Wild Stream Exploration Inc.
TSX VENTURE : WSX

August 17, 2011 17:24 ET

Wild Stream Exploration Inc. Announces Second Quarter 2011 Operating and Financial Results and Re-Affirms 2011 Guidance

CALGARY, ALBERTA--(Marketwire - Aug. 17, 2011) - Wild Stream Exploration Inc. (the "Company" or "Wild Stream") (TSX VENTURE:WSX) is pleased to announce its operating and financial results for the three and six months ended June 30, 2011. Effective January 1, 2011, the Company has prepared its financial statements under International Financial Reporting Standards ("IFRS"). Prior year comparative amounts have been restated to reflect results as if Wild Stream had always prepared its financial results using IFRS. Selected financial and operational information is outlined below and should be read in conjunction with the interim financial statements and the related MD&A. These filings will be available at www.wildsr.com and www.sedar.com.

2011 Financial and Operating Highlights

Three months ended
June 30,
Percent Change Six months ended
June 30,
Percent Change
2011 2010 2011 2010
Financial (thousands of dollars except share data)
Petroleum and natural gas revenue 25,166 9,541 164 46,055 16,521 179
Funds from operations (1) 14,459 5,418 167 26,590 8,804 202
Per share - basic 0.25 0.15 67 0.51 0.25 104
- diluted 0.24 0.13 85 0.47 0.22 114
Net earnings (loss) 4,214 567 643 4,878 652 648
Per share - basic 0.07 0.02 250 0.09 0.02 350
- diluted 0.07 0.01 600 0.09 0.02 350
Capital expenditures, net 188,188 17,897 952 229,815 49,976 360
Corporate acquisitions - 1,518 (100 ) - 8,493 (100 )
Working capital deficiency (4) 62,557 9,481 560
Shareholders' equity 413,113 146,670 182
Weighted average shares (thousands)
Basic 57,567 36,938 56 52,408 35,125 49
Diluted 61,774 42,347 46 56,490 40,458 40
Shares Outstanding, end of period (thousands)
Basic 66,382 37,003 79
Diluted 74,917 46,687 60
Operating (6:1 boe conversion)
Average daily production
Liquids (bbls/d) 3,273 1,515 116 3,300 1,261 162
Natural gas (mcf/d) 1,657 1,372 21 1,335 1,102 21
Barrels of oil equivalent (2)(boe/d) 3,549 1,744 103 3,522 1,445 144
Netbacks
Operating
Petroleum and natural gas revenue(4) 75.63 60.80 24 70.52 63.72 11
Royalties (11.78 ) (7.92 ) 49 (10.07 ) (8.42 ) 20
Operating expenses (14.00 ) (13.20 ) 6 (13.34 ) (14.08 ) (5 )
Transportation expenses (2.33 ) (1.91 ) 22 (2.48 ) (1.80 ) 38
Operating netback ($/boe) 47.52 37.77 26 44.63 39.42 13
Corporate netback(3)($/boe) 44.79 34.14 31 41.71 33.67 24
Wells drilled
Gross 11 7 57 27 18 50
Net 10.2 6.8 50 24.9 16.2 54
Success 100 % 86 % - 100 % 94 % -

(1) Management uses funds generated by operations to analyze operating performance and leverage. Funds generated by operations as presented do not have any standardized meaning prescribed by IFRS and therefore it may not be comparable with the calculation of similar measures for other entities. The reconciliation between funds flow from operations and cash flow from operating activities can be found in the MD & A.

(2) Boe conversion ratio for natural gas of 1 Boe: 6 Mcf has been used, which is based on an energy equivalency conversion method primarily applicable at the burner tip and does not necessarily represent a value equivalency at the wellhead.

(3) Corporate netbacks are calculated as the operating netback less general and administrative expenses, financial charges asset retirement obligations and transaction costs.

(4) Excludes unrealized risk management contracts.

Highlights

  • Funds flow from operations increased 167% to $14.5 million ($0.25 per share - basic), compared to $5.4 million ($0.15 per share – basic) in the second quarter of 2010.
  • Despite having 50% of our total production shut in during April, Wild Stream increased production by 2% to 3,549 boe/d over the first quarter of 3,496 boe/d and a 103 percent increase from 1,744 boe/d in the comparable quarter of 2010.
  • Wild Stream closed its previously announced $175 million, 1,800 boe/d acquisition of focused, high working interest, operated producing oil and gas assets in southwest Saskatchewan from a senior energy producer ("the Property Acquisition"). This acquisition closed at the end of the quarter and accordingly had minimal impact on the operating and financial results.
  • Wild Stream's current production is more than 6,100 boe/d (90% oil) and we re-affirm our 2011 average production guidance of 5,000 - 5,200 boe/d with an exit rate in excess of 6,800 boe/d. Our planned capital expenditures remain at $135 million.
  • During the second quarter Wild Stream incurred drilling and completion capital expenditures of $14.6 million. The Company drilled 11 (10.2 net) oil wells with a 100% success rate including 1.9 net wells in Shaunavon, 8.0 net wells in Dodsland and 0.3 net wells in Garrington.
  • Additional capital expenditures of $14.4 million were focused on the expansion of our core land holdings in Shaunavon and Dodsland through the acquisition of approximately 82 net sections of land.
  • Wild Stream continued to expand its position in the Beaverhill Lake light oil resource play through crown land sales and a partnership with a senior oil and gas producer. The Company has accumulated 23 (15.25 net) sections of highly prospective lands on this play.
  • Expanded our hedge position to include 1,200 bbls/d of oil at a fixed WTI price of Cdn $98.66/bbl in 2011 and 700 bbls/d of oil at a fixed WTI price of Cdn $103.33/bbl in 2012.
  • Raised $88.9 million through the issuance of 7.7 million shares at a price of $11.55 per share and $5.1 million through the exercise of 2.8 warrants.
  • During the quarter Wild Stream increased its credit facility to $160 million from $70 million.
  • Wild Stream's balance sheet remains strong with approximately $100 million of unutilized bank lines at June 30, 2011.

