CALGARY, AB–(Marketwired – May 18, 2016) – Marquee Energy Ltd. (“Marquee” or the “Company”) (TSX VENTURE: MQL) announces its first quarter operational results and financial for the three months ended March 31, 2016. The Company’s financial statements and Management’s Discussion and Analysis (“MD&A”) for the three months ended March 31, 2016 are available on SEDAR at www.sedar.com and on Marquee’s website at www.marquee-energy.com.
First Quarter 2016 Operational and Financial Highlights
- Reduced G&A expenses of $2.64 per boe representing a decrease of 22% from the $3.37 per boe from the first quarter of 2015;
- The Company’s hedging program generated $5.89 per boe of gains in the first quarter;
- First quarter exit net debt was reduced to $49.1 million, representing a decrease of 9% compared to the first quarter of 2015;
- Dramatic reduction in commodity prices resulted in first quarter funds flow from operations falling to $1.4 million or $0.01 per share, an 80% decrease as compared to $7.0 million generated in the first quarter of 2015;
- Realized average production volumes of 4,430 boe/d (46% oil and NGLs) representing a 10% decrease over the fourth quarter of 2015 and a 20% decrease from the first quarter of 2015;
- Approximately 600 boe/d shut-in non-core production in response to the decline in commodity prices in the first quarter;
Subsequent to quarter end, Marquee announced the sale of a non-core, shallow gas asset for total cash consideration of $4.5 million. The gross proceeds from the sale of the assets will be used to reduce the Company’s current debt and improve financial flexibility.
| FINANCIAL AND OPERATING HIGHLIGHTS | |||||||
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Three months ended March 31, |
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| 2016 | 2015 | ||||||
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Financial (000’s except per share and per boe amounts) |
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| Oil and natural gas sales (1) | $ | 7,749 | $ | 14,110 | |||
| Funds flow from operations (2) | $ | 1,392 | $ | 7,004 | |||
| Per share – basic and diluted | $ | 0.01 | $ | 0.06 | |||
| Per boe | $ | 3.45 | $ | 14.06 | |||
| Net loss | $ | (7,918) | $ | (4,131) | |||
| Per share – basic and diluted | $ | (0.06) | $ | (0.03) | |||
| Capital expenditures | $ | 100 | $ | 6,627 | |||
| Net debt (2) | $ | 49,058 | $ | 54,064 | |||
| Total Assets | $ | 217,189 | $ | 270,972 | |||
| Weighted average basic and diluted shares outstanding | 123,165,652 | 120,340,685 | |||||
| Operational | |||||||
| Net wells drilled | – | 2.0 | |||||
| Daily sales volumes | |||||||
| Oil (bbls per day) | 1,457 | 1,749 | |||||
| Heavy Oil (bbls per day) | 407 | 771 | |||||
| NGL’s (bbls per day) | 157 | 227 | |||||
| Natural Gas (mcf per day) | 14,451 | 16,733 | |||||
| Total (boe per day) | 4,430 | 5,536 | |||||
| % Oil and NGL’s | 46% | 50% | |||||
| Average realized prices | |||||||
| Light Oil ($/bbl) | $ | 31.11 | $ | 42.74 | |||
| Heavy Oil ($/bbl) | $ | 17.60 | $ | 33.75 | |||
| NGL’s ($/bbl) | $ | 24.08 | $ | 23.25 | |||
| Natural Gas ($/mcf) | $ | 2.00 | $ | 3.03 | |||
| Netbacks | |||||||
| Revenue ($/boe) | $ | 19.22 | $ | 28.32 | |||
| Royalties ($/boe) | $ | (1.34) | $ | (2.12) | |||
| Operating and transportation costs ($/boe) | $ | (16.46) | $ | (14.78) | |||
| Operating netbacks prior to hedging (2) | $ | 1.42 | $ | 11.42 | |||
| Realized hedging gain ($/boe) | $ | 5.89 | $ | 7.01 | |||
| Operating netbacks ($/boe) (2) | $ | 7.31 | $ | 18.43 | |||
| (1) | Before royalties. | |
| (2) | Non-GAAP measure, defined under the Non-GAAP Measures section of this press release. | |
OUTLOOK
Over the first four months of 2016, the oil and gas industry has faced its largest challenge in the last decade. The Company is fortunate to own a low-cost oil focused asset base which allows Marquee to mitigate some of its exposure to volatility in commodity prices, while also positioning it for potential growth as commodity pricing improves.
