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| Share Name | Share Symbol | Market | Type |
|---|---|---|---|
| Strategic Oil And Gas Ltd | TSXV:SOG | TSX Venture | Common Stock |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 0.02 | 0.015 | 0.03 | 0 | 01:00:00 |
Hot Features
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Strategic Oil & Gas Ltd. ("Strategic" or the "Corporation") (TSX VENTURE:SOG) is
pleased to report financial and operating results for the fourth quarter and
year ended December 31, 2012. The Corporation achieved record production and
funds from operations in 2012 as a result of strong drilling results, and
continues to establish itself as an efficient light oil producer in northern
Canada. Detailed results are presented in Strategic's audited consolidated
financial statements and related Management's Discussion and Analysis ("MD&A")
which will be available through the Corporation's website at www.sogoil.com and
SEDAR at www.sedar.com.
FINANCIAL AND OPERATIONAL SUMMARY
----------------------------------------------------------------------------
Three Months Ended Year Ended
December 31 December 31
----------------------------------------------------------------------------
2012 2011 % change 2012 2011 % change
----------------------------------------------------------------------------
Financial ($000's,
except per share
amounts)
----------------------------------------------------------------------------
Petroleum and
natural gas sales 15,863 8,606 84 56,512 23,853 137
Funds from (used in)
operations (1) 3,578 824 334 20,021 745 2,587
Per share basic 0.02 0.01 100 0.11 0.01 1,000
Per share diluted 0.02 0.01 100 0.11 0.01 1,000
Net loss (5,917) (16,194) (63) (4,788) (24,646) (81)
Per share basic (0.03) (0.11) (72) (0.03) (0.18) (83)
Per share diluted (0.03) (0.11) (72) (0.03) (0.18) (83)
Capital expenditures
(excluding
acquisitions) 15,467 12,648 22 62,612 46,030 36
Acquisitions, net of
dispositions 23,696 - - 23,696 - -
Net debt (working
capital surplus)
(1) 47,303 (19,534) - 47,303 (19,534) -
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Operating
----------------------------------------------------------------------------
Production
Oil and NGL (bbl
per day) 2,107 943 123 1,871 659 184
Natural gas (mcf
per day) 1,050 1,725 (39) 1,415 1,780 (21)
Barrels of oil
equivalent (Boe
per day) 2,282 1,230 86 2,106 956 120
Average realized
price
Oil and NGL ($ per
bbl) 80.09 93.05 (14) 80.69 88.82 (9)
Natural gas ($ per
mcf) 3.52 3.36 5 2.46 3.83 (36)
Barrels of oil
equivalent ($ per
Boe) 75.57 76.03 (1) 73.30 68.37 7
Netback per Boe ($)
Petroleum and
natural gas sales 75.57 76.03 (1) 73.30 68.37 7
Royalties 16.81 17.27 (3) 12.55 15.12 (17)
Operating expenses 27.31 30.91 (12) 22.29 32.54 (31)
Transportation
expenses 2.36 2.37 - 2.82 2.17 30
----------------------------------------------------------------------------
Operating Netback ($
per Boe) (1) 29.09 25.48 14 35.64 18.54 92
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Common Shares
(000's)
----------------------------------------------------------------------------
Common shares
outstanding, end of
period 186,415 186,562 - 186,415 186,562 -
Weighted average
common shares
(basic) 187,176 144,139 30 186,800 140,161 33
----------------------------------------------------------------------------
(1) Funds from operations, net debt and operating netback are non-IFRS
measurements; see "Non-IFRS Measurements" in the Corporation's MD&A for
the year ended December 31, 2012.
HIGHLIGHTS
-- Production increased by 120 percent from 956 Boed (69 percent oil and
NGL) in 2011 to an average 2,106 Boed (89 percent oil and NGL) in 2012.
As a result, oil and gas revenues increased 137 percent to $56.5 million
in 2012 from $23.9 million in 2011.
-- Funds from operations increased from $0.7 million in 2011 to $20.0
million in 2012.
