Donnycreek Energy Inc. ("Donnycreek" or the "Company") (TSX VENTURE:DCK) reports
that it has filed its condensed interim financial statements and related
Management's Discussion and Analysis ("MD&A") for the three and nine months
ended April 30, 2014 with 2013 comparatives on SEDAR. Selected financial and
operational information is outlined below and should be read in conjunction with
Donnycreek's condensed interim financial statements for the three and nine
months ended April 30, 2014 and its audited financial statements and related
MD&A for the year ended July 31, 2013 which are available for review at
www.sedar.com and on our website at www.donnycreekenergy.com.
FINANCIAL AND OPERATING HIGHLIGHTS
Three Months Ended Nine Months Ended
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30-Apr-14 30-Apr-13 30-Apr-14 30-Apr-13
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Petroleum and
natural gas sales $ 6,914,196 $ 1,327,463 $ 10,909,301 $ 2,230,879
Funds flow from
operations(1) $ 4,831,782 $ 753,544 $ 6,823,045 $ 1,098,047
Basic ($/share) $ 0.09 $ 0.02 $ 0.13 $ 0.03
Diluted ($/share) $ 0.09 $ 0.02 $ 0.13 $ 0.03
Net income (loss) $ 4,390,715 $ (754,969) $ 5,238,080 $ (1,562,711)
Basic ($/share) $ 0.08 $ (0.02) $ 0.10 $ (0.04)
Diluted ($/share) $ 0.08 $ (0.02) $ 0.10 $ (0.04)
Capital expenditures $ 13,397,914 $ 5,459,698 $ 35,530,287 $ 22,231,245
Working capital $ 8,562,773 $ 15,197,516 $ 8,562,773 $ 15,197,516
Total assets $ 87,913,804 $ 47,895,080 $ 87,913,804 $ 47,895,080
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Operating
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Average daily
production (sales)
Crude oil (bbls/d) 0.0 0.2 0.5 0.6
Natural gas
(mcf/d) 3,190.9 725.0 1,836.5 473.7
NGLs (bbls/d)(2) 523.9 105.2 295.7 58.8
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Total (boe/d) 1,055.7 226.2 602.3 138.4
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Average realized
price
Crude oil ($/bbls) $ - $ 81.03 $ 91.17 $ 82.06
Natural gas
($/mcf) $ 6.72 $ 4.41 $ 5.34 $ 3.67
NGLs ($/bbls)(2) $ 108.63 $ 95.40 $ 102.31 $ 87.43
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Netback ($/boe)
Petroleum and
natural gas sales $ 73.59 $ 65.92 $ 66.35 $ 59.08
Royalties $ (4.52) $ (3.75) $ (3.86) $ (2.80)
Operating expenses
(incl.
transportation) $ (13.98) $ (14.48) $ (13.45) $ (11.77)
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Operating
netbacks(3) $ 55.09 $ 47.69 $ 49.04 $ 44.51
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Share Information
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Common shares
outstanding 54,920,530 41,735,530 54,920,530 41,735,530
Weighted average
common shares
outstanding 54,697,609 41,592,552 51,561,702 35,610,924
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Notes:
(1) Funds flow from operations are petroleum and natural gas revenue and
interest income less producing and operating expenses, royalties,
exploration and evaluation expenditures and general and administrative
expenses.
(2) References to NGLs include condensate.
(3) Operating netbacks are determined by deducting royalties, production
expenses and transportation and selling expenses from petroleum and natural
gas revenue.
Operations Update
As of June 26, 2014, the Company has a total of 11 Montney horizontal natural
gas wells, with an average working interest of 45.34%, in 20.75 gross sections
at Kakwa. Eight of the wells are tied in and producing, two wells have been
drilled and cased, and one well is currently being drilled and expected to reach
total depth in early July 2014. The Company holds a 50% working interest in
16.75 gross sections, a 23.75% working interest in 2 gross sections and a 62%
working interest in 2 gross sections at Kakwa.
Production growth continued in the Company's fiscal third quarter ("Q3, 2014")
with the addition of two new 50% working interest Montney horizontal natural gas
wells in February 2014 contributing to record high average production volumes of
1,056 BOE/d for Q3, 2014 - approximately 50% condensate. This was achieved while
also having some production being shut in for safety reasons while drilling
operations were being conducted on an existing lease with two producing wells.
Revenues for the quarter exceeded $6.9 million with condensate prices averaging
approximately $108.63/bbl and gas prices averaging approximately $6.72/mcf.
The Company has accelerated its development plans at Kakwa with the drilling of
three 50% working interest extended length Montney horizontal wells from a
single surface pad in an effort to reduce costs and improve operating
efficiencies. As of June 26, 2014, two wells have been drilled and cased and the
third is expected to reach total depth by early July 2014. Production from this
3 well pad is expected to be brought on in September 2014. In July 2014, this
drilling rig is then scheduled to move to another existing pad site with a
single producing well to drill two development Montney horizontal wells. It is
expected that this drilling rig will then be utilized to continuously drill
development wells until the end of calendar 2014.
A second drilling rig has been secured to drill a vertical Montney stratigraphic
well at Kakwa followed by a Montney horizontal well west of the current
developed land block to further delineate the western portion of the acreage
block. The vertical well is expected to be drilled in August 2014 at 07-15-63-6
W6M followed by a kick off of a horizontal leg targeting 01-14-63-6 W6M.
As reported on May 22, 2014, a Corporate reserves update was undertaken to
evaluate the impact of new natural gas wells brought on production at Kakwa.
