Charger Energy Corp. Announces 2012 Second Quarter Results, Updates Viking Oil Reserves and 2012 Capital Program
August 28 2012 - 7:10PM
Marketwired Canada
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Charger Energy Corp. ("Charger", the "Company") (TSX VENTURE:CHX) announces its
unaudited interim financial and operating results for the quarter ended June 30,
2012 and provides an operational update on its Viking light oil drilling
activities in its Halkirk-Provost core area.
Charger has filed interim Financial Statements and Management's Discussion and
Analysis on www.sedar.com and on the Company's website at www.chargerenergy.com.
Second Quarter 2012
The second quarter of 2012 is the first full quarter following the closing of
the 4 company arrangement earlier this year, however it does not fully reflect
the results of Charger's Viking light oil development program, specifically the
results of the Company's first multi-well pad drilled at Neutral Hills which
will be put on production during the third quarter.
-- The Company successfully drilled and completed 4 horizontal Viking light
oil wells during the quarter from a multi-well pad at Neutral Hills.
These wells are currently producing at a combined rate in excess of 350
boe/d. In addition, Charger began construction of a 4,000 bbl/d multi-
well battery and treating facility at Neutral Hills which will be
completed in the third quarter. Current production at Neutral Hills is
constrained while the new wells and facility are optimized;
-- Second quarter production averaged 3,172 boe/d (34% oil and liquids);
-- Capital spending totalled $7.7 million during the second quarter of 2012
focused primarily on development of the Viking light oil play in the
Halkirk-Provost core area;
-- The Company closed two non-core property dispositions of approximately
80 boe/d for total proceeds of $4 million;
-- Funds flow from operations during the second quarter was $1.5 million
($0.02 per share) which reflects low natural gas prices but does not
include the impact of recent drilling success at Neutral Hills; and
-- The Company's senior lender has confirmed Charger's revolving credit
facility at $65 million, the Company was drawn $52 million on the
facility at the end of the second quarter;
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Selected Financial & Three Months Ended June Six Months Ended June
Operational Information 30, 30,
($000 except per share
amounts) 2012 2011 2012 2011
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Financial
Petroleum and natural gas
sales 9,595 123 13,527 123
Funds flow from (used in)
operations(1) 1,473 (431) 1,930 (847)
Per share - basic and
diluted 0.03 (0.02) 0.04 (0.04)
Net loss and
comprehensive loss (1,978) (1,324) (4,054) (1,860)
Per share - basic and
diluted (0.03) (0.08) (0.08) (0.12)
Capital expenditures (7,747) (6,919) (18,550) (7,808)
Dispositions 4,000 - 4,000 -
Bank debt 51,600 - 51,600 -
Working
capital(deficiency)(2) (4,944) 14,958 (4,944) 14,958
Operational Production
Crude oil and liquids
(bbls/d) 1,071 3 764 2
Natural gas (mcf/d) 12,608 268 8,398 135
Oil equivalent (boe/d) 3,172 48 2,164 25
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(1) Funds flow from (used in) operations is calculated based on cash flow
from operating activities before changes in non-cash working capital,
transaction costs, and decommissioning expenditures.
(2) Working capital (deficiency) - excludes the current portion of financial
derivative instruments.
Provost Viking Reserves Update
Charger's independent reserves evaluator GLJ Petroleum Consultants Ltd. ("GLJ")
has provided, effective May 31, 2012, an evaluation of Charger's oil and natural
gas reserves limited to the Company's Provost Viking oil properties. The
evaluation, which reflects Charger's active Viking light oil development
program, resulted in the following consolidated oil and natural gas reserves:
-- Total company proved reserves increased to 10.6 MMboe (40% oil and
liquids) with a net present value (discounted at 10%, before tax) of
$122 million;
-- Total company proved plus probable reserves increased to 18.0 MMboe (42%
oil and liquids) with a net present value (discounted at 10%, before
tax) of $197 million;
Further details regarding Charger's updated NI 51-101 reserves are available in
a material change report which has been filed on www.sedar.com.
Outlook - Viking Activity, Capital Program and Guidance
Charger has completed development of its first multi-well pad at Neutral Hills
with four wells currently producing at a combined rate in excess of 350 boe/d.
To date in the third quarter of 2012, Charger drilled and completed 1 (0.9 net)
additional Viking horizontal well at Brownstone which will be placed on
production in early September.
Charger has also commissioned a new multi-well treating and storage facility at
Neutral Hills. The construction cost of the facility is approximately $1.8
million and provides 4,000 bbl/d of processing and treating capacity along with
emulsion and crude oil storage. Charger is tying 6 Neutral Hills wells directly
into the multi-well battery and intends to truck in produced oil from its other
Viking wells throughout the Provost area. Moving forward, it is expected that
the multi-well battery, once optimized, will reduce operating costs for
Charger's Viking oil production by $3 to $5 per bbl and provide additional
marketing flexibility.
