Questerre Energy Corporation
TSX : QEC
OSLO : QEC

Questerre Energy Corporation

November 14, 2014 00:15 ET

Questerre Reports Third Quarter 2014 Results

CALGARY, ALBERTA--(Marketwired - Nov. 14, 2014) -

THIS NEWS RELEASE IS NOT FOR DISSEMINATION OR DISTRIBUTION IN THE UNITED STATES OF AMERICA
TO UNITED STATES NEWSWIRE SERVICES OR UNITED STATES PERSONS

Questerre Energy Corporation ("Questerre" or the "Company") (TSX:QEC)(OSLO:QEC) reported today on its financial and operating results for the quarter ended September 30, 2014.

Michael Binnion, President and Chief Executive Officer, commented, "Although we experienced some setbacks this quarter, we also moved forward in several other areas. We validated the condensate rates with the positive results from the 16-07 Well on our ten-section block at Kakwa South. At our seven-section block at Kakwa North, we drilled the 14-29 Well with a lateral of one and a half miles. While we were unable to complete this well as originally scheduled due to a mechanical failure, we have a modified plan that should see results by early next year. Although the frac pump rates under this modified plan may be lower than initially planned, the well can become a producer and provide valuable data. We plan to spud our next well at Kakwa North after we have evaluated the 14-29 Well."

He added, "While the economics in the Kakwa area are still very positive, we expect payout times will be longer with the recent drop in oil prices. As a result, the Board has decided to take a conservative approach and defer a full development plan at Kakwa North until we have better visibility on how long prices will remain low."

He further added, "On our joint venture acreage, we completed our first multi-well pad with three wells each with a lateral of approximately one and a half miles. These wells have been on production for 30 days and the flow rates throughout are in line with the gas and condensate rates during testing. These results support our expectations of enhanced economics for wells with longer laterals. We also expanded our original program with a second rig delineating acreage to the west of the existing producing wells. With five wells spud in the third quarter alone, we intend to participate in the drilling of up to two more wells prior to year end."

Highlights

  • Activity in third quarter contributes to current production of over 1,500 boe/d
  • Kakwa South well tests at over 800 boe/d with an estimated 70 bbls/MMcf of total liquids
  • Kakwa North well results delayed with mechanical failure during completion
  • Completed and tied-in first multi-well pad on Kakwa JV acreage with laterals of one and a half miles
  • First commercial scale capsule construction underway by Red Leaf and Total joint venture
  • Production in the quarter averaged 849 boe/d with cash flow from operations of $2.6 million

Updating developments on its oil shale assets, he further added, "During a site visit last month, we saw first-hand the impressive progress made by Red Leaf and Total on the construction of their first large-scale capsule at the Seep Ridge site in Utah. We are looking forward to the completion of construction next year and the firing of the capsule."

Daily volumes in the third quarter averaged 849 boe/d with approximately 100 bbls/d shut-in at Antler and Pierson due to weather. Additionally, Kakwa production was shut-in for a third party plant turnaround in September. This compares to average production of 849 boe/d in the second quarter of 2014 and 880 boe/d for the third quarter of 2013. Oil sales revenue decreased in the third quarter of 2014 compared with 2013 due to lower oil prices and oil volumes, to generate cash flow from operations of $2.6 million (2013: $3.6 million). Questerre anticipates production from the Kakwa-Resthaven area should grow in the fourth quarter as additional operated and non-operated wells are completed and placed on production.

Capital expenditures for the third quarter were $23.36 million and $46.97 million for the first nine months of 2014. Over 90% of the capital was directed to the Montney development. As at September 30, 2014, the Company reported a working capital deficit of $3.86 million and had no amounts drawn on its existing credit facilities.

The term "cash flow from operations" is a non-IFRS measure. Please see the reconciliation elsewhere in this press release.

Questerre Energy Corporation is leveraging its expertise gained through early exposure to shale and other non-conventional reservoirs. The Company has base production and reserves in the tight oil Bakken/Torquay of southeast Saskatchewan. It is bringing on production from its lands in the heart of the high-liquids Montney shale fairway. It is a leader on social license to operate issues for its Utica shale gas discovery in the St. Lawrence Lowlands, Quebec. In conjunction with a supermajor, it is at the leading edge of commercializing a proven process to unlock the massive resource potential of oil shale.

