Orleans Energy Ltd.

Orleans Energy Ltd.

May 06, 2009 17:00 ET

Orleans Energy Announces Updated Bank Loan Facility, Provides Operations Update and Appoints Chairman of the Board

CALGARY, ALBERTA--(Marketwire - May 6, 2009) - Orleans Energy Ltd. ("Orleans" or the "Company") (TSX:OEX) is pleased to announce and provide the following:

Bank Loan Facility

The Company announces that it has diversified its lending arrangements by entering into a committed, extendible revolving bank facility (the "Credit Facility") underwritten by a two-bank syndicate including the Bank of Montreal, acting as agent bank, and Alberta Treasury Branches (collectively the "Lenders"). The successful graduation from the pre-existing demand facility to a committed syndicated facility endorses the quality of Orleans' asset base and the strength of its banking relationships in the midst of volatile and tightened credit markets. The maximum borrowing amount of the Credit Facility provided by the Lenders is set at $65 million, with borrowings available on a fully revolving basis through to April 29, 2010, at which time Orleans can request approval by the Lenders for an extension for an additional 364 day cycle or convert the outstanding bank indebtedness to a one-year term loan. As of May 4, 2009, $46.3 million or 71% was drawn against the existing line of credit.

Operations Update

At the end of January 2009, the Company finalized the installation of a second, two-stage compressor unit at the Orleans-owned and operated Kaybob 10-22-60-19W5M Compression Facility site, enabling its Montney gas production to bypass a third-party compression facility and flow directly north into the Kaybob Amalgamated gas plant ("KA Gas Plant"). Prior to the installation of the second compressor, the Company's Kaybob production was tempered throughout January as only its first compressor unit was operational. As a result, for the three months ended March 31, 2009, Orleans' corporate average daily production was 4,181 barrels of oil equivalent ("boe") per day. However, the corporate average production yield for the two-month period of February and March 2009 approximated 4,600 boe per day, with a commodity weighting of 81% natural gas and 19% percent light gravity crude oil and natural gas liquids ("NGLs"). Orleans' Kaybob Montney production base contributed approximately 3,000 boe per day or 65% to this two-month period average daily output.

In the first quarter of 2009, the Company successfully drilled two (2.0 net) horizontal Montney gas wells at Kaybob. The 100% working interest wells were drilled from a common lease pad on section 11-60-19W5M allowing for minimal surface lease disturbance and expedited tie-in subsequent to application of the "Packers Plus" completion technology. Multi-stage, sequential well bore fractures of 140 and 160 tonnes of total sand displacement over seven and eight stages were performed, respectively. The wells were placed on-stream on April 16th and 18th, 2009 at strong rates. During the period between production start-up and the shut-down of the KA Gas Plant discussed hereafter, the wells average "flush" production rates, net shrinkage, were approximately 3.3 million cubic feet ("mmcf") per day (624 boe per day including associated NGLs) and approximately 3.6 mmcf per day (690 boe per day including associated NGLs), respectively. Both wells are anticipated to receive substantial benefit from the March 3, 2009 announced Government of Alberta New Well Incentive Program, which provides for a maximum 5% royalty rate on new well production generated through to March 31, 2010.

At Kaybob, on April 24, 2009, Orleans' Montney production was temporarily disrupted as part of the previously disclosed, planned maintenance turnaround at the KA Gas Plant. This major maintenance turnaround is expected to curtail Orleans' Kaybob production for a period of up to four weeks.

The Company is actively progressing with the installation of the strategic, Orleans-owned Kaybob pipeline. Notwithstanding "spring break-up" weather conditions and the level of complexity associated with both river and creek boring operations, the Company has made significant strides with the installation of the 18.2 kilometre pipeline project ("Kaybob K3 Pipeline Project"). To recap, the Kaybob K3 Pipeline Project is designed to transport up to 75 mmcf of natural gas per day directly from Orleans' 10-22-60-19W5M Compression Facility site to the midstream-operated Kaybob South #3 Gas Plant Facility ("K3 Gas Plant") located at 3-15-59-18W5M. The K3 Gas Plant is significantly under-utilized with nameplate design of 675 mmcf per day and throughput of only approximately 240 mmcf per day.

Financially, the Kaybob K3 Pipeline Project provides Orleans with significant operating cost savings as the processing fee structure at the K3 Gas Plant is presently lower than the current processing fees charged at the KA Gas Plant. Additionally, the pipeline would eliminate the current pipeline fee charged to the Company by an area operator. Moreover, Orleans expects to generate pipeline transportation revenue from partner working-interest owners and potential third-party utilization.

Operationally, the Kaybob K3 Pipeline Project provides access to a new pipeline system with lower operating pressures and an under-utilized gas plant functioning at lower inlet pressures, therefore providing for improved operating conditions. The Company will also possess the ability to transport and process gas volumes to either the KA Gas Plant or the K3 Gas Plant, thereby minimizing downtime during plant turnarounds and unscheduled plant shutdowns.

