Open Range Energy Corp.
TSX : ONR

Open Range Energy Corp.

April 07, 2011 17:11 ET

Open Range Energy Corp. Announces Continuing Wilrich Horizontal Drilling Success, Poseidon Concepts Expansion and Revised First-Half Cash Flow Guidance

CALGARY, ALBERTA--(Marketwire - April 7, 2011) - Open Range Energy Corp. ("Open Range" or the "Company") (TSX:ONR) is pleased to provide an update on the continuing success of its Wilrich-focused winter drilling program and on the further expansion of its Poseidon Concepts tank fleet to meet increasing demand. Guidance for first-half 2011 (H1) consolidated cash flow from operations is increased to $29 million ($0.45 per basic share) from $22 million previously.

Wilrich Update

Open Range has now drilled, completed and brought on-production three Wilrich horizontal wells (100 percent working interest) of its planned four-well H1 capital program at the Company's core Ansell/Sundance Deep Basin property. The fourth well is planned to be fracture stimulated within the week.

As previously press-released, the first well of the H1 program came on-stream in mid-February. The second and third wells, each drilled to a total measured depth of over 4,000 metres, recently underwent completion operations using a packer system. They were placed on test in March to clean up fracture fluids, flowing up 4 ½" casing at initial cleanup rates of up to 7.5 mmcf per day and 5.5 mmcf per day, respectively. The wells were recently tied-in to Open Range's gathering and processing facilities at initial production rates of 4.2 mmcf per day plus NGL and 3.0 mmcf per day plus NGL, respectively. This early data continues to indicate strong per-well reserves and attractive economics at prevailing commodity prices, and demonstrates the repeatability of the Wilrich play over Open Range's lands.

Initial 30-day average productivity (IP30) among competitor wells in the greater Ansell/Sundance area is averaging approximately 3.5 mmcf per day, ranging from 1.7 mmcf per day to 6.6 mmcf per day. Open Range's initial Wilrich horizontal well came on-stream October 2010 with an IP30 of 4.3 mmcf per day. The first well of the winter program came on-stream mid-February with an IP30 of 3.9 mmcf per day. These two wells have cumulative production to date of approximately 450 mmcf and 230 mmcf (plus NGL), respectively. Open Range's four wells to date are meeting the Company's expectations and reflect a normal production distribution for the Wilrich play. 

Total Wilrich horizontal production in the greater Ansell/Sundance area is now approximately 100 mmcf per day (plus NGL) from 39 producing wells, including Open Range's four net wells. Within six months of tying in its first Wilrich horizontal well, the Company is contributing approximately 10 percent of the estimated area Wilrich horizontal production.

The fourth well (60 percent working interest) of the H1 program is expected to be brought on-stream in late April, weather permitting, which will give the Company a total of five (4.6 net) Wilrich horizontal wells on-production as it commences its second-half 2011 (H2) program.

Poseidon Update

The oil and natural gas upstream sector continues to respond to the performance and cost advantages of the innovative Poseidon Concepts fracturing fluid handling system. The Poseidon tank fleet has been expanded from 65 rental systems at the end of February to 80 as of March 31, which includes 10 of the recently deployed 41,000-barrel capacity Atlantis models.

Fleet expansion is ongoing to meet increasing demand, which now includes minimum 12-month commitments commencing in the first and second quarters of 2011 from 11 major U.S. and Canadian oil and natural gas companies. These commitments will utilize approximately 30 percent of the current tank rental fleet and are expected to generate combined minimum revenue of approximately $30 million over the period from February 2011 through March 2012.

The Company estimates Poseidon's H1 cash flow from operations and EBITDA to be $16.5 million, based on the expanding activities observed to date and continued strong operating margins of 80-85 percent.

Poseidon continues to expand its footprint in the United States, with approximately one-third of the current fleet operating in the U.S. as of early April. Poseidon has established a presence in four states and expects to deploy multiple units in several other key operating regions over the near term. Expansion is achieving customer and geographical diversification, weighted to the expanding oil and liquids-rich natural gas shale plays in North America. U.S. expansion is already helping to offset the normal seasonal impact of slower industry activity during spring break-up in western Canada.