Effective March 31, 2014, McDaniel & Associates Consultants Limited ("McDaniel")
evaluated all of the Company's producing assets. Based on the McDaniel's
evaluation, the Company has booked 16.4 million barrels of oil equivalent of
proved plus probable ("P+P") reserves and 10.8 million barrels of oil equivalent
of total proved ("TP") reserves. The net present value at 10% discount is
estimated to be $249.2 million for the P+P reserves and $162.3 million for the
TP reserves.
Donnycreek is a Calgary based public oil and gas company which holds
approximately 439 gross (313 net) sections of petroleum and natural gas rights,
with an average working interest of approximately 70%, prospective primarily for
Montney liquid rich natural gas resource exploration and development all of
which are located in the Deep Basin area of west-central Alberta.
ADVISORY ON FORWARD-LOOKING STATEMENTS: This news release contains certain
forward-looking information and statements ("forward-looking statements") within
the meaning of applicable securities laws. The use of any of the words "expect",
"anticipate", "continue", "estimate", "may", "will", "project", "should",
"believe", "plans", "intends" and similar expressions are intended to identify
forward-looking statements. In particular, but without limiting the foregoing,
this news release contains statements concerning the timing of the drilling of
wells, the timing to bring on further production, future drilling plans and the
primary prospective zone of exploration and development on the Company's lands.
Forward-looking statements are based on a number of material factors,
expectations or assumptions of Donnycreek which have been used to develop such
statements and information but which may prove to be incorrect. Although
Donnycreek believes that the expectations reflected in these forward-looking
statements are reasonable, undue reliance should not be placed on them because
Donnycreek 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. Further, events or
circumstances may cause actual results to differ materially from those predicted
as a result of numerous known and unknown risks, uncertainties, and other
factors, many of which are beyond the control of the Company, including, without
limitation: whether the Company's exploration and development activities
respecting its prospects will be successful or that material volumes of
petroleum and natural gas reserves will be encountered, or if encountered can be
produced on a commercial basis; the ultimate size and scope of any hydrocarbon
bearing formations on its lands; that drilling operations on its lands will be
successful such that further development activities in these areas are
warranted; that Donnycreek will continue to conduct its operations in a manner
consistent with past operations; results from drilling and development
activities will be consistent with past operations;
the general stability of the economic and political environment in which
Donnycreek operates; drilling results; field production rates and decline rates;
the general continuance of current industry conditions; the timing and cost of
pipeline, storage and facility construction and expansion and the ability of
Donnycreek to secure adequate product transportation; future commodity prices;
currency, exchange and interest rates; regulatory framework regarding royalties,
taxes and environmental matters in the jurisdictions in which Donnycreek
operates; and the ability of Donnycreek to successfully market its oil and
natural gas products; changes in commodity prices; changes in the demand for or
supply of the Company's products; unanticipated operating results or production
declines; changes in tax or environmental laws, changes in development plans of
Donnycreek or by third party operators of Donnycreek's properties, increased
debt levels or debt service requirements; inaccurate estimation of Donnycreek's
oil and gas reserve and resource volumes; limited, unfavourable or a lack of
access to capital markets; increased costs; a lack of adequate insurance
coverage; the impact of competitors; and certain other risks detailed from
time-to-time in Donnycreek's public disclosure documents. Additional information
regarding some of these risks, expectations or assumptions and other factors may
be found under in the Company's Annual Information Form for the year ended July
31, 2013 and the Company's Management's Discussion and Analysis prepared for the
year ended July 31, 2013. The reader is cautioned not to place undue reliance on
these forward-looking statements. The forward-looking statements contained in
this news release are made as of the date hereof and Donnycreek undertakes no
obligations to update publicly or revise any forward-looking statements, whether
as a result of new information, future events or otherwise, unless so required
by applicable securities laws.
Statements relating to reserves are by their nature forward-looking statements,
as they involve the implied assessment, based on certain estimates and
assumptions, that the reserves can be profitably produced in the future. It
should not be assumed that the estimated future net cash flow shown below is
representative of the fair market value of the Company's properties. There is no
guarantee that the estimated reserves will be recovered or at the commodity
prices used to calculate the net present value of such reserves. Actual crude
oil, natural gas liquids and natural gas reserves may be greater than or less
than the estimates provided herein.
In this news release the calculation of barrels of oil equivalent (boe) is
calculated at a conversion rate of six thousand cubic feet (6 mcf) of natural
gas for one barrel (bbl) of oil based on an energy equivalency conversion
method. 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 to 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.
NON-GAAP MEASURES
In this document "Funds flow from operations" and "Operating Netbacks",
collectively the "Non-GAAP measures", are used and do not have any standardized
meanings as prescribed by IFRS. They are used to assist management in measuring
the Company's ability to finance capital programs and meet financial
obligations. Funds flow from operations refers to cash flows from operating
activities before net changes in operating working capital.
Non-GAAP measures should not be considered in isolation or construed as
alternatives to their most directly comparable measure calculated in accordance
with IFRS, or other measures of financial performance calculated in accordance
with IFRS. The Non-GAAP measures are unlikely to be comparable to similar
measures presented 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 NEWS RELEASE.
FOR FURTHER INFORMATION PLEASE CONTACT:
Donnycreek Energy Inc.
Jack Marsh
Chief Operating Officer
403-255-2356
Donnycreek Energy Inc.
Malcolm Todd
Chief Executive Officer
403-237-5700
403-265-3506 (FAX)
www.donnycreekenergy.com.
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