Strategically, the Kaybob K3 Pipeline Project facilitates unimpeded, long-term development of Orleans' extensive Montney asset base through direct control and ownership of a strategic pipeline. Orleans currently holds 28 sections (25.5 net) of Montney rights within the heart of the Kaybob Montney fairway. On March 16, 2009, the Company received regulatory approval to drill five wells per section on 25 sections (22.5 net) with no interwell distance restrictions, thereby providing for enhanced reserves recoveries and economic development of the Triassic Montney formation. As a result, the Company's Kaybob multi-year drilling inventory is expected to expand to over 100 operated horizontal drilling locations. Incidentally, Orleans has only five sections of land where it has production from three wells per section on reduced spacing.

Chairman of the Board Appointment

Orleans is pleased to announce that D. Michael G. Stewart, P.Eng., has been appointed the non-executive Chairman of the Board of the Company. Mr. Stewart is a current member of the Board of Directors of Orleans and also serves as a director on the boards of Pengrowth Energy Trust, TransCanada Corporation, Canadian Energy Services Inc. (the general partner of Canadian Energy Services LP), and Northpoint Energy Ltd.

Annual General Meeting of Shareholders

The Company will hold its annual general meeting of shareholders on Wednesday, June 10, 2009 at 3:00 p.m. in the McMurray Room of the Calgary Petroleum Club located at 319 - 5th Avenue S.W., Calgary, Alberta, Canada.

First Quarter 2009 Financial Results

Orleans expects to release its financial results for the three-month interim period ended March 31, 2009 prior to the opening of trading on the TSX on Thursday, May 14, 2009.

Orleans Energy Ltd. is a Calgary, Alberta-based emerging crude oil and natural gas company, with common shares trading on the Toronto Stock Exchange under the symbol "OEX". Orleans is a team of dedicated, experienced professionals focused on the creation of shareholder value via acquisition, exploration and development of crude oil and natural gas assets in Alberta, Canada.

The information in this news release contains certain forward-looking statements. These statements relate to future events or our future performance. All statements other than statements of historical fact may be forward-looking statements. Forward-looking statements are often, but not always, identified by the use of words such as "seek", "anticipate", "plan", "continue", "estimate", "approximate", "expect", "may", "will", "project", "predict", "potential", "targeting", "intend", "could", "might", "should", "believe", "would" and similar expressions. These statements involve substantial known and unknown risks and uncertainties, certain of which are beyond the Company's control, including: the impact of general economic conditions; 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; fluctuations in commodity prices and foreign exchange and interest rates; stock market volatility and market valuations; volatility in market prices for oil and natural gas; liabilities inherent in oil and natural gas operations; uncertainties associated with estimating oil and natural gas reserves; competition for, among other things, capital, acquisitions, of reserves, undeveloped lands and skilled personnel; incorrect assessments of the value of acquisitions; changes in income tax laws or changes in tax laws and incentive programs relating to the oil and gas industry ; geological, technical, drilling and processing problems and other difficulties in producing petroleum reserves; and obtaining required approvals of regulatory authorities. The Company's actual results, performance or achievement could differ materially from those expressed in, or implied by, such 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 that the Company will derive from them. These statements are subject to certain risks and uncertainties and may be based on assumptions that could cause actual results to differ materially from those anticipated or implied in the forward-looking statements. The Company's forward-looking statements are expressly qualified in their entirety by this cautionary statement. Except as required by law, the Company undertakes no obligation to publicly update or revise any forward-looking statements.

Any references in this news release to initial test production rates and/or "flush" production rates are useful in confirming the presence of hydrocarbons, however, such rates are not determinative of the rates at which such wells will commence production and decline thereafter. While encouraging, readers are cautioned not to place reliance on such rates in calculating the aggregate production for the Company.

In this news release, reserves and production data are commonly stated in barrels of oil equivalent ("boe") using a six to one conversion ratio when converting thousands of cubic feet of natural gas ("mcf") to barrels of oil ("bbl") and a one to one conversion ratio for natural gas liquids ("NGLs" or "ngls"). Such conversion may be misleading, particularly if used in isolation. A boe conversion ratio of 6 mcf: 1 bbl is based on energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.

Any reference to net debt refers to outstanding or drawn bank debt plus working capital deficit (excludes current unrealized amounts pertaining to risk management commodity contracts) plus long-term accounts receivables. Net debt is not a recognized measure under Canadian generally accepted accounting principles ("GAAP").

Contact Information

  • Orleans Energy Ltd.
    Barry Olson
    President & CEO
    (403) 215-2941
    (403) 261-8850 (FAX)
    Email: bolson@orleansenergy.com
    Orleans Energy Ltd.
    Dean Bernhard
    Vice President, Finance & CFO
    (403) 215-2945
    (403) 261-8850 (FAX)
    Email: dbernhard@orleansenergy.com
    Orleans Energy Ltd.
    Head office: Suite 1200, 500-4th Avenue S.W.
    Calgary, Alberta, T2P 2V6
    Website: www.orleansenergy.com