Orion Oil & Gas Corporation

May 12, 2011 18:05 ET

Orion Announces a 60% Increase in Average Daily Production Levels From Q1-2010 and Q1-2011 Interim Results

CALGARY, ALBERTA--(Marketwire - May 12, 2011) - Orion Oil & Gas Corporation ("Orion" or the "Company") (TSX:OIP) announces that it has filed its Q1-2011 interim financial statements and the related Management Discussion and Analysis ("MD&A") for the quarter ended March 31, 2011 on SEDAR at www.SEDAR.com and on the Company's website at www.orionoilandgas.ca.

Highlights in Q1-2011 were as follows:

  • Achieved Q1-2011 record funds flow from operations of $12.5 million ($0.04 per share);
  • Achieved a 60% increase in average daily production levels; averaging 5,292 boe/d in Q1-2011 compared to 3,314 boe/d in Q1-2010 due to the successful Q1-2011 and 2010 drilling programs;
  • Drilled 12 wells (11.8 net), including two liquids-rich natural gas wells at the Kaybob property, three horizontal oil wells at the Redwater property, and 7 vertical oil wells at the Redwater property. These Redwater new drills added over 800 bbls/d of initial oil production;
  • Drilled our first multi-lateral horizontal well in the Viking formation at Redwater North (03/13-31) which achieved an initial production rate of 170 bbls/d. We have over 25 potential follow up locations in lands which we acquired during Q4-2010;
  • Reported a loss in Q1-2011 of $1.5 million compared to profit of $0.1 million in Q1-2010. Production and price increases were offset by higher operating expenses and the non-cash unrealized losses from financial derivative instruments, depletion and depreciation, and deferred tax expense. Much of the increase in operating expenses was non-recurring in nature; and
  • Increased the size of our bank credit facility by $60.0 million during the quarter to $120.0 million ($100.0 committed syndicated revolving credit facility and a $20.0 million committed operating facility, hereafter the "Credit Facilities").

Orion continued to build upon the solid production base that was redeveloped in 2010. In Q1-2011, we drilled 12 development wells (11.8 net) with a 100% success rate. Overall, in Q1-2011 we generated funds flow from operations of $12.5 million with production averaging 5,292 boe/d during the quarter. Production at Kaybob has been constrained due to infrastructural limitations, and we are working over Q2 and Q3 to debottleneck the gathering system.

At Redwater, we drilled an Ellerslie horizontal well (04/9-23) which achieved an initial production rate of 320 bbls/d, as well as a multi-lateral horizontal in the Viking formation with its initial production rate of 170 bbls/d. With Orion's Q4-2010 acquisition of 4.6 net sections of Viking rights in Redwater there are 25 to 35 potential follow up Viking locations. In addition, Orion acquired a section of highly perspective Ellerslie land at the May 4, 2011 land sale.

Orion's oil and liquids production as a percentage of total production has increased considerably during the quarter as a result of drilling success at its Redwater property. At the end of Q1-2011, crude oil and natural gas liquids were 55% of total production.

On May 11, 2011, Orion and WestFire Energy Ltd. ("WestFire") entered into a Plan of Arrangement (the "Arrangement") whereby WestFire would acquire all of the issued and outstanding common shares of Orion. If approved by the shareholders, and all other conditions are satisfied or waived, each Orion shareholder may elect to receive 0.125 of a common share of WestFire or 0.125 of a non-listed, non-voting convertible share, in exchange for every one common share of Orion held. Orion expects the transaction to close on or before July 15, 2011. The merger of the two companies will create a uniquely positioned intermediate-sized producer focusing on the world-class Viking oil resource play in Alberta and west central Saskatchewan.

Summary Information Relating to Orion

Orion is engaged in the exploration for and development of oil and natural gas interests located primarily in the Kaybob, Redwater and Bigstone areas of Alberta. Orion is operator at its Kaybob, Redwater and Bigstone properties.

