CALGARY, AB--(Marketwired - May 01, 2017) -
NOT FOR DISTRIBUTION TO U.S. NEWS SERVICES OR FOR DISSEMINTATION IN THE UNITED STATES
Marquee Energy Ltd. ("Marquee" or the "Company") (TSX VENTURE: MQX) announces a corporate update, its fourth quarter operational results and financial results for the three and twelve months ended December 31, 2016, and year-end 2016 reserves. The Company's financial statements and Management's Discussion and Analysis ("MD&A") for the three months and twelve months ended December 31, 2016 are available on SEDAR at www.sedar.com and on Marquee's website at www.marquee-energy.com.
CORPORATE UPDATE
In response to persistent low commodity prices throughout 2016, the Company reduced its capital budget and focused its efforts over the past year on improving its balance sheet and liquidity position in order to re-position the Company to resume development of its light oil asset at Michichi, Alberta.
During the second quarter of 2016, the Company disposed of non-core shallow gas assets and heavy oil assets for net proceeds of $5.1 million, reducing decommissioning liabilities by $31.5 million and eliminating future capital commitments of $22.3 million.
On December 6, 2016, Alberta Oilsands Inc. ("AOS") and Marquee Energy Ltd. ("Old Marquee"), completed a plan of arrangement pursuant to which AOS acquired all of the issued and outstanding shares of Old Marquee and Old Marquee became a wholly-owned subsidiary of AOS (the "Arrangement"). Immediately following the Arrangement, Old Marquee was amalgamated into AOS by way of short-form vertical amalgamation, to form the Company, which operates under the name of "Marquee Energy Ltd". The Company reports on SEDAR under the previous AOS profile. This transaction, in combination with the rationalization of non-core properties during 2016, reduced bank debt to $15.8 million at December 31, 2016 representing a reduction of $36.6 million from December 31, 2015.
Highlights of the Company's asset base include:
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Over 320 multi-zone horizontal development drilling locations at Michichi targeting the Banff reservoir have been identified through extensive 2D and 3D seismic, vertical well control (1,300 vertical wells) and offsetting horizontal wells drilled in the Michichi area;
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Costs to drill, complete, equip, and tie-in a new horizontal well have continued to decrease with current estimated expenditures of $1.7 million per well. Economics based on the April 25, 2017 strip price forecast indicates that new wells at Michichi are expected to payout in approximately 1.2 years and generate an internal rate of return of 76% with finding and development costs of approximately $9/boe; and
The Company's Board of Directors approved a capital program of approximately $7.0 million for the first half of 2017. Marquee remains focused on the management of its balance sheet and believes it is prudent to limit capital spending to free corporate cash flow at this time. Details on guidance for 2017 and further capital plans for the year will be forthcoming.
The Company recently completed its Q1 2017 drilling program at Michichi with all three wells being placed on production in early April. The three wells continue to clean-up post completion, and over the last week have averaged 180 boe/d per well (based on field estimates). Marquee will provide further well performance updates as it becomes available.