Operations Review

With the continued success of our drilling programs our production volumes have begun a meaningful ramp up. Average production in July exceeded 5,800 boe/d and we anticipate averaging greater than 6,200 boe/d in August setting the stage to exceed our exit rate guidance of 6,800 boe/d. We have one drilling rig active in the Shaunavon area and as one rig active in Dodsland.

Shaunavon area

During the quarter, Wild Stream drilled 2 (1.9 net) horizontal oil wells achieving a 100 percent success rate. Subsequent to the end of the quarter the Company drilled an additional 4 (3.7 net) Upper Shaunavon wells and 4 (3.9 net) Lower Shaunavon wells at 100% success rate. Current production from the Shaunavon area is in excess of 4,000 bbls/d of oil.

We have licensed locations in both the Upper and Lower Shaunavon on our recently acquired northern lands from the Property Acquisition. The majority of the remaining second half 2011 locations will be focused on these lands as we begin to de-risk and validate the prospectivity with 3-5 wells anticipated in each of the Upper and Lower Shaunavon formations on these lands.

Lower Shaunavon formation

  • The pilot waterflood is expected to commence injection in early September. Based on the results of other area waterfloods we anticipate preliminary results in the first quarter of 2012.
  • In our southern exploration block, Wild Stream recently drilled a second horizontal test well. The well is waiting on completion and combined with our first horizontal test well, should begin validating the type curve for this area.
  • Wild Stream has been modifying completion techniques on several recent Lower Shaunavon horizontal wells to enhance long term well rates with encouraging initial results.
  • The northern extension of the Lower Shaunavon formation will be tested with 3-5 locations during the second half of 2011, with the first well expected to spud by late August, 2011.

Upper Shaunavon formation

  • Waterflood expansion continues in the Whitemud pool
    • 13 injection wells are currently providing pressure support.
    • We have observed waterflood response in 6 of the 22 horizontal wells drilled.
    • Two water source wells have been placed on production to provide makeup water for the flood
    • Facilities debottlenecking is occurring at both batteries to enhance increased fluid throughput.
  • Southern step out wells
    • 7 wells drilled to date at 100% success rate
      • 2 with 30 day IP's of approximately 250 bbls/d
      • 1 with 30 day IP of approximately 100 bbls/d
      • 2 with 30 day IP's of approximately 30 bbls/d
      • 2 waiting on completion
  • Northern wells
    • 7 wells surveyed
    • 3-5 locations to be drilled by year end 2011 with first well to spud by early September, 2011.

Other activities

  • Wild Stream has identified significant potential for horizontal drilling in the Cantuar formation on our northern Shaunavon acreage. Two wells are being licensed with the drilling of the first well expected in the fourth quarter of 2011.
  • We are working on $5 million of facilities and production optimization that should add production at a cost of approximately $10,000–$15,000 per producing boe.
  • Wild Stream initiated an ASP study on a recently acquired Upper Shaunavon pool.
    • Successful ASP floods have been implemented by other operators in the area at the Instow, Bone Creek and Gull Lake.
    • Wild Stream will likely implement a pilot ASP flood in second half of 2012.

Dodsland area

Active drilling in the Dodsland area commenced on May 30, 2011. To date Wild Stream has drilled 12 (12 net) wells at a 100% success rate. We will see an additional 4 wells drilled this quarter with the remaining 6 wells scheduled for the fourth quarter of 2011. Current production from the Dodsland area is in excess of 900 boepd (90% oil).

Pilot waterflood

  • Five of six horizontal wells are on production.
  • Injection facility construction is complete and eight injection wells have been converted and tied-in with SIR approval pending to commence injection.
  • Injection to commence with SIR approval which is expected by early September, 2011.
  • Preliminary results are expected by the first quarter of 2012

Southern exploration lands

  • Purchased 31 sections at April 2011 crown land sale.
  • Six wells have been drilled to date.
    • Four wells on production at average 30 day rates of 40 bbls/d of oil.
    • Two wells are waiting on completion.
    • Three additional step-out wells remaining to be drilled in the third quarter.

