Traverse Energy Ltd.

TSX VENTURE : TVL


Traverse Energy Ltd.

November 15, 2012 16:18 ET

Traverse Energy Announces 2012 Third Quarter Results

CALGARY, ALBERTA--(Marketwire - Nov. 15, 2012) - Traverse Energy Ltd. ("Traverse" or "the Company") (TSX VENTURE:TVL) presents financial and operating results for the nine months ended September 30, 2012. Unless otherwise stated, the volume conversion of natural gas to barrel of oil equivalent (BOE) is presented on the basis of 6 thousand cubic feet of natural gas being equal to 1 barrel of oil. This conversion ratio is based upon an energy equivalent conversion method primarily applicable at the burner tip and does not represent value equivalence at the wellhead. BOE figures may be misleading, particularly if used in isolation.

HIGHLIGHTS Three months ended Nine months ended
(Unaudited) Sept. 30, 2012 Sept. 30, 2011 Sept. 30, 2012 Sept. 30, 2011
Financial ($ thousands, except per share amounts)
Revenue 2,112 1,105 5,370 2,991
Funds flow from operations 1,602 600 3,809 1,463
Per share - basic and diluted 0.04 0.02 0.09 0.04
Cash flow from operations 1,132 599 3,394 1,544
(including changes in working capital)
Per share - basic and diluted 0.03 0.02 0.08 0.04
Net income (loss) 32 (1,079 ) 427 (1,238 )
Per share - basic and diluted 0.00 (0.03 ) 0.01 (0.04 )
Capital expenditures, net of dispositions 3,041 2,836 5,954 7,488
Total assets 21,154 17,096 21,154 17,096
Working capital 1,727 2,078 1,727 2,078
Common shares
Outstanding (millions) 44.3 38.5 44.3 38.5
Weighted average (millions) 44.1 38.5 42.8 35.2
Operations (units as noted)
Average production
Natural gas (mcf/day) 1,064 452 822 418
Oil and NGL (bbls/day) 266 126 221 112
Total production (BOE/day) 444 202 358 181
Average sales price
Natural gas ($/mcf) 2.36 3.99 2.25 4.00
Oil and NGL ($/bbl) 76.77 80.76 80.32 83.21
Operating netback ($/BOE)
Petroleum and natural gas revenue 51.56 60.99 50.85 64.03
Royalties 4.56 3.70 3.33 4.03
Operating and transportation costs 10.78 22.22 12.74 18.37
Working interest operating netback ($/BOE) 36.22 35.07 34.78 41.63
Royalty netback ($/BOE) 52.02 52.07 60.72 40.02
Total Company operating netback ($/BOE) 42.31 37.88 45.05 41.39

Non-GAAP measures

Management uses funds flow from operations and operating netback to analyze operating performance. These measures are commonly utilized in the oil and gas industry and are considered informative for management and stakeholders. The reconciliation between cash flow from operations and funds flow from operations can be found in the statement of cash flows in the financial statements with funds flow from operations calculated before non-cash working capital and asset retirement expenditures. Management believes that in addition to net income (loss), funds flow from operations is a useful supplemental measure as it provides an indication of Traverse's operating performance. Operating netback reflects petroleum and natural gas revenues less royalties, operating and transportation costs and is calculated on a per unit basis. Investors should be cautioned, however, that these measures may not be comparable to measures reported by other companies nor should they be construed as an alternative to cash flow from operations or other measures of financial performance calculated in accordance with GAAP.

Operations Review

All of the Company's oil and gas properties are located in Alberta. Traverse is focusing on its' existing medium and light oil properties located in central and southern Alberta. At September 30, 2012 undeveloped land holdings totalled 157,600 gross (154,800 net) acres at an average working interest of 98%.

In July, Traverse drilled 5 wells (4.5 net) on the Turin property in southern Alberta where Traverse has increased its' landholdings to 12,500 gross (11,900 net) acres. Three of these drilling locations were development targets and two were exploratory in nature. This drilling resulted in 2 oil wells (1.75 net), 2 natural gas wells (1.75 net) and 1 net dry hole. In August the oil wells were tied into the Company's battery at Turin. The first oil well (Traverse 75%) was placed on production August 1 and during the third quarter produced at an average rate of 76 barrels of oil per day. The second oil well (Traverse 100%) was placed on production in mid August and during the quarter produced at an average rate of 88 barrels of oil per day and 450 mcf of associated natural gas. The two natural gas wells are currently shut in. During the third quarter of 2012 the Turin property contributed 203 BOE/day (65% oil) to Company production.

The Turin battery includes a water disposal facility and a treater capable of handling up to 2,500 barrels of fluid per day. The battery also includes a gas separator and sweetening unit capable of sweetening up to 2 mmcf of natural gas per day. The new oil production at Turin is accompanied by increased volumes of associated gas. The Company is currently evaluating a pipeline expansion to manage the increased gas volumes.

In the Brazeau area of west central Alberta, Traverse has a gross overriding royalty interest in 10 sections of land (6,400 acres). By September 30, 2012 a total of 13 horizontal Cardium wells were drilled on these lands by an industry partner. Ten of the wells were on production during the quarter resulting in 152 BOE per day (63% light oil) net to the Company. Subsequent to September 30, 2012 two additional wells were drilled by the industry partner.

Subsequent to the third quarter, Traverse drilled two wells in the Turin area. One well has been completed as an oil well (Traverse 100%) and is anticipated to be placed on production by December 1 at an approximate rate of 80 BOE/day (70% oil). The second well, which was a step out well, will be abandoned after testing indicated no commercial hydrocarbon accumulations. During the first quarter of 2013 the Company will be shooting a 3D seismic survey in the area followed up with additional drilling.

During the third quarter Traverse revised its' 2012 budget to $8 million, deferring the drilling of several wells to 2013. The initial budget for 2013 has been set at $12.6 million to be funded from working capital, cash flow, new equity issues and debt where appropriate. The budget includes 2D and 3D seismic surveys in two project areas and the drilling of 11 wells.

Forward-looking information

This press release contains forward-looking information. Forward-looking information is based upon the opinions, expectations and estimates of management as at the date the information is provided and, in some cases, information received from or disseminated by third parties. In particular, the Company's statements with respect to a potential gas pipeline expansion in the Turin area; planned additional seismic surveying and follow up drilling on the Company's Turin property; intentions for funding capital expenditures during 2013, and the intention to complete 2D and 3D seismic in two project areas and drill 11 wells in 2013 are forward-looking information. This forward-looking information is subject to a variety of substantial known and unknown risks and uncertainties and other factors that could cause actual events or outcomes to differ materially from those anticipated or implied by such forward-looking information. The Company's Annual Information Form filed with securities regulatory authorities (accessible through the SEDAR website www.sedar.com) describes the risks, material assumptions and other factors that could influence actual results and which are incorporated herein by reference.

The forward-looking information contained in this press release is made as of the date hereof and the Company undertakes no obligation to update publicly or revise any forward-looking information, whether as a result of new information, future events or otherwise, unless so required by applicable securities laws.

Further details on the Company including the September 30, 2012 unaudited interim financial statements, the related management's discussion and analysis and Annual Information Form are available on the Company's website and SEDAR.

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

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