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| FINANCIAL AND OPERATIONAL HIGHLIGHTS |
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| | | Three months ended | | | Year ended | |
| | | December 31, | | | December 31, | |
| | | 2016 | | | 2015 | | | 2016 | | | 2015 | |
| Financial (000's except per share and per boe amounts) | | | | | | | | | | | | | | | | |
| Oil and natural gas sales (1) | | $ | 8,013 | | | $ | 12,153 | | | $ | 31,538 | | | $ | 55,137 | |
| Funds flow from operations (2) | | $ | (153 | ) | | $ | 2,471 | | | $ | 1,897 | | | $ | 18,402 | |
| | Per share - basic and diluted | | $ | 0.01 | | | $ | 0.01 | | | $ | 0.01 | | | $ | 0.05 | |
| | Per boe | | $ | 8.06 | | | $ | 5.45 | | | $ | 1.10 | | | $ | 9.30 | |
| Net income (loss) | | $ | (10,063 | ) | | $ | (26,701 | ) | | $ | (22,185 | ) | | $ | (53,419 | ) |
| | Per share - basic and diluted | | $ | (0.04 | ) | | $ | (0.08 | ) | | $ | (0.10 | ) | | $ | (0.15 | ) |
| Capital expenditures | | $ | 2,852 | | | $ | 2,386 | | | $ | 3,539 | | | $ | 18,539 | |
| Acquisitions | | $ | - | | | $ | - | | | $ | - | | | $ | 27,049 | |
| Dispositions (3) | | $ | (1,700 | ) | | $ | - | | | $ | (6,827 | ) | | $ | (38,653 | ) |
| | |
| Net debt (2) | | $ | 17,165 | | | $ | 50,277 | | | $ | 17,165 | | | $ | 50,277 | |
| Total Assets | | $ | 169,162 | | | $ | 227,941 | | | $ | 169,162 | | | $ | 227,941 | |
| Weighted average basic and diluted shares outstanding | | | 226,740,053 | | | | 354,093,535 | | | | 226,740,053 | | | | 354,093,535 | |
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| Operational | | | | | | | | | | | | | | | | |
| Net wells drilled | | | - | | | | - | | | | - | | | | 6 | |
| Daily sales volumes | | | | | | | | | | | | | | | | |
| | Oil (bbls per day) | | | 1,047 | | | | 1,691 | | | | 1,254 | | | | 1,646 | |
| | Heavy Oil (bbls per day) | | | - | | | | 461 | | | | 162 | | | | 598 | |
| | NGL's (bbls per day) | | | 172 | | | | 176 | | | | 142 | | | | 185 | |
| | Natural Gas (mcf per day) | | | 8,034 | | | | 15,578 | | | | 10,824 | | | | 15,831 | |
| | Total (boe per day) | | | 2,558 | | | | 4,924 | | | | 3,361 | | | | 5,068 | |
| | % Oil and NGL's | | | 48 | % | | | 47 | % | | | 46 | % | | | 48 | % |
| Average realized prices | | | | | | | | | | | | | | | | |
| | Light Oil ($/bbl) | | $ | 51.38 | | | $ | 42.76 | | | $ | 42.78 | | | $ | 46.60 | |
| | Heavy Oil ($/bbl) | | $ | - | | | $ | 29.35 | | | $ | 23.61 | | | $ | 38.26 | |
| | NGL's ($/bbl) | | $ | 30.52 | | | $ | 32.67 | | | $ | 32.37 | | | $ | 34.91 | |
| | Natural Gas ($/mcf) | | $ | 3.49 | | | $ | 2.60 | | | $ | 2.23 | | | $ | 2.84 | |
| Netback | | | | | | | | | | | | | | | | |
| | Revenue ($/boe) | | $ | 34.05 | | | $ | 26.83 | | | $ | 25.64 | | | $ | 29.81 | |
| | Royalties ($/boe) | | $ | (1.64 | ) | | $ | (3.41 | ) | | $ | (1.99 | ) | | $ | (3.57 | ) |
| | Operating and transportation costs ($/boe) | | $ | (24.29 | ) | | $ | (18.63 | ) | | $ | (17.54 | ) | | $ | (16.74 | ) |
| | Operating netback prior to hedging (2) | | $ | 8.12 | | | $ | 4.79 | | | $ | 6.11 | | | $ | 9.50 | |
| | Realized hedging gain (loss) ($/boe) | | $ | (1.25 | ) | | $ | 4.64 | | | $ | 1.41 | | | $ | 4.97 | |
| | Operating netback ($/boe) (2) | | $ | 6.87 | | | $ | 9.43 | | | $ | 7.52 | | | $ | 14.47 | |
(1) Before Royalties
(2) Defined under the Non-GAAP Measures section of this MD&A
(3) Proceeds on dispositions
2016 YEAR END RESERVES
Marquee's year end reserves for 2016 are based on the Sproule Associates Limited ("Sproule") independent evaluation of the Company's reserves dated effective December 31, 2016, which has been prepared in accordance with NI 51-101 and the Canadian Oil and Gas Evaluation Handbook ("COGE Handbook"). Additional reserves information required under NI 51-101 will be included in Marquee's Annual Information Form to be filed on SEDAR.
