 211
Net earnings 6,465 (932 ) N/A 7,327 1,135 545
Basic per share 0.08 (0.01 ) N/A 0.10 0.02 449
Diluted per share 0.08 (0.01 ) N/A 0.09 0.02 444
Working capital deficiency (1) 16,655 5,296 214 16,655 5,296 214
Bank debt 75,443 26,281 187 75,443 26,281 187
PP&E expenditures 23,661 7,462 217 82,211 28,642 187
E&E expenditures 35,265 - N/A 36,700 - N/A
Total assets 280,857 141,112 99 280,857 141,112 99
Weighted average shares (000's)
Basic 77,771 62,370 25 73,219 62,303 18
Diluted 80,763 62,370 29 77,378 65,068 19
Common shares outstanding (000's)
Basic 79,009 62,370 27 79,009 62,370 27
Diluted 84,921 69,490 22 84,921 69,490 22
Average production:
Oil and NGL's (bbl/d) 2,477 1,008 146 2,246 820 174
Natural gas (mcf/d) 8,041 5,515 46 7,038 4,969 42
Oil equivalent (boe/d 6 : 1) 3,817 1,927 98 3,419 1,648 107
Average realized prices:
Oil and NGL's ($/bbl) 90.72 70.64 28 85.13 72.34 18
Natural gas ($/mcf) 4.06 4.25 (4 ) 4.02 4.59 (12 )
Oil equivalent (boe/d 6 : 1) 67.41 49.10 37 64.19 49.82 29
Netback ($/boe)
Petroleum and natural gas sales 67.41 49.10 37 64.19 49.82 29
Royalties 8.07 5.28 53 7.55 5.55 36
Operating expenses 13.08 14.26 (8 ) 12.64 14.90 (15 )
Operating netback 46.26 29.56 56 44.00 29.37 50
(1) Excludes the current portion of bank debt.

Forward-looking Statements

This news release contains forward-looking statements relating to the Company's plans and other aspects of the Company's anticipated future operations, management focus, strategies, financial and operating results and business opportunities. Forward-looking statements typically use words such as "anticipate", "believe", "project", "expect", "goal", "plan", "intend" or similar words suggesting future outcomes, statements that actions, events or conditions "may", "would", "could" or "will" be taken or occur in the future. In particular, this press release contains forward-looking statements relating, but not limited to:

  • drilling, development and completion plans, targets and prospects and the expected results therefrom;

  • plans to expand the Company's land holdings and drillable land base;

  • anticipated drilling locations in the Company's core areas;

  • anticipated quarterly, exit and average production rates;

  • Midway's capital program, the allocation thereof and the source of funding of the Company's capital program;

  • performance characteristics of Midway's oil and natural gas properties; and

  • Midway's business strategy and management focus and the results therefrom.

These forward-looking statements are based on various assumptions including: the outlook for petroleum and natural gas prices; estimated amounts and timing of capital expenditures and the results therefrom; the timing, location and extent of future drilling operations and the results therefrom; estimates of future production and operating costs; the state of the economy and the exploration and production business; results of operations; performance; business prospects and opportunities; future exchange and interest rates, Midway's ability to obtain equipment in a timely manner to carry out development activities, impact of increasing competition, ability to market oil and natural gas successfully and the ability of Midway to access capital. While Midway considers these assumptions to be reasonable based on information currently available to it, they may prove to be incorrect.

By their nature, forward-looking statements involve numerous assumptions, known and unknown risks and uncertainties and other factors that contribute to the possibility that the predicted outcome will not occur, including, without limitation: risks associated with oil and gas exploration, development, exploitation, production, marketing and transportation; loss of markets; volatility of commodity prices; currency fluctuations; imprecision of reserve estimates; environmental risks; competition from other producers; inability to retain drilling rigs and other services; incorrect assessment of the value of acquisitions; failure to realize the anticipated benefits of acquisitions; general economic conditions in Canada, the U.S. and globally; and ability to access sufficient capital from internal and external sources. Readers are cautioned that the foregoing list of factors is not exhaustive.

Although Midway believes that the expectations represented in such forward-looking statements are reasonable, there can be no assurance that such expectations will prove to be correct. As a consequence, actual results may differ materially from those anticipated in the forward-looking statements and you should not unduly rely on forward-looking statements. The forward-looking statements contained in this news release are made as the date of this new release and the company does not undertake any obligation to update publicly or to revise any of the included forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by applicable securities laws.

Non-GAAP Financial Measures

Midway uses the following terms for measurement within this press release that do not have a standardized prescribed meaning under International Financial Reporting Standards ("IFRS") and previous GAAP and are considered non-GAAP measures. These measurements may not be comparable with the calculation of similar measurements of other entities.

The terms "funds from operations", "funds from operations per share" and "operating netback per boe" in this press release are not recognized measures under GAAP. Management of Midway believes that in addition to net earnings and cash flow from operating activities as defined by GAAP, these terms are useful supplemental measures to evaluate operating performance and assess leverage. Users are cautioned; however, that these measures should not be construed as an alternative to net earnings or cash flow from operating activities determined in accordance with GAAP as an indication of Midway's performance. For a reconciliation of funds from operations refer to Midway's Managements' Discussion and Analysis ("MD&A") for the three and six month period ended June 30, 2011.

Midway considers funds from operations to be an important measure of Midway's ability to generate the funds necessary to finance capital expenditures and repay debt. All references to funds from operations throughout this press release are based on cash provided by operating activities before the change in non-cash working capital and actual decommissioning obligation expenditures since Midway believes the timing of collection, payment or incurrence of these items involves a high degree of discretion and as such may not be useful for evaluating Midway's operating performance. Funds from operations per share are calculated using the weighted average number of shares outstanding used in calculating earnings per share. Operating netback per boe is determined by deducting royalties and operating expenses from petroleum and natural gas sales (all on a per boe basis). Midway's method of calculating funds from operations and operating netback per boe may differ from that of other companies and, accordingly, may not be comparable to measures used by other companies.

51-101 Advisory

In conformity with National Instrument 51-101, Standards for Disclosure of Oil and Gas Activities ("NI 51-101"), natural gas volumes have been converted to barrels of oil equivalent ("boe") using a conversion rate of six thousand cubic feet of natural gas to one barrel of oil. This ratio is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. Readers are cautioned that the term "boe" may be misleading, particularly if used in isolation.

Filings

Midway has filed with Canadian securities regulatory authorities its unaudited consolidated financial statements for the three and six months ended June 30, 2011 and the accompanying MD&A. These filings are available under Midway's SEDAR profile at www.sedar.com. Full pdf versions of our June 30, 2011 unaudited consolidated financial statements and the accompanying MD&A are available on our website at www.midwayenergy.com.

Information Regarding Midway

Midway Energy Ltd. is a public oil and natural gas exploration and development company, located in Calgary, Alberta with operations pursued in Alberta. Midway currently trades on the Toronto Stock Exchange (TSX) under the Symbol "MEL".

Contact Information