Questerre is a believer that the future success of the oil and gas industry depends on a balance of economics, environment and society. We are committed to being transparent and are respectful that the public must be part of making the important choices for our energy future.

This media release contains certain statements which constitute forward-looking statements or information ("forward-looking statements") including validating the condensate rates at Kakwa South with the results of the 16-07 Well, the timing and expected results from the completion of the 14-29 Well at Kakwa North, the timing of the next well at Kakwa North, the participation in the drilling of up to two more wells prior to year end on the joint venture acreage, the completion of construction and firing of the capsule at the Seep Ridge site in Utah, and the Company's anticipation that production volumes from the Kakwa-Resthaven area will increase in the fourth quarter. Although Questerre believes that the expectations reflected in our forward-looking statements are reasonable, our forward-looking statements have been based on factors and assumptions concerning future events which may prove to be inaccurate, including the timing of pricing and terms of the placement, the placement results and closing, the use of net proceeds, the timing of receipt of required regulatory approvals and assumptions concerning the success of future drilling activities. Those factors and assumptions are based upon currently available information available to Questerre. Such statements are subject to known and unknown risks, uncertainties and other factors that could influence actual results or events and cause actual results or events to differ materially from those stated, anticipated or implied in the forward-looking statements. As such, readers are cautioned not to place undue reliance on the forward looking information, as no assurance can be provided as to future results, levels of activity or achievements. The risks, uncertainties, material assumptions and other factors that could affect actual results are discussed in our Annual Information Form and other documents available at www.sedar.com. Furthermore, the forward-looking statements contained in this document are made as of the date of this document and, except as required by applicable law, Questerre does not undertake any obligation to publicly update or to revise any of the included forward-looking statements, whether as a result of new information, future events or otherwise. The forward-looking statements contained in this document are expressly qualified by this cautionary statement.

This news release is not an offer of securities for sale in the United States. Securities may not be offered or sold in the United States or to or for the account or benefit of US persons (as such terms are defined in Regulation S under the United States Securities Act of 1933, as amended (the "U.S. Securities Act"), absent registration or an exemption from registration. The securities offered have not been and will not be registered under the U.S. Securities Act or any state securities laws and, therefore, may not be offered for sale in the United States, except in transactions exempt from registration under the U.S. Securities Act and applicable state securities laws. This news release shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of the securities in any State in which such offer, solicitation or sale would be unlawful.

Barrel of oil equivalent ("boe") amounts may be misleading, particularly if used in isolation. A boe conversion ratio has been calculated using a conversion rate of six thousand cubic feet of natural gas to one barrel of oil and the conversion ratio of one barrel to six thousand cubic feet is based on an energy equivalent conversion method application at the burner tip and does not necessarily represent an economic value equivalent at the wellhead. Given that the value ratio based on the current price of crude oil as compared to natural gas is significantly different from the energy equivalent of 6:1, utilizing a conversion on a 6:1 basis may be misleading as an indication of value.

This press release contains the terms "cash flow from operations", "working capital surplus (deficit)", and "netbacks" which are non-IFRS terms. Questerre uses these measures to help evaluate its performance.

As an indicator of Questerre's performance, cash flow from operations should not be considered as an alternative to, or more meaningful than, cash flows from operating activities as determined in accordance with IFRS. Questerre's determination of cash flow from operations may not be comparable to that reported by other companies. Questerre considers cash flow from operations to be a key measure as it demonstrates the Company's ability to generate the cash necessary to fund operations and support activities related to its major assets.

For the quarter ended September 30, ($ thousands) 2014 2013
Net cash from operating activities $ 3,128 $ 2,437
Change in non-cash operating working capital (571 ) 1,204
Cash flows from operations $ 2,557 $ 3,641

The Company considers netbacks a key measure as it demonstrates its profitability relative to current commodity prices. Operating netbacks per boe equal total petroleum and natural gas revenue per boe adjusted for royalties per boe and operating expenses per boe.

The Company also uses the term "working capital surplus (deficit)". Working capital surplus (deficit), as presented, does not have any standardized meaning prescribed by IFRS and may not be comparable with the calculation of similar measures for other entities. Working capital surplus (deficit), as used by the Company, is calculated as current assets less current liabilities excluding the current portions of the share based compensation liability, risk management contracts and the flow-through share liability.

Contact Information

  • Questerre Energy Corporation
    Anela Dido
    Investor Relations
    (403) 777-1185
    (403) 777-1578 (FAX)
    info@questerre.com