Sproule used a Canadian Light Sweet Crude price forecast based on US$55 WTI and US$65 WTI for light oil for 2017 and 2018, respectively, and $3.26 per GJ and $3.10 per GJ for AECO natural gas in 2017 and 2018, respectively.
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| Summary of Reserves |
| As at December 31, 2016(1) |
| | | |
| | | Gross Company Reserves (2) |
| Description
| | Light Crude
Oil (Mbbl) | | Conventional Natural
Gas (MMcf) | | Natural Gas
Liquids (Mbbl) | | Total (Mboe)
|
| Proved producing | | 1,997 | | 15,539 | | 243 | | 4,830 |
| Proved non-producing | | 180 | | 648 | | 9 | | 297 |
| Proved undeveloped | | 4,386 | | 13,355 | | 387 | | 6,999 |
| Total proved | | 6,563 | | 29,542 | | 640 | | 12,126 |
| Probable | | 3,140 | | 12,758 | | 289 | | 5,555 |
| Total proved plus probable | | 9,703 | | 42,298 | | 929 | | 17,681 |
(1) Based on Sproule December 31, 2016 forecast prices
(2) Gross Company reserves are the Company's total working interest share before the deduction of royalties
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| Summary of Before Tax Net Present Values |
| As at December 31, 2016(1) |
| | | | |
| | | Before Tax Net Present Value of Future Revenue ($M) | |
| | | Discount Rate | |
| Description | | 0% | | 5% | | 10% | | 15% | | 20% | |
| | | | | | | | | | | | |
| Proved producing | | $74,528 | | $63,529 | | $54,834 | | $48,103 | | $42,868 | |
| Proved non-producing | | $4,617 | | $3,585 | | $2,884 | | $2,384 | | $2,013 | |
| Proved undeveloped | | $146,793 | | $103,720 | | $73,468 | | $52,612 | | $37,975 | |
| Total proved | | $225,938 | | $170,834 | | $131,186 | | $103,099 | | $82,856 | |
| Probable | | $151,330 | | $101,093 | | $71,668 | | $53,283 | | $41,072 | |
| Total proved plus probable | | $377,268 | | $271,927 | | $202,854 | | $156,382 | | $123,928 | |
| Per Basic Share | | $0.87 | | $0.62 | | $0.47 | | $0.36 | | $0.28 | |
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(1) Based on Sproule December 31, 2016 forecast prices
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| Reconciliation of Reserves |
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| | | 2016 Reserves Reconciliation |
| Description (mboe)
|
| December 31, 2015
|
| Acquired
(Sold) |
| Production
|
| Additions,
revisions |
| December 31, 2016
|
| Total proved | | 0 | | 12,188 | | (62) | | 0 | | 12,126 |
| Probable | | 0 | | 0 | | 0 | | 0 | | 5,555 |
| Proved plus probable | | 0 | | 17,743 | | 62 | | 0 | | 17,681 |
Finding, Development and Acquisition Costs
Marquee incurred capital expenditures from December 6, 2016 to December 31, 2016 of $0.25 million comprised of monies spent on land and seismic. Costs related to reserve acquisitions in 2016 are $29.6 million, and includes the announced purchase price of acquisitions including any estimated working capital deficit or surplus rather than the amounts allocated to property, plant and equipment for accounting purposes. Historical F&D and FD&A costs for 2014 and 2015 are nil as AOS sold all of its reserves in 2012 and did not have any reserves in 2014 and 2015. The following table summarizes the Company's Finding, Development and Acquisition costs including changes in Future Development Costs:
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| | | Including the Change in Future Development Costs(1) |
| Description | | 2016 | | 2015 | | 2014 | | 3 Year Weighted |
| | | | | | | | | Average |
| Total proved ($/boe) | | | | | | | | |
| | F&D costs(3) | | - | | n/a | | n/a | | - |
| | FD&A costs(2,3) | | $2.45 | | n/a | | n/a | | $2.45 |
| | FDC(4) | | - | | n/a | | n/a | | - |
| Proved plus probable ($/boe) | | | | | | | | |
| | F&D costs(3) | | - | | n/a | | n/a | | - |
| | FD&A costs(2,3) | | 1.68 | | n/a | | n/a | | $1.68 |
| | FDC(3) | | - | | n/a | | n/a | | - |
(1) The Company incurred minimal capital cost post December 6, 2016 amalgamation.