Outlook

Given Open Range's ongoing capital efficiency efforts, the winter program included executing various drilling and completion optimization techniques including the Company's first micro-seismic program. The data will be utilized to continue optimizing fracture design and well spacing with the aim to maximize reserve capture without over-capitalizing the asset base. The Company has a current inventory of 41 (35 net) Wilrich horizontal locations over 20 net sections. 

Open Range's H1 consolidated cash flow from operations is expected to be $29 million ($0.45 per basic share), compared to the Company's previous guidance of $22 million. The significant increase is due to growing demand for Poseidon Concepts tank rentals and slightly positive revenue impact from the Company's conservative commodity price forecasting. Current Company production is approximately 4,400 boe per day.

The Company is finalizing its H2 capital program along with associated production and cash flow guidance for both its exploration and production operations and the Poseidon Concepts business unit. Open Range management expects the H2 program to accelerate horizontal drilling opportunities including a continued focus on Wilrich development and continued expansion of Poseidon Concepts' reach.

OPEN RANGE ENERGY CORP. IS A PUBLICLY TRADED CANADIAN ENERGY COMPANY WITH FOCUSED OPERATIONS IN THE DEEP BASIN REGION OF ALBERTA AND AN EXPANDING NORTH AMERICAN WELL COMPLETIONS EQUIPMENT AND SERVICE BUSINESS.

OPEN RANGE HAS APPROXIMATELY 68.0 MILLION COMMON SHARES ISSUED AND OUTSTANDING, WHICH TRADE ON THE TSX UNDER THE SYMBOL "ONR".

Reader Advisory

This news release contains certain forward-looking statements, which include assumptions with respect to (i) results from drilling and completion operations; (ii) production; (iii) future capital expenditures; (iv) funds from operations; (v) cash flow from operations and EBITDA; (vi) demand for Poseidon Concepts' tank systems and the corresponding utilization rate and operating margins; (vii) future capital expenditures and how they will be financed; and (viii) general oil and gas industry activity. The reader is cautioned that assumptions used in the preparation of such information may prove to be incorrect. Such risks and uncertainties include, without limitation, risks associated with oil and natural 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, dependence on manufacturers of the Poseidon Concepts tank systems; operating risk liability; demand for Poseidon Concepts' tank systems; levels of competition in the fracturing fluid storage industry; the ability of Poseidon Concepts to attract and retain clientele; the ability of Poseidon Concepts to fund its ongoing capital requirements; Poseidon Concepts' limited operating history; delays resulting from or inability to obtain required regulatory approvals and ability to access sufficient capital from internal and external sources, the impact of general economic conditions in Canada and the United States, industry conditions, changes in laws and regulations (including the adoption of new environmental laws and regulations) and changes in how they are interpreted and enforced, increased competition, the lack of availability of qualified personnel or management, fluctuations in foreign exchange or interest rates, stock market volatility and market valuations of companies with respect to announced transactions and the final valuations thereof, and obtaining required approvals of regulatory authorities. Open Range's actual results, performance or achievements could differ materially from those expressed in, or implied by, these forward-looking statements and, accordingly, no assurances can be given that any of the events anticipated by the forward-looking statements will transpire or occur, or if any of them do, what benefits, including the amount of proceeds, Open Range will derive therefrom. Readers are cautioned that the foregoing list of factors is not exhaustive. All subsequent forward-looking statements, whether written or oral, attributable to Open Range or persons acting on its behalf are expressly qualified in their entirety by these cautionary statements. Additional information on the foregoing risks and other factors that could affect Open Range's operations and financial results are included in the Company's annual information form and other reports on file with Canadian securities regulatory authorities and may be accessed through the SEDAR website (www.sedar.com). Furthermore, the forward-looking statements contained in this news release are made as at the date of this news release and Open Range 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.

Disclosure provided herein in respect of barrel(s) of oil equivalent (boe) may be misleading, particularly if used in isolation. A boe conversion ratio of 6 mcf:1 barrel is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.

Contact Information

  • Open Range Energy Corp.
    A. Scott Dawson, P.Eng.
    President and Chief Executive Officer
    403-205-3704
    or
    Open Range Energy Corp.
    Lyle D. Michaluk, CA
    Vice President, Finance and Chief Financial Officer
    403-262-9280
    www.openrangeenergy.com