Open Range Energy Corp.

Open Range Energy Corp.

May 18, 2011 17:32 ET

Open Range Energy Corp. Announces First-Quarter Highlights, Accelerated 2011 Capital Program and Full-Year Guidance

CALGARY, ALBERTA--(Marketwire - May 18, 2011) - Open Range Energy Corp. ("Open Range" or the "Company") (TSX:ONR) is pleased to announce record quarterly funds from operations and strong growth in funds from operations per share in the three months ended March 31, 2011, and to provide an overview of its 2011 capital program and guidance. Guidance includes a forecast 2011 exit production rate of 6,200 boe per day.

First-Quarter 2011 Highlights (Unaudited)

In the three months ended March 31, 2011, OpenRange:

--  Had estimated consolidated funds from operations of $14.5 million or
    $0.23 per basic share. This is an increase of 56 percent from $9.3
    million ($0.15 per share) in the fourth quarter of 2010 and of 111
    percent from $6.9 million ($0.11 per share) in the first quarter of
    2010, and represents Company record consolidated quarterly funds from
--  Generated estimated EBITDA of $8.8 million from its Poseidon Concepts
    fracturing fluid handling business unit, which is included in
    consolidated funds from operations; 
--  Had average estimated production of 3,693 boe per day and exited the
    quarter with production of approximately 4,400 boe per day; 
--  Made consolidated capital expenditures of approximately $34 million to
    fund the drilling and completion of four (3.6 net) Wilrich horizontal
    wells at its Ansell/Sundance Deep Basin property and to expand the
    Poseidon Concepts tank fleet to approximately 80 systems by quarter-end;
--  Continued on its track of declining operating costs, with operating
    costs including transportation averaging $4.47 per boe ($0.74 per mcfe)
    of production in the first quarter of 2011, compared to $5.45 per
    boe($0.91 per mcfe) in the fourth quarter of 2010 and $6.54 per
    boe($1.09 per mcfe) in the first quarter of 2010. 

Open Range's complete financial and operating results for the three months ended March 31, 2011 are expected to be released on June 1, 2011, along with regulatory filing of the Company's IFRS-based consolidated financial statements and management's discussion and analysis for the period.

The Company's annual and special meeting of shareholders will be held on June 2 at 9 a.m.Mountain Daylight Time in the Strand-Tivoli room of the Metropolitan Conference Centre in Calgary, Alberta.

2011 Capital Program

Capital expenditures and financial resources

OpenRange's Board of Directors has approved a full-year capital budget of $100 million, including expenditures to date. This will fund an expanded horizontal drilling program focused on the Company's Ansell/Sundance Deep Basin property as well as continued expansion of the Poseidon Concepts tank fleet in Canada and the United States. The 2011 capital program will continue to move OpenRange towards its goal of 10,000 boe per day by the end of 2012.

The capital program will be funded primarily through anticipated funds from operations, supplemented by the $20 million bought-deal equity financing which closed in March and modest additional borrowings. The 2011 program will aim to enhance capital efficiencies in the Company's drilling and completions activities and maximize per-well production performance, in order to optimize returns on investment.

Open Range is pleased to report it has received commitments to increase its borrowing capacity toup to $90 million (from $80 million), subject to final documentation, with its expanded banking syndicate comprising National Bank of Canada, Canadian Western Bank and Union Bank. Union Bank's participation will in part facilitate banking services for Poseidon Concepts' business in the United States. Total borrowings on the Company's credit facilities were $44.1 million at March 31, 2011.

Field activities

The Company's planned field activities for the remainder of 2011 include an accelerated horizontal drilling program utilizing two drilling rigs at Ansell/Sundance and comprising five (3.8 net) Wilrich wells, two (100 percent working interest) Notikewin wells and one (0.6 net) Cardium well, all targeting liquids-rich gas at Ansell/Sundance, plus potentially one net well targeting Montney light oil at the Company's new 100 percent working interest play at Waskahigan. This will bring OpenRange's 2011 drilling activity to a total of 14 (11.2 net) horizontal multi-stage fractured wells. Drilling will resume as soon as possible after spring break-up.

The current program builds on the strong success of the Company's initial Wilrich program at Ansell/Sundance, where five gross wells drilled and completed over fall 2010 through spring 2011 are on-stream. The Company continues to be very pleased with the strong repeatability and initial productivity shown in its Wilrich program.

