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NuVista Energy Ltd
Symbol NVA
Shares Issued 138,365,827
Close 2014-10-30 C$ 10.36
Market Cap C$ 1,433,469,968
Recent Sedar Documents

NuVista loses $208,000 in Q3

2014-10-30 21:23 ET - News Release

Mr. Jonathan Wright reports

NUVISTA ENERGY LTD. ANNOUNCES THIRD QUARTER 2014 RESULTS AND GROWTH PLANS FOR 2015 AND BEYOND

NuVista Energy Ltd. has released its results for the three and nine months ended Sept. 30, 2014, and has provided an update on its future business plans. During the third quarter of 2014, NuVista significantly advanced on the company's long-term goals with the start-up of the Keyera raw gas pipeline, achieved strong IP30 results on eight condensate-rich gas wells and continued the company's successful Wapiti Montney drilling program. The company also announced an additional long-term processing contract for 30 million cubic feet per day commencing in mid-2016, and made strong progress in non-core divestitures. Although the new Keyera pipeline just recently started up, NuVista delivered production near the top of the company's original third quarter guidance range of 17,300 to 18,300 barrels of oil equivalent per day.

The company has continued to participate in an active commodity hedge program to ensure a strong baseline price underpinning the company's capital plans and economic threshold. For 2015, NuVista has currently hedged approximately 54 per cent of 2015 forecasted gas production and 40 per cent of forecasted oil and condensate production at approximate floor prices of $3.67 per gigajoule AECO and $97.91 per barrel WTI, respectively. The company has positioned NuVista to provide strong long-term profitable growth in a low AECO natural gas price environment due to the company's growing condensate production and the continuous improvement of the company's capital and operating efficiencies. In this scenario, NuVista continues to be in an excellent position to deliver growth and profitability.

Significant highlights for the third quarter of 2014:

  • Achieved an average production rate of 18,030 boe per day;
  • Achieved funds from operations of $27.3-million in the third quarter of 2014 compared with $15.1-million in the second quarter and $23.2-million in the same period last year;
  • With the start-up of the Keyera raw gas pipeline from the company's Wapiti Montney Bilbo block to the Keyera Simonette gas plant on Sept. 26, 23 Montney wells on production, up from 16 wells at the beginning of the year and current production levels of approximately 23,000 boe per day (21,500 boe per day, net of fourth quarter dispositions); the company has six previous wells, which were shut in and are ready for production once additional facility capacity becomes available;
  • Achieved IP30 production rates on eight new Montney wells in Wapiti with strong results as follows: presented versus type curve expectation; the IP30s ranging from 916 to 1,770 boe per day, or about 70 per cent to 140 per cent of type curve; the associated Bilbo well average condensate gas ratio of 87 barrels per million cubic feet; is strongly encouraged by these results particularly for the following two reasons:
    • The strongest wells were well above type curve despite being choked due to facilities constraints for most or all of the IP30 period. Flowing pressures on several of these wells ranged from 3,000- to 4,000-pound-per-square-inch gauge.
    • Recent mechanical interventions to relieve temporary plugging in wells, which tested below type curve, have demonstrated significant postintervention improvement results above type curve. An example of such improvements will be included in the updated corporate presentation on the company's website.

All of these recent results continue to provide the company with confidence that strong incremental improvements are under way. With continuous production, the company is hopeful that in due course, the company will be revising the company's Montney Bilbo type curve upward.

                      NEW-WELL IP30 RESULTS

Location                         Raw gas  Condensate total sales         CGR
                                                                  condensate/
                                                                     raw gas
                                 (MMcf/d)     (bbl/d)     (boe/d)  (bbl/MMcf)

Bilbo development type curve         5.8         435       1,356          75
Well 22: Bilbo dev.                  4.3         405       1,077          93
100/07-06-066-05W6/00
Well 23: Bilbo dev.                  4.6         712       1,379         156
100/08-06-066-05W6/00
Well 24: Bilbo dev.                  7.8         611       1,760          78
100/04-27-065-05W6/02
Well 25: Bilbo dev.                  4.9         331       1,087          67
100/14-34-065-06W6/00
Well 26: Bilbo dev.                  4.2         268         916          64
100/16-33-065-06W6/00
Well 27: Bilbo dev.                  8.3         512       1,740          61
100/04-02-066-06W6/00
Well 28: Bilbo dev.                  7.9         578       1,770          74
100/05-02-066-06W6/00
Montney delineation
type curve                           5.8         261       1,222          45
Well 29: North Montney
delineation                          9.0         236       1,694          26
100/05-24-068-09W6/00

Well numbering for the Montney refers to the numbered wells in the 
company's corporate presentation available on the company's website.
They are effectively in chronological order since the company's 
inception in the play. All numbers shown are based on field estimate 
data.

