Seaview Energy Inc.

TSX VENTURE : CVU.A
TSX VENTURE : CVU.B


Seaview Energy Inc.

June 20, 2011 19:59 ET

Seaview Energy Inc. Releases Financial and Operating Results for the Three Months Ended March 31, 2011 and Provides Operations Update

CALGARY, ALBERTA--(Marketwire - June 20, 2011) -

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Seaview Energy Inc. ("Seaview" or the "Company") (TSX VENTURE:CVU.A) (TSX VENTURE:CVU.B) releases an update on the Company's financial and operational results for the three months ended March 31, 2011 and an update of recent operations.

SELECTED INFORMATION
Financial ($000's except per share amounts)Q1 2011Q4 2010% Change
Petroleum and natural gas sales$6,382$6,950(8%)
Funds flow from operations (1)2,9473,938(25%)
Basic and diluted per share(2)0.050.06(17%)
Net loss(2,778)(2,895)4%
Basic and diluted per share(2)(0.04)(0.04)-
Capital expenditures (3)12,96711,51713%
Shares Outstanding at period end (000's)
Class A65,55365,537-
Class B1,0541,054-
Operations
Daily production
Natural gas (mcf/d)12,28614,016(12%)
Light oil and NGLs (bbl/d)277305(9%)
Total production (boe/d)2,3252,641(12%)
Average realized sales price (net of risk management gains)
Natural gas (per mcf)$4.38$4.48(2%)
Light oil and NGL (per bbl)71.7866.278%
Netback per boe (1)
Sales price$30.50$28.607%
Realized risk management gains1.202.85(58%)
Sales price (net of realized risk management gains)31.7031.451%
Royalties(3.65)(3.02)21%
Operating expenses(8.36)(5.44)54%
Transportation(1.43)(1.63)(12%)
Operating netback (1)$18.26$21.36(15%)
(1)The Company uses "funds flow from operations" and "funds flow from operations per share" which do not have any standardized meaning prescribed by IFRS. The terms are used to analyze operating performance and leverage. The Company uses "Netback per boe" and "Operating Netback" which do not have any standardized meaning prescribed by IFRS. The terms are used to evaluate performance and in capital allocation decisions.
(2)Weighted average diluted shares outstanding for all periods exclude both the impact of the conversion of the Class B shares and the effect of the granted options as they would have been anti-dilutive.
(3)Capital expenditures include only the cash additions for the period.
FINANCIAL AND OPERATIONS OVERVIEW OF FIRST QUARTER 2011
  • Funds flow from operations for Q1 2011 was $2.9 million compared to Q4 2010 funds flow of $3.9 million. The reduction in funds flow is primarily attributed to the combination of natural production declines and a reduction in hedging gains;
  • Average production for Q1 2011 was 2,325 boe per day compared to Q4 2010 volumes of 2,641 boe per day. The decrease in volumes is attributed to natural declines as a result of minimal capital investment on the Peace River Arch natural gas assets and delays in completions at Wapiti due to service equipment constraints and weather related issues;
  • During the quarter, the Company successfully completed 2 Wapiti Cardium horizontal wells (1.1 net) utilizing liquid propane gas ("LPG") fracturing technology; the initial application of this technology. The IP rates from these new wells are more than three times better than that of the previous oil fractures completed by the Company in 2010 (see table below). Advances in the initial production ("IP") rates in the Cardium zone in the Wapiti area continue to be encouraging;
  • New production additions from 4 Cardium horizontal wells (2.4 net) were brought on stream late in Q1 2011 or early Q2 2011. As a result, the production from these wells had minimal impact on the average reported production for Q1 2011;
  • During Q1 2011, Seaview completed the following operations:
  • Drilled 1 Wapiti Cardium horizontal well (0.7 net) located at 100/01-17-066-08W6 ("1-17") which has subsequently been completed and placed on production on March 19th with a 30 day IP rate of 361 boe per day (41% crude oil and natural gas liquids);
  • Successfully completed 3 Wapiti Cardium horizontal wells (1.7 net), which were drilled in Q4 2010, utilizing liquid propane gas ("LPG") fracturing technology. Tie-in of each of these projects was completed late in Q1 2011 and therefore had minimal impact on Q1 2011 production;
  • Initial 30-day production from the recent LPG fraced wells averaged 476 boe per day on a producing day basis and 306 boe per day on a calendar day basis (61% crude oil and natural gas liquids); and
  • Completed installation of additional compression in Boundary Lake to optimize the Company's 100% operated Kiskatinaw gas property, and also completed the equip and tie-in of 1 natural gas well (1.0 net) adding 145 boe per day of production over Q1 2011.

Wapiti Operations Update

The Company's strategic focus shifted to light oil and liquids rich natural gas opportunities in 2010. Seaview continues to evaluate its extensive land position in Wapiti through exploration drilling to earn lands through farm-in agreements. Seaview has accumulated a large, contiguous land position with exposure of up to 42.5 sections (22.8 net) of prospective Cardium rights targeting a potential light oil and liquids rich natural gas resource play in the Cardium fairway. The oil is 37-42° API and the natural gas has associated liquids (C3+) of 105 bbls/mmcf of sales gas which significantly enhances the economics of the play.