-- Exploration and development expenditures totaled $62.6 million for the
twelve months ended December 31, 2012 as compared to $46.0 million for
2011. Approximately 98 percent of exploration and development spending
was directed to the Corporation's light oil asset base at Steen River.
-- The Corporation added 3.7 MMBoe of proved and probable reserves in 2012,
excluding production, for a reserve replacement ratio of 479 percent.
-- Strategic increased its proved and probable oil and gas reserves by 55
percent and the net present value of its reserves before tax (discounted
at 10 percent) by 54 percent compared to the previous year, as
determined by the Corporation's independent reserve evaluators McDaniels
and Associates Consultants Ltd. ("McDaniel") at December 31, 2012.
-- Strategic successfully closed an acquisition of light oil assets at
Steen in December 2012. This acquisition included production capability
of 340 Boed (83% oil, 200 Boed tied in), pipelines, facilities and roads
that are strategic to the Corporation's operations in this core area.
-- Strategic realized finding and development ("F&D") costs, including
changes in future development capital ("FDC") of $26.03 per Boe in 2012,
a 57 percent reduction from F&D costs of $60.62 per Boe for 2011. The
Corporation realized finding, development and acquisition ("FD&A") costs
including FDC of $29.36 per Boe in 2012.
OPERATIONAL OVERVIEW
In 2012 Strategic continued to execute on its corporate strategy to explore and
exploit its light oil asset base in northern Canada, while continuing to review
other high impact oil resource plays in the Corporation's portfolio.
The Corporation had a highly successful drilling program, resulting in a 120
percent increase in average production from 956 Boed in 2011 to 2,106 Boed in
2012. Declines in natural gas production from 2011 levels were mainly attributed
to the shut-in of the Larne property in July due to forest fires, natural
production declines and lower development spending on gas-weighted assets. The
Larne field was placed back on production in late December 2012.
An increase in the oil weighting of Strategic's production mix allowed the
Corporation to realize an average price of $73.30 per Boe, up 7 percent from
$68.37 in 2011, despite declines in both oil and gas prices as compared to prior
year.
Strategic was active throughout 2012 at Steen River, drilling a total of
eighteen wells (18.0 net) with a 100 percent success rate. Seventeen of the
wells drilled were targeting Keg River and Sulphur Point oil zones with sixteen
vertical wells and one horizontal well drilled during the year. In addition, the
Corporation drilled one Muskeg Stack horizontal well in the first quarter of
2012. Drilling activity was concentrated along the rim of the Steen River
Astrobleme, which has demonstrated high oil deliverability from several
formations.
Capital activity in 2012 also included facility upgrades and expansion of
storage capacity at the Steen River oil facility. An additional 3,000 bbls of
oil storage capacity and a second tanker truck loading station were added to
accommodate increased produced volumes. Through the aforementioned acquisition,
road, pipeline and facility synergies reduced the Corporation's 2013 capital
spending allocated to infrastructure projects by over $12 million.
In order to diversify its revenue stream, access to market and minimize
production downtime due to pipeline disruptions, the Corporation reached an
agreement to transport up to 1,500 bbl/d of its oil production by rail starting
in December 2012.
F&D and FD&A COSTS
The following table summarizes Strategic's F&D costs as well as FD&A costs, both
before and after the inclusion of changes in FDC. Costs have changed slightly
from the figures released on February 25, 2013 due to the completion of the
Corporation's audited financial statements for the year ended December 31, 2012.