Downspacing

  • Industry results at 40 acre spacing (16 horizontal wells per section) continue to show similar type curve performance as those wells drilled on 80 acre spacing (8 horizontal wells per section).
  • The down-spacing results have the potential to double Wild Stream's inventory.
  • Wild Stream will commence its first 40 acre spacing (16 well per section) in the fourth quarter of 2011

Swan Hills

  • Wild Stream continued to expand its position in the Beaverhill Lake light oil resource play through additional crown land sales and a partnership with a senior oil and gas producer. Wild Stream has currently accumulated 23 gross (15.25 net) sections of highly prospective lands on the play.
  • Wild Stream expects to spud the first 50% working interest well by early September, 2011.

An additional 30,000 stock options have been granted to certain directors and officers of the Company.

Outlook

Wild Stream continues to successfully execute on its business plan of providing per share value growth through its combined exploration, exploitation and enhanced oil recovery strategies. At the heart of our success to date is our ability to stay focused on our core commodity in our core areas. In excess of 90% of our production comes from southwest Saskatchewan while our corporate commodity mix has stayed weighted at greater than 90% oil.

The production impacts seen in the second quarter of this year are expected to mitigated for next year's breakup period. Ongoing pipeline projects in the fourth quarter of 2011 and first quarter of 2012 will increase our pipeline connected volumes from the current 60% level to in excess of 85% of our corporate production.

Wild Stream has seen an approximate 10% increase in the costs of services in the first half of 2011. In spite of increased costs we have optimized our drilling program to maintain our $135 million capital guidance while leaving our 2011 average production guidance of 5,000 - 5,200 boe/d with an exit rate exceeding 6,800 boepd intact.

Wild Stream has more than 1,000 net risked drilling locations in our current inventory. This inventory provides the fuel to grow our reserves, production and net asset value in the future. The defined capital inventory of in excess of $1.7 billion has the potential to add in excess of $20 per share to our value over the long term.

We remain committed to increasing shareholder value through a combination of exploration, strategic acquisitions and subsequent exploitation while maintaining a conservative approach to balance sheet management.

Additional corporate information can be found in our August corporate presentation on our website at www.wildsr.com.

FORWARD LOOKING STATEMENTS: This press release contains forward-looking statements. More particularly, this press release contains statements concerning Wild Stream's drilling plans, future growth plans, reserves and values attributable thereto, per share growth, Wild Stream's growth strategy, the nature of the assets acquired pursuant to the Property Acquisition and the benefits of the Property Acquisition. In addition, the use of any of the words "guidance", "initial, "scheduled", "can", "will", "prior to", "estimate", "anticipate", "believe", "potential", "should", "unaudited", "forecast", "future", "continue", "may", "expect", "project", and similar expressions are intended to identify forward-looking statements. The forward-looking statements contained herein are based on certain key expectations and assumptions made by the Company, including expectations and assumptions concerning the success of optimization and efficiency improvement projects, the availability of capital, current legislation, receipt of required regulatory approval, the success of future drilling and development activities, the performance of existing wells, the performance of new wells, Wild Stream's growth strategy, general economic conditions, availability of required equipment and services and prevailing commodity prices. Although the Company believes that the expectations and assumptions on which the forward-looking statements are based are reasonable, undue reliance should not be placed on the forward-looking statements because the Company can give no assurance that they will prove to be correct. Since forward-looking statements address future events and conditions, by their very nature they involve inherent risks and uncertainties. Actual results could differ materially from those currently anticipated due to a number of factors and risks. These include, but are not limited to, risks associated with the oil and gas industry in general (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 fluctuations, changes in legislation affecting the oil and gas industry and uncertainties resulting from potential delays or changes in plans with respect to exploration or development projects or capital expenditures. Certain of these risks are set out in more detail in the Company's Annual Information Form which has been filed on SEDAR and can be accessed at www.sedar.com or Wild Stream's website www.wildsr.com.

The forward-looking statements contained in this press release are made as of the date hereof and the Company undertakes no obligation 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.

Meaning of Boe: When used in this press release, Boe means a barrel of oil equivalent on the basis of 1 Boe to 6 thousand cubic feet of natural gas. Boe per day means a barrel of oil equivalent per day. Boe's may be misleading, particularly if used in isolation. A Boe conversion ratio of 1 Boe for 6 thousand cubic feet of natural gas is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.

This press release shall not constitute an offer to sell, nor the solicitation of an offer to buy, any securities in the United States, nor shall there be any sale of securities mentioned in this press release in any state in the United States in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state.

NEITHER THE TSX VENTURE EXCHANGE NOR ITS REGULATION SERVICES PROVIDER (AS THAT TERM IS DEFINED IN THE POLICIES OF THE TSX VENTURE EXCHANGE) ACCEPTS RESPONSIBILITY FOR THE ADEQUACY OR ACCURACY OF THIS RELEASE.

Contact Information

  • Wild Stream Exploration Inc.
    Mr. Neil Roszell
    President and Chief Executive Officer
    403-767-1250
    403-232-8083 (FAX)

    Wild Stream Exploration Inc.
    Mr. Jerry Sapieha, CA
    Vice President, Finance and Chief Financial Officer
    403-767-1265
    403-232-8083 (FAX)
    www.wildsr.com