Cautionary Statements

Certain information contained in this press release constitutes forward-looking information or statements including, without limitation, information and statements respecting: anticipated cash flow, future investment objectives, anticipated oil and gas pricing, expected inflation and future foreign exchange rates. Statements relating to "reserves" and "resources" are forward-looking information as they involve the implied assessment, based on certain estimates and assumptions that, among others, the reserves and resources described exist in the quantities predicted or estimated. Forward-looking information and statements are often, but not always, identified by the use of words such as "anticipate", "seek", "believe", "expect", "hope", "plan", "intend", "forecast", "target", "project", "guidance", "may", "might", "will", "should", "could", "estimate", "predict" or similar words or expressions suggesting future outcomes or language suggesting an outlook. By their very nature, forward-looking information and statements involve inherent risks and uncertainties, both general and specific, and risks that predictions, forecasts, projections and other forward-looking information and statements will not be achieved. We caution readers not to place undue reliance on these statements as a number of important factors could cause the actual results to vary materially from the forward-looking information or statements. These factors include, but are not limited to: the volatility of oil and gas prices; production and development costs; capital expenditures; the imprecision of reserve and resource estimates and estimates of recoverable quantities of oil, natural gas and liquids; the Company's ability to replace and expand oil and gas reserves; environmental claims and liabilities; incorrect assessments of value when making acquisitions or dispositions; increases in debt service charges; the loss of key personnel; the marketability of production; defaults by third party operators; unforeseen title defects; fluctuations in foreign currency and exchange rates; inadequate insurance coverage; compliance with environmental laws and regulations; changes in tax and royalty laws; the Company's ability to access external sources of debt and equity capital; and the Company's ability to obtain equipment in a timely manner to carry out development activities. Further information regarding these factors may be found under the headings "Risk Factors" and "Industry Conditions" in the Company's most recent Annual Information Form available under the Company's profile on SEDAR (www.sedar.com). Readers are cautioned that the foregoing list of factors that may affect future results is not exhaustive. When relying on our forward-looking statements to make decisions with respect to the Company, investors and others should also carefully consider information set forth in the section "Forward-Looking Statements" of the Company's most recent Annual Information Form respecting the assumptions upon which the Company bases certain forward-looking information and the uncertainties inherent in such assumptions. The Company does not assume responsibility for the accuracy and completeness of the forward-looking information or statements and such information and statements should not be taken as guarantees of future outcomes. Subject to applicable securities laws, the Company does not undertake any obligation to revise these forward-looking information or statements to reflect subsequent events or circumstances. Furthermore, the forward-looking information contained in this press release are made as of the date of this document 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 required by applicable law. The forward-looking information and statements contained in this press release are expressly qualified by this cautionary statement.

As of January 1, 2011, Orion prepares its consolidated financial statements and comparative information in accordance with International Financial Reporting Standards ("IFRS"). Previously, Orion's consolidated financial statements were prepared using Canadian generally accepted accounting standards ("Canadian GAAP"). Reconciliations between Canadian GAAP and IFRS can be found in Orion's consolidated financial statements for the three months ended March 31, 2011 and 2010.

This press release uses the terms "funds flow from operations" which term is not recognized under IFRS and may not be comparable to similar measures presented by other companies. The Company considers funds flow from operations a key performance measure as it demonstrates the Company's ability to generate funds necessary to repay debt and to fund future growth through capital investment. Funds flow from operations and funds flow from operations per share should not be considered an alternative to, or more meaningful than, cash flow from operating activities as determined in accordance with IFRS. Funds flow from operations is calculated as cash flow from operating activities before adjusting for changes in non-cash working capital. Funds flow from operations per share is calculated using the same weighted average number of shares outstanding as in the case of the net earnings per share calculation for a given reporting period.

For the purposes of this press release, boe has been calculated on the basis of six thousand cubic feet of gas to one barrel of oil. The term boe may be misleading, particularly if used in isolation. A boe conversion ratio of six thousand cubic feet to one 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. The estimates of reserves and future net revenue for individual properties may not reflect the same confidence level as estimates of reserves and future net revenue for all properties, due to the effects of aggregation.

Contact Information

  • Orion Oil & Gas Corporation
    Gary Guidry
    President and Chief Executive Officer
    (403) 297-1430
    (403) 237-9791 (FAX)

    Orion Oil & Gas Corporation
    Douglas Allen
    Chief Financial Officer
    (403) 297-1430
    (403) 237-9791 (FAX)

    Orion Oil & Gas Corporation
    Trevor Peters
    Vice President, Business Development and Corporate Planning
    (403) 297-1430
    (403) 237-9791 (FAX)