2012 F&D and FD&A Costs
Proved &
($ thousands, except as noted) Proved Probable
----------------------------------------------------------------------------
F&D Costs, Excluding FDC
Exploration and Development Expenditures 62,612 62,612
Reserve Additions, Including Revisions - MBoe 1,255 3,246
F&D Costs - $/Boe 49.88 19.29
F&D Costs, Including FDC
Exploration and Development Expenditures 62,612 62,612
Total Change in FDC -8,721 21,865
----------------------------------------------------------------------------
Total F&D Capital, Including Change in FDC 53,891 84,477
Reserve Additions, Including Revisions - MBoe 1,255 3,246
F&D Costs- $/Boe 42.94 26.03
FD&A Costs, Excluding FDC
Exploration and Development Capital Expenditures 62,612 62,612
Net Acquisitions 23,696 23,696
----------------------------------------------------------------------------
FD&A Capital Expenditures, Including Net
Acquisitions 86,308 86,308
Reserve Additions, Including Net Acquisitions -
MBoe 1,921 3,684
FD&A Costs - $/Boe 44.93 23.43
FD&A Costs, Including FDC
FD&A Capital Expenditures, Including Net
Acquisitions 86,308 86,308
Total Change in FDC -8,721 21,865
----------------------------------------------------------------------------
Total FD&A Capital, Including Change in FDC 77,587 108,173
Reserve Additions, Including Net Acquisitions -
MBoe 1,921 3,684
FD&A Costs, Including FDC - $/Boe 40.39 29.36
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Q1 2013 OPERATIONAL UPDATE AND GUIDANCE
For 2013 Strategic has a capital budget of $75 million that is expected to
provide growth in crude oil production and continue to expand the productive
boundaries of the Steen River light oil play.
Corporate production averaged approximately 3,000 Boed during the first quarter
of 2013 even with downtime associated with operational and facility constraints.
Approximately $15 million of the 2013 capital program is being targeted towards
reconfiguring newly acquired pipelines and upgrading facilities for future
production increases. With most of the tie-in work completed, Strategic will
minimize future downtime associated with operations at Steen River.
In the first quarter of 2013, Strategic carried out 2D and 3D seismic programs,
commenced reconfiguring pipelines, initiated upgrading of facilities, undertook
a workover program by re-entering existing vertical wells and drilled and
completed a total of six new wells (6.0 net) at Steen River. The six new wells
include one vertical Keg River well, three horizontal Muskeg Stack wells and two
vertical step out exploration wells. As a result, the Corporation's current
production is 4,600 Boed (83% oil), including approximately 1,000 Boed from new
wells.
Second quarter drilling is anticipated to start in early May. Strategic expects
to complete and tie in up to 3 additional wells in the quarter. Strategic is
increasing its exit rate guidance for 2013 to 5,000 Boed.
Keg River Vertical Well
The vertical Keg River well is a step out well drilled in the vicinity of the
West Marlowe Keg River Pool. The pool is on the northwest rim of the Steen River
Astrobleme, approximately 15 km west of the North Marlowe pool which was the
focus of development during 2012. The vertical well extends the existing West
Marlowe Keg River pool, and will result in a significant increase in reserves
for this pool. The initial production results are very encouraging.
Strategic plans to drill up to six additional Keg River wells during the
remainder of the year. Three of these wells will be targeting new structures on
the northern rim of the Astrobleme as mapped using the newly shot 3D seismic.
Muskeg Stack Horizontal Wells
Strategic drilled and completed three horizontal wells in the Muskeg Stack
formation during the first quarter of 2013. The Muskeg stack is a sheet-like
zone and has been mapped with oil bearing pay over the rim of the Steen River
Astrobleme. Following the success of the first Muskeg Stack well drilled in
2012, Strategic re-entered three existing vertical wells, perforated and
fracture stimulated the Muskeg Stack zone. The intent was to fine tune the
fracture techniques as well as prove up the oil potential of the Muskeg on the
northern rim of the Astrobleme. The vertical wells proved up the presence of oil
on the northern rim with production capability of 30-50 bbl/d per day from a
single frac. This work helped refine the design and tonnage used per stage for
the horizontal wells.
The first Muskeg Stack horizontal has a horizontal lateral of 905 meters. The
horizontal well was fracture stimulated over 8 stages. The well was flowing oil
and gas immediately, and flowed for two days up the 3 1/2" frac string with a
tubing pressure of 470 psi at an average rate of 566 bbl/d of 34 degrees API oil
and 1.1 MMcf/d of raw gas. The average rate over the test period equated to 750
Boed (75% Oil).
The second Muskeg Stack horizontal has a horizontal lateral of 875 meters. The
horizontal well was fracture stimulated over 8 stages. After five days of
swabbing the well starting to flow up the 3 1/2" frac string string with a
tubing pressure of 92 psi at an average rate of 465 bbl/d of 34 degrees API oil
and 1.2 MMcf/d of gas over the four day flow period. The average rate over the
test period equated to 665 Boed (70% Oil).