Since Seaview's initial exploration success at 100/01-09-066-07W6 (The "1-9 well") in Q1 2010, a variety of completion techniques have been utilized to optimize the production potential and ultimate reserves of the Company's Wapiti property. Seaview has drilled 8 Cardium horizontal wells (5.0 net) to date and industry activity in Wapiti has increased substantially with a total of 25 horizontal locations targeting the Cardium having been drilled or licensed. Throughout the initial exploration phase, Seaview and other operators have experimented with various completion designs demonstrating continued improvement in initial production rates.

In Q1 2011, Seaview successfully drilled and completed 1 Cardium horizontal well (0.7 net) and executed 2 Cardium horizontal completions wells (1.1 net) using LPG fracturing technology, the initial application of this completion technology in the Wapiti field. Seaview has significantly improved the initial production rates through the application of this technology. The following information outlines the initial 30 day production performance for the Wapiti Cardium wells placed on production to date by Seaview and other regional operators:

IP 30 Production (boe/d)
WellFrac FluidProducing Day(3)Calendar Day(4)% LiquidsStart date
Phase 1 Completions: Early Exploration
100/06-10-67-8W6(5)Water535293Jun-2010
100/01-09-66-8W6(1)Oil1799576Aug-2010
100/04-17-66-7W6(1)Oil1007294Nov-2010
100/04-22-66-8W6(1)Oil544882Nov-2010
Phase 1 Average976786
Phase 2 Completions: Frac oil and Ball-drop
100/16-35-66-8W6(5)Oil1608489Aug-2010
100/08-19-66-7W6(5)Oil13613689Sep-2010
100/12-14-67-9W6(1)Oil16112154Mar-2011
100/01-03-66-8W6(1)Oil/LPG1668263Apr-2011
Phase 2 Average15610674
Phase 3 Completions: LPG and Ball-drop
100/01-17-66-8W6(1)LPG41436141Mar-2011
100/14-28-67-8W6(2)LPG53825081Apr-2011
Phase 3 Average47630661
(1)Denotes wells where Seaview is the operator and has a working interest position.
(2)Denotes wells where Seaview is not the operator, but is a working interest partner in the well.
(3)Producing day average is calculated by taking monthly production volumes divided by producing days determined by calculating total monthly hours divided by 24 hours.
(4)Calendar day average is calculated by taking monthly production volumes divided by total days in the month.
(5)Denotes wells where Seaview has no working interest, production rates are based on publically available data.

Seaview's two most recent horizontal wells, 100/01-17-066-08-W6 (67% WI) ("the 1-17 well") and 100/14-28-067-08-W6 (37.1% WI) ("the 14-28 well") were the initial wells completed using LPG fracturing technology. Following an initial clean-up period, the 1-17 well flowed an average 361 boe/d on a calendar day basis (41% liquids) over the first 30 days on production. During the first two weeks of June, the well averaged 225 boe/d on a calendar basis. Post initial clean-up period, the 14-28 well flowed an average 250 boe/d on a calendar day basis (81% liquids) over the first 30 days on production. The well has experienced liquid loading issues and will be optimized by the installation of a plunger lift system and modifications to the wellsite compressor.

Seaview is currently planning to execute an LPG based fracture treatment at 100/16-12-066-08W6 (54% working interest) in Q3 2011, subject to surface and equipment access. In addition, Seaview is preparing for additional drilling with the surveying of seven additional locations with 4 of the locations currently licensed. The Company is confident that further cost reductions can also be achieved by pre-building production facilities whenever possible to allow for shorter tie-in cycle times and to allow for LPG recovery.

Wapiti Exploration Program

Results to date continue to validate the Company's strategy of accumulating a large, contiguous position targeting light oil and liquids rich natural gas in the Wapiti Cardium fairway. Throughout the initial exploration drilling phase, Seaview has been able to continuously improve initial production rates and plans to continue advancing the completion design based on the LPG fluid platform. Management is encouraged by the exploration results to date and remains confident that the Wapiti Cardium light oil resource play offers a sizeable and repeatable opportunity.

The 8 wells drilled to date have all been earning wells and once the earning phase of the project has been completed, Seaview will be able to high grade drilling in development areas. Through pad based development drilling and refinement of completion techniques, management expects to significantly improve the economics of the play.

Seaview's opportunity base within the prospective Wapiti Cardium light oil resource fairway has the following characteristics:

  • Exposure to earn up to 42.5 sections (22.8 net) of prospective Cardium rights;
  • An extensive drilling inventory with over 170 horizontal development locations (91 net); and
  • Excellent operational focus featuring a large contiguous land position directly offsetting the Company's recent successful Cardium exploration activities.

Seaview believes the Wapiti Cardium light oil resource play contains the essential elements of a profitable resource play including:

  • Large areal extent, supported by numerous logs and tests validating the reservoir continuity;
  • Contiguous resource potential including an average of 10 m of vertical pay exceeding 6% porosity providing for significant accumulation of light oil, and a high degree of repeatability;
  • Ability to improve drilling and completion techniques leading to lower capital costs and higher productivity over time; and
  • Scalable project targeting high quality light oil (41 degree API), and natural gas with high liquid recovery NGL's.

