Seaview Energy Inc.
TSX VENTURE : CVU.A
TSX VENTURE : CVU.B

Seaview Energy Inc.

April 06, 2011 20:13 ET

Seaview Energy Inc. Releases Financial and Operating Results for the Year and Three Months Ended December 31, 2010

CALGARY, ALBERTA--(Marketwire - April 6, 2011) -

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Seaview Energy Inc. (TSX VENTURE:CVU.A) (TSX VENTURE:CVU.B)("Seaview" or the "Company") is pleased to provide shareholders with an update on the Company's 2010 financial and operational results. 

SELECTED INFORMATION
Financial ($000's except per share amounts) Q4 2010 Q4 2009 % Change 2010 2009 % Change
Petroleum and natural gas sales 7,642 $ 10,377 (26%) 35,171 $ 33,504 5%
Funds flow from operations (1) 4,244 5,024 (16%) 17,577 15,120 16%
  Basic and diluted per share (2) 0.06 0.08 (25%) 0.26 0.26 -
Net loss (2,562) (2,366) 8% (4,701) (9,607) 51%
  Basic and diluted per share (2) (0.04) (0.04) - (0.07) (0.16) 56%
Capital expenditures (3) 8,842 5,368 65% 27,357 16,567 65%
Property acquisitions (dispositions) 3,315 3,840 (14%) (29,775) 30,455 (198%)
Net debt to funds flow from operations ratio 1.15 2.67 (57%) 1.15 2.67 (57%)
Shares Outstanding at period end (000's)
  Class A 65,537 65,433 - 65,537 65,433 -
  Class B 1,054 1,054 - 1,054 1,054 -
Operations
Daily production            
  Natural gas (mcf/d) 14,016 13,703 2% 15,223 11,422 33%
  Light oil and NGLs (bbl/d) 305 445 (31%) 370 417 (11%)
Total production (boe/d) 2,641 2,729 (3%) 2,907 2,321 25%
Average realized sales price (net of risk management gains)  
  Natural gas (per mcf) 4.48 $ 6.06 (26%) 4.65 $ 5.88 (21%)
  Light oil and NGL (per bbl) 66.27 66.92 (1%) 69.16 58.92 17%
Netback per boe (1)            
  Sales price 28.60 $ 35.35 (19%) 31.47 $ 32.00 (2%)
  Realized risk management gains 2.85   5.98 (52%) 1.68   7.55 (78%)
  Sales price (net of realized risk management gains) 31.45   41.33 (24%) 33.15   39.55 (16%)
  Royalties 3.02 4.52 (33%) 4.12 4.90 (16%)
  Operating expenses 5.44 11.80 (54%) 7.65 11.57 (34%)
  Transportation 1.63 1.27 28% 1.43 1.44 (1%)
Operating netback (1) 21.36 $ 23.74 (10%) 19.95 $ 21.64 (8%)
  1. The Company uses "funds flow from operations" and "funds flow from operations per share" which do not have any standardized meaning prescribed by Canadian GAAP. 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 Canadian GAAP. 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 and capitalized G&A expense.

HIGHLIGHTS OF 2010 AND SUBSEQUENT EVENTS

  • Average production for 2010 was 2,907 boe per day, an increase of 25% relative to 2009 average production of 2,321 boe per day (increase of 11% per basic weighted average share);

  • Funds flow from operations for 2010 increased 16% to $17.6 million from $15.1 million in 2009;

  • Closed the disposition of Seaview's assets in Southeast Saskatchewan for $33 million on April 29, 2010 representing disposition metrics of $165,000 per flowing barrel. The Company reduced corporate debt levels to below $11 million at closing, providing available credit facilities of over $40 million to finance new exploration projects;

  • Executed a series of strategic farm-ins and land acquisitions to assemble a large, contiguous land position in the emerging Wapiti Cardium light oil resource play: 

    • Accumulated 42.5 sections (22.8 net) of prospective lands setting up extensive drilling inventory with over 170 horizontal development locations (91 net) targeting high quality, high net-back light oil and associated natural gas production;

    • Drilled 8 Cardium horizontal wells (5.0 net) at 100% success rate establishing light oil resource potential over the majority of the Company's Wapiti lands;

    • Demonstrated improved initial production rates while lowering capital costs through continuous improvement of both drilling and completion practices; and

    • Tested the application of new technologies to maximize the potential of the Wapiti Cardium light oil resource fairway.

  • Established light oil resource potential of the Wapiti Cardium play demonstrated by strong reserve additions:

    • Total Proven reserve additions of 1,450 Mboe, including 1,032 Mbbls of crude oil and natural gas liquids with Net Present Value (BTAX 10% discount factor) of $22.4 million;

    • Total Proven plus Probable reserve additions of 3,165 Mboe, including 2,264 Mbbls of crude oil and natural gas liquids with Net Present Value (BTAX 10% discount factor) of $41.8 million;

    • The evaluation from Sproule Associates Limited, the Company's independent engineering firm, recognized reserves on 23 Cardium horizontal wells (13.3 net) representing 16% of Seaview's total Wapiti net well locations based on 4 wells per section; and

    • Continued success in developing the Wapiti Cardium light oil play could add significant incremental upside to Seaview's current reserves and net asset value.