The third Muskeg Stack horizontal has a horizontal lateral of 545 meters. The
horizontal well was fracture stimulated over 4 stages. The well was swabbed for
approximately 48 hours over four days. Initial clean up rates are 120 Boed (95%
oil) at controlled swab rates with 54% of load recovered. Although the well did
not kick in and start flowing by the fourth day of swabbing, once the well is on
artificial lift and the load is recovered, the Corporation expects the well to
perform similar to the other two Muskeg Stack horizontal wells.
The Corporation expects the 30 day rates for each of the Muskeg Stack horizontal
wells to be approximately 400 Boed (75% Oil). The average drill, complete, equip
and tie-in costs for the three Muskeg Stack wells was $2.95 million per well.
The three Muskeg Stack horizontal wells are spaced over 15 km on the rim of the
Steen Astrobleme and will help the Corporation prove up 40 sections with a
potential to drill four horizontal wells per section.
Deeper Pool Tests
The first step out exploratory vertical well discovered commercial production of
light sweet oil from within the crater at a depth of 1350 meters, approximately
400 meters deeper than the producing wells on the rim. The well was tested for a
period of two days at swab rates of 180 Boed (96% oil). This well will be tied
in during Q4 2013.
The second exploratory step out well, drilled 15 km south of the North Marlowe
pool, was drilled to test the multi zone potential in the southeast quadrant of
the rim. It has been perforated and fraced as a Slave Point oil well. The well
was swabbed for a period of two day and was producing 50 bbl/d on the second day
of the swabbing. This well will be tied in during Q4 2013.
In summary, the results of the six wells drilled during the first quarter of
2013 are as follows:
----------------------------------------------------------------------------
Test Period
Well Rate(1) (Days) Test Type
----------------------------------------------------------------------------
Keg River- Vertical 250 Boed (96% Oil) 12 Pumping
----------------------------------------------------------------------------
Muskeg Stack
Horizontal1 750 Boed (75% Oil) 2 Flowing
----------------------------------------------------------------------------
Muskeg Stack
Horizontal2 665 Boed (70% Oil) 4 Flowing
----------------------------------------------------------------------------
Muskeg Stack Swabbing (Recovering
Horizontal3 120 Boed (95% Oil) 2 load fluid)
----------------------------------------------------------------------------
Deeper Pool test-
Vertical 180 Boed (96% Oil) 2 Swab Rates
----------------------------------------------------------------------------
Slave Point test-
Vertical 50 Boed (96% Oil) 2 Swab Rates
----------------------------------------------------------------------------
(1) rates include raw gas volumes and do not represent the stabilized rates
for the wells.
Recompletions and Workovers
During the first quarter of 2013, the Corporation also conducted a recompletion
and workover program by re-entering three existing vertical wells at Steen River
and two existing vertical wells at Bistcho to further evaluate the oil potential
in the Slave Point. Results from this workover program are being evaluated. The
results of the drilling and recompletion activities have confirmed the presence
of a multi-zone oil resource at Steen River.
Seismic
In the first quarter of 2013 Strategic shot a 19.75 km2 3D seismic program on
the north rim of the Steen Astrobleme, on trend between the North Marlowe and
Old Marlowe fields, to map structures with multi-zone potential. The Corporation
also shot 185 km of exploratory 2D seismic, mostly in the interior of the Steen
crater. Strategic has identified multiple play possibilities, and recent wells
have proven there is oil charge within the crater.
Facilities
Strategic's current oil handling capability at the two facilities at Steen River
is approximately 4,500 bbl/d. With the new wells drilled in the first quarter
outperforming expectations and up to three additional wells planned for the
second quarter, the Corporation is working on adding an additional 3,500 bbl/d
of oil handling capability at Steen River in the third quarter of 2013. The
resulting total oil handling capability will be approximately 8,000 bbl/d from
Corporation's the two facilities in this area.