COMMODITY PRICE RISK MANAGEMENT

A key component to Seaview's balance sheet management is the Company's commodity price risk program. The price risk management program is intended to reduce price volatility in order to support cash flow, protect acquisition economics and finance ongoing capital expenditures.

Seaview currently has approximately 1,485 boe/d hedged for 2011, as follows:

  • 8,140 GJ/d of natural gas hedged in put contracts for calendar 2011 providing for a "net of cost" floor of $4.18/GJ ($4.42/mcf), which is an 11% premium to the current calendar AECO 2011 futures strip of $3.76/GJ, and a 13% premium to the current AECO strip price of $3.70/GJ;
  • 200 bbl/d of crude oil hedged in put contracts for calendar 2011 with a "net of cost" floor of CDN$75.00/bbl; and
  • On a combined basis, Seaview has 8,913 mcfe/d, hedged at a "net of cost" floor price of $5.50/mcfe, which will provide for minimum revenue of $17.9 million for 2011.

OUTLOOK

The Company's focused long-life, low cost Peace River Arch assets and available credit capacity provides a stable capital base to support continued capitalization of Seaview's emerging Wapiti Cardium light oil resource play. Management believes that continued improvement on the latest LPG based fracture treatments has significantly enhanced the economic viability of Wapiti.

The drilling program over the remainder of 2011 will be financed through available cash-flow and focus on completing earning on farm-in lands as first priority and drilling development locations offsetting existing Cardium horizontal producers offering the highest potential.

Seaview has the following characteristics:

  • Total Proven reserves of 6,578 Mboe (23% light oil and natural gas liquids);
  • Total Proven plus Probable reserves of 11,823 Mboe (26% light oil and natural gas liquids), effective December 31, 2010, as evaluated by Sproule Associates Ltd. using National Instrument 51-101 reserve definitions;
  • Reserve life index is 13.9 years based on Total Proven plus Probable reserves and Q1 2011 production of 2,325 boe per day;
  • Seaview has established significant positions in resource plays providing for longer-term growth potential in a diverse portfolio of assets targeting both light oil and natural gas plays, including:
    • In Wapiti, the Company has assembled a sizable land position targeting a Cardium light oil resource play:
      • Exposure to earn up to 42.5 sections (22.8 net) of prospective Cardium rights;
      • An extensive drilling inventory with over 170 horizontal development locations (91 net);
      • Scalable project targeting high quality light oil (41 degree API), and natural gas with high liquid recovery NGL's; and
      • Excellent operational focus featuring a large contiguous land position directly offsetting the Company's recent successful Cardium exploration activities.
    • In Pouce Coupe, the Company holds interests in 21 sections (4.5 net) of land targeting a Doig-Montney natural gas resource play. Seaview's land position is on trend with successful industry development activities further reducing the risk of full development when economics are more viable;
  • Commodity hedging program providing for downside protection on 8,913 mcfe per day for 2011 at a "net of cost" floor price of $5.50/mcfe, providing minimum 2011 revenue of $17.9 million; and
  • 65.55 million Class A shares and 1.0 million Class B shares outstanding, as at March 31, 2011.

RELEASE OF FIRST QUARTER FINANCIALS

Seaview has filed its financial results for the period ended March 31, 2011 including the unaudited condensed interim consolidated financial statements and related management's discussion and analysis ("MD&A"). These filings will be available in their entirety at www.seaviewenergy.com and www.sedar.com or by contacting the Company directly.

ANNUAL GENERAL MEETING

Seaview's Annual General Meeting is scheduled for Wednesday, August 24, 2011 at a time and location to be announced.

Barrels of oil equivalent (boe) may be misleading, particularly if used in isolation. A boe conversion ratio of six thousand cubic feet (mcf) of natural gas to one barrel (bbl) of oil is based on an energy conversion method primarily applicable at the burner tip and is not intended to represent a value equivalency at the wellhead. All boe conversions in this press release are derived by converting natural gas to oil in the ratio of six thousand cubic feet of natural gas to one barrel of oil. Certain financial amounts are presented on a per boe basis, such measurements may not be consistent with those used by other companies.

Estimated values contained in this press release do not represent fair market value.

This press release may contain forward-looking statements within the meaning of applicable securities laws. Forward-looking statements may include estimates, plans, anticipations, expectations, opinions, forecasts, projections, guidance or other similar statements that are not statements of fact. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to be correct. 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. These risks include, but are not limited to: the risks associated with the oil and gas industry (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 reserve estimates; the uncertainty of estimates and projections relating to production, costs and expenses and health, safety and environmental risks), commodity price and exchange rate fluctuation and uncertainties resulting from potential delays or changes in plans with respect to exploration or development projects or capital expenditures. The Company's forward-looking statements are expressly qualified in their entirety by this cautionary statement. The forward-looking statements contained in this press release are made as of the date hereof and the Company undertakes no obligations 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.

Neither the TSX Venture Exchange nor its Regulation Services Provider (as the term is defined in the Policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

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