  • Net debt at the end of 2010 was $20.3 million compared to $40.3 million at the end of 2009 representing a 50% reduction over the prior year; and

  • In February 2011, Seaview's credit facility has been confirmed, by the lenders, at $52 million with the next interim review set for May 31, 2011, providing for approximately $30 million of available credit facilities at year end to fund the Company's capital program in the Wapiti Cardium light oil resource play.

Wapiti Results and Activity Plans

Seaview's strategy in 2010 focused on accumulating a large, contiguous land position targeting a potential light oil resource play in the Wapiti Cardium fairway. Industry activity in Wapiti has increased substantially since Q1-10 following Seaview's initial exploration success at 100/01-09-066-07W6 (The "1-9 well"). As at April 2011, industry has licensed 24 locations targeting the Cardium. 

Over the course of 2010, Seaview successfully drilled 7 Cardium horizontal exploration wells (4.3 net) to evaluate the Company's lands. Subsequent to December 31, 2010, Seaview has drilled and cased one additional Cardium horizontal well (0.7 net).

The Company's focus continues to be on the evaluation of the extensive land position in Wapiti through exploration drilling. In addition, Seaview continues to see improved test results with the evolution of the completion technology designed to optimize production and ultimate reserves potential of the Company's Wapiti property.

The current status of the 8 Wapiti horizontal wells (5.0 net) is as follows:

  • 4 horizontal wells (2.7 net) are currently on production, including conservation of associated solution gas. In addition to crude oil production, the natural gas liquid yields from the Company's Wapiti wells have been over 85 bbls per mmcf of associated solution gas. Seaview's fourth horizontal well located at 100/12-14-067-9W6 (73.7% WI) came on production in mid-March and continues to produce remaining load oil while flowing to sales;
  • 3 horizontal wells (1.7 net) have been completed and are awaiting tie-in including 100/14-28-067-08W6 ("the 14-28 well") (37% WI in Petroleum; 18% WI in natural gas), 100/01-17-066-08W6 (67.6% WI) and 100/01-03-066-08W6 (64.4% WI). The completions of each of these wells utilized the same completion technology as the 14-28 well;
  • The Company elected to proceed with the equip and tie-in of each of these locations, in order to continue evaluation and testing through spring break-up. Seaview anticipates all 3 locations (1.7 net) to be producing within the next month; and 
  • 1 horizontal well (0.5 net) at 100/16-12-066-08W6 has been drilled and cased with completion to commence after spring break-up.

Wapiti Exploration Program

Results to date in the Wapiti area continue to validate the Company's strategy of accumulating a large, contiguous position targeting light oil in the Wapiti Cardium fairway. 

With 8 Cardium horizontal wells (5.0 net) drilled to date, Seaview has made significant progress towards evaluating the resource potential throughout the Company's land base in Wapiti. Management is encouraged by the exploration results to date and remain confident that the Wapiti Cardium light oil resource play offers a sizeable and repeatable opportunity.

Management also expects the economics of the play and initial production rates will continue to improve through the optimization of completion technology during this initial phase of exploration.

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 providing for a "net of cost" floor of $4.18/GJ ($4.42/mcf), which is a 14% premium to the current calendar AECO 2011 futures strip of $3.66/GJ, and a 19% premium to the current AECO strip price of $3.51/GJ;
  • 200 bbl/d of crude oil hedged in put contracts for 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

Management successfully completed several strategic initiatives during 2010 to position the Company for long term sustainability and growth. The combined impacts of significantly reducing debt, high grading operations towards higher net back production and early exploration success in the Wapiti Cardium light oil resource play provides a solid platform for long term growth of reserves, production and cash flow on a per share basis.

The Company's focused long-life, low cost Peace River Arch asset and strong balance sheet provide a stable capital base to support development of the upside potential in the Wapiti Cardium play, and support ongoing exploration projects. Seaview now 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 12.3 years based on Total Proven plus Probable reserves and Q4 2010 production of 2,641 boe per day;
  • Year-end net debt of $20.3 milllion, with approximately $32 million of available credit capacity;
  • 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; and
  • In Harlech, Seaview holds a 25% working interest in 9 contiguous sections (2.25 net) of land targeting multi-zone Cretaceous and Nordegg gas resource potential. The Harlech area offers exposure to liquids rich natural gas reservoirs.
  • Commodity hedging program providing for downside protection on 1,485 boe per day for 2011 at a "net of cost" floor price of $5.50/mcfe, providing minimum 2011 revenue of $17.9 million; and
  • 65.54 million Class A shares and 1.0 million Class B shares outstanding, as at December 31, 2010.

RELEASE OF 2010 FINANCIALS AND ANNUAL INFORMATION FORM

Seaview has filed its financial results for the year ended December 31, 2010 including the audited consolidated financial statements and related management's discussion and analysis ("MD&A") and the Annual Information Form which includes Seaview's reserves data and other oil and gas information for the year ended December 31, 2010 as mandated by National Instrument 51-101 Standards for Disclosure for Oil and Gas Activities of the Canadian Securities Administrators. These filings will be available in their entirety at www.seaviewenergy.com and www.sedar.com or by contacting the Company directly. 

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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