Transportation
The Corporation is working towards building a new rail transloading facility at
Steen River with a capacity of 5,000 bbl/d. In the first quarter of 2014,
Strategic plans to pipeline connect the Steen River assets to the recently
acquired 50 km 4 inch oil pipeline that can deliver up to 4,000 bbl/d of sales
oil into the Rainbow pipeline. Between rail and pipeline, the Corporation will
have takeaway capacity of up to 9,000 bbl/d from Steen River. The capacity on
the rail and the pipeline will enable Strategic to reduce trucking charges while
maintaining multiple accesses to market for its crude products.
ABOUT STRATEGIC
Strategic is a well-capitalized junior oil and gas company committed to growth
by exploiting its light oil assets in Canada. Strategic is primarily focused on
implementing development plans for its light oil properties, while continuing to
review other high impact light oil resource plays. Strategic's common shares
trade on the TSX Venture Exchange under the symbol SOG.
ADDITIONAL INFORMATION
Additional information is also available at www.sogoil.com and at www.sedar.com.
Forward-Looking Statements
This news release includes certain information, with management's assessment of
Strategic's future plans and operations, and contains forward-looking statements
which may include some or all of the following: (i) anticipated production
rates; (ii) expected operating and service costs; (iii) expected capital
spending; (iv) the Corporation's financial strength and capitalization; (v)
estimates of reserves; (vi) expected use of proceeds from the private placement;
(vii) corporate production levels; (viii) oil takeaway capacity; (ix) extensions
of mapped oil in place; which are provided to allow investors to better
understand the Corporation's business. By their nature, forward-looking
statements are subject to numerous risks and uncertainties; some of which are
beyond Strategic's control, including the impact of general economic conditions,
industry conditions, volatility of commodity prices, currency fluctuations,
imprecision of reserve estimates, environmental risks, changes in environmental
tax and royalty legislation, competition from other industry participants, the
lack of availability of qualified personnel or management, stock market
volatility and ability to access sufficient capital from internal and external
sources, and other risks and uncertainties described under the heading 'Risk
Factors' and elsewhere in the Corporation's Annual Information Form for the year
ended December 31, 2011 and other documents filed with Canadian provincial
securities authorities and are available to the public at www.sedar.com. Readers
are cautioned that the assumptions used in the preparation of such information,
although considered reasonable at the time of preparation, may prove to be
imprecise and, as such, undue reliance should not be placed on forward-looking
statements. The principal assumptions Strategic has made includes security of
land interests; drilling cost stability; royalty rate stability; oil and gas
prices to remain in their current range; finance and debt markets continuing to
be receptive to financing the Corporation and industry standard rates of
geologic and operational success. Actual results could differ materially from
those expressed in, or implied by, these forward-looking statements. Strategic
disclaims any intention or obligation to update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise,
except as required by law.
Basis of Presentation
This discussion and analysis of Strategic's oil and natural gas production and
related performance measures is presented on a working-interest, before
royalties basis. For the purpose of calculating unit information, the
Corporation's production and reserves are reported in barrels of oil equivalent
(Boe) and Boe per day (Boed). Boe may be misleading, particularly if used in
isolation. A Boe conversion ratio for natural gas of 6 Mcf: 1 Boe has been used,
which is based on an energy equivalency conversion method primarily applicable
at the burner tip and does not necessarily 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.
Non-IFRS Measurements
The Corporation utilizes certain measurements that do not have a standardized
meaning or definition as prescribed by IFRS and therefore may not be comparable
with the calculation of similar measures by other entities, including net debt,
operating netback and funds from operations. Readers are referred to advisories
and further discussion on Non-IFRS measurements contained in the Corporation's
MD&A.
FOR FURTHER INFORMATION PLEASE CONTACT:
Strategic Oil & Gas Ltd.
Gurpreet Sawhney, MBA, MSc., PEng.
President and CEO
403.767.2949
403.767.9122 (FAX)
Strategic Oil & Gas Ltd.
Sean Hayes, PhD, PGeol
Chief Operating Officer
403.767.2946
403.767.9122 (FAX)
Strategic Oil & Gas Ltd.
1100, 645 7th Avenue SW
Calgary, AB T2P 4G8
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