(2) Comprised mainly of the Costs related to acquisition of Old Marquee reserves by the Company.
(3) See the "Additional Advisories" section of this press release for information pertaining to these oil and gas metrics
ANNUAL GENERAL MEETING OF SHAREHOLDERS
The Company's Annual General Meeting of Shareholders is scheduled for 2:00 PM on Monday June 26, 2017 in the Strand/Tivoli room at the Metropolitan Conference Centre in Calgary, AB. The record date for the meeting has been set as May 23, 2017.
ABOUT MARQUEE
Marquee is a Calgary based, junior energy company focused on light oil development and production in the Michichi area of eastern Alberta through the exploitation of existing opportunities and possible consolidation. Marquee's shares trade on the TSX Venture Exchange under the trading symbol "MQX". Additional information about Marquee may be found on its website www.marquee-energy.com and in its continuous disclosure documents filed with Canadian securities regulators on the System for Electronic Document Analysis and Retrieval (SEDAR) at www.sedar.com.
FORWARD-LOOKING STATEMENTS OR INFORMATION
Certain statements included or incorporated by reference in this news release may constitute forward -looking statements under applicable securities legislation. Such forward-looking statements or information typically contain statements with words such as "anticipate", "believe", "expect", "plan", "intend", "estimate", "propose", or similar words suggesting future outcomes or statements regarding an outlook. Forward-looking statements or information in this news release may include, but are not limited to: reserves estimates and the net present value of the future net reserves related thereto; the number and quality of future potential drilling and development opportunities; anticipated capital budgets and expenditures; the Company's development plan; the size and extent of the Michichi oil fairway; and the timing of disclosure of further 2017 guidance, capital expenditure plans and well performance.
Such forward-looking statements or information are based on a number of assumptions all or any of which may prove to be incorrect. In addition to any other assumptions identified in this document, assumptions have been made regarding, among other things: the ability of the Company to obtain equipment, services and supplies in a timely manner to carry out its activities; the ability of the Company to market crude oil, natural gas liquids and natural gas successfully to current and new customers; the ability to secure adequate product transportation; the timely receipt of required regulatory approvals; the ability of the Company to obtain financing on acceptable terms; interest rates; regulatory framework regarding taxes, royalties and environmental matters; future crude oil, natural gas liquids and natural gas prices; the ability to successfully integrate acquisitions into Marquee's business and management's expectations relating to the timing and results of development activities.
Forward-looking information is based on current expectations, estimates and projections that involve a number of risks and uncertainties which could cause actual results to differ materially from those anticipated by the Company and described in the forward-looking information. Material risk factors affecting the Company and its business are contained in Marquee's Annual Information Form, which is available under Marquee's issuer profile on SEDAR at www.sedar.com.
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 required by applicable securities laws. The forward -looking information contained in this press release is expressly qualified by this cautionary statement.
