Seaview Energy Inc.

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


Seaview Energy Inc.

August 17, 2011 16:00 ET

Seaview Energy Inc. Releases Financial and Operating Results for the Three and Six Months Ended June 30, 2011 and Operations Update

CALGARY, ALBERTA--(Marketwire - Aug. 17, 2011) -

NOT FOR DISTRIBUTION TO U.S. NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES. ANY FAILURE TO COMPLY WITH THIS RESTRICTION MAY CONSTITUTE A VIOLATION OF U.S. SECURITIES LAWS.

Seaview Energy Inc. (TSX VENTURE:CVU.A) (TSX VENTURE:CVU.B) ("Seaview" or the "Company") releases an update on the Company's financial and operational results for the three and six months ended June 30, 2011 and an update of recent operations.

SELECTED INFORMATION
Financial ($000's except per share amounts) Q2 2011 Q1 2011 % Change
Petroleum and natural gas sales $ 8,478 $ 6,382 33 %
Funds flow from operations (1) 4,297 2,947 46 %
Basic and diluted per share (2) 0.07 0.05 40 %
Net income (loss) (1,650 ) (2,778 ) 41 %
Basic and diluted per share (2) (0.03 ) (0.04 ) 25 %
Capital expenditures (3) 3,712 12,967 (71 %)
Shares Outstanding at period end (000's)
Class A 65,553 65,553 -
Class B 1,054 1,054 -
Operations
Daily production
Natural gas (mcf/d) 13,810 12,286 12 %
Light oil and NGLs (bbl/d) 437 277 58 %
Total production (boe/d) 2,739 2,325 18 %
Average realized sales price (net of risk management gains)
Natural gas (per mcf) $ 4.56 $ 4.38 4 %
Light oil and NGL (per bbl) 75.97 71.78 6 %
Netback per boe (1)
Sales price $ 34.01 $ 30.50 12 %
Realized risk management gains 1.10 1.20 (8 %)
Sales price (net of realized risk management gains) 35.11 31.70 11 %
Royalties (4.90 ) (3.65 ) 34 %
Operating expenses (8.39 ) (8.36 ) -
Transportation (1.37 ) (1.43 ) (4 %)
Operating netback (1) $ 20.45 $ 18.26 12 %
  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 SECOND QUARTER 2011

  • Average production for Q2 2011 was up 18% to 2,739 boe per day compared to Q1 2011 volumes of 2,325 boe per day;
  • Liquids production increased by 58% and natural gas increased by 12% compared to Q1 2011, as a result of the Cardium wells brought on stream;
  • Operating netbacks increased by 12% to $20.45 per boe compared to $18.26 per boe in Q1 2011;
  • Funds flow from operations for Q2 2011 increased 46% to $4.3 million compared to Q1 2011 funds flow of $2.9 million. The increase in funds flow is primarily attributed to the combination of the 18% production increase and 11% increase in realized prices;
  • Subsequent to the quarter end, on August 3, 2011, the Company disposed of a minor natural gas asset in the Sinclair area of the Peace River Arch, for net proceeds of $4.34 million. The proceeds have been used, initially, to reduce net debt, and will be redirected towards the Wapiti Cardium capital program.

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 40° 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 Q2 2011, Seaview focused on the equip and tie-in of 3 Cardium horizontal wells (1.9 net), which were completed using liquid propane gas ("LPG") fracturing technology during Q1 2011. With the tie-in of these wells, Seaview was able to increase total production by 18% relative to Q1 2011 average and increase liquids production by 58% in Q2 2011, averaging 437 bbl/d of crude oil and NGL's. Crude oil and natural gas liquids accounted for 16% of Q2 2011 production, as compared to 12% during Q1 2011.

Seaview is currently executing a LPG based fracture treatment at 100/16-12-066-08W6 (54% working interest) with initial test results expected later in Q3 2011, subject to weather conditions, surface and equipment access.

Subsequent to the end of the quarter, a workover of Seaview's initial Cardium horizontal well at 1-9 has been completed and has recently been placed back on production using plunger lift to minimize liquid loading. Production over the first two weeks of August has averaged 99 mcf/d of natural gas and 36 bbl/d of crude oil and natural gas liquids (52 boe/d) and remains a flowing oil well one year after initial production with minimal decline.

The initial production performance of the latest generation completions continues to outperform the earlier wells completed with frac oil. Additionally, production rates from the LPG completions outperforms the oil based fracs by 2-3 times after more than 120 days of production. Combined with the stable, shallow decline profile evident in the early wells such as the 1-9, management remains confident that Wapiti offers a scaleable, repeatable resource play with significant long life reserves.

In addition, Seaview is preparing for upcoming 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 (40 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 21% premium to the current calendar AECO 2011 futures strip of $3.46/GJ, and a 24% premium to the current AECO strip price of $3.37/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 11.8 years based on Total Proven plus Probable reserves and Q2 2011 production of 2,739 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 (40 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 June 30, 2011.

RELEASE OF SECOND QUARTER FINANCIALS

Seaview has filed its financial results for the period ended June 30, 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 2:30PM Calgary time in the Viking Rooms A/B, Calgary Petroleum Club, 319 5th Ave SW Calgary, AB. The meeting is open to all shareholders and interested parties and will be webcast for those unable to attend in person and can be accessed on the internet through the Company's website at http://www.seaviewenergy.com/events.php or directly by the provider at http://www.gowebcasting.com/2543.

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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