The current economic environment relating to the oil and gas industry has made access to capital, both debt and equity, challenging for many companies. The Company believes the current depressed commodity price environment and the recent disposition of non-core assets may lead to a reduction in the credit facility availability. The Company’s current bank lending review is anticipated to occur by May 31, 2016.
Marquee will continue to evaluate and prudently manage its 2016 capital program, and remain focused on balance sheet preservation and long-term value creation. The Company will also look to maintain its hedging program as opportunities present themselves, in an effort to continue to provide a base level of revenue to protect short-term capital programs. Marquee continues to pursue opportunities to monetize non-core assets as a means to further reduce indebtedness and future liabilities as seen in the recently announced shallow gas disposition.
With the current uncertainty in oil and natural gas prices, Marquee believes the most prudent course of action is to limit capital spending to free corporate cash flow, evaluate its production on a regular basis and shut-in non-economic wells where warranted. The Company currently expects to spend between $3.5 and $5.0 million on capital costs in 2016. The Company expects to provide updated production guidance for the remainder of 2016 subsequent to closing its shallow gas disposition, which is expected to occur on May 31, 2016. The focus on sustainability and proactive measures will position Marquee to realize the potential value that has been delineated at Michichi when commodity prices improve.
Management believes the Company strengths at Michichi include large oil in place, extensive drilling inventory, strong economics at current oil prices, ownership and control of infrastructure, high working interest ownership and an improving cost structure. Pursuant to the Contingent Resource Assessment generated by Sproule and Associates at December 31, 2015, there are 370 million barrels of Discovered Petroleum Initially In Place that can be mapped on Marquee’s lands at Michichi. The Company has identified more than 300 potential drilling locations within its multi-zone light oil fairway and recently received government approval for its Michichi water flood pilot which may be ready for implementation in the third quarter of 2016.
The Directors and management of Marquee continue to monitor changes to commodity pricing and the current economic environment, as it affects both the Company’s business and that of its suppliers. Changes in capital spending are dependent on projected cash flow and market conditions and are reviewed quarterly by the Board of Directors.
ANNUAL GENERAL MEETING OF SHAREHOLDERS
The Company’s Annual General Meeting of Shareholders is scheduled for 2:00 PM on Wednesday June 22, 2016 in the Altius Building, Second Floor, 500 4th Avenue SW, Calgary, AB.
ABOUT MARQUEE
Marquee Energy Ltd. is a Calgary based, junior energy company focused on high rate of return light oil development and production. Marquee is committed to growing the company through exploitation of existing opportunities and continued consolidation within its core area at Michichi. The Company’s shares are traded on the TSX Venture Exchange under the trading symbol “MQL.V” and on the OTCQX marketplace under the symbol “MQLXF”. An updated presentation and 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: business plans and expectations; volumes of reserves and resources; the number and quality of future potential drilling and development opportunities; anticipated capital budgets and expenditures; petroleum and natural gas sales; the size and extent of the Michichi oil fairway; and the Company’s expected financial position when commodity prices improve.
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 identify and consummate transactions 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.
NON-GAAP FINANCIAL MEASURES
This press release contains the term “operating netbacks prior to hedging” which does not have a standardized meaning prescribed by IFRS and, therefore, may not be comparable with the calculation of similar measures 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. Therefore reference to funds flow from operations or funds flow from operations per share may not be comparable with the calculation of similar measures for 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”. Net debt is 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.
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, 2015 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 300 (net) Michichi drilling locations identified herein, 57 are proved locations, 25 are probable 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.
CONTINGENT RESOURCES ADVISORY
Contingent resources are those quantities of petroleum estimated to be potentially recoverable from known accumulations using established technology or technology under development, but which are not currently considered to be commercially recoverable due to one or more contingencies. There is no certainty that it will be commercially viable to produce any portion of the resources. Please refer to the Company’s Annual Information Form dated April 29, 2016 and the press release dated April 6, 2016 for further information concerning the Company’s contingent resources.
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.
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.
FOR ADDITIONAL INFORMATION PLEASE CONTACT:
Richard Thompson
President & Chief Executive Officer
(403) 817-5561
RThompson@marquee-energy.com
or visit the Company’s website at www.marquee-energy.com