The Company's first Wilrich well has produced a cumulative total of more than 0.5 bcf since coming on-stream in October, the second well has produced over 300 mmcf over its first 90 days, and the most recent tie-in has produced more than 100 mmcf in its first 30 days. OpenRange's combined net Wilrich production in mid-May is estimated at 1,850 boe per day. At current capital efficiencies, low operating costs and a well type curve suggesting ultimate expected average recovery of approximately 3.5 bcf and 45,000 bblsof NGL per well, Wilrich horizontal development is highly economic even at current natural gas prices.

The 2011 program also expands the Company's horizontal drilling focus to test more of the multiple play opportunities at Ansell/Sundance. OpenRange's previous vertical drilling has established productivity in 17 geological zones at Ansell/Sundance, and the DeepBasin around Ansell/Sundance is proving amenable to horizontal development in at least six of these horizons.

The 2011 program includes two 100 percent working interest horizontal wells targeting the Notikewin and one (0.6 net) targeting the Cardium. The Company's existing Notikewin horizontal wells continue to perform well, having combined cumulative production to date of more than 1.2 bcf since coming on-stream in the first half of 2010. The Notikewin channel sands have a large gas-in-place resource estimated at up to 20 bcf per section, and OpenRange has mapped an extensive Notikewinfairway on its land base at Ansell/Sundance. Certain technical enhancements in the completions process developed in the Wilrich program will be applied to the Company's future Notikewin wells. OpenRange expects this optimization to increase productivity and expected resource recovery, enhancing what is already an economic play at Ansell/Sundance.

In addition the Company plans to drill one (0.6 net) horizontal well targeting the Cardium. Competitor Cardium wells offsetting Company lands have shown strong results and favourable economics due in large part to the Cardium's high liquids content in the area. Open Range has over 10 net sectionsof prospective lands within the greater Ansell/Sundance Cardium fairway.

OpenRange has initiated expansion of its Company-operated gas plant at Ansell/Sundance (61 percent working interest). The $6.5 million expansion will increase capacity by 50 percent to a planned 60 mmcf per day to handle anticipated production increases. The plant currently extracts the full range of natural gas liquids, enabling OpenRange to realize premium pricing for heavier liquids such as condensate. Procurement of components is underway, construction is to begin in early summer and the expanded capacity is expected to be on-stream in the fourth quarter. The Company considers infrastructure investments of this nature pivotal to ensuring timely tie-in of new production and continued reduction of its operating costs per boe.

Poseidon Concepts

Poseidon Concepts' tank rental activities continue to expand in the United States and are expected to resume growth following the seasonal spring break-up period in western Canada. The current tank fleet stands at approximately 100 systems.

Poseidon is expanding its U.S. activities to seven states, where it is participating in some of the most active and rapidly growing unconventional oil and liquids-rich natural gas plays. Poseidon's patent application recently received its acceptance from the Canadian Intellectual Property Office, as disclosed on May 10, 2011.

Long-term minimum commitments have also continued to increase and currently total $45 million in revenue through June 2012, of which approximately $33 million will be generated by year-end 2011.

2011 Guidance

Open Range's current production is approximately 4,400 boe per day. Key guidance for 2011 comprises:

--  Average production of 4,500 boe per day; 
--  Exit production of 6,200 boe per day; 
--  Capital expenditures of $100 million; 
--  Drilling and completion of 14 (11.2 net) horizontal multi-stage
    fractured wells; 
--  Consolidated funds from operations of $70 million or $1.05 per basic
    share, comprising $45 million in EBITDA from Poseidon Concepts and $25
    million in funds from operations from exploration and production
    activities (based on an average realized natural gas price of $3.75 per
--  Net debt of approximately $60 million at year-end; and 
--  A year-end net debt to annualized fourth quarter funds from operations
    ratio of 0.6:1, compared to 1.3:1 at year-end 2010. 



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 and operating activities and how they will be financed; (iv) funds from operations; (v) cash flow from operations and EBITDA; (vi) demand for Poseidon Concepts' tank systems; and (vii) 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 ( 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

    Open Range Energy Corp.
    Lyle D. Michaluk, CA
    Vice President, Finance and Chief Financial Officer