Orion Oil & Gas Corporation

December 16, 2010 09:00 ET

Orion Oil & Gas Corporation Announces 2011 Capital Program

CALGARY, ALBERTA--(Marketwire - Dec. 16, 2010) - Orion Oil & Gas Corporation ("Orion" or the "Company") (TSX:OIP) announced today that its Board of Directors has approved a capital spending program of $35 million in 2011 for production development operations (the "Capital Program") at its Alberta properties. The Capital Program includes the drilling of six development wells at Kaybob and fifteen development wells at Redwater, including two horizontal Ellerslie wells and one horizontal Viking well. In addition, Orion will be directing capital to the optimization of existing production and enhancement of infrastructure at both core areas. The Company is well advanced with its planning process relative to the Capital Program, and will be commencing drilling on both properties in January.

Current production from Orion's properties is approximately 6,125 boe/d, with a mix of 52% natural gas and 48% light oil and natural gas liquids. With one remaining Kaybob well coming on production early next week, Orion will have met its 2010 exit guidance of 6,000 to 7,000 boe/d. 

Management expects the 2011 Capital Program to be fully funded from internally generated cash flow and its committed credit facility. 

To protect our 2011 Capital Program, we have entered into a commodity hedging transaction with a major Canadian bank under which we will receive $87.35 against the WTI index denominated in Canadian dollars on production of 1,500 bbls/d for calendar 2011. 

2011 Guidance

As previously released, Orion's strategy for 2010 was to ramp production to a plateau between 5,000 and 7,000 boe/d, and then maintain this level through 2011 and beyond. Our intention is to generate significant free cash flow to support investment in new projects and geographies. We have designed our 2011 Capital Program with this goal in mind.

Specifically, we expect our 2011 average production level to be between 6,000 boe/d and 6,500 boe/d, and our exit production level to be between 6,500 boe/d and 7,000 boe/d. We expect our operating costs to be between $11.75/boe and $12.25/boe.

South America Growth Strategy

Throughout 2010, Orion has evaluated numerous opportunities to expand its operations both in South America and elsewhere. In 2011, we will remain steadfast to our strategic commitment to grow internationally and will continue to aggressively pursue accretive business transactions.

Operations Update

Orion has now completed its 2010 drilling program which included 11 (10.0 net) wells in Kaybob and 20 (19.3 net) wells in Redwater, including two horizontals, one in the Ellerslie formation and one in the Viking formation. All wells have now been completed and are on production, with the exception of one Kaybob well which is expected to be on production by early next week. This will place Orion in the middle of its exit guidance of 6,000 to 7,000 boe/d and within its annual average guidance of 4,050 to 4,900 boe/d.

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's current production is approximately 6,125 boe/d, which is comprised of approximately 48% light oil and natural gas liquids and 52% natural gas. Orion is operator at its Kaybob, Redwater and Bigstone properties.

MEANING OF BOE: When used in this press release, boe means a barrel of oil equivalent on the basis of 1 boe to 6 thousand cubic feet of natural gas. Boe/d means a barrel of oil equivalent per day. Boe's may be misleading, particularly if used in isolation. A boe conversion ratio of 1 boe for 6 thousand cubic feet of natural gas is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.

Cautionary Statements

This press release contains forward looking statements. More particularly, this press release contains statements including management's assessments of the future plans and operations drilling plans, 2010 and 2011 capital expenditure budget and the planned expenditures in respect thereof and production estimates. Although Orion believes that the expectations and assumptions on which the forward-looking statements are based are reasonable, undue reliance should not be placed on the forward-looking statements because Orion can give no assurance that they will prove to be correct. Since forward-looking statements address future events and conditions, by their very nature they involve inherent risks and uncertainties. Actual results could differ materially from those currently anticipated due to a number of factors and risks. These include, but are not limited to risks associated with the oil and gas industry in general (e.g., operational risks in development, exploration and production; delays or changes in plans with respect to exploration or development projects or capital expenditures; the uncertainty of reserves estimates; the uncertainty of estimates and projections relating to production, costs and expenses, and health, safety and environmental risks), commodity price and exchange rate fluctuations and uncertainties resulting from potential delays or changes in plans with respect to exploration or development projects or capital expenditures. Certain of these risks are set out in more detail in Orion's Annual Information Form which has been filed on SEDAR and can be accessed at www.sedar.com.

The forward-looking statements contained in this document are made as of the date hereof and Orion undertakes no obligation to update publicly or revise any forward-looking statements or information, whether as a result of new information, future events or otherwise, unless so required by applicable securities laws.

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)