The Company recently completed a review of its capital program in the context of
lower natural gas prices. As a result, Charger has revised its 2012 capital
program to approximately $35 million (prior to dispositions), primarily
concentrated on Viking light oil development in Charger's Halkirk-Provost core
area. As a result of the revised capital forecast, 2012 exit production is
expected to be between 3,300 boe/d and 3,600 boe/d (38% to 40% oil and liquids).
Charger's full year 2012 average production is expected to average 2,700 to
3,000 boe/d, recognizing that the production from the business combination was
not incorporated into Charger's results until March 6, 2012.
Charger expects to drill and complete up to 6 additional Viking oil wells at
Neutral Hills, Consort and Halkirk prior to year end. This activity level is
expected to provide meaningful growth in Charger's light oil production. The
Company has identified approximately 100 sections (64,000 net acres) which are
highly prospective for Viking light oil from its extensive land position in the
Halkirk-Provost area. In addition, the Company plans to drill up to 2 wells in
its Ghost Pine core area targeting light oil.
Charger's 2013 capital program will be determined later this year and will be
based on forecasted cash flow, available credit facilities and may also
contemplate the sale of certain non-core assets. The Company continues to
evaluate strategic opportunities that would increase production and enhance cash
flow. In addition, the Company is evaluating various debt and equity financing
opportunities to accelerate Charger's capital program. Management will continue
to prudently manage capital spending and financial resources in the best
interest of shareholders.
Charger's strategy is to grow shareholder value by focusing primarily on
acquiring, developing and producing light oil resource plays in Western Canada
using horizontal drilling and multi-stage fracturing technology. The Company is
pursuing a growth strategy focused on building a large undeveloped land base and
drilling inventory through a combination of strategic acquisitions, farm-ins and
crown land acquisitions.
About Charger Energy Corp.
Charger is a Calgary, Alberta based crude oil and natural gas company that
trades on the TSX Venture Exchange under the symbol "CHX". The Company is
committed to maximizing value for its shareholders through successful drilling
of internally-generated light oil prospects and by pursuing strategic property
and corporate acquisitions with light oil potential using new completion
technology. The Company has operated, high working interest, light oil and
natural gas assets in the Halkirk-Provost and Ghost Pine areas of east central
Alberta as well as the Peace River Arch area of north western Alberta.
Reader Advisory and Note Regarding Forward Looking Information
This news release contains forward-looking statements and forward-looking
information within the meaning of applicable securities laws. These statements
relate to future events or future performance. All statements other than
statements of historical fact may be forward-looking statements or information.
Forward-looking statements and information are often, but not always, identified
by the use of words such as "appear", "seek", "anticipate", "plan", "continue",
"estimate", "approximate", "expect", "may", "will", "project", "predict",
"potential", "targeting", "intend", "could", "might", "should", "believe",
"would" and similar expressions. More particularly and without limitation, this
news release contains forward-looking statements and information concerning the
expected results of the Arrangement; the Company's petroleum and natural gas
production and reserves; drilling opportunities; management team; business
strategy; future development and growth opportunities; prospects; asset base;
anticipated benefits from the Arrangement; value and debt levels; and capital
programs. The forward-looking statements and information are based on certain
key expectations and assumptions made by the management of the Company,
including expectations and assumptions concerning prevailing commodity prices
and exchange rates, applicable royalty rates and tax laws; future well
production rates and reserve volumes; the timing of receipt of regulatory
approvals; the performance of existing wells; the success obtained in drilling
new wells; the sufficiency of budgeted capital expenditures in carrying out
planned activities; and the availability and cost of labour and services.
Although management of the Company believes that the expectations and
assumptions on which such forward looking statements and information are based
are reasonable, undue reliance should not be placed on the forward-looking
statements and information since no assurance can be given that they will prove
to be correct. Forward-looking information is provided for the purpose of
providing information about the current expectations and plans of management of
the Company relating to the future. Readers are cautioned that reliance on such
information may not be appropriate for other purposes, such as making investment
decisions. Since forward-looking statements and information 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, the risks associated with the oil and gas
industry in general such as 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 reserves, production, costs
and expenses; health, safety and environmental risks; commodity price and
exchange rate fluctuations, marketing and transportation, loss of markets,
environmental risks, competition, incorrect assessment of the value of
acquisitions, failure to realize the anticipated benefits of acquisitions,
ability to access sufficient capital from internal and external sources, failure
to obtain required regulatory and other approvals and changes in legislation,
including but not limited to tax laws, royalties and environmental regulations.
There are risks also inherent in the nature of the Arrangement, including
failure to realize anticipated synergies or cost savings; risks regarding the
integration of the four entities and incorrect assessments of the values of each
entity. Accordingly, readers should not place undue reliance on the
forward-looking statements, timelines and information contained in this news
release. Readers are cautioned that the foregoing list of factors is not
exhaustive. The forward-looking statements and information contained in this
news release are made as of the date hereof and no undertaking is given 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.
Barrel of oil equivalents or BOEs 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. As the value ratio between
natural gas and crude oil based on the current prices of natural gas and crude
oil 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 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.
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