Highlights:

  • Announced the signing of two non-core asset sales agreements including NuVista's non-core northeast British Columbia natural gas assets and Wapiti Cardium assets. The expected closing date for these transactions is Nov. 6, 2014. The assets are currently producing approximately 1,400 boe per day and have been sold for gross cash proceeds of $49.0-million plus 3.5 net sections of Wapiti Montney undeveloped land rights. These asset sales, together with those completed earlier in 2014, bring NuVista's total year-to-date proceeds from asset dispositions to $67.2-million cash plus 3.5 net sections of Wapiti Montney land.
  • Booked new Montney condensate-rich contingent resources in the Pipestone land block, which was purchased in August of 2014. The new contingent resource estimates, based on GLJ Petroleum Consultants Ltd., effective Aug. 1, 2014, and based on July 1, 2014, pricing, cover two-thirds of the new lands purchased in just one of the four Montney layers so far. Due to directly offsetting well results, this was achieved without having drilled a new well. The best estimate of contingent resources, which has been newly added, amounts to 22.3 million boe (77 per cent natural gas and 23 per cent natural gas liquids) valued at a net present value of $195-million before tax, an increase to the company's total contingent resource value of approximately 7.5 per cent. It is only the beginning for this land block, and it further underpins the company's belief in the low-risk and high-value nature of this recent land addition.
  • The company executed a total capital program of $55.8-million in the quarter, focused mainly on Bilbo (South) block development with seven wells (4.9 net) drilled for 100-per-cent success rate.
  • The company achieved an increase to the company's revolving bank facility limit from $240-million to $300-million.

Guidance for 2014, 2015 and beyond

NuVista's production has increased from 20,000 boe per day in September to over 23,500 boe per day currently. This represents 21,500 boe per day, net of the previously announced asset divestitures, which are being effected in the fourth quarter. Capital expenditures for 2014 will be approximately $310-million to $320-million, in line with original guidance. Production for the fourth quarter of 2014 is expected to average 21,000 to 22,500 boe per day, net of announced divestitures. This meets or slightly exceeds the middle of the previously announced guidance range of 20,000 to 23,000 boe per day despite absorbing the effect of year-to-date divestitures with associated production of 2,200 boe per day. The company also reaffirms the company's full-year production guidance of 17,750 to 18,500 boe per day for 2014 and continues to expect to have approximately 32 Montney wells on-line by year-end, up from 16 at the start of 2014. For 2014, funds from operations are anticipated to be in the range of $110-million to $120-million based on current strip commodity prices.

The company's 2015 capital expenditure program has now been finalized and meets five goals:

  • To continue development drilling in the company's Bilbo block and ramp up production in the new Bilbo facilities;
  • To replace, through Montney development spending, the production of 2,200 boe per day from assets recently sold;
  • To build another large compressor station in the company's Elmworth (North) block of the same size and design as the company's successful Bilbo station; this will ultimately underpin significant 2015 to 2017 Elmworth facility capacity growth of another 80 million cubic feet per day and 4,800 bbl per day of condensate; this capacity growth represents a tripling of the company's facility capacity as compared with first quarter 2014; with the addition of the Elmworth compressor station, total NuVista Montney facility capacity will reach over 40,000 boe per day by mid-2016;
  • To continue the successful development drilling program in the company's Elmworth block;
  • To continue the company's single-rig Wapiti Montney rolling delineation and land continuation program.