DRILLING LOCATIONS
This press release discloses drilling locations in three categories: (i) proved locations; (ii) probable locations; and (iii) unbooked locations. Proved locations and probable locations are derived from the Company's most recent independent reserves report prepared by Sproule as at December 31, 2016 and account for drilling locations that have associated proved and/or probable reserves, as applicable. Unbooked locations are internal estimates based on the Company's prospective acreage and assumptions as to the number of wells that can be drilled per section based on industry practice and internal review. Unbooked locations do not have attributed reserves. Of the 322 Michichi drilling locations identified herein, 69 are proved locations, 19 are probable locations, and the remaining 234 are unbooked locations. Unbooked locations have been identified by management as an estimation of our multi-year drilling activities based on evaluation of applicable geologic, seismic, engineering, production and reserves information. There is no certainty that the Company will drill all unbooked drilling locations and if drilled there is no certainty that such locations will result in additional oil and gas reserves or production. The drilling locations on which the Company will actually drill wells will ultimately depend upon the availability of capital, regulatory approvals, seasonal restrictions, oil and natural gas prices, costs, actual drilling results, additional reservoir information that is obtained and other factors. While certain of the unbooked drilling locations have been de - risked by drilling existing wells in relative close proximity to such unbooked drilling locations, other unbooked drilling locations are farther away from existing wells where management has less information about the characteristics of the reservoir and therefore there is more uncertainty whether wells will be drilled in such locations and if drilled there is more uncertainty that such wells will result in additional oil and gas reserves or production.
NON-GAAP FINANCIAL MEASURES
This press release contains the term "operating netbacks prior to hedging" and "operating netbacks" which do not have standardized meanings prescribed by IFRS and, therefore, may not be comparable with the calculation of similar measures presented by other companies. Marquee uses operating netbacks to analyze operating performance. Marquee believes this benchmark is a key measure of profitability and overall sustainability for the Company and this term is commonly used in the oil and natural gas industry. Operating netbacks are not intended to represent operating profits, net earnings or other measures of financial performance calculated in accordance with IFRS.
Operating netbacks prior to hedging are calculated by subtracting royalties, production, and operating and transportation expenses from revenues before other income/losses. Operating netbacks include realized hedging gain (loss).
This press release also contains the term "funds flow from operations" which should not be considered an alternative to, or more meaningful than "cash flow from operating activities", as determined in accordance with IFRS, as an indicator of the Company's performance. "Funds flow from operations" does not have any standardized meaning prescribed by IFRS and therefore reference to funds flow from operations or funds flow from operations per share may not be comparable with the calculation of similar measures presented by other entities. Management uses funds flow from operations to analyze operating performance and leverage and considers funds flow from operations to be a key measure as it demonstrates the
Company's ability to generate cash necessary to fund future capital investments and to repay debt. Funds flow from operations per share is calculated using the weighted average number of shares for the period.
In addition, the press release contains the term "net debt", which does not have any standardized meaning under IFRS and therefore may not be comparable to similar measures presented by other issuers. Net debt is calculated as net debt, defined as current assets less current liabilities (excluding fair value of commodity contracts and flow-through share premiums). Management considers net debt as an important additional measure to monitor debt repayment requirements and track the financial viability of the Company.
ADDITIONAL ADVISORIES
Boes are presented on the basis of one boe for six Mcf of natural gas. Disclosure provided herein in respect of boe may be misleading, particularly if used in isolation. A boe conversion ratio of 6 Mcf: 1 bbl is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. Given that the value ratio based on the current price of crude oil as compared to natural gas is significantly different from the energy equivalency of 6:1, utilizing a conversion on a 6:1 basis may be misleading as an indication of value.
This press release contains disclosure in respect of F&D costs and FD&A costs, which are considered oil and gas metrics within the meaning of NI 51-101. F&D costs are calculated as the sum of development capital plus the change in future development capital for the period divided by the reserves additions for the period. FD&A costs are calculated as the sum of development capital plus the change in future development capital and acquisition costs for the period divided by the reserves. Management uses F&D costs as a measure to assess the performance of the Company's resources required to locate and extract new hydrocarbon reservoirs. The aggregate of the exploration and development costs incurred in the most recent financial year and the change during that year in estimated future development costs generally will not reflect total finding and development costs related to reserves additions for that year. FD&A and F&D costs used by Marquee may not be comparable to similar measures used by other issuers.
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.
