Traverse Energy Ltd.
TSX VENTURE : TVL

Traverse Energy Ltd.

April 15, 2015 16:15 ET

Traverse Energy Announces 2014 Year End Results

CALGARY, ALBERTA--(Marketwired - April 15, 2015) - Traverse Energy Ltd. ("Traverse" or "the Company") (TSX Venture:TVL) presents financial and operating results for the year ended December 31, 2014.

Three Months Ended
December 31 (unaudited)
Year Ended December 31
Highlights 2014 2013 2014 2013
Financial ($ thousands, except per share amounts)
Petroleum and natural gas revenue $ 5,508 $ 4,055 $ 19,717 $ 14,674
Cash provided by operations 3,473 2,723 10,182 10,594
Funds from operations (1) 3,420 1,958 11,556 9,914
Per share - basic and diluted 0.05 0.04 0.18 0.20
Net income (loss) (6,358 ) 27 (4,570 ) 3,245
Per share - basic and diluted (0.10 ) 0.00 (0.07 ) 0.07
Capital expenditures, net of dispositions 7,725 5,482 30,821 14,875
Total assets 44,038 32,126 44,038 32,126
Working capital (deficiency) (3,201 ) 2,430 (3,201 ) 2,430
Bank debt (1,440 ) - (1,440 ) -
Common shares
Outstanding (millions) 70.5 53.5 70.5 53.5
Weighted average (millions) 69.6 50.3 65.8 48.7
Operations (Units as noted)
Production (BOE/d) 1,249 787 975 680
Natural gas (Mcf per day) 3,287 1,666 2,743 1,569
Oil and NGL (bbls per day) 701 509 518 419
Average sales price
Natural gas ($/Mcf) 3.96 3.50 4.23 3.44
Oil and NGL ($/bbl) 66.83 75.16 81.86 83.11
Operating netback ($/BOE) (2)
Petroleum and natural gas revenue 47.94 56.04 55.39 59.10
Realized gain (loss) on financial derivatives (0.01 ) 0.27 (0.62 ) 0.15
Royalties (4.60 ) (6.68 ) (7.85 ) (4.70 )
Operating and transportation costs (12.86 ) (10.12 ) (11.73 ) (8.91 )
Operating netback 30.47 39.51 35.19 45.64
(1) Funds from operations is calculated as cash provided by operating activities before changes in non-cash working capital and settlement of decommissioning obligations. Funds from operations does not have a standardized measure prescribed by IFRS and therefore may not be comparable with the calculation of similar measures for other companies.
(2) Operating netback equals petroleum and natural gas revenue, royalty income and realized gain (loss) on financial derivatives, less royalties, operating and transportation costs and is calculated on a per unit basis. Operating netback does not have a standardized measure prescribed by IFRS and therefore may not be comparable with the calculation of similar measures by other companies.

Operations Review

Traverse spent $16.2 million on drilling and completion activities in 2014 with a total of 14 wells drilled (14 net), resulting in nine oil wells and five natural gas wells. Equipping and facility expenditures of $11.9 million in 2014 related to well equipping and tie-ins, installation of a booster compressor at the Turin facility and the expansion of the Coyote battery.

In the Coyote area, located approximately 40 kilometers east of Drumheller in East Central Alberta, Traverse holds a 100 percent working interest in 32,040 net acres. Traverse drilled a new Ellerslie oil discovery in 2013 which was placed on production in June, 2013. In 2013 two additional oil wells were drilled into this pool and three additional oil wells were drilled in the north Coyote area and placed on production. One dry hole was drilled in the north Coyote area; this well may be completed as a water disposal well. In 2014 Traverse drilled 10 wells in the Coyote area resulting in nine oil wells (including two horizontals) and one natural gas well. The Ellerslie oil pool is now designated as the Mannville Q13Q pool and has expanded to 10 producing oil wells and one shut-in oil well at the end of 2014. During 2014 Traverse directed its efforts to delineate the Mannville Q13Q oil pool and begin horizontal development drilling; the two horizontal wells were drilled and placed on production in Q4 2014. An additional 3D seismic program was shot in Q4 2014 to further delineate the oil pool. Further exploitation of this pool will be drilling to the west with vertical delineation wells, followed by additional horizontal wells.

A new Upper Mannville oil zone was discovered in the Coyote area when drilling to develop the deeper Mannville Q13Q oil pool. This shallower zone was delineated by wells drilled in 2013 and 2014 and one well was completed in the zone in Q4 2014 and placed on production subsequent to year-end. The vertical oil well is a modest producer. Further exploitation of this zone will be undertaken with horizontal drilling.

In the west Coyote area two wells were drilled in 2014 with one well placed on production in 2014 and the second well subsequent to year-end. Both wells are Mannville gas wells that produce minor amounts of oil. Traverse shot a 3D program in the area in Q1 2014 and plans further drilling in the area. The future wells to be drilled would be vertical delineation wells and horizontal development wells.

The Coyote battery expansion was completed in the third quarter of 2014 with clean oil shipments commencing in late August. The facility is licensed to treat up to 2,000 barrels of oil and water and 4 mmcf of gas per day. The battery expansion completed in 2014 included a new treater, additional storage tanks, water and gas separation facilities, gas sweetening unit and onsite power generation. A well 1.5 kilometers to the southwest of the battery was re-entered in 2014 and completed for water disposal. Traverse now has approval to dispose of produced water in this well which can be used as economics dictate. Other activities in 2014 included building multi-well satellite gathering facilities as well as additional multi-well drilling pad sites. Production for the 2014 year from Coyote averaged 400 BOE per day consisting of 72% oil, 25% natural gas and 3% natural gas liquids.

In the Turin area, located approximately 20 kilometers northeast of Lethbridge in Southern Alberta, Traverse holds a 100% interest in 7,720 acres. Production in 2014 was 445 BOE per day consisting of 32% oil, 64% natural gas and 4% natural gas liquids. The production is processed through the Company owned Turin battery which consists of a treater, water and gas separation facilities, gas sweetening unit, onsite power generation and a water disposal well.

In 2014 at Turin, the Company drilled two wells resulting in two natural gas wells which were placed on production in June and July. The Company installed gas compression at the Turin battery site in the second quarter of 2014 to allow for additional natural gas production from several shut in gas wells and decrease field operating pressures to allow for more stable oil and associated gas production.

Undeveloped land holdings in Alberta at December 31, 2014 totalled 187,300 gross (185,900 net) acres with an average working interest of 99%. At December 31, 2014, the Corporation had a working capital deficiency of $3.2 million and had drawn $1.4 million on the approved credit facility of $10 million.

In February 2015 Traverse announced a reduction in the 2015 exploration and development program to $15 million. The reduced program contains an estimated seven wells, including two horizontals. The 2015 program will continue to focus on light oil projects at Coyote and Michichi in southern Alberta. The budget is to be financed by cash flow and new equity issues or debt where appropriate.

In the first quarter of 2015, Traverse drilled one well in the Coyote area resulting in a potential oil well. This well appears to extend the Coyote oil pool approximately 0.4 miles further to the west. The well awaits tie-in (to conserve the associated natural gas) when field conditions permit after spring break up. Activity on the Turin property included workovers of three existing wellbores resulting in minor natural gas production additions. In the Hanna area, the Company re-entered an existing wellbore; the zone tested encountered water and minor hydrocarbons and will be abandoned.

Non-IFRS measures

Funds from operations

Funds from operations is a measure not defined in IFRS that is commonly used in the oil and gas industry. Funds from operations is calculated as cash provided by operating activities before non-cash working capital and settlement of decommissioning obligations as detailed under the heading "Cash and funds from operations and net income (loss)" within the Company's management's discussion and analysis for the year ended December 31, 2014. The Company believes that in addition to net income (loss), funds from operations is a useful supplemental measure as it provides an indication of Traverse's operating performance. Funds from operations should not be considered as an alternative to or more meaningful than cash provided by operating activities as determined in accordance with IFRS. Traverse's determination of funds from operations may not be comparable to that reported by other companies. Traverse also presents funds from operations per share whereby share amounts are calculated using weighted average shares outstanding consistent with the calculation of income per share.

Operating netback

Management uses certain industry benchmarks such as operating netback to analyze financial and operating performance. This benchmark as presented does not have any standardized meaning prescribed by IFRS and therefore may not be comparable with the calculation of similar measures for other entities. Operating netback reflects petroleum and natural gas revenue, royalty income and realized gain (loss) on financial derivatives less royalties, operating and transportation costs and is calculated on a per unit basis. The calculation of Traverse's netback is detailed under the heading "Operating netback" within the Company's management's discussion and analysis for the year ended December 31, 2014.

BOE equivalent

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.

Forward-looking information

This news release contains forward-looking information which is not comprised of historical fact. Forward-looking information involves risks, uncertainties and other factors that could cause actual events, results, performance, prospects and opportunities to differ materially from those expressed or implied by such forward-looking information. Forward-looking information in this news release includes: the Company's statements with respect to the exploitation and further drilling in the Coyote area; the number of wells to be drilled in 2015 and intentions for funding capital expenditures in 2015. 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 on April 15, 2015 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.

Although the Company believes that the material assumptions and factors used in preparing the forward-looking information in this news release are reasonable, undue reliance should not be placed on such information, which only applies as of the date of this news release, and no assurance can be given that such events will occur. The Company disclaims any intention or obligation to update or review any forward-looking information, whether as a result of new information, future events or otherwise, other than as required by law.

Further details on the Company including the 2014 year end audited financial statements, the related management's discussion and analysis and Annual Information Form are available on the Company's website (www.traverseenergy.com) 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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