The board of directors of NuVista has approved the company's 2015 capital expenditure program at a range of $340-million to $380-million, only slightly above 2014 spend levels. This includes up to $275-million for development and delineation drilling, completions, and tie-ins of approximately 29 wells; $55-million for the Elmworth block compressor station and trunk pipelines; and up to $40-million for long-term permanent water supply, treatment and disposal facilities, as well as land, seismic and overheads. This program allows the company to balance short-term growth while continuing to lay the important foundational items for significant long-term growth. The company also intends to continue the company's asset rationalization program with the same annual target of $25-million to $50-million in 2015 divestiture proceeds to assist in financing the company's profitable Wapiti Montney growth. NuVista has significant flexibility and opportunity to accelerate the Wapiti program as 2015 progresses; however, given the current commodity price uncertainty, the company has elected to take a conservative approach while the company closely monitors future drilling results in addition to the commodity price environment.

The company expects 2015 NuVista production to be in the range of 23,500 to 25,000 boe per day, which represents a 35-per-cent increase from absolute 2014 reported average production, or a 50-per-cent increase after adjusting for announced 2014 asset dispositions with associated production of 2,200 boe per day. The company expects 2015 funds from operations in the range of $180-million to $200-million at current strip prices, or approximately 65 per cent higher than 2014 funds from operations.

Looking beyond 2015, the company's plans remain flexible depending on market conditions. At a level of capital spending similar to 2015, sustained annual production growth of 20 per cent to 25 per cent per year is achievable. In the case of accelerated capital spending beyond 2015, NuVista is confident in the company's capability to deliver annual production growth of 30 per cent to 35 per cent in the 2016 to 2018 period. Both capital pace options are underpinned by firm service agreements already in place through 2017, or into 2018, in the case of flat capital spending levels. The company will continue to set annual capital programs, which are commensurate with a strong balance sheet, while delivering excellent growth in the context of the ever changing external environment.

With corporate netbacks and production rising quickly, and capital and operating efficiencies improving through experience and technological advancements, NuVista is confident that the company can continue to accelerate the pace of the company's activity in the future. The company will continue to work to provide incremental facility capacity to underpin long-term profitable growth.

The company would like to thank its shareholders for their continued support, the board of directors for its continuing guidance, and the company's dedicated and talented staff for their significant contributions to the bright future the company is delivering together. Please refer to the company's website for more details, which will be provided in the company's corporate presentation on or before Nov. 3, 2014.

                          CORPORATE HIGHLIGHTS
                    ($ thousands, except per share) 

                                   Three months ended       Nine months ended
                                         Sept. 30,                Sept. 30,
                                     2014        2013        2014        2013
Financial
Oil and natural gas revenue       $66,426     $60,420    $187,057    $156,326
Funds from operations              27,326      23,161      73,272      53,773
Per basic and diluted
share                                0.20        0.20        0.54        0.45
Net earnings (loss)                  (208)     (2,295)    (16,403)    (13,739)
Per basic and diluted
share                                  --       (0.02)      (0.12)      (0.12)
Adjusted net earnings
(loss)                             (1,812)     (2,416)     (4,654)    (15,887)
Per basic and diluted
share                               (0.01)      (0.02)      (0.03)      (0.13)

Operating
Production
Natural gas (MMcf/d)                 78.3        76.7        69.6        71.0
Condensate (bbl/d)                  3,197       2,210       2,600       1,731
Butane (bbl/d)                        525         475         538         450
Propane (bbl/d)                       443         802         656         709
Ethane (bbl/d)                        288         715         712         820
Oil (bbl/d)                           521       1,550         684       1,545
Total oil equivalent
(boe/d)                            18,030      18,532      16,782      17,092
Average product prices
Natural gas ($/Mcf)                 $4.31       $3.04       $4.38       $3.23
Condensate ($/bbl)                  92.74       97.92       96.01       97.08
Butane ($/bbl)                      51.26       63.94       56.54       58.72
Propane ($/bbl)                     27.12       27.52       43.25       23.98
Ethane ($/bbl)                      12.46       11.59       14.23        8.97
Oil ($/bbl)                         86.72       94.45       90.48       80.44
Operating expenses ($/boe)          11.75       11.37       11.36       11.90
Operating netback ($/boe)           21.09       17.28       21.58       16.01
Funds from operations
netback ($/boe)                     16.47       13.59       16.00       11.52

Consolidated financial statements and management's discussion and analysis

NuVista's third quarter 2014 interim consolidated financial statements and the accompanying management's discussion and analysis are filed on SEDAR under NuVista Energy Ltd. and can also be accessed on NuVista's website.